<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1997
REGISTRATION NO. 333-30285
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
ON
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SIGNATURE RESORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 6552 95-4582157
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
1875 SOUTH GRANT STREET, SUITE 650, SAN MATEO, CALIFORNIA 94402
(650) 312-7171
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ANDREW D. HUTTON
VICE PRESIDENT AND GENERAL COUNSEL
SIGNATURE RESORTS, INC.
1875 SOUTH GRANT STREET, SUITE 650, SAN MATEO, CALIFORNIA 94402
(650) 312-7171
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
JOHN M. NEWELL, ESQ.
LATHAM & WATKINS
633 WEST FIFTH STREET, SUITE 4000, LOS ANGELES, CALIFORNIA 90071
(213) 485-1234
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement as
determined by market conditions.
----------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [_]
If any of the securities on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434 of
the Securities Act of 1933, please check the following box: [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 9, 1997
4,890,073 SHARES
LOGO
SIGNATURE RESORTS, INC.
COMMON STOCK
The shares of Common Stock, par value $0.01 per share ("Common Stock"), of
Signature Resorts, Inc., a Maryland corporation (the "Company" or "Signature"),
which may be offered hereby (the "Registered Offering") are held by certain
stockholders of the Company (the "Registering Stockholders"). See "Registering
Stockholders." The Company will not receive any of the proceeds from the sale
of any shares offered hereby. The Registering Stockholders received such shares
of Common Stock in private placement transactions and the Company has agreed to
file and maintain a shelf registration statement relating to such shares in
order to permit the Registering Stockholders to resell such shares from time-
to-time in public transactions. In connection with this transaction, the
Company will bear expenses estimated at $675,000.
The Common Stock is listed on the Nasdaq National Market under the symbol
"SIGR." On September 5, 1997, the last reported sales price for the Company's
Common Stock was $37.1875 per share. See "Common Stock Price Range."
SEE "RISK FACTORS" COMMENCING ON PAGE 5 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Any distribution of the shares covered by this Prospectus may be effected
from time to time in one or more transactions (which may involve block
transactions) on the Nasdaq National Market, in negotiated transactions or in a
combination of such methods of sale, at fixed prices, at prices related to the
prevailing market prices or at negotiated prices. The Registering Stockholders
will effect any such transactions with or through one or more broker-dealers
which may act as agent or principal, and if required by the Company, through
block trades or offerings through underwriters. Any such broker-dealer may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Registering Stockholders and/or the purchaser of the
shares for whom it may act as agent or to whom it may sell as principals or
both. With respect to any shares sold by a Registering Stockholder, the
Registering Stockholder and/or any broker-dealer effecting the sales may be
deemed to be an "underwriter" within the meaning of Section 2(11) of the
Securities Act of 1933, as amended (the "Securities Act"), and any commissions
received by the broker-dealer and any profit on the resale of shares as
principal may be deemed to be underwriting discounts or commissions under the
Securities Act. Additionally, the Registering Stockholders may pledge or make
gifts of their shares and such shares may also be sold by the pledgees or
transferees. See "Plan of Distribution."
-----------
The date of this Prospectus is , 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS REGISTERED OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all
amendments, exhibits and schedules thereto, the "Registration Statement")
under the Securities Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company
and the Common Stock offered hereby, reference is hereby made to such
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus, or in any document incorporated by reference
herein, as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified by such reference.
The Company is also subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Copies of the Registration Statement and reports, proxy statements and other
information concerning the Company may be obtained from the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: Seven World Trade Center, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained from the public
reference section of the Commission at its Washington address upon payment of
the fees prescribed by the Commission or may be examined without charge at the
offices of the Commission. Electronic filings made through the Electronic Data
Gathering Analysis and Retrieval System are publicly available through the
Commission's Website (http://www.sec.gov). In addition, such reports, proxy
statements and other information concerning the Company can be inspected and
copied at the offices of the Nasdaq National Market, Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006, on which the Common Stock of the Company
is quoted.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which the Company has filed with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference in, and
shall be deemed to be a part of, this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997;
(c) The Company's Proxy Statement dated April 11, 1997 related to the
Annual Meeting of Stockholders held on May 16, 1997;
(d) The Company's Current Report on Form 8-K filed with the Commission on
May 30, 1997;
(e) The Company's amended Current Report on Form 8-K/A filed with the
Commission on July 29, 1997; and
(f) The Company's Current Report on Form 8-K filed with the Commission on
September 8, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part thereof from
the respective dates of filing of such documents. Any statement contained in
this Prospectus or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is incorporated or deemed to be
incorporated by reference in this Prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus except as so modified or superseded.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide without charge to any
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the foregoing documents incorporated
herein by reference (other than exhibits to such documents unless such
exhibits are specifically incorporated by reference therein). Requests should
be directed to the attention of Andrew D. Hutton, Vice President and General
Counsel, Signature Resorts, Inc., 1875 South Grant Street, Suite 650, San
Mateo, California 94402 (Telephone: (650) 312-7171).
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data,
included elsewhere or incorporated by reference in this Prospectus. Unless
the context otherwise indicates, the "Company" means Signature Resorts,
Inc. and includes its corporate and partnership predecessors and wholly-
owned subsidiaries and affiliates, including AVCOM International, Inc.
("AVCOM") and its subsidiaries, which were acquired by a subsidiary of
Signature Resorts, Inc. on February 7, 1997 in the merger with AVCOM (the
"AVCOM Merger"), Plantation Resorts Group, Inc. ("PRG") and its
subsidiaries, which were acquired by a subsidiary of Signature Resorts,
Inc. on May 15, 1997 (the "PRG Merger") and LSI Group Holdings Plc ("LSI")
and its subsidiaries, which were acquired by Signature Resorts, Inc. on
August 28, 1997 (the "LSI Acquisition"). This Prospectus contains forward-
looking statements which involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Risk Factors."
THE COMPANY
The Company is one of the largest developers and operators of vacation
ownership resorts in North America and Europe. The Company is devoted
exclusively to vacation ownership operations and, as of the date of this
Prospectus, owns 34 vacation ownership resorts located in a variety of
popular resort destinations. The Company's North American resorts are
located in Arizona (six resorts), California (five resorts), Florida (three
resorts), Netherlands Antilles (two resorts), Virginia (two resorts),
Hawaii, Missouri, South Carolina, Texas and the U.S. Virgin Islands. The
Company's European resorts are located in England's Lake District and
Midlands (three resorts), Southern England, the sun coast of Spain (three
resorts), the Spanish island of Menorca (two resorts), Lanzarote in the
Canary Islands and the Austrian Alps. The Company acquired (i) its Arizona
resorts, three of its California resorts and its Texas resort as a result
of the AVCOM Merger (the "All Seasons Resorts"), (ii) its Virginia resorts
as a result of the PRG Merger (the "PRG Resorts") and (iii) its European
resorts as a result of the LSI Acquisition (the "LSI Resorts").
The Company's principal operations currently consist of (i) acquiring,
developing and operating vacation ownership resorts, (ii) marketing and
selling vacation ownership interests in its North American resorts, which
typically entitle the buyer to use a fully-furnished vacation residence,
generally for a one-week period each year in perpetuity ("Vacation
Intervals"), (iii) marketing and selling vacation points at its European
resorts which may be redeemed for occupancy rights at participating resorts
("Vacation Points") and (iv) providing consumer financing to individual
purchasers for the purchase of Vacation Intervals at its resorts. The
Company currently sells Vacation Intervals or Vacation Points at 30 of its
34 resorts; sales at three resorts have been substantially completed; and
sales at one resort have yet to commence. The Company also provides resort
management and maintenance services at its resorts for which it receives
fees paid by the resorts' homeowners' associations.
As part of its growth and acquisition strategy, in May 1997 the Company
consummated the PRG Merger, acquiring 100% of the capital stock of PRG in
exchange for the issuance of 2,401,229 shares of the Company's Common Stock.
PRG is a Williamsburg, Virginia based developer, owner and operator of two
vacation ownership resorts. Based upon the closing price of the Company's
Common Stock on the Nasdaq National Market on May 15, 1997, the
2,401,229 shares of Common Stock issued in the PRG Merger were valued at an
aggregate of approximately $59.1 million and represented on a pro forma basis
10.8% of the shares of Common Stock outstanding on such date.
Additionally, in August 1997 the Company consummated the LSI Acquisition.
The Company acquired 100% of LSI's capital stock in exchange for the
issuance of 1,330,934 shares of the Company's Common Stock. LSI is a United
Kingdom-based developer, owner and operator of 11 vacation ownership
resorts and a European points-based vacation club system. Based on the
closing price of the Company's Common Stock on the Nasdaq
3
<PAGE>
National Market on August 28, 1997, the 1,330,934 shares of Common Stock
issued in the LSI Acquisition were valued at our aggregate of approximately
$48.2 million and represented on a pro forma basis 5.6% of the shares of
Common Stock outstanding on such date. In addition to the Common Stock
issued in the LSI Acquisition, the Company paid cash consideration of
approximately $1,036,000 to a former LSI shareholder. See "Risk Factors--
Risks Related to the AVCOM Merger, PRG Merger and LSI Acquisition."
The Company's principal executive offices are located at 1875 South Grant
Street, Suite 650, San Mateo, California 94402, and its telephone number is
(650) 312-7171.
PENDING ACQUISITIONS
On July 28, 1997, the Company announced that a partnership of which it is a
managing general partner had entered into a definitive agreement to acquire the
Embassy Suites Resort at Kaanapali Beach, Maui, Hawaii (the "Kaanapali
Acquisition") for approximately $78 million from a Japanese partnership. The
acquiring entity is a partnership formed by a wholly-owned subsidiary of the
Company (as the managing general partner), the Whitehall Street Real Estate
Limited Partnership VII and Apollo Real Estate Advisors, L.P. The Company's
subsidiary owns a 24% partnership interest in the acquiring entity. The Embassy
Suites Resort at Kaanapali Beach is a 413-suite, full service resort hotel
located on the beach in Kaanapali, Maui, Hawaii. Upon the receipt of necessary
governmental approvals, the Company intends to convert the first phase of hotel
suites to vacation ownership units. The Company expects to operate the resort
with approximately 256 hotel suites and approximately 157 one-bedroom and two-
bedroom vacation ownership units. The Kaanapali Acquisition is anticipated to
close during the fourth quarter of 1997 and vacation ownership sales at the
resort are anticipated to commence in the first half of 1998.
On September 3, 1997, the Company announced the execution of a definitive
agreement to acquire 100% of the capital stock of Hawaii based Marc Hotels &
Resorts, Inc. Marc Resorts is one of Hawaii's leading hospitality management
companies and operators of hotels, resort condominiums and all-suite resorts
with 22 locations on Hawaii's five major islands. The Company will acquire all
the outstanding shares of Marc Resorts for an aggregate purchase price of $6
million. The total consideration will be comprised of a combination of newly
issued shares of the Company's Common Stock and cash. The allocation of stock
and cash will be determined prior to closing, which is expected to occur in the
fourth quarter of 1997 following the satisfaction of customary closing
conditions. The transaction is structured to qualify for purchase accounting.
THE REGISTERED OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Registering
Stockholders.............................. 4,890,073 shares
Common Stock to be outstanding after
the Registered Offering................... 23,745,524 shares(1)
Use of Proceeds............................ The Company will not receive any
proceeds from the sale of Common
Stock by the Registering
Stockholders in the Registered
Offering. See "Use of Proceeds."
Nasdaq National Market symbol.............. "SIGR"
</TABLE>
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(1) Does not include 3,024,660 shares of Common Stock initially issuable upon
conversion of the Company's 5 3/4% Convertible Subordinated Notes due 2007
(the "Convertible Notes"), 2,500,000 shares of Common Stock reserved for
issuance upon exercise of options granted pursuant to the Company's 1996
Equity Participation Plan and 500,000 shares of Common Stock reserved for
issuance pursuant to the Company's Employee Stock Purchase Plan. Holders of
shares of the Company's Common Stock are not entitled to vacation ownership
interests at any of the Company's resorts.
4
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following material risk factors should be carefully considered in evaluating
the Company and its business before purchasing any of the shares of Common
Stock offered hereby. The Company cautions the reader that this list of
material risk factors may not be exhaustive.
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Certain statements in this
Prospectus that are not historical fact constitute "forward- looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Discussions containing such forward-looking statements may be found
in the material set forth under "Summary," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as within the Prospectus generally. In addition, when used
in the Prospectus the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Such
statements are subject to a number of risks and uncertainties. Actual results
could differ materially from those projected in the forward-looking statements
as a result of the risk factors set forth below and the matters set forth in
the Prospectus generally. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements that
may be made to reflect any future events or circumstances.
RISK OF INCREASING LEVERAGE; RESTRICTIVE COVENANTS
The Company will have significant interest expense and principal repayment
obligations under its indebtedness. As of June 30, 1997, after giving effect
to the Company's offering of its 9 3/4% Senior Subordinated Notes due 2007
(the "Note Offering") and the application of the net proceeds therefrom, the
PRG Merger and the LSI Acquisition, the Company and its consolidated
subsidiaries would have had an aggregate of approximately $438.9 million of
long-term debt (net of original issue discount of approximately $1.5 million).
See "Consolidated Capitalization." Total debt to total capitalization was 66%
and 70.2% at December 31, 1996 and pro forma June 30, 1997, respectively.
Future development by the Company at its resorts will be financed with
existing cash, indebtedness obtained pursuant to the Company's existing credit
facilities or credit facilities obtained by the Company in the future. The
agreements with respect to such credit facilities do contain or in the future
could contain restrictive covenants, including covenants limiting capital
expenditures, incurrence of debt and sales of assets and requiring the Company
to achieve certain financial ratios, some of which could become more
restrictive over time. The Company is restricted from paying dividends by
certain of its debt agreements which require tangible net worth of at least
$140 million. Subsequent acquisition activities will be financed primarily by
new financing arrangements. Portions of the Company's indebtedness currently
are, and in the future may be, secured by mortgages on the Company's resorts,
as well as other assets of the Company. Among other consequences, the leverage
of the Company and such restrictive covenants and other terms of the Company's
debt instruments could impair the Company's ability to obtain additional
financing in the future, to make acquisitions and to take advantage of
significant business opportunities that may arise. In addition, the Company's
leverage may increase its vulnerability to adverse general economic and
vacation ownership industry conditions and to increased competitive pressures.
ACQUISITION STRATEGY AND RISKS RELATED TO RAPID GROWTH
Growth by Acquisition. A principal component of the Company's strategy is to
continue to grow by acquiring additional resorts. The Company's future growth
and financial success will depend upon a number of factors, including its
ability to identify attractive resort acquisition opportunities, consummate
the acquisitions of such resorts on favorable terms, convert such resorts to
use as vacation ownership resorts and profitably sell Vacation Intervals at
such resorts. There can be no assurance that the Company will be successful
with respect to such factors. The Company's ability to execute its growth
strategy depends to a significant degree on the existence of attractive resort
acquisition opportunities (which, in the past, have included completed or
nearly
5
<PAGE>
completed resort properties), its ability both to consummate acquisitions on
favorable terms and to obtain additional debt and equity capital and to fund
such acquisitions and any necessary conversion and marketing expenditures.
Currently, there are numerous potential buyers of resort real estate which are
better capitalized than the Company competing to acquire resort properties
which the Company may consider attractive resort acquisition opportunities.
There can be no assurance that the Company will be able to compete against
such other buyers successfully or that the Company will be successful in
consummating any such future financing transactions or equity offerings on
terms favorable to the Company. The Company's ability to obtain and repay any
indebtedness at maturity may depend on refinancing, which could be adversely
affected if the Company cannot effect the sale of additional debt or equity
through public offerings or private placements on terms favorable to the
Company. Factors which could affect the Company's access to the capital
markets, or the cost of such capital, include changes in interest rates,
general economic conditions, the perception in the capital markets of the
vacation ownership industry and the Company's business, results of operations,
leverage, financial condition and business prospects.
Risks Related to the Growth of Embassy Vacation Resorts and Westin Vacation
Clubs. An important part of the Company's growth strategy is to acquire and
develop additional Embassy Vacation Resorts and Westin Vacation Club resorts.
See "Business--Embassy Vacation Resorts," and "--Westin Vacation Club
Resorts." Westin has not previously been active in the vacation ownership
market and may not devote the corporate resources to such projects at levels
which will make the projects successful. Moreover, there can be no assurance
that Promus will elect to continue licensing the Embassy Vacation Resort name
to the Company with respect to possible future resorts. Under the terms of an
exclusive five-year agreement, Promus and Vistana, Inc. will jointly acquire,
develop, manage and market vacation ownership resorts in North America under
Promus brand names. As part of the exclusive agreement, Promus and Vistana,
Inc. will designate selected markets for development (which markets currently
include Kissimmee, Florida and Myrtle Beach, South Carolina). The Company is
not precluded from using the Embassy Vacation Resort name in connection with
resorts acquired during the term of the agreement. The Company has been
identified by Promus as the only other licensee to whom Promus will license
the Embassy Vacation Resort name. However, there can be no assurance that
Promus will not grant other entities a license to develop Embassy Vacation
Resorts or that Promus will not exercise its rights to terminate the Embassy
Vacation Resort licensees. On January 7, 1997, Promus announced that it
intended to expand its branded vacation ownership business only with the
Company and Vistana and that additional Embassy Vacation Resort properties to
be developed or acquired by the Company and licensed by Promus are under
discussion. See "--Competition."
Risks Related to Development of a Points-Based Vacation Club System. The
Company intends to develop and operate a North American points-based vacation
club system and expand the European points-based Grand Vacation Club system
operated by LSI and acquired by the Company in the LSI Acquisition. The
Company has not previously developed or operated a points-based vacation club
system and no assurance can be given as to management's ability to efficiently
develop or operate such a system.
RISKS RELATED TO THE AVCOM MERGER, PRG MERGER AND LSI ACQUISITION
Uncertainty as to Future Financial Results. The Company believes that the
AVCOM Merger, PRG Merger and LSI Acquisition (collectively, the
"Acquisitions") offer opportunities for long-term efficiencies in operations
that should positively affect future results of the combined operations of the
Company, AVCOM, PRG and LSI. However, until the Company is able to offset
earnings dilution resulting from the issuance of Common Stock in the
Acquisitions with the positive effect of expected long-term efficiencies, the
Acquisitions may adversely affect the Company's financial performance in 1997
and future years. In addition, the combined companies will be more complex and
diverse than the Company prior to the Acquisitions, and the combination and
continued operation of their distinct business operations present difficult
challenges for the Company's management due to the increased time and
resources required in the management effort. While management and the Board of
Directors of the Company believe that the combinations can be effected in a
manner which will realize the value of the companies, management has limited
experience in combinations of this size.
6
<PAGE>
In order to maintain and increase profitability, the combined companies will
need to successfully integrate and streamline overlapping functions with
respect to AVCOM and PRG (LSI will be operated as a separate European unit).
There can be no assurance that such integration will be successfully
accomplished or, if successfully accomplished, that such integration will not
be more costly to accomplish than contemplated by the Company. The
difficulties of such integration may be increased by the necessity of
coordinating geographically separate organizations. The integration of certain
operations (such as customer service, loan servicing and loan processing)
following the Acquisitions will require the dedication of management resources
which may distract attention from the day-to-day business of the combined
companies in the short and long term. Failure to effectively accomplish the
integration of AVCOM's and PRG's operations could have an adverse effect on
the Company's results of operations and financial condition.
PRG Merger and LSI Acquisition and Related Expenses. Transaction costs
relating to the negotiation of and preparation for the PRG Merger and the LSI
Acquisition, the consummation of the PRG Merger and the LSI Acquisition and
the anticipated combination of certain operations resulted in a one-time
charge to the Company's earnings of approximately $4.2 million in the second
quarter of 1997 and are expected to result in a one-time charge to earnings of
approximately $3.3 million in the third quarter of 1997. These charges will
include the fees and expenses payable to financial advisors, lawyers,
accountants and other transaction expenses related to the PRG Merger and the
LSI Acquisition. In addition, there can be no assurance that the Company will
not incur additional charges in subsequent quarters to reflect costs
associated with the PRG Merger and the LSI Acquisition and the integration of
the Company's and PRG's operations.
Accounting Treatment. The AVCOM Merger and PRG Merger have been, and the LSI
Acquisition will be, accounted for by the Company by the pooling-of-interests
method of accounting. Under this method of accounting, the recorded assets and
liabilities of the Company, AVCOM, PRG and LSI will be carried forward at
their book values to the Company, income of the Company will include the
income (or loss) of the Company, AVCOM, PRG and LSI for the entire fiscal year
in which the Acquisitions occurred, and the reported income of the Company,
AVCOM, PRG and LSI for prior periods will be combined and restated as income
of the Company. Although the Company has received an opinion from its
independent public accountants that the Acquisitions will qualify for pooling-
of-interests accounting treatment, opinions of accountants are not binding
upon the Commission, and there can be no assurance that the Commission will
not successfully assert a contrary position. In such case, the purchase method
of accounting would be applicable. Under the purchase method, the book value
of AVCOM's, PRG's and LSI's assets would be increased to their fair values,
which could result in higher operating costs and expenses as the excess of the
purchase price over the fair value of AVCOM's, PRG's and LSI's assets would be
amortized and expensed over a period of years, which would adversely affect
the Company's future earnings.
Dilution to Existing Stockholders. As a result of the AVCOM Merger, the PRG
Merger and the LSI Acquisition, the Company issued 883,036, 2,401,229 and
1,330,934 shares of its Common Stock, respectively. Such shares represented
approximately 4.4%, 10.7%, and 5.6%, respectively, of the number of shares of
Common Stock outstanding following each such acquisition.
Shares Eligible for Public Sale. Sales of substantial amounts of the
Company's Common Stock issued in the Acquisitions in the public market could
adversely affect prevailing market prices. The shares of Common Stock issued
in the AVCOM Merger are eligible for sale in the public market. Upon the
effectiveness of the shelf registration statement of which this Prospectus is
a part, the shares of Common Stock issued in the PRG Merger will be eligible
for sale in the public market. Following the release of the Company's and
LSI's third quarter 1997 combined earnings, 248,702 of the shares of Common
Stock issued in the LSI Acquisition will be eligible for sale in the public
market on or subsequent to the effectiveness of the shelf registration
statement of which this Prospectus is a part. The Company is obligated to
register the remaining 1,082,232 shares issued in the LSI Acquisition in three
equal annual installments over three years from August 28, 1997.
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VARIABILITY OF QUARTERLY RESULTS; POSSIBLE VOLATILITY OF STOCK PRICE
The Company's earnings may be impacted by the timing of the completion of
the acquisition and development of future resorts and the potential impact of
weather or other natural disasters at the Company's resort locations (e.g.,
hurricanes in Hawaii, St. Maarten and St. John and earthquakes in California).
See "--Natural Disasters; Uninsured Loss." Furthermore, the Company has
historically experienced and expects to continue to experience seasonal
fluctuations in its gross revenues and net income from the sale of Vacation
Intervals. This seasonality may cause significant variations in quarterly
operating results. If sales of Vacation Intervals are below seasonal
normalities during a particular period, the Company's annual operating results
could be materially adversely affected. In addition, the combination of (i)
the possible delay in generating revenue after the acquisition by the Company
of additional resorts prior to the commencement of Vacation Interval sales and
(ii) the expenses associated with start-up unit or room-rental operations,
interest expense, amortization and depreciation expenses from such
acquisitions may materially adversely impact earnings.
Due to the foregoing and other factors, the Company believes that its
quarterly and annual revenues, expenses and operating results could vary
significantly in the future and that period-to-period comparisons should not
be relied upon as indications of future performance. Because of the above
factors, it is possible that the Company's operating results will be below the
expectations of stock market analysts and investors, which could have an
adverse effect on the market value of the Company's Common Stock. Numerous
factors, including announcements of fluctuations in the Company's or its
competitors' operating results and market conditions for hospitality and
vacation ownership industry stocks in general, could have a significant impact
on the future price of the Common Stock. In addition, the stock market in
recent years has experienced significant price and volume fluctuations that
often have been unrelated or disproportionate to the operating performance of
companies. These broad fluctuations may adversely affect the market price of
the Common Stock.
RISKS OF DEVELOPMENT AND CONSTRUCTION ACTIVITIES
Risks Related to Development Activities. The Company intends to actively
continue development, construction, redevelopment/conversion and expansion of
vacation ownership resorts, and to develop a North American points-based
vacation club system and expand the European points-based vacation club system
operated by LSI. There can be no assurance that the Company will: complete
development, expansion and/or conversion of its resorts currently under
development or expansion; undertake additional expansion plans set forth in
"Business--Description of the Company's Resorts;" undertake to develop other
resorts or complete such development if undertaken; or complete development of
a North American points-based vacation club system or expansion of a European
points-based vacation club system. Risks associated with the Company's
development, construction and redevelopment/conversion activities, and
expansion activities may include the risks that: acquisition and/or
development opportunities may be abandoned; construction costs of a resort may
exceed original estimates, possibly making the resort uneconomical or
unprofitable; sales of Vacation Intervals at a newly completed resort may not
be sufficient to make the resort profitable; financing may not be available on
favorable terms for development of, or the continued sales of Vacation
Intervals at, a resort; and construction may not be completed on schedule,
resulting in decreased revenues and increased interest expense. Risks
associated with the Company's development of a North American points-based
vacation club system and expansion of LSI's European points-based Grand
Vacation Club system may include the risks that: such development and/or
expansion may be abandoned; the North American and European points-based
vacation club systems cannot be efficiently combined or operated with the
Company's current vacation ownership operations; the North American and
European points-based vacation club system may be or become subject to
extensive regulation by federal, state and local jurisdictions, or the
equivalent thereof in Europe, possibly making such points-based system
uneconomical or unprofitable; and financing may not be available on favorable
terms for development of a North American points-based vacation club system or
the expansion of a European points-based vacation club system.
Risks Related to Construction Activities. In addition, the Company's
construction activities typically are performed by third-party contractors,
and, accordingly, the timing, quality and completion of which cannot be
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controlled by the Company. Nevertheless, construction claims may be asserted
against the Company for construction defects and such claims may give rise to
liabilities. New development activities, regardless of whether or not they are
ultimately successful, typically require a substantial portion of management's
time and attention. Development activities are also subject to risks relating
to the inability to obtain, or delays in obtaining, all necessary zoning,
land-use, building, occupancy and other required governmental permits and
authorizations, the ability of the Company to coordinate construction
activities with the process of obtaining such permits and authorizations, and
the ability of the Company to obtain the financing necessary to complete the
necessary acquisition, construction, and/or conversion work at the resorts.
The Company currently does not have the financing available to complete all of
its planned expansion as set forth in "Business--The Resorts." The ability of
the Company to expand its business to include new resorts will in part depend
upon the availability of suitable properties at reasonable prices and the
availability of financing for the acquisition and development of such
properties. However, there can be no assurance that such preferential
purchases can be effected in the future. In addition, certain states and local
laws may impose liability on property developers with respect to construction
defects discovered or repairs made by future owners of such property. Pursuant
to such laws, future owners may recover from the Company amounts in connection
with any repairs made to the developed property. See "Business--Business
Strategy."
RISKS ASSOCIATED WITH PARTNERSHIP INVESTMENT IN THE POIPU PARTNERSHIP
The Embassy Vacation Resort Poipu Point is owned by the Poipu Partnership
(as defined), which consists of the Company and a third party. Property
ownership through a partnership involves additional risks, including
requirements of partner consents for major decisions (including approval of
budgets), capital contributions and entry into material agreements. If the
Company and its partner are unable to agree on major decisions, either partner
may elect to invoke a buy/sell right, which could require the Company to
either sell its interest in the Embassy Vacation Resort Poipu Point or to buy
out the interest of its partner at a time when the Company is not prepared to
do so. In addition, under certain circumstances, the other partner can require
the Company to purchase such partner's interest or sell its interest to the
partner. If a dispute arises under this partnership, an adverse resolution
could have a material adverse effect on the operations of the Company. In
addition, as a general partner, the Company will be subject to certain
fiduciary obligations which may obligate it to act in a manner which is not
necessarily in the best interest of the Company. The Company may elect to
purchase interests in future resorts through similar partnership arrangements.
See "--Risks Related to Westin Agreement; Limited Control of Resorts and
Termination" and "Business--the Resorts."
LIMITED OPERATING HISTORY
The Company was formed in May 1996 in order to effectuate the consolidation
of the Company's predecessor partnerships, limited liability companies and
corporations (the "Consolidation Transactions") and the Company's initial
public offering (the "Initial Public Offering"), each of which was consummated
in August 1996. Although predecessors of the Company have operating histories
in the vacation ownership and hospitality industries, the Company has limited
operating history as an integrated entity and limited experience operating as
a public company and no experience operating a points-based vacation club
system, any of which could have an adverse impact on the Company's operations
and future profitability. The Company has chosen to conduct its management
operations in (i) two locations in California primarily with respect to
acquisition, development, finance and legal (ii) Chicago, Illinois with
respect to marketing, (iii) Orlando, Florida with respect to sales, accounting
and property management operations and (iv) Carnforth, England with respect to
LSI's European resorts and its Grand Vacation Club system. However, as the
Company grows and diversifies into additional geographic markets, including
new markets entered as a result of the LSI Acquisition, no assurance can be
given as to management's ability to efficiently manage operations and control
functions without a centrally located management team.
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GENERAL ECONOMIC CONDITIONS; CONCENTRATION IN VACATION OWNERSHIP INDUSTRY;
GEOGRAPHIC CONCENTRATION OF INVESTMENTS
Any downturn in economic conditions or any price increases (e.g., airfares)
related to the travel and tourism industry could depress discretionary
consumer spending and have a material adverse effect on the Company's
business. Any such economic conditions, including recession, may also
adversely affect the future availability of attractive financing rates for the
Company or its customers and may materially adversely affect the Company's
business. Furthermore, adverse changes in general economic conditions may
adversely affect the collectibility of the Company's loans to Vacation
Interval buyers. Because the Company's operations are conducted solely within
the vacation ownership industry, any adverse changes affecting the vacation
ownership industry such as an oversupply of vacation ownership units, a
reduction in demand for vacation ownership units, changes in travel and
vacation patterns, changes in governmental regulations of the vacation
ownership industry and increases in construction costs or taxes, as well as
negative publicity for the vacation ownership industry, could have a material
adverse effect on the Company's operations.
RISKS ASSOCIATED WITH CUSTOMER FINANCING
The Company offers financing to the buyers of Vacation Intervals at the
Company's resorts who make a down payment generally equal to at least 10% of
the purchase price. This financing generally bears interest at fixed rates and
is collateralized by a first mortgage on the underlying Vacation Interval. The
Company has entered into agreements with lenders for the financing of these
customer receivables. As of June 30, 1997, these agreements provide an
aggregate of up to approximately $220 million of available financing to the
Company bearing interest at variable rates tied to LIBOR or the prime rate of
which, at June 30, 1997, the Company had approximately $88 million of
additional borrowing capacity available.
Under these arrangements, the Company pledges as security promissory notes
to these lenders, who typically lend the Company 85% to 90% of the principal
amount of such promissory notes. Payments under these promissory notes are
made by the buyer/borrowers directly to a third-party payment processing
center and such payments are credited against the Company's outstanding
balance with the respective lenders. The Company does not presently have
binding agreements to extend the terms of such existing financing arrangements
or for any replacement financing arrangements upon the expiration of such
funding commitments (which have varying borrowing periods ranging from 18 to
20 months after the initial commitment date), and there can be no assurance
that alternative or additional arrangements can be made on terms that are
satisfactory to the Company. Accordingly, future sales of Vacation Intervals
may be limited by both the availability of funds to finance the initial
negative cash flow that results from sales that are financed by the Company
and by reduced demand which may result if the Company is unable to provide
financing through unaffiliated lenders to buyers of Vacation Intervals. If the
Company is required to sell its customer receivables to lenders, discounts
from the face value of such receivables may be required by such lenders, if
lenders are available at all.
The Company has historically derived income from its financing activities.
At June 30, 1997, the Company's mortgage portfolio included approximately
34,406 consumer loans totaling approximately $278 million, with a stated
maturity of seven to ten years and a weighted average interest rate of 15% per
annum. Additionally, at June 30, 1997, the weighted average maturity of all
outstanding consumer loans was approximately 8.4 years and the total
borrowings secured by consumer loans were approximately $140 million, bearing
a weighted average interest rate of 9.7%. However, because the Company's
borrowings bear interest at variable rates (which, as of June 30, 1997, equal
9.9% per annum on a weighted average basis) and the Company's loans to buyers
of Vacation Intervals bear interest at fixed rates (which, as of June 30,
1997, equal 15% per annum on a weighted average basis), the Company bears the
risk of increases in interest rates with respect to the loans it has from its
lenders. To the extent interest rates on the Company's borrowings decrease,
the Company faces an increased risk that customers will pre-pay their loans
and reduce the Company's income from financing activities. See "Business--
Customer Financing."
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RISKS OF HEDGING ACTIVITIES AND EXCHANGE RATE FLUCTUATIONS
The Company does not engage in speculative or profit motivated hedging
activities. However, to manage risks associated with the Company's borrowings
bearing interest at variable rates, the Company may from time to time purchase
interest rate caps, interest rate swaps or similar instruments. The nature and
quantity of the hedging transactions for the variable rate debt will be
determined by the management of the Company based on various factors,
including market conditions, and there have been no limitations placed on
management's use of certain instruments in such hedging transactions. No
assurance can be given that any such hedging transactions will offset the
risks of changes in interest rates, or that the costs associated with hedging
activities will not increase the Company's operating costs.
The Company's international operations subject the Company to certain risks,
including increased exposure to currency exchange rate fluctuations. Although
the Company does not currently engage in foreign currency hedging
transactions, as it continues to expand its international operations, exposure
to losses in foreign currency transactions may increase or occur. The Company
may choose to limit such exposure by the purchase of forward foreign exchange
contracts or similar hedging strategies. However, there can be no assurance
that any currency hedging strategy would be successful in avoiding exchange-
related losses. In addition, there can be no assurance that such exchange-
related losses would not have a material adverse effect on the Company's
future international revenue and, consequently, on the Company's business,
operating results and financial condition.
RISKS ASSOCIATED WITH CUSTOMER DEFAULT
The Company bears the risk of defaults by buyers who financed the purchase
of their Vacation Intervals. As of June 30, 1997, approximately 3.9% of the
Company's consumer loans were considered by the Company to be delinquent (past
due by 60 or more days). The Company had completed or commenced foreclosure or
deed-in-lieu of foreclosure (which is typically commenced once a loan is more
than 120 days past due) on an additional approximately 2.4% of its consumer
loans. As of June 30, 1997, the Company's allowance for doubtful accounts as a
percentage of gross mortgages receivable was 6.8%, which management believes
is an adequate reserve for expected loan losses.
If a buyer of a Vacation Interval defaults on the consumer loan made by the
Company and the Company has pledged the mortgage receivable as collateral to a
lending institution, the Company generally must take back the mortgage with
respect to such Vacation Interval and replace it with a performing mortgage.
In connection with the Company taking back any such Vacation Interval, the
relatively substantial associated marketing costs, other than certain sales
commissions, will not have been recovered by the Company and they must be
incurred again after their Vacation Interval has been returned to the
Company's inventory for resale (commissions paid in connection with the sale
of Vacation Intervals may be recoverable from the Company's sales personnel
and from independent contractors upon default in accordance with contractual
arrangements with the Company, depending upon the amount of time that has
elapsed between the sale and the default and the number of payments made prior
to such default). Although private mortgage insurance or its equivalent is
available to cover Vacation Intervals, the Company has never purchased such
insurance and has no present intention of doing so. In addition, although the
Company in many cases may have recourse against Vacation Interval buyers,
sales personnel and independent contractors for the purchase price paid and
for commissions paid, respectively, no assurance can be given that the
Vacation Interval purchase price or any commissions will be fully or partially
recovered in the event of a buyer default under such financing arrangements.
The Company purchased defaulted mortgage notes with respect to 900 Vacation
Intervals at the San Luis Bay Resort on which the Company is in the process of
foreclosing. The Company will be subject to the costs and delays associated
with such foreclosure process and no assurance can be given that the value of
the underlying Vacation Intervals being foreclosed upon at the time of resale
will exceed the purchase price of the defaulted loans, taking into
consideration the costs of foreclosure and resale. See "Business--Customer
Financing." Similarly, in March 1996, AVCOM purchased defaulted mortgage notes
with respect to 1,057 Vacation Intervals at the Tahoe Seasons Resort on which
AVCOM was then in the process of foreclosing. The Company continues to be
subject to the costs and delays associated with
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such foreclosure process and no assurance can be given that the value of the
underlying Vacation Intervals being foreclosed upon at the time of resale will
exceed the purchase price of the defaulted loans, taking into consideration
the costs of foreclosure and resale. See "Business--Description of the
Company's Resorts."
COMPETITION
The Company is subject to significant competition at each of its resorts
from other entities engaged in the business of resort development, sales and
operation, including Vacation Interval ownership, condominiums, hotels and
motels. Many of the world's most recognized lodging, hospitality and
entertainment companies have begun to develop and sell Vacation Intervals in
resort properties. Although the Company recently obtained the exclusive
development rights to Westin Vacation Clubs from Westin pursuant to the Westin
Agreement, other major companies that now operate or are developing or
planning to develop Vacation Interval resorts include Marriott Ownership
Resorts ("Marriott"), The Walt Disney Company ("Disney"), Hilton Hotels
Corporation ("Hilton"), Hyatt Corporation ("Hyatt"), Four Seasons Hotels &
Resorts ("Four Seasons") and Inter-Continental Hotels and Resorts ("Inter-
Continental"). Many of these entities possess significantly greater financial,
marketing, personnel and other resources than those of the Company and may be
able to grow at a more rapid rate or more profitably as a result. LSI competes
in Europe with certain other vacation ownership and points-based companies.
See "Business--Competition."
The Company also competes with companies with non-branded resorts such as
Westgate, Vistana, Inc. and Vacation Break USA, Inc. (each of which competes
with the Company's Orlando area resorts), Fairfield Communities (which
recently announced plans to acquire Vacation Break USA, Inc. and which
currently competes with the Company's Orlando area, Williamsburg and Branson
resorts) and ILX Incorporated (which competes with the Company's Sedona,
Arizona resorts). Under the terms of a recently announced exclusive five-year
agreement, Promus and Vistana, Inc. will jointly acquire, develop and manage
and market vacation ownership resorts in North America under Promus brand
names. As part of the exclusive agreement, Promus and Vistana, Inc. will
designate selected markets for development (which markets currently include
Kissimmee, Florida and Myrtle Beach, South Carolina). The Company is not
precluded from using the Embassy Vacation Resort name in connection with
resorts acquired during the term of the agreement. The Company has been
identified by Promus as the only other licensee to whom Promus will license
the Embassy Vacation Resort name. However, there can be no assurance that
Promus will not grant other entities a license to develop Embassy Vacation
Resorts or that Promus will not exercise its rights to terminate the Embassy
Vacation Resort licenses. On January 7, 1997, Promus announced that it
intended to expand its branded vacation ownership business only with the
Company and Vistana and that additional Embassy Vacation Resort properties to
be developed or acquired by the Company and licensed by Promus are under
discussion. See "Business--Competition."
In the event that the Westin Agreement becomes the subject of dispute
between the parties thereto, it is possible that the Company's interest in
pursuing acquisition and development opportunities at "four-star" and "five-
star" resorts located in North America, Mexico and the Caribbean through May
2001 could be barred pending the final resolution of such dispute.
Additionally, at the expiration or early termination of the Westin Agreement,
Westin could become a direct competitor with the Company in the vacation
ownership business, including in the markets most attractive to the Company.
See "--Risks Related to the Westin Agreement; Limited Control of Resorts and
Termination" and "Business--Westin Vacation Club Resorts." Subject to certain
covenants not to compete, the Founders could acquire resort and other hotel
properties that could compete with the Company's vacation ownership business.
DEPENDENCE ON VACATION INTERVAL EXCHANGE NETWORKS; RISK OF INABILITY TO
QUALIFY RESORTS
The attractiveness of Vacation Interval ownership is enhanced significantly
by the availability of exchange networks that allow Vacation Interval owners
to exchange in a particular year the occupancy right in their Vacation
Interval for an occupancy right in another participating network resort.
According to the American Resort Development Association ("ARDA"), the ability
to exchange Vacation Intervals was cited by buyers as a primary reason for
purchasing a Vacation Interval. Several companies, including Resort
Condominiums International ("RCI") and Interval International ("II"), provide
broad-based Vacation Interval exchange services, and the Company's resorts are
currently qualified for participation in the RCI and II exchange networks.
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No assurance can be given that the Company will continue to be able to
qualify its resorts or will be able to qualify its future resorts, for
participation in the RCI or II exchange networks or any other exchange
network. RCI and II are under no obligation to include the Company's resorts
in their exchange networks. If such exchange networks cease to function
effectively, or if the Company's resorts are not accepted as exchanges for
other desirable resorts, the Company's sales of Vacation Intervals could be
materially adversely affected. See "Business--Participation in Vacation
Interval Exchange Networks."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a large extent upon the experience and
abilities of Messrs. Osamu Kaneko, Andrew J. Gessow and Steven C. Kenninger
(the "Founders"), who serve as the Company's Co-Chief Executive Officer,
President and Co-Chief Executive Officer and Chief Operating Officer,
respectively, as well as the abilities of James E. Noyes and Michael A.
Depatie, the Company's Executive Vice President, and Executive Vice President
and Chief Financial Officer, respectively. The Company's success in Europe
will depend to a large extent upon the experience and abilities of Ian Ganney
and Richard Harrington, LSI's founders, who serve as LSI's Chairman and Chief
Executive Officer, respectively.
The Founders have agreed to devote substantially full time to the business
of the Company and not engage in any competitive businesses. However,
notwithstanding their covenants not to compete, the Founders have the right to
pursue certain activities which could divert their time and attention from the
Company's business.
The loss of the services of any of the Founders or Messrs. Ganney or
Harrington could have a material adverse effect on the Company, its operations
and its business prospects. The Company does not maintain "keyman" life
insurance with respect to any of the Founders or Messrs. Ganney and
Harrington. The Company's success is also dependent upon its ability to
attract and maintain qualified development, acquisition, marketing,
management, administrative and sales personnel for which there is keen
competition among the Company's competitors. In addition, the cost of
retaining such key personnel could escalate over time. There can be no
assurance that the Company will be successful in attracting and/or retaining
such personnel.
REGULATION OF MARKETING AND SALES OF VACATION INTERVALS; OTHER LAWS
The Company's marketing and sales of Vacation Intervals and other operations
are, and any North American points-based vacation club system developed by the
Company will be, subject to extensive regulation by the federal government and
the states and foreign jurisdictions in which its resorts are located and in
which Vacation Intervals or Vacation Points are marketed and sold. On a
federal level, the Federal Trade Commission has taken the most active
regulatory role through the Federal Trade Commission Act, which prohibits
unfair or deceptive acts or competition in interstate commerce. Other federal
legislation to which the Company is or may be subject appears in the Truth-in-
Lending Act and Regulation Z, the Equal Opportunity Credit Act and Regulation
B, the Interstate Land Sales Full Disclosure Act, Telephone Consumer
Protection Act, Telemarketing and Consumer Fraud and Abuse Prevention Act,
Fair Housing Act and the Civil Rights Acts of 1964 and 1968. In addition, many
states have adopted specific laws and regulations regarding the sale of
Vacation Interval ownership programs. The laws of most states, including
Florida, California, Arizona, South Carolina, Virginia and Hawaii, require the
Company to file with a designated state authority for its approval a detailed
offering statement describing the Company and all material aspects of the
project and sale of Vacation Intervals. Laws in each state where the Company
sells Vacation Intervals generally grant the purchaser of a Vacation Interval
the right to cancel a contract of purchase at any time within a period ranging
from three to fifteen calendar days following the earlier of the date the
contract was signed or the date the purchaser has received the last of the
documents required to be provided by the Company. Most states have other laws
which regulate the Company's activities, such as real estate licensure;
seller's of travel licensure; anti-fraud laws; telemarketing laws; price, gift
and sweepstakes laws; and labor laws. The Company believes that it is in
material compliance with all federal, state, local and foreign laws and
regulations to which it is currently subject. However, no assurance can be
given that the cost of qualifying under Vacation Interval ownership
regulations in all jurisdictions in which the
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Company desires to conduct sales will not be significant or that the Company
is in fact in compliance with all applicable federal, state, local and foreign
laws and regulations. Certain European laws and regulations regulate LSI's
vacation ownership operations. Any failure to comply with applicable laws or
regulations could have a material adverse effect on the Company. See
"Business--Governmental Regulation."
Certain state and local laws may impose liability on property developers
with respect to construction defects discovered or repairs made by future
owners of such property. Pursuant to such laws, future owners may recover from
the Company amounts in connection with the repairs made to the developed
property.
In addition, from time to time, potential buyers of Vacation Intervals
assert claims with applicable regulatory agencies against Vacation Intervals
salespersons for unlawful sales practices. Such claims could have adverse
implications for the Company in negative public relations and potential
litigation and regulatory sanctions. However, the Company does not believe
that such claims will have a material adverse effect on the Company or its
business.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state and local laws, ordinances and regulations, the
owner of real property generally is liable for the costs of removal or
remediation of certain hazardous or toxic substances located on or in, or
emanating from, such property, as well as related costs of investigation and
property damage. Such laws often impose such liability without regard to
whether the owner knew of, or was responsible for, the presence of such
hazardous or toxic substances. The presence of such substances, or the failure
to properly remediate such substances, may adversely affect the owner's
ability to sell or lease a property or to borrow using such real property as
collateral. Other federal and state laws require the removal or encapsulation
of asbestos-containing material when such material is in poor condition or in
the event of construction, demolition, remodeling or renovation. Other
statutes may require the removal of underground storage tanks. Noncompliance
with these and other environmental, health or safety requirements may result
in the need to cease or alter operations at a property.
As of the date of the Prospectus, Phase I environmental reports (which
typically involve inspection without soil sampling or ground water analysis)
have been prepared by independent environmental consultants for each of the
Company's 34 resorts. In connection with the acquisition and development of
the Embassy Vacation Resort Lake Tahoe and the San Luis Bay Resort, the
independent environmental consultants have identified several areas of
environmental concern. The areas of concern at the Embassy Vacation Resort
Lake Tahoe relate to possible soil and water contamination that originated on
the resort site due to prior uses and to contamination that may migrate onto
the resort site from upgradient sources. California regulatory agencies have
been monitoring the resort site and have required or are in the process of
requiring the responsible parties (presently excluding the Company) to effect
remediation action. The Company has been indemnified by certain of such
responsible parties for certain costs and expenses in connection with
contamination at the Embassy Vacation Resort Lake Tahoe (including Chevron
(USA), Inc.) and does not anticipate incurring material costs in connection
therewith; however, there is no assurance that the indemnitor(s) will meet
their obligations in a complete and timely manner. In addition, the Company's
San Luis Bay Resort is located in an area of Avila Beach, California which has
experienced underground contamination resulting from leaking pipes at a nearby
oil refinery. California regulatory agencies have required the installation of
groundwater monitoring wells on the beach near the resort site, and no demand
or claim in connection with such contamination has been made on the Company,
however, there is no assurance that claims will not be asserted against the
Company with respect to this environmental condition.
With the exception of the above mentioned resorts, the Company is not aware
of any environmental liability that would have a material adverse effect on
the Company's business, assets or results of operations. No assurance,
however, can be given that these reports reveal all environmental liabilities
or that no prior owner created any material environmental condition not known
to the Company. The Company believes that it is in
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compliance in all material respects with all federal, state and local
ordinances and regulations regarding hazardous or toxic substances.
Certain environmental laws impose liability on a previous owner of property
to the extent that hazardous or toxic substances were present during the prior
ownership period. A transfer of the property does not relieve an owner of such
liability. Thus, the Company may have liability with respect to properties
previously sold by its predecessors.
A variety of laws concerning the protection of the environment, health and
safety apply to the European operations, properties and other assets owned by
LSI. See "Business--Governmental Regulations--Environmental Matters."
COSTS OF COMPLIANCE WITH LAWS GOVERNING ACCESSIBILITY OF FACILITIES TO
DISABLED PERSONS
A number of state and federal laws, including the Fair Housing Act and the
Americans with Disabilities Act (the "ADA"), impose requirements related to
access and use by disabled persons on a variety of public accommodations and
facilities. These requirements did not become effective until after January 1,
1991. Although the Company believes that its resorts are substantially in
compliance with laws governing the accessibility of its facilities to disabled
persons, a determination that the Company is not in compliance with the ADA
could result in a judicial order requiring compliance, imposition of fines or
an award of damages to private litigants. The Company is likely to incur
additional costs of complying with the ADA; however, such costs are not
expected to have a material adverse effect on the Company's results of
operations or financial condition. Additional legislation may impose further
burdens or restrictions on property owners (including homeowner associations
at the Existing Resorts) with respect to access by disabled persons. The
ultimate amount of the cost of compliance with such legislation is not
currently ascertainable, and, while such costs are not expected to have a
material effect on the Company, such costs could be substantial. Limitations
or restrictions on the completion of certain renovations may limit application
of the Company's growth strategy in certain instances or reduce profit margins
on the Company's operations. If a homeowners' association at a resort was
required to make significant improvements as a result of non-compliance with
the ADA, Vacation Interval owners may default on their mortgages and/or cease
making required homeowners' association assessment payments. The Company is
not aware of any non-compliance with the ADA, the Fair Housing Act or similar
laws that management believes would have a material adverse effect on the
Company's business, assets or results of operations.
NATURAL DISASTERS; UNINSURED LOSS
In 1992, prior to the Company's purchase of an interest in the Embassy
Vacation Resort Poipu Point, the resort was substantially destroyed by
Hurricane Iniki. The resort was rebuilt with insurance proceeds before the
Company acquired its interest in the resort, but could suffer similar damage
in the future. In September 1995 and July 1996, the Company's St. Maarten
resorts were damaged by hurricanes and could suffer similar damage in the
future. In addition, the Company's other resorts which are or will be located
in Hawaii, Florida and the Caribbean (including the St. John resort which was
damaged by Hurricane Marilyn in 1995) may be subject to hurricanes and damaged
as a result thereof. The Company's resorts located in California and Hawaii
may be subject to damage resulting from earthquakes. The Company currently
maintains insurance coverage which, in management's opinion, is at least as
comprehensive as the coverage maintained by other prudent entities in the
Company's line of business. However, there are certain types of losses (such
as losses arising from acts of war and civil unrest) that are not generally
insured because they are either uninsurable or not economically insurable and
for which the Company does not have insurance coverage. Should an uninsured
loss or a loss in excess of insured limits occur, the Company could lose its
capital invested in a resort, as well as the anticipated future revenues from
such resort and would continue to be obligated on any mortgage indebtedness or
other obligations related to the property. Any such loss could have a material
adverse effect on the Company. See "Business--Insurance, Legal Proceedings."
15
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EFFECTIVE VOTING CONTROL BY EXISTING STOCKHOLDERS; WESTIN DIRECTOR DESIGNATION
The Founders hold substantial amounts of shares of Common Stock (Messrs.
Kaneko, Gessow and Kenninger hold 11.2%, 12.0% and 4.9%, respectively, as of
the date of this Prospectus) which may allow them, collectively, to exert
substantial influence over the election of directors and the management and
affairs of the Company. Accordingly, if such persons vote their shares of
Common Stock in the same manner, they may have sufficient voting power to
determine the outcome of various matters submitted to the stockholders for
approval, including mergers, consolidations and the sale of substantially all
of the Company's assets. Pursuant to the Westin Agreement, during the term
thereof Westin generally will have the right to designate one member of the
Company's Board of Directors, irrespective of its share ownership in the
Company. See "Registering Stockholders," "Description of Capital Stock" and
"Business--Westin Vacation Club Resorts." Such control may result in decisions
which are not in the best interest of the Company. In addition, under certain
circumstances, in the event that the Founders collectively own less than 75%
of the shares of Common Stock owned by them immediately following the closing
of the Initial Public Offering and the consummation of the Consolidation
Transactions, and the Common Stock they own thereafter is less than 75% of the
market value of the Common Stock issued to them in the Initial Public
Offering, then the Company's partner in the Poipu Partnership will be entitled
to require the Company to either dispose of its interest or purchase such
partner's interest in the Poipu Partnership pursuant to the terms and
conditions of the partnership agreement.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. Any payment of future dividends will be in the discretion of the
Company's Board of Directors and will depend upon, among other things, the
Company's earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions in respect of the payment of dividends
and other factors that the Company's Board of Directors deems relevant.
RISKS RELATED TO INTERNATIONAL OPERATIONS
The Company expects that international operations will account for an
increasingly significant percentage of the Company's operations. As a result,
the Company is subject to a number of risks, including, among other things,
difficulties relating to administering its business globally, managing foreign
operations, currency fluctuations, restrictions against the repatriation of
earnings, export requirements and restrictions and multiple and possibly
overlapping tax structures. These risks could have a material adverse effect
on the Company's business, results of operations and financial condition.
Additionally, changes in inflation, interest rates, taxation, regulation or
other social, political, economic or diplomatic developments affecting the
countries in which the Company has (or intends to have) international
operations could have a material adverse effect on the Company's business,
operating results and financial condition.
POTENTIAL CONFLICTS OF INTEREST
Because affiliates of Messrs. Kaneko and Kenninger have operations in the
lodging industry other than those with respect to the development and
operation of vacation ownership resorts, potential conflicts of interest
exist. Affiliates of KOAR Group, Inc. ("KOAR"), a Los Angeles based real
estate acquisition and development company and predecessor of the Company
which is owned by Messrs. Kaneko and Kenninger, have developed and currently
act as the managing general partner of partnerships which own hotels that are
franchised as Embassy Suites hotels (one of which, the Embassy Suites Lake
Tahoe, is located in a market served by the Company) and a residential
condominium project overlooking the ocean in Long Beach, California (a market
in which the Company may operate in the future). Messrs. Kaneko and Kenninger
will continue to devote a portion of their time to KOAR's hotel business and
to meeting their duties and responsibilities to investors in such entities.
16
<PAGE>
Additionally, notwithstanding their covenants not to compete, the Founders
have the right to pursue certain activities which could divert their time and
attention from the Company's business and result in conflicts with the
Company's business. The Founders are evaluating the acquisition of other hotel
properties in Hawaii, which at a future date may be converted to accommodate
vacation ownership operations. However, any such acquisition from the Founders
would be subject to the approval of the Company's Independent Directors.
RISKS RELATED TO WESTIN AGREEMENT; LIMITED CONTROL OF RESORTS AND TERMINATION
The Westin Agreement may involve certain additional risks to the Company's
future operations. The Westin Agreement imposes certain restrictions on the
Company's ability to develop certain vacation ownership resorts in conjunction
with hotel operators other than Westin. Generally, the Company is required,
subject to certain exceptions involving Embassy Vacation Resorts and Promus,
to submit for Westin's consideration any "four-star" or "five-star"
development opportunity that the Company has determined to pursue in North
America, Mexico and the Caribbean. In the event Westin determines not to
proceed with the Company to develop such resort, the Company would be free
only to develop the resort as a "non-branded" property or as a property
branded as an Embassy Vacation Resort or in conjunction with other upscale
operators, but excluding specified operators of luxury hotels and resorts. In
addition, resorts acquired or developed pursuant to the Westin Agreement,
including the St. John resort, will be owned by partnerships, limited
liability companies or similar entities in which each of Westin and the
Company will own a 50% equity interest and have an equal voice in management.
Accordingly, the Company will not be able to control such resorts or the
applicable entities. In addition, the Westin Agreement will be terminable by
either party if certain thresholds relating to development or acquisitions of
resorts are not met, in the event of certain changes in management of Westin
or the Company or in the event of an acquisition or merger of either party.
Pursuant to the Westin Agreement, Westin and the Company intend to enter into
detailed definitive agreements to implement the Westin Agreement, including
operating agreements. There can be no assurance that the parties will be able
to reach such definitive agreements. See "Business--Westin Vacation Club
Resorts" and "Risk Factors--Effective Voting Control of Existing Stockholders;
Westin Director Designation."
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND THE COMPANY'S
CHARTER AND BYLAWS
Certain provisions of the Company's articles of incorporation (the
"Charter") and bylaws (the "Bylaws"), as well as Maryland corporate law, may
be deemed to have anti-takeover effects and may delay, defer or prevent a
takeover attempt that a stockholder might consider to be in the stockholder's
best interest. For example, such provisions may (i) deter tender offers for
Common Stock, which offers may be beneficial to stockholders or (ii) deter
purchases of large blocks of Common Stock, thereby limiting the opportunity
for stockholders to receive a premium for their Common Stock over then-
prevailing market prices. These provisions include the following:
Preferred Shares. The Charter authorizes the Board of Directors to issue
preferred stock in one or more classes and to establish the preferences and
rights (including the right to vote and the right to convert into Common
Stock) of any class of preferred stock issued. No preferred stock will be
issued or outstanding as of the closing of either of the Offerings.
Staggered Board. The Board of Directors of the Company has three classes of
directors. The terms of the first, second and third classes will expire in
1997, 1998 and 1999, respectively. Directors for each class will be chosen for
a three-year term upon the expiration of the term of the current class,
beginning in 1997. The affirmative vote of two-thirds of the outstanding
Common Stock is required to remove a director.
Maryland Business Combination Statute. Under the Maryland General
Corporation Law ("MGCL"), certain "business combinations" (including the
issuance of equity securities) between a Maryland corporation and any person
who owns, directly or indirectly, 10% or more of the voting power of the
corporation's shares of capital stock (an "Interested Stockholder") must be
approved by a supermajority (i.e., 80%) of voting shares. In addition, an
Interested Stockholder may not engage in a business combination for five years
following the date he or she became an Interested Stockholder.
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<PAGE>
Maryland Control Share Acquisition. Maryland law provides that "Control
Shares" of a corporation acquired in a "Control Share Acquisition" have no
voting rights except to the extent approved by a vote of two-thirds of the
votes eligible under the statute to be cast on the matter. "Control Shares"
are voting shares of beneficial interest which, if aggregated with all other
such shares of beneficial interest previously acquired by the acquiror, would
entitle the acquiror directly or indirectly to exercise voting power in
electing directors within one of the following ranges of voting power: (i)
one-fifth or more but less than one-third, (ii) one-third or more but less
than a majority or (iii) a majority of all voting power. Control Shares do not
include shares of beneficial interest the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. A
"Control Share Acquisition" means the acquisition of Control Shares, subject
to certain exceptions.
If voting rights are not approved at a meeting of stockholders then, subject
to certain conditions and limitations, the issuer may redeem any or all of the
Control Shares (except those for which voting rights have previously been
approved) for fair value. If voting rights for Control Shares are approved at
a stockholders meeting and the acquiror becomes entitled to vote a majority of
the shares of beneficial interest entitled to vote, all other stockholders may
exercise appraisal rights.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of Common Stock, or the potential for
such sales, could adversely affect prevailing market prices. The shares of
Common Stock issued in the Consolidation Transactions, the PRG Merger and the
LSI Acquisition are subject to the limitations of Rule 144 of the Securities
Act ("Rule 144"). The holders of the shares issued in the Consolidation
Transactions, the PRG Merger and the LSI Acquisition have been granted certain
registration rights pursuant to which the Company has agreed to file the shelf
registration statement of which this Prospectus is a part with the Commission
for the purpose of registering the sale of such shares of Common Stock.
Sales in the public market of substantial amounts of the Company's Common
Stock issued in the Acquisitions could also adversely affect prevailing market
prices. Additionally, sales of substantial amounts of the Company's Common
Stock pursuant to this Prospectus could adversely affect prevailing market
prices.
The Founders have only elected to register a portion of their shares in the
shelf registration statement of which this Prospectus is a part pursuant to
such registration rights. However, they reserve the right to register their
remaining shares pursuant to another shelf registration statement.
As of the date of this Prospectus, there were (i) outstanding stock options
to purchase approximately 2,300,000 shares of Common Stock which have been
granted to executive officers, other key employees, independent directors and
independent contractors of the Company under the 1996 Equity Participation
Plan (less than 20% of which are presently exercisable), (ii) up to 500,000
shares of Common Stock that may be sold pursuant to the Company's Employee
Stock Purchase Plan (none of which have been sold to date) and (iii) 3,024,660
shares of Common Stock initially issuable upon conversion of the Convertible
Notes.
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<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds of the sale of Common Stock
by the Registering Stockholders. In connection with the filing of the shelf
registration of which this Prospectus is a part, the Company will bear the
estimated expenses set forth on the cover of this Prospectus.
CONSOLIDATED CAPITALIZATION
The following table sets forth, as of June 30, 1997, the total consolidated
capitalization of the Company. The as adjusted information gives effect to the
(i) the LSI Acquisition and (ii) the Note Offering and the application of the
net proceeds therefrom.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
------------------------------------------
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
AS ADJUSTED
FOR THE
THE NOTE LSI ACQUISITION/
ACTUAL LSI OFFERING NOTE OFFERING
-------- ------ -------- ----------------
<S> <C> <C> <C> <C>
Cash and cash equivalents........... $ 44,361 $7,619 $111,593 $163,573
======== ====== ======== ========
Debt:
Notes payable to financial
institutions(a).................. $154,280 $ 516 $(52,375) $102,421
9 3/4% Senior Subordinated Notes
due 2007(b)...................... -- -- 198,468 198,468
5 3/4% Convertible Subordinated
Notes due 2007................... 138,000 -- -- 138,000
-------- ------ -------- --------
Total debt...................... 292,280 516 146,093 438,887
Stockholders' equity:
Common Stock, $0.01 par value;
22,292,070 issued and
outstanding; as adjusted for the
LSI Acquisition, 23,623,004
shares issued and outstanding(c). 223 14 -- 237
Additional paid-in capital........ 155,145 134 -- 155,279
Retained earnings................. 23,047 7,659 -- 30,706
-------- ------ -------- --------
Total stockholders' equity........ 178,415 7,807 -- 186,222
-------- ------ -------- --------
Total capitalization............ $470,695 $8,323 $146,093 $625,111
======== ====== ======== ========
</TABLE>
- --------
(a) Includes notes collateralized by mortgages receivable.
(b) Net of original issue discount of $1,532,000.
(c) Does not include an aggregate of 2,500,000 shares of Common Stock reserved
for issuance upon exercise of options granted pursuant to the Company's
1996 Equity Participation Plan, as amended, 500,000 shares of Common Stock
reserved for issuance pursuant to the Employee Stock Purchase Plan and
3,024,660 shares of Common Stock initially issuable upon conversion of the
Convertible Notes.
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<PAGE>
BUSINESS
OVERVIEW
The Company is one of the largest developers and operators of vacation
ownership resorts in North America and Europe. The Company is devoted
exclusively to vacation ownership operations and, as of the date of this
Prospectus owns 34 vacation ownership resorts located in a variety of popular
resort destinations. The Company's North American resorts are located in
Arizona (six resorts), California (five resorts), Florida (three resorts),
Netherlands Antilles (two resorts), Virginia (two resorts), Hawaii, Missouri,
South Carolina, Texas and the U.S. Virgin Islands. The Company's European
resorts are located in England's Lake District and Midlands (three resorts),
Southern England, the sun coast of Spain (three resorts), the Spanish island
of Menorca (two resorts), Lanzarote in the Canary Islands and the Austrian
Alps.
The Company's principal operations currently consist of (i) acquiring,
developing and operating vacation ownership resorts, (ii) marketing and
selling vacation ownership interests in its North American resorts, which
typically entitle the buyer to use a fully-furnished vacation residence,
generally for a one-week period each year in perpetuity, (iii) marketing and
selling Vacation Points at its European resorts and (iv) providing consumer
financing to individual purchasers for the purchase of Vacation Intervals at
its resorts. The Company currently sells Vacation Intervals at 30 of these 34
resorts; sales at three resorts have been substantially completed; and sales
at one resort have yet to commence. The Company also provides resort
management and maintenance services at its resorts for which it receives fees
paid by the resorts' homeowners' associations.
As part of its growth and acquisition strategy, in May 1997 the Company
consummated the PRG Merger, acquiring 100% of the capital stock of PRG in
exchange for the issuance of 2,401,229 shares of the Company's Common Stock.
PRG is a Williamsburg, Virginia based developer, owner and operator of two
vacation ownership resorts. Based upon the closing price of the Company's
Common Stock on the Nasdaq National Market on May 15, 1997, the
2,401,229 shares of Common Stock issued in the PRG Merger were valued at an
aggregate of approximately $59.1 million and represented on a pro forma basis
10.8% of the shares of Common Stock outstanding on such date.
Additionally, in August 1997 the Company consummated the LSI Acquisition.
The Company acquired 100% of LSI's capital stock in exchange for the issuance
of 1,330,934 shares of the Company's Common Stock. LSI is a United Kingdom-
based developer, owner and operator of 11 vacation ownership resorts and a
European points-based vacation club system. Based on the closing price of the
Company's Common Stock on the Nasdaq National Market on August 28, 1997, the
1,330,934 shares of Common Stock issued in the LSI Acquisition were valued at
our aggregate of approximately $48.2 million and represented on a pro forma
basis 5.6% of the shares of Common Stock outstanding on such date. In addition
to the Common Stock issued in the LSI Acquisition, the Company paid cash
consideration of approximately $1,036,000 to a former LSI shareholder. See
"Risk Factors--Risks Related to the AVCOM Merger, PRG Merger and LSI
Acquisition."
On a pro forma basis, giving effect to the Acquisitions, the Company sold
14,997 Vacation Intervals and 159,953 Vacation Points at its resorts for the
twelve month period ended June 30, 1997, an increase of 48.9% and 50.8%,
respectively, compared to 10,073 Vacation Intervals and 106,040 Vacation
Points for the twelve month period ended June 30, 1996. The pro forma number
of resorts increased through acquisitions and development to 34 at June 30,
1997 from 28 at June 30, 1996.
THE VACATION OWNERSHIP INDUSTRY
The Market. The resort component of the leisure industry primarily is
serviced by two separate alternatives for overnight accommodations: commercial
lodging establishments and vacation ownership resorts. Commercial lodging
consists of hotels and motels in which a room is rented on a nightly, weekly
or monthly basis for the duration of the visit and is supplemented by rentals
of privately-owned condominium units or homes. For many vacationers,
particularly those with families, a lengthy stay at a quality commercial
lodging establishment can be very expensive, and the space provided to the
guest relative to the cost (without renting multiple rooms) is not
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<PAGE>
economical for vacationers. Also, room rates and availability at such
establishments are subject to change periodically. In addition to providing
improved lifestyle benefits to owners, vacation ownership presents an
economical alternative to commercial lodging for vacationers.
First introduced in Europe in the mid-1960's, vacation ownership has been
one of the fastest growing segments of the hospitality industry over the past
two decades. According to ARDA, during the fifteen year period ending in 1994
(the most recent year for which ARDA statistics are available), worldwide
vacation ownership sales volume for the vacation ownership industry increased
from $490 million in 1980 to $4.8 billion in 1994, representing a 17%
compounded annual growth rate. A year-by-year presentation of annual vacation
ownership sales volume follows. Based on industry data, the Company believes
that the total Vacation Interval sales volume for the vacation ownership
industry exceeded $5.5 billion in 1995 and $6.0 billion in 1996.
According to RCI Consulting, the United States and Europe are the largest
and second largest vacation ownership markets in the world, respectively.
Approximately 50% of the world's vacation owners have purchased Vacation
Intervals or vacation points at resorts or clubs in the United States and
approximately 19% of the world's vacation owners purchased in Europe.
As shown in the following charts, according to ARDA the worldwide vacation
ownership industry has expanded significantly since 1980 both in Vacation
Interval sales volume and number of Vacation Interval owners.
[CHARTS APPEAR HERE]
NUMBER OF VACATION OWNERS
(in millions)
1980.......... 0.155
1981.......... 0.22
1982.......... 0.335
1983.......... 0.47
1984.......... 0.62
1985.......... 0.805
1986.......... 0.97
1987.......... 1.125
1988.......... 1.31
1989.......... 1.53
1990.......... 1.8
1991.......... 2.07
1992.......... 2.363
1993.......... 2.76
1994.......... 3.144
DOLLAR VOLUME OF VACATION
OWNERSHIP SALES
(in billions)
1980.......... $0.49
1981.......... 0.965
1982.......... 1.165
1983.......... 1.34
1984.......... 1.735
1985.......... 1.58
1986.......... 1.61
1987.......... 1.94
1988.......... 2.39
1989.......... 2.97
1990.......... 3.24
1991.......... 3.74
1992.......... 4.25
1993.......... 4.505
1994.......... 4.76
Source: American Resort Development Association, The 1995 Worldwide Timeshare
Industry.
ARDA reports and other industry data indicate that during the past decade
the following factors have contributed to the increased acceptance of the
vacation ownership concept among the general public and the substantial growth
of the vacation ownership industry:
. increased consumer awareness of the value and benefits of vacation
ownership, including the cost savings relative to other lodging
alternatives;
. increased flexibility of vacation ownership due to the growth of
international exchange organizations;
. improvement in the quality of accommodations and management of vacation
ownership resorts;
. increased consumer confidence resulting from new consumer protection
regulations and the entrance of brand name national lodging companies to
the industry; and
. increased availability of consumer financing for purchasers of Vacation
Intervals.
The vacation ownership industry traditionally has been highly fragmented and
dominated by a large number of local and regional resort developers and
operators, each with small resort portfolios generally of differing quality.
The Company believes that one of the most significant factors contributing to
the current success of the
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<PAGE>
vacation ownership industry is the entry into the market of some of the
world's major lodging, hospitality and entertainment companies. Such major
companies which now operate or are developing Vacation Interval resorts
include Marriott, Disney, Hilton, Hyatt, Four Seasons and Inter-Continental,
as well as Promus and Westin. Unlike the Company, however, the vacation
ownership operations of each of Marriott, Disney, Hilton, Hyatt, Four Seasons,
Inter-Continental and Westin comprise only a small portion of such companies'
overall operations.
The Company believes that national lodging and hospitality companies are
attracted to the vacation ownership concept because of the industry's
relatively rapid recent growth rate and relatively high profit margins. In
addition, such companies recognize that Vacation Intervals provide an
attractive alternative to the traditional hotel-based vacation and allow the
hotel companies to leverage their brands into additional resort markets where
demand exists for accommodations beyond traditional hotels.
The Consumer. According to information compiled by ARDA for 1994 (the most
recent year for which statistics are available), the prime market for Vacation
Intervals is customers in the 40-55 year age range who are reaching the peak
of their earning power and are gaining more leisure time. The median age of a
Vacation Interval buyer at the time of purchase is 46. The median annual
household income of current Vacation Interval owners in the United States is
approximately $63,000, with approximately 35% of all Vacation Interval owners
having annual household incomes greater than $75,000 and approximately 17% of
such owners having annual household incomes greater than $100,000. However,
despite the growth in the vacation ownership industry by December 31, 1994
Vacation Interval ownership has achieved only an approximate 3.0% market
penetration among United States households with income above $35,000 per year
and 3.9% market penetration among United States households with income above
$50,000 per year. In addition, as of such date, the industry had achieved only
a 1.0% market penetration among European households with income above $30,000
per year.
According to the ARDA study, the three primary reasons cited by consumers
for purchasing a Vacation Interval are (i) the ability to exchange the
Vacation Interval for accommodations at other resorts through exchange
networks (cited by 82% of Vacation Interval purchasers), (ii) the money
savings over traditional resort vacations (cited by 61% of purchasers) and
(iii) the quality and appeal of the resort at which they purchased a Vacation
Interval (cited by 54% of purchasers). According to the ARDA study, Vacation
Interval buyers have a high rate of repeat purchases: approximately 41% of all
Vacation Interval owners own more than one Vacation Interval representing
approximately 65% of the industry inventory and approximately 51% of all
owners who bought their first Vacation Interval before 1985 have since
purchased a second Vacation Interval. In addition, the ARDA study indicates
that customer satisfaction increases with length of ownership, age, income,
multiple location ownership and accessibility to Vacation Interval exchange
networks.
The Company believes it is well positioned to take advantage of current
demographic trends, primarily because of the variety and quality of its resort
locations and its participation in the RCI and II exchange networks. However,
neither RCI nor II is under any obligation to continue to include the
Company's resorts in its exchange network. The Company expects the vacation
ownership industry to continue to grow as the baby-boom generation continues
to enter the 40-55 year age bracket, the age group which purchased the most
Vacation Intervals in 1994.
BUSINESS STRATEGY
The Company's objective is to become the world's leading developer and
operator of vacation ownership resorts. To meet this objective, the Company
intends to (i) increase sales and financing of Vacation Intervals at its
resorts through broader-based marketing efforts and through the construction
of additional Vacation Interval inventory, (ii) acquire, convert and develop
additional resorts to be operated as Embassy Vacation Resorts, Westin Vacation
Club resorts and non-branded resorts, capitalizing on the acquisition and
marketing opportunities to be provided as a result of its relationships with
Promus, Westin, selected financial institutions and its position in certain
markets and the vacation ownership industry generally, (iii) improve operating
margins by reducing borrowing costs and reducing its sales and marketing
expenses as a percentage of revenues over time, (iv) acquire additional
Vacation Interval inventory, operating companies, management contracts,
Vacation
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<PAGE>
Interval mortgage portfolios or other vacation ownership-related assets that
may be integrated into the Company's operations and (v) develop and operate a
North American points-based vacation club system, as well as expand LSI's
existing points-based vacation club in Europe. The key elements of the
Company's strategy are described below.
Sales and Expansion at the Company's Resorts. The Company intends to
continue sales of Vacation Intervals at its resorts by adding Vacation
Interval inventory through the construction of new development units and by
broadening marketing efforts. As of June 30, 1997 and after giving effect to
the LSI Acquisition, (i) the Company had a current inventory of 29,225
Vacation Intervals and 244,633 Vacation Points, (ii) the Company was in the
process of developing or had plans to develop an additional 107,355 Vacation
Intervals at its resorts and (iii) LSI was in the process of developing or has
plans to develop additional units to accommodate an additional 276,000 points
in LSI's Grand Vacation Club system. In light of the foregoing, the Company
believes it is well-positioned to expand sales of Vacation Intervals at its
resorts as a result of its existing supply of Vacation Intervals in inventory,
as well as planned expansion. Based on information received from the Company's
customers and sales agents, the Company believes that in addition to basic
quality, expanded resort amenities and larger, multi-purpose units, current
and potential buyers want enhanced flexibility in scheduling their vacations,
a broader distribution of quality exchange locations and the availability of
other value-priced services. As a major developer and operator of vacation
ownership resorts in North America, the Company believes that it has acquired
skill and expertise both in the development and operation of vacation
ownership resorts and in the marketing and sales of Vacation Intervals and
that it has acquired the breadth of resorts which give it a competitive
advantage.
Acquisition and Development of New Resorts. The Company intends to acquire
and develop additional resorts to be operated as branded Embassy Vacation
Resorts, Westin Vacation Club resorts and as non-branded resorts. To implement
its business strategy, the Company intends to pursue resort acquisitions and
developments in a number of vacation destinations that will complement the
Company's operations. The Company believes that its relationships with Promus,
Westin and selected financial institutions that control resort properties will
provide it with acquisition, development and hotel-to-vacation ownership
conversion opportunities and will allow it to take advantage of currently
favorable market opportunities to acquire resort and condominium properties to
be operated as vacation ownership resorts. Since the 1992 inception of the
Company's predecessor's resort acquisition and development business, the
Company believes it has been able to purchase hotel, condominium and resort
properties and/or entitled land at less than either their initial development
cost or replacement cost and remodel or convert such properties for sale and
use as vacation ownership resorts. However, there can be no assurance that
such preferential purchases can be effected in the future. See "Risk Factors--
Risks of Development and Construction Activities." In addition to acquiring
existing resort and hotel-to-vacation ownership conversion properties, the
Company also seeks to develop resorts located in destinations where it
discerns a strong demand, which the Company anticipates will enable it to
achieve attractive rates of return.
The Company considers the potential acquisition or development of vacation
ownership resorts in locations based on existing vacation ownership
competition in the area as well as existing overall demand for accommodations.
In evaluating whether to acquire, convert or develop a vacation ownership
resort in a particular location, the Company analyzes relevant demographic,
economic and financial data. Specifically, the Company considers the following
factors, among others, in determining the viability of a potential new
vacation ownership resort in a particular location: (i) supply/demand ratio
for the purchase of Vacation Intervals in the relevant market and for Vacation
Interval exchanges into the relevant market by other Vacation Interval owners,
(ii) the market's growth as a vacation destination, (iii) the ease of
converting a hotel or condominium property into a vacation ownership resort
from a regulatory and construction point of view, (iv) the availability of
additional land at or nearby the property for potential future development and
expansion, (v) competitive accommodation alternatives in the market, (vi)
uniqueness of location and (vii) barriers to entry that would tend to limit
competition.
The Company believes that its relationships with Promus and Westin will
provide it with attractive acquisition, conversion, development and marketing
opportunities and uniquely position the Company to offer
23
<PAGE>
Vacation Intervals at a variety of attractive resort destinations to multiple
demographic groups in the vacation ownership market.
Through the Westin Agreement, the Company has the exclusive right through
May 2001, to jointly acquire, develop and market with Westin "four-star" and
"five-star" vacation ownership resorts located in North America, Mexico and
the Caribbean. The Company's rights also cover the conversion of Westin hotels
to vacation ownership resorts. In addition, pursuant to the Westin Agreement,
it is expected that Westin will provide the Company with lead generation
assistance and marketing support at the Westin Vacation Club resorts and
Promus currently provides such assistance at Embassy Vacation Resorts. The
Embassy Suites hotels owned by two of the Company's Founders also provide lead
generation assistance and support to the Company with respect to the marketing
of the Company's resorts.
The Company's relationships with Promus and Westin also provide it with a
competitive advantage in the vacation ownership industry by allowing it to
offer two separate branded products in both the upscale and luxury market
segments. The Company believes that brand affiliation is becoming an important
characteristic in the vacation ownership industry as it provides the consumer
an important element of reliability and image in a fragmented and largely non-
branded industry. Through its Embassy Vacation Resorts and Westin Vacation
Club resorts, the Company believes it will be able to provide Vacation
Interval buyers with consistent quality in their vacation ownership purchases.
In addition, through its non-branded resorts the Company will be able to
appeal to the value-conscious consumer who seeks the best value for the
vacation dollar and does not seek affiliation with brand-name lodging
companies.
Improvement of Operating Margins. As the Company grows, management believes
that its larger number of resorts relative to its competitors will provide it
with additional revenue opportunities and the potential for cost savings. The
Company believes that increased efficiency, reduction in on-site
administrative requirements and a multi-resort management system will reduce
operating costs and allow the Company to experience increased margins by
spreading operating and corporate overhead costs over a larger revenue base.
In addition, operating margins at a resort tend to improve over time as a
greater percentage of Vacation Intervals are sold, resulting in lower selling,
marketing and advertising expenses. The Company also believes that it will
reduce sales and marketing expenses over time as a result of the lead
generation assistance provided or to be provided by Westin and Promus and by
targeting potential buyers through Westin Vacation Club resorts and Embassy
Suites hotels.
Acquisition of Vacation Ownership Assets, Management Contracts and Operating
Companies. The Company's relationships in the vacation ownership and financial
communities and the size and geographic diversity of its portfolio of
properties provide the Company access to a variety of acquisition
opportunities. The Company believes that its proven acquisition and
development record and public company status give the Company a competitive
advantage in acquiring assets, businesses and operations in the fragmented
vacation ownership industry. Examples of such acquisitions may include
acquiring additional Vacation Interval inventory, operating companies,
management contracts, Vacation Interval mortgage portfolios and properties
which may be integrated into the Company's operations. The acquisitions of
AVCOM, PRG and LSI are recent examples of this aspect of the Company's
business strategy.
Development of Points-Based Vacation Club System. The Company does not
currently operate a points-based vacation club system. However, as a result of
the LSI Acquisition, the Company acquired LSI's European points-based Grand
Vacation Club system. The Company intends to expand this system in Europe and
develop a points-based vacation club system in North America. In general,
under a points-based vacation club system, members purchase an annual
allotment of points which can be redeemed for occupancy rights at the club's
participating resorts. Compared to other vacation ownership arrangements, the
points-based system provides members significant flexibility in planning
vacations as the number of points that are required for a stay at any one
resort varies depending upon a variety of factors, including the resort
location, the size of the unit, the vacation season and the days of the week
used. Under this system, members can select vacations according to their
schedules, space needs and available points. Subject to certain restrictions,
members are typically allowed
24
<PAGE>
to carry over for one year any unused points and to "borrow" points from the
forthcoming year. In addition, members are required to pay annual fees for
certain maintenance and management costs associated with the operation of the
resorts based on the number of points to which they are entitled. See "Risk
Factors--Risks Related to the AVCOM Merger, PRG Merger and LSI Acquisition."
DESCRIPTION OF THE COMPANY'S RESORTS
The Company believes that, based on ARDA and Vacation Ownership World
reports and the Company's extensive knowledge of the industry, it is the only
developer and operator of vacation ownership resorts that offers Vacation
Intervals in each of the three principal price segments of the market (value,
upscale (characterized by high quality accommodations and service) and luxury
(characterized by elegant accommodations and personalized service)). Since the
inception of the vacation ownership development and acquisition business of
the Company's predecessors, the Company has developed or acquired 34 vacation
ownership resorts in North America and Europe, of which 30 are currently in
sales. Of the 34 resorts currently owned and operated by the Company, three
resorts are partially-owned by the Company. In addition, as a result of the
LSI Acquisition, the Company now operates a points-based vacation club in
Europe. Each of the Company's four resort types is described below:
Non-Branded Resorts. The Company's non-branded resorts, which are not
affiliated with any hotel chain, are positioned in the value price segment of
the market. Vacation Intervals at the Company's 19 non-branded resorts (which
include the All Seasons Resorts and the PRG Resorts) generally sell for $6,000
to $15,000 and are targeted to buyers with annual incomes ranging from $35,000
to $80,000. The Company believes its non-branded resorts offer buyers an
economical alternative to branded vacation ownership resorts (such as Embassy
Vacation Resorts and Westin Vacation Club resorts) or traditional vacation
lodging alternatives.
Embassy Vacation Resorts. The Company's Embassy Vacation Resorts are
positioned in the upscale price segment of the market and are characterized by
high quality accommodations and service. Vacation Intervals at the Company's
three Embassy Vacation Resorts generally sell for $14,000 to $20,000 and are
targeted to buyers with annual incomes ranging from $60,000 to $150,000.
Embassy Vacation Resorts are designed to provide vacation ownership
accommodations that offer the same high quality and value that is represented
by the more than 135 Embassy Suites hotels throughout North America. Under the
terms of an exclusive five-year agreement, Promus and Vistana, Inc. will
jointly acquire, develop, manage and market vacation ownership resorts in
North America under Promus brand names. As part of the exclusive agreement,
Promus and Vistana, Inc. will designate selected markets for development
(which markets currently include Kissimmee, Florida and Myrtle Beach, South
Carolina). The Company is not precluded from using the Embassy Vacation Resort
name in connection with resorts acquired during the term of the agreement. The
Company is one of two licensees and operators of Embassy Vacation Resorts, and
is currently evaluating additional resorts that could be operated as Embassy
Vacation Resorts.
Westin Vacation Club Resorts. The Company's Westin Vacation Club resorts are
positioned in the luxury price segment of the market and are characterized by
elegant accommodations and personalized service. Through the Westin Agreement,
the Company has the exclusive right through May 2001 to jointly acquire,
develop and market with Westin "four-star" and "five-star" vacation ownership
resorts located in North America, Mexico and the Caribbean. Vacation Intervals
at Westin Vacation Club resorts generally will sell for $16,000 to $25,000 and
will be targeted to buyers with annual incomes ranging from $80,000 to
$250,000. The Westin Agreement represented Westin's entry into the vacation
ownership market.
LSI's Grand Vacation Club. As a result of the LSI Acquisition, the Company
acquired LSI's Grand Vacation Club points-based system which LSI currently
markets to buyers principally in the United Kingdom. LSI's Grand Vacation Club
allows members to purchase an annual allotment of points that can be redeemed
for occupancy rights at LSI's 11 European resorts and at the club's other
participating resorts. Points in LSI's Grand Vacation Club can typically be
purchased for approximately $215 a point. A typical one week stay at an LSI
Resort requires approximately 46 points.
25
<PAGE>
THE RESORTS
The following tables set forth certain information regarding each of the
Company's 34 existing resorts, including location, date acquired by the
Company, the number of existing and total potential units at the resort and,
where applicable, the number of Vacation Intervals currently available for
sale and occupancy and additional expansion potential. Of the resorts set
forth below, the Embassy Vacation Resort Poipu Point and the North Bay Resort
at Lake Arrowhead and the Westin Vacation Club at St. John are partially owned
by the Company. The exact number of units, Vacation Intervals and Vacation
Points ultimately achieved may differ from the following estimates based on
future land planning and site layout considerations.
<TABLE>
<CAPTION>
UNITS AT RESORT VACATION INTERVALS AT RESORT
------------------------------ ----------------------------------
DATE POTENTIAL CURRENT POTENTIAL
RESORT LOCATION ACQUIRED CURRENT(A) EXPANSION(B) TOTAL INVENTORY(C) EXPANSION(D) TOTAL
------ -------- -------- ---------- ------------ ----- ------------ ------------ -------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
NON-BRANDED RESORTS:
Cypress Pointe Resort Lake Buena November 1992 224 276(e) 500 1,461 14,076(e) 15,537
Vista, Florida
Plantation at Fall Creek Branson, July 1993 114 286(f) 400 554 14,586(f) 15,140
Missouri
Royal Dunes Resort Hilton Head April 1994 40 15(g) 55 374 765(g) 1,139
Island, South
Carolina
Royal Palm Beach Club St. Maarten, July 1995 140 (h) 140 1,296 (h) 1,296
Netherlands
Antilles
Flamingo Beach Club St. Maarten, July 1995 172 85(i) 257 1,715 4,335(i) 6,050
Netherlands
Antilles
San Luis Bay Resort Avila Beach, June 1996 68 62(j) 130 316 3,162(j) 3,478
California
The Savoy at Miami Beach, August 1997 -- 68(k) 68 -- 3,468(k) 3,468
South Beach Florida
----- ----- ----- ------ ------- -------
TOTAL............................................... 758 792 1,550 5,716 40,392 46,108
EMBASSY VACATION RESORTS:
Poipu Point(l) Koloa, Kauai, November 1994 219(m) -- 219 9,138 -- 9,138
Hawaii
Grand Beach Orlando, Florida January 1995 126 304(n) 430 2,817 15,504(n) 18,321
Lake Tahoe South Lake Tahoe,
California May 1996 62 148(o) 210 2,411 7,548(o) 9,959
----- ----- ----- ------ ------- -------
TOTAL............................................... 407 452 859 14,366 23,052 37,418
WESTIN VACATION CLUB:
St. John(p) St. John, U.S.
Virgin Islands May 1997 48 48(q) 96 1,715 2,448(q) 4,163
----- ----- ----- ------ ------- -------
TOTAL............................................... 48 48 96 1,715 2,448 4,163
ALL SEASONS RESORTS:
Scottsdale Villa Mirage Scottsdale,
Resort Arizona February 1997 64 104(r) 168 1,289 5,304(r) 6,593
The Ridge on Sedona
Golf Resort Sedona, Arizona February 1997 12 108(s) 120 219 5,508(s) 5,727
Sedona Springs Resort Sedona, Arizona February 1997 40 -- 40 52 -- 52
Sedona Summit Resort Sedona, Arizona February 1997 60 -- 60 933 -- 933
Villas of Poco Diablo Sedona, Arizona February 1997 33 -- 33 58 -- 58
Villas of Sedona Sedona, Arizona February 1997 40 -- 40 197 -- 197
North Bay Resort(t) Lake Arrowhead, February 1997 13 -- 13 85 -- 85
California
Tahoe Beach & Ski Club South Lake Tahoe, February 1997 140 -- 140 900 -- 900
California
Tahoe Seasons Resort South Lake Tahoe, February 1997 21(u) -- 21 808 -- 808
California
Villas on the Lake Lake Conroe,
Texas February 1997 37 64(v) 101 1,523 3,264(v) 4,787
----- ----- ----- ------ ------- -------
TOTAL............................................... 460 276 736 6,064 14,076 20,140
PRG RESORTS:
Powhatan Plantation Williamsburg,
Virginia May 1997 405 95(w) 500 636 4,845(w) 5,481
Greensprings Plantation Williamsburg,
Virginia May 1997 58 442(x) 500 728 22,542(x) 23,270
----- ----- ----- ------ ------- -------
TOTAL............................................... 463 537 1,000 1,364 27,387 28,751
----- ----- ----- ------ ------- -------
TOTAL UNITS AND
VACATION INTERVALS...................................... 2,136 2,105 4,241 29,225 107,355 136,580
===== ===== ===== ====== ======= =======
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
UNITS AT RESORT VACATION POINTS IN SYSTEM
----------------------------- -----------------------------------
DATE POTENTIAL CURRENT POTENTIAL
RESORT LOCATION ACQUIRED CURRENT(Y) EXPANSION(Z) TOTAL INVENTORY(AA) EXPANSION(BB) TOTAL
- ------ -------- -------- ---------- ------------ ----- ------------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LSI RESORTS:
Pine Lake Resort Lake District, England August 1997 112 -- 112
Woodford Bridge
Country
Club Devon, England August 1997 72 50 122
Wychnor Park
Country Club Midlands, England August 1997 44 20 64
Flanesford
Priory Midlands, England August 1997 16 -- 16
Los Amigos Beach
Club Costa Del Sol, Spain August 1997 140 50 190
Royal Oasis Club
at
La Quinta Costa Del Sol, Spain August 1997 68 -- 68 244,633 276,000 520,633
Royal Oasis Club
at
Benal Beach Costa Del Sol, Spain August 1997 108 -- 108
White Sands
Beach Club Menorca, Spain August 1997 48 -- 48
White Sands
Country Club Menorca, Spain August 1997 51 -- 51
Club del Carmen Lanzarote, Canary Islands August 1997 67 -- 67
Alpine Club Schladming, Austria August 1997 69 -- 69
--- --- ---
TOTAL UNITS AND
VACATION POINTS...................................... 795 120 915
=== === ===
</TABLE>
- -------
(a) Current units at each resort represents only those units that have
received their certificate of occupancy as of June 30, 1997. The Company
generally is able to sell 51 Vacation Intervals with respect to each unit
at its resorts (the 52nd week is generally utilized for maintenance).
(b) Potential expansion units at each resort includes, as of June 30, 1997,
(i) units currently under construction that have not yet received their
certificate of occupancy and (ii) units planned to be developed on land
currently owned by the Company or under option to be acquired which have
not yet received their certificate of occupancy and which are not
currently under construction.
(c) Current inventory of Vacation Intervals at each resort represents only
those unsold Vacation Intervals that have received their certificate of
occupancy as of June 30, 1997.
(d) Potential expansion of Vacation Intervals at each resort includes, as of
June 30, 1997, (i) Vacation Intervals currently under development that
have not yet received their certificate of occupancy and (ii) Vacation
Interval development potential on land currently owned by the Company or
under option to be acquired which have not yet received their certificate
of occupancy and which are not currently under construction.
(e) Includes an estimated 276 units which the Company plans to construct on
land which it owns at the Cypress Pointe Resort and for which all
necessary governmental approvals and permits (except building permits)
have been obtained. Should the Company elect to construct a higher
percentage of three bedroom units, rather than its current planned mix of
one, two and three bedroom units, the actual number of planned units will
be lower than is indicated above.
(f) Includes an estimated 286 units which the Company plans to construct on
land which it owns or is currently subject to a contract to purchase at
the Plantation at Fall Creek.
(g) Includes 15 units construction of which commenced in the second quarter of
1997 and for which all necessary governmental approvals and permits have
been received by the Company.
(h) The Company has not committed to any expansion of the Royal Palm Beach
Club. The Company is considering the acquisition of additional land
adjacent to the Royal Palm Beach Club for the addition of an estimated 60
units (and a corresponding number of Vacation Intervals) but has yet to
enter into an agreement with respect to such additional land or to obtain
the necessary governmental approvals and permits for such expansion.
(i) In May 1996 the Company acquired a five-acre parcel of land adjacent to
the Flamingo Beach Club on which the Company plans to develop
approximately 85 units (and create a corresponding number of Vacation
Intervals). The Company is in the process of seeking to obtain the
necessary governmental approvals and permits for such proposed expansion.
(j) Includes 62 units for which all necessary governmental approvals and
permits have been received by the Company (except building permits).
Construction of the first 30 units began in October 1996 and is scheduled
for completion during the third quarter of 1997. In addition, the Company
is considering the acquisition of additional land near the San
27
<PAGE>
Luis Bay Resort for the addition of an estimated 100 units, but has yet to
enter into an agreement with respect to such land or to obtain any of the
necessary governmental approvals and permits for such proposed expansion.
In June 1996 the Company acquired approximately 130 Vacation Intervals at
the San Luis Bay Resort out of the bankruptcy estate of Glen Ivy Resorts,
Inc. In addition, the Company acquired promissory notes in default that are
secured by approximately 900 Vacation Intervals. The Company intends to
foreclose upon and acquire clear title to such Vacation Intervals and
intends to complete such foreclosure procedures (or deed-in-lieu
procedures) during 1997.
(k) Includes 68 units that the Company currently rents on a nightly basis,
pending the Company's commencement of Vacation Interval sales at the
resort.
(l) The Company acquired a 30.43% partnership interest in the Embassy Vacation
Resort Poipu Point in November 1994. The Company owns, directly or
indirectly, 100% of the partnership interests in one of the two co-
managing general partners of Poipu Resort Partners L.P., a Hawaii limited
partnership ("Poipu Partnership"), the partnership which owns the Embassy
Vacation Resort Poipu Point. The managing general partner owned by the
Company holds a 0.5% partnership interest for purposes of distributions,
profits and losses. The Company also holds, directly or indirectly, a
29.93% limited partnership interest in the Poipu Partnership for purposes
of distributions, profits and losses, for a total partnership interest of
30.43%. In addition, following repayment of any outstanding partner loans,
the Company, directly or indirectly, is entitled to receive a 10% per
annum return on the Founders' and certain former limited partners' initial
capital investment of approximately $4.6 million in the Poipu Partnership.
After payment of such preferred return and the return of approximately
$4.6 million of capital to the Company, directly or indirectly, on a pari
passu basis with the other general partner in the partnership, the
Company, directly or indirectly, is entitled to receive approximately 50%
of the net profits of the Poipu Partnership. In the event certain internal
rates of return specified in the Poipu Partnership agreement are achieved,
the Company, directly or indirectly, is entitled to receive approximately
55% of the net profits of the Poipu Partnership.
(m) Includes 179 units that the Company currently rents on a nightly basis,
pending their sale as Vacation Intervals.
(n) The Company has received all necessary discretionary governmental
approvals and permits to construct an additional estimated 304 units on
land which it owns at the Embassy Vacation Resort Grand Beach (excluding
building permits which have not yet been applied for by the Company). The
Company plans to apply for and obtain these building permits on a
building-by-building basis.
(o) The Company has received all necessary discretionary governmental
approvals and permits (excluding building permits which the Company
intends to apply for and obtain on a phase-by-phase basis) to construct an
additional estimated 148 units on land that it owns at the Embassy
Vacation Resort Lake Tahoe. The Company commenced construction on 40 of
such units in the first quarter of 1997 and, subject to market demand,
currently plans to construct an additional 40 of such units commencing in
the second quarter of each year from 1998 through 1999 and the remaining
28 units commencing in May 2000.
(p) The Company owns 50% of the entity which has acquired the unsold Vacation
Intervals at this resort. The acquisition closed in May of 1997 and
commencement of Vacation Interval sales is anticipated to begin by the
fourth quarter of 1997.
(q) Includes 48 units which are currently available for occupancy. With
respect to such 48 units, 36 of such units have received all necessary
discretionary governmental approvals and permits necessary to commence
Vacation Interval sales and the Company plans to file the necessary
documentation to receive such approvals with respect to the remaining 12
of such units. Also includes an additional 48 units which will require the
installation of utilities, furniture, fixtures and equipment and interior
finishes before occupancy. The Company currently anticipates completing
the renovation of such 48 additional units by the fourth quarter of 1997.
The Company also owns adjacent land at the St. John resort which will
accommodate the development of additional units but with respect to which
no permits or approvals have been sought or obtained. The Company has not
yet determined the number of potential additional units which may be
constructed on such adjacent land or the timing of such potential
development.
(r) Includes 40 units and 64 units which are scheduled for completion in the
first quarter of 1998 and 1999, respectively. All necessary discretionary
approvals and permits have been received for all units to be constructed
at the Scottsdale Villa Mirage Resort.
(s) Construction began in December 1996 on The Ridge on Sedona Golf Resort,
which upon completion will consist of 120 units. The first 12 units and
clubhouse are scheduled for occupancy in the third quarter of 1997 and
have received
28
<PAGE>
all necessary discretionary governmental approvals and permits. Governmental
approvals and permits have not been sought or received for the additional
planned 108 units. Vacation Interval sales began in May 1997.
(t) The Company owns or has the power to vote 80% of the partnership interests
of Trion Capital Corporation. Trion is the General Partner of Arrowhead
Capital Partners, L.P., which is the developer of North Bay Resort at Lake
Arrowhead. The General Partner is entitled to receive 1% of the profits of
Arrowhead Capital Partners, L.P., but under certain circumstances, is
entitled to receive substantially higher profits. All Seasons has an
exclusive sales and marketing contract for sales at North Bay, and is the
property manager of the resort. Although Arrowhead Capital Partners, L.P.
owns undeveloped land and buildings under construction at the North Bay
Resort at Lake Arrowhead, no definitive expansion plans have been made.
(u) Prior to being acquired by the Company, AVCOM purchased a portfolio of
1,057 defaulted consumer notes at the Tahoe Seasons Resort in March 1996
which are secured by Vacation Intervals. Of the notes purchased, 414 notes
have been converted to inventory of which 160 Vacation Intervals have been
sold by the Company and 41 of the notes have been reaffirmed by the
original buyers. The Company intends to foreclose on the remaining notes
and acquire clear title to the applicable Vacation Intervals.
(v) Villas on the Lake consists of 37 existing units purchased in February 1996
currently in the final phase of renovation. Land included in the initial
purchase is able to accommodate construction of an additional 64 units in
Phase II. The Phase II construction start date has not yet been determined,
however, all necessary discretionary governmental approvals and permits
(excluding building permits which have not yet been applied for) have been
received for such additional 64 units.
(w) Includes 14 units which are currently under construction and are scheduled
for occupancy during the first quarter of 1998. The Company has received
all necessary discretionary governmental approvals and permits with respect
to such 14 units, excepting certificates of occupancy. The Company's
development schedule for the remaining 81 units will be determined based on
market demand and other factors.
(x) Includes 30 units which are currently under construction and are scheduled
for occupancy during the first quarter of 1998. The Company has received
all necessary discretionary governmental approvals and permits with respect
to such 30 units, excepting certificates of occupancy. The Company's
development schedule for the remaining 412 units will be determined based
on market demand and other factors.
(y) Current units at each resort represents only those units that have received
their certificate of occupancy (or other equivalent certificate) as of June
30, 1997. LSI generally is able to sell points representing 50 weeks with
respect to each unit at its resorts (the 51st and 52nd weeks are generally
utilized for maintenance).
(z) Potential expansion units at each resort includes, as of June 30, 1997, (i)
units currently under construction that have not yet received their
certificate of occupancy (or other equivalent certificate) and (ii) units
planned to be developed on land currently owned by LSI or under option to
be acquired which have not yet received their certificate of occupancy (or
other equivalent certificate) and which are not currently under
construction.
(aa) Current inventory of Vacation Points represents, as of June 30, 1997, the
number of unsold Vacation Points in LSI's vacation club system, as well as
the number of points allocable to current unit inventory owned by LSI but
not yet contributed to LSI's vacation club system.
(bb) Potential expansion Vacation Points represents, as of June 30, 1997, the
estimated number of Vacation Points assignable to potential expansion
units at the 11 existing LSI Resorts.
29
<PAGE>
The following table sets forth certain information with respect to the
Company's resorts. All of the units are fully-furnished, including telephones,
televisions, VCRs and stereos, and all but the studio units feature full
kitchens. Most of the units contain a washer and dryer, microwave and private
outdoor barbecue grill. Many units also include a private deck.
<TABLE>
<CAPTION>
RESORT AMENITIES
--------------------------------------
TYPES OF UNITS
OFFERED
------------------- SWIMMING WHIRLPOOL/ RESTAURANT/
RESORTS LOCATION S 1BR 2BR 3BR 4BR TENNIS POOL JACUZZI LOUNGE
- ------- ------------------------- --- --- --- --- --- ------ -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NON-BRANDED RESORTS:
Cypress Pointe Resort Lake Buena Vista, Florida X X X X X X X
Plantation at Fall
Creek Branson, Missouri X X X X X X X
Royal Dunes Resort Hilton Head Island,
South Carolina X X X
Royal Palm Beach Club St. Maarten, Netherlands
Antilles X X X X X
Flamingo Beach Club St. Maarten, Netherlands
Antilles X X X X X
San Luis Bay Resort Avila Beach, California X X X X X
The Savoy at South
Beach Miami Beach, Florida X X X X X
EMBASSY VACATION
RESORTS: X X X
Poipu Point Koloa, Kauai, Hawaii X X X X X
Grand Beach Orlando, Florida X X X
Lake Tahoe South Lake Tahoe,
California X X X X X
WESTIN VACATION CLUB:
St. John St. John, U.S. Virgin
Islands X X X X X X X X
ALL SEASONS RESORTS:
Scottsdale Villa Mirage
Resort Scottsdale, Arizona X X X X X X
The Ridge on Sedona
Golf Resort Sedona, Arizona X X X X X X X
Sedona Springs Resort Sedona, Arizona X X X X X
Sedona Summit Resort Sedona, Arizona X X X X X
Villas of Paco Diablo Sedona, Arizona X X X X
Villas of Sedona Sedona, Arizona X X X X X
North Bay Resort Lake Arrowhead,
California X X X X X
Tahoe Beach and Ski South Lake Tahoe,
Club California X X X X X X X
Tahoe Seasons Resort South Lake Tahoe,
California X X X X
Villas on the Lake Lake Conroe, Texas X X X
PRG RESORTS:
Powhatan Plantation Williamsburg, Virginia X X X X X X X
Greensprings Plantation Williamsburg, Virginia X X X X X
LSI RESORTS:
Pine Lake Resort Lake District, England X X X X X X
Woodford Bridge Country
Club Devon, England X X X X X X
Wychnor Park Country
Club Midlands, England X X X X X X
Flanesford Priory Midlands, England X X X X
Los Amigos Beach Club Costa Del Sol, Spain X X X X X X X X
Royal Oasis Club at La
Quinta Costa Del Sol, Spain X X X X X
Royal Oasis Club at
Benal Beach Costa Del Sol, Spain X X X X X
White Sands Beach Club Menorca, Spain X X X X X X
White Sands Country
Club Menorca, Spain X X X X
Club del Carmen Lanzarote, Canary Islands X X X X X
Alpine Club Schladming, Austria X X X X X X X
</TABLE>
EMBASSY VACATION RESORTS
Capitalizing on two of the Company's Founders' relationship with Promus as a
developer and owner of Embassy Suites hotels, in 1994 the Company and Promus
established Embassy Vacation Resorts. However, the Company has no ownership of
or rights to the "Embassy Vacation Resorts" name or servicemark, both of which
are owned exclusively by Promus, except as set forth in the Company's license
agreements with Promus with
30
<PAGE>
respect to the Company's Embassy Vacation Resorts. Under Promus's exclusive
development agreement with Vistana, Inc., Promus has identified the Company as
the only other licensee of the Embassy Vacation Resort name. However, there
can be no assurance that Promus will license the Embassy Vacation Resort name
to the Company with respect to possible future resorts. On January 7, 1997,
Promus announced that it intended to expand its branded vacation ownership
business with only the Company and Vistana and that additional Embassy
Vacation Resort properties to be developed or acquired by the Company and
licensed by Promus are under discussion.
The Company seeks to attract potential Vacation Interval buyers at its
Embassy Vacation Resorts by targeting past and present Embassy Suites' hotel
guests with in-hotel marketing and direct marketing programs. These marketing
efforts offer this target audience of Embassy Suites hotel guests value-priced
vacation packages which include resort tours and the opportunity to purchase
complete vacations, including accommodations, airfare and other vacation
components such as car rental. Additionally, the Company has the ability to
generate resort tours through Embassy Suites' central reservation system by
offering a premium for a resort tour at the time a guest reserves an Embassy
Suites hotel in the vicinity of an Embassy Vacation Resort property. The
Company believes its access to the Embassy Suites customer base allows it to
generate Vacation Interval sales from these prospective customers at a lower
cost than through other lead generation methods. Because a high percentage of
such customers already have a preference for the Embassy brand, the Company
believes it achieves relatively high sales closing percentages among these
customers.
The Embassy Vacation Resort Poipu Point is owned by the Poipu Partnership,
which consists of the Company and a third party. The Poipu Partnership
requires partner consents for major decisions including approval of budgets,
capital contributions and entry into material agreements. If the Company and
its partner are unable to agree on major decisions, either partner may elect
to invoke a buy/sell right, which could require the Company to either sell its
interest in the Embassy Vacation Resort Poipu Point or to buy out the interest
of its partner at a time when the Company is not prepared to do so. In
addition, under certain circumstances, the other partner can require the
Company to purchase such partner's interest or sell its interest to the
partner.
WESTIN VACATION CLUB RESORTS
The Company and Westin have entered into the Westin Agreement pursuant to
which the Company has acquired the exclusive right to jointly acquire, develop
and sell with Westin "four-star" and "five-star" Westin Vacation Club resorts
in North America, Mexico and the Caribbean for a five year term expiring May
3, 2001. Pursuant to the Westin Agreement, Westin and the Company intend to
enter into detailed definitive agreements to implement the Westin Agreement,
including operating agreements. There can be no assurance that the parties
will be able to reach such definitive agreements. Pursuant to the Westin
Agreement, each of the Company and Westin will own a 50% equity interest in
the ventures that own such resorts and have an equal voice in the management
of such ventures. The primary focus of the Westin Agreement is (i) developing
vacation ownership villas surrounding existing Westin hotel resort properties
and (ii) acquiring or developing hotels which can be operated under the Westin
hotel brand while at the same time being converted to vacation ownership
properties. Pursuant to the Westin Agreement, each of the Company and Westin
has agreed that, subject to certain exceptions, including certain Embassy
Vacation Resort acquisition and development opportunities, it will present to
the other party all "four-star" and "five-star" hotel and resort acquisition
and development opportunities (e.g., properties that are flagged by brands
such as Disney, Marriott, Omni, Ritz Carlton, Four Seasons/Regent, Inter-
Continental and Meridien) that it has determined to pursue and such other
party has a right of first refusal to determine whether to jointly develop
such opportunities with the other party subject to the foregoing exclusions.
Pursuant to the Westin Agreement, Westin and the Company intend to form a
separate partnership, limited liability company or similar entity to develop
and operate each Westin Vacation Club resort, of which Westin and the Company
shall be co-general partners or co-managers, as applicable. Each of the
Company and Westin will contribute 50% of the equity needed to develop and
operate each Westin Vacation Club resort. Pursuant to the Westin Agreement,
Westin has the right to manage all Westin Vacation Club resorts and the
Company and Westin will share the profits from such management activity. In
addition, Westin will promote the
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Westin Vacation Club concept by utilizing its customer base for sales and
marketing programs, arranging for on-site sales desks and other in-house
marketing programs, in exchange for which the Company has agreed to reimburse
Westin predetermined marketing and advertising costs incurred by Westin. Under
certain circumstances, either party may terminate the Westin Agreement upon
failure to reach specified development goals.
Pursuant to the Westin Agreement, the Company has agreed to make available
to Westin one voting seat on the Company's Board of Directors and has agreed
to use maximum reasonable efforts to cause the nomination and election of
Westin's designee. Westin has agreed to make available to the Company one non-
voting seat on its Board of Directors which will be filled by one of the
Founders and is presently filled by Osamu Kaneko. Following any public
offering of equity securities by Westin, the Company's seat on Westin's board
will become a voting seat, entitled to all reciprocal provisions granted by
the Company to Westin.
In May 1997, the Company and Westin jointly acquired the Westin Vacation
Club resort in St. John, U.S. Virgin Islands. The "four-star" Westin Vacation
Club at St. John involves a conversion of the existing St. John Villas,
located adjacent to the Great Cruz Bay Resort Hotel (formerly known as the
Hyatt Regency St. John) which will be operated as a Westin Hotel. Pursuant to
a purchase and sale agreement with subsidiaries of Skopbank, a Finnish
corporation, Westin acquired a 100% interest in the hotel and the Company and
Westin formed the Westin Partnership owned 50% by each of the Company and
Westin to acquire an interest in the 96 units at the St. John Villas,
representing 4,163 Vacation Intervals (the number of unsold Vacation Intervals
remaining at the St. John Villas), which will be operated as the Westin
Vacation Club resort at St. John. Of the $10.5 million purchase price for the
remaining unsold Vacation Intervals at the St. John Villas, each of the
Company and Westin is obligated to contribute approximately $2.5 million in
cash, with the remaining $5.5 million of the acquisition price to be paid by
the Westin Partnership (which amount was loaned to the partnership by the
Company in the first quarter of 1997). In addition, the Westin Partnership
will borrow approximately $7.1 million to complete the conversion of the St.
John Villas to a Westin Vacation Club resort.
Commencement of Vacation Interval sales began in September 1997. Located
adjacent to the beachfront hotel, the St. John Villas consist of 96 studio,
one bedroom, two bedroom and three bedroom units located on 12.3 hillside
acres, of which 48 units are completed and ready for immediate occupancy. The
additional 48 units currently require construction of all interior finishes
and installation of furniture, fixtures and equipment prior to occupancy.
CUSTOMER FINANCING
A typical Vacation Interval entitles the buyer to a one-week per year stay
at one of the Company's resorts and ranges in price from approximately $6,000
to $8,000 for a studio residence to approximately $12,000 to $26,000 for a
three bedroom residence. The Company offers consumer financing to the
purchasers of Vacation Intervals in the Company's resorts who make a down
payment generally equal to at least 10% of the purchase price. This financing
generally bears interest at fixed rates and is collateralized by a first
mortgage on the underlying Vacation Interval. A portion of the proceeds of
such financing is used to obtain releases of the Vacation Interval unit from
outstanding construction loans, if any.
The Company has entered into agreements with lenders for the Company's
financing of customer receivables. At June 30, 1997, these agreements provided
an aggregate of up to approximately $220 million of available financing to the
Company bearing interest at variable rates tied to either the prime rate or
LIBOR of which the Company had at June 30, 1997 approximately $88 million of
additional borrowing capacity available.
At June 30, 1997, the Company's mortgage portfolio included approximately
34,406 consumer loans totaling approximately $278 million, with a stated
maturity of seven to ten years and a weighted average interest rate of 15% per
annum. As of June 30, 1997, approximately 3.9% of the Company's consumer loans
were considered by the Company to be delinquent (past due by 60 or more days).
The Company had completed or commenced foreclosure or deed-in-lieu of
foreclosure (which is typically commenced once a loan is more than
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120 days past due) on an additional approximately 2.4% of its consumer loans.
As of June 30, 1997, the Company's allowance for doubtful accounts as a
percentage of gross mortgages receivable was 6.8%, which management believes
is an adequate reserve for expected loan losses. The Company has historically
derived income from its financing activities. Because the Company's borrowings
bear interest at variable rates and the Company's loans to purchasers of
Vacation Intervals bear interest at fixed rates, the Company bears the risk of
increases in interest rates with respect to the loans it has from its lenders.
The Company may engage in interest rate hedging activities from time to time
in order to reduce the risk and impact of increases in interest rates with
respect to such loans, but there can be no assurance that any such hedging
activity will be adequate at any time to fully protect the Company from any
adverse changes in interest rates.
The Company also bears the risk of purchaser default. The Company's practice
has been to continue to accrue interest on its loans to purchasers of Vacation
Intervals until such loans are deemed to be uncollectible (which is generally
120 days after the date such loans are due), at which point it expenses the
interest accrued on such loan, commences foreclosure proceedings and, upon
obtaining title, returns the Vacation Interval to the Company's inventory for
resale. The Company closely monitors its loan accounts and determines whether
to foreclose on a case-by-case basis.
LSI currently contracts with a third-party bank to provide financing to
purchasers of points in its Grand Vacation Club. LSI is paid an upfront
commission of approximately 13% of the principal amount of eligible consumer
loans.
SALES AND MARKETING
As one of the leading developers and operators of vacation ownership resorts
in North America, the Company believes that it has acquired the skill and
expertise in the development, management and operation of vacation ownership
resorts and in the marketing of Vacation Intervals. The Company's primary
means of selling Vacation Intervals is through on-site sales forces at each of
its resorts. A variety of marketing programs are employed to generate
prospects for these sales efforts, which include targeted mailings, overnight
mini-vacation packages, gift certificates, seminars and various destination-
specific local marketing efforts. Additionally, incentive premiums are offered
to guests to encourage resort tours, in the form of entertainment tickets,
hotel stays, gift certificates or free meals. The Company's sales process is
tailored to each prospective buyer based upon the marketing program that
brought the prospective buyer to the resort for a sales presentation.
Prospective target customers are identified through various means of
profiling, and are intended to include Westin Vacation Club and Embassy Suites
hotel guests and current owners of vacation ownerships. Cross-marketing
targets current owners of Vacation Intervals at the Company's resorts, both to
sell additional Vacation Intervals at the owner's home resort, or to sell a
Vacation Interval at another of the Company's resorts. The Company also sells
Vacation Intervals through off-site sales centers.
ACQUISITION PROCESS
The Company obtains information with respect to resort acquisition
opportunities through interaction by the Company's management team with resort
operators, real estate brokers, lodging companies or financial institutions
with which the Company has established business relationships. From time to
time the Company is also contacted by lenders and property owners who are
aware of the Company's development, management, operations and sales expertise
with respect to Vacation Interval properties.
The Company has expertise in all areas of resort development including, but
not limited to, architecture, construction, finance, management, operations
and sales. With relatively little lead time, the Company is able to analyze
potential acquisition and development opportunities. After completing an
analysis of the prospective market and the general parameters of the property
or the site, the Company generates a conceptual design to determine the extent
of physical construction or renovation that can occur on the site in
accordance with the requirements of the local governing agencies. For most
properties, the predominant factors in determining the physical design of the
site include density of units, maximum construction height, land coverage and
parking
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requirements. Following the preparation of such a conceptual design, the
Company analyzes other aspects of the development process, such as
construction cost and phasing, to match the projected sales flow in the
relevant market. At this stage of analysis, the Company compares sales,
construction cost and phasing, debt and equity structure, cash flow, financing
and overall project cost to the acquisition cost. The Company's procedures
when considering a potential acquisition are generally set forth below.
Economic and Demographic Analysis. To evaluate the primary economic and
demographic indicators for the resort area, the Company considers the
following factors, among others, in determining the viability of a potential
new vacation ownership resort in a particular location: (i) supply/demand
ratio for Vacation Intervals in the relevant market, (ii) the market's growth
as a vacation destination, (iii) the ease of converting a hotel or condominium
property into a vacation ownership resort, (iv) the availability of additional
land at or nearby the property for future development and expansion, (v)
competitive accommodation alternatives in the market, (vi) uniqueness of
location, and (vii) barriers to entry that would limit competition. The
Company examines the competitive environment in which the proposed resort is
located and all existing or to-be-developed resorts. In addition, information
respecting characteristics, amenities and financial information at competitive
resorts is collected and organized. This information is used to assess the
potential to increase revenues at the resort by making capital improvements.
Pro Forma Operating Budget. The Company develops a comprehensive pro forma
budget for the resort, utilizing available financial information in addition
to the other information collected from a variety of sources. The estimated
sales of units are examined, including the management fees associated with
such unit. Finally, the potential for overall capital appreciation of the
resort is reviewed, including the prospects for obtaining liquidity through
sale or refinancing of the resort.
Environmental and Legal Review. In conjunction with each prospective
acquisition or development, the Company conducts real estate and legal due
diligence on the property. This due diligence includes an environmental
investigation and report by a reputable environmental consulting firm,
including tests on identified underground storage tanks. If recommended by the
environmental consulting firm, additional testing is generally conducted. The
Company also obtains a land survey of the property and inspection reports from
licensed engineers or contractors on the physical condition of the resort. In
addition, the Company conducts customary real estate due diligence, including
the review of title documents, operating leases and contracts, zoning, and
governmental permits and licenses and a determination of whether the property
is in compliance with applicable laws.
OTHER OPERATIONS
Room Rental Operations. In order to generate additional revenue at certain
of its resorts that have rentable inventory of Vacation Intervals, the Company
rents units with respect to such unsold or unused Vacation Intervals for use
as a hotel. The Company offers these unoccupied units both through direct
consumer sales, travel agents or vacation package wholesalers. In addition to
providing the Company with supplemental revenue, the Company believes its
room-rental operations provide it with a good source of lead generation for
the sale of Vacation Intervals. As part of the management services provided by
the Company to Vacation Interval owners, the Company receives a fee for
services provided to rent an owner's Vacation Interval in the event the owner
is unable to use or exchange the Vacation Interval. In addition, the Embassy
Vacation Resort Poipu Point (acquired in November 1994) was acquired as a
traditional hotel with the intention of converting each such resort to a
vacation ownership property. Until such time as a unit at each resort is sold
as Vacation Intervals, the Company continues (or will continue) to rent such
unit on a nightly basis. In the future, other acquired resorts may be operated
in this fashion during the start-up of Vacation Interval sales.
Resort Management. The Company's resorts are (i) generally managed by the
Company pursuant to management agreements with homeowner associations with
respect to each of the Company's non-branded resorts, (ii) managed by Promus
pursuant to management agreements with the Company with respect to the
Company's Grand Beach and Lake Tahoe Embassy Vacation Resorts or (iii) managed
by Aston Hotels & Resorts
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("Aston") with respect to the Embassy Vacation Resort Poipu Point. The Company
pays Promus a licensing fee of 2% of Vacation Interval sales at the Embassy
Vacation Resorts. Westin will manage Westin Vacation Club resorts.
At each of the Company's non-branded resorts, the Company enters into a
management agreement with an association comprised of owners of Vacation
Intervals at the resort to provide for management and maintenance of the
resort. Pursuant to each such management agreement the Company is paid a
monthly management fee equal to 10% to 12% of monthly maintenance fees. The
management agreements are typically for a three year period, renewable
annually automatically unless notice of non-renewal is given by either party.
Pursuant to each management agreement the Company has sole responsibility and
exclusive authority for all activities necessary for the day-to-day operation
of the non-branded resorts, including administrative services, procurement of
inventories and supplies and promotion and publicity. With respect to each
resort the Company also obtains comprehensive and general public liability
insurance, all-risk property insurance, business interruption insurance and
such other insurance as is customarily obtained for similar properties. The
Company also provides all managerial and other employees necessary for the
non-branded resorts, including review of the operation and maintenance of the
resorts, preparation of reports, budgets and projections, employee training,
and the provision of certain in-house legal services. At the Company's Grand
Beach and Lake Tahoe Embassy Vacation Resorts, Promus provides these services.
At the Embassy Vacation Resort Poipu Point, Aston provides management and
maintenance services to the Company pursuant to a management agreement and
assumes responsibility of such day-to-day operation of the Embassy Vacation
Resorts.
LSI manages each resort in its Grand Vacation Club pursuant to contracts
which typically provide for a management fee of 15% of monthly maintenance
fees to be paid to LSI.
VACATION INTERVAL OWNERSHIP
The purchase of a Vacation Interval typically entitles the buyer to use a
fully-furnished vacation residence, generally for a one-week period each year,
in perpetuity. Typically, the buyer acquires an ownership interest in the
vacation residence, which is often held as tenant in common with other buyers
of interests in the property.
The owners of Vacation Intervals manage the property through a non-profit
homeowners' association, which is governed by a Board consisting of
representatives of the developer and owners of Vacation Intervals at the
resort. The Board hires an agent, delegating many of the rights and
responsibilities of the homeowners' association to a management company, as
described above, including grounds landscaping, security, housekeeping and
operating supplies, garbage collection, utilities, insurance, laundry and
repair and maintenance.
Each Vacation Interval owner is required to pay the homeowners' association
a share of all costs of maintaining the property. These charges can consist of
an annual maintenance fee plus applicable real estate taxes (generally $300 to
$700 per interval) and special assessments, assessed on an as-needed basis. If
the owner does not pay such charges, the owner's use rights may be suspended
and the homeowners' association may foreclose on the owner's Vacation
Interval.
For a description of the general terms of a points-based vacation club
system, see "--Business Strategy-- Development of Points-Based Vacation Club
System."
PARTICIPATION IN VACATION INTERVAL EXCHANGE NETWORKS
The Company believes that its Vacation Intervals are made more attractive by
the Company's participation in Vacation Interval exchange networks operated by
RCI and II. In addition, LSI's Grand Vacation Club points system is affiliated
with II. In a 1995 study sponsored by the Alliance for Timeshare Excellence
and ARDA, the exchange opportunity was cited by purchasers of Vacation
Intervals as one of the most significant factors in determining whether to
purchase a Vacation Interval. Participation in RCI and II allows the Company's
customers to exchange in a particular year their occupancy right in the unit
in which they own a Vacation Interval
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for an occupancy right at the same time or a different time in another
participating resort, based upon availability and the payment of a variable
exchange fee. A member may exchange his Vacation Interval for an occupancy
right in another participating resort by listing his Vacation Interval as
available with the exchange organization and by requesting occupancy at
another participating resort, indicating the particular resort or geographic
area to which the member desires to travel, the size of the unit desired and
the period during which occupancy is desired. Both RCI and II assign ratings
to each listed Vacation Interval, based upon a number of factors, including
the location and size of the unit, the quality of the resort and the period
during which the Vacation Interval is available, and attempts to satisfy the
exchange request by providing an occupancy right in another Vacation Interval
with a similar rating. If RCI or II is unable to meet the member's initial
request, it suggests alternative resorts based on availability.
Founded in 1974, RCI has grown to be the world's largest Vacation Interval
exchange organization, which has a total of more than 2,900 participating
resort facilities and over 2.0 million members worldwide. During 1995 RCI
processed over 1.5 million Vacation Interval exchanges. The cost of the annual
membership fee in RCI, which typically is at the option and expense of the
owner of the Vacation Interval, is $65 per year, plus an exchange fee of $89
and $119 for domestic and international exchanges, respectively. RCI has
assigned high ratings to the Vacation Intervals in the Company's resort
properties, and such Vacation Intervals have in the past been exchanged for
Vacation Intervals at other highly-rated member resorts. During 1995,
approximately 97% of all exchange requests were fulfilled by RCI, and
approximately 58% of all exchange requests are confirmed on the day of the
request. In November 1996, HFS Incorporated consummated the acquisition of RCI
for cash and securities.
FUTURE ACQUISITIONS
The Company intends to expand its vacation ownership business by acquiring
or developing resorts located in attractive resort destinations, and is in the
process of evaluating strategic acquisitions in a variety of locations. Such
future acquisitions and development of resorts could have a substantial and
material impact on the Company's operations and prospects. The Company
currently is evaluating possible acquisitions of resorts and development
opportunities, including opportunities located in Southern and Northern
California, the Hawaiian islands of Hawaii, Maui and Oahu, the Caribbean,
Mexico, the Western, Southwestern and Southeastern United States (including
Florida, Arizona, Utah and Colorado) and in various Westin resorts throughout
North America, as well as in Europe and Asia. In addition, the Company has
also explored the acquisition of and may consider acquiring existing
management companies, vacation ownership developers and marketers, loan
portfolios or other industry related operations or assets in the fragmented
vacation ownership development, marketing, finance and management industry.
COMPETITION
Although major lodging and hospitality companies such as Marriott, Disney,
Hilton, Hyatt, Four Seasons and Inter-Continental, as well as Promus and
Westin, have established or declared an intention to establish vacation
ownership operations in the past decade, the industry remains largely
unbranded and highly fragmented, with a vast majority of North America's
approximately 2,000 vacation ownership resorts being owned and operated by
smaller, regional companies. Of the Company's major brand name lodging company
competitors, the Company believes, based on RCI reports and the Company's
extensive knowledge of the industry, that Marriott currently sells Vacation
Intervals at 12 resorts which it also owns and operates and directly competes
with the Company's Poipu Point, Hilton Head Island, Williamsburg and Orlando
area resorts; Disney currently sells Vacation Intervals at four resorts which
it also owns and operates and directly competes with the Company's Orlando
area and Hilton Head Island resorts; Hilton currently sells Vacation Intervals
at two resorts which it also owns and operates and directly competes with the
Company's Orlando area resorts; Hyatt owns and operates two resorts in Key
West, Florida and one in Beaver Creek, Colorado, but does not directly compete
in any of the Company's existing markets; Four Seasons began sales of Vacation
Interval at its first vacation ownership resort in Carlsbad, California; and
Inter-Continental has announced its entry into the vacation ownership market
but has yet to commence sales of Vacation Intervals. Many of these entities
possess significantly greater financial, marketing, personnel and other
resources than those of the Company and may be able to grow at a more rapid
rate than the Company as result.
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The Company also competes with companies with non-branded resorts such as
Westgate, Vistana, Inc. and Vacation Break USA, Inc. (each of which competes
with the Company's Orlando area resorts), Fairfield Communities (which recently
announced plans to acquire Vacation Break USA, Inc. and which currently
competes with the Company's Orlando area, Williamsburg and Branson resorts) and
ILX Incorporated (which competes with the Company's Sedona, Arizona resorts).
Under the terms of a recently announced exclusive five-year agreement, Promus
and Vistana, Inc. will jointly acquire, develop, manage and market vacation
ownership resorts in North America under Promus brand names. As part of the
exclusive agreement, Promus and Vistana, Inc. will designate selected markets
for development (which markets currently include Kissimmee, Florida and Myrtle
Beach, South Carolina). The Company is not precluded from using the Embassy
Vacation Resort name in connection with resorts acquired during the term of the
agreement. The Company has been identified by Promus as the only other licensee
to whom Promus will license the Embassy Vacation Resort name. However, there
can be no assurance that Promus will not grant other entities a license to
develop Embassy Vacation Resorts or that Promus will not exercise its rights to
terminate the Embassy Vacation Resort licenses.
As a result of the LSI Acquisition, the Company is also subject to
competition in the European vacation ownership market, which is very
fragmented. In addition to LSI, there are two other operators in Europe
operating multi-resort points clubs -- Global Group and Club la Costa. LSI also
has competition from individual vacation ownership resorts (including Marriott)
in several of the areas in which it operates.
In addition, the Company also competes with the buyers of its Vacation
Intervals who subsequently decide to resell those intervals. While the Company
believes, based on experience at its resorts, that the market for resale of
Vacation Intervals by buyers is presently limited, such resales are typically
at prices substantially less than the original purchase price. The market price
of Vacation Intervals sold by the Company at a given resort or by its
competitors in the market in which each resort is located could be depressed by
a substantial number of Vacation Intervals offered for resale.
In the event that the Westin Agreement becomes the subject of dispute between
the parties thereto, it is possible that the Company's interest in pursuing
acquisition and development opportunities at "four-star" and "five-star"
resorts located in North America, Mexico and the Caribbean through May 2001
could be barred pending the final resolution of such dispute. Additionally, at
the expiration or early termination of the Westin Agreement, Westin could
become a direct competitor with the Company in the vacation ownership resort
business, including in the markets most attractive to the Company. In addition,
the Embassy Suites hotels owned or controlled by affiliates of the Company's
Founders may compete with certain of the Company's vacation ownership resorts;
however, the Company anticipates that such Embassy Suites hotels could be a
significant source of lead generation for its marketing activities. Subject to
certain covenants not to compete, the Company's Founders could acquire resort
and other hotel properties that could compete with the Company's vacation
ownership business.
The Company believes, based on ARDA and RCI reports and the Company's
extensive knowledge of the industry, that its experience and exclusive focus on
the vacation ownership industry, together with its portfolio of resorts located
in a wide range of resort destinations and at a variety of price points,
distinguish it from each of its competitors and that the Company is uniquely
positioned for future growth.
GOVERNMENTAL REGULATION
General. The Company's Vacation Interval marketing and sales are subject to
extensive regulations by the federal government and the states and foreign
jurisdictions in which its resort properties are located and in which Vacation
Intervals are marketed and sold. On a federal level, the Federal Trade
Commission has taken the most active regulatory role through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which the Company is or may
be subject appears on the Truth-In-Lending Act and Regulation Z, the Equal
Credit Opportunity Act and Regulation B, the Interstate and Land Sales Full
Disclosure Act, Telephone Consumer Protection Act, Telemarketing and Consumer
Fraud
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and Abuse Prevention Act, Fair Housing Act and the Civil Rights Act of 1964
and 1968. In addition, many states have adopted specific laws and regulations
regarding the sale of Vacation Interval ownership programs. The laws of most
states, including Florida, South Carolina and Hawaii require the Company to
file with a designated state authority for its approval a detailed offering
statement describing the Company and all material aspects of the project and
sale of Vacation Intervals. The laws of California require the Company to file
numerous documents and supporting information with the California Department
of Real Estate, the agency responsible for the regulation of Vacation
Intervals. When the California Department of Real Estate determines that a
project has complied with California law, it will issue a public report for
the project. The Company is required to deliver an offering statement or
public report to all prospective purchaser of a Vacation Interval, together
with certain additional information concerning the terms of the purchase. The
laws of Illinois, Florida, Hawaii and Virginia impose similar requirements.
Laws in each state where the Company sells Vacation Intervals generally grant
the purchaser of a Vacation Interval the right to cancel a contract of
purchase at any time within a period ranging from 3 to 15 calendar days
following the earlier of the date the contract was signed or the date the
purchaser has received the last of the documents required to be provided by
the Company. Most states have other laws which regulate the Company's
activities such as real estate licensure; sellers of travel licensure; anti-
fraud laws; telemarketing laws; price gift and sweepstakes laws; and labor
laws. The Company believes that it is in material compliance with all federal,
state, local and foreign laws and regulations to which it is currently or may
be subject. However, no assurance can be given that the cost of qualifying
under Vacation Interval ownership regulations in all jurisdictions in which
the Company desires to conduct sales will not be significant. Any failure to
comply with applicable laws or regulations could have material adverse effect
on the Company.
In addition, certain state and local laws may impose liability on property
developers with respect to construction defects discovered or repairs made by
future owners of such property. Pursuant to such laws, future owners may
recover from the Company amounts in connection with the repairs made to the
developed property.
The marketing and sales of LSI's points system and its other operations are
subject to national and European regulation and legislation. Within the
European Community (which includes all the countries in which LSI conducts its
operations), the European Timeshare Directive of 1994 regulates vacation
ownership activities. For it to have direct effect, the European Timeshare
Directive must be implemented by European Community Member States and the
Directive required such implementation to have taken place prior to May 1997.
The terms of the Directive require LSI to issue a disclosure statement
providing specific information about its resorts and its vacation ownership
operations as well as making mandatory a 10 day rescission period and a
prohibition on the taking of advance payments prior to the expiration of that
rescission period. Member States are permitted to introduce legislation which
is more protective of the consumer when implementing the European Timeshare
Directive. In the United Kingdom, where the majority of LSI's marketing and
sales operations take place, the Directive has been implemented by way of an
amendment to the Timeshare Act 1992. In the United Kingdom a 14 day rescission
period is mandatory. There are other United Kingdom laws which LSI is or may
be subject to including the Consumer Credit Act 1974, the Unfair Terms in
Consumer Contracts Regulations 1995 and the Package Travel, Package Holidays
and Package Tours Regulations 1992. While Spain has no specific timeshare
legislation, it is expected that it will implement the Timeshare Directive in
the near future. Until it does so, however, the European Timeshare Directive
has no direct effect in Spain. The Timeshare Act 1992 does appear to have
extra-territorial effect in that United Kingdom resident purchasers buying
timeshare in other European Economic Area States may rely upon it. All the
countries in which LSI operates have consumer and other laws which regulate
its activities in those countries. LSI is member of the Timeshare Council
which is the United Kingdom self regulating trade body for vacation ownership
companies. As a member it is obligated to comply with all laws as well as with
certain codes of conduct (including a code of conduct for the operating of
points systems) promulgated by the Timeshare Council.
Environmental Matters. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up hazardous or toxic
substances or petroleum product releases at such property, and may be held
liable to a governmental entity or to third parties for property damage and
for investigation and clean-up costs incurred by
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<PAGE>
such parties in connection with the contamination. Such laws typically impose
clean-up responsibility and liability without regard to whether the owner knew
of or caused the presence of the contaminants, and the liability under such
laws has been interpreted to be joint and several unless the harm is divisible
and there is a reasonable basis for allocation of responsibility. The cost of
investigation, remediation or removal of such substances may be substantial,
and the presence of such substances, or the failure to properly remediate the
contamination on such property, may adversely affect the owner's ability to
sell or rent such property or to borrow using such property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances at a disposal or treatment facility also may be liable for the
costs of removal or remediation of a release of hazardous or toxic substances
at such disposal or treatment facility, whether or not such facility is owned
or operated by such person. In addition, some environmental laws create a lien
on the contaminated site in favor of the government for damages and costs it
incurs in connection with the contamination. Finally, the owner of a site may
be subject to common law claims by third parties based on damages and costs
resulting from environmental contamination emanating from a site. In
connection with its ownership and operation of its properties, the Company may
be potentially liable for such costs.
Certain federal, state and local laws, regulations and ordinances govern the
removal, encapsulation or disturbance of asbestos-containing materials
("ACMs") when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such laws
may impose liability for release of ACMs and may provide for third parties to
seek recovery from owners and operation of real properties for personal injury
associated with ACMs. In connection with its ownership and operation of its
properties, the Company may be potentially liable for such costs.
In addition, recent studies have linked radon, a naturally-occurring
substance, to increased risks of lung cancer. While there are currently no
state or federal requirements regarding the monitoring for, presence of, or
exposure to, radon in indoor air, the EPA and the Surgeon General recommend
testing residences for the presence of radon in indoor air, and the EPA
further recommends that concentrations of radon in indoor air be limited to
less than 4 picocuries per liter of air (Pci/L) (the "Recommended Action
Level"). The presence of radon in concentrations equal to or greater than the
Recommended Action Level in one or more of the Company's resorts may adversely
affect the Company's ability to sell Vacation Intervals at such resorts and
the market value of such resort. Recently-enacted federal legislation will
eventually require the Company to disclose to potential purchasers of Vacation
Intervals at the Company's resorts that were constructed prior to 1978 any
known lead-paint hazards and will impose treble damages for failure to so
notify.
The Company has conducted Phase I assessments at each of its resorts in
order to identify potential environmental concerns. These Phase I assessments
have been carried out in accordance with accepted industry practices and
consisted of non-invasive investigations of environmental conditions at the
properties, including a preliminary investigation of the sites and
identification of publicly known conditions concerning properties in the
vicinity of the sites, physical site inspections, review of aerial photographs
and relevant governmental records where readily available, interviews and
knowledgeable parties, investigation for the presence of above ground and
underground storage tanks presently or formerly at the sites, a visual
inspection of potential lead-based paint and suspect friable ACMs where
appropriate, a radon survey, and the preparation and issuance of written
reports.
The Company's assessments of its resorts have not revealed any environmental
liability that the Company believes would have a material adverse effect on
the Company's business, assets or results of operations, nor is the Company
aware of any such material environmental liability. Nevertheless, it is
possible that the Company's assessments do not reveal all environmental
liabilities or that there are material environmental liabilities of which the
Company is unaware. The Company does not believe that compliance with
applicable environmental laws or regulations will have a material adverse
effect on the Company or its financial condition or results of operations.
In connection with the acquisition and development of the Embassy Vacation
Resort Lake Tahoe and the San Luis Bay Resort, the Company's environmental
consultant has identified several areas of environmental concern. The areas of
concern at the Embassy Vacation Resort Lake Tahoe relate to possible
contamination that originated on the resort site due to prior uses and to
contamination that may migrate onto the resort site from
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upgradient sources. California regulatory agencies have been monitoring the
resort site and have required or is in the process of requiring the
responsible parties (presently excluding the Company) to effect remediation
action. The Company has been indemnified by certain of the responsible parties
for certain costs and expenses in connection with contamination at the Embassy
Vacation Resort Lake Tahoe (including Chevron (USA), Inc.) and does not
anticipate incurring material costs in connection therewith, however, there is
no assurance that the indemnitor(s) will meet their obligations in a complete
and timely manner. In addition, the Company's San Luis Bay Resort is located
in an area of Avila Beach, California which has experienced underground
contamination resulting from leaking pipes at a nearby oil refinery.
California regulatory agencies have required the installation of groundwater
monitoring wells on the beach near the resort site, and no demand or claim in
connection with such contamination has been made on the Company, however,
there is no assurance that claims will not be asserted against the Company
with respect to this environmental condition.
The Company believes that its properties are in compliance in all material
respects with all federal, state and local laws, ordinances and regulations
regarding hazardous or toxic substances. Except as described above with
respect to the Embassy Vacation Resort Lake Tahoe and the San Luis Bay Resort,
the Company has not been notified by any governmental authority or any third
party, and is not otherwise aware, of any material noncompliance, liability or
claim relating to hazardous or toxic substances or petroleum products in
connection with any of its present properties.
A variety of laws concerning the protection of the environment, health and
safety apply to the operations, properties and other assets owned by LSI.
These laws originate at the European Union, national, state and local level.
As a result of the consummation of the LSI Acquisition, the Company has
effectively assumed the pre-existing liabilities of LSI under these laws, some
of which impose liability in respect of operations no longer carried out and
properties or assets no longer owned by LSI as well as existing operations,
properties and assets. These environmental laws govern, among other things,
the discharge of substances into waterways and the quality of water. Liability
can attach to a person who causes or permits the discharge of substances to
such waterways without a permit authorizing such discharges or beyond the
scope of the applicable permit. Criminal sanctions can be imposed for any such
violations and any persons violating these laws can be held responsible for
the cost of remedying the consequences of an unauthorized discharge. In
addition, certain laws restrict the use of property and the construction of
buildings and other structures. Carrying out development without the
appropriate consent or beyond the scope of the consent can result in
regulatory authorities taking action to require the unauthorized use to cease
or unauthorized building or structure to be removed or modified. Criminal
sanctions are available if the authority's requirements are not satisfied.
As of the date of this Prospectus, Phase I environmental reports (which
typically involve inspection without soil sampling or groundwater analysis)
have been prepared by independent environmental consultants for each of the
resorts currently owned by LSI. The Company is not aware of any environmental
liability which it is acquiring as a result of the purchase of LSI that would
have a material adverse effect on the Company's business, assets or results of
operations. No assurance, however, can be given that these reports reveal all
potential environmental liabilities.
Other Regulations. Under various state and federal laws governing housing
and places of public accommodation the Company is required to meet certain
requirements related to access and use by disabled persons. Many of these
requirements did not take effect until after January 1, 1991. Although
management of the Company believes that its facilities are substantially in
compliance with present requirements of such laws, and the Company may incur
additional costs of compliance. Additional legislation may impose further
burdens or restriction on owners with respect to access by disabled persons.
The ultimate amount of the cost of compliance with such legislation is not
currently ascertainable, and, while such costs are not expected to have a
material effect on the Company, such costs could be substantial. Limitations
or restrictions on the completion of certain renovations may limit application
of the Company's growth strategy in certain instances or reduce profit margins
on the Company's operations.
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EMPLOYEES
As of June 30, 1997, the Company employed approximately 1,700 full-time
employees and approximately 500 part-time employees. The Company believes that
its employee relations are good. Except for certain employees located at the
St. Maarten, Netherlands Antilles resorts, none of the Company's employees is
represented by a labor union.
The Company sells Vacation Intervals at its resorts through approximately
770 independent sales agents. Such independent sales agents provide services
to the Company under contract and, the Company believes, are not employees of
the Company. Accordingly, the Company does not withhold payroll taxes from the
amounts paid to such independent contractors. Although the Internal Revenue
Service has made inquiries regarding the Company's classification of its sales
agents at its Branson, Missouri resort, no formal action has been taken and
the Company has requested that the inquiry be closed. In the event the
Internal Revenue Service or any state or local taxing authority were to
successfully classify such independent sales agents as employees of the
Company, rather than as independent contractors, and hold the Company liable
for back payroll taxes, such reclassification may have a material adverse
effect on the Company.
INSURANCE
The Company carries comprehensive liability, fire, hurricane, storm,
earthquake and business interruption insurance with respect to the Company's
resorts, with policy specifications, insured limits and deductibles
customarily carried for similar properties which the Company believes are
adequate. In September 1995 and July 1996, the Company's St. Maarten resorts
were damaged by a hurricane. With respect to such September 1995 damage, the
Company has recovered amounts from its insurance carriers sufficient to cover
100% of the property damage losses and is in the process of recovering amounts
for business interruption. The Company has agreed to provide approximately
2,700 replacement weeks to owners who were unable to use their Vacation
Interval as a result of such September 1995 hurricane. Such provision of
replacement Vacation Intervals will have the short term effect of reducing the
number of Vacation Intervals available for sale or alternative rental as hotel
rooms at the St. Maarten resorts. Additionally, the St. Maarten resorts
sustained relatively minor damage in 1996 as the result of Hurricane Bertha;
management estimates that such damage is approximately $100,000, which is less
than the applicable insurance deductibles and, accordingly, the expense to
repair the damage will be borne by the Company. There are, however, certain
types of losses (such as losses arising from acts of war) that are not
generally insured because they are either uninsurable or not economically
insurable. Should an uninsured loss or a loss in excess of insured limits
occur, the Company could lose its capital invested in a resort, as well as the
anticipated future revenues from such resort and would continue to be
obligated on any mortgage indebtedness or other obligations related to the
property. Any such loss could have a material adverse effect on the Company.
LEGAL PROCEEDINGS
The Company is currently subject to litigation and claims respecting
employment, tort, contract, construction and commissions, disputes, among
others. In the judgment of management, none of such lawsuits or claims against
the Company is likely to have a material adverse effect on the Company or its
business.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On September 12, 1996, Ernst & Young LLP advised the Company that it was
resigning as independent auditors for the Company. Ernst & Young LLP had been
retained since the Company's inception and there have been no disagreements
between the Company and Ernst & Young LLP with respect to accounting
principles or practices, financial statement disclosure, auditing scope or
procedures, which if not resolved to Ernst & Young LLP's satisfaction, would
have resulted in a reference to the subject matters of the disagreement in its
audit report. Since the Company's inception, Ernst & Young LLP's report on the
Company's financial statements did not contain an adverse opinion or a
disclaimer of opinion, nor were the opinions qualified or modified as to
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uncertainty, audit scope, or accounting principles, nor were there any events
of the type requiring disclosure under Item 304(a)(l)(v) of Regulation S-K
under the Securities Act.
On September 17, 1996, the Company retained the accounting firm of Arthur
Andersen LLP as auditors for the fiscal year ending December 31, 1996
following Board of Directors approval, which was obtained on September 16,
1996. The decision to retain Arthur Andersen LLP was based upon the prior
relationship with a predecessor of the Company as auditors for the fiscal year
ending December 31, 1994 and Arthur Andersen LLP's experience in the Company's
industry, and was not motivated by any disagreements between the Company and
Ernst & Young LLP concerning any accounting principles and/or policy matters.
From the Company's inception to September 17, 1996, the Company did not
consult with Arthur Andersen LLP with respect to the matters described in Item
304(a)(2) of Regulation S-K.
TRADEMARKS AND COMPANY NAME
While the Company owns and controls a number of trade secrets, confidential
information, trademarks, trade names, copyrights and other intellectual
property rights which, in the aggregate, are of material importance to its
business, it is believed that the Company's business, as a whole, is not
materially dependent upon any one intellectual property or related group of
such properties. The Company is licensed to use certain technology and other
intellectual property rights owned and controlled by others, and, similarly,
other companies are licensed to use certain technology and other intellectual
property rights owned and controlled by the Company.
The Company's Board of Directors has approved, subject to stockholder
approval, a proposal to change the Company's corporate name.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BACKGROUND
Signature Resorts, Inc. was incorporated in Maryland in May 1996 by the
Founders to effect the Consolidation Transactions and the Initial Public
Offering. The exchange of direct and indirect interests in, and obligations
of, certain limited partnerships, limited liability companies and other
corporations affiliated with the Founders for shares of Common Stock in the
Company are referred to herein as the "Consolidation Transactions."
The Company's predecessor commenced its vacation ownership resort
acquisition and development business in 1992 to take advantage of the unique
real estate development, financing and travel industry expertise of the
Founders. Mr. Kaneko, who is a Japanese national and was educated in the
United States, has more than 24 years of experience in resort real estate
acquisition and development. Prior to forming the Company, Mr. Kaneko co-
founded KOAR with Mr. Kenninger in 1985 and was previously the executive vice-
president of the Hawaii-based United States operations of a Japanese publicly-
traded real estate developer. Mr. Kenninger, a former business attorney for
the seven years prior to co-founding KOAR, has had overall responsibility for
the development, acquisition, licensing, branding and legal operations of the
Company since 1993. Prior to forming the Company, Mr. Gessow in 1990 formed
Argosy and, prior to forming Argosy, was previously president of both the
Florida and west coast offices of Trammell Crow Residential Services, a real
estate development company.
FOUNDERS' OTHER BUSINESS INTERESTS
Affiliates of Messrs. Kaneko and Kenninger currently have managing general
partner or similar interests in entities which own investment properties which
the Company does not consider to be competitive with its vacation ownership
business (the "KOAR Interests"). These properties include a 225-unit
condominium project in Long Beach, California which is being marketed for
whole share unit sales or long-term residential use rather than vacation use
(and with respect to which the KOAR Interests, as of the date of this
Prospectus, own 42 of the total 225 units, the balance having been sold to
third parties); and several retail centers. Messrs. Kaneko and
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Kenninger are also currently the constituent general partners of a number of
partnerships in which they owe fiduciary duties to limited partners who
invested over $80 million of equity therein (which partnerships include five
Embassy Suites hotels which are still owned by partnerships controlled by
Affiliates of Messrs. Kaneko and Kenninger (the "Prior Partnerships")).
Messrs. Kaneko and Kenninger are authorized by the Company to meet their
duties and responsibilities to the Prior Partnerships pursuant to the terms
thereof, including the sale, refinancing, restructuring and packaging of the
Prior Partnerships, and including with respect to the formation of public or
private entities for such purpose, including a public real estate investment
trust ("REIT") for one or all of the Embassy Suites hotels in the Prior
Partnerships (provided that Messrs. Kaneko and Kenninger agree not to serve as
an officer or employee of such REIT). Messrs. Kaneko and Kenninger agree to
continue to retain third party management companies to manage these properties
(e.g., Promus Hotels manages all of the KOAR Interests' Embassy Suites
hotels), and to employ personnel not employed by the Company to carry out the
day-to-day responsibilities of managing and overseeing these properties.
However, Messrs. Kaneko and Kenninger reserve the right to do what is
reasonably necessary within these constraints to carry out their duties and
responsibilities to the Prior Partnerships pursuant to the terms thereof. The
Company does not believe that such activities will detract materially from
Messrs. Kaneko's and Kenninger's services to the Company.
PAYMENTS TO AFFILIATES
A total of $15.7 million of the net proceeds from the Consolidation
Transactions and the Initial Public Offering were used to repay outstanding
debt to affiliates of the Founders. Of the $15.7 million of the funds paid to
the affiliates of the Founders, $15.3 million was used to pay-off existing
debt to third-party financial institutions or other third-party financing
sources or to pay tax liabilities. The proceeds from the loans were previously
either invested in or loaned either to the Company or its predecessors or to
acquire or develop certain of the Company's resorts.
In addition, pursuant to the Consolidation Transactions, during the three
months ended September 30, 1996, the Founders also received $2.3 million of
distributions from certain predecessor partnerships of the Company to fund
income tax obligations which had accrued through the date of the Initial
Public Offering and with respect to which no pre-Initial Public Offering
profits of the Company had been distributed.
In addition, $12.2 million of the net proceeds of the Initial Public
Offering were used to repay outstanding indebtedness owed to partnerships in
which an affiliate of Mr. Friedman, a director of the Company, is a general
partner. Of such repayment, approximately $3.0 million was repaid directly to
Mr. Friedman or his affiliates.
The Company generally receives management fees and certain other expenses
from homeowners' associations at the resorts it manages. Payables to such
homeowners' associations consist mostly of maintenance fees for units owned by
the Company. At December 31, 1996, the Company had accrued $4,405,000 and
$1,590,000 as a receivable and payable, respectively, with the various
homeowners' associations that it manages at its resorts. The Company accrued
$1,220,000 and $1,771,000 as a receivable and payable, respectively, at
December 31, 1995 with the homeowners' associations that it manages at its
resorts. The related party payable to the homeowners' associations that it
manages at December 31, 1995, included $1,030,000 of a special assessment fee
charged to the Company.
CONSOLIDATION TRANSACTIONS
The Company's nine vacation ownership resorts existing prior to the
Consolidation Transactions were previously owned and operated by partnerships,
each affiliated with the Founders. Such partnerships consisted of Grand Beach
Resort, L.P., a Georgia limited partnership (Embassy Vacation Resort Grand
Beach); AKGI-Flamingo C.V., a Netherlands Antilles limited partnership
(Flamingo Beach Club); AKGI-Royal Palm C.V., a Netherlands Antilles limited
partnership (Royal Palm Beach Club); Port Royal Resort, L.P., a South Carolina
limited partnership (Royal Dunes Resort); an approximately 30% interest in
Poipu Resort Partners, L.P., a Hawaii limited partnership (Embassy Vacation
Resort Poipu Point); Fall Creek Resort, L.P., a Georgia limited partnership
(Plantation at Fall Creek); Cypress Pointe Resort, L.P., a Delaware limited
partnership (Cypress
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Pointe Resort); Lake Tahoe Resort Partners, LLC, a California limited
liability company (Embassy Vacation Resort Lake Tahoe); and San Luis Resort
Partners, LLC, a Georgia limited liability company (San Luis Bay Resort)
(collectively the "Property Partnerships"). Affiliates of the Founders were
previously the sole general partners or the sole members of each of the
Property Partnerships. Each of the Property Partnerships (other than the
Embassy Vacation Resort Poipu Beach) which remained in existence following the
Consolidation Transactions and the Initial Public Offering are wholly owned by
the Company.
As a result of the consummation of the Consolidation Transactions, the
partnership and limited liability company interests in each of the Property
Partnerships, certain of the stock of certain other corporations affiliated
therewith (the "Affiliated Companies") held by "accredited investors" (as
defined pursuant to Regulation D under the Securities Act) and certain debt
obligations of the Property Partnerships and affiliates (and, as a result,
ownership of certain of the Company's resorts) have been directly or
indirectly transferred to the Company and in exchange the holders of such
partnership interests and certain of such stock received shares of Common
Stock in the Company. Holders of any such partnership interests who are not
"accredited investors" received cash at a price commensurate with the value
received by the accredited investors to be determined prior to the Consent
Solicitation. As a result of the Consolidation Transactions, 11,354,705 shares
of Common Stock were issued to the holders of partnership interests in the
Property Partnerships and to certain stockholders of the Affiliated Companies.
The Affiliated Companies include Argosy/KOAR Group, Inc., Resort Management
International, Inc., Resort Marketing International, Inc., RMI-Royal Palm
C.V.o.a., RMI-Flamingo C.V.o.a., AK-St. Maarten, LLC, Premier Resort
Management, Inc., Resort Telephone & Cable of Orlando, Inc., Kabushiki Gaisha
Kei, LLC, Vacation Ownership Marketing Company and Vacation Resort Marketing
of Missouri, Inc., each of which are controlled by the Founders and previously
provided administrative, utility, management and/or marketing services to
certain of the Property Partnerships.
The Company was incorporated in Maryland in May 1996 by the Founders to
effect the Consolidation Transactions and the Initial Public Offering.
Pursuant to a Private Placement Memorandum dated as of May 28, 1996, the
Company in the Consent Solicitation solicited and received on or before June
13, 1996 the consent and agreement of the ultimate owners of interests in the
Property Partnerships, the stockholders of the Affiliated Companies and the
holders of certain debt obligations to exchange their partnership interests or
shares in, and obligations of, the Property Partnerships or Affiliated
Companies (or their direct or indirect interests in the owners thereof), as
applicable, for shares of Common Stock in the Company. Such exchange occurred
simultaneously with the closing of the Initial Public Offering. Direct and
indirect holders of interests in, and obligations of, certain Property
Partnerships received, upon consummation of the Consolidation Transactions,
shares of Common Stock in the Company equal to a predetermined dollar value
based on agreement between the Company and such holders as set forth in the
Private Placement Memorandum for the Consent Solicitation. The balance of the
shares of Common Stock issued in the Consolidation Transactions were issued to
the holders of interests in the remaining Property Partnerships and to the
holders of interests in the Affiliated Companies, which are comprised solely
of the Founders or their affiliates.
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REGISTERING STOCKHOLDERS
All shares indicated below have been registered pursuant to the Company's
previously announced obligations under registration rights agreements entered
into in connection with the Consolidation Transactions, the PRG Merger and the
LSI Acquisition. An aggregate of 4,890,073 shares of Common Stock may be
offered by the Registering Stockholders from time-to-time. The following table
sets forth, as of the date of this Prospectus, the name of each Registering
Stockholder, and for each, the number of shares of Common Stock which may be
offered for sale and, unless otherwise indicated, the number of shares to be
owned beneficially after the Registered Offering (assumes all shares available
for offer will be sold). Applicable percentage ownership is based on
23,745,524 shares of Common Stock outstanding as of the date of this
Prospectus.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE AFTER THE
REGISTERED OFFERING REGISTERED OFFERING
----------------------- -----------------------
NAME AND ADDRESS OF NUMBER OF SHARES
REGISTERING STOCKHOLDER SHARES PERCENTAGE BEING REGISTERED SHARES PERCENTAGE
----------------------- --------- ---------- ---------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Osamu Kaneko(a)......... 2,651,903(f) 11.2% 300,000(b) 2,351,903(f) 9.9%
Andrew J. Gessow(a)..... 2,854,204(f) 12.0% 300,000(c) 2,554,204(f) 10.8%
Steven C. Kenninger(a).. 1,155,779(f) 4.9% 100,000(d) 1,055,779(f) 4.4%
Canpartners
Incorporated(e)........ 505,011 2.1% 505,011 -- --
Beth Friedman(e)(g)... 86,188 * 86,188 -- --
Loretta Evensen(e).... 86,188 * 86,188 -- --
Mitchell R. Julis(e).. 86,188 * 86,188 -- --
--------- ---- ------- --------- -----
Total (as a group)... 763,575 3.2% 763,575
Robert T. Gow and Kay F.
Gow.................... 853,727 3.6% 853,727 -- --
Offsite International,
Inc. .................. 773,751 3.3% 773,751 -- --
Ian K. Ganney........... 665,467 2.8% 124,351 541,116 2.3%
Richard Harrington...... 665,467 2.8% 124,351 541,116 2.3%
Plantation Group,
L.L.C. ................ 464,251 2.0% 464,251 -- --
Bush Construction
Corporation............ 309,500 1.3% 309,500 -- --
Peach Tree, Ltd. ....... 227,154 * 227,154 -- --
First Capital Investment
Fund................... 93,492 * 93,492 -- --
Shinko Sangyou Co. Ltd.. 59,355 * 59,355 -- --
EKC Corporation......... 53,534 * 53,534 -- --
Centaur Corp. .......... 41,941 * 41,941 -- --
KPI Realty, Inc. ....... 35,989 * 35,989 -- --
Brains-Heart, Ltd....... 26,953 * 26,953 -- --
Genevieve Giannoni(a)... 25,980(h) * 3,000 22,980(h) *
Dennis H. Vaughn(i)..... 25,660 * 25,660 -- --
Michael C. Ross(j)...... 23,980 * 23,980 -- --
James C. Anderson....... 23,960 * 23,960 -- --
Charles C. Frey(a)...... 21,900(h) * 6,000 15,900(h) *
James W. Geisz.......... 21,025 * 21,025 -- --
Arai Development Co.,
Inc. .................. 13,623 * 13,623 -- --
Kumagai El Paseo, Inc. . 13,623 * 13,623 -- --
Martin A. Flannes....... 11,078 * 11,078 -- --
Susan K. Kenninger...... 8,993 * 8,993 -- --
Michael B. Reeves(k).... 8,396 * 8,396 -- --
Charles V. Thornton(l).. 6,840 * 6,840 -- --
Timothy D. Levin(a)..... 6,438(m) * 4,348 2,000(m) *
David M. Roberts........ 5,990 * 5,990 -- --
Ruth L. Kenninger....... 5,990 * 5,990 -- --
James A. Hamilton....... 4,643 * 4,643 -- --
Charles H. Reeves(n).... 1,000 * 1,000 -- --
</TABLE>
- --------
* Less than 1%
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(a) Such person is a director and/or executive officer of the Company.
(b) Mr. Kaneko has advised the Company that he intends to donate 200,000 of
the shares registered by him hereunder as charitable gifts. Mr. Kaneko is
registering the remaining 100,000 shares pursuant to his obligations under
a pledge agreement securing a margin loan, although such pledge agreement
does not prohibit the sale of such shares by him.
(c) Mr. Gessow has advised the Company that he intends to donate 200,000 of
the shares registered by him hereunder as charitable gifts. Mr. Gessow is
registering the remaining 100,000 shares pursuant to his obligations under
a pledge agreement securing a margin loan, although such pledge agreement
does not prohibit the sale of such shares by him.
(d) Mr. Kenninger is registering such shares pursuant to his obligations under
a pledge agreement securing a margin loan, although such pledge agreement
does not prohibit the sale of such shares by him.
(e) Canpartners Incorporated ("Canyon") is the beneficial owner of 42,219
shares and is the sole general partner of CPI Securities L.P. (which holds
317,586 shares). Canpartners Investments II, L.P. (which holds 101,241
shares) and Canpartners Investments V, L.P. (which holds 43,965 shares).
Mr. Friedman (a director of the Company), Mitchell R. Julis and R.
Christian B. Evensen are the sole shareholders and directors of Canyon and
may be deemed to share beneficial ownership of the shares shown as owned
by Canyon and the indicated limited partnerships. Such persons disclaim
beneficial ownership of such shares. The 505,011 shares shown as
beneficially owned by Canyon do not include 98,188 shares owned by Mr.
Friedman's wife, 98,188 shares owned by Mr. Julis and 98,188 shares owned
by Mr. Evensen's wife, the beneficial ownership of which is disclaimed by
Canyon.
(f) Includes presently exercisable options to purchase 50,000 shares of Common
Stock.
(g) Beth Friedman is the wife of Joshua S. Friedman, a director of the
Company. Loretta Evensen is the wife of R. Christian B. Evensen, a
shareholder and director of Canyon. Mitchell R. Julis is a shareholder and
director of Canyon.
(h) Includes presently exercisable options to purchase 15,900 shares of Common
Stock with respect to Mr. Frey and 22,980 shares of Common Stock with
respect to Ms. Giannoni.
(i) Includes 22,660 shares held by The Vaughn Family Trust, of which Mr.
Vaughn is a co-trustee and 3,000 shares held by the Dennis Vaughn
Subtrust, of which Mr. Vaughn is trustee.
(j) Includes 16,780 shares held by the Ross Revocable Trust, of which Mr. Ross
is a co-trustee and 7,200 shares held by the Latham & Watkins Pension Plan
FBO Michael C. Ross, of which Mr. Ross is beneficiary.
(k) Includes 6,000 shares held by The CCN&M Revocable Trust, of which Mr.
Reeves is co-trustee.
(l) Includes 1,560 shares held by the Paul, Hastings, Janofsky & Walker
Retirement Plan FBO Charles V. Thornton, of which Mr. Thornton is
beneficiary.
(m) Includes presently exercisable options to purchase 2,000 shares of Common
Stock.
(n) The shares indicated are held by a trust of which Mr. Reeves is co-
trustee.
46
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, par value $0.01 per share, 23,745,524 shares of which
are outstanding as of the date of this Prospectus and (ii) 25,000,000 shares
of Preferred Stock, par value $0.01 per share, none of which will be
outstanding after the Registered Offering. The following summary description
of the material features of the Company's capital stock is qualified by
reference to the Charter and Bylaws of the Company, copies of which are filed
as exhibits to the Registration Statement of which this Prospectus is a part.
See "Additional Information."
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters voted on by stockholders, including elections of directors, and,
except as otherwise required by law or provided in any resolution adopted by
the Board of Directors with respect to any series of Preferred Stock
establishing the designation, powers, preferences and relative, participating,
option or other special rights and powers of such series of Preferred Stock,
the holders of shares of Common Stock exclusively possess all voting power.
The Charter does not provide for cumulative voting in the election of
directors. Subject to any preferential rights of any outstanding series of
Preferred Stock, the holders of Common Stock are entitled to such
distributions as may be declared from time to time by the Board of Directors
from funds available therefor, and upon liquidation are entitled to receive
pro rata all assets of the Company available for distribution to such holders.
All shares of Common Stock issued in the Offering will be fully paid and
nonassessable and the holders thereof will not have preemptive rights.
PREFERRED STOCK
Preferred Stock may be issued from time to time, in one or more classes, as
authorized by the Board of Directors. Prior to issuance of shares of each
class, the Board of Directors is required by the MGCL and the Company's
Charter to fix for each such class, the terms, preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms or conditions of redemption, as
are permitted by Maryland law. The Board of Directors could authorize the
issuance of Preferred Stock with terms and conditions which could have the
effect of discouraging a takeover or other transaction which holders of some,
or a majority, of the Company's outstanding shares might believe to be in
their best interests or in which holders of some, or a majority, of shares
might receive a premium for their shares over the market price of such shares.
TRANSFER AGENT AND REGISTRAR
The Company has appointed ChaseMellon Shareholder Services, L.L.C.
(successor in interest to Wells Fargo Bank) as its transfer agent and
registrar.
PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock offered hereby
pursuant to a Registration Rights Agreement dated August 20, 1996 between the
Company and certain of the Registering Stockholders which was executed in
connection with the Initial Public Offering (the "Initial Registration Rights
Agreement"), a Registration Rights Agreement dated May 15, 1997 between the
Company and certain of the Registering Stockholders which was executed in
connection with the PRG Merger (the "PRG Registration Rights Agreement") and a
Registration Rights Agreement dated August 28, 1997 between the Company and
certain of the Registering Stockholders which was executed in connection with
the LSI Acquisition (the "LSI Registration Rights Agreement"). Any
distribution of the shares covered by this Prospectus may be effected from
time to time in one or more transactions (which may involve block
transactions) on the Nasdaq National Market, in negotiated transactions or in
a combination of such methods of sale, at fixed prices, at market prices
prevailing at the time of sale, at prices related to the prevailing market
prices or at negotiated prices. The Registering
47
<PAGE>
Stockholders will effect any such transactions with or through one or more
broker-dealers which may act as agent or principal, and if required by the
Company, through block trades or offerings through underwriters. Any such
broker-dealer may receive compensation in the form of underwriting discounts,
concessions or commissions from the Registering Stockholders and/or the
purchaser of the shares for whom it may act as agent or to whom it may sell as
principals or both. With respect to any shares sold by a Registering
Stockholder, the Registering Stockholder and/or any broker-dealer effecting
the sales may be deemed to be an "underwriter" within the meaning of Section
2(11) of the Securities Act, and any commissions received by the broker-dealer
and any profit on the resale of shares as principal may be deemed to be
underwriting discounts or commissions under the Securities Act. Additionally,
the Registering Stockholders may pledge or make gifts of their shares and the
shares may also be sold by the pledgee or transferees. Pursuant to the Initial
Registration Rights Agreement, the PRG Registration Rights Agreement and the
LSI Registration Rights Agreement, the Company shall (i) pay substantially all
of the expenses incurred by the Company and the Registering Stockholders
incident to the sale of the shares offered hereby, excluding any fees and
disbursements of counsel to such Registering Stockholders, (ii) provide
customary indemnification to each Registering Stockholder and (iii) keep the
Registration Statement continuously effective for the periods of time provided
therein.
The shares of Common Stock offered hereby are not, but ultimately may be,
offered on an underwritten basis. If such shares are offered on an
underwritten basis, certain underwriters may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M promulgated by the Commission,
pursuant to which such persons may bid for or purchase Common Stock for the
purpose of stabilizing its market price. In addition, the underwriters may
overallot any such underwritten offering, creating a syndicate short position.
These activities may result in the maintenance of the price of the Common
Stock at a level above that which might otherwise prevail in the open market.
If the transactions described in this paragraph are undertaken, they may be
discontinued at any time.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless it has been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland. Certain
other legal matters will be passed upon for the Company by Latham & Watkins,
Los Angeles, California.
EXPERTS
The consolidated financial statements of Signature Resorts, Inc. and
subsidiaries incorporated by reference herein have been audited by Arthur
Andersen LLP, independent certified public accountants, as indicated in their
report with respect thereto, and are included in reliance upon the authority
of said firm as experts in accounting and auditing in giving said report.
The consolidated financial statements of AVCOM International, Inc. and
subsidiaries as of December 31, 1995, and for each of the two years in the
period ended December 31, 1995, not presented separately in this Prospectus
and the related Registration Statement or the documents incorporated by
reference herein, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report with respect thereto and incorporated
by reference herein, given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of LSI Group Holdings Plc and
subsidiaries as of December 31, 1995 and 1996 and for each of the three years
in the period ended December 31, 1996 are incorporated herein by reference and
in the registration statement in reliance upon the report of KPMG, chartered
accountants and registered auditors, incorporated herein by reference, and
upon the authority of said firm as experts in accounting and auditing.
48
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or by any of the
Underwriters. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the registered
securities to which this Prospectus relates or any offer to any person in any
jurisdiction where such an offer would be unlawful. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information herein is correct as of any time
subsequent to the date hereof.
------------------
TABLE OF CONTENTS
------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Summary.................................................................... 3
Risk Factors............................................................... 5
Use of Proceeds............................................................ 19
Consolidated Capitalization................................................ 19
Business................................................................... 20
Certain Relationships and Related Transactions............................. 42
Registering Stockholders................................................... 45
Description of Capital Stock............................................... 47
Plan of Distribution....................................................... 47
Legal Matters.............................................................. 48
Experts.................................................................... 48
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,890,073 SHARES
[LOGO OF SIGNATURE RESORTS]
SIGNATURE RESORTS, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses, other than
underwriting discounts and commissions, in connection with the sale and
distribution of the shares of Common Stock being registered hereby.
<TABLE>
<S> <C>
Commission Registration Fee..................................... $ 49,690
Accounting fees and expenses.................................... 200,000
Blue Sky fees and expenses...................................... 10,000
Legal fees and expenses......................................... 100,000
Printing and engraving expenses................................. 300,000
Transfer Agent fees............................................. 5,000
Miscellaneous and other expenses................................ 10,310
--------
TOTAL......................................................... $675,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Maryland corporation. Section 2-418 of the Maryland General
Corporation Law empowers the Company to indemnify, subject to the standards
set forth therein, any person who is a party in any action in connection with
any action, suit or proceeding brought or threatened by reason of the fact
that the person was a director, officer, employee or agent of such company, or
is or was serving as such with respect to another entity at the request of
such company. The Maryland General Corporation Law also provides that the
Company may purchase insurance on behalf of any such director, officer,
employee or agent.
The Company's Charter and Bylaws provide in effect for the indemnification
by the Company of each director and officer of the Company to the fullest
extent permitted by applicable law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the Consolidation Transactions in June 1996, investors in
the Company's predecessor partnerships, limited liability companies and
corporations agreed to contribute their interests in such entities to the
Company in return for the issuance of 11,354,705 shares of the Company's
common stock, $.01 par value.
Additionally, in connection with the PRG Merger in May 1997, the Company
issued 2,401,229 shares of its Common Stock to former PRG stockholders. Such
securities were issued by the Company in reliance upon an exemption from the
registration requirements of the Securities Act provided by Section 4(2)
thereof.
Finally, in connection with the LSI Acquisition in August 1997, the Company
issued 1,330,934 shares of its Common Stock to former LSI stockholders. Such
securities were issued by the Company in reliance upon an exemption from the
registration requirements of the Securities Act provided by Section 4(2)
thereof.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Unless otherwise indicated, all exhibits have been previously filed.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1.1 Purchase Agreement dated as of August 5, 1997 by and among Signature
Resorts, Inc. and the several Initial Purchasers named therein
relating to the 9 3/4% Senior Subordinated Notes of Signature
Resorts, Inc. due 2007.
2.1 Plan and Agreement of Merger dated as of September 22, 1996 by and
between Signature Resorts, Inc. and AVCOM International, Inc. as
amended (incorporated by reference to Exhibit 2 to Registrant's
Registration Statement on Form S-4 (No. 333-16339))
2.2 Agreement and Plan of Merger dated as of May 15, 1997 by and among
Signature Resorts, Inc., Primavera Acquisition Corp. and Plantation
Resorts Group, Inc. (incorporated by reference to Exhibit 2.1 to
Registrant's current report on Form 8-K filed with the Commission on
May 29, 1997)
*2.3 Purchase Agreement dated as of June 5, 1997 by and among Signature
Resorts, Inc., Ian K. Ganney, Richard Harrington and Stephen Massey
3.1 Articles of Incorporation, as amended, of Signature Resorts, Inc.
(incorporated by reference to Exhibit 3.1 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
3.2 Bylaws of Signature Resorts, Inc., as amended (incorporated by
reference to Exhibit 3.2 to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996)
4.1 Indenture dated as of January 15, 1997 by and between Signature
Resorts, Inc. and Norwest Bank Minnesota, National Association, as
trustee, for the 5 3/4% Convertible Subordinated Notes of Signature
Resorts, Inc. due 2007
*4.2 Indenture dated as of August 1, 1997 by and between Signature Resorts,
Inc. and Norwest Bank Minnesota, National Association, as trustee,
for the 9 3/4% Senior Subordinated Notes of Signature Resorts, Inc.
due 2007
*5.1 Opinion of Ballard Spahr Andrews & Ingersoll regarding the validity of
the Common Stock being registered (including consent)
10.1 Registration Rights Agreement dated as of August 20, 1996 by and among
Signature Resorts, Inc. and the persons named therein
10.2.1 Employment Agreement between Signature Resorts, Inc. and Osamu Kaneko
10.2.2 Employment Agreement between Signature Resorts, Inc. and Andrew J.
Gessow
10.2.3 Employment Agreement between Signature Resorts, Inc. and Steven C.
Kenninger
10.2.4 Employment Agreement between Signature Resorts, Inc. and James E.
Noyes (incorporated by reference to Exhibit 10.2.2 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
10.2.5 Employment Agreement between Signature Resorts, Inc. and Michael A.
Depatie (incorporated by reference to Exhibit 10.2.5 to Registrant's
Registration Statement on Form S-4 (No. 333-16339))
10.2.6 Option Agreement between Signature Resorts, Inc. and Osamu Kaneko.
10.2.7 Option Agreement between Signature Resorts, Inc. and Andrew J. Gessow
10.2.8 Option Agreement between Signature Resorts, Inc. and Steven C.
Kenninger
10.2.9 Option Agreement between Signature Resorts, Inc. and James E. Noyes
10.2.10 Option Agreement between Signature Resorts, Inc. and Michael A.
Depatie
10.3.1 1996 Equity Participation Plan of Signature Resorts, Inc.
(incorporated by reference to Exhibit 10.3 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
10.3.2 First Amendment to 1996 Equity Participation Plan of Signature
Resorts, Inc. dated as of May 16, 1997
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.4 Agreement of Limited Partnership of Pointe Resort Partners, L.P.
(subsequently renamed Poipu Resort Partners L.P.) dated October 11,
1994 (incorporated by reference to Exhibit 10.4 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
10.5 Signature Resorts, Inc. Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.5 to Registrant's Registration Statement on
Form S-1 (No. 333-06027))
10.6 Agreement between W&S Hotel L.L.C. and Argosy/KOAR Group, Inc. dated
as of May 3, 1996 (incorporated by reference to Exhibit 10.6 to
Registrant's Registration Statement on Form S-1 (No. 333-06027))
10.7 Conti-Trade Financial Warehouse Line Agreement (incorporated by
reference to Exhibit 10.7 to Registrant's Registration Statement on
Form S-4 (No. 333-16339))
10.8.1 Loan and Security Agreement between Port Royal Resort, L.P., and
Finova Capital Corporation (as successor in interest to Greyhound
Capital Corporation) dated as of October 7, 1993 and as amended by
the First Amendment to Loan and Security Agreement dated as of April
26, 1995 (incorporated by reference to Exhibit 10.8.1 to Registrant's
Registration Statement on Form S-1 (No. 333-18447))
10.8.2 Loan and Security Agreement between Signature Resorts, Inc. (as
successor in interest to Cypress Pointe Resorts, L.P.), and Finova
Capital Corporation (as successor in interest to Greyhound Real
Estate Finance Company) dated as of December 19, 1991 and as amended
by (i) the First Amendment to Loan and Security Agreement and Consent
and Agreement of Guarantors dated as of November 9, 1992, (ii) the
Second Amendment to Loan and Security Agreement dated as of January
13, 1993, (iii) the Third Amendment to Loan and Security Agreement
dated as of April 7, 1993, (iv) the Fourth Amendment to Loan and
Security Agreement dated as of December 16, 1993, (v) the Fifth
Amendment to Loan and Security Agreement dated as of June 28, 1994,
(vi) the Sixth Amendment to Loan and Security Agreement dated
December 16, 1994, and (vii) the Seventh Amendment to Loan and
Security Agreement dated as of November 6, 1995 (incorporated by
reference to Exhibit 10.8.2 to Registrant's Registration Statement on
Form S-1 (No. 333-18447))
10.8.3 Loan and Security Agreement between Signature Resorts, Inc. (as
successor in interest to San Luis Resort Partners, LLC), and Finova
Capital Corporation dated as of June 6, 1996 (incorporated by
reference to Exhibit 10.8.3 to Registrant's Registration Statement on
Form S-1 (No. 333-18447))
10.8.4 Loan and Security Agreement between Grand Beach Resort, Limited
Partnership, and Finova Capital Corporation (as successor in interest
to Greyhound Financial Corporation) dated as of October 7, 1994 and
as amended by the First Amendment to Loan and Security Agreement
dated as of July 5, 1995 (incorporated by reference to Exhibit 10.8.4
to Registrant's Registration Statement on Form S-1 (No. 333-18447))
10.8.5 Loan and Security Agreement (Receivables) between Signature Resorts,
Inc. (as successor in interest to Fall Creek Resort, L.P.), and
Heller Financial, Inc., dated as of October 9, 1995 (incorporated by
reference to Exhibit 10.8.5 to Registrant's Registration Statement on
Form S-1 (No. 333-18447))
10.8.6 Loan and Security Agreement between AKGI-St. Maarten NV (as successor
in interest to AKGI-Royal Palm C.V.o.a.), and Finova Capital
Corporation dated as of July 12, 1995 (incorporated by reference to
Exhibit 10.8.6 to Registrant's Registration Statement on Form S-1
(No. 333-18447))
10.8.7 Loan and Security Agreement between Lake Tahoe Resort Partners, LLC,
and Finova Capital Corporation dated as of April 29, 1996
(incorporated by reference to Exhibit 10.8.7 to Registrant's
Registration Statement on Form S-1 (No. 333-18447))
10.8.8 Construction Loan Agreement between Lake Tahoe Resort Partners, LLC,
and Finova Capital Corporation dated as of April 29, 1996
(incorporated by reference to Exhibit 10.8.8 to Registrant's
Registration Statement on Form S-1 (No. 333-18447))
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.8.9 Lender's Certification and Consent from Resort Capital Corporation to
Signatures Resorts, Inc. dated as of August 15, 1996 (incorporated
by reference to Exhibit 10.8.1 to Registrant's Registration
Statement on Form S-4 (No. 333-16339))
10.8.10 Lender's Certification and Consent from FINOVA Capital Corporation to
Signature Resorts, Inc. dated as of August 15, 1996 (incorporated by
reference to Exhibit 10.8.2 to Registrant's Registration Statement
on Form S-4 (No. 333-16339))
10.8.11 Assumption Agreement between FINOVA Capital Corporation and Signature
Resorts, Inc. dated as of August 15, 1996 (incorporated by reference
to Exhibit 10.8.3 to Registrant's Registration Statement on Form S-4
(No. 333-16339))
10.8.12 Assumption Agreement between Resort Capital Corporation and Signature
Resorts, Inc. dated as of August 15, 1996 (incorporated by reference
to Exhibit 10.8.4 to Registrant's Registration Statement on Form S-4
(No. 333-16339))
10.8.13 Assumption Agreement between FINOVA Capital Corporation and AKGI-Sint
Maarten, N.V. dated as of August 15, 1996 (incorporated by reference
to Exhibit 10.8.5 to Registrant's Registration Statement on Form S-4
(No. 333-16339))
10.9 Registration Rights Agreement dated as of May 15, 1997 by and among
Signature Resorts, Inc. and the persons named therein (incorporated
by reference to Exhibit 4 to Registrant's current report on Form 8-K
filed with the Commission on May 29, 1997)
*10.10 Registration Rights Agreement dated as of August 28, 1997 by and
among Signature Resorts, Inc., Ian K. Ganney and Richard Harrington.
*10.11 Registration Rights Agreement dated as of August 8, 1997 by and among
Signature Resorts, Inc. and the persons named therein relating to
the 9 3/4% Senior Subordinated Notes due 2007 of Signature Resorts,
Inc.
*10.12 Amended Consulting Agreement dated as of August 1, 1997 by and
between Signature Resorts, Inc., Resort Services, Inc. and Dr. Kay
F. Gow and Robert T. Gow.
*11 Statement re Computation of Per Share Earnings
16 Letter from Ernst & Young LLP regarding change in certifying
accountant (incorporated by reference to Exhibit 16.1 to
Registrant's current report on Form 8-K filed with the Commission on
September 18, 1996)
*21 Subsidiaries of Signature Resorts, Inc.
*23.1 Consent of Ballard Spahr Andrews & Ingersoll (included as part of
Exhibit 5.1)
*23.2 Consent of Arthur Andersen LLP
*23.3 Consent of Ernst & Young LLP
*23.4 Consent of KPMG
24 Power of Attorney
27 Financial Data Schedule
</TABLE>
- --------
* Filed herewith
(b) Financial Statement Schedules
None. Schedules are omitted because of the absence of the conditions under
which they are required or because the information required by such omitted
schedules is set forth in the financial statements or the notes thereto.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) ((S) 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold as of the
termination of the offering.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing a Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Los Angeles, State of California, on
September 8, 1997.
SIGNATURE RESORTS, INC.
By: /s/ Andrew D. Hutton
-----------------------------------
Name: Andrew D. Hutton
Title: Vice President and General
Counsel
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ * Chairman of the Board and September 8, 1997
____________________________________ Co-Chief Executive Officer
Osamu Kaneko (Principal Executive
Officer)
/s/ * Director, President and September 8, 1997
____________________________________ Co-Chief Executive Officer
Andrew J. Gessow
/s/ * Director, Chief Operating September 8, 1997
____________________________________ Officer and Secretary
Steven C. Kenninger
/s/ * Executive Vice President and September 8, 1997
____________________________________ Chief Financial Officer
Michael A. Depatie (Principal Financial
Officer)
/s/ * Executive Vice President and September 8, 1997
____________________________________ Director
James E. Noyes
/s/ * Senior Vice President and September 8, 1997
____________________________________ Chief Accounting Officer
Charles C. Frey (Principal Accounting
Officer)
/s/ * Director September 8, 1997
____________________________________
Juergen Bartels
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ * Director September 8, 1997
____________________________________
Sanford R. Climan
/s/ * Director September 8, 1997
____________________________________
Joshua S. Friedman
/s/ * Director September 8, 1997
____________________________________
W. Leo Kiely III
*By /s/ Andrew D. Hutton
----------------------------------
Andrew D. Hutton
Attorney-in-fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
*1.1 Purchase Agreement dated as of August 5, 1997 by and
among Signature Resorts, Inc. and the several Initial
Purchasers named therein relating to the 9 3/4%
Senior Subordinated Notes of Signature Resorts, Inc.
due 2007.
2.1 Plan and Agreement of Merger dated as of September 22,
1996 by and between Signature Resorts, Inc. and AVCOM
International, Inc. as amended (incorporated by
reference to Exhibit 2 to Registrant's Registration
Statement on Form S-4 (No. 333-16339))
2.2 Agreement and Plan of Merger dated as of May 15, 1997
by and among Signature Resorts, Inc., Primavera
Acquisition Corp. and Plantation Resorts Group, Inc.
(incorporated by reference to Exhibit 2.1 to
Registrant's current report on Form 8-K filed with
the Commission on May 29, 1997)
*2.3 Purchase Agreement dated as of June 5, 1997 by and
among Signature Resorts, Inc., Ian K. Ganney, Richard
Harrington and Stephen Massey
3.1 Articles of Incorporation, as amended, of Signature
Resorts, Inc. (incorporated by reference to
Exhibit 3.1 to Registrant's Registration Statement on
Form S-1 (No. 333-06027))
3.2 Bylaws of Signature Resorts, Inc., as amended
(incorporated by reference to Exhibit 3.2 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996)
4.1 Indenture dated as of January 15, 1997 by and between
Signature Resorts, Inc. and Norwest Bank Minnesota,
National Association, as trustee, for the 5 3/4%
Convertible Subordinated Notes of Signature Resorts,
Inc. due 2007
*4.2 Indenture dated as of August 1, 1997 by and between
Signature Resorts, Inc. and Norwest Bank Minnesota,
National Association, as trustee, for the 9 3/4%
Senior Subordinated Notes of Signature Resorts, Inc.
due 2007
*5.1 Opinion of Ballard Spahr Andrews & Ingersoll regarding
the validity of the Common Stock being registered
(including consent)
10.1 Registration Rights Agreement dated as of August 20,
1996 by and among Signature Resorts, Inc. and the
persons named therein
10.2.1 Employment Agreement between Signature Resorts, Inc.
and Osamu Kaneko
10.2.2 Employment Agreement between Signature Resorts, Inc.
and Andrew J. Gessow
10.2.3 Employment Agreement between Signature Resorts, Inc.
and Steven C. Kenninger
10.2.4 Employment Agreement between Signature Resorts, Inc.
and James E. Noyes (incorporated by reference to
Exhibit 10.2.2 to Registrant's Registration Statement
on Form S-1 (No. 333-06027))
10.2.5 Employment Agreement between Signature Resorts, Inc.
and Michael A. Depatie (incorporated by reference to
Exhibit 10.2.5 to Registrant's Registration Statement
on Form S-4 (No. 333-16339))
10.2.6 Option Agreement between Signature Resorts, Inc. and
Osamu Kaneko.
10.2.7 Option Agreement between Signature Resorts, Inc. and
Andrew J. Gessow
10.2.8 Option Agreement between Signature Resorts, Inc. and
Steven C. Kenninger
10.2.9 Option Agreement between Signature Resorts, Inc. and
James E. Noyes
10.2.10 Option Agreement between Signature Resorts, Inc. and
Michael A. Depatie
10.3.1 1996 Equity Participation Plan of Signature Resorts,
Inc. (incorporated by reference to Exhibit 10.3 to
Registrant's Registration Statement on Form S-1 (No.
333-06027))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<C> <S> <C>
10.3.2 First Amendment to 1996 Equity Participation Plan of
Signature Resorts, Inc. dated as of May 16, 1997
10.4 Agreement of Limited Partnership of Pointe Resort
Partners, L.P. (subsequently renamed Poipu Resort
Partners L.P.) dated October 11, 1994 (incorporated
by reference to Exhibit 10.4 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
10.5 Signature Resorts, Inc. Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.5 to
Registrant's Registration Statement on Form S-1 (No.
333-06027))
10.6 Agreement between W&S Hotel L.L.C. and Argosy/KOAR
Group, Inc. dated as of May 3, 1996 (incorporated by
reference to Exhibit 10.6 to Registrant's
Registration Statement on Form S-1 (No. 333-06027))
10.7 Conti-Trade Financial Warehouse Line Agreement
(incorporated by reference to Exhibit 10.7 to
Registrant's Registration Statement on Form S-4 (No.
333-16339))
10.8.1 Loan and Security Agreement between Port Royal Resort,
L.P., and Finova Capital Corporation (as successor in
interest to Greyhound Capital Corporation) dated as
of October 7, 1993 and as amended by the First
Amendment to Loan and Security Agreement dated as of
April 26, 1995 (incorporated by reference to
Exhibit 10.8.1 to Registrant's Registration Statement
on Form S-1 (No. 333-18447))
10.8.2 Loan and Security Agreement between Signature Resorts,
Inc. (as successor in interest to Cypress Pointe
Resorts, L.P.), and Finova Capital Corporation (as
successor in interest to Greyhound Real Estate
Finance Company) dated as of December 19, 1991 and as
amended by (i) the First Amendment to Loan and
Security Agreement and Consent and Agreement of
Guarantors dated as of November 9, 1992, (ii) the
Second Amendment to Loan and Security Agreement dated
as of January 13, 1993, (iii) the Third Amendment to
Loan and Security Agreement dated as of April 7,
1993, (iv) the Fourth Amendment to Loan and Security
Agreement dated as of December 16, 1993, (v) the
Fifth Amendment to Loan and Security Agreement dated
as of June 28, 1994, (vi) the Sixth Amendment to Loan
and Security Agreement dated December 16, 1994, and
(vii) the Seventh Amendment to Loan and Security
Agreement dated as of November 6, 1995 (incorporated
by reference to Exhibit 10.8.2 to Registrant's
Registration Statement on Form S-1 (No. 333-18447))
10.8.3 Loan and Security Agreement between Signature Resorts,
Inc. (as successor in interest to San Luis Resort
Partners, LLC), and Finova Capital Corporation dated
as of June 6, 1996 (incorporated by reference to
Exhibit 10.8.3 to Registrant's Registration Statement
on Form S-1 (No. 333-18447))
10.8.4 Loan and Security Agreement between Grand Beach
Resort, Limited Partnership, and Finova Capital
Corporation (as successor in interest to Greyhound
Financial Corporation) dated as of October 7, 1994
and as amended by the First Amendment to Loan and
Security Agreement dated as of July 5, 1995
(incorporated by reference to Exhibit 10.8.4 to
Registrant's Registration Statement on Form S-1
(No. 333-18447))
10.8.5 Loan and Security Agreement (Receivables) between
Signature Resorts, Inc. (as successor in interest to
Fall Creek Resort, L.P.), and Heller Financial, Inc.,
dated as of October 9, 1995 (incorporated by
reference to Exhibit 10.8.5 to Registrant's
Registration Statement on Form S-1 (No. 333-18447))
10.8.6 Loan and Security Agreement between AKGI-St. Maarten
NV (as successor in interest to AKGI-Royal Palm
C.V.o.a.), and Finova Capital Corporation dated as of
July 12, 1995 (incorporated by reference to
Exhibit 10.8.6 to Registrant's Registration Statement
on Form S-1 (No. 333-18447))
10.8.7 Loan and Security Agreement between Lake Tahoe Resort
Partners, LLC, and Finova Capital Corporation dated
as of April 29, 1996 (incorporated by reference to
Exhibit 10.8.7 to Registrant's Registration Statement
on Form S-1 (No. 333-18447))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
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<C> <S> <C>
10.8.8 Construction Loan Agreement between Lake Tahoe Resort
Partners, LLC, and Finova Capital Corporation dated
as of April 29, 1996 (incorporated by reference to
Exhibit 10.8.8 to Registrant's Registration Statement
on Form S-1 (No. 333-18447))
10.8.9 Lender's Certification and Consent from Resort Capital
Corporation to Signatures Resorts, Inc. dated as of
August 15, 1996 (incorporated by reference to Exhibit
10.8.1 to Registrant's Registration Statement on Form
S-4 (No. 333-16339))
10.8.10 Lender's Certification and Consent from FINOVA Capital
Corporation to Signature Resorts, Inc. dated as of
August 15, 1996 (incorporated by reference to Exhibit
10.8.2 to Registrant's Registration Statement on Form
S-4 (No. 333-16339))
10.8.11 Assumption Agreement between FINOVA Capital
Corporation and Signature Resorts, Inc. dated as of
August 15, 1996 (incorporated by reference to Exhibit
10.8.3 to Registrant's Registration Statement on Form
S-4 (No. 333-16339))
10.8.12 Assumption Agreement between Resort Capital
Corporation and Signature Resorts, Inc. dated as of
August 15, 1996 (incorporated by reference to Exhibit
10.8.4 to Registrant's Registration Statement on Form
S-4 (No. 333-16339))
10.8.13 Assumption Agreement between FINOVA Capital
Corporation and AKGI-Sint Maarten, N.V. dated as of
August 15, 1996 (incorporated by reference to Exhibit
10.8.5 to Registrant's Registration Statement on Form
S-4 (No. 333-16339))
10.9 Registration Rights Agreement dated as of May 15, 1997
by and among Signature Resorts, Inc. and the persons
named therein (incorporated by reference to Exhibit 4
to Registrant's current report on Form 8-K filed with
the Commission on May 29, 1997)
*10.10 Registration Rights Agreement dated as of August 28,
1997 by and among Signature Resorts, Inc., Ian K.
Ganney and Richard Harrington.
*10.11 Registration Rights Agreement dated as of August 8,
1997 by and among Signature Resorts, Inc. and the
persons named therein relating to the 9 3/4% Senior
Subordinated Notes due 2007 of Signature Resorts,
Inc.
*10.12 Amended Consulting Agreement dated as of August 1,
1997 by and between Signature Resorts, Inc., Resort
Services, Inc. and Dr. Kay F. Gow and Robert T. Gow.
*11 Statement re Computation of Per Share Earnings
16 Letter from Ernst & Young LLP regarding change in
certifying accountant (incorporated by reference to
Exhibit 16.1 to Registrant's current report on Form
8-K filed with the Commission on September 18, 1996)
*21 Subsidiaries of Signature Resorts, Inc.
*23.1 Consent of Ballard Spahr Andrews & Ingersoll (included
as part of Exhibit 5.1)
*23.2 Consent of Arthur Andersen LLP
*23.3 Consent of Ernst & Young LLP
*23.4 Consent of KPMG
24 Power of Attorney
27 Financial Data Schedule
</TABLE>
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* Filed herewith
<PAGE>
EXHIBIT 1.1
Purchase Agreement
August 5, 1997
MONTGOMERY SECURITIES
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
BT SECURITIES CORPORATION
SOCIETE GENERALE SECURITIES CORPORATION
As Initial Purchasers
c/o MONTGOMERY-SECURITIES
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
INTRODUCTORY. Signature Resorts, Inc., a Maryland corporation (the
"Company"), proposes to issue and sell to the several Initial Purchasers named
in Schedule A (the "Initial Purchasers"), acting severally and not jointly, the
----------
respective amounts set forth in such Schedule A of $200,000,000 aggregate
----------
principal amount of the Company's 9 3/4% Senior Subordinated Notes due 2007
(the "Notes"). Montgomery Securities, Donaldson, Lufkin & Jenrette Securities
Corporation, Goldman, Sachs & Co., BT Securities Corporation and Societe
Generale Securities Corporation have agreed to act as the several Initial
Purchasers in connection with the offering and sale of the Notes.
The Notes will be issued pursuant to an indenture dated as of August
1, 1997 (the "Indenture") between the Company and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee"). Notes issued in book entry
form will be issued in the name of Cede & Co., as nominee of The Depository
Trust Company (the "Depositary").
The holders of the Notes will be entitled to the benefits of a
registration rights agreement to be dated as of the Closing Date (as defined
herein) (the "Registration Rights Agreement"), among the Company and the Initial
Purchasers, pursuant to which the Company will agree to file, no later than 75
days after the Closing Date, a registration statement with the Securities and
Exchange Commission (the "Commission") registering the Exchange Notes (as
defined in the Registration Rights Agreement) under the Securities Act (as
defined below).
The Company understands that the Initial Purchasers propose to make an
offering of the Notes on the terms and in the manner set forth herein and in the
Offering Memorandum (as defined below) and agree that the Initial Purchasers may
resell, subject to the conditions set forth herein, all or a portion of the
Notes to purchasers (the "Subsequent Purchasers") at any time after the date of
this Purchase Agreement. The Notes are to be offered and sold to or through the
Initial Purchasers without being registered with the Commission under the
Securities Act of 1933, as amended (the "Securities Act," which term, as used
herein, includes the rules and regulations of the Commission promulgated
thereunder), in reliance upon exemptions therefrom. The terms of the Notes
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<PAGE>
and the Indenture will require that investors that acquire Notes expressly agree
that Notes may only be resold or otherwise transferred, after the date hereof,
if such Notes are registered for sale under the Securities Act or if an
exemption from the registration requirements of the Securities Act is available
(including the exemptions afforded by Rule 144A ("Rule 144A") or Regulation S
("Regulation S") thereunder).
The Company has prepared and delivered to each Initial Purchaser
copies of an Offering Memorandum "subject to completion" dated July 21, 1997
(the "Preliminary Offering Memorandum") and has prepared and will deliver to
each Initial Purchaser, on the date hereof or the next succeeding day, copies of
the Offering Memorandum dated the date hereof describing the terms of the Notes,
each for use by such Initial Purchaser in connection with its solicitation of
offers to purchase the Notes. As used herein, the "Offering Memorandum" shall
mean, with respect to any date or time referred to herein, the Company's
Offering Memorandum dated the date hereof, including amendments or supplements
thereto, in the most recent form that has been prepared and delivered by the
Company to the Initial Purchasers in connection with their solicitation of
offers to purchase Notes. Further, any reference to the Preliminary Offering
Memorandum or the Offering Memorandum shall be deemed to refer to and include
any Additional Issuer Information (as defined in Section 4(h)) furnished by the
Company prior to the completion of the distribution of the Notes.
The Company currently operates, directly or through subsidiaries, the
22 resorts described in the Offering Memorandum (the "Existing Resorts"). The
Company has entered into a definitive purchase agreement (the "LSI Purchase
Agreement") to acquire all of the outstanding shares of stock of LSI Group
Holdings Plc ("LSI"), a United Kingdom corporation, in exchange for newly issued
shares of the Company's Common Stock ("Common Stock"), par value $0.01 per share
(the "LSI Acquisition"). The Company anticipates that the LSI Acquisition will
be consummated in August 1997. Following the LSI Acquisition, the Company will
operate, directly or through subsidiaries, the 11 LSI Resorts (as defined in the
Offering Memorandum, the "LSI Resorts").
The Company hereby confirms its agreements with respect to the
purchase of the Notes by the Initial Purchasers as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents, warrants and covenants to each Initial Purchaser as follows:
(a) No Registration Required. Subject to compliance by the Initial
Purchasers with the representations and warranties set forth in Section 3(e)
hereof and with the procedures set forth in Section 8 hereof, it is not
necessary in connection with the offer, sale and delivery of the Notes to the
Initial Purchasers and to each Subsequent Purchaser in the manner contemplated
by this agreement and the Offering Memorandum to register the Notes under the
Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act," which term, as used herein,
includes the rules and regulations of the Commission promulgated thereunder).
(b) No Integration of Offerings or General Solicitation. The Company has
not, directly or indirectly, solicited any offer to buy or offered to sell, and
will not, directly or indirectly, solicit any offer to buy or offer to sell, in
the United States or to any United States citizen or resident, any security
which is or would be integrated with the sale of the Notes in a manner that
would require the Notes to be registered under the Securities Act. None of the
2
<PAGE>
Company, its affiliates (as such term is defined in Rule 501(b) under the
Securities Act (each, an "Affiliate"), or any person acting on its or any of
their behalf (other than the Initial Purchasers, as to whom the Company makes no
representation or warranty) has engaged or will engage, in connection with the
offering of the Notes, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act. With
respect to Notes sold in reliance upon Regulation S, (i) none of the Company,
its Affiliates or any person acting on its or their behalf (other than the
Initial Purchasers, as to whom the Company makes no representation or warranty)
has engaged or will engage in any directed selling efforts within the meaning of
Regulation S and (ii) each of the Company and its affiliates and any person
acting on its or their behalf (other than the Initial Purchasers, as to whom the
Company makes no representation or warranty) has complied and will comply with
the offering restrictions set forth in Regulation S.
(c) Eligibility for Resale under Rule 144A. The Notes are eligible for
resale pursuant to Rule 144A and will not be, at the Closing Date, of the same
class as securities listed on a national securities exchange registered under
Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act," which term, as used herein, includes the rules and regulations of the
Commission promulgated thereunder) or quoted in a U.S. automated interdealer
quotation system.
(d) The Offering Memorandum. The Offering Memorandum does not, and at the
Closing Date will not, include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided
that no representation, warranty or agreement contained in this Section l(d)
shall be applicable to information contained in or omitted from the Offering
Memorandum in reliance upon and in conformity with written information furnished
by or on behalf of any Initial Purchaser specifically for use in the preparation
thereof. Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144(A)(d)(4). The Company has not distributed
and will not distribute, prior to the later of the Closing Date and the
completion of the Initial Purchasers' distribution of the Notes, any offering
material in connection with the offering and sale of the Notes other than a
preliminary Offering Memorandum, the Offering Memorandum and other materials
permitted or not prohibited by the Securities Act.
(e) [intentionally omitted]
(f) The Purchase Agreement. This Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding obligation of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(g) The Registration Rights Agreement. At the Closing Date, the
Registration Rights Agreement will be duly authorized, executed and delivered
by, and will be a valid and binding agreement of, the Company, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or
3
<PAGE>
other similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles.
(h) Authorization of the Notes and the Exchange Notes. (i) The Notes to
be purchased by the Initial Purchasers from the Company have been duly and
validly authorized for issuance by the Company, and when issued, delivered and
paid for in accordance with the terms of this Agreement and the Indenture, will
be duly executed, authenticated and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits provided by
the Indenture under which they are to be issued, except as the enforcement
thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
moratorium, reorganization and similar laws of general applicability relating to
or affecting enforcement of the rights and remedies of creditors and to general
principles of equity and (ii) the Exchange Notes have been duly and validly
authorized for issuance by the Company, and when issued and authenticated in
accordance with the terms of the Indenture, the Registration Rights Agreement
and the Registered Exchange Offer (as defined in the Registration Rights
Agreement), will constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws of general applicability
relating to or affecting enforcement of the rights and remedies of creditors and
to general principles of equity and will be entitled to the benefits of the
Indenture.
(i) Authorization of the Indenture. The Indenture has been duly authorized
by the Company and, when executed and delivered by the Company and the Trustee,
will constitute a valid and legally binding instrument enforceable in accordance
with its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization and similar laws of
general applicability relating to or affecting enforcement of the rights and
remedies of creditors and to general principles of equity.
(j) Description of the Notes and the Indenture. The Notes, the Exchange
Notes, the Registration Rights Agreement and the Indenture will conform in all
material respects to the descriptions thereof in the Offering Memorandum.
(k) No Material Adverse Change. Except as disclosed in or specifically
contemplated by the Offering Memorandum, subsequent to the respect~ve dates as
of which information is given in the Offering Memorandum: (i) 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 Company
Affiliates and Subsidiaries (as defined below) and, upon consummation of the LSI
Acquisition and except as set forth in the LSI Purchase Agreement and the
exhibits or schedules thereto, LSI, considered as one entity (a "Material
Adverse Change"), (ii) the Company has not incurred any material liabilities or
obligations, indirect, direct or contingent, or entered into any material verbal
or written agreement or other transaction which is not in the ordinary course of
business or which could result in a material reduction in the future earnings of
the Company; (iii) the Company has not paid or declared any dividends or other
distributions with respect to its capital stock, shares or interests, as
applicable (other than such dividends or distributions paid to shareholders to
satisfy tax liabilities) and the Company is not in arrears or default in the
payment of principal or interest on any outstanding material debt obligations,
and (iv) there has not been any change (excluding transfers) in the capital
stock of the Company, or
4
<PAGE>
indebtedness material to the Company (other than the sale of securities under
this Agreement and other than in the ordinary course of business).
(l) Independent Accountants. Arthur Andersen LLP, Ernst & Young LLP and
KPMG, who have expressed their opinion with respect to the financial statements
(which term as used in this Agreement includes the related notes thereto)
included in the Offering Memorandum are independent public or chartered or
certified public accountants within the meaning of Regulation S-X under the
Securities Act and the Exchange Act.
(m) Preparation of the Financial Statements. The consolidated financial
statements of the Company, Plantation Resorts Group, Inc. ("PRG") and LSI,
together with the related notes thereto, set forth in the Offering Memorandum
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. Such statements, schedules and related notes have been
prepared in accordance with generally accepted accounting principles as applied
in the United States (with respect to the Company and PRG) and the United
Kingdom (with respect to LSI) applied on a consistent basis as certified by the
applicable independent accountants named in Section l(l). The selected financial
data set forth in the Offering Memorandum under the captions "Consolidated
Capitalization," "Selected Consolidated and Restated Historical Financial
Information of the Company," "Selected Financial Data of PRG," "Selected
Financial Data of LSI," "Pro Forma Financial Information (Unaudited) of the
Company" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" fairly present the information set forth therein on the
basis stated in the Offering Memorandum. The Company's ratios of earnings to
fixed charges set forth in the Offering Memorandum, under the caption "Selected
Consolidated and Restated Historical Financial Information of the Company" and
elsewhere, have been calculated in compliance with Item 503(d) of Regulation S-K
under the Securities Act.
(n) Incorporation and Good Standing of the Company and the Company
Affiliates and Subsidiaries. The Company has been duly formed and is validly
existing as a corporation, is in good standing under the laws of the State of
Maryland, with full power and authority (corporate and other) to conduct its
business as currently conducted or as described in the Offering Memorandum. Each
of the Company's affiliates (as defined in Rule 144(a) under the Securities Act)
and subsidiaries which is material to the operation of the Company, considered
as whole (the "Company Affiliates and Subsidiaries") has been duly formed and is
validly existing as a partnership, limited liability company or corporation, as
applicable, in good standing under the laws of its jurisdiction of formation,
with full power and authority (partnership and other) to own and lease its
properties and conduct its respective businesses as currently conducted or
described in the Offering Memorandum, except where the failure to be in good
standing would not result in a Material Adverse Change. The Company has full
legal right, power and authority to enter into this Agreement, the Registration
Rights Agreement, the Notes, the Exchange Notes and the Indenture and to perform
the transactions contemplated hereby and thereby. The Company and each of the
Company Affiliates and Subsidiaries are duly qualified to do business and in
good standing as a foreign corporation, partnership or limited liability
company, as applicable, in each jurisdiction in which the conduct of their
respective businesses requires such qualification, except where the failure to
be so qualified and in good standing would not result in a Material Adverse
Change; and to the Company's knowledge no proceeding has been instituted or
threatened in any such jurisdiction revoking,
5
<PAGE>
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.
(o) Capitalization and Other Capital Stock Matters. At March 31, 1997, on
a consolidated basis, after giving pro forma effect to the issuance and sale of
the Notes pursuant hereto, the Company would have an authorized and outstanding
capitalization as set forth in the Offering Memorandum under the caption
"Consolidated Capitalization" (other than for subsequent issuances of capital
stock, if any, pursuant to employee benefit plans described in the Offering
Memorandum or upon exercise of outstanding options described in the Offering
Memorandum).
(p) [intentionally omitted]
(q) No Current Defaults. Except as disclosed in the Offering Memorandum,
each of the Company and each Company Afffiliate and Subsidiary is not in
violation of any of its articles of organization or by-laws, and is not in
breach or default (either by itself or upon notice or the passage of time or
both) ("Default") with respect to any provision of any agreement, judgment,
decree, order, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which it is a party or by which it or any of its
properties are bound, or to which any of its property or assets is subject
(each, an "Existing Instrument"), except for any such violation, breach or
Default that will not result in a Material Adverse Change.
(r) Non-Contravention of Existing Instruments. The making and performance
of this Agreement, the Registration Rights Agreement, and the Indenture, and the
issuance and delivery of the Notes or the Exchange Notes, and the consummation
of the transactions contemplated herein and therein, (i) will not violate any
provisions of any partnership agreement, certificate of partnership, charter,
bylaws or other organizational documents, as applicable, of the Company or any
of the Company Affiliates and Subsidiaries and (ii) will not conflict with,
result in the breach or violation of, or constitute a Default under (A) any
Existing Instrument or (B) any statute or any authorization, rule or regulation
of any court or any regulatory body, administrative agency or other governmental
body applicable to the Company, any of the Company Affiliates and Subsidiaries
or any of the Existing Resorts, in each case except as would not result in a
Material Adverse Change.
(s) No Further Authorizations or Approvals Required. 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 Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, for the execution and delivery of this Agreement, the
Registration Rights Agreement or the Indenture, or the issuance and delivery of
the Notes or the Exchange Notes or the consummation of the transactions
otherwise contemplated hereby and thereby except for compliance with the
Securities Act, the Exchange Act, the Trust Indenture Act, the Blue Sky or state
or Canadian securities laws (collectively, the "Blue Sky Laws") applicable to
the offering of the Notes by the several Initial Purchasers, the issuance of the
Exchange Notes or the consummation of the Exchange Offer, and except for any
such consent, approval, authorization or other order as has been or will be
obtained prior to the Closing Date, or in the case of the Exchange Notes, prior
to the date of issuance.
6
<PAGE>
(t) No Material Actions or Proceedings. Except as disclosed in the Offering
Memorandum, there are no legal or governmental actions, suits or proceedings
pending or threatened to which the Company or any of the Company Affiliates and
Subsidiaries are a party or of which any resort owned or leased by the Company
Affiliates and Subsidiaries is the subject, or related to environmental or
discrimination matters, which actions, suits or proceedings could reasonably be
anticipated to individually or in the aggregate, prevent or adversely affect the
transactions contemplated by this Agreement or result in a Material Adverse
Change. Neither the Company nor any of the Company Affiliates and Subsidiaries
is a party or subject to the provisions of any material injunction, judgment,
decree or order of any court, regulatory body, administrative agency or other
governmental body. To the Company's knowledge, no labor problem exists or is
imminent with respect to the employees of any of the Existing Resorts, the
Company, any of the Company Affiliates and Subsidiaries or, except as set forth
in the Offering Memorandum or in the LSI Purchase Agreement or the schedules or
exhibits thereto, the LSI Resorts which could result in a Material Adverse
Change.
(u) Intellectual Property Rights. Except as specifically disclosed in or
specifically contemplated by the Offering Memorandum, the Company has and, upon
consummation of the LSI Acquisition and except as set forth in the LSI Purchase
Agreement or schedules or exhibits thereto, will have sufficient trademarks,
trade names, patent rights, copyrights, licenses or other similar rights and
proprietary knowledge (collectively, "Intangibles"), approvals and governmental
authorizations to conduct its businesses as now conducted or as described in the
Offering Memorandum; the expiration of any Intangibles, approvals or
governmental authorizations will not result in a Material Adverse Change; and
the Company has no knowledge of any material infringement by it or any of the
Company Affiliates and Subsidiaries or, except as set forth in the LSI Purchase
Agreement or the schedules or exhibits thereto, LSI of any Intangibles, and
there is no claim being made against the Company or any of the Company
Affiliates and Subsidiaries or, to the Company's knowledge and except as set
forth in the LSI Purchase Agreement or the schedules or exhibits thereto, LSI
regarding any Intangible or other infringement which could result in a Material
Adverse Change.
(v) All Necessary Permits, etc. Except as set forth in the Offering
Memorandum, the Company, each of the Company Affiliates and Subsidiaries and, to
the Company's knowledge and except as set forth in the LSI Purchase Agreement or
the schedules or exhibits thereto, LSI are in possession of and operating in
compliance with all authorizations, licenses, permits, consents, certificates
and orders material to the conduct of their respective businesses, all of which
are valid and in full force and effect; and to the Company's knowledge and
except as set forth in the LSI Purchase Agreement or the schedules or exhibits
thereto, no proceeding has been instituted or threatened in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, any such authorization, license, permit, consent, certificate or order.
(w) Title to Properties. Except as set forth in the Offering Memorandum,
each of the Company, each of the Company Affiliates and Subsidiaries and, to the
Company's knowledge and except as set forth in the LSI Purchase Agreement or the
schedules or exhibits thereto, LSI has good and marketable title to all the
properties and assets reflected as owned in the financial statements referred to
in Section l(m) above, in each case free and clear of any security interests,
mortgages, liens, encumbrances, equities, claims and other defects,
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except such as do not materially and adversely affect the value of such property
and do not materially interfere with the use made or proposed to be made of such
property by the Company, any such Company Affiliate or Subsidiary or LSI. Except
as disclosed in the Offering Memorandum, the Company and each of the Company
Affiliates and Subsidiaries owns or leases all such properties as are necessary
to operate the Existing Resorts as now conducted or as proposed to be conducted,
except with respect to the Poipu Resort and the San Luis Bay intervals.
(x) Tax Law Compliance. The Company and each of the Company Affiliates and
Subsidiaries and, to the Company's knowledge and except as set forth in the LSI
Purchase Agreement or the schedules or exhibits thereto and except as set forth
in the Offering Memorandum, LSI has filed all necessary federal, state and
foreign income and franchise tax returns and have paid all taxes shown as due
thereon; to the Company's knowledge and except as set forth in the Offering
Memorandum or the LSI Purchase Agreement or the schedules and exhibits thereto,
LSI has filed all necessary tax returns and has paid all taxes due; and the
Company has no knowledge of any tax deficiency which has been or might be
asserted or threatened against the Company, any of the Company Affiliates and
Subsidiaries or LSI, in each case except as would not, individually or in the
aggregate, result in a Material Adverse Change.
(y) Company Not an "Investment Company". The Company is not, nor will it
conduct its business in a manner in which it would become an "investment
company" or an entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended (the "1940 Act").
(z) Insurance. The Company and the Company Affiliates and Subsidiaries have
and will maintain liability, property and casualty insurance (insured by
insurers of recognized financial responsibility) in favor of the Company, or the
Company Affiliates and Subsidiaries, with respect to each of the Existing
Resorts (other than the Poipu Resort) and, upon consummation of the LSI
Acquisition and except as set forth in the Offering Memorandum or the LSI
Purchase Agreement or the schedules or exhibits thereto, the LSI Resorts, in an
amount and on such terms as is reasonable and customary for businesses of the
type proposed to be conducted by the Company, including, among other things,
insurance against theft, damage, destruction and acts of vandalism. The Company
has not received from any insurance company notice of any material defects or
deficiencies affecting the insurability of any such resort. Title insurance in
favor of the Company or the Company Affiliates and Subsidiaries, is in force
with respect to each of the Existing Resorts in an amount reasonably acceptable
to a reasonably prudent company in a similar line of business (except with
respect to the St. Maarten Resorts) and, upon consummation of the LSI
Acquisition and except as set forth in the Offering Memorandum or the LSI
Purchase Agreement or the schedules or exhibits thereto, the Company shall have
received title opinions in favor of the Company or the Company Affiliates and
Subsidiaries with respect to the LSI Resorts.
(aa) Certain Losses. Except as otherwise disclosed in the Offering
Memorandum, subsequent to the respective dates as of which information is given
in the Offering Memorandum, the Company has not sustained any loss or
interference with its respective businesses or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered by insurance, that
would result in a Material Adverse Change.
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(ab) No Price Stabilization or Manipulation. Neither the Company nor any
of the Company Affiliates and Subsidiaries has taken or will take, directly or
indirectly, any action designed to or that might be reasonably expected to cause
or result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Notes.
(ac) [intentionally omitted]
(ad) No Unlawful Contributions or Other Payments. None of the Company, any
of the Company Affiliates and Subsidiaries or, to the Company's knowledge and
except as set forth in the Offering Memorandum or the LSI Purchase Agreement or
the schedules or exhibits thereto, LSI 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.
(ae) Company's Accounting System. The Company and each of the Company
Affiliates and Subsidiaries maintain and will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to financial
and corporate books and records is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(af) Compliance with Environmental Laws. The Company and each of the
Company Affiliates and Subsidiaries (i) are in compliance with any and all
applicable foreign, federal, state and local rules, laws and regulations
relating to the protection of human health and safety, the environment or any
Hazardous Material (as hereinafter defined) ("Environmental Laws"), (ii) have
received, or will have received, as of the Closing Date, as the case may be, all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are or will
be, as of the Closing Date, as the case may be, in compliance with all terms and
conditions of any such permit, license or approval, in each case except as would
not result in a Material Adverse Change. 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, foreign or domestic. To the
Company's knowledge, there is no liability, alleged liability or potential
liability (including, without limitation, liability, alleged liability or
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties), of the Company or any Company Affiliate or Subsidiary 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 such entity,
or (b) any violation or alleged violation of any
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<PAGE>
Environmental Law, which liability, alleged liability or potential liability is
material to the Company or such Company Affiliate or Subsidiary, as applicable,
except as set forth in the Offering Memorandum.
(ag) [intentionally omitted]
(ah) Disinterestedness of Environmental Engineering Firms. No environmental
engineering firm which prepared Phase I environmental assessment reports (or
other similar reports with respect to the Existing Resorts as set forth in the
Offering Memorandum) was, at the time such reports were delivered, employed for
such purpose on a contingent basis or had any substantial interest in the
Company or any of the Company Affiliates and Subsidiaries.
(ai) ERISA Compliance. The assets of neither the Company nor any of the
Company Affiliates and Subsidiaries constitute, nor will such assets, as of the
Closing Date, constitute "plan assets" under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
(aj) Compliance with Timeshare Laws. The Company and, to the Company's
knowledge and except as set forth in the Offering Memorandum or the LSI Purchase
Agreement or the schedules or exhibits thereto, LSI are in compliance with all
federal, state, local and foreign laws and regulations applicable to such entity
regarding the marketing, offers to sell and sales of vacation intervals in each
state in which the Company is doing business, including, but not limited to, the
Federal Trade Commission Act, Regulation Z (the truth-in-lending act), Equity
Opportunity Credit Act and Regulation B, Interstate Land Sales Full Disclosure
Act, Telephone Consumer Protection Act, Telemarketing and Consumer Fraud and
Abuse Prevention Act, Fair Housing Act and Civil Rights Acts of 1964 and 1968
and all corresponding foreign laws, in each case as applicable to the Company
and/or LSI, and in each case except as would not result in a Material Adverse
Change. The Company and, to the Company's knowledge and except as set forth in
the Offering Memorandum or the LSI Purchase Agreement or the schedules or
exhibits thereto, LSI have filed all required documents and supporting
information in compliance with federal, state, local and foreign laws and
regulations, and the Company and, to the Company's knowledge and except as set
forth in the Offering Memorandum or the LSI Purchase Agreement or the schedules
or exhibits thereto, LSI are in compliance with all licensure, anti-fraud,
telemarketing, price, gift and sweepstakes and labor laws to which it is or may
become subject, in each case except as would not result in a Material Adverse
Change. The Company and each of the Company Affiliates and Subsidiaries have, or
upon the Closing Date will have, all permits and licenses which are required to
sell vacation intervals in each state and foreign jurisdiction where they
conduct business, in each case except as would not result in a Material Adverse
Change. To the Company's knowledge and except as set forth in the Offering
Memorandum or the LSI Purchase Agreement or the schedules or exhibits thereto,
the Company will have, upon consummation of the LSI Acquisition, all permits and
licenses which are required to sell vacation points at the LSI Resorts in each
jurisdiction where the Company or any Company Affiliate or Subsidiary conducts
or will conduct business, in each case except as would not result in a Material
Adverse Change.
(ak) Compliance with All Laws. Except as set forth in the Offering
Memorandum, neither the Company nor any of the Company Affiliates and
Subsidiaries has been advised, or has reason to believe, that the Company or any
of the Company Affiliates and Subsidiaries or,
10
<PAGE>
except as set forth in the LSI Purchase Agreement or the schedules or exhibits
thereto, LSI is not conducting its businesses in compliance with all applicable
laws, rules and regulations of the jurisdictions in which any of them is
operating, including, without limitation, all applicable local, state, federal
and foreign environmental laws and regulations, in each case except as would not
result in a Material Adverse Change.
(al) Mortgage Related Matters. The mortgages and deeds of trust encumbering
the Existing Resorts and, to the best knowledge of the Company and except as set
forth in the Offering Memorandum or the LSI Purchase Agreement or the schedules
or exhibits thereto, the LSI Resorts are not convertible into equity securities
of the Company nor does the Company hold a participating interest therein and
such mortgages and deeds of trust are not cross-defaulted or cross-
collateralized to any property not to be owned, upon consummation of the LSI
Acquisition, directly or indirectly by the Company, and since the Company's
initial public offering and as of the date hereof, the Company has not acquired
any property subject to such mortgage.
(am) No Finder's Fees. Neither the Company nor any of the Company
Affiliates and Subsidiaries has incurred any liability for a fee, commission or
other compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement other than as
disclosed in the Offering Memorandum.
(an) No First Refusals to Purchase Resorts. Except as set forth in the
Offering Memorandum, no person has an option or right of first refusal to
purchase all or part of any of the Existing Resorts (other than the Poipu
Resort) or, to the Company's knowledge and except as set forth in the LSI
Purchase Agreement or the schedules or exhibits thereto, any of the LSI Resorts,
or any interest therein. Except as set forth in the Offering Memorandum, each of
the Existing Resorts and, to the Company's knowledge and except as set forth in
the LSI Purchase Agreement or the schedules or exhibits thereto, each of the LSI
Resorts complies with all applicable codes, laws and regulations (including,
without limitation, building and zoning codes and laws relating to handicapped
access), except for such non compliance as will not result in a Material Adverse
Change. The Company has no knowledge of any pending or threatened condemnation
proceedings, zoning changes, or other proceedings or actions that will in any
manner affect the size of, number of vacation intervals planned for, the use of
any improvements on, or access to, the Existing Resorts or, except as set forth
in the Offering Memorandum or the LSI Purchase Agreement or the schedules or
exhibits thereto, the LSI Resorts.
(ao) Company's Relationship with Westin and Promus. To the Company's
knowledge, no dispute exists or is imminent between the Company and Promus
Hotels, Inc. or between the Company and Westin Hotels & Resorts and no officer
or director of the Company has any agreement or understanding (verbally or in
writing) with Westin Hotels & Resorts except as set forth in the Prospectus.
(ap) LSI Acquisition.
(i) LSI Purchase Agreement. The Company has full legal right, power
and authority to enter into the LSI Purchase Agreement and perform the
transactions contemplated thereby. The LSI Purchase Agreement has been duly
authorized,
11
<PAGE>
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company in accordance with its terms.
(ii) Non-Contravention of Certain Instruments and Laws. Assuming the
consents and approvals set forth in the Offering Memorandum or the LSI Purchase
Agreement or the schedules or exhibits thereto have been obtained, the making
and performance of the LSI Purchase Agreement by the Company and by LSI and the
consummation of the transactions therein contemplated, will not violate any
provisions of any partnership agreement, certificate of partnership, charter,
bylaws or other organizational documents, as applicable, of the Company or any
of the Company Affiliates and Subsidiaries and will not conflict with, result in
the breach or violation of, or constitute, a Default under (A) any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or other
instrument to which the Company or any of the Company Affiliates and
Subsidiaries is a party or by which the Company, any of the Company Affiliates
and Subsidiaries and, to the Company's knowledge and except as set forth in the
Offering Memorandum, any of the Existing Resorts may be bound or affected, (B)
to the Company's knowledge and except as set forth in the LSI Purchase Agreement
or the schedules or exhibits thereto, any agreement, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to which LSI is
a party or by which any of the LSI Resorts may be bound or affected
(collectively, the "Existing LSI Contracts") or (C) any statute or any
authorization, judgment, decree, order, rule or regulation of any court or any
regulatory body, administrative agency or other governmental body applicable to
the Company, any of the Company Affiliates and Subsidiaries or any of the
Existing Resorts or, to the Company's knowledge and except as set forth in the
Offering Memorandum or the LSI Purchase Agreement or the schedules or exhibits
thereto, LSI or any of the LSI Resorts, in each case except as individually or
in the aggregate would not result in a Material Adverse Change.
(iii) [intentionally omitted]
(iv) LSI Written Consents. Except as set forth in the LSI Purchase
Agreement or the schedules or exhibits thereto, consummation of the LSI
Acquisition and operation of the LSI Resorts by the Company as contemplated by
the Offering Memorandum will not require the consent of any other party to any
Existing LSI Contract except for such consents as have been or, prior to the
consummation of the LSI Acquisition, will be obtained in writing by the Company,
a Company Affiliate or Subsidiary, or LSI, as applicable (the "LSI Written
Consents") and except as individually or in the aggregate will not result in a
Material Adverse Change.
(v) No Further Approvals. No consent, approval, authorization or
other order of any court, regulatory body, administrative agency or other
governmental body is required, including, without limitation (A) the
satisfaction of any requirements pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and corresponding foreign laws, and (B)
the procurement of a waiver by the City Panel of the application of the City
Code on Takeovers and Mergers for the execution and delivery of the LSI Purchase
Agreement or the consummation of the transactions contemplated therein except
for such consents, approvals, authorizations and waivers as have been or will be
obtained prior to the consummation of the LSI Acquisition and
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except for compliance with the Act, the Exchange Act, and the Blue Sky
Laws applicable to the transactions contemplated by the LSI Purchase
Agreement.
(aq) Pooling of Interest Treatment. The Company has received from its
independent certified public accountants and made available to counsel for
the Initial Purchasers a letter respecting pooling of interest treatment
relating to the PRG Merger (as defined in the Offering Memorandum) and a
draft letter respecting pooling of interest treatment relating to the LSI
Acquisition.
Any certificate signed by an officer of the Company and delivered to the
Initial Purchasers or to counsel for the Initial Purchasers shall be deemed
to be a representation and warranty by the Company to each Initial
Purchaser as to the matters set forth therein.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE INITIAL PURCHASERS. Each
of the Initial Purchasers, represents and warrants to the Company that the
information set forth (i) on the cover page of the Offering Memorandum with
respect to price, commissions and terms of offering and (ii) under the caption
"Plan of Distribution" in the Offering Memorandum was furnished to the Company
by and on behalf of the Initial Purchasers for use in connection with the
preparation of the Offering Memorandum and is correct in all material respects.
Montgomery Securities represents and warrants that it has been authorized by
each of the other Initial Purchasers to enter into this Agreement on their
behalf and to act for each Initial Purchaser in the manner herein provided.
SECTION 3. PURCHASE, SALE AND DELIVERY OF THE NOTES.
(a) The Notes. The Company agrees to issue and sell to the several
Initial Purchasers, severally and not jointly, all of the Notes upon the terms
herein set forth. On the basis of the representations, warranties and agreements
herein contained, and upon the terms but subject to the conditions herein set
forth, the Initial Purchasers agree, severally and not jointly, to purchase from
the Company the aggregate principal amount of Notes set forth opposite their
names on Schedule A, at a purchase price of 99.234% of the principal amount
----------
thereof. The Company agrees to pay to the Initial Purchasers a commission equal
to 3% of the aggregate principal amount of the Notes, payable on the Closing
Date.
(b) The Closing Date. Delivery of certificates for the Notes in
definitive form to be purchased by the Initial Purchasers and payment therefor
shall be made at the offices of Latham & Watkins, 633 W. 5th Street, Suite 4000,
Los Angeles, California 90071 (or such other place as may be agreed to by the
Company and the Initial Purchasers) at 9:00 a.m., New York time, on August 8,
1997 or such other time and date not later than 12:30 P.M., New York time, on
August 13, 1997 as the Initial Purchasers shall designate by notice to the
Company (the time and date of such closing are called the "Closing Date").
(c) Delivery of the Notes. The Company shall deliver, or cause to be
delivered, to Montgomery Securities for the accounts of the several Initial
Purchasers certificates for the Notes at the Closing Date against payment by
wire transfer of immediately available funds for the amount of the purchase
price therefor. The certificates for the Notes shall be in such denominations
($1,000 or integral multiples thereof) and registered in the name of Cede & Co.,
as nominee of the Depositary, and shall be made available for inspection on the
business
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day preceding the Closing Date at a location in New York City as the Initial
Purchasers may designate. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Initial Purchasers.
(d) Delivery of Offering Memorandum to the Initial Purchasers. Not later
than 12:00 p.m. on the second business day following the date of this Agreement,
the Company shall deliver or cause to be delivered copies of the Offering
Memorandum in such quantities and at such places as the Initial Purchasers shall
reasonably request.
(e) Initial Purchasers as Qualified Institutional Buyers. Each Initial
Purchaser severally and not jointly represents and warrants to, and agrees with,
the Company that it is a "qualified institutional buyer" within the meaning of
Rule 144A (a "Qualified Institutional Buyer") and an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act (an "Accredited
Investor").
SECTION 4. ADDITIONAL COVENANTS. The Company further covenants and agrees
with each Initial Purchaser as follows:
(a) Initial Purchasers' Review of Proposed Amendments and Supplements.
Prior to amending or supplementing the Offering Memorandum, the Company shall
furnish to the Initial Purchasers for review a copy of each such proposed
amendment or supplement, and the Company shall not file any such proposed
amendment or supplement to which the Initial Purchasers reasonably object.
(b) Amendments and Supplements to the Offering Memorandum and Other
Securities Act Matters. If, prior to the completion of the placement of the
Notes by the Initial Purchasers with the Subsequent Purchasers (as evidenced by
a notice in writing from the Initial Purchasers to the Company), any event shall
occur or condition exist as a result of which it is necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when the Offering Memorandum is delivered to a
purchaser, not misleading, or if in the opinion of the Initial Purchasers or
counsel for the Initial Purchasers it is otherwise necessary to amend or
supplement the Offering Memorandum to comply with law, the Company agrees
promptly to prepare (subject to Section 4(a) hereof), and furnish at its own
expense to the Initial Purchasers, amendments or supplements to the Offering
Memorandum so that the statements in the Offering Memorandum as so amended or
supplemented will not, in the light of the circumstances when the Offering
Memorandum is delivered to a purchaser, be misleading or so that the Offering
Memorandum, as amended or supplemented, will comply with law.
The Company hereby expressly acknowledges that the indemnification and
contribution provisions of Section 9 hereof are specifically applicable and
relate to each offering memorandum, registration statement, prospectus,
amendment or supplement referred to in this Section 4(b).
(c) Copies of the Offering Memorandum. The Company agrees to furnish the
Initial Purchasers, without charge, as many copies of the Offering Memorandum
and any amendments and supplements thereto as they may reasonably request.
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(d) Blue Sky Compliance. The Company shall cooperate with the Initial
Purchasers and counsel for the Initial Purchasers to qualify or register the
Notes for sale under (or obtain exemptions from the application of) the Blue Sky
Laws of those jurisdictions designated by the Initial Purchasers, shall comply
with such laws and shall continue such qualifications, registrations and
exemptions in effect so long as required for the distribution of the Notes. The
Company shall not be required to qualify as a foreign corporation or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise the Initial
Purchasers promptly of the suspension of the qualification or registration of
(or any such exemption relating to) the Notes for offering, sale or trading in
any jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best efforts
to obtain the withdrawal thereof at the earliest possible moment.
(e) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Notes sold by it in the manner described under the caption "Use of
Proceeds" in the Offering Memorandum.
(f) Ratings of the Notes. The Company shall take all reasonable action
necessary to enable Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc. ("S&P"), Moody's Investors Service, Inc. ("Moody's") and Duff & Phelps to
provide their respective credit ratings of the Notes.
(g) The Depositary. The Company will cooperate with the Initial Purchasers
and use its best efforts to permit the Notes to be eligible for clearance and
settlement through the facilities of the Depositary.
(h) Additional Issuer Information. Prior to the completion of the placement
of the Notes by the Initial Purchasers with the Subsequent Purchasers (as
evidenced by a notice in writing from the Initial Purchasers to the Company),
the Company shall file, on a timely basis, with the Commission and the Nasdaq
National Market all reports and documents required to be filed under Section 13
or 15(d) of the Exchange Act. Additionally, at any time when the Company is not
subject to Section 13 or 15(d) of the Exchange Act, for the benefit of holders
and beneficial owners from time to time of Notes, the Company shall furnish, at
its expense, upon request, to holders and beneficial owners of Notes and
prospective purchasers of Notes information ("Additional Issuer Information")
satisfying the requirements of subsection (d)(4)(i) of Rule 144A.
(i) [intentionally omitted]
(j) Future Reports to the Initial Purchasers. During the period of five
years hereafter the Company will furnish to 600 Montgomery Street, San
Francisco, California 94111, Telecopier: (415) 249-5802, Attention: Eric
Peterson, with a copy to O'Melveny & Myers LLP, 275 Battery Street, Suite 2600,
San Francisco, California 94111, Telecopier: (415) 984-8701, Attention: Peter T.
Healy, (i) as soon as practicable after the end of each fiscal year, copies of
the Annual Report of the Company containing the balance sheet as the Company as
of the close of such fiscal year and statements of income, stockholders' equity,
and cash flows for the year then ended and the opinion thereon of the Company's
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independent public or certified 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, Current 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 capital stock or debt securities (including the holders of the Notes).
(k) Registration Rights Agreement. The Company shall comply with all
provisions and obligations of, and shall cause the Exchange Offer (as
defined in the Registration Rights Agreement) to be made in the appropriate
form as contemplated by, the Registration Rights Agreement, and shall
comply with all applicable federal and state securities laws in connection
with the Exchange Offer.
(l) No Integration. The Company agrees that it will not and will cause
its Affiliates not to make any offer or sale of securities of the Company
of any class if, as a result of the doctrine of "integration" referred to
in Rule 502 under the Securities Act, such offer or sale would render
invalid (for the purpose of (i) the sale of the Notes by the Company to the
Initial Purchasers, (ii) the resale of the Notes by the Initial Purchasers
to Subsequent Purchasers or (iii) the resale of the Notes by such
Subsequent Purchasers to others) the exemption from the registration
requirements of the Securities Act provided by Section 4(1) or 4(2) thereof
or by Rule 144A or Regulation S thereunder or otherwise.
(m) Rule 144A Information. The Company agrees that, in order to render
the Notes eligible for resale pursuant to Rule 144A under the Securities
Act, while any of the Notes remain outstanding, it will make available,
upon request, to any holder of Notes or prospective purchasers of Notes the
information specified in Rule 144A(d)(4), unless the Company furnishes
information to the Commission pursuant to Section 13 or 15(d) of the
Exchange Act.
(n) [intentionally omitted]
(o) Legended Notes. Each certificate for a Note will bear the legend
contained in "Notice to Investors" in the Offering Memorandum for the time
period and upon the other terms stated in the Offering Memorandum.
(p) PORTAL Market. The Company will use its best efforts to cause such
Notes to qualify for initial designation and continued designation as
PORTAL securities in the National Association of Securities Dealers, Inc.
PORTAL Market (the "PORTAL Market").
Montgomery Securities, on behalf of the several Initial Purchasers,
may, in its sole discretion, waive in writing the performance by the Company of
any one or more of the foregoing covenants or extend the time for their
performance.
SECTION 5. PAYMENT OF EXPENSES. 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 limitation (i) all expenses incident to the issuance and delivery of the
Notes (including all printing and engraving costs), (ii) all necessary issue,
transfer and other stamp taxes in connection with the issuance and sale of the
Notes to the Initial
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Purchasers, (iii) all fees and expenses of the Company's counsel, independent
public or certified public accountants and other advisors, (iv) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of each Preliminary Offering Memorandum and the Offering
Memorandum (including financial statements), and all amendments and supplements
thereto, this Agreement, the Registration Rights Agreement, the Indenture and
the Notes, (v) all filing fees, attorneys' fees and expenses incurred by the
Company or the Initial Purchasers in connection with qualifying or registering
(or obtaining exemptions from the qualification or registration of) all or any
part of the Securities for offer and sale under the Blue Sky Laws and, if
requested by the Initial Purchasers, preparing and printing a "Blue Sky Survey"
or memorandum, and any supplements thereto, advising the Initial Purchasers of
such qualifications, registrations and exemptions, (v) the fees and expenses of
the Trustee, (vii) any fees payable in connection with the rating of the Notes
or the Exchange Notes with the ratings agencies and the designation of the Notes
as PORTAL securities, (vii) all fees and expenses (including reasonable fees and
expenses of counsel) of the Company in connection with approval of the Notes by
the Depositary for "book-entry" transfer, and (viii) the performance by the
Company of its other obligations under this Agreement. Except as provided in
this Section 5, Section 7, Section 9 and Section 10 hereof, the Initial
Purchasers shall pay their own expenses, including the fees and disbursements of
their counsel.
SECTION 6. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASERS. The
obligations of the several Initial Purchasers to purchase and pay for the Notes
as provided herein on the Closing Date shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the Closing Date as though then made and
to the timely performance by the Company of its covenants and other obligations
hereunder, and to each of the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Initial
Purchasers shall have received from Arthur Andersen LLP and KPMG, independent
public or chartered or certified public accountants for the Company or LSI, as
applicable, letters dated the date hereof addressed to the Initial Purchasers,
in form and substance satisfactory to the Initial Purchasers, containing
statements and information of the type ordinarily included in accountant's
"comfort letters" to Initial Purchasers, delivered according to Statement of
Auditing Standards Nos. 72 and 76 (or any successor bulletins), with respect to
the audited and unaudited financial statements and certain financial information
contained in the Offering Memorandum.
(b) No Material Adverse Change or Ratings Agency Change. For the period
from and after the date of this Agreement and prior to the Closing Date:
(i) there shall not have occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading, nor shall any notice
have been given of any intended or potential downgrading or of any review for a
possible change that does not indicate the direction of the possible change, in
the rating accorded any securities of the Company or any of its subsidiaries by
any "nationally recognized statistical rating organization" as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act.
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(c) Opinions of Counsel for the Company. On the Closing Date the Initial
Purchasers shall have received the favorable opinions of:
(i) Latham & Watkins, counsel for the Company, dated as of the Closing
Date, substantially in the form attached hereto as Exhibit A;
---------
(ii) Andrew D. Hutton, Vice President and General Counsel of the
Company, dated as of the Closing Date, substantially in the form attached hereto
as Exhibit B;
---------
(iii) Ballard Spahr Andrews and Ingersoll, special Maryland counsel for
the Company, dated as of the Closing Date, substantially in the form attached
hereto as Exhibit C;
---------
(iv) Schreeder, Wheeler & Flint, special Georgia counsel for the
Company, dated as of the Closing Date, substantially in the form attached hereto
as Exhibit D;
---------
(v) Jones, Blechman, Woltz & Kelly, P.C., special Virginia counsel for
the Company, dated as of the Closing Date, substantially in the form attached
hereto as Exhibit E; and
---------
(vi) SJ Berwin & Co. as special British counsel for the Company, dated
as of the Closing Date, substantially in the form attached hereto as Exhibit F.
---------
(d) Opinions of Counsel for the Initial Purchasers. On the Closing Date the
Initial Purchasers shall have received the favorable opinions of O'Melveny and
Myers LLP, counsel for the Initial Purchasers, dated as of the Closing Date,
with respect to such matters as may be reasonably requested by the Initial
Purchasers.
(e) Officers' Certificate. On the Closing Date the Initial Purchasers shall
have received a written certificate executed by the Chairman of the Board, Chief
Executive Officer or President of the Company and the Chief Financial Officer or
Chief Accounting Officer of the Company, dated as of the Closing Date, to the
effect set forth in subsection (b)(ii) of this Section 6, and further to the
effect that:
(i) for the period from and after the date of this Agreement and prior
to the Closing Date there has not occurred any Material Adverse Change;
(ii) the representations, warranties and covenants of the Company set
forth in Section I of this Agreement are true and correct with the same force
and effect as though expressly made on and as of the closing date;
(iii) the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to the
Closing Date; and
(iv) each of the respective signers of each certificate has carefully
examined the Offering Memorandum; in his opinion and to the knowledge of the
Company the Offering Memorandum does not include any untrue statement of a
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material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that such certificate shall not require any
representation concerning statements in, or omitted from, the Offering
Memorandum, in reliance upon and in conformity with written
information furnished to the Company by the Initial Purchasers
expressly for use in preparation of the Offering Memorandum.
(f) Bring-down Comfort Letter. On the Closing Date the Initial
Purchasers shall have received from Arthur Andersen LLP and KPMG,
independent public or chartered or certified public accountants for the
Company or LSI, letters dated such date, in form and substance satisfactory
to the Initial Purchasers, to the effect that they reaffirm the statements
made in the respective letters furnished by them pursuant to subsection (a)
of this Section 6, except that the specified date referred to therein for
the carrying out of procedures shall be no more than three business days
prior to the Closing Date.
(g) PORTAL Designation. At the Closing Date the Notes shall have been
designated for trading in the PORTAL Market.
(h) Registration Rights Agreement. The Company shall have entered into
the Registration Rights Agreement and the Initial Purchasers shall have
received executed counterparts thereof.
(i) LSI Purchase Agreement. The Initial Purchasers shall have received
a copy of the executed LSI Purchase Agreement.
(j) Additional Documents. On or before the Closing Date, the Initial
Purchasers and counsel for the Initial Purchasers shall have received such
information, documents and opinions as they may reasonably require for the
purposes of enabling them to pass upon the issuance and sale of the Notes
as contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the
conditions or agreements, herein contained.
If any condition specified in this Section 6 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the Initial
Purchasers by notice to the Company at any time on or prior to the Closing Date,
which termination shall be without liability on the part of any party to any
other party, except that Section 5, Section 7, and Section 9 shall at all times
be effective and shall survive such termination.
SECTION 7. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If this Agreement
is terminated by the Initial Purchasers pursuant to Section 6 or Section 16 or
if the sale to the Initial Purchasers of the Notes on the Closing Date 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 the Initial Purchasers (or such Initial
Purchasers as have terminated this Agreement with respect to themselves),
severally, upon demand for all out-of-pocket expenses that shall have been
reasonably incurred by the Initial Purchasers in connection with the proposed
purchase and the offering and sale of the Notes, including but not limited to
fees and disbursements of counsel, printing expenses, travel expenses, postage,
facsimile and telephone charges.
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SECTION 8. OFFER, SALE AND RESALE PROCEDURES. Each of the Initial
Purchasers, on the one hand, and the Company, on the other hand, hereby
represents and warrants and covenants with each other to observe the following
procedures in connection with the offer and sale of the Notes:
(a) Offers and Sales only to Institutional Accredited Investors or
Qualified Institutional Buyers. Offers and sales of the Notes will be made
only by the Initial Purchasers or Affiliates thereof qualified to do so in
the jurisdictions in which such offers or sales are made. Each such offer
or sale shall only be made (i) to persons whom the offeror or seller
reasonably believes to be qualified institutional buyers (as defined in
Rule 144A under the Securities Act), (ii) to a limited number of other
institutional accredited investors (as such term is defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D) that the offeror or seller
reasonably believes to be and, with respect to sales and deliveries, that
are Accredited Investors ("Institutional Accredited Investors") or (iii)
non-U.S. persons outside the United States to whom the offeror or seller
reasonably believes offers and sales of the Notes may be made in reliance
upon Regulation S under the Securities Act, upon the terms and conditions
set forth under the captions "Notice to Investors" and "Annex A" and on
pages 99-104 of the Preliminary Offering Memorandum, all of which are
hereby expressly made a part hereof.
(b) No General Solicitation. The Notes will be offered by
approaching prospective Subsequent Purchasers on an individual basis. No
general solicitation or general advertising (within the meaning of Rule
502(c) under the Securities Act) will be used in the United States in
connection with the offering of the Notes.
(c) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
Subsequent Purchaser of a Note acting as a fiduciary for one or more third
parties, in connection with an offer and sale to such purchaser pursuant to
clause (a) above, each third party shall, in the judgment of the applicable
Initial Purchaser, be an Institutional Accredited Investor or a Qualified
Institutional Buyer or a non-U.S. person outside the United States.
(d) Restrictions on Transfer. Upon original issuance thereof by the
Company, and until such time as the same is no longer required under the
applicable requirements of the Securities Act, the Notes (and all
securities issued in exchange therefor or in substitution thereof, other
than the Exchange Notes) shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT
ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL
NOT,
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WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT
THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE)
UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS
NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES
IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI THAT, PRIOR
TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES AT THE TIME OF TRANSFER OF LESS THAN $250,000, AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS."
Following the sale of the Notes by the Initial Purchasers to Subsequent
Purchasers pursuant to the terms hereof, the Initial Purchasers shall not
be liable or responsible to the Company for any losses, damages or
liabilities suffered or incurred by the Company, including any losses,
damages or liabilities under the Securities Act, arising from or relating
to any resale or transfer of any Note.
(e) Delivery of Offering Memorandum. Each Initial Purchaser will
deliver to each purchaser of the Notes from such Initial Purchaser, in
connection with its original distribution of the Notes, a copy of the
Offering Memorandum, as amended and supplemented at the date of such
delivery.
SECTION 9. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of the Initial Purchasers. The Company agrees
to indemnify and hold harmless each Initial Purchaser and each person, if
any, who controls any Initial Purchaser within the meaning of the
Securities Act against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Initial Purchaser or such
controlling person may become subject, under the Securities Act, the
Exchange Act, the Trust Indenture
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Act, or other federal, state or Canadian statutory laws or regulations, or
at common law or otherwise (including in settlement of any litigation, if
such settlement is effected with the written consent of the Company)
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Offering Memorandum, the Preliminary Offering Memorandum,
or any amendment or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state in any of them a material fact
required to be stated therein or necessary to make the statements in any of
them not misleading, or arise out of or are based in whole or in part on
any inaccuracy in the representations and warranties of the Company
contained herein or any failure of the Company to perform its obligations
hereunder or under law, and will reimburse each Initial Purchaser and each
such controlling person for any legal and other expenses as such expenses
are reasonably incurred by such Initial Purchaser or such controlling
person in connection with investigating, defending, settling, compromising
or paying any such loss, claim, damage, liability, expense or action;
provided, however, that the Company will not be liable in any such case to
the extent that any such loss, claim, damage, liability, expense or action
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Offering Memorandum,
the Preliminary Offering Memorandum or as a result of any amendment or
supplement thereto in reliance upon and in conformity with the information
furnished to the Company pursuant to this agreement; and provided the
indemnity agreement contained in this Section 9(a) shall not inure to the
benefit of any Initial Purchaser from whom the person asserting any such
losses, claims, damages, liabilities or expenses purchased the Notes
concerned to the extent that any such loss, claim, damage liability or
expense of such Initial Purchaser results from the fact that a copy of the
Offering Memorandum was not sent or given to such person at or prior to the
written confirmation of sale of such Notes to such person as required by
the Securities Act. In addition to its other obligations under this Section
9(a) the Company agrees that it will reimburse expenses as provided in this
Section 9(a) as incurred, but no less frequently than quarterly,
notwithstanding the absence of a judicial determination as to the propriety
and enforceability of the Company's obligations to reimburse each Initial
Purchaser 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 Initial Purchaser shall promptly return it to the
Company, together with interest, compounded daily, determined on the basis
of the prime rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by Bank of America
NT&SA, San Francisco, California (the "Prime Rate"). Any such interim
reimbursement payments which are not made to an Initial Purchaser within 30
days of a request for reimbursement shall bear interest at the Prime Rate
from the date of such request. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers.
Each Initial Purchaser will severally indemnify and hold harmless the
Company, each of its directors and officers and each person, if any, who
controls the Company within the meaning of the Securities Act, against any
losses, claims, damages, liabilities or expenses to which the Company, any
such director, officer or controlling person may become subject under the
Securities Act, the Exchange Act, the Trust Indenture Act, or other federal
or state statutory laws or regulations, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected
with the written consent of such Initial Purchaser), insofar as
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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
Offering Memorandum, the Preliminary Offering Memorandum, 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
Offering Memorandum, the Preliminary Offering Memorandum, or any amendment
or supplement thereto, in reliance upon and in conformity with the
information furnished to the Company pursuant to this agreement; and will
reimburse the Company, or any such director, officer or any controlling
person of the Company for any legal and other expense reasonably incurred
by the Company, or any such director, officer or controlling person of the
Company in connection with investigating, defending, settling, compromising
or paying any such loss, claim, damage, liability, expense or action. In
addition to its other obligations under this Section 9(b), each Initial
Purchaser severally agrees that it will reimburse expenses as provided in
this Section 9(b) as incurred, but no less frequently than quarterly,
notwithstanding the absence of a judicial determination as to the propriety
and enforceability of the Initial Purchasers, obligation to reimburse the
Company (and, to the extent applicable, each officer, director or
controlling person of the Company) for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, the Company (and, to the extent
applicable, each officer, director or controlling person of the Company)
shall promptly return it to the Initial Purchasers 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 Initial Purchaser may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly
after receipt by an indemnified party under this Section 9 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 9, notify the indemnifying party in writing of the commencement
thereof; but the omission to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party for
contribution or otherwise under the indemnity agreement contained in this
Section 9 or to the extent it is not prejudiced as a proximate result of
such failure. In case any such action is brought against any indemnified
party and such indemnified party seeks or intends to seek indemnity from
an indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be a conflict between the
positions of the indemnifying party and the indemnified party in conducting
the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from
or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of
notice from the
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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 9 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the
proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than
one separate counsel representing all indemnified parties who are parties
to such action or set of related actions) or (ii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after
notice of commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.
(d) Contribution. If the indemnification provided for in this
Section 9 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 9(a), 9(b) or 9(c) hereof in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of any losses, claims,
damages, liabilities or expenses referred to herein (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company
and the Initial Purchasers from the offering of the Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Initial Purchasers in connection with the statements or
omissions or inaccuracies in the representations and warranties herein
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The respective
relative benefits received by the Company and the Initial Purchasers in
connection with the offering of the Notes pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Notes pursuant to this Agreement (before
deducting expenses) received by the Company, and the total discount
received by the Initial Purchasers bear to the aggregate initial offering
price of the Notes. The relative fault of the Company, on the one hand, and
the Initial Purchasers, on the other hand, shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
or any such inaccurate or alleged inaccurate representation and/or warranty
relates to information supplied by the Company, on the one hand, or the
Initial Purchasers, on the other hand, 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
subsection (c) of this Section 9, 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 subsection (c)
of this Section 9 with respect to notice of commencement of any action
shall apply if a claim for contribution is to be made under this Section 9;
provided, however, that no additional notice shall be required with
respect to any action for which notice has been given under subsection (c)
of this Section 9 for purposes of indemnification. The Company and the
Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 9 were determined solely by pro rata
allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not
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take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 9, no Initial Purchaser
shall be required to contribute any amount in excess of the discount
received by such Initial Purchaser in connection with the Notes distributed
by it. No person guilty of fraudulent misrepresentation (within the meaning
of Section 1l(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
The Initial Purchasers' obligations to contribute pursuant to this Section
9 are several in proportion to their respective commitments as set forth
opposite their names in Schedule A and not joint.
----------
(e) Arbitration. It is agreed that any controversy arising out of
the operation of the interim reimbursement arrangements set forth in
Sections 9(a) or 9(b) hereof, including the amounts of any requested
reimbursement payments and the method of determining such amounts, shall be
settled by arbitration conducted under the provisions of the Constitution
and Rules of the Board of Governors of the New York Stock Exchange, Inc. or
pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for
arbitration or written notice of intention to arbitrate, therein electing
the arbitration tribunal. In the event the party demanding arbitration does
not make such designation of an arbitration tribunal in such demand or
notice, then the party responding to said demand or notice is authorized to
do so. Such an arbitration would be limited to the operation of the interim
reimbursement provisions contained in Sections 9(a) and 9(b) hereof and
would not resolve the ultimate propriety or enforceability of the
obligation to reimburse expenses which is created by the provisions of such
Sections 9(a) or 9(b) hereof.
SECTION 10. TERMINATION OF THIS AGREEMENT. Prior to the Closing Date this
Agreement may be terminated by the Initial Purchasers by notice given to the
Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq National Market, or trading in securities generally on either the Nasdaq
National Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the NASD; (ii) a general
banking moratorium shall have been declared by any of federal, New York or
California authorities; (iii) there shall have occurred any outbreak or
escalation of national or international hostilities or any crisis or calamity,
or any change in the United States or international financial markets, or any
substantial change or development involving a prospective substantial change in
United States or international political, financial or economic conditions, as
in the judgment of the Initial Purchasers is material and adverse and makes it
impracticable to market the Notes in the manner and on the terms described in
the Offering Memorandum or to enforce contracts for the sale of securities; or
(iv) there shall be any action, suit or proceeding pending or threatened, or
there shall have been any development involving particularly the business or
properties or securities of the Company or the transactions contemplated by this
Agreement, which, in the reasonable judgment of the Initial Purchasers, may
materially and adversely affect the Company's business or earnings and makes it
impracticable or inadvisable to offer or sell the Notes. Any termination
pursuant to this Section 10 shall be without liability on the part of any
Initial Purchaser to the Company or on the part of the Company to any Initial
Purchaser (except for expenses to be paid or reimbursed by the Company pursuant
to Sections 5 and 7 hereof and except to the extent provided in Section 9
hereof).
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SECTION 11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company of their respective officers and of the several
Initial Purchasers 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 Initial Purchaser or the Company or any of its respective partners,
officers or directors or any controlling person, as the case may be, and will
survive delivery of and payment for the Notes sold hereunder and any termination
of this Agreement.
SECTION 12. NOTICES. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Initial Purchasers:
Montgomery Securities
600 Montgomery Street
San Francisco, California 94111
Facsimile: 415-249-5558
Attention: Richard A. Smith
with a copy to:
Montgomery Securities
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 249-5553
Attention: David A. Baylor, Esq.
and:
O'Melveny & Myers LLP
Embarcadero Center West
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
Facsimile: (415) 984-8701
Attention: Peter T. Healy, Esq.
If to the Company:
Signature Resorts, Inc.
5933 West Century Boulevard, Suite 210
Los Angeles, California 90045
Facsimile: 310-348-1000
Attention: Andrew D. Hutton, Esq.
26
<PAGE>
with a copy to:
Latham & Watkins
633 West 5th Street, Suite 400
Los Angeles, California 90071-2007
Facsimile: 213-891-8763
Attention: John M. Newell, Esq.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 13. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Initial Purchasers
pursuant to Section 16 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 9, and in each case
their respective successors, and no other person will have any right or
obligation hereunder. The term "successors" shall not include any purchaser of
the Notes as such from any of the Initial Purchasers merely by reason of such
purchase.
SECTION 14. 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 15. GOVERNING LAW PROVISIONS. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
SECTION 16. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL PURCHASERS. If
any one or more of the several Initial Purchasers shall fail or refuse to
purchase Notes that it or they have agreed to purchase hereunder on the Closing
Date, and the aggregate number of Notes which such defaulting Initial Purchaser
or Initial Purchasers agreed but failed or refused to purchase does not exceed
10% of the aggregate number of the Notes to be purchased on such date, the other
Initial Purchasers shall be obligated, severally, in the proportions that the
number of Notes set forth opposite their respective names on Schedule A bears to
----------
the aggregate number of Notes set forth opposite the names of all such non-
defaulting Initial Purchasers, or in such other proportions as may be specified
by the Initial Purchasers with the consent of the non-defaulting Initial
Purchasers, to purchase the Notes which such defaulting Initial Purchaser or
Initial Purchasers agreed but failed or refused to purchase on such date. If any
one or more of the Initial Purchasers shall fail or refuse to purchase Notes and
the aggregate number of Notes with respect to which such default occurs exceeds
10% of the aggregate number of Notes to be purchased on the Closing Date, and
arrangements satisfactory to the Initial Purchasers and the Company for the
purchase of such Notes are not made within 48 hours after such default, this
Agreement shall terminate without liability of any non-defaulting party to any
other party except that the provisions of Section 5, Section 7 and Section 9
shall at all times be effective and shall survive
27
<PAGE>
such termination. In any such case either the Initial Purchasers or the Company
shall have the right to postpone the Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Offering Memorandum or any other documents or arrangements may be effected.
As used in this Agreement, the term "Initial Purchaser" shall be
deemed to include any person substituted for a defaulting Initial Purchaser
under this Section 16. Any action taken under this Section 16 shall not relieve
any defaulting Initial Purchaser from liability in respect of any default of
such Initial Purchaser under this Agreement.
SECTION 17. GENERAL PROVISIONS. 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 two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The section headings herein are for the convenience of the parties only and
shall not affect the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification and contribution provisions of Section 9, and is fully informed
regarding said provisions. Each of the parties hereto further acknowledges that
the provisions of Sections 9 hereto fairly allocate the risks in light of the
ability of the parties to investigate the Company and its affairs and its
business in order to assure that adequate disclosure has been made in the
Preliminary Offering Memorandum and the Offering Memorandum (and any amendments
and supplements thereto), as required by the Securities Act and the Exchange Act
or otherwise.
[signature page to follow]
28
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.
Very truly yours,
SIGNATURE RESORTS, INC.
By: /s/ Andrew D. Hutton
-----------------------------------
Name: Andrew D. Hutton
-----------------------------------
Title: Vice President and General Counsel
-----------------------------------
The foregoing Purchase Agreement is hereby confirmed and accepted by the
Initial Purchasers in San Francisco, California as of the date first above
written.
MONTGOMERY SECURITIES
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
BT SECURITIES CORPORATION
SOCIETE GENERALE SECURITIES CORPORATION
As the several Initial Purchasers
By: MONTGOMERY SECURITIES
By: /s/ Peter Wilson
-----------------
Name: Peter Wilson
-----------------
Title: Managing Director
-----------------
S-1
<PAGE>
SCHEDULE A
Aggregate Principal
Initial Purchaser Amount
----------------- of Notes to be Purchased
------------------------
<TABLE>
<CAPTION>
<S> <C>
Montgomery Securities ........................... $100,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation ................... 60,000,000
Goldman, Sachs & Co. ............................ 20,000,000
BT Securities Corporation ....................... 10,000,000
Societe Generale Securities
Corporation ............................. 10,000,000
------------
Total ................................... $200,000,000
============
Schedule A
</TABLE>
<PAGE>
EXHIBIT 2.3
================================================================================
AGREEMENT FOR PURCHASE AND SALE OF
THE ENTIRE ISSUED SHARE CAPITAL OF LSI GROUP HOLDINGS plc
By and Among
Signature Resorts, Inc
and
Ian K. Ganney, Richard Harrington and Stephen Massey
Dated as of
June 5, 1997
================================================================================
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF
----------------------------------
THE ENTIRE ISSUED SHARE CAPITAL OF LSI
--------------------------------------
This Agreement for Purchase and Sale of the entire issued share capital of
LSI ("AGREEMENT") is made as of June 5, 1997, by and among Signature Resorts,
Inc., a Maryland corporation ("SIGNATURE"), and Ian K. Ganney, Richard
Harrington, and Stephen Massey (respectively, "GANNEY", "HARRINGTON" and
"MASSEY", or, individually, a "LSI SHAREHOLDER" or, collectively, the "LSI
SHAREHOLDERS"). Except as may be otherwise stated herein, all amounts are in
United States dollars.
WITNESSETH:
WHEREAS, SIGNATURE desires to purchase from LSI Shareholders and LSI
Shareholders desire to sell to SIGNATURE all of the issued share capital of LSI
Group Holdings plc an English public limited company ("LSI"), upon the terms and
conditions hereinafter set forth.
SIGNATURE and the LSI Shareholders acknowledge and agree that their
representations, covenants, warranties, agreements, indemnities and other
undertakings contained in this Agreement are made and given to induce the other
party to enter into this Agreement and to consummate the transactions
contemplated by this Agreement and that each party in reliance thereon and not
in reliance upon any other representation, covenant, warranty, agreement,
indemnity and other undertakings, has agreed to execute this Agreement and
consummate the transactions contemplated by this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto do mutually agree as follows:
ARTICLE 1
TERMS OF THE PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions set forth
---------------------------
in this Agreement, as of the Effective Time (as defined in Section 1.2),
LSI Shareholders agree to sell, convey, and transfer to SIGNATURE, with
full title guarantee or procure the same in the case of Massey and
SIGNATURE agrees to purchase, accept, and take from the LSI Shareholders,
all of the issued share capital of LSI (the "LSI SHARES") on the Closing
Date (as defined in Section 1.2) (the "PURCHASE"). Each of the LSI
Shareholders hereby irrevocably waives any right of pre-emption to which he
may be entitled in respect of the LSI Shares, whether pursuant to LSI's
articles of association or otherwise, in connection with the transactions
hereby contemplated.
2
<PAGE>
1.2 TIME AND PLACE OF CLOSING. Subject to the satisfaction or waiver of the
-------------------------
conditions specified in Article 6 and 7, the closing of the Purchase (the
"CLOSING") shall occur on such date, at such time and at such place in the
United Kingdom as the parties shall determine on or before the later of (i)
August 31, 1997, and (ii) fifteen (15) calendar days following the receipt
by SIGNATURE of unaudited financial statements of LSI for the quarter
ending June 30, 1997 (the "CLOSING DATE"). At the Closing, there shall be
delivered to SIGNATURE and to LSI the certificates and other documents and
instruments required to be delivered under Articles 6 and 7. The parties
shall prepare and execute all documents in order to effect the Purchase in
all respects with the requirements of the corporate laws of the State of
Maryland and England and Wales. The "EFFECTIVE TIME" of the Purchase
shall be 12:01 a.m., British Summer Time on the Closing Date.
1.3 PURCHASE CONSIDERATION. Upon consummation of the Purchase, the Purchase
----------------------
Consideration (as defined below) shall be as follows:
(a) Determination of Purchase Consideration. Subject to adjustments
---------------------------------------
required herein, the LSI Shares shall be sold and transferred, and
there shall be paid and issued to the LSI Shareholders in proportion
to their respective holdings of LSI Shares, in payment for the LSI
Shares (subject to the provisions of this Agreement) a number of
shares of common stock of SIGNATURE, par value $.01 per share (the
"SIGNATURE STOCK"), determined as follows (the "PURCHASE
CONSIDERATION"):
(i) To determine the "PRE-ADJUSTMENT PURCHASE CONSIDERATION," if the
average of the closing prices of SIGNATURE Stock as reported on
the NASDAQ Stock Market for each of the five (5) consecutive
trading days commencing on July 31, 1997 or, if earlier,
commencing on the date on which SIGNATURE determines the
conditions to Closing set out in Article 7 are satisfied in full
(the "CLOSING PRICE"), subject to adjustment in the event of a
stock split, stock dividend or recapitalisation applicable to
shares of SIGNATURE Stock held of record prior to the Closing to
the extent not reflected in such prices, is
(A) between and including $21.00 per share and $27.00 per share,
then the Pre-Adjustment Purchase Consideration shall be
1,875,000 shares of SIGNATURE Stock;
(B) greater than $27.00 per share, then the Pre-Adjustment
Purchase Consideration shall be that number of shares of
SIGNATURE Stock equal to $50,625,000.00 divided by the
Closing Price; provided, however, that in no event shall the
number of shares of SIGNATURE Stock to be issued to the LSI
Shareholders as the Pre-Adjustment Purchase Consideration be
less than 1,400,000 shares (the "MINIMUM SIGNATURE STOCK");
3
<PAGE>
(C) less than $21.00 per share, then the Pre-Adjustment Purchase
Consideration shall be that number of shares of SIGNATURE
Stock equal to $39,375,000.00 divided by the Closing Price;
provided, however, that in the event the Closing Price is
less than $19.00 per share, SIGNATURE may elect not to
proceed with the Closing unless the LSI Shareholders agree
that the SIGNATURE Stock to be issued to the LSI
Shareholders as the Pre-Adjustment Purchase Consideration
shall be 2,072,368 shares (the "MAXIMUM SIGNATURE STOCK").
By way of example, if the Closing Price is $28.00 per share, then
the PreAdjustment Purchase Consideration is 1,808,036 shares of
SIGNATURE Stock, determined by dividing $50,625,000.00 by the
Closing Price of $28.00 per share. If the Closing Price is
$20.00 per share, then the PreAdjustment Purchase Consideration
is 1,968,750 shares of SIGNATURE Stock, determined by dividing
$39,375,000.00 by the Closing Price of $20.00 per share;
(ii) To determine the number of shares of SIGNATURE Stock to be
delivered as the "FINAL PURCHASE CONSIDERATION", the number of
shares of SIGNATURE Stock constituting the Pre-Adjustment
Purchase Consideration shall be adjusted, if and as necessary, by
deducting the number of shares of SIGNATURE Stock equal to the
Adjustment Amount divided by the Closing Price and adding the
number of shares of SIGNATURE Stock equal to the Increase
Adjustment Amount divided by the Closing Price.
(aa) The "ADJUSTMENT AMOUNT" shall be equal to either (A) in the
event that the Closing Price is less than or equal to $25.00
per share, fifty percent (50%) of any costs or expenses paid
by or accrued on the books of LSI or any of its Subsidiaries
and unpaid as of the Closing, including, but not limited to,
legal, accounting, consulting, brokers' and finders' fees,
investment banking (including transaction or finders' fees
to Prudential Securities Incorporated and Paul Dean), in
connection with the Purchase or the due diligence conducted
by LSI or the LSI Shareholders in regard to the Purchase
(the "LSI PURCHASE EXPENSES") up to $1,500,000.00 of such
expenses (i.e., a $750,000.00 reduction), plus one hundred
percent (100%) of any LSI Purchase Expenses exceeding
$1,500,000.00 (i.e., on a dollar for dollar basis for the
excess), or (B) in the event that the Closing Price is
greater than $25.00 per share, one hundred percent (100%) of
any LSI Purchase Expenses paid by or accrued on the books of
LSI or any of its Subsidiaries and unpaid as of the Closing
(i.e., LSI Shareholders shall be responsible to bear all of
the LSI Purchase Expenses);
4
<PAGE>
(bb) The "INCREASE ADJUSTMENT AMOUNT" shall be, if and as
necessary, in the event that the Closing Price is less than
or equal to $25.00 per share, fifty percent (50%) of any
costs or expenses paid or payable by the LSI Shareholders as
of the Closing (the "LSI SHAREHOLDER EXPENSES"), including,
but not limited to, legal, accounting, consulting, brokers'
and finders' fees, investment banking (including transaction
or finders' fees to Prudential Securities Incorporated and
Paul Dean), in connection with the Purchase or the due
diligence conducted by LSI or the LSI Shareholders in regard
to the Purchase up to $1,500,000.00 of such expenses (i.e.,
a $750,000.00 increase);
(iii) The LSI Shareholders shall present at Closing a certificate
with respect to the amount of any LSI Purchase Expenses or LSI
Shareholder Expenses and shall represent and warrant the accuracy
of such certificate.
(b) Shareholders' Rights upon Purchase. The SIGNATURE Stock to be issued
----------------------------------
hereunder has not been registered under the securities act or the
securities laws of any states and is being offered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), in either
(i) a private placement transaction not involving any public offering
under Section 4(2) of the Securities Act or (ii) in an offering
satisfying the safe-harbor requirements of Regulation S. The SIGNATURE
Stock issued to the LSI Shareholders in connection with the Purchase
is subject to restrictions on transferability and may not be
transferred or resold except as permitted under the Securities Act,
and any then applicable federal or state securities laws.
(c) Payment of Purchase Consideration. Subject to and in accordance with
---------------------------------
Article VII, immediately upon consummation of the Purchase and receipt
by SIGNATURE of certificates representing the LSI Shares accompanied
by duly executed stock transfer forms SIGNATURE immediately shall
cause to be issued to each LSI Shareholder or (provided that
SIGNATURE's accountants determine that the proposed direction does not
result in any breach of the pooling regulations) as they may direct a
certificate representing 90% of the number of shares of SIGNATURE
Stock which such holder is entitled to receive pursuant to subsection
(a) hereof (less the amount of any required withholding under the laws
of England and Wales), with the remaining SIGNATURE Stock due to each
LSI Shareholder to be held in escrow by the Escrow Agent and delivered
in accordance with Section 9.3 and the Escrow Agreement referred to
therein. No fractional shares of SIGNATURE Stock shall be issued. In
lieu thereof, the number of shares of SIGNATURE Stock to be issued to
any LSI Shareholder who would otherwise be entitled to a fractional
share of SIGNATURE Stock shall be rounded to the nearest number of
whole shares of SIGNATURE Stock (with any one-half share being rounded
up). Provided that SIGNATURE's accountants determine that the proposed
direction would not result in any breach of the pooling regulations,
if any LSI Shareholder requests that any certificate
5
<PAGE>
evidencing shares of SIGNATURE Stock be issued in a name other than
that in which the certificate(s) surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the
certificate surrendered in exchange shall be delivered with proper
transfer instructions and that the person requesting such transfer pay
any transfer or other taxes required by reason of the issuance of a
certificate for shares of SIGNATURE Stock in any name other than that
of the registered holder of the certificate surrendered, or establish
to the satisfaction of SIGNATURE that such tax has been paid or is not
payable.
(d) Tax-Free Reorganisation. The parties intend that, for United States
-----------------------
income tax purposes, the Purchase will qualify as a tax-free
reorganisation pursuant to Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "CODE"). Each party will report
the transaction to their respective taxing authorities consistent with
such treatment. The parties acknowledge and agree that the tax
treatment of the Purchase for the LSI Shareholders and any duty or
responsibility therefore shall rest solely and exclusively with the
LSI Shareholders, and SIGNATURE shall have no duty or responsibility
with respect thereto.
1.4 MANNER OF EFFECTIVE SALE. SIGNATURE and the LSI Shareholders shall
------------------------
cooperate in effecting the transactions contemplated by this Agreement,
including without limitation, taking, or causing to be taken, such actions
as may be required in order to cause the Purchase to be consummated,
subject to and in accordance with the provisions hereof.
1.5 BOARD OF DIRECTORS OF LSI. At the Effective Time, the LSI Shareholders
-------------------------
shall procure (subject to SIGNATURE making appropriate nominations) that
the board of directors of LSI shall comprise 5 persons of whom 2 shall be
Ian K. Ganney and Richard Harrington and 3 shall be nominated by SIGNATURE.
The LSI Shareholders shall on and from time to time after the Effective
Date at the request of SIGNATURE procure (insofar as they are able to do
so) the appointment of one or more additional directors nominated by
SIGNATURE to the board of directors of any one or more Subsidiary.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SIGNATURE
SIGNATURE represents and warrants to the LSI Shareholders as follows:
2.1 ORGANIZATION.
------------
(a) SIGNATURE is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, is
duly qualified and in good standing as a foreign corporation in the
jurisdictions where the ownership of its assets or the conduct of its
business requires such qualification (except where the failure to so
qualify would not have a material adverse effect on SIGNATURE and its
subsidiaries taken as whole), and has full power and
6
<PAGE>
authority to own its property and assets and to carry on lawfully its
business as currently conducted.
(b) Except as set forth on Exhibit 2.1(b) attached hereto, SIGNATURE does
--------------
not have any wholly or partially owned companies, subsidiaries or
other entities and neither it nor any subsidiary of SIGNATURE owns or
holds any securities of, or any ownership interest (whether directly
or indirectly or whether beneficial or otherwise) in, any other person
or entity. Except to the extent that such failure would not have a
material adverse effect on SIGNATURE or the transactions contemplated
hereby, each such subsidiary of SIGNATURE is a company, corporation,
joint venture, partnership, or limited company duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its organization, is duly qualified and in good standing as a foreign
company, corporation, partnership, or limited company in the
jurisdictions so indicated on said Exhibit 2.1(b), with full power and
--------------
authority to own its property and assets and to carry on lawfully its
business as currently conducted, and is not required to be qualified
to do business as a foreign company, corporation, joint venture,
partnership, or limited company in any other jurisdiction in which it
is not so qualified.
2.2 ARTICLES OF INCORPORATION, BYLAWS AND AGREEMENTS. A true, complete and
------------------------------------------------
correct copy of the Articles of Incorporation and Bylaws of SIGNATURE as
currently in effect have been delivered to LSI and are described on Exhibit
-------
2.2 attached hereto. There are no agreements by and between or among
---
SIGNATURE and any or all of its shareholders imposing any restrictions upon
the transfer of or otherwise pertaining to the SIGNATURE Stock to be
received by the LSI Shareholders or the ownership thereof.
2.3 AUTHORIZATION. SIGNATURE has full legal right, power and authority to
-------------
enter into this Agreement and to carry out the transactions contemplated by
this Agreement. The execution, delivery and performance by SIGNATURE and
the Related Agreements and documents referred to herein and the actions
contemplated hereby and thereby have been duly and validly authorized by
all necessary corporate and shareholder action, and this Agreement and
(upon their effectiveness) such other agreements and documents constitute
or will constitute valid and binding obligations of SIGNATURE, enforceable
in accordance with their terms.
2.4 CAPITAL STRUCTURE. The authorized capital stock of SIGNATURE consists of
-----------------
(i) 50,000,000 shares of $.01 par value common stock (the "SIGNATURE
COMMON") and (ii) 25,000,000 shares $.01 par value preferred stock (the
"SIGNATURE PREFERRED"). As of the date of this Agreement, there are
22,292,070 shares of SIGNATURE Common issued and outstanding and no shares
of SIGNATURE Preferred issued and outstanding. No shares of any other
class of capital stock or security of SIGNATURE are outstanding. No shares
of SIGNATURE Common are held by SIGNATURE in its treasury. Except as
described in the SIGNATURE SEC Documents (as defined below), there are no
outstanding securities, options, warrants, convertible securities or other
rights (including stock appreciation rights), subscription rights
(including pre-emptive rights), calls,
7
<PAGE>
agreements, understandings, arrangements or commitments to acquire
securities of SIGNATURE to which SIGNATURE or any subsidiary thereof is a
party or by which such entity is bound. All outstanding shares of
SIGNATURE Common are duly authorized, validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive
rights of any person or applicable securities laws. As of the date of this
Agreement, there are not any outstanding contractual obligations of
SIGNATURE to repurchase, redeem or otherwise acquire any shares of
SIGNATURE Common. Except pursuant to applicable corporate laws, there are
no restrictions, including but not limited to self-imposed restrictions, on
the retained earnings of SIGNATURE or on the ability of SIGNATURE to
declare and pay dividends or distributions that are not imposed herein or
disclosed in SIGNATURE SEC Documents (as defined below). At Closing, the
SIGNATURE Stock to be issued as the Final Purchase Consideration shall be
free and clear of all liens, encumbrances, pledges, security agreements,
costs, or other charges. No proxies, voting trusts, or other agreements
exist affecting any rights to vote the stock.
2.5 SEC DOCUMENTS FINANCIAL STATEMENTS. SIGNATURE has timely filed (within
----------------------------------
applicable extension periods) all reports, forms, registration statements,
proxy statements and other documents (the "SIGNATURE SEC DOCUMENTS")
required to be filed by it under the Securities Act, the Securities
Exchange Act and the rules and regulations promulgated thereunder (the
"SECURITIES LAWS"). During the period prior to the Effective Time,
SIGNATURE shall provide to LSI copies of all financial statements and
reports as and when sent to the SIGNATURE shareholders and the SEC, as to
which the representations and warranties in the preceding sentence shall
also apply. The SIGNATURE SEC Documents, including exhibits and schedules
thereto and documents incorporated by reference therein, at the time of
filing and in the case of registration statements, as of their effective
dates, did not contain any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, except to the extent such statements
have been modified or superseded by later filed SIGNATURE SEC Documents.
SIGNATURE has filed with the SEC all documents and agreements which were
required to be filed as exhibits to the SIGNATURE SEC Documents. The
consolidated financial statements of SIGNATURE included in the SIGNATURE
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with US generally
accepted accounting principles ("US GAAP") (except, in the case of interim
financial statements, as permitted by Forms 10-Q or 8-K of the SEC) applied
on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented, in accordance with
the applicable requirements of US GAAP, the consolidated financial position
of SIGNATURE and its subsidiaries taken as a whole, as of the dates thereof
and the consolidated results of operations and cash flows for the periods
then ended (subject, in the case of interim financial statements, to normal
year-end adjustments).
8
<PAGE>
2.6 SIGNATURE STOCK. The shares of SIGNATURE Stock to be issued in the
---------------
Purchase have been duly authorized by all necessary corporate and
shareholder action on the part of SIGNATURE and upon issuance in accordance
with this Agreement will be validly issued, fully paid and non-assessable.
2.7 NONCONTRAVENTION. The execution and delivery of this Agreement and the
----------------
Related Agreements by SIGNATURE and the consummation by SIGNATURE of the
transactions contemplated hereby and thereby and the consummation of such
transactions to which SIGNATURE is a party and compliance by SIGNATURE with
the provisions of this Agreement will not conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or to loss of a material benefit under, or result in the
creation of any lien upon any of the properties or assets of SIGNATURE or
any of its subsidiaries under, (i) the Charter or Bylaws of SIGNATURE or
the comparable charter or organizational documents or partnership or
similar agreement (as the case may be) of any such subsidiary, (ii) any
material loan or credit agreement, note, bond, mortgage, indenture,
reciprocal easement agreement, lease or other agreement, instrument,
permit, concession, franchise or license applicable to SIGNATURE or any of
its subsidiaries or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to SIGNATURE or any of its
subsidiaries or their respective properties or assets, other than, in the
case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or liens that individually or in the aggregate would not (x) have a
material adverse effect on SIGNATURE or (y) prevent the consummation of the
Purchase.
2.8 DISCLOSURE. No representation, or warranty made by or on behalf of
----------
SIGNATURE in this Agreement or the Exhibits attached hereto or in the
certificates or the SEC Documents which have been made available to LSI
Shareholders and their representatives or lenders in connection with this
Agreement and the transactions contemplated hereby or thereby contains or
will contain any untrue statement of material fact, or omits or will omit
to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not
misleading. Through the Closing Date, SIGNATURE shall promptly notify LSI
of any change or event which could materially adversely affect the assets,
operations, business, conditions or prospects of SIGNATURE or any SIGNATURE
subsidiary taken as a whole.
2.9 ENVIRONMENTAL MATTERS. SIGNATURE has provided to the LSI Shareholders
---------------------
copies, which are true and complete in all material respects, of all
environmental reports which SIGNATURE has prepared or has had prepared on
properties of SIGNATURE, its affiliates and subsidiaries, at the request of
any of the foregoing entities, or to SIGNATURE's knowledge which have been
prepared by any other person or entity (the "SIGNATURE ENVIRONMENTAL
REPORTS"). Except as disclosed in Exhibit 2.9, which disclosure relates
-----------
solely to San Louis Bay, Arila Beach, California to the best knowledge of
SIGNATURE, there has been no material change in the environmental condition
to the properties covered by the SIGNATURE Environmental Reports since the
date of the applicable report. There have been no environmental reports
which have been prepared on properties of SIGNATURE, its affiliates and
subsidiaries at the request of any of the
9
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foregoing entities or to SIGNATURE's knowledge which have been prepared by
any other person or entity since the respective dates of the SIGNATURE
Environmental Reports with respect to the applicable properties.
2.10 LITIGATION AND COMPLIANCE. There is no pending claim, lawsuit or
-------------------------
administrative proceeding or any lack of material compliance with any law
or regulation applicable to SIGNATURE's business, or, to the best knowledge
of SIGNATURE, investigation by or against SIGNATURE or a subsidiary of
SIGNATURE or the operation of its business which has not been disclosed in
the SIGNATURE SEC Documents that is required to be disclosed therein, or
that would be required to be disclosed if SIGNATURE were filling a
disclosure document with the SEC as of the date of this Agreement or as of
the Closing Date.
2.11 LICENSES, PERMITS AND REQUIRED CONSENTS. To the best knowledge of
---------------------------------------
SIGNATURE, SIGNATURE and each subsidiary of SIGNATURE have all material
federal, state and local licenses, ordinances, certifications, approvals,
authorizations and permits necessary to the conduct of their business as
currently conducted, including, but not limited to, building permits which
are presently required for ongoing construction activities, business
licenses, health permits, all public reports, brokerage and marketing
licenses and other permits required by national, state and local laws to
sell the Intervals in the local jurisdictions in which the Resorts are
located, as well as all other local jurisdictions in which the Intervals
are being advertised, marketed and sold (except where lack of such items
would not have a material adverse effect on SIGNATURE and its subsidiaries
when taken as a whole). To the best knowledge of SIGNATURE all material
licenses and permits necessary to the conduct of its business as, currently
conducted are in full force and effect, no material violations have been
made in respect thereof, and no proceeding is pending which is likely to
have the effect of revoking or limiting any such licenses and permits
(except where the failure to have such permit or license in full force and
effect would not have a material adverse effect on SIGNATURE and its
subsidiaries when taken as a whole).
2.12 EMPLOYEE BENEFIT PLANS. The Proxy Statement of SIGNATURE dated April 11,
----------------------
1997 contains a description of all employee benefit plans, as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended, as required to be described therein maintained for any employees
of SIGNATURE or any of the subsidiaries of SIGNATURE or contributed to by
SIGNATURE or any of the subsidiaries of SIGNATURE.
2.13 REPORTING. To the best of the knowledge of SIGNATURE, SIGNATURE and each
---------
subsidiary of SIGNATURE has timely filed (within applicable extension
periods) all reports and documents required to be filed by it pursuant to
applicable laws of the jurisdiction in which located, operating or subject
to, regulating time-share resorts and the rules and regulations promulgated
thereunder (except where the failure to file would not have a material
adverse effect on SIGNATURE and its subsidiaries when taken as a whole).
To the best knowledge of SIGNATURE, all such reports and documents were
appropriately responsive to all applicable requirements.
10
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTS OF
LSI SHAREHOLDERS
The LSI Shareholders do hereby jointly and severally represent and warrant
to SIGNATURE as follows:
3.1 ORGANIZATION.
------------
(a) LSI is a public limited company duly incorporated under the laws of
England and Wales with full power and authority to own its properties
and assets and to carry on lawfully its business as currently
conducted in the jurisdictions so indicated on said Exhibit 3.1(a).
(b) Except as set forth on Exhibit 3.1(b) attached hereto, LSI does not
--------------
have any wholly or partially owned companies, subsidiaries or other
entities (hereinafter, any such companies, subsidiaries or other
entities, whether in corporate or non-corporate form, are referred to
collectively as the "SUBSIDIARIES" and individually as a "SUBSIDIARY")
and neither it nor any Subsidiary owns or holds any securities of, or
any ownership interest (whether directly or indirectly or whether
beneficial or otherwise) in, any other person or entity. Except to
the extent that such failure would not have a material adverse effect
on LSI or the transaction contemplated hereby, each such Subsidiary is
a company, corporation, joint venture, partnership, or limited company
duly organized, validly existing under the laws of the jurisdiction of
its organization, is duly qualified and in good standing as a foreign
company, corporation, partnership, or limited company in the
jurisdictions so indicated on said Exhibit 3.1(b), with full power and
--------------
authority to own its property and assets and to carry on lawfully its
business as currently conducted, and is not required to be qualified
to do business as a foreign company, corporation, joint venture,
partnership, or limited company in any other jurisdiction.
(c) Except as set forth on Exhibit 3.1(c) attached hereto, there are no
--------------
condominium, timeshare or other owner associations (hereinafter, any
such associations are referred to collectively as the "ASSOCIATIONS"
and individually as an "ASSOCIATION") for any of the Resorts (as
defined in Section 3.6(a)) and, except as set forth on Exhibit 3.1(b),
--------------
neither LSI nor any Association owns or holds any securities of, or
any material interest in, any other person or entity. Each such
Association is duly organized and validly existing under the laws of
the country of its organization. To the extent that such Association
holds any interest in any property or assets it has full power and
authority to do so and no Association carries on any business.
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<PAGE>
3.2 MEMORANDA AND ARTICLES OF ASSOCIATION AND AGREEMENTS. A true, complete and
----------------------------------------------------
correct and current copy of the organizational documents (e.g. Memoranda
and articles of association, certificate of incorporation and equivalent
documents in relation to non-English subsidiaries) of LSI and each
Subsidiary and each Association together with all amendments thereto have
been delivered to SIGNATURE, as set forth on Exhibit 3.2(a) attached
--------------
hereto. Except as set forth on Exhibit 3.2(b) attached hereto, LSI and the
LSI Shareholders have no actual knowledge that there are any agreements by
and between or among LSI, any Subsidiary or any Association or any or all
of their respective shareholders, whether or not LSI or a Subsidiary or an
Association is a party thereto, imposing any restrictions upon the transfer
of or otherwise pertaining to the securities of LSI (including but not
limited to the LSI Shares) or any Subsidiary or the ownership thereof. Any
and all such restrictions have been duly complied with or waived.
3.3 CAPITAL STRUCTURE AND OWNERSHIP.
-------------------------------
(a) LSI and each Subsidiary has authorized and issued the number of shares
of stock and other securities so indicated on Exhibit 3.3 attached
-----------
hereto. All such securities have been duly and validly issued, are
fully paid and have not been issued in violation of the preemptive
rights of any person or applicable securities laws. No shares of any
other class or security of LSI or any Subsidiary are issued. There
are no outstanding options, warrants or other rights to acquire or
subscribe securities of LSI or any Subsidiary, nor are there
securities which are convertible into securities of LSI or any
Subsidiary. Except pursuant to applicable company, corporate,
partnership or limited liability company laws and applicable UK
generally accepted accounting principles, there are no restrictions,
including but not limited to self-imposed restrictions, on the
retained earnings of LSI or any Subsidiary or on the ability of LSI or
any Subsidiary to declare and pay dividends or distributions that are
not imposed herein or disclosed on Exhibit 3.3.
-----------
(b) The name and residence address of each shareholder of LSI, and the
securities of each Subsidiary and the respective shareholders and
number and description of issued securities held by each holder are
set forth on Exhibit 3.3 attached hereto The shareholders of LSI are
-----------
the true, lawful, and sole owners of all outstanding securities of
LSI, free and clear of any liens, encumbrances, pledges, security
agreements, costs, or other charges. At Closing, each such
shareholder will possess good and marketable title to their LSI
Shares, free and clear of all liens, encumbrances, pledges, security
agreements, costs, or other charges. No proxies, voting trusts, or
other agreements exist affecting any rights to vote the stock.
3.4 AUTHORIZATION. Each of the LSI Shareholders has full legal right, power
-------------
and authority to enter into this Agreement and to carry out the
transactions contemplated by this Agreement. The execution, delivery and
performance by each of the LSI Shareholders of this Agreement and by LSI
and the LSI Shareholders of the Related Agreements and documents referred
to herein and the actions contemplated hereby and thereby constitute or
will constitute valid and binding obligations of LSI and each LSI
Shareholder.
12
<PAGE>
3.5 FINANCIAL STATEMENTS AND ABSENCE OF CHANGES. The consolidated and separate
-------------------------------------------
balance sheets as of December 31, 1996, 1995, and 1994, and the
consolidated and separate profit and loss statements and consolidated and
separate statements of changes in financial condition or cash flows for the
fiscal years then ended (the "FINANCIAL STATEMENTS"), and the consolidated
and separate balance sheets as of the end of the full fiscal quarter ended
March 31, 1997, and the consolidated and separate profit and loss
statements for the fiscal quarter then ended of LSI and the Subsidiaries
(the "1997 FINANCIAL STATEMENTS") (together, the "COMBINED FINANCIAL
STATEMENTS") have been provided to SIGNATURE. Each of the Combined
Financial Statements gives a true and fair view of the financial condition
including the assets and liabilities or the results of operations of LSI
and the Subsidiaries as of the dates and for the periods indicated on a
consolidated basis as to consolidated Combined Financial Statements and
individually as to separate Combined Financial Statements. The Financial
Statements were prepared in accordance with United Kingdom generally
accepted accounting principles in the case of LSI and relevant generally
accepted accounting principles in the case of non-United Kingdom
subsidiaries, applicable to the business of LSI and the Subsidiaries
consistently applied in accordance with past accounting practices, during
the last three (3) years, and the 1997 Financial Statements have been
prepared internally to fairly present the financial condition including the
assets and liabilities and results of LSI and the Subsidiaries. Except as
reflected in the Combined Financial Statements, none of LSI or any
Subsidiary has any debts, obligations, subsidies, cost sharing or other
agreements required by any governmental authority or in favor of any
Associations or otherwise, guaranties of obligations of others or
liabilities (contingent or otherwise), capital commitments or bad or
doubtful debts of a material nature that would be required to be disclosed
in financial statements prepared as described herein. Since December 31,
1996, (i) there have been no material adverse changes to the business,
financial condition, results of operations or prospects of LSI or any
Subsidiary from that described and reflected in the 1997 Financial
Statements; (ii) LSI and the Subsidiaries have paid their creditors in
accordance with their normal practice; (ii) all amounts received by LSI and
the Subsidiaries and to which LSI or such Subsidiary is legally entitled
have been paid into bank account's of LSI or a Subsidiary and appear in the
appropriate books of account. All budgets and reserves have been funded in
accordance with the historical practice of LSI.
3.6 TITLE TO AND CONDITION OF ASSETS AND PROPERTY.
---------------------------------------------
PROPERTY.
--------
(a) Exhibit 3.6 attached hereto sets forth (i) a list of each of the
resorts, properties under development and undeveloped real property
holdings or interests therein (collectively the "RESORTS") over which
LSI and the Subsidiaries directly or indirectly exercise control or
which they directly or indirectly own; (ii) a description of the
Resorts; (iii) a list of the accommodation units at the Resorts title
to which has been conveyed or transferred into trust (the "DEDICATED
UNITS") with an independent trustee (the "TRUSTEE"); (iv) a list and
description of the freehold or leasehold real property at the Resorts
which is owned by LSI or the
13
<PAGE>
Subsidiaries (the "REAL PROPERTY") showing the identity and nature of
the property and in the case of accommodation units (the "UNDEDICATED
UNITS"), the numbers of such units in each Resort; (v) a list of all
timeshare interests at the Resorts to which LSI or the Subsidiaries
are entitled (the "UNSOLD INVENTORY") and (vi) a list of all leases,
easements, licenses or similar agreements pursuant to which LSI and
any Subsidiary uses or occupies any of the Resorts (the "LEASES"),
copies of which have been delivered to SIGNATURE. Except as set forth
in Exhibit 3.6, neither LSI nor any Subsidiary owns any material
-----------
interest in any real property or any leasehold interest therein or has
entered into any agreement to acquire any other real property
("PURCHASE AND OPTION AGREEMENTS"). Except as set forth in Exhibit
-------
3.6, to the best knowledge of the LSI Shareholders, since the
---
acquisition of the Real Property by LSI or any Subsidiary there has
been no act, omission or claim which has had a material adverse effect
on the title to such Real Property. Prior to acquiring the Real
Property LSI or the relevant Subsidiary (as the case may be)
investigated title to that Real Property. To the best knowledge of
the LSI Shareholders the relevant Trustee has good title to the
Dedicated Units. The Undedicated Units, the Unsold Inventory and the
Real Property collectively comprise all of the real property which is
used and/or occupied in the ownership and operation of the Resorts and
to the best knowledge of the LSI Shareholders no real property in
addition to the Undedicated Units, the Unsold Inventory and the Real
Property is needed or necessary for the control and operation of the
Resorts as currently controlled and operated by LSI and the
Subsidiaries.
(b) Except as set forth in Exhibit 3.6, attached hereto, neither LSI nor
-----------
any of the Subsidiaries has any patents, copyrights, trade names,
trademarks, service marks, other such names or marks or applications
therefor and has not conducted business under any corporate, trade or
fictitious name other than their current corporate name. There are no
pending, nor to the best knowledge of the LSI Shareholders, threatened
claims of infringement upon the rights to any intellectual property
referred to on Exhibit 3.6 of others or, except as set forth in
-----------
Exhibit 3.11 attached hereto, any agreements or undertakings with
------------
respect to any such rights.
(c) Except as noted on Exhibit 3.6, with respect to the Leases and the
-----------
Purchase and Option Agreements, to the best knowledge of the LSI
Shareholders there is no material breach or event of default on the
part of LSI or any Subsidiary or any other party thereto, and no event
that, with the giving of notice or lapse of time or both, would
constitute such breach or event of default on the part of LSI or any
Subsidiary or any other party thereto, has occurred and is continuing.
To the best knowledge of the LSI Shareholders, the Leases and the
Purchase and Option Agreements are in full force and effect and to the
best knowledge of the LSI Shareholders, are valid and enforceable
against the parties thereto and all rental and other payments
currently due under each of the Leases and all option and other
payments currently due under each of the Purchase and Option
Agreements have been duly paid in accordance with the terms thereof or
are
14
<PAGE>
outstanding for fewer than 30 days. Except as noted on Exhibit 3.11,
------------
the consummation of the transactions contemplated hereby will not
require the consent of any party to any Lease or Purchase and Option
Agreement and will not terminate or allow any party to terminate any
Lease or Purchase and Option Agreement.
(d) Except as noted on Exhibit 3.6 and/or 3.11 with respect to any deeds,
-----------------------
mortgages, agreements and other documents granting to LSI or any
Subsidiary title to or an interest in or otherwise affecting any real
property, there is to the best knowledge of the LSI Shareholders (i)
no material breach or event of default on the part of LSI or any
Subsidiary; and (ii) no material breach or event of default on the
part of any other party thereto.
(e) Except as set forth on Exhibit 3.6 to the best of the knowledge of the
-----------
LSI Shareholders, the existing buildings owned by LSI or any
Subsidiary, and the operation and maintenance thereof as operated and
maintained, do not, in any material respect, (i) contravene any
existing applicable planning or building law or ordinance or other
administrative regulation promulgated hereunder or (ii) violate any
restrictive covenant or any law, including those related to working
conditions and access. All accommodation units at the Resorts and
common facilities are furnished for the present use thereof with all
furniture, fixtures and equipment therein and are in an appropriate
condition for their current and intended use (ordinary wear and tear
excepted).
(f) Except as set forth in Exhibit 3.6 there is no pending or to the best
-----------
knowledge of the LSI Shareholders, threatened forfeiture or similar
proceeding with respect to, or that could reasonably be expected to
affect, any freehold or leasehold Real Property.
(g) Except as set forth on Exhibit 3.6, the Real Property owned by LSI or
-----------
any Subsidiary (i) has direct access or has a legal right permitting
access to public roads; and (ii) is served by all utilities in such
quantity and quality as are sufficient to satisfy the current normal
business activities conducted there. Except as set forth in Exhibit
-------
3.6, neither LSI nor any LSI Subsidiaries has received notice of any
---
condition which would result in the discontinuation of water, sewage,
electric, telephone, drainage or other utilities or services to such
Real Property which are necessary and required for the current use and
operation thereof Except as provided on Exhibit 3.6, all utility
-----------
connection and similar fees which are due and payable have been
completely and fully paid with respect to all buildings now located on
Real Property owned or, to the extent required to be paid by the
lessee, leased by LSI or any Subsidiary.
(h) Neither LSI nor to the knowledge of the LSI Shareholders, any third
party having any interest in any of the Real Property the Subsidiaries
has granted any outstanding options or rights of first refusal to
purchase or lease any of the Real Property, or any portion thereof or
interest therein except as noted in Exhibit 3.6.
-----------
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<PAGE>
(i) Except as set forth in Exhibit 3.6, to the best knowledge of the LSI
-----------
Shareholders the Resorts and are not located within any governmental
designated flood plain (such that a reasonable mortgagee would require
a mortgagor of such Resorts to obtain flood insurance).
(j) To the best knowledge of the LSI Shareholders, and except as set forth
on Exhibit 3.6, there are no contracts, agreements, licenses,
-----------
concessions, easements, or other agreements, including, without
limitation, service arrangements and employment agreements, either
recorded or unrecorded, written or oral in existence at the date of
this Agreement, which materially affect or could materially adversely
affect the operation or development of the Real Property or any
portion thereof, or the continued present use thereof, after the
Closing.
(k) Prior to Closing, no portion of the Real Property or any interest of
LSI or any Subsidiary therein shall be further (after the date hereof)
alienated, encumbered, conveyed or otherwise transferred except for
sales of Intervals and the dedication of Undedicated Units in the
ordinary course of business. Except as set forth on Exhibit 3.6,
-----------
there are no agreements (whether or oral or written) to sell, convey
or transfer any Intervals except sales of Intervals in the ordinary
course of business (i.e., for a price and upon terms which are in the
ordinary course of business of LSI and any Subsidiary).
(l) Except as set forth in Exhibit 3.6 and to the best knowledge of the
-----------
LSI Shareholders there is no actual or contingent liability on LSI or
any of the Subsidiaries arising out of any lease or conveyance or
other deed or guarantee relating to real property (other than the Real
Property) previously entered into by LSI or any of the Subsidiaries.
(m) For the avoidance of doubt, where the representations and warranties
relating to the Resorts or any part of them contained in this Section
3.6 are expressly to the knowledge of the LSI Shareholders, the LSI
Shareholders it is agreed and understood that have not carried out and
will not carry out the usual title and structural searches and
enquiries that a reasonably prudent English purchaser ought to make
provided that this shall not exclude that knowledge of the structure
of the Resorts which the LSI Shareholders would be deemed to have if
LSI had operated the Resorts in accordance with good business
practice.
3.7 INSURANCE. Exhibit 3.7 attached hereto sets forth a list of all policies
--------- -----------
of insurance which insure the properties, business or liability (including,
but not limited to, directors' and officers' liability) of LSI and each of
the Subsidiaries, setting forth the types and amounts of coverage, true,
correct and complete copies of which have previously been delivered to
SIGNATURE. Each of such policies is current and in full force and effect
and neither LSI nor any of the Subsidiaries has received notice of default
under, or intended cancellation or non-renewal of, any such policies. LSI
and each of the Subsidiaries will keep all insurance policies listed in
Exhibit 3.7 in effect through the Closing. All the assets of LSI and the
-----------
Subsidiaries which are of an insurable nature have been at all
16
<PAGE>
material times and to the best knowledge of the LSI Shareholders are
insured to their full replacement value against fire and other risks
normally insured against by companies carrying on similar businesses or
owning property of a similar nature and the level of insurance cover
provided by such policies is reasonable. Neither LSI nor any of the
Subsidiaries has been refused any insurance by an insurance carrier to
which it has applied for insurance. The representations and warranties set
out in this Section 3.7 are given subject to any disclosure set out in
Exhibit 3.7.
-----------
3.8 ENVIRONMENTAL MATTERS.
---------------------
(a) LSI and all Subsidiaries are and to the best knowledge of the LSI
Shareholders have at all times been in compliance with all
Environmental, Health and Safety Laws (as defined herein) governing or
applying in respect of its business, operations, properties and
assets. Neither LSI nor any Subsidiary is currently liable for any
penalties, fines or forfeitures for failure to comply with any
Environmental Health and Safety Laws. LSI and the Subsidiaries are in
compliance in all material respects with all notice labeling, record
keeping and reporting requirements of all Environmental, Health and
Safety Laws.
(b) LSI and each Subsidiary has obtained or caused to be obtained and is
in material compliance with all authorizations, consents, permissions,
orders, licenses, certificates, permits, approvals and registrations
(including all variations, modifications or transfers thereof)
(collectively "Environmental Licenses") required by Environmental
Health and Safety Laws in connection with the ownership of its
respective properties and assets and the operation of its business as
presently conducted. LSI and each Subsidiary is in material
compliance with all the terms, conditions and requirements of
Environmental Licenses and copies of such Environmental Licenses have
been provided to SIGNATURE.
(c) Neither LSI nor any Subsidiary has received nor is it aware of any
actual pending or threatened order, warning letter, notice, claim,
suit, action, judgment, or administrative or judicial proceeding
pending against or involving LSI or any Subsidiary, its business,
operations, properties, or assets, from any regulatory or judicial
authority or third party with respect to any Environmental, Health and
Safety Laws in connection with the ownership by LSI or any Subsidiary
of its properties or assets or the operation of its business, which
has not been resolved to the satisfaction of the issuing regulatory or
judicial authority or third party in a manner that would not impose
any obligation, burden or continuing liability on SIGNATURE following
Closing, or which could have a material adverse effect on LSI or any
Subsidiary.
(d) There are no facts or circumstances which would lead LSI or any
Subsidiary to believe that:
(i) LSI or any Subsidiary may become non-compliant with or have any
material liability under any Environmental Health and Safety
Laws;
17
<PAGE>
(ii) LSI or any Subsidiary may become liable for any penalties,
fines or forfeitures for failure to comply with any
Environmental Health and Safety Laws;
(iii) LSI or any Subsidiary may within two years of Closing be
required to undertake material works or other material
investment to secure compliance with any Environmental Health
and Safety Laws;
(iv) LSI or any Subsidiary may become out of material compliance
with any Environmental License or may not materially comply
with the terms, conditions and requirements of such
Environmental Licenses;
(v) any Environmental Licenses held or enjoyed by LSI or any
Subsidiary may be revoked suspended varied or modified;
(vi) any Environmental Licenses held or enjoyed by LSI will not
continue to be so held or enjoyed following Closing;
(vii) LSI or its Subsidiaries may receive an order, warning letter,
notice, claim, suit, action, judgment or administrative or
judicial proceeding issued by any regulatory or judicial
authority or third party with respect to any Environmental,
Health and Safety Laws in connection with the ownership by LSI
or any Subsidiary of its properties or assets or the operation
of its business.
(e) Neither LSI nor any Subsidiary has generated, manufactured, treated,
spilled, leaked, dumped, discharged, released or disposed, nor has it
allowed or arranged for any third parties to generate, manufacture,
treat, spill, leak, dump, discharge, release or dispose of, Hazardous
Substances or Waste in contravention of any Environmental Laws nor are
the LSI Shareholders otherwise aware to their best knowledge of the
presence within any of the properties now owned, occupied, leased or
used by LSI or any Subsidiary of any Hazardous Substances or Waste.
For purposes of this Section the term "HAZARDOUS SUBSTANCES" shall be
construed broadly to include any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or
constituent thereof, whether liquid, solid, semi-solid, sludge and/or
gaseous, including without limitation, chemicals, compounds, by-
products, pesticides, asbestos containing materials, petroleum, oil or
petroleum or oil products, and polychlorinated biphenyls, the presence
of which may require investigation or remediation under any
Environmental, Health and Safety Laws or which may otherwise cause
harm to or have a detrimental effect on the environment or human
health. For purposes of this Section the term "WASTE" shall mean
waste, controlled waste, directive waste, special waste, hazardous
waste or refuse as defined or referred to in any Environmental Health
and Safety Law.
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<PAGE>
(f) Neither LSI nor any Subsidiary has caused, or allowed to be caused or
permitted, either by action or inaction, a release or discharge or
threatened release or discharge of any Hazardous Substance from, on,
into or beneath the surface of any property. To the best knowledge of
the LSI Shareholders, there has not occurred, nor is there presently
occurring, a release or discharge, or threatened release or discharge,
of any Hazardous Substance from, on, into or beneath the surface of
any property now owned, leased or occupied by LSI or any Subsidiary.
(g) (i) Neither LSI or any Subsidiary has obtained any environmental
audits, assessments, monitoring or test results or occupational
health studies undertaken by or for LSI, any Subsidiary or its
agents nor to the best knowledge of the LSI Shareholders have any
such audit etc. been undertaken for any other party in relation
to property now or previously owned, leased or occupied by LSI or
any Subsidiary in relation to activities taking place on or in
connection with those properties.
(ii) all material written communications between LSI and its
Subsidiaries and any regulatory or judicial authority arising
under or related to Environmental Health and Safety Laws have
been disclosed to SIGNATURE.
(h) LSI and its Subsidiaries are in compliance in all material respects
with all conditions, limitations, obligations, prohibitions or
requirement contained in any insurance or other indemnity policy in
respect of liability arising under Environmental Health and Safety
Law.
(i) No liens or any other filing, notice, charge or restriction or the
ownership, occupancy, use or transferability have been asserted
against the property or assets of LSI or its Subsidiaries for costs or
expenses arising under Environmental, Health and Safety Law.
(j) As used in this Agreement, "ENVIRONMENTAL, HEALTH AND SAFETY LAWS"
means all national state, regional or local statutes (including,
without limitation, subordinate legislation), laws (including, without
limitation, common law), rules, regulations, codes, circulars,
directives, decisions, treaties, conventions, orders, injunctions,
decrees and rulings, in force and binding on LSI or any Subsidiary at
or prior to Closing any of which govern (or purport to govern) or
relate to pollution, protection or regulation of the environment,
health and safety, air emissions, water discharges and abstractions,
land contamination, Hazardous Substances, or Waste and part IIA of the
Environmental Protection Act 1990 and any other legislation governing
contamination of land or water which is enacted but not yet in forge.
3.9 MINUTE AND STOCK BOOKS; RECORDS. Except as disclosed in Exhibit 3.9, the
------------------------------- -----------
respective minute books of LSI and each of the Subsidiaries made available
to SIGNATURE contain all of the records of meetings and other corporate or
similar actions of the respective
19
<PAGE>
shareholders, directors, partners and members (and committees thereof) to
the extent such records were prepared or required to be prepared; the share
register and stock transfer records maintained by LSI and made available to
SIGNATURE are materially complete and accurate in all material respects;
the respective share registers and stock transfer records maintained by
each of the Subsidiaries and made available to SIGNATURE are complete and
accurately disclose all issuances and transfers of stock of each of the
Subsidiaries and all other statutory records required to be maintained by
LSI and each of the Subsidiaries are maintained and accurately reflect the
information presented therein, including but not limited to statutory
records pertaining to bank accounts and safe deposit boxes. Except as
disclosed in Exhibit 3.9 hereto, all accounts documents and letters
-----------
required to be delivered or made to the Registrar of Companies by LSI or
any Subsidiary have been duly and correctly delivered or made.
3.10 NO UNDISCLOSED MATERIAL LIABILITIES. There are no material liabilities of
-----------------------------------
LSI or any Subsidiary of any kind whatsoever, whether accrued, contingent
or absolute, and there is no known existing condition, situation or set of
circumstances which could reasonably be expected to result in such a
liability, other than:
(a) liabilities fully provided for in the consolidated balance sheets (the
"BALANCE SHEETS") of LSI and the Subsidiaries as of December 31, 1996,
March 31, 1997 or June 30, 1997 (the "BALANCE SHEET DATE");
(b) liabilities disclosed in Exhibit 3.10;
------------
(c) liabilities that have arisen in the ordinary course of business since
the Balance Sheet Dates and that could not reasonably be expected to
give rise to any material loss or damage to LSI or any Subsidiary;
(d) other undisclosed liabilities that, individually or in the aggregate,
are not material to LSI and the Subsidiaries, taken as a whole.
3.11 CONTRACTS. Except as set forth in Exhibit 3.11 attached hereto or in any
--------- ------------
other Exhibit attached hereto and referenced below, true, correct and
complete copies (in all material respects) of which referenced items have
previously been delivered to SIGNATURE, neither LSI nor any Subsidiary is a
party to or bound by any of the following (hereinafter, any of the
following are referred to collectively as the "CONTRACTS" and individually
as a "CONTRACT"):
(a) any material contract outside of the ordinary course of business for
the purchase or sale of services, equipment, inventory, materials,
supplies, or any capital item or items, or supply agreements with the
national government or any state or local government or any agency
thereof;
(b) any material acquisition, development, working capital, receivables or
other loan (whether secured or unsecured) agreement or other
instrument relating to the borrowing of money or guaranty of any
obligation for the borrowing of money;
20
<PAGE>
(c) any material license, lease or other agreement outside of the ordinary
course of business to provide or acquire services or equipment related
to the timeshare industry of any kind;
(d) any instrument or agreement relating to any material indebtedness by
way of lease-purchase arrangements, conditional sale, or other
undertakings on which others rely in extending credit, any joint
venture agreements or any chattel mortgages or other security
arrangements;
(e) any material agreement or contract entered into on terms other than on
an arms' length basis or with, or any obligation to or from an
Affiliate or a shareholder of LSI, or to the best knowledge of LSI and
the LSI Shareholders, any Affiliate or any shareholder of any
Subsidiary. For purposes of this Agreement, "AFFILIATE" shall mean
any person or entity (i) that controls or is controlled by or is under
common control with, the person or entity involved, including, without
limitation, officers and directors, (ii) that beneficially owns or
holds 5% or more of any equity interest in any person or entity
involved, or (iii) 5% or more of whose voting securities (or in the
case of a person which is not a corporation, 5% or more of any equity
interest) is owned beneficially by the person or entity involved. As
used herein, the term "CONTROL" shall mean possession of the power to
direct or cause the direction of the management or policies of a
person or entity, whether through ownership of securities, by contract
or otherwise;
(f) any marketing and sales or agency agreement, any management agreement,
any timeshare exchange agreement, any franchise agreement, any
agreement in favor of any Association or any governmental or
regulatory authority, declarations of covenants, conditions and
restrictions, indemnification agreement, or partnership or joint
venture agreement in each case to the extent that such agreements are
material;
(g) any other material agreements, contracts or powers of attorney whether
written or oral;
(h) any guarantee or indemnity under which any material liability or
contingent liability is outstanding.
For purposes of this Section 3.11, "MATERIAL" shall refer to any obligation
which may exceed $50,000, in the aggregate, or which is not cancelable upon
ninety days notice without cost or penalty or which is material to the
operations of LSI and/or the Subsidiaries. Except as set forth in Exhibit
-------
3.11 attached hereto, none of LSI nor any Subsidiary has committed any
----
material breach of any provisions of, or is in violation or default under
the terms of, or has caused or permitted to exist any event that with
notice or lapse of time or both would constitute a default or event of
default under, any such Contract (except for such defaults which
individually or, in the aggregate, would not have a material adverse effect
on LSI or a Subsidiary). Except as set forth on Exhibit 3.11, the
------------
execution and delivery of this Agreement by LSI and the consummation of the
21
<PAGE>
transactions contemplated by this Agreement will not violate or cause a
default or event of default under any provision of, or result in the
acceleration of any obligation under, or the termination of, any such
Contract (except for such defaults which individually or in the aggregate
would not have a material adverse effect on LSI or a Subsidiary). To the
best knowledge of the LSI Shareholders, all such Contracts are in full
force and effect and will continue in full force and effect to the benefit
of LSI or a Subsidiary, as indicated on said Exhibit 3.11, without change
------------
following the consummation of the transactions contemplated by this
Agreement without obtaining the consent of any other party, except as set
forth on Exhibit 3.14(b) attached hereto.
---------------
3.12 LITIGATION AND COMPLIANCE. Except as set forth on Exhibit 3.12 attached
------------------------- ------------
hereto, there is no pending claim, lawsuit, administrative proceeding, or,
to the best knowledge of LSI Shareholders, investigation by or against LSI
or a Subsidiary or the operation of its business which is current, pending
or threatened; the business of LSI or a Subsidiary is not affected by any
pending or threatened strike or other labor disturbance. LSI and each of
the Subsidiaries and the operation of their business are in material
compliance with all applicable national, European Community and local laws
and regulations and administrative orders applicable thereto, (including
national, state, local and foreign laws and regulations) regarding the
advertising, marketing, offer to sell or sale of Intervals in each local
jurisdiction in which LSI and the Subsidiaries are doing business
including, but not limited to, the English Timeshare Act of 1992 save where
such non-compliance would not have a material adverse effect on LSI and its
Subsidiaries taken as a whole; and there is no order, writ, injunction or
decree (other than orders, writs, injunctions or directions affecting the
timeshare industry generally) affecting the operations or the business of
LSI or any of the Subsidiaries.
3.13 NON-CONTRAVENTION. Except as set forth in Exhibit 13, the execution and
----------------- ----------
delivery of this Agreement and the Related Agreements by LSI and the LSI
Shareholders (to the extent that they are parties thereto) and the
consummation by LSI and the LSI Shareholders (to the extent that they are
parties thereto) of the transactions contemplated hereby and thereby and
compliance by the LSI Shareholders with the provisions of this Agreement
will not conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any lien upon any of
the properties or assets of LSI or any of its Subsidiaries under, (i) the
articles of association of LSI or the comparable organizational documents
or partnership or similar agreement (as the case may be) of any such
Subsidiary, (ii) any material loan or credit agreement, note, bond,
mortgage, indenture, reciprocal easement agreement, lease or other
agreement, instrument, permit, concession, franchise or license applicable
to LSI or any of its Subsidiaries, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to LSI or any of its
Subsidiaries or their respective properties or assets, or (iv) will result
in the creation of any lien or encumbrance other than, in the case of
clause (ii) or (iii), any such conflicts, violations, defaults, rights or
liens that individually or in the aggregate would not (x) have a material
adverse effect on LSI or (y) prevent the consummation of the Purchase.
22
<PAGE>
3.14 LICENSES, PERMITS AND REQUIRED CONSENTS. LSI and each of the Subsidiaries
---------------------------------------
have all material national licenses, ordinances, certifications, approvals,
authorizations and permits necessary to the conduct of their business as
currently conducted, including, but not limited to, building permits which
are presently required for on-going construction activities, business
licenses, health permits, all public reports, brokerage and marketing
licenses and other permits required by national and local laws to sell the
Intervals in the local jurisdictions in which the Resorts are located, as
well as all other local jurisdictions in which the Intervals are being
advertised, marketed and sold (collectively, "LICENSES AND PERMITS" or with
respect to all permits issued by any governmental authority, a
"GOVERNMENTAL PERMIT") save where the failure to have any Licenses and
Permits would not have a material adverse effect on LSI and its
Subsidiaries taken as a whole. A list of the Licenses and Permits
(excluding television licenses) is set forth on Exhibit 3.14(a) attached
---------------
hereto, true, correct and complete (in all material respects) copies of
which have previously been delivered to SIGNATURE. All material Licenses
and Permits are in full force and effect except as disclosed in Exhibit
-------
3.14(a), no material violations have been made in respect thereof, and no
-------
proceeding is pending which is likely to have the effect of revoking or
limiting any such Licenses and Permits and, except for amendments to
Licenses and Permits which will be necessary as a result of the
transactions contemplated hereby and which can be obtained in due course,
the same will not cease to remain in full force and effect by reason of the
transactions contemplated by this Agreement.
Exhibit 3.14(b) attached hereto sets forth all registrations, filings,
---------------
applications, notices, transfers, consents, approvals, orders,
qualifications, waivers or other actions of any kind known by LSI to be
required to be made by LSI or any of the Subsidiaries or the LSI
Shareholders SIGNATURE including those which have been filed, given or
obtained by or on behalf of LSI or any of the Subsidiaries with, to or from
any persons, governmental authorities or private entities in connection
with the consummation of the transactions contemplated by this Agreement,
and, to the best knowledge of LSI Shareholders, there is no reason why all
registrations, filings, applications, notices, transfers, consents,
approvals, orders, qualifications, waivers and other actions will not be
able to be made and/or granted in a manner that will permit the
transactions contemplated herein within the time frame contemplated herein
without the payment of any fee or other amount (except as disclosed on
Exhibit 3.14(b) and without any material adverse affect on the business or
---------------
operations of LSI.
3.15 LABOR MATTERS. Neither LSI nor any of the Subsidiaries has any
-------------
obligations, contingent or otherwise, under any employment, secondment or
consulting severance, bonus, deferred compensation or commission agreement
(except if and as set forth in Exhibit 3.11 attached hereto), collective
------------
bargaining agreement, dismissal procedures agreements, union membership
agreement, union recognition agreements or other contract or agreement with
a trade union or other employee representative or representatives. To the
best knowledge of LSI Shareholders, there are no efforts presently being
made or threatened by or on behalf of any trade union with respect to
employees of LSI or a Subsidiary to take industrial action or to obtain
recognition or collective bargaining or consultation right in relation to
those employees. To the best knowledge of LSI and LSI Shareholders, there
is no industrial action, labor strike, dispute, slowdown or stoppage
23
<PAGE>
pending or threatened against or involving LSI or any Subsidiary; no
material representation question or claim exists or is pending or
threatened respecting the employees of LSI or any Subsidiary; no grievance
or internal or informal complaint which might have a material adverse
effect upon LSI or any Subsidiary or the conduct of their respective
businesses exists; no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and no claim therefor has been
asserted; and no collective bargaining agreement is currently being
negotiated by LSI or any Subsidiary. Except as set forth in Exhibit 3.15
------------
hereto, neither LSI nor any of the Subsidiaries has any liability to pay
compensation for loss of office or employment or a redundancy payment to
any present or former employee or to make any payment under any provision
of the Employment Rights Act 1996 and to the best knowledge of the LSI
Shareholders there are no circumstances which might give rise to such a
liability.
3.16 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Except under the schemes set forth in Exhibit 3.16 (the "PENSION
------------
SCHEMES"), there is no agreement, arrangement or understanding
(whether contractual, under trust or otherwise) which exists for the
provision of relevant benefits (as defined in section 612 of the
Income and Corporation Taxes Act 1988) for any past or present officer
or employee of LSI or any of the Subsidiaries (or a predecessor in
business of LSI or any of the Subsidiaries) or for any relative or
dependent of such a person in connection with which LSI or any of the
Subsidiaries is or may become legally obliged to make any payment.
(b) All material details of the Pension Schemes in the form of copies of
the documents governing the scheme, the rate at which LSI is obliged
to contribute to each of the Pension Schemes, any insurance policies
and contracts relating to the Pension Schemes, any undertakings and
indemnities given to the Inland Revenue and the Contributions Agency
in connection with the Pension Schemes are set forth in Exhibit 3.16.
------------
(c) The Pension Schemes are exempt approved schemes for the purposes of
chapter I or chapter IV of part XIV of the Income and Corporation
Taxes Act 1988 and to the best knowledge of LSI and the LSI
Shareholders there is no matter which could lead to the withdrawal of
that approval.
(d) Apart from earnings related lump sum death in service benefits the
Pension Schemes provides only money purchase benefits (as defined in
the Pension Schemes Act 1993) for the beneficiaries of the Pension
Schemes and neither LSI nor the trustees of the Pension Schemes have
given any promise or assurance to any beneficiary that his benefits
will be calculated wholly or partly by reference to any person's
remuneration or equate (approximately or exactly) to any particular
amount. Section 74(6) of the Pension Schemes Act 1993 (uniform
accrual) does not apply to the calculation of short service benefit
under the Pension Schemes.
24
<PAGE>
(e) All lump sum and pension benefits payable under the Pension Schemes in
the event of the death of a member are fully insured, and all benefits
which are in payment and which are paid up (payments not having
commenced) and all contingent benefits are fully secured with an
insurance company authorized to carry on ordinary long term insurance
business under the Insurance Companies Act 1982.
(f) All due contributions and expenses payable by LSI or the trustees of
each of the Pension Schemes in respect of the Pension Scheme have been
paid and no services have been rendered or requested in respect of the
Pension Schemes in relation to which an account has not been rendered.
The rate of contributions paid to the Pension Schemes has not, to the
best knowledge of the LSI Shareholders, been calculated by reference
to the sex of the members.
(g) The representations and warranties set out in this Section 3.16 are
given subject to any disclosure set out in Exhibit 3.16.
------------
3.17 TAXES AND RETURNS. As used herein, the terms "TAX" or "TAXES" shall mean
-----------------
all national, state, provincial, municipal, local or foreign taxes,
impositions, levies and duties whether of the United Kingdom, Spain,
Austria, Gibraltar or elsewhere in the world including without limitation
those charges on or in respect of charged in respect of income, tariff,
franchise, excise, gross receipts, sales and use, value added tax, payroll,
national insurance, social security, real and personal property, transfer,
distributions, insurance premiums, turnover, gains, customs, and other
taxes and government charges, assessments and contributions and including
without limitation all fines, interest and penalties in respect thereof.
As used herein, the term "TAXES ACT" means the United Kingdom Income and
Corporation Taxes Act 1988.
As used herein, the term "TCGA" means the United Kingdom Taxation of
Chargeable Gains Act 1992.
Except as set forth in Exhibit 3.17
------------
(a) Except as described on Exhibit 3.17, no questions or issues other than
------------
those of a minor nature have been raised and are currently pending by
any taxing authority in connection with any return of LSI or any
Subsidiary or any liability to Tax of LSI or any Subsidiary nor so far
as the LSI Shareholders are aware is there any fact or circumstances
which may give rise to any such issue, questions or disputes to the
best knowledge of the LSI Shareholders. Exhibit 3.17 sets forth the
------------
years for which examination of any return by any taxing authority are
presently being conducted. All deficiencies other than those of a
minor nature asserted or assessments made as a result of any
examination by any taxing authority have been fully paid, or are being
contested and an adequate reserve therefore has been
25
<PAGE>
established and is reflected in the Financial Statements of LSI for
the fiscal year ended December 31, 1996.
(b) All elections currently effective or made within the last six years
with respect to Taxes affecting LSI and the Subsidiaries are set forth
in Exhibit 3.17.
------------
(c) All tax sharing agreements or similar arrangements with respect to or
involving LSI and the Subsidiaries are set forth in Exhibit 3.17.
------------
(d) The amount of trading losses, rights to repayment of tax capital
losses, foreign tax credits, surplus ACT and other tax credits
available to LSI and the Subsidiaries is set forth in Exhibit 3.17.
------------
(e) The base cost, if any, of the shares in each Subsidiary is set forth
in Exhibit 3.17.
------------
(f) Except as set forth in Exhibit 3.17 or Exhibit 3.1 attached hereto,
------------ -----------
neither LSI nor any of the Subsidiaries is subject to any joint
venture, partnership or other arrangement or contract which is or
should be treated by LSI or a Subsidiary as a partnership for income
or corporation tax purposes.
(g) LSI and each of its Subsidiaries has duly and punctually paid all tax
which it is or has been liable to pay or account for prior to the date
of this Agreement and has made adequate provisions in the Financial
Statements for the fiscal year ended December 31, 1996 in respect of
all Taxes which it will or may become liable to pay or account for in
respect of all accounting and other periods ending on or before the
date of this Agreement.
(h) The amount of the provision for deferred taxation (if any) contained
in the Financial Statements for the fiscal year ended December 31,
1996 in respect of LSI and each Subsidiary was in accordance with UK
generally accepted accounting principles and, in particular, was
calculated in accordance with SSAP 15.
(i) LSI and each Subsidiary has properly and punctually deducted and
accounted for Taxes which it has been required to deduct or for which
it has been required to account in respect of any payments made or
deemed to have been made by it. In particular, LSI and each of its
Subsidiaries has properly operated the PAYE (or any other applicable
payroll tax) system and has duly made all deductions any payments
required to be made in respect of National Insurance contributions
(including employer's contributions) and their equivalents in each
other relevant jurisdiction.
(j) LSI and each Subsidiary has duly and punctually made all returns,
complied with all reporting obligations, and given or delivered all
notices and accounts and information, all of which were correct and
complete in all material respects,
26
<PAGE>
which on or before the date of the Agreement ought to have been made
given or delivered for purposes of Taxes.
(k) Exhibit 3.17 details all relevant surrenders of or claims for group
------------
relief or advance corporation tax which affect LSI or any Subsidiary
for accounting periods in respect of which no final agreement has been
reached with the relevant Tax Authority as to its tax affairs or which
were made in the seven years ending with the date of this Agreement.
Except as disclosed on Exhibit 3.17, LSI and its Subsidiaries have not
------------
made or received any payment in respect of a claim for or surrender of
group relief or advance corporation tax which to the best knowledge of
the LSI Shareholders are aware could be liable to be refunded nor is
under any obligation to make such payment or has any entitlement to
receive such a payment.
(l) LSI has not elected to have any assets treated as short life assets
under Section 37 Capital Allowances Act of 1990.
(m) All documents which are in the possession of LSI or its Subsidiaries
or by virtue of which LSI or its Subsidiaries has any right or
interest and which either attracts stamp duty or stamp duty reserve
tax in the United Kingdom or to the best knowledge of the LSI
Shareholders in any other jurisdiction or requires to be stamped with
a particular stamp denoting that no duty is chargeable or that the
document has been produced to the appropriate authority have been
properly stamped provided that the awareness limitation shall not
apply to any stamp duty or stamp duty reserve tax relating to land or
other real property.
(n) LSI and each of its Subsidiaries has duly registered for Value Added
Tax purposes and has materially complied with all relevant provisions
of the Value Added Tax Act of 1994 ("VATA") or any similar provision
in any jurisdiction outside of the United Kingdom, and the regulations
made or notices issued under any legislation relating to the Value
Added Tax. The exempt supplies for VATA purposes made by LSI and each
Subsidiary are set out in Exhibit 3.17.
------------
(o) All statutory clearances and consents obtained from any Taxing
Authority by any of LSI and any of the Subsidiaries in the six (6)
years prior to the date of this Agreement are specifically set forth
in Exhibit 3.17 and were obtained after sufficient and accurate
------------
disclosure of all material facts and considerations and to the best
knowledge of the LSI Shareholders no such clearance or consent is
liable to be withdrawn, nullified or rendered void.
(p) No Tax will be chargeable on or recoverable from any of LSI and any of
the Subsidiaries nor will any credit or allowance cease to be
available to any of them or be restricted in each case as a result of
or in connection with the entry into this Agreement and/or the sale of
the Shares hereunder and none of LSI or any of the Subsidiaries has
acquired an asset which could be deemed to be disposed of if Section
179 TCGA 1992 were to apply to the relevant company.
27
<PAGE>
(q) No liability to Tax would arise if any assets of or debts owed to LSI
or any of the Subsidiaries were disposed of or discharged for an
amount equal to the value attributed to such asset or debt in the
Balance Sheet.
(r) None of LSI and any of the Subsidiaries has or to the best knowledge
of the LSI Shareholders will have any liability to indemnify (whether
statutory or otherwise) any other person in respect of Tax.
(s) Except only as specifically described in Exhibit 3.17, (i) LSI is
------------
resident in the United Kingdom for United Kingdom Tax purposes and is
not and never has been resident for any purpose in any other country,
(ii) none of the Subsidiaries is or ever has been resident for any Tax
purposes (including for the purposes of any double taxation treaty) in
any territory other than that in which it is incorporated and (iii)
none of LSI and any of the Subsidiaries carries on business through a
branch or agency or permanent establishment or is otherwise liable to
Tax, in any jurisdiction other than that in which it is incorporated.
(t) No amount of an income nature which has been paid since December 31,
1996 or to the best knowledge of the LSI Shareholders is payable by
any of LSI and any of the Subsidiaries, or which it is under an
obligation entered into before the date of this Agreement the Closing
Date to pay, is wholly or partly disallowable as a deduction, charge
on income or otherwise in computing its liability to Taxation and no
debt owed by any of them has since December 31, 1996 been released in
whole or in part in circumstances that give rise or could give rise to
a liability to taxes.
(u) In the last 6 years no loan, advance, release or payment has been made
or consideration given or transaction effected by LSI or any of the
Subsidiaries falling within Section 419 to 422 (inclusive) of the
Taxes Act.
(v) None of LSI and any of the Subsidiaries has caused, permitted or
entered into any of the transactions specified in Section 765 of the
Taxes Act without the prior consent of HM Treasury nor made a deemed
disposal of assets pursuance to Section 185 or 186 of the TCGA nor
made an election as the principal company under Section 187 of the
TCGA nor failed to comply with Section 130 Finance Act 1988 before
ceasing to be resident in the United Kingdom.
(w) All claims, disclaimers elections and notices in relation to Tax or
other Returns which have been taken into account in calculating the
provisions for Tax in the for the fiscal year ended December 31 1996
have been properly and duly submitted to the relevant Taxing
Authorities and are not the subject nor to the best knowledge of the
LSI Shareholders are likely to be the subject of any dispute.
(x) There are specifically set forth in Exhibit 3.17(a) copies of all
---------------
notifications from a Taxing Authority to any of LSI and the
Subsidiaries that any payment which
28
<PAGE>
any of LSI and any of the Subsidiaries is currently liable to make may
be made gross or at a reduced rate of withholding which otherwise
should have been made subject to deduction of an amount in respect of
Tax and (b) details of any liability (actual or contingent) on any of
LSI and the Subsidiaries to make a payment subject to a deduction or
withholding of Tax which are subject to a liability to gross up.
(y) Except as disclosed in Exhibit 3.17, neither LSI nor any of the
------------
Subsidiaries has issued (i) any securities (as defined in Section
254(1) Taxes Act) in relation to which payments might fall within
Section 209(2)(d) and/or (da) and/or (e) Taxes Act; or (ii) any debt
which is not a normal commercial loan for the purposes of Section
117(1) TCG Act or Schedule 18 Taxes Act.
(z) Except as disclosed in Exhibit 3.17, none of LSI and any of the
------------
Subsidiaries (i) are parties to leasing transactions to which the
provisions of Section 82 and Schedule 12 of the Finance Act 1997 could
apply; or (ii) have made a or currently intends to declare and/or make
prior to Closing a distribution to which the provisions of section 69
and Schedule 7 of the Finance Act 1997 could apply.
(aa) To the best knowledge of the LSI Shareholders no transaction has been
entered into or event occurred in consequence whereof any of LSI and
any of the Subsidiaries could be liable to Taxation or increased
Taxation pursuant to Section 770-773 Taxes Act or any equivalent or
substantially equivalent provision, law or regulation in any other
relevant jurisdiction.
(bb) Except as described in Exhibit 3.17, neither the assets nor the shares
------------
of LSI or any of the Subsidiaries are subject to any United Kingdom
Inland Revenue charge for the purposes of the Inheritance Tax Act
1984. No person has, or could obtain, the power under Section 212 of
the Inheritance Tax Act 1984 to raise any inheritance tax by the sale
or mortgage of or by a terminable charge on any of the assets of LSI
or any of the Subsidiaries.
(cc) Article 3.17 of this Schedule shall apply mutatis mutandis in relation
to Taxes outside the United Kingdom and accordingly any reference in
those paragraphs to any form of Taxation or Relief or any statutory
provision relating to Taxation in the United Kingdom shall be deemed
to include a reference to the equivalent or substantially equivalent
form of Taxation or Relief or statutory provision relating to Taxation
in any other relevant taxing jurisdiction.
3.18 CHANGES. Except as otherwise expressly disclosed on the Exhibits hereto,
-------
since December 31, 1996, there has not been:
(a) any damage, destruction, other casualty loss or other occurrence
resulting in a loss individually of $25,000 and in the aggregate of
$50,000;
29
<PAGE>
(b) any disposition of any asset of LSI or a Subsidiary other than in the
ordinary course of business;
(c) any termination or, except in the ordinary course of business, any
amendment or modification of any existing, or entering into any new,
contract, agreement, lease, license, permit or franchise with a value
individually of $25,000 and in the aggregate of $100,000;
(d) any direct or indirect redemption, purchase or other acquisition of,
or any declaration, setting aside or payment of any dividend or other
distribution on or in respect of, any stock or other securities of LSI
or a Subsidiary, other than distributions otherwise permitted under
this Agreement;
(e) any material changes in the accounting methods or practices followed
by LSI or any of the Subsidiaries or any change in depreciation or
amortization policies or rates, other than as disclosed on Exhibit
-------
3.18 attached hereto and made a part hereof; or
----
(f) any other materially adverse change in the assets, business or
condition or prospects of LSI or a Subsidiary.
(g) incurred any liability or contingent liability for Taxation otherwise
than as a result of trading activities in the ordinary course of
business;
(h) any forgiving of any advances, loans or other assets owed to LSI or
the Subsidiaries, including, but not limited to any indebtedness or
obligation of Related Parties;
(i) borrowed any sums or entered into any financial guarantees or
otherwise incurred any indebtedness or liability in excess of $75,000
individually or $500,000 in the aggregate for LSI and all Subsidiaries
as a group;
(j) issued or sold any shares of its capital stock of any class, or issued
or sold any securities convertible into, or options with respect to,
or warrants to purchase or rights to subscribe to, any shares of its
capital stock of any class, nor made any commitment to issue or sell
any such shares or securities;
(k) declared, paid or set aside for payment any dividend, distribution or
return of capital in respect of its capital stock or other equity
securities or, directly or indirectly, redeemed, purchase or otherwise
acquired any shares of its capital stock, options, warrants or
securities convertible into its capital stock or other equity
securities;
(l) made or committed to make any capital expenditures in excess of
$50,000 individually or $250,000 when aggregated with all other such
expenditures by LSI and all Subsidiaries as a group;
30
<PAGE>
(m) made any new elections with respect to Taxes or any changes in current
elections with respect to Taxes;
(n) altered or revised the accounting practices, procedures, methods or
principles currently in place;
(o) any forgiving of any advances, loans or other assets owed to LSI or
the Subsidiaries, including, but not limited to any indebtedness or
obligation of Related Parties.
3.19 ACCOUNTS RECEIVABLE. Each account receivable reflected in the Financial
-------------------
Statements or which arose subsequent thereto represents an undisputed, bona
fide sale and delivery of goods or services rendered or to be rendered.
The accounts receivable (a) have not been pledged, encumbered or sold (or
are subject to a contract which for the sale, encumbrance or pledge
thereof) except as set forth on Exhibit 3.19 and (b) have been delivered in
------------
accordance with UK GAAP, consistently applied. The reserves for doubtful
accounts reflected on the Financial Statements were determined in
accordance with UK GAAP consistently applied.
3.20 SOFTWARE. Except as disclosed in Exhibit 3.20 all software used for the
-------- ------------
purposes of the respective businesses of LSI and its Subsidiaries on
computers at the Resorts or any off-site management or other office
operated by LSI or a Subsidiary serving the Resorts (such software being
described on Exhibit 3.21) which is material to the business of LSI is
------------
properly licensed to LSI, all licensing fees have been paid and LSI or a
Subsidiary, as the case may be, has the rights to use the software
indefinitely.
3.21 NO ADVERSE ACTIONS. There is no existing, pending or threatened
------------------
termination, cancellation, limitation, modification or change in the
business relationship of LSI or a Subsidiary with any principal supplier,
customer or other person or entity except as are immaterial individually
and in the aggregate and which are in the ordinary course of business.
None of LSI, a Subsidiary or, to the best knowledge of the LSI
Shareholders, any shareholder, director, officer, agent, employee or other
person associated with or acting on behalf of any of the foregoing has used
any corporate funds for unlawful contributions, payments, gifts,
entertainment or other unlawful expenses relating to political activity, or
made any direct or indirect unlawful payments to governmental officials or
others.
3.22 REPORTING. LSI and each Subsidiary has timely filed (within applicable
---------
extension periods) all reports and documents required to be filed by it
pursuant to applicable laws of the jurisdiction, in which located,
operating or subject to, regulating time-share resorts and the rules and
regulations promulgated thereunder (except where the failure to file would
not have a material adverse effect on LSI and its Subsidiaries when taken
as a whole). To the best knowledge of LSI, all such reports and documents
were appropriately responsive to all applicable requirements, were
complete, correct and proper in form and did not contain an untrue
statement of a fact or omit to state a fact required to be stated therein
or necessary to make the statements therein, in light of the
31
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circumstances under which they were made, not misleading LSI shall send to
SIGNATURE copies of all releases, financial statements and reports as and
when sent to regulatory authority regulating timeshare resorts or
businesses, as to which the representations and warranties in the preceding
sentence shall also apply.
3.23 DISCLOSURE. No representation or warranty made by the LSI Shareholders in
----------
this Agreement and no information concerning the business, operations,
assets or liabilities of LSI contained or referred to in the Exhibits
attached hereto or in the certificates furnished to SIGNATURE in connection
with this Agreement and the transactions contemplated hereby (a full list
of which is contained on Exhibit 3.23), which SIGNATURE acknowledges are
------------
the only documents upon which it may rely in relation to this Section 3.23,
in the light of the circumstances under which such information was prepared
and when taken as a whole contains any untrue statement of material fact or
omits to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not
misleading. Through the Closing Date, LSI shall promptly notify SIGNATURE
of any change or event which could materially adversely affect the assets,
operations, business, conditions or prospects of LSI or a Subsidiary.
3.24 Insolvency. No administrator, administrative receiver, receiver, manager
----------
of assets, liquidator or any other similar officer has ever been appointed
in respect of the whole or any part of the assets or undertaking of LSI or
any Subsidiary and to the best knowledge of the LSI Shareholders no order
has been made, petition presented or resolution passed for the purpose of
the making of any order in relation to administration, liquidation, or any
other similar situation of LSI or any Subsidiary. Neither LSI nor any
Subsidiary is insolvent or unable to pay its debts as they fall due (as
such expression is defined in either subsection (1)(a) through (d) or
subsection (2) of Section 123 of the Insolvency Act of 1986) and no scheme
of arrangement as regards its creditors has been proposed by the Directors
or is in operation in relation to LSI or any Subsidiary. Neither LSI nor
any Subsidiary has entered into any transaction or to the best knowledge of
the LSI Shareholders been given any preference to which Sections 238, 239
or 423 of the Insolvency Act of 1986 applies or which to the best knowledge
of the LSI Shareholders may otherwise be liable to be set aside or avoided
for any reason.
ARTICLE 4
ADDITIONAL AGREEMENTS AND REPRESENTATIONS OF THE PARTIES
4.1 ORDINARY COURSE. Except as set forth in this Agreement, any schedules or
---------------
exhibits hereto or in any of the transactions described herein, prior to
the Closing from and after the date of this Agreement, without SIGNATURE's
written consent, the LSI Shareholders represent, covenant and agree that
neither LSI nor a Subsidiary shall:
(a) borrow any sums or enter into any financial guarantees or otherwise
incur any indebtedness or liability in excess of $75,000 individually
or $500,000 in the aggregate for LSI and all Subsidiaries as a group;
32
<PAGE>
(b) sell, assign, transfer, lease, mortgage, pledge or subject to lien, or
otherwise encumber, any of its assets, with the exception of the sale
of timeshare interests ("INTERVALS") made in the ordinary course of
business;
(c) manage customer accounts, receivable portfolios, construction of new
units and facilities, the marketing and sale of Intervals, equipment,
inventories and other supplies other than in the ordinary course of
business;
(d) issue or sell any shares of its capital stock of any class, or issue
or sell any securities convertible into, or options with respect to,
or warrants to purchase or rights to subscribe to, any shares of its
capital stock of any class, nor make any commitment to issue or sell
any such shares or securities;
(e) directly or indirectly through any investment banker or other
representative or otherwise, solicit or negotiate with respect to any
inquiries or proposals from any person, other than SIGNATURE and its
representatives, relating to: (1) the merger or consolidation of LSI
or a Subsidiary with any person or entity, (2) the direct or indirect
acquisition by any person of any of the assets of LSI or a Subsidiary,
or (3) the acquisition of direct or indirect beneficial ownership or
control of LSI or a Subsidiary or any securities thereof by any
person;
(f) enter into any agreement or transaction not in the ordinary course of
business (i) pursuant to which the aggregate financial obligation of
LSI or a Subsidiary exceeds $10,000 individually or $100,000 in the
aggregate for LSI and the Subsidiaries as a group, or (ii) which is
not terminable by LSI or such Subsidiary without penalty upon less
than 31 days' notice;
(g) enter into any employment, consulting or similar agreement with, or
make or authorize any compensation increase for, any executive
officer, director or key employee of LSI or a Subsidiary whether such
increase relates to base compensation, commissions, bonuses or
benefits, or otherwise;
(h) declare, pay or set aside for payment any dividend, distribution or
return of capital in respect of its capital stock or other equity
securities or, directly or indirectly, redeem, purchase or otherwise
acquire any shares of its capital stock, options, warrants or
securities convertible into its capital stock or other equity
securities;
(i) make or commit to make any capital expenditures in excess of $50,000
individually or $250,000 when aggregated with all other such
expenditures by LSI and all Subsidiaries as a group during any 30-day
period;
(j) make any new elections with respect to Taxes or any changes in current
elections with respect to Taxes;
33
<PAGE>
(k) alter or revise the accounting practices, procedures, methods or
principles currently in place;
(l) materially change any credit policies or failed to pay any creditors
in accordance with its normal practices;
(m) settle or compromise any litigation described on Exhibit 3.12 or any
------------
tax disputes;
(n) establish or adopt any employee benefit plan;
(o) consent to any adverse planning changes, or sell, transfer, assign,
dispose of, or consent to the utilization of any development rights of
any Real Property, including air rights, if any, or adversely modified
or amended or consented to any modification, amendment, termination or
surrender of any Governmental Permit;
(p) otherwise enter into any material transaction or take other material
action not in the ordinary course of business;
(q) pass any members' resolution of any kind other than resolutions
relating to business at annual general meetings which was not special
business; or
(r) repay any loan, loan capital or other debenture by reason of LSI's or
its Subsidiaries default.
4.2 ACCESS PRIOR TO CLOSING.
-----------------------
(a) Upon reasonable notice from the date hereof through the earlier of (i)
termination of this Agreement, or (ii) the Closing, the LSI
Shareholders shall procure that LSI and the Subsidiaries, and their
respective directors, officers, agents and employees, shall afford
SIGNATURE and its representatives (including, without limitation, its
independent public accountants, engineers, consultants, attorneys,
lenders and other representatives) reasonable access to, and
opportunity to examine, during normal business hours, any and all of
the premises, properties, contracts, books, records, business, data,
personnel, customers and vendors of or relating to LSI, any of the
Subsidiaries or (to the extent reasonably necessary) the Related
Parties or their operations. The parties hereto shall cooperate fully
in connection with the foregoing and in particular LSI shall promptly
respond to all enquiries raised by SIGNATURE and its representatives
which are in any way connected with SIGNATURE's investigations into
the matters referred to in Section 8.1(i)(iv);
(b) Upon reasonable notice from the date hereof through the earlier of (i)
termination of this Agreement, or (ii) the Closing, SIGNATURE shall
and shall procure that its subsidiaries and their respective
directors, officers, agents and employees, shall afford LSI and its
representatives (including, without limitation, its independent public
accountants, engineers, consultants, attorneys, lenders and
34
<PAGE>
other representatives) reasonable access to, and opportunity to
examine, during normal business hours, any and all of the premises,
properties, contracts, books, records, business, data, personnel,
customers and vendors of or relating to LSI any of the Subsidiaries or
(to the extent reasonably necessary) the Related Parties or their
operations to the extent necessary to answer the due diligence
enquiries notified to SIGNATURE by or on behalf of the LSI
Shareholders prior to the date hereof. The parties hereto shall
cooperate fully in connection with the foregoing.
In the event that, in the reasonable opinion of SIGNATURE, there has
occurred a material adverse change in the business, financial
condition, results of operations, assets or properties of SIGNATURE
and its subsidiaries when taken as a whole, SIGNATURE shall promptly
notify LSI and SIGNATURE and its subsidiaries and their respective
directors, officers, agents and employees, shall afford LSI and its
representatives (including, without limitation, its independent public
accountants, engineers, consultants, attorneys, lenders and other
representatives) reasonable access to, and opportunity to examine,
during normal business hours, any and all of the premises, properties,
contracts, books, records, business, data, personnel customers and
vendors of or relating to SIGNATURE, any of its subsidiaries or their
operations. SIGNATURE and its subsidiaries, and their respective
officers, directors, shareholders, agents and employees shall
cooperate fully in connection with the foregoing. LSI and SIGNATURE
acknowledge that they are parties to that certain Confidentiality
Agreement, dated May 21, 1997 (the "CONFIDENTIALITY AGREEMENT") the
terms and conditions of which shall survive the execution of this
Agreement and shall continue to be binding on the parties with respect
to the inspections referred to in this Section 4.2 of this Agreement.
4.3 REGULATION AND OTHER AUTHORIZATIONS. The parties shall obtain, and/or
-----------------------------------
shall cooperate fully with each other in obtaining, all governmental
regulatory and third-party approvals, consents, filings, authorizations or
certifications necessary in order to consummate the transactions
contemplated hereby. The parties hereto will not take any action that will
have the effect of delaying, impairing or impeding the receipt of any of
the foregoing and will use their best efforts to secure the same as
promptly as possible.
4.4 FURTHER ASSURANCES. At any time and from time to time at or after the
------------------
Closing, the parties agree to cooperate with each other, to execute and
deliver such other documents, instruments of transfer or assignment, files,
books and records and do all such further acts and things as may be
reasonably required to carry out the transactions contemplated hereby.
4.5 MATERIAL CHANGES. From the date of this Agreement through the Closing
----------------
Date, LSI shall promptly notify SIGNATURE of any change or event which
could materially adversely affect the assets, operations, business,
conditions or prospects of LSI or a Subsidiary or result in a breach of
Section 3.
35
<PAGE>
4.6 PAYMENT OF TAXES. The LSI Shareholders shall pay all sales taxes, property
----------------
transfer taxes, all documentary or other stamp taxes and all similar taxes,
including but not limited to income taxes, if any, arising out of or
related to their receipt of SIGNATURE Stock (including the Holdback Shares)
or cash as contemplated by this Agreement.
4.7 DELIVERY. Subject to the terms and conditions of this Agreement, the
--------
parties shall cause the delivery of the respective documents required to be
delivered or caused to be delivered by them pursuant to Articles 6 and 7
----------------
below. In addition to their respective obligations under Section 4.4 and
elsewhere in this Agreement, the parties agree to take or cause to be taken
all commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each condition to the other's
obligations contained in this Agreement and to consummate and make
effective the transactions contemplated by this agreement. Neither party,
nor any of their respective subsidiaries, will take or fail to take any
action that could be reasonably expected to result in the non-fulfillment
of any such condition.
4.8 CONTINUED RELATIONSHIPS. The LSI Shareholders shall utilize commercially
-----------------------
reasonable efforts to cause LSI to preserve intact the business of LSI and
each of the Subsidiaries and keep available the services of their
respective officers and employees and maintain good relationships with
suppliers, customers and others having business relations with LSI or any
of the Subsidiaries, and shall use commercially reasonable efforts to
ensure there is no change in the business, condition or results of
operations of LSI or any of the Subsidiaries which may have a material
adverse effect on the assets, business, condition or prospects of LSI or a
Subsidiary. SIGNATURE shall utilize commercially reasonable efforts to
preserve intact the business of SIGNATURE and each of the subsidiaries of
SIGNATURE and keep available the services of their respective officers and
employees and maintain good relationships with suppliers, customers and
others having business relations with SIGNATURE or any of the subsidiaries
of SIGNATURE.
4.9 CONFIDENTIALITY. Except as contemplated by this Agreement, as required by
---------------
law or otherwise expressly consented to in writing by SIGNATURE and LSI,
all information or documents furnished hereunder by any party shall be kept
strictly confidential by the party or parties to whom furnished at all
times prior to the Closing Date, and in the event such transactions are not
consummated, each shall return to the other all documents furnished
hereunder and copies thereof upon request and shall continue to keep
confidential all information furnished hereunder and shall not thereafter
use the same for its advantage. Notwithstanding the foregoing, SIGNATURE
may issue or make a press release, announcement or other disclosure
regarding this Agreement and the transactions contemplated hereby which it
reasonably determines necessary or desirable under applicable law, after
affording the LSI shareholders a reasonable opportunity to review.
In the event the Closing is not consummated, each party hereto will hold in
absolute confidence any information obtained from another party, except to
the extent (a) such party is required to disclose such information by law,
regulation or order of court with competent jurisdiction or other
governmental agency, (b) disclosure of such information is necessary in
connection with the pursuit of a claim by such party against another party,
36
<PAGE>
or (c) such information becomes generally available to the public or is
otherwise no longer confidential or (d) such information was known by such
party prior to it being provided by or obtained from the other party except
to the extent such knowledge was obtained in breach of a confidentiality
obligation. Prior to any disclosure of information pursuant to the
exception in clause (a) or (b) of the preceding sentence, the party
intending to disclose the same shall so notify the party which provided the
same in order that such party may seek a protective order or other
appropriate remedy should it choose to do so. Notwithstanding the
foregoing, SIGNATURE may issue or make a press release, announcement or
other disclosure stating that this Agreement is terminated and such other
information which it reasonably determines to be required under applicable
law.
4.10 ADDITIONAL AGREEMENTS AND RELATIONSHIPS. On or prior to Closing the
---------------------------------------
appropriate parties will enter into the following agreements (collectively,
the "RELATED AGREEMENTS"):
(a) LSI and SIGNATURE and (as the case may be) Ganney and Harrington shall
enter into Service Agreements between LSI and SIGNATURE and Ganney and
between LSI and SIGNATURE and Harrington, requiring the services of
each pursuant to the terms thereof and which are effective subject to
the Closing.
(b) SIGNATURE and the LSI Shareholders shall enter into a Registration
Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT") with respect to
the registration of the SIGNATURE Stock being delivered to the LSI
Shareholders at Closing, which is effective subject to the Closing.
(c) SIGNATURE and the LSI Shareholders shall execute the Escrow Agreement
(along with the Escrow Agent specified therein) substantially in the
form of Exhibit 4.10(c) (the "ESCROW AGREEMENT").
---------------
(d) SIGNATURE shall have granted to LSI Shareholders and certain persons
employed by LSI options to acquire SIGNATURE Stock as described on
Exhibit 4.10(d), pursuant to a Stock Option Agreement, the form of
---------------
which is attached thereto.
(e) SIGNATURE and the LSI Shareholders shall have entered into an
agreement regarding cooperation on tax returns and tax computations
covering periods prior to Closing, such agreement to contain terms and
conditions which are customary in the UK for transactions similar to
the Purchase, provided that such agreement shall conform to the
requirements of Section 4.13 of this Agreement.
4.11 NO SOLICITATION. The LSI Shareholders, and those acting on behalf of any
---------------
of them will not, and the LSI shareholders shall insure that LSI and the
LSI Subsidiaries will use all reasonable efforts to cause its officers,
employees, agents, and representatives (including any investment banker)
not, directly or indirectly, to solicit, encourage, or initiate any
discussions with, or negotiate or otherwise deal with, or provide any
information to, any
37
<PAGE>
person or entity other than SIGNATURE and its officers, employees, and
agents, concerning any merger, sale of substantial assets, or similar
transaction involving LSI or any Subsidiary or division of LSI or any sale
of any of its shares or of the shares or other securities or assets of any
Subsidiary or division of LSI. The LSI shareholders shall notify SIGNATURE
immediately upon receipt of any inquiry, offer or proposal relating to any
of the foregoing prior to the earlier of (i) termination of this Agreement
or (ii) the Closing. None of the foregoing shall prohibit LSI, any
Subsidiary, officers, director, employee, agent or representative of LSI
from providing information to others in a manner in keeping with the
ordinary conduct of LSI's business or providing information to government
authorities.
4.12 AGREEMENT OF AFFILIATES. At the Closing, each LSI Shareholder shall
-----------------------
deliver to SIGNATURE the Affiliate Agreement attached hereto as Exhibit
-------
4.12 (the "AFFILIATE AGREEMENT"). Each LSI Shareholder, being an
----
"affiliate" of LSI, agrees that with respect to the Purchase qualifying for
pooling-of-interests accounting treatment, shares of SIGNATURE Stock issued
to the LSI Shareholders in exchange for their LSI Shares shall not be
transferable until such time as the financial results covering at least 30
days of combined operations of SIGNATURE and LSI have been published within
the meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies, except for sales of amounts permitted thereunder,
provided advance notice of any such proposed sale is given to SIGNATURE not
less than two (2) business days prior to such sale. SIGNATURE shall be
entitled to place a restrictive legend on certificates issued in the
Purchase to enforce the provisions of this Section, regardless of whether
the recipient has executed the Affiliate Agreement.
4.13 ACCOUNTING TREATMENT. SIGNATURE and LSI will not knowingly enter into any
--------------------
agreement or take any action that would prevent treatment of the Purchase
and the transactions related thereto on a pooling-of-interest basis under
US GAAP or under the rules and regulations of the SEC, and agree to execute
such amendments to this Agreement as may be reasonably required in the
written opinion of Arthur Andersen to qualify for such treatment.
4.14 REORGANISATION. From and after the date hereof and until the Closing,
--------------
neither LSI nor SIGNATURE nor any of their respective subsidiaries shall
(i) knowingly take any action, or knowingly fail to take any action, that
would jeopardize qualification of the Purchase as a reorganisation with the
meaning of Section 368(a)(1)(B) of the Code; or (ii) enter into any
contract, agreement, commitment or arrangement with respect to the
foregoing.
ARTICLE 5
REGISTRATION RIGHTS
The SIGNATURE Stock to be issued hereunder shall be offered under the
Securities Act in either (i) a private placement in transactions not
involving any public offering under Section 4(2) of the Securities Act or
(ii) in an offering in compliance with the requirements of Regulation S.
The SIGNATURE Stock to be issued hereunder shall not
38
<PAGE>
be registered under the Securities Act. SIGNATURE has entered into the
Registration Rights Agreement with the LSI Shareholders, providing for
certain limited shelf registration rights and piggyback registration
rights, for the purpose of providing to the LSI Shareholders an ability to
sell in the open marketplace the shares of SIGNATURE Stock being received
in the Purchase. Notwithstanding any provisions of the Registration Rights
Agreement, LSI and the LSI Shareholders acknowledge and agree that all of
the SIGNATURE stock received by them in connection with the Purchase must
be made in compliance with the Securities Act, the Affiliate Letter and the
rules relating to pooling-of-interest accounting as applicable to the
Purchase.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 CLOSING CONDITIONS OF THE LSI SHAREHOLDERS. The obligations of the LSI
------------------------------------------
Shareholders under this Agreement are subject to the reasonable
satisfaction, or waiver by the LSI Shareholders, at or prior to the
Closing, of each of the following conditions:
(a) The representations and warranties of SIGNATURE contained in this
Agreement shall be true and correct in all material respects on the
date hereof and on the Closing Date as though made on and as of the
Closing Date; or, in the case of representations and warranties made
as of a specified date earlier than the Closing Date, on and as of
such earlier date.
(b) SIGNATURE shall have performed and complied with all of the covenants
and agreements in all material respects and satisfied all of the
conditions required by this Agreement to be performed or complied with
or satisfied by SIGNATURE at or prior to the Closing;
(c) There shall not have occurred any material adverse change in the
business, financial condition, results of operations, assets or
properties of SIGNATURE or its subsidiaries when taken as a whole.
(d) All authorizations, consents, licenses, approvals and other actions
by, and all notices to and filings with, any governmental authority
that are required for the due execution, delivery and performance of
this Agreement, the failure of which to be obtained could be
reasonably expected to have a material adverse effect on LSI or the
LSI Shareholders following the Closing, shall have been made or
obtained in form and substance reasonably satisfactory to LSI, and all
waiting periods which are required by law to have expired prior to
consummation of the Purchase shall have expired;
(e) No action, suit or proceeding shall have been instituted by any person
or entity, or by any governmental authority, before a court or other
governmental body, to restrain or prevent the carrying out of the
transactions contemplated by this Agreement or that seeks other
material relief with respect to any of such
39
<PAGE>
transactions or that could, individually or in the aggregate, have a
material adverse effect on the business or prospects of LSI or any
Subsidiary. On the Closing Date, there shall be no injunction,
restraining order or decree of any nature of any court or governmental
authority in effect that restrains or prohibits the consummation of
the transactions contemplated by this Agreement;
(f) SIGNATURE's lenders shall have consented to the transactions
contemplated by this Agreement;
(g) None of the Related Agreements have been revoked or terminated;
(h) All deliveries required by Section 7.2 shall have been made;
(i) The receipt of a waiver by The City Panel on Takeovers and Mergers of
the provisions of the City Code, which the LSI Shareholders hereby
undertake to use all their reasonable efforts to obtain.
6.2 CLOSING CONDITIONS OF SIGNATURE. The obligations of SIGNATURE under this
-------------------------------
Agreement are subject to the reasonable satisfaction, or waiver by
SIGNATURE, at or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of the LSI Shareholders contained
in this Agreement shall be true and correct in all material respects
on the date hereof and on the Closing Date as though made on and as of
the Closing Date; or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as
of such date;
(b) The LSI Shareholders and LSI and each of the Subsidiaries shall have
performed and complied with all the covenants and agreements in all
material respects and satisfied all the conditions required by this
Agreement to be performed or complied with or satisfied by it or them
at or prior to the Closing,including but not limited to, those
covenants contained in Section 4.1 hereof;
(c) There shall not have occurred any material adverse change in the
business, financial condition, results of operations, assets or Real
Property or personal property of LSI or its Subsidiaries when taken as
a whole;
(d) All authorizations, consents, licenses, approvals and other actions
by, and all notices to and filings with, any governmental body,
agency, official or authority, that are required for the due
execution, delivery and performance of this Agreement, the failure of
which to be obtained could be reasonably expected to have a material
adverse effect on SIGNATURE following the Closing, shall have been
made or obtained in form and substance reasonably satisfactory to
SIGNATURE and copies thereof delivered to SIGNATURE, and all waiting
periods which are required by law (including the Hart-Scott-Rodino
Antitrust
40
<PAGE>
Improvements Act of 1976) to have expired prior to consummation of the
Purchase shall have expired;
(e) No action, suit or proceeding shall have been instituted by any person
or entity, or by any governmental authority, before a court or other
governmental body, to restrain or prevent the carrying out of the
transactions contemplated by this Agreement or that seeks other
material relief with respect to any of such transactions or that
could, individually or in the aggregate, have a material adverse
effect on the business or prospects of LSI or any Subsidiary. On the
Closing Date, there shall be no injunction, restraining order or
decree of any nature of any court or governmental agency or body in
effect that restricts or prohibits the consummation of the
transactions contemplated by this Agreement[, and there shall be no
ongoing investigation by any legal authority or the agency relating to
LSI or any Subsidiary that if adversely determined could reasonably be
expected to have a material effect on LSI and the Subsidiaries taken
as a whole];
(f) SIGNATURE shall receive, in the form attached at Exhibit 6.2(f)(1),
-----------------
the consents, estoppel certificates and beneficiary statements from
the parties listed on Exhibit 6.2(f)(2);
-----------------
(g) SIGNATURE shall have received all authorizations required by
securities laws or blue sky laws and other authorizations necessary to
consummate the transactions contemplated hereby including a waiver by
The City Panel on Takeovers and Mergers of the provisions of The City
Code;
(h) Each person who is or may be an Affiliated Person of LSI shall have
entered into an Affiliate Letter with SIGNATURE in the form
customarily given in similar transactions;
(i) SIGNATURE shall have received a letter, dated as of the Closing Date,
in a form and substance reasonably acceptable to SIGNATURE, from
Arthur Anderson & Co. to the effect that the Purchase shall qualify
for pooling-of-interest accounting treatment;
(j) SIGNATURE shall have received all the Exhibits required to be
delivered hereunder by the LSI Shareholders and shall thereafter have
had a period of 15 days in order to review the same;
(k) SIGNATURE shall have received and had fifteen (15) calendar days to
review the information contained in the consolidated and separate
balance sheets as of June 30, 1997, and the consolidated and separate
income statements and consolidated and separate statements of changes
in financial condition or cash flows for the fiscal half-year then
ended and verified to SIGNATURE's reasonable satisfaction that the
consolidated revenue (turnover) and consolidated pre-tax net income of
LSI and its Subsidiaries reflected therein shall be twenty-eight
percent (28%) or
41
<PAGE>
more of the consolidated revenue (turnover) and consolidated pre-tax
net income of LSI and its Subsidiaries reflected in the consolidated
and separate income statements for the six (6) month period ended June
30, 1997; provided that for purposes of this subsection (k) the LSI
Purchase Expenses shall be excluded from the calculation of pre-tax
net income of LSI and its Subsidiaries;
(l) SIGNATURE shall have completed its review of the title, structural and
environmental conditions relating to the real property owned, occupied
or used by LSI or a Subsidiary or comprising any part of a Resort
which review shall in any event have been completed by August 30, 1997
and SIGNATURE has not become aware of matters or conditions that
SIGNATURE reasonably concludes are cumulatively material and adverse
and which cannot, in SIGNATURE's reasonable judgment, be remedied
without material cost;
(m) Arthur Andersen & Co. shall have completed and shall have issued an
audit of the Financial Statements and a review of the financial
statements of LSI and its Subsidiaries for the six months ended June
30, 1997 and shall have determined that no material downward
adjustments to consolidated revenue (turnover) or consolidated pre-tax
net income or net assets in the financial statements of LSI. and its
Subsidiaries for the six months ended June 30, 1997 are required or to
the extent that such a material downward adjustment is required, the
consolidated revenue (turnover) and consolidated pre-tax net income
reflected in the financial statements of LSI and its subsidiaries for
the six months ended June 30, 1997 as so adjusted is twenty-eight per
cent (28%) or more of the comparable figures reflected in the
consolidated and separate income statements for the six (6) month
period ended June 30, 1996; provided that for purposes of this sub-
section (m) the LSI Purchase Expenses and LSI Shareholder Expenses
shall be excluded from the calculation of pre-tax net income of LSI
and its Subsidiaries;
(n) Each shareholder of LSI shall have executed a subscription agreement
and accredited investor letter addressed to SIGNATURE for the purposes
of establishing that such shareholder is an Accredited Investor within
the meaning of the Securities Act and that the distribution of
SIGNATURE Stock in accordance with this Agreement will be exempt from
the registration requirements of the Securities Act;
(o) In the event that the Closing Price is less than $19.00 per share and
following timely notice by SIGNATURE to LSI, SIGNATURE shall not be
obligated to consummate the Purchase unless LSI timely notifies
SIGNATURE of its intention to proceed with the consummation of the
Purchase and accept the Maximum SIGNATURE Stock in full satisfaction
of the Purchase Consideration;
(p) All deliveries required by Section 7.1 and Section 8.1(i)(i) shall
have been made; and
(q) None of the Related Agreements have been revoked or terminated.
42
<PAGE>
ARTICLE 7
THE CLOSING
7.1 DELIVERIES BY LSI. At the Closing, SIGNATURE shall receive from LSI the
-----------------
following and LSI shall cause the same to be delivered to SIGNATURE:
(a) To the extent applicable, certificates of good standing from the
appropriate governmental authority of each of the jurisdictions in
which any of the non-English LSI Subsidiaries is incorporated,
organized or qualified stating that each such entity is a validly
existing limited company in good standing;
(b) A certificate, dated as of the Closing, signed by the LSI Shareholders
to the effect that the conditions specified in Sections 6.2(a) and (b)
above, have been satisfied;
(c) An opinion from counsel of LSI and the Subsidiaries, in such form and
substance as are customarily given by English law firms and in a form
which can be properly given by Rowe & Maw; provided that SIGNATURE
shall only be entitled to seek remedies under this opinion if it has
first exhausted its remedies under (i) the representations and
warranties contained in this Agreement and (ii) the opinion of its own
counsel (if it has been so advised);
(d) A true, correct and complete copy of the Memorandum and Articles of
Association (or similar public record of formation), as amended, of
LSI and each Subsidiary, in respect of the non-English Subsidiaries,
in any jurisdiction certified by the governmental authority of its
jurisdiction of registration, incorporation or formation, and a true,
correct and complete copy of the Bylaws, operating agreement or
partnership agreement (as applicable) as amended, of each such
Subsidiary, and in the case of LSI and the remaining Subsidiaries such
documents certified by the Secretary of LSI;
(e) A list of the LSI Shareholders as of the Closing and certified by the
Secretary of LSI;
(f) All consents referred to in Exhibit 3.14(b); an original or
---------------
photostatic copy duly certified as accurate and complete of all
requisite governmental or regulatory approvals of the transactions
contemplated hereby,
(g) The Related Agreements, the subscription agreement and accredited
investor letters referred to in Section 3.3 and the Affiliate
Agreements, all executed by the appropriate parties (with the
exception of SIGNATURE);
(h) The consolidated and separate balance sheets as of June 30, 1997, and
the consolidated and separate income statements and consolidated and
separate statements of changes in financial condition or cash flows
for the first two (2) fiscal quarters of 1997 then ended;
43
<PAGE>
(i) An opinion from KPMG Peat Marwick, as auditors of LSI and the
Subsidiaries in the form of Exhibit 7.1(i) attached hereto;
--------------
(j) Any changes, modifications, supplements or amendments to any Exhibits
attached to any provision of Article 3;
(k) transfers in respect of the LSI Shares duly executed by the registered
holders thereof in favor of SIGNATURE or as it may direct;
(l) transfers in respect of such of the shares in the subsidiaries as are
not registered in the name of LSI or a Subsidiary only duly executed
by the registered holders thereof in favor of SIGNATURE or as it may
direct;
(m) certificates for LSI Shares and the shares in the Subsidiaries and any
other documents which may be required to give good title to the LSI
Shares and the shares in the Subsidiaries and to enable SIGNATURE to
procure registration of the same in its name or as it may direct;
(n) in relation to LSI and each of the Subsidiaries, all corporate and
other records including but not limited to, certificates of
incorporation, certificates of incorporation on change of name (if
applicable), common seals, statutory registers, minute books, share
certificate books, books of account and all other books (all duly
written up to date), Contracts, and such financial records and
personnel records as are maintained by LSI and the Subsidiaries;
(o) subject to the receipt of the opinion described in Section 7.2(f); an
opinion from Counsel of the LSI Shareholders that delivery of the LSI
Shares will not subject the LSI Shareholders to any withholding under
US tax law;
(p) certified copies of board resolutions of LSI and each of the
Subsidiaries in the agreed form;
(i) recording, acceptance of the resignation from office of all the
Directors (other than those requested in writing to remain by
the Purchaser), the secretary and the auditors of each company;
(ii) if requested by SIGNATURE prior to Closing, changing all
existing authorities in respect of all bank accounts operated
by the company as instructed by SIGNATURE;
(iii) approving (subject only to proper stamping) the transfers of
the LSI Shares or the relevant shares in the Subsidiaries
delivered under this Agreement;
(iv) approving the placing on the register of members of the company
of the names of the transferees for registration in accordance
with the share
44
<PAGE>
transfer forms referred to above and authorizing the issue of
appropriate share certificates;
(v) recording the appointment of such persons as the directors
(within the maximum number permitted by the articles of
association of the relevant company), secretaries and the
auditors of the company as SIGNATURE shall nominate;
(vi) if requested by SIGNATURE prior to Closing, changing the
situation of the registered office of LSI and each of the
Subsidiaries to such place as SIGNATURE may direct.
(q) irrevocable powers of attorney in an agreed form executed by the LSI
Shareholders to enable SIGNATURE (during the period prior to the
registration of the transfer of the LSI Shares) to exercise all voting
and other rights attaching to the LSI Shares; and
(r) such other documents and instruments as SIGNATURE may reasonably
request.
7.2 SIGNATURE'S DELIVERIES. At the Closing, the LSI Shareholders (as a group
----------------------
and not individually) shall receive from SIGNATURE the following:
(a) Certificate of good standing from the Secretary of State of the State
of Maryland stating that SIGNATURE is a validly existing corporation
in good standing;
(b) A certificate, dated as of the Closing, signed by an officer of
SIGNATURE to the effect that the conditions specified in Section
6.1(a) and (b) above have been satisfied;
(c) Copies of duly adopted resolutions of SIGNATURE's Board of Directors
approving the execution, delivery and performance of this Agreement
and the Related Agreements, certified by its Secretary,
(d) An opinion from counsel of SIGNATURE, in form and substance
substantially similar to that given in recent acquisitions involving
SIGNATURE (to the extent applicable); provided that the LSI
shareholders shall only be entitled to seek remedies under this
opinion if it has first exhausted its remedies under (i) the
representations and warranties contained in this Agreement and (ii)
the opinion of its own counsel (if it has been so advised);
(e) The Registration Rights Agreement attached hereto as Exhibit 5, and
---------
the Related Agreements described in Section 4.10 all executed by
SIGNATURE;
(f) Subject to receipt of appropriate representations from the LSI
Shareholders, an opinion from SIGNATURE'S tax advisers to the effect
that the transactions
45
<PAGE>
contemplated hereby qualify for tax free treatment under Section
368(a)(1)(B) of the Code; and
(g) Such other documents and instruments as the LSI Shareholders may
reasonably request.
ARTICLE 8
TERMINATION
8.1 TERMINATION. Notwithstanding anything in this Agreement to the contrary,
-----------
this Agreement may be terminated only:
(a) by mutual consents of the Boards of Directors of SIGNATURE and the LSI
Shareholders;
(b) by SIGNATURE or the LSI Shareholders if, for any reason, the Closing
has not occurred on or before August 31, 1997 (except to the extent
the terminating party is then in breach of its obligations hereunder);
(c) by SIGNATURE upon a breach on the part of LSI or the LSI Shareholders
of any representation, warranty or covenant set forth in this
Agreement, or any representation or warranty of LSI or the LSI
Shareholders shall become untrue, in either case such that the
conditions set forth in Section 6.2(a), 6.2(b) or 6.2(c), as the case
may be, would be incapable of being satisfied by the Closing Date;
(d) by the LSI Shareholders upon a breach on the part of SIGNATURE of any
representation, warranty or covenant set forth in this Agreement, or
any representation or warranty of SIGNATURE shall became untrue, in
either case such that the conditions set forth in Section 6.1(a),
6.1(b) or 6.1(c), as the case may be, would be incapable of being
satisfied by the Closing Date;
(e) by SIGNATURE or the LSI Shareholders if any court of competent
jurisdiction in the United States, United Kingdom or other
governmental authority or other United States, United Kingdom or other
governmental authority shall have issued an order, decree or ruling or
taken any other final action restraining, enjoining or otherwise
prohibiting the Purchase and such order, decree, ruling or other
action is or shall have become non-appealable;
(f) by SIGNATURE if the LSI Shareholders shall have withdrawn or
materially modified their authorization or approval of the Purchase or
this Agreement or shall have refused to consummate the Purchase,
unless such withdrawal, modification or refusal occurs at a time when
the LSI Shareholders would have the right to terminate this Agreement
under Sections 8.1(a), (b), (d), (e) or (g);
(g) by the LSI Shareholders if SIGNATURE (or its Board of Directors) shall
have withdrawn or materially modified its authorization or approval of
the Purchase
46
<PAGE>
or shall have refused to consummate the Purchase, unless such
withdrawal, modification or refusal occurs at a time when SIGNATURE
would have the right to terminate this Agreement under Sections 8.1
(a), (b), (c), (e) or (f);
(h) by SIGNATURE if the Closing Price determined pursuant to Section
1.3(a) above shall be less than $19.00 per share, subject to
appropriate adjustment in the event of a stock split, stock dividend
or recapitalization as referenced therein, unless the LSI Shareholders
shall have agreed to accept as the Final Purchase Consideration the
Maximum SIGNATURE Stock; and
(i) by SIGNATURE in the following circumstances:
(i) in the event that the LSI Shareholders shall fail to deliver
all Exhibits required of the LSI Shareholders hereunder by June
29, 1997;
(ii) in the event that based upon SIGNATURE's review of the Exhibits
described in the preceding subsection or SIGNATURE's due
diligence review of LSI, the LSI Subsidiaries and their
properties, which except as provided below must be concluded by
the later of July 12, 1997 or 15 days following the receipt of
all Exhibits (whichever is later), SIGNATURE becomes aware of
matters or conditions or omissions that SIGNATURE reasonably
concludes are cumulatively material and adverse;
(iii) in the event that the condition described in Section 6.2(k) is
not met by August 31, 1997;
(iv) in the event that based upon SIGNATURE'S review of the
following, SIGNATURE becomes aware of matters or conditions
that SIGNATURE reasonably concludes are cumulatively material
and adverse and which cannot, in SIGNATURE'S reasonable
judgment, be remedied without material cost:
(aa) review of opinions of title to all real property owned,
occupied or used by LSI or a Subsidiary or comprising any
part of a Resort; and
(bb) review of the condition of the properties referred to in
(act) above and the activities which are or were
undertaken on or in adjoining properties covering
environmental, structural, site engineering, heating,
ventilation, safety and general property condition issues.
8.2 EFFECT OF TERMINATION. Upon the termination of this Agreement pursuant to
---------------------
Section 8.1, this Agreement shall forthwith be void and of no further force
and effect without any liability or obligation on the part of either party,
except for the provisions set forth in Sections 4.9, Article X Section 8.3,
and in this Section 8.2.
47
<PAGE>
8.3 TERMINATION PAYMENTS AND EXPENSE REIMBURSEMENTS.
-----------------------------------------------
(a) If the Purchase is not consummated or this Agreement is terminated
pursuant to Section 8.1(c), the LSI Shareholders shalt upon demand,
reimburse SIGNATURE for all Reimbursable Expenses (as defined below).
(b) If the Purchase is not consummated or this Agreement is terminated
pursuant to (i) a refusal by the LSI Shareholders to perform, without
cause, its obligations under the term of this Agreement, or (ii)
Section 8.1(c) because of a breach of a material representation or
warranty by the LSI Shareholders, in which case the LSI Shareholders
were grossly negligent in not knowing or discovering said breach, then
SIGNATURE may, at its option, either (A) require the specific
performance of this Agreement by the LSI Shareholder, (B) sue the LSI
Shareholders for damages, including all Reimbursable Expenses, or (C)
require the LSI Shareholders to pay to SIGNATURE promptly upon notice
the sum of $4,500,000.00 and all Reimbursable Expenses (the "LSI
CANCELLATION FEE") as liquidated damages, and not as a penalty,
payable in immediately available funds to a bank account maintained by
SIGNATURE.
(c) If the Purchase is not consummated or this Agreement is terminated
pursuant to Section 8.1(d), SIGNATURE shalt upon demand, reimburse the
LSI Shareholders for all Reimbursable Expenses (as defined below).
(d) If the Purchase is not consummated or this Agreement is terminated
pursuant to (i) a refusal by SIGNATURE to perform, without cause, its
obligations under the term of this Agreement, or (ii) Section 8.1(d)
because of a breach of a material representation or warranty by
SIGNATURE, in which case SIGNATURE was grossly negligent in not
knowing or discovering said breach, then the LSI Shareholders may,
SIGNATURE require SIGNATURE to pay to the LSI shareholders promptly
upon notice the sum of $4,500,000.00 and all Reimbursable Expenses as
liquidated damages, and not as a penalty, payable in immediately
available funds to a bank account maintained by the LSI Shareholders.
(e) "REIMBURSABLE EXPENSES" means all reasonable out-of-pocket expenses
and fees incurred by the party being reimbursed, including, without
limitation, reasonable attorneys fees and other professional fees, as
well as all other expenses and costs of what ever kind and nature
incurred in connection with the negotiation, preparation and execution
of this Agreement, the Related Agreements, and the other documents
prepared in connection with such agreements and documents.
(f) The parties acknowledge that the agreements contained in this Section
8.3 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, the parties would not
enter into this Agreement. Accordingly, if either party fails to pay
any amounts due pursuant to this Section 8.3 and in order to obtain
such payment, suit is commenced which results in a judgment
48
<PAGE>
against such party therefor, such party shall pay the other party's
reasonable costs (including reasonable attorneys' fees and expenses)
in connection with such suit, together with interest computed on any
amounts determined to be due pursuant to this Section 8.3 (computed
from the date upon which such amounts were due and payable pursuant to
this Section 8.3) and such costs (computed from the date(s) incurred)
at the prime rate of interest published from time to time by the Wall
----
Street Journal (using the highest if more than one is published for a
--------------
particular day). The obligations under this Section 8.3 shall survive
any termination of this Agreement. The provisions for liquidated
damages hereunder are acknowledged by the parties to be reasonable due
to the inability to accurately estimate damages for breach hereunder.
(g) Liability for any and all payments of Reimbursable Expenses and the
LSI Cancellation Fee shall be an obligation, joint and several, among
the LSI Shareholders.
ARTICLE 9
INDEMNIFICATION AND HOLDBACK SHARES
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the representations
------------------------------------------
and warranties made by SIGNATURE and the LSI Shareholders in this Agreement
or pursuant hereto shall survive until the first anniversary of the Closing
Date. No claim of any sort under this Agreement may be asserted against
any party hereto and no party hereto shall have any liability to the other
party hereto, with respect to any inaccuracy in or any breach of any
representation or warranty unless a written notice of such claim making
reference to this section 9.1 as been delivered in the survival period,
except that if a claim shall be first asserted within the applicable
period, such claim shall not thereafter be barred provided that if the
party asserting the claim is LSI or SIGNATURE and the claim shall not
itself have arisen from a claim made by a third party, the party asserting
the claim shall have commenced proceedings through the courts in respect of
the claim within the later of one year of first asserting it and one year
of the crystallization of the liability in respect of which the claim is
asserted. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the right
to fully rely on the representations, warranties, covenants and agreements
of the other parties contained in this Agreement. Each representation,
warranty, covenant and agreement of the parties contained in this Agreement
is independent of each other representation, warranty, covenant and
agreement.
9.2 AGREEMENT TO INDEMNIFY SIGNATURE. The LSI Shareholders agree jointly and
--------------------------------
severally to indemnify and hold SIGNATURE harmless from and against the
aggregate of all expenses, losses, costs, deficiencies, liabilities and
damages (including, without limitation, related counsel and paralegal fees
and expenses) incurred or suffered by SIGNATURE (collectively, "LSI
INDEMNIFIABLE DAMAGES") resulting from or arising out of (i) any breach of
a representation or warranty made by the LSI Shareholders in or pursuant to
this Agreement, (ii) any breach of the covenants or agreements made by the
LSI Shareholders in this Agreement, or (iii) any inaccuracy in any
certificate
49
<PAGE>
delivered by or on behalf of the LSI Shareholders pursuant to this
Agreement. For purposes of this Section 9.2, the amount of LSI
Indemnifiable Damages hereunder shall be net of any insurance proceeds and
any indemnity, contribution or other similar payment payable by any third-
party with respect thereto. This Agreement shall not relieve SIGNATURE of
any duty to mitigate its loss and SIGNATURE shall for such time as the
indemnification obligations of the LSI Shareholders are in effect, maintain
commercially reasonable insurance cover not materially different from LSI's
or its Subsidiaries' (as applicable) existing policies of insurance with
respect to LSI's or its Subsidiaries' (as applicable) assets.
9.3 AGREEMENT TO INDEMNIFY LSI SHAREHOLDERS. Signature agrees to indemnify and
---------------------------------------
hold LSI Shareholders harmless from and against the aggregate of all
expenses, losses, costs, deficiencies, liabilities and damages (including,
without limitation, related counsel and paralegal fees and expenses)
incurred or suffered by the LSI Shareholders (collectively, "SIGNATURE
INDEMNIFIABLE DAMAGES") resulting from or arising out of (i) any breach of
a representation or warranty made by SIGNATURE in or pursuant to this
Agreement, (ii) any breach of the covenants or agreements made by SIGNATURE
in this Agreement, or (iii) any inaccuracy in any certificate delivered by
or on behalf of SIGNATURE pursuant to this Agreement. For purposes of this
Section 9.2, the amount of Indemnifiable Damages hereunder shall be net of
any insurance proceeds and any indemnity, contribution or other similar
payment payable by any third-party with respect thereto. This Agreement
shall not relieve the LSI Shareholders of any duty to mitigate its loss.
9.4 SECURITY FOR INDEMNIFICATION OBLIGATION. As security for the agreement by
---------------------------------------
the LSI Shareholders to indemnify and hold SIGNATURE harmless as described
in Section 9.2, at the Closing, SIGNATURE shall set aside and hold
certificates representing ten percent (10%) of the consideration paid
hereunder (the "HOLDBACK SHARES"). SIGNATURE may set off against the
Holdback Shares any loss, damage, cost or expense for which LSI or the LSI
Shareholders may be responsible pursuant to this Agreement (including
without limitations, any Indemnifiable Damages for which LSI or the LSI
Shareholders may be responsible pursuant to this Agreement) subject,
however, to the terms and conditions set forth in the Escrow Agreement.
Except with respect to shares transferred pursuant to the foregoing right
of set-off (and in the case of such shares, until the same are
transferred), all Holdback Shares shall be deemed to be owned by the LSI
Shareholders, and the LSI Shareholders shall be entitled to vote the same;
provided, however, that, there shall also be deposited with SIGNATURE
subject to the terms of this Section 9.3 and the Escrow Agreement, all
shares of SIGNATURE Stock issued to the Shareholders as a result of any
stock dividend or stock split and all cash issuable to the Shareholders as
a result of any cash dividend, with respect to the Holdback Shares. All
stock and cash issued or paid upon Holdback Shares shall be distributed to
the LSI Shareholders together with such Holdback Shares.
9.5 DELIVERY OF HOLDBACK SHARES. SIGNATURE agrees to deliver to the LSI
---------------------------
Shareholders no later than one year following the Closing Date any Holdback
Shares then held by it (or proceeds from the Holdback Shares) pursuant to
the Escrow Agreement unless there
50
<PAGE>
then remains unresolved any claim for Indemnifiable Damages or other
damages hereunder as to which notice has been given, in which event any
Holdback Shares remaining on deposit (or proceeds from the sale of Holdback
Shares) after such claim shall have been satisfied shall be returned to the
Shareholders promptly after the time of satisfaction in accordance with the
Escrow Agreement.
9.6 NO BAR. If the Holdback Shares are insufficient to set off any claim for
------
Indemnifiable Damages hereunder then SIGNATURE may take any action or
exercise any remedy available to it hereunder by appropriate legal
proceedings to collect the Indemnifiable Damages from the LSI Shareholders
specifically including the LSI Shareholders.
9.7 LIMITATIONS ON CLAIMS AGAINST LSI SHAREHOLDERS. Notwithstanding anything
----------------------------------------------
contained in this Article IX to the contrary, no claim for indemnification
(other than claims relating to a breach of Article 1.3 or of the Related
Agreements) may be made by SIGNATURE unless the amount of the individual
claim exceeds $25,000, or the aggregate amount of all claims made from the
date of Closing shall exceed $1,000,000 of the Purchase Consideration.
Once the aggregate amount of $1,000,000 is met, all claims shall be subject
to indemnification; provided, however, that the maximum amount for which
all LSI Shareholders may be liable for indemnification hereunder shall not
exceed the aggregate amount of the value of the Purchase Consideration paid
hereunder and the maximum amount payable by each LSI Shareholder shall not
exceed the value of the Purchase Consideration paid hereunder. This
provision does not provide for a deductible and shall not apply, in any
event, in the event that the claim arises out of fraud or intentional or
willful misconduct on the part of the breaching party.
9.8 LIMITATIONS ON CLAIMS AGAINST SIGNATURE. Notwithstanding anything
---------------------------------------
contained in this Article IX to the contrary, no claim for indemnification
may be made by LSI unless the amount of the individual claim exceeds
$25,000, or (other than claims relating to a breach of Article 1.3 or of
the Related Agreements) the aggregate amount of all claims made from the
date of Closing shall exceed $1,000,000. Once the aggregate amount of
$1,000,000 is met, all claims shall be subject to indemnification;
provided, however, that the maximum amount for which SIGNATURE may be
liable for indemnification hereunder shall not exceed the aggregate amount
of the value of the Purchase Consideration paid hereunder and the maximum
amount payable by each LSI Shareholder shall not exceed the value of the
Purchase Consideration paid hereunder. This provision does not provide for
a deductible and shall not apply, in any event, in the event that the claim
arises out of fraud or intentional or willful misconduct on the part of the
breaching party.
9.9 TAX INDEMNIFICATION.
-------------------
(a) Except as provided in Section 9.9(b) the LSI Shareholders jointly and
severally covenant with SIGNATURE to pay to SIGNATURE by way of an
adjustment to the Purchase Price an amount equal to:
51
<PAGE>
(i) all Pre-Closing Taxes payable by any of LSI and any of the
Subsidiaries (whether or not the Tax is primarily payable by
the Person in question or whether or not the Person in question
has or may have a right of reimbursement against another
Person);
(ii) all Pre-Closing Taxes which would have been payable by LSI and
any of the Subsidiaries but for the use or set-off of any loss,
relief, allowance, exemption, deduction, credit, right to
repayment in respect of Tax or other relief of a similar nature
including the carry-back of net operating loss, capital loss,
credit or other item (hereinafter referred to as a "TAX
RELIEF") which arises in respect of an Event after the Closing
Date;
(iii) all Tax liabilities of LSI and any of the Subsidiaries which
would not have arisen but for the loss, reduction, modification
or cancellation of some Tax Relief in consequence of an Event
occurring on or before Closing where the availability of the
Tax Relief has been shown as an asset in the Balance Sheet or
has been taken into account in computing (and reducing) a
provision (for deferred Tax or otherwise) which appears in the
Balance Sheet for the fiscal year ended December 31, 1996 or
has resulted in no provision for deferred Tax being made in the
Balance Sheet for the fiscal year ended December 31, 1996;
(iv) any repayment of Tax the right to which is shown as an asset in
the Balance Sheet for the fiscal year ended December 31, 1996
but which is lost or cancelled in consequence of an Event
occurring on or before Closing;
(v) all Tax liabilities in respect of which any of the assets of
LSI or any of the Subsidiaries and/or any of the shares in LSI
or any of the Subsidiaries are or become subject to an Inland
Revenue charge under Section 237 Inheritance Tax Act 1984 as a
result of an Event occurring on or before Closing (whether or
not in combination with any Event occurring after Closing);
(vi) all Tax liabilities in respect of which any Person exercises or
intends to exercise a power to sell mortgage or impose a
terminable charge on any of the assets of LSI and any of the
Subsidiaries and/or any of the shares in LSI and any of the
Subsidiaries under Section 212 Inheritance Tax Act 1984 as a
result of any Event occurring on or before Closing (whether or
not in combination with any Event occurring after Closing);
(vii) any Tax liability which is also a Tax liability of another
person (other than one of LSI and any of the Subsidiaries) and
which is payable by one or more of LSI and any of the
Subsidiaries by virtue of (A) the other person failing to
discharge such Taxation Liability; and (B) one or more LSI and
any of the Subsidiaries being at any time prior to Closing a
member of the
52
<PAGE>
same group as such other person or otherwise connected with or
related to such other person for any Tax purpose;
(viii) all liabilities of LSI and any of the Subsidiaries under a
contractual or statutory liability entered into or incurred
prior to Closing to make a payment by way of reimbursement,
indemnity, or damages in respect of or arising from any Tax
liability of any other person other than LSI or any of the
Subsidiaries; and
(ix) all reasonable costs and expenses incurred by SIGNATURE or LSI
or any of the Subsidiaries or any affiliate of any of them in
connection with any of the matters referred to in paragraphs
(i) to (viii) above or in connection with any claim under this
Article 9.9.
As used herein, "PRE-CLOSING TAXES" means any Taxes arising in respect
of or with reference to any income, profits or gains, earned, accrued
or received on or before or in respect of a period ending on or before
Closing (or deemed for any Tax purposes to have been so earned,
accrued, or received) or as a result of or with reference to any Event
which occurred on or before Closing, "EVENT" means on event, act,
transaction or omission including, without limitation, a receipt or
accrual of income or gains, distribution, failure to distribute,
acquisition, disposal, transfer, payment, loan, advance or death and
further includes an Event deemed to have occurred for Tax purposes;
and references to Events on or before any date or to the occurrence of
any Event on or before any date shall include two or more Events or
the combined result of two or more Events all of which occurred or
were deemed to occur before that date or the combined result of two or
more events the first of which occurred or is deemed for any tax
purpose to have occurred before that date outside the ordinary course
of business as carried on at Closing and all such events occurring
after that date occur in the ordinary course of business or pursuant
to a contractual obligation entered into on or before Closing or are
required by law or to comply with applicable regulatory requirement or
at the request of, or with the consent of, the LSI Shareholders.
(b) Exclusions.
----------
The LSI Shareholders shall be under no liability pursuant to Section
9.9 in respect of any Tax:
(i) to the extent that identifiable provision or reserve for that
Tax (not including any provision for deferred Tax) has been
made in the Financial Statements for the fiscal year ended
December 31, 1996; or
(ii) to the extent that it arises out of a transaction undertaken
after December 31, 1996 but before Closing by LSI or any of the
Subsidiaries in the ordinary and lawful course of its day to
day business; or
53
<PAGE>
(iii) to the extent that the Tax liability was paid or discharged
before Closing; or
(iv) to the extent that the Tax arises or is increased as a result
only of any increase in rates of Tax or any change in law or
any withdrawal of any extra-statutory concession by a Tax
Authority or any change in accountancy practice or principles,
being an increase, withdrawal or change made, in any such case,
after Closing with retrospective effect; or
(v) to the extent that the Tax liability would not have arisen but
for a voluntary transaction, action or omission carried out or
effected by SIGNATURE or LSI or any of the Subsidiaries at any
time after Closing which SIGNATURE knew or ought reasonably to
have known would give rise to that liability other than any
such transaction, action or omission:
(aa) carried out or effected under a legally binding commitment
created on or before Closing; or
(bb) carried out or effected in the ordinary course of the
business carried on by SIGNATURE or LSI or any of the
Subsidiaries at Closing; or
(cc) carried out with the consent or at the direction of the
LSI Shareholders; or
(vi) to the extent that Tax would not have arisen or would have been
reduced but for a failure or omission otherwise than at the
request or direction of the LSI Shareholders on the part of
SIGNATURE or LSI or any of the Subsidiaries after Closing to
make any election or claim any Tax Relief the making or
claiming of which was taken into account in computing the
provision or reserve for Tax in the Financial Statements for
the fiscal year ended December 31, 1996 and which was
specifically disclosed with reference to this provision to
SIGNATURE prior to Closing; or
(vii) to the extent that Tax arises as a result of any changes after
Closing in the bases, methods or policies of accounting of LSI
or any of the Subsidiaries other than because such bases,
methods or policies disclosed prior to Closing did not comply
with UK generally accepted accounting practice as at Closing;
or
(viii) to the extent that the Tax has been made good by insurers or
otherwise compensated for without cost to LSI or any of the
Subsidiaries; or
(ix) to the extent that a Tax Relief arising in respect of an Event
prior to Closing (other than a Relief which has been taken into
account in computing (and reducing) a provision for deferred
Tax or otherwise which
54
<PAGE>
appears in the Financial Statements or has resulted in no
provision for deferred Tax being made in the Financial
Statements) is used to set against or otherwise mitigate the
Tax liability in question; or
(x) to the extent that Tax would not have arisen or would have been
reduced but for the disclaiming (otherwise than at the request
or direction of the LSI Shareholders) after Closing of capital
allowances claimed prior to this Closing on the part of LSI or
any of the Subsidiaries, the claiming of which was taken into
account in computing the provision or reserve for Tax in the
financial statements for the fiscal year ended December 31,
1996;
(xi) to the extent that there is any indemnity, contribution or
other similar payment payable by any third party with respect
thereto and to the extent that the Tax Liability which has
resulted in a payment having become due from the LSI
Shareholders will give rise to a Tax Relief for POND or any of
the Subsidiaries which would not otherwise have arisen, an
amount equal to the tax that would be saved through the use of
that Tax Relief on the basis of the rates of tax current at the
date of payment shall be treated as a similar payment for these
purposes.
(c) DATE FOR PAYMENT. Where the LSI Shareholders become liable to make
----------------
any payment pursuant to section 9.9, the due date for the making of
that payment shall be:
(i) where that payment relates to a liability on the part of
SIGNATURE or LSI or any of the Subsidiaries or the Affiliate
actually to pay an amount of tax, the fifth business day prior
to the date on which that amount must be paid to the Taxing
Authority concerned in order to avoid incurring a liability to
interest or a charge or penalty in respect of such Tax and
(ii) in any other case that date falling ten business days after the
date when the LSI Shareholders have a liability for a
determinable amount pursuant to article 9.9. If any payment
required to be made by the LSI Shareholders pursuant to article
9.9 is not made in cleared funds by the due date, then, the
amount payable shall carry interest (before and after judgment)
from the due date until the date when payment is actually made
in cleared funds at the rate of interest publicly announced
from time to time by National Westminster Bank plc at its
"base" rate, plus 2 percent.
9.10 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS OF LSI SHAREHOLDERS.
--------------------------------------------------------------
Notwithstanding anything else to the contrary set forth in this Agreement
or which may be available or exist under applicable law, SIGNATURE
acknowledges, understands and agrees that the indemnification obligations
of the LSI Shareholders are subject to the following limitations and
conditions:
55
<PAGE>
(a) Except to the extent specifically provided by Section 8.3, neither LSI
nor any LSI Shareholder shall have any liability or obligation to
SIGNATURE in the event the Closing fails to occur, regardless of the
reason therefor;
(b) this Article 9 and Section 8.3(b) set forth the sole and exclusive
remedies for SIGNATURE and its successors and assigns for any claim,
suit, action or proceeding any of them may assert or attempt to assert
against any of LSI or the LSI Shareholders (individually or in their
capacity as officers or directors of LSI) or their respective
successors, affiliates and assigns to the extent the claim, action,
suit or proceeding in any way relates to (i) the negotiation,
execution, delivery or performance of, or any alleged breach of or
default, under this Agreement or the exhibits or attachments hereto
(other than the Related Agreements), or the transactions contemplated
hereby or thereby except to the extent such claim arises out of fraud
or a willful or intentional misconduct.
9.11 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS OF SIGNATURE. Notwithstanding
-------------------------------------------------------
anything else to the contrary set forth in this Agreement or which may be
available or exist under applicable law, the LSI Shareholders acknowledge,
understand and agree that the indemnification obligations of SIGNATURE are
subject to the following limitations and conditions:
(a) Except to the extent specifically provided by Section 8.3, shall not
have any liability or obligation to LSI in the event the Closing fails
to occur, regardless of the reason therefor;
(b) this Article 9 and Section 8.3(d) set forth the sole and exclusive
remedies for LSI and its successors and assigns for any claim, suit,
action or proceeding any of them may assert or attempt to assert
against SIGNATURE or its successors, affiliates and assigns to the
extent the claim, action, suit or proceeding in any way relates to the
negotiation, execution, delivery or performance of, or any alleged
breach of or default, under this Agreement or the exhibits or
attachments hereto (other than the Related Agreements), or the
transactions contemplated hereby or thereby except to the extent such
claim arises out of fraud or a willful or intentional misconduct.
ARTICLE 10
RESTRICTIVE COVENANTS BY LSI SHAREHOLDERS
10.1 Each of the LSI Shareholders hereby covenants and agrees with SIGNATURE
(for its own benefit and for the benefit of LSI and its Subsidiaries) that
he will not, for a period of 60 months following the Closing Date, directly
or indirectly do or attempt to do any of the following:
(a) undertake, carry on or be employed, engaged or interested in any
capacity in either any business which is competitive with or similar
to a Relevant Business
56
<PAGE>
within the Territory, or any business an objective or anticipated
result of which is to compete with a Relevant Business within the
Territory;
(b) entice, induce or encourage a Customer to transfer or remove custom
from LSI or any of its Subsidiaries;
(c) solicit or accept business from a Customer for the supply of Relevant
Services;
(d) induce or encourage an Employee to leave or seek to leave his or her
position with LSI or any of its Subsidiaries for the purpose of being
involved in or concerned with either the supply of Relevant Services
or a business which competes with or is similar to a Relevant Business
or which plans to compete with a Relevant Business, regardless of
whether or not that Employee acts in breach of his or her contract of
employment with LSI or any of its Subsidiaries by so doing and
regardless of whether the Relevant Business is within or outside the
Territory; or
(e) entice, induce or encourage a Supplier to cease to supply, or to
restrict or vary the terms of supply to, LSI or any of its
Subsidiaries or otherwise interfere with the relationship between such
a Supplier and LSI or any of its Subsidiaries.
10.2 For the purpose of this Article 10.1:
(a) "CUSTOMER" means a person:
(i) who at any time during the Relevant Period was a customer of
LSI or any of its Subsidiaries (whether or not goods or
services were actually provided during such period) or to whom
at the expiry of the Relevant Period LSI or any of its
Subsidiaries was actively and directly seeking to supply goods
or services, in either case for the purpose of a Relevant
Business; and
(ii) with whom the relevant LSI Shareholder or an Employee in a
Relevant Business reporting directly to him had dealings at any
time during the Relevant Period or were in possession of
confidential information about such Customer in the performance
of their duties to LSI or any of its Subsidiaries.
(b) "RELEVANT SERVICES" means goods or services identical or similar to or
competitive with those which at the expiry of the Relevant Period LSI
or any of its subsidiaries was supplying or negotiating or actively
and directly seeking to supply to a Customer for the purpose of a
Relevant Business;
(c) "RELEVANT BUSINESS" means the business of developing, marketing or
selling timeshare interests to consumers;
57
<PAGE>
(d) "TERRITORY" means England, Wales, Scotland and/or Northern Ireland and
each state of the United States of America in which LSI or any of its
Subsidiaries is operating at the expiry of the Relevant Period and any
other country or state in which LSI or any of its Subsidiaries is
operating or planning to operate at the expiry of the Relevant Period.
A business of LSI or any of its Subsidiaries will be operating with
the Territory at the expiry of the Relevant Period if Relevant
Services have been supplied during the Relevant Period. A business
will be within the Territory if either any such business in which the
relevant LSI Shareholder is to be involved is located or to be located
within the Territory or is conducted or to be conducted wholly or
partly within the Territory;
(e) "EMPLOYEE" means a person who is employed by or who renders service to
LSI or any of its Subsidiaries in a Relevant Business in a
managerial/marketing/sales/ distribution capacity who has client
responsibility/influence over customers or knowledge of confidential
information and who whilst so employed also rendered services during
the period of 12 months ending on the last day on which the relevant
LSI Shareholder actively worked during his employment for LSI or any
of its Subsidiaries and who had dealing with him during that period;
(f) "RELEVANT PERIOD" means, in relation to each LSI Shareholder, the
period of 12 months ending on the last day of the employment of that
LSI Shareholder by LSI or any of its Subsidiaries;
(g) "SUPPLIER" means a person:
(i) who at any time during the Relevant Period was a supplier of
LSI or any of its Subsidiaries; and
(ii) with whom the LSI Shareholder or an Employee in a Relevant
Business reporting directly to him had dealings at any time
during the Relevant Period.
ARTICLE 11
DEFINITIONS AND INTERPRETATION
For purposes of this Agreement, the following definitions shall apply:
11.1 "ADJUSTMENT AMOUNT" shall have the meaning as set forth in Section
1.3(a)(ii).
11.2 "AFFILIATE" shall have meaning as set forth in Section 3.11(e).
11.3 "AFFILIATE AGREEMENT" shall have meaning as set forth in Section 4.12.
11.4 "AGREEMENT" shall have meaning as set forth in the first paragraph.
11.5 "ASSOCIATION" and/or "ASSOCIATIONS" shall have meaning as set forth in
Section 3.1(c).
58
<PAGE>
11.6 SIGNATURE "BALANCE SHEET DATE" shall have meaning as set forth in Section
3.10(a).
11.7 "CODE" shall have meaning as set forth in Section 1.3(d).
11.8 "CLOSING" shall have meaning as set forth in Section 1.2.
11.9 "CLOSING DATE" shall have meaning as set forth in Section 1.2.
11.10 "CLOSING PRICE" shall have meaning as set forth in Section 1.3(a)(i).
11.11 "COMBINED FINANCED STATEMENTS" shall have meaning as set forth in Section
3.5.
11.12 "CONSUMER PROTECTION LAWS" shall have meaning as set forth in Section
2.10.
11.13 "CONTRACT" and/or "CONTRACTS" shall have meaning as set forth in Section
3.11.
11.14 "CONTROL" shall have meaning as set forth in Section 3.11(e).
11.15 "LSI SHAREHOLDERS" shall have the meaning as set forth in Section 9.2.
11.16 "CUSTOMER" shall have the meaning as set forth in Section 10.2(a).
11.17 "DEDICATED UNITS" shall have meaning as set forth in Section 3.6(a).
11.18 "EFFECTIVE TIME" shall have meaning as set forth in Section 1.2.
11.19 "EMPLOYEE" shall have meaning as set forth in Section 10.2 (e).
11.20 "ENVIRONMENTAL HEALTH AND SAFETY LAWS" shall have meaning as set forth in
Section 3.8(j).
11.21 "ENVIRONMENTAL LICENCES" shall have meaning as set forth in Section
3.8(b).
11.22 "ESCROW AGREEMENT" shall have meaning as set forth in Section 4.10(c).
11.23 "EVENT" shall have meaning as set forth in Section 9.9(a).
11.24 "FINAL PURCHASE CONSIDERATION" shall have the meaning as set forth in
Section 1.3(a)(ii).
11.25 "FINANCIAL STATEMENTS" and "1997 FINANCIAL STATEMENTS" shall have meaning
as set forth in Section 3.5.
11.26 "GAAP" shall have meaning as set forth in Section 2.5.
11.27 "GANNEY" shall have meaning as set forth in the first paragraph.
59
<PAGE>
11.28 "GOVERNMENTAL PERMIT" shall have meaning as set forth in Section 3.14.
11.29 "HARRINGTON" shall have meaning as set forth in the first paragraph.
11.30 "HAZARDOUS SUBSTANCES" shall have meaning as set forth in Section 3.8(e).
11.31 "HOLDBACK SHARES" shall have meaning as set forth in Section 9.3.
11.32 "INDEMNIFIABLE DAMAGES" shall have meaning as set forth in Section 9.2.
11.33 "INTERVALS" shall have meaning as set forth in Section 4.1(c).
11.34 "LEASES" shall have meaning as set forth in Section 3.6(a).
11.35 "LICENSES AND PERMITS" shall have meaning as set forth in Section 3.14.
11.36 "LSI" shall have meaning as set forth in the Recitals.
11.37 "PERMITTED EXCEPTIONS" shall have meaning as set forth in Section 3.6(a).
11.38 "PENSION SCHEMES" shall have meaning as set forth in Section 3.16(a).
11.39 "LSI CANCELLATION FEE" shall have meaning as set forth in Section 8.3(b).
11.40 "LSI SHARES" shall have meaning as set forth in Section 1.1.
11.41 "LSI SHAREHOLDER" shall have meaning as set forth in the first paragraph.
11.42 "LSI SHAREHOLDERS" shall have meaning as set forth in the first
paragraph.
11.43 "LSI PURCHASE EXPENSES" shall have the meaning as set forth in Section
1.3(a)(ii).
11.44 "PURCHASE" shall have meaning as set forth in Section 1.1.
11.45 "PURCHASE CONSIDERATION" shall have meaning as set forth in Section
1.3(a).
11.46 "MASSEY" shall have meaning as set forth in the first paragraph.
11.47 "MINIMUM SIGNATURE STOCK" shall have meaning as set forth in Section
1.3(a)(i)(B).
11.48 "MAXIMUM SIGNATURE STOCK" shall have meaning as set forth in Section
1.3(a)(i)(C).
11.49 "MATERIAL" shall have meaning as set forth in Section 3.11.
60
<PAGE>
11.50 "PRE-CLOSING TAXES" shall have meaning as set forth in Section ,9.7(a).
11.51 "PERMITTED EXCEPTIONS" shall have meaning as set forth in Section 3.6(a).
11.52 "PRE-ADJUSTMENT PURCHASE CONSIDERATION" shall have meaning as set forth
in Section 1.3(a)(i).
11.53 [Intentionally deleted]
11.54 "PURCHASE AND OPTION AGREEMENTS" shall have meaning as set forth in
Section 3.6(a).
11.55 "REAL PROPERTY" and/or "REAL PROPERTIES" shall have meaning as set forth
in Section 3.6(a).
11.56 "REGISTRATION RIGHTS AGREEMENT" shall have meaning as set forth in
Section 4.10(b).
11.57 "REIMBURSABLE EXPENSES" shall have meaning as set forth in Section
8.3(e).
11.58 "RELATED AGREEMENTS" shall have meaning as set forth in Section 4.10.
11.59 "RELEVANT BUSINESS" shall have meaning as set forth in Section 10.2(a).
11.60 "RELEVANT PERIOD" shall have meaning as set forth in Section 10.2(f).
11.61 "RELEVANT SERVICES" shall have meaning as set forth in Section 10.2(b).
11.62 "RESORTS" shall have meaning as set forth in Section 3.6(a).
11.63 "SIGNATURE" shall have meaning as set forth in the first paragraph.
11.64 "SIGNATURE COMMON" shall have meaning as set forth in Section 2.4.
11.65 "SIGNATURE ENVIRONMENTAL REPORTS" shall have meaning as set forth in
Section 2.9.
11.66 "SIGNATURE PREFERRED" shall have meaning as set forth in Section 2.4.
11.67 "SIGNATURE SEC DOCUMENTS" shall have meaning as set forth in Section 2.5.
11.68 "SIGNATURE STOCK" shall have meaning as set forth in Section 1.3(a).
11.69 "SECURITIES ACT" shall have meaning as set forth in Section 1.3(b).
11.70 "SECURITIES LAWS" shall have meaning as set forth in Section 2.5.
11.71 "SUBSIDIARIES" and/or "SUBSIDIARY" shall have meaning as set forth in
Section 3.1(b).
61
<PAGE>
11.72 "SUPPLIES" shall have meaning as set forth in Section 10.2(g).
11.73 "TAX OR TAXES" shall have meaning as set forth in Section 3.17.
11.74 "TAXES ACT" shall have meaning as set forth in Section 3.17.
11.75 "TERRITORY" shall have meaning as set forth in Section 10.2(d).
11.76 "TCGA" shall have meaning as set forth in Section 3.17.
11.77 "TRUSTEE" shall have meaning as set forth in Section 3.6(a).
11.78 "UNDEDICATED UNITS" shall have meaning as set forth in Section 3.6(a).
11.79 "UNSOLD INVENTORY" shall have meaning as set forth in Section 3.6(a).
11.80 "VATA" shall have meaning as set forth in Section 3.17(n).
11.81 "WASTE" shall have the meaning as set forth in Section 3.8(e).
11.82 The word "MATERIAL" (or any derivation thereof) when used in relation to
LSI or, as the case may be, SIGNATURE, shall mean material in the context
of the business, assets and operations of LSI or, as the case may be,
SIGNATURE, and their respective subsidiaries taken as a whole.
ARTICLE 12
MISCELLANEOUS
12.1 GOVERNING LAW AND CONSENT TO JURISDICTION. This Agreement shall be deemed
-----------------------------------------
to be made in, and in all respects shall be interpreted, construed and
governed by and in accordance with the internal laws of, the State of
California (without regard to such state's conflicts of law principles).
Any action or proceeding seeking to enforce any provision of, or based
upon any right arising out of this Agreement may be brought against any of
the parties in the courts of the State of California, County of Los
Angeles, or, if it has or can acquire jurisdiction, in the United States
District Court for the Southern District of California and each of the
parties consents to the jurisdiction of such courts (and of appropriate
appellate courts) in any such action or proceedings and waives any
objection to venue laid therein. Process of any action or proceeding
referred to in the preceding sentence may be served on any party in the
world.
12.2 NOTICES. Any notices or other communications required under this Agreement
-------
shall be in writing, shall be deemed to have been given when delivered in
person, by telex or telecopier, when delivered to a recognized next
business day courier, or, if mailed, when deposited in the United States
or United Kingdom mail, first class, registered or certified,
62
<PAGE>
return receipt requested, with proper postage prepaid, addressed as follows
or to such other address as notice shall have been given pursuant hereto:
If to LSI or any LSI Shareholder:
LSI Group Holdings, PLC
417 Finchley Road
Hampstead, London NW3 6HJ
Attn: Ian K. Ganney, Chairman
Richard Harrington, Chief Executive Officer
Telecopy: 44-1524-720319 and 44-171-431-8792
With a copy to:
Reference: 26860.00006
Rowe & Maw
20 Black Friars Lane
London EC4V 6HD
Telecopy: 44-171-248-2009
If to SIGNATURE:
SIGNATURE Resorts, Inc.
5933 West Century Boulevard
Suite 210
Los Angeles, California 90045
Attn: Andrew D. Hutton, Esq.
Telecopy: (310) 348-1010
With a copy to:
Edward H. Brown, Esq.
Schreeder, Wheeler & Flint, LLP
127 Peachtree Street, N.E.
1600 Candler Building
Atlanta, Georgia 30303-1845
Telecopy: (404)681-1046
12.3 ASSIGNMENT. This Agreement may not be assigned, by operation of law or
----------
otherwise, except that SIGNATURE may assign its rights under this Agreement
in whole or in part to a subsidiary or other Affiliate of SIGNATURE
(including but not limited to any subsidiary or Affiliate of SIGNATURE
formed or acquired following the date hereof) or to any lender of SIGNATURE
as security for any financing; provided, however, that such assignment
shall not relieve SIGNATURE of its obligations hereunder.
63
<PAGE>
12.4 SECTION HEADINGS. The section headings contained in this Agreement are for
----------------
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
12.5 LEGAL TERMS. Any English or US legal term or any legal concept or thing
-----------
shall in respect of any jurisdiction other than in England or (as the case
may be ) the United States be deemed to include what most nearly
approximates in that jurisdiction to the English or (as the case may be) US
legal term, concept or thing.
12.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
------------
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
12.7 AMENDMENT. Except as hereinafter provided, this Agreement may not be
---------
amended except by a writing signed by the party to be charged.
12.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
----------------
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
12.9 BINDING EFFECT. Subject to Section 12.3, this Agreement shall be binding
--------------
upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and permitted assigns.
64
<PAGE>
12.10 SEVERABILITY. In case any provision in this Agreement shall be held
------------
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any may be
affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SIGNATURE RESORTS, INC.
By: /s/ Andrew J. Gessow
-----------------------------------
Name: Andrew J. Gessow
-----------------------------------
Title: President
----------------------------------
/s/ Ian K. Ganney
- ----------------------------------------
IAN K. GANNEY
/s/ Richard Harrington
- ----------------------------------------
RICHARD HARRINGTON
/s/ Stephen Massey
- ----------------------------------------
STEPHEN MASSEY
65
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
SIGNATURE RESORTS, INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee
INDENTURE
Dated as of August 1, 1997
$200,000,000
9.75% Senior Subordinated Notes due October 1, 2007
- --------------------------------------------------------------------------------
<PAGE>
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of August 1, 1997*****
<TABLE>
<CAPTION>
Trust
Indenture
Act Indenture
Section Section
- --------- ---------
<S> <C>
310 (a)(1)................................ 6.09
(a)(2)................................ 6.09
(a)(3)................................ Not Applicable
(a)(4)................................ Not Applicable
(b)................................... 6.08, 6.01
311 (a)................................... 6.13
(b)................................... 6.13
312 (a)................................... 7.01, 7.02(a)
(b)................................... 7.02(b)
(c)................................... 7.02(c)
313 (a)................................... 7.03(a)
(b)................................... 7.03(a)
(c)................................... 7.03(a)
(d)................................... 7.03(b)
314 (a)................................... 7.04
(b)................................... Not Applicable
(c)(1)................................ 1.02
(c)(2)................................ 1.02
(c)(3)................................ Not Applicable
(d)................................... Not Applicable
(e)................................... 1.02
315 (a)................................... 6.01(a)
(b)................................... 6.02, 7.03(a)
(c)................................... 6.01(b)
(d)................................... 6.01(c)
(d)(1)................................ 6.01(a)(i)
(d)(2)................................ 6.01(c)(ii)
(d)(3)................................ 6.01(c)(iii)
(e)................................... 5.14
316 (a)(1)(A)............................. 5.12
(a)(1)(B)............................. 5.13
(a)(2)................................ Not Applicable
(b)................................... 5.08
317 (a)(1)................................ 5.03
(a)(2)................................ 5.04
(b)................................... 10.03
318 (a)................................... 1.07
</TABLE>
- ----------------------
***** Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions............................................ 1
Section 1.02. Compliance Certificates and Opinions................... 18
Section 1.03. Form of Documents Delivered to Trustee................. 18
Section 1.04. Acts of Holders........................................ 19
Section 1.05. Notices, Etc., to Trustee and Company.................. 20
Section 1.06. Notice to Holders; Waiver.............................. 20
Section 1.07. Conflict with Trust Indenture Act...................... 21
Section 1.08. Book-Entry System...................................... 21
Section 1.09. Effect of Headings and Table of Contents............... 21
Section 1.10. Successors and Assigns................................. 21
Section 1.11. Separability Clause.................................... 21
Section 1.12. Benefits of Indenture.................................. 21
Section 1.13. Governing Law.......................................... 21
Section 1.14. Legal Holidays......................................... 21
Section 1.15. Immunity of Incorporators, Stockholders, Officers
and Directors.......................................... 22
ARTICLE 2
NOTE FORMS
Section 2.01. Generally.............................................. 22
Section 2.02. Form and Dating........................................ 22
Section 2.03. Execution and Authentication........................... 23
Section 2.04. Registrar and Paying Agent............................. 23
Section 2.05. Paying Agent To Hold Money in Trust.................... 24
Section 2.06. Noteholder Lists....................................... 24
Section 2.07. Transfer and Exchange.................................. 24
Section 2.08. Replacement Notes...................................... 33
Section 2.09. Outstanding Notes...................................... 34
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 2.10. Temporary Notes........................................ 34
Section 2.11. Cancellation........................................... 34
Section 2.12. Defaulted Interest..................................... 35
Section 2.13. CUSIP Numbers.......................................... 35
Section 2.14. Restrictive Legends.................................... 35
ARTICLE 3
THE NOTES
Section 3.01. Title and Terms........................................ 37
Section 3.02. Denominations.......................................... 37
Section 3.03. Payment of Interest; Interest Rights Preserved......... 37
Section 3.04. Persons Deemed Owners.................................. 38
Section 3.05. Computation of Interest................................ 38
ARTICLE 4
SATISFACTION AND DISCHARGE; DEFEASANCE
Section 4.01. Satisfaction and Discharge of Indenture................ 38
Section 4.02. Option To Effect Legal Defeasance Or Covenant
Defeasance............................................. 39
Section 4.03. Legal Defeasance and Discharge......................... 39
Section 4.04. Covenant Defeasance.................................... 40
Section 4.05. Conditions to Defeasance............................... 40
Section 4.06. Application of Trust Money............................. 41
ARTICLE 5
DEFAULTS AND REMEDIES
Section 5.01. Events of Default...................................... 42
Section 5.02. Acceleration of Maturity; Rescission and Annulment..... 43
Section 5.03. Collection of Indebtedness and Suits for Enforcement
by Trustee............................................. 44
Section 5.04. Trustee May File Proofs of Claim....................... 44
Section 5.05. Trustee May Enforce Claims Without Possession of
Notes.................................................. 45
Section 5.06. Application of Money Collected......................... 45
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Section 5.07. Limitation on Suits.................................... 45
Section 5.08. Unconditional Right of Holders To Receive Principal
and Interest........................................... 46
Section 5.09. Restoration of Rights and Remedies..................... 46
Section 5.10. Rights and Remedies Cumulative......................... 46
Section 5.11. Delay or Omission Not Waiver........................... 46
Section 5.12. Control by Holders..................................... 46
Section 5.13. Waiver of Past Defaults................................ 47
Section 5.14. Undertaking for Costs.................................. 47
Section 5.15. Waiver of Stay or Extension Laws....................... 47
ARTICLE 6
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities.................... 48
Section 6.02. Notice of Defaults..................................... 48
Section 6.03. Certain Rights of Trustee.............................. 49
Section 6.04. Not Responsible for Recitals or Issuance of Notes...... 50
Section 6.05. May Hold Notes......................................... 50
Section 6.06. Money Held in Trust.................................... 50
Section 6.07. Compensation and Reimbursement......................... 50
Section 6.08. Disqualification; Conflicting Interests................ 50
Section 6.09. Corporate Trustee Required; Eligibility................ 51
Section 6.10. Resignation and Removal; Appointment of Successor...... 51
Section 6.11. Acceptance of Appointment by Successor................. 52
Section 6.12. Merger, Consolidation or Succession to Business........ 52
Section 6.13. Preferential Collection of Claims Against Company...... 52
Section 6.14. Appointment of Authenticating Agent.................... 52
ARTICLE 7
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01. Company to Furnish Trustee Names and Addresses of
Holders............................................... 54
Section 7.02. Preservation of Information; Communications to
Holders............................................... 54
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Section 7.03. Reports by Trustee..................................... 55
Section 7.04. Reports by Company..................................... 55
ARTICLE 8
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.01. Company May Consolidate, Etc., Only on Certain Terms....... 55
Section 8.02. Successor Substituted...................................... 56
ARTICLE 9
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Holders..... 56
Section 9.02. Supplemental Indentures with Consent of Holders........ 56
Section 9.03. Execution of Supplemental Indentures................... 57
Section 9.04. Effect of Supplemental Indentures...................... 57
Section 9.05. Conformity with Trust Indenture Act.................... 57
Section 9.06. Reference in Notes to Supplemental Indentures.......... 57
Section 9.07. Notice of Supplemental Indentures...................... 57
ARTICLE 10
COVENANTS
Section 10.01. Payment of Principal and Interest...................... 58
Section 10.02. Maintenance of Office or Agency........................ 58
Section 10.03. Money for Note Payments to Be Held in Trust............ 58
Section 10.04. Statement by Officers as to Default.................... 59
Section 10.05. Existence.............................................. 60
Section 10.06. Maintenance of Properties.............................. 60
Section 10.07. Payment of Taxes and Other Claims...................... 60
Section 10.08. Waiver of Certain Covenants............................ 60
Section 10.09. Book-Entry System...................................... 60
Section 10.10. Limitation on Indebtedness............................. 60
Section 10.11. Limitation on Restricted Payments...................... 62
Section 10.12. Limitation on Restrictions on Distributions from
Restricted Subsidiaries................................ 64
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Section 10.13. Limitation on Sales of Assets and Subsidiary Stock..... 65
Section 10.14. Limitation on Affiliate Transactions................... 68
Section 10.15. Change of Control...................................... 68
Section 10.16. Further Instruments and Acts........................... 70
Section 10.17. Limitation on Liens.................................... 70
Section 10.18. Commission Reports..................................... 70
ARTICLE 11
REDEMPTION OF NOTES
Section 11.01. Right of Redemption.................................... 71
Section 11.02. Applicability of Article............................... 71
Section 11.03. Election to Redeem; Notice to Trustee.................. 71
Section 11.04. Selection by Trustee of Notes To Be Redeemed........... 71
Section 11.05. Notice of Redemption................................... 72
Section 11.06. Deposit of Redemption Price............................ 72
Section 11.07. Notes Payable on Redemption Date....................... 72
Section 11.08. Notes Redeemed in Part................................. 73
ARTICLE 12
SUBORDINATION OF NOTES
Section 12.01. Securities Subordinate to Senior Indebtedness.......... 73
Section 12.02. No Payments in Certain Circumstances; Payment Over
of Proceeds upon Dissolution, Etc...................... 73
Section 12.03. Prior Payment to Senior Indebtedness upon
Acceleration of Notes.................................. 75
Section 12.04. Payment Permitted if No Default........................ 75
Section 12.05. Subrogation of Rights to Holders of Senior
Indebtedness........................................... 76
Section 12.06. Provisions Solely To Define Relative Rights............ 76
Section 12.07. Trustee To Effectuate Subordination.................... 76
Section 12.08. No Waiver of Subordination Provisions.................. 76
Section 12.09. Notice to Trustee...................................... 77
Section 12.10. Reliance on Judicial Order or Certificate of
Liquidating Agent...................................... 78
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Section 12.11. Trustee Not Fiduciary for Holders of Senior
Indebtedness........................................... 78
Section 12.12. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights....................... 78
Section 12.13. Article Applicable to Paying Agents.................... 78
</TABLE>
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INDENTURE, dated as of August 1, 1997, between Signature Resorts,
Inc., a corporation duly organized and existing under the laws of the State of
Maryland (herein called the "Company"), having its principal office at San
Mateo, California, and Norwest Bank Minnesota, National Association, as Trustee
(herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 9.75%
Senior Subordinated Notes due October 1, 2007 (herein called the "Notes") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Notes, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the
valid obligations of the Company, and to make this Indenture a valid agreement
of the Company, in accordance with their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Accredited Investor" has the meaning set forth in Rule 501(a)(1),(2),
(3) or (7) of the Securities Act.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.04.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary; provided,
--------
however, that any such Restricted Subsidiary is primarily engaged in a Related
- -------
Business; (iii) additions to property, plant and equipment of the Company and
its Restricted Subsidiaries; and (iv) investments in Mortgages Receivable.
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"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Member" means any member of, or participant in, the Depository.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Note or beneficial interest therein, the rules
and procedures of the Depository, Euroclear or Cedel Bank, as the case may be,
for such Global Note to the extent applicable to such transaction and as in
effect from time to time.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares and,
to the extent required by local ownership laws in foreign countries, shares
owned by foreign shareholders), (ii) all or substantially all the assets of any
division, business segment or comparable line of business of the Company or any
Restricted Subsidiary or (iii) any other assets of the Company or any Restricted
Subsidiary outside of the ordinary course of business of the Company or such
Restricted Subsidiary. Notwithstanding the foregoing, the term "Asset
Disposition" shall not include (w) sales, in the ordinary course of business, of
Vacation Intervals, points in a points based vacation club system or Mortgages
Receivable, (x) a disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Restricted Subsidiary, (y) for
purposes of the covenant described under Section 10.13, a disposition that
constitutes a Permitted Investment or a Restricted Payment permitted by the
covenant described under Section 10.11, and (z) a disposition of assets having a
fair market value of less than $1 million.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate implicit in such transaction in accordance with GAAP) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Notes.
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
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"Broker-Dealer" shall mean any broker or dealer registered under the
1934 Act.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of acquisition issued, fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit,
time deposits, overnight bank deposits, bankers' acceptances and repurchase
agreements issued by a Qualified Issuer having maturities of 270 days or less
from the date of acquisition, (c) commercial paper of an issuer rated at least
A-2 by Standard & Poor's Corporation or P-2 by Moody's Investors Service, Inc.,
or carrying an equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease publishing ratings of investments,
and having maturities of 270 days or less from the date of acquisition, and (d)
money market accounts or funds with or issued by Qualified Issuers.
"Change of Control" means the occurrence of any of the following
events:
(i) the acquisition by any Person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) of the Exchange Act) of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of
capital stock of the Company entitling such Person to exercise 50% or more
of the total voting power of all shares of capital stock of the Company
entitled to vote generally in elections of directors (other than any such
acquisition by the Company, any Subsidiary of the Company or any employee
benefit plan of the Company); or
(ii) any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company, or
any conveyance, sale, transfer or lease, in one transaction or a series of
related transactions, of all or substantially all of the assets (other than
to a Restricted Subsidiary of the Company) of the Company to any other
Person (other than (a) any such transaction pursuant to which the holders
of 50% or more of the total voting power of all shares of capital stock of
the Company entitled to vote generally in elections of directors
immediately prior to such transaction have, directly or indirectly, at
least 50% or more of the total voting power of all shares of capital stock
of the continuing or surviving corporation entitled to vote generally in
elections of directors of the continuing or surviving corporation
immediately after such transaction, and (b) a merger (x) which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock, or (y) which is effected solely to
change the jurisdiction of incorporation of the Company and results in a
reclassification,
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conversion or exchange of outstanding shares of Common Stock solely into
shares of common stock); or
(iii) a change in the Board of Directors of the Company in which the
individuals who constituted the Board of Directors of the Company at the
beginning of the 12-month period immediately preceding such change
(together with any other director whose election by the Board of Directors
of the Company or whose nomination for election by the stockholders of the
Company was approved by a vote of at least a majority of the directors then
in office either who were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors then in office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument unless and until a successor Person shall have
become such pursuant to the applicable provisions of this Indenture and
thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by (i) its Chairman of the Board, its
President or a Vice President, and (ii) by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days (or, if less,
the number of days after the end of such fiscal quarter as the consolidated
financial statements of the Company shall be available) prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any Restricted
-------- -------
Subsidiary has Incurred any Indebtedness since the beginning of such period that
remains outstanding on such date of determination or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period (except that, in the case
of Indebtedness used to finance working capital needs incurred under a revolving
credit or similar arrangement, the amount thereof shall be deemed to be the
average daily balance of such Indebtedness during such four-fiscal-quarter
period), (2) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for such period
shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period, and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased, assumed by a third person
(to the extent the Company and its Restricted Subsidiaries are no longer liable
for such Indebtedness) or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
4
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for such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such period the Company shall
have consummated an Equity Offering, Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to
the Company and its Restricted Subsidiaries in connection with such Equity
Offering for such period, (4) if since the beginning of such period the Company
or any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of assets which acquisition constitutes
all or substantially all of an operating unit of a business, including any such
Investment or acquisition occurring in connection with a transaction requiring a
calculation to be made hereunder, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and (5) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(3) or (4) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition occurred on the first day of such period. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, (i) interest
expense attributable to Capital Lease Obligations, (ii) amortization of debt
discount, (iii) capitalized interest, (iv) non-cash interest expenses, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) net costs associated with
Hedging Obligations (including amortization of fees), (vii) Preferred Stock
dividends in respect of all Preferred Stock held by Persons other than the
Company or a Wholly-Owned Subsidiary and (viii) interest actually paid on any
Indebtedness of any other Person that is Guaranteed by the Company or any
Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
-------- -------
not be included in such Consolidated Net Income: (i) any net income (or loss)
of any Person if such Person is not a Restricted Subsidiary, except that the
Company's equity in the net income of any such Person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution; (ii) for purposes of
subclause (a)(iii)(A) of Section 10.11 only, any net income (or loss) of any
Person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income of any Restricted Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to the
Company, except that (A) the Company's equity
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in the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Restricted Subsidiary consistent with such
restriction during such period to the Company or another Restricted Subsidiary
as a dividend or other distribution (subject, in the case of a dividend or other
distribution paid to another Restricted Subsidiary, to the limitation contained
in this clause) and (B) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income; (iv) any gain (or loss) realized upon the sale or other
disposition of any assets of the Company or its consolidated Subsidiaries
(including pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (or loss)
realized upon the sale or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and (vi) the cumulative effect of a change in
accounting principles. Notwithstanding the foregoing, for the purposes of the
covenant described in Section 10.11 only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under Section 10.11
pursuant to clause (a)(iii)(D) thereof.
"Convertible Notes" means the 5 3/4% Convertible Subordinated Notes
due 2007 issued pursuant to an indenture dated January 15, 1997 between the
Company and Norwest Bank Minnesota, National Association, as trustee.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered.
Initially, the Corporate Trust Office of the Trustee is located at 608 2nd
Avenue South, Northstar East Building, Minneapolis, Minnesota 55402, Attn:
Corporate Trust Department.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Credit Agreements" means the Senior Credit Facility and any credit
agreement or similar facility or any other agreement governing Indebtedness
entered into by the Company or any Restricted Subsidiary, as any of the same may
be amended, waived, modified, Refinanced or replaced from time to time (except
to the extent that any such amendment, waiver, modification, replacement or
Refinancing would be prohibited by the terms of the Indenture).
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement to which
such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.03.
"Definitive Notes" means Restricted Definitive Notes and Unrestricted
Definitive Notes.
"Depository" means The Depository Trust Company, a New York
corporation and its nominees and their respective successors.
"Designated Noncash Consideration" means the fair market value of
noncash consideration received by the Company or one of its Restricted
Subsidiaries in connection with an Asset Disposition that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, which
sets forth the basis of such valuation and is executed by the principal
executive officer and the principal financial officer of the Company, less the
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amount of cash or Cash Equivalents received in connection with a sale of such
Designated Noncash Consideration.
"Designated Senior Indebtedness" means any particular Senior
Indebtedness having an aggregate principal amount of $25 million or more in
which the instrument creating or evidencing the same or the assumption or
guarantee thereof (or related agreements or documents to which the Company is a
party) expressly provides that such Senior Indebtedness shall be "Designated
Senior Indebtedness" for purposes of this Indenture, provided that such
--------
instrument, agreement or other document may place limitations and conditions on
the right of such Senior Indebtedness to exercise the rights of Designated
Senior Indebtedness.
"Disqualified Capital Stock" means with respect to any person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the happening
of an event or the passage of time would be, required to be redeemed or
repurchased (including at the option of the holder thereof) by such person or
any of its Subsidiaries, in whole or in part, on or prior to the Stated Maturity
of the Notes.
"EBITDA" for any period means the sum of Consolidated Net Income plus
Consolidated Interest Expense plus, without duplication, the following to the
extent deducted in calculating such Consolidated Net Income: (i) income tax
expense, (ii) depreciation expense, (iii) amortization expense, (iv) non-
recurring charges incurred as a result of business combinations and (v) all
other non-cash items reducing Consolidated Net Income (other than items that
will require cash payments and for which an accrual or reserve is, or is
required by GAAP to be, made), less all non-cash items increasing Consolidated
Net Income, in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of the Company shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Subsidiary was included in calculating Consolidated Net
Income.
"Equity Offering" means a primary offering (either public or private)
of any Capital Stock of the Company.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and the rules and regulations promulgated thereunder.
"Exchanging Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Notes" means another series of Senior Subordinated
Indebtedness of the Company registered under the Securities Act with terms
substantially identical to the terms of the Notes which will be exchanged for
the Notes pursuant to a registration statement.
"Expiration Date" has the meaning specified in Section 1.04(f).
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Private Placement
Notes for Exchange Notes.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, including those set forth in
(i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board and (iii) such other
statements by such other entity as is approved by a significant segment of the
accounting profession.
7
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"Guarantee" means (a) any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person, and (b) any obligation, direct or indirect, contingent or
otherwise, of any Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) any Indebtedness or other obligation of any other
Person (whether arising by virtue of partnership arrangements, or by agreements
to keep-well, to purchase assets, goods, securities or services, to take-or-pay
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner any Indebtedness or other
obligation (for the payment thereof) of any other Person or to protect any other
Person against loss in respect thereof (in whole or in part); provided, however,
-------- -------
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used as a verb
has a corresponding meaning. The term "Guarantor" shall mean any Person
Guaranteeing any obligation.
"Global Note" means, individually and collectively, the Regulation S
Global Note, the Rule 144A Global Note and the Unrestricted Global Note.
"Global Note Legend" means the legend initially set forth on the
Global Note in the form set forth in Section 2.14.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means a Person in whose name a Note is
registered on the Note Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
-------- -------
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary; provided, further, however, that
-------- ------- -------
in the case of a discount security, neither the accrual of interest nor the
accretion of original issue discount shall be considered an Incurrence of
Indebtedness, but the entire face amount of such security shall be deemed
Incurred upon the issuance of such security. The term "Incurrence" when used as
a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property or
services, all conditional sale obligations of such Person and all obligations of
such Person under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business and which are not more than
90 days past due and not in dispute), which purchase price or obligation is due
more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services (provided
that, in the case of obligations of an acquired Person assumed in connection
with an acquisition of such Person, such obligations would constitute
Indebtedness of such Person); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit); (v) the amount of all obligations
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<PAGE>
of such Person with respect to the redemption, repayment or other repurchase of
any Disqualified Capital Stock or, with respect to any Subsidiary of such
Person, any Preferred Stock (but excluding, in each case, any accrued
dividends); (vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee; (vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the amount of
such obligation being deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured; and (viii) to the extent not
otherwise included in this definition, Hedging Obligations of such Person.
Notwithstanding the foregoing, (i) any Guarantee of any obligations of a Joint
Venture given by or entered into by any Person shall not constitute, or be
deemed to be the Incurrence of, any Indebtedness of such Person, provided, such
--------
Guarantee would be permitted under Section 10.11 hereof and (ii) any obligation,
contingent or otherwise, of any Person arising as a result of such Person's
ownership of, or control over, the Capital Stock of another Person shall not
constitute, or be deemed to be the Incurrence of, Indebtedness of such Person,
provided, the Incurrence of such obligation would be permitted under Section
- --------
10.11. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations as described above at such
date; provided, however, that the amount outstanding at any time of any
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Indebtedness issued with original issue discount shall be deemed to be the face
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Purchasers" means Montgomery Securities, Donaldson, Lufkin &
Jenrette Securities Corporation, Goldman, Sachs & Co., BT Securities Corporation
and Societe Generale Securities Corporation.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
to protect the Company or any Restricted Subsidiary against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances or loans to customers or other Persons in the ordinary
course of business that are recorded as accounts or mortgages receivable on the
balance sheet of such Person) or other extension of credit (including by way of
Guarantee or similar arrangement) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by such Person.
For purposes of the definition of "Unrestricted Subsidiary," the definition of
"Restricted Payment" and the covenant described in Section 10.11 hereof, (i)
"Investment" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
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Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary
at the
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time of such redesignation less (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time of such redesignation; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Joint Venture" means a corporation, partnership or other entity
engaged in a Related Business as to which the Company (directly or through one
or more Restricted Subsidiaries) owns any Capital Stock.
"Junior Securities" of any Person means any Capital Stock (other than
Disqualified Capital Stock) and any indebtedness of such Person that is
subordinated in right of payment to the Notes and has no scheduled installment
of principal due, by redemption, sinking fund payment or otherwise, on or prior
to the Stated Maturity of the Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Mortgages Receivable" means the gross mortgages receivable of the
Company and its Restricted Subsidiaries (including any mortgages receivable
acquired as a result of any business combination) determined on a consolidated
basis in accordance with GAAP.
"Net Available Cash" from an Asset Disposition means cash payments
received by the Company or any of its Subsidiaries therefrom (including any cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to such
properties or assets or received in any other noncash form) in each case net of
(i) all legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign and local taxes
required to be paid or accrued as a liability under GAAP, as a consequence of
such Asset Disposition, (ii) all payments made on any Indebtedness which is
secured by any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon or other security agreement of any kind with respect to
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other payments
required to be made to minority interest holders in Subsidiaries or Joint
Ventures as a result of such Asset Disposition and (iv) the deduction of
appropriate amounts provided by the seller as a reserve, in accordance with
GAAP, against any liabilities associated with the property or other assets
disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition, including without limitation
liabilities under any indemnification obligations associated with such Asset
Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-recourse Debt" means Indebtedness of a Person to the extent that
under the terms thereof and pursuant to applicable law, no personal
10
<PAGE>
recourse could be had against such Person for the payment of the principal of or
interest or premium or any other amounts with respect to such indebtedness or
for any claim based on such indebtedness and that enforcement of obligations on
such indebtedness is limited solely to recourse against interests in specified
assets.
"Note Offering" means the issuance of the Notes by the Company.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.04.
"Notes" shall mean the Private Placement Notes and the Exchange Notes.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary, of the Company, and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding," when used with respect to Notes, means, as of the date
of determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Notes; provided that, if such Notes are to be redeemed,
--------
notice of such redemption has been duly given pursuant to this Indenture or
provision therefore satisfactory to the Trustee has been made; and
(iii) Notes which have been paid pursuant to Section 2.07 or in
exchange for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, other than any such Notes in respect
of which there shall have been presented to the Trustee proof satisfactory
to it that such Notes are held by a bona fide purchaser in whose hands such
Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or of such other obligor shall be disregarded and deemed not to be outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes which the Trustee knows to be so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such securities and that
the pledgee is not the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor. The Trustee may require, and
may conclusively rely upon, an Officers' Certificate as to whether or not any
Notes are so owned.
"Paying Agent" shall have the meaning set forth in Section 2.04
hereof.
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<PAGE>
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) the Company, (ii) a Restricted Subsidiary or a
Person that will, upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary business of such Subsidiary is a
-------- -------
Related Business; (iii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
- -------- -------
(iv) Temporary Cash Investments; (v) purchases or acquisitions of mortgage
receivables owing to the Company or any Restricted Subsidiary created or
acquired in the ordinary course of business; (vi) payroll, travel and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vii) loans or advances to employees made in
the ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary; (viii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; (ix)
Persons other than Restricted Subsidiaries that are primarily engaged in a
Related Business, in an aggregate amount not to exceed the sum of (1) 10% of the
Total Assets of the Company and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP and (2) the fair market value of
assets (other than Net Cash Proceeds) received by the Company, as determined in
good faith by the Board of Directors of the Company at the time of such receipt,
from the issuance of its Capital Stock (other than Disqualified Capital Stock)
subsequent to the Issue Date (to the extent utilized for an Investment, such
aggregate amount will be reinstated to the extent that the Company or any
Restricted Subsidiary receives dividends, repayments of loans or other transfers
of assets as a return of such Investment); and (x) any Person to the extent such
Investment represents the non-cash portion of the consideration received for an
Asset Disposition as permitted pursuant to Section 10.13 hereof; (xi) any
Investment existing as of the Issue Date; (xii) any Investment acquired by the
Company or any of its Restricted Subsidiaries (i) in exchange for any other
Investment or accounts receivable held by the Company or any such Restricted
Subsidiary in connection with or as a result of a bankruptcy, workout,
reorganization or recapitalization of the issuer of such other Investment or
accounts receivable or (ii) as a result of a foreclosure (or deed in lieu of) by
the Company or any of its Restricted Subsidiaries with respect to any secured
Investment or other transfer of title with respect to any secured Investment in
default; or (xiii) Hedging Obligations permitted under clause (7) of Section
10.10.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.16 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of any Indebtedness (including a Note) means the principal
of such Indebtedness plus the premium, if any, payable on such Indebtedness
which is due or overdue or is to become due at the relevant time.
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<PAGE>
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.14.
"Private Placement Notes" means the 9.75% Senior Subordinated Notes
due 2007 of the Company issued on the Issue Date for so long as such Notes
constitute Restricted Securities.
"Purchase Money Indebtedness" mean Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligations
under any title retention agreement, other purchase money obligations or similar
Indebtedness, in each case where the maturity of such Indebtedness does not
exceed the anticipated useful life of the asset being financed, and (ii)
incurred to finance the acquisition by the Company or a Restricted Subsidiary of
such asset, including additions and improvements; provided, however, that any
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Lien arising in connection with any such Indebtedness shall be limited to the
specified asset being financed or, in the case of real property or fixtures,
including additions and improvements, the real property to which such asset is
attached; and provided, further, however, that such Indebtedness is Incurred
-------- ------- -------
within 90 days after such acquisition of such asset by the Company or such
Restricted Subsidiary.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Qualified Issuer" means (A) any lender that is a party to any Credit
Agreement; and (B) any commercial bank (i) which has capital and surplus in
excess of $100,000,000, and (ii) the outstanding short-term debt securities of
which are rated at least A-2 by Standard & Poor's Corporation or at least P-2 by
Moody's Investors Service, Inc., or carry an equivalent rating by a nationally
recognized rating agency if both the two named rating agencies cease publishing
ratings of investments.
"Receivables and Related Assets" means Mortgages Receivable and
instruments, chattel paper, obligations, general intangibles and other similar
assets, in each case relating to such Mortgages Receivable.
"Receivables Subsidiary" means a Restricted Subsidiary which is
established for the limited purpose of acquiring and financing Receivables and
Related Assets.
"Redemption Date," when used with respect to any Note to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture; provided, however, that (i)
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in the case of Indebtedness that has a Stated Maturity after the Stated Maturity
of the Notes, such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced, (ii) in the case
of Indebtedness that has a Stated Maturity after the Stated Maturity of the
Notes, such Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being Refinanced and (iii) such Refinancing
Indebtedness has an aggregate principal amount (or if Incurred with original
issue discount, an aggregate issue price) that is equal to or less than the
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<PAGE>
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding or committed (plus fees and expenses,
including any premium and defeasance costs) under the Indebtedness being
Refinanced; provided, further, however, that Refinancing Indebtedness shall not
-------- ------- -------
include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the March 15 or September 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Registration Rights Agreement" means the Registration Rights
Agreement dated August 8, 1997, by and among the Company and the Initial
Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depository or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A hereto bearing the Private Placement Legend, the Global
Note Legend and the Regulation S Temporary Global Note Legend and deposited with
or on behalf of and registered in the name of the Depository or its nominee,
issued in a denomination equal to the outstanding principal amount of Notes
initially sold in reliance on Rule 903 of Regulation S.
"Regulation S Temporary Global Note Legend" means the legend initially
set forth on the Regulation S Temporary Global Note in the form set forth in
Section 2.14.
"Related Business" means, at any time, any business related, ancillary
or complementary (as determined in good faith by the Board of Directors) to the
businesses conducted by the Company and the Restricted Subsidiaries at such
time.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company.
"Repurchase Date" has the meaning specified in Section 10.15.
"Repurchase Price" has the meaning specified in Section 10.15.
"Responsible Officer," when used with respect to the Trustee, means
any officer assigned to and working in the corporate trust department of the
Trustee, or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his or her knowledge of and familiarity
with the particular subject.
"Restricted Definitive Notes" means Notes that are in the form of the
Notes attached hereto as Exhibit A, bearing the Private Placement Legend but not
the Global Note Legend.
"Restricted Global Notes" means the Regulation S Global Notes and the
Rule 144A Global Notes.
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<PAGE>
"Restricted Payment" means, with respect to any Person, (i) the
declaration or payment of any dividends or any other distributions on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the holders
of its Capital Stock, except dividends or distributions payable solely in its
Capital Stock (other than Disqualified Capital Stock) and except dividends or
distributions payable solely to the Company or a Restricted Subsidiary (and, if
such Restricted Subsidiary is not wholly owned, to its other shareholders on a
pro rata basis or on a basis that results in the receipt by the Company or a
Restricted Subsidiary of dividends or distributions of greater value than it
would receive on a pro rata basis), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company held by
any Person including the exercise of any option to exchange any Capital Stock
(other than into Capital Stock of the Company that is not Disqualified Capital
Stock), (iii) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, of any Subordinated Obligations of
the Company (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) or (iv) the making of any Investment in any
Person (other than a Permitted Investment).
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
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entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Global Note" means a permanent Global Note in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of and registered in the name of the Depository
or its nominee, representing Notes sold in reliance on Rule 144A.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Credit Facility" means a $100 million, three year, secured
revolving credit facility from a bank lender with a variable borrowing rate
ranging from LIBOR plus 7/8% to LIBOR plus 1 3/8%.
"Senior Indebtedness" includes (a) all Indebtedness of the Company,
including the principal of and interest on such indebtedness (including all
interest accruing subsequent to the commencement of any bankruptcy or similar
proceeding, whether or not a claim for post-petition interest is allowable as a
claim in such proceeding) and all fees and other amounts payable in connection
with such Indebtedness; provided, however, that Senior Indebtedness shall not
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include (A) Indebtedness to a Subsidiary or
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<PAGE>
other Affiliate of the Company, (B) any such Indebtedness or obligation if the
terms of such Indebtedness or obligation (or the terms of the instrument under
which, or pursuant to which, it is issued) expressly provide that such
Indebtedness or obligation shall not be senior in right of payment to the Notes,
(C) accounts payable of the Company to trade creditors, and (D) the Convertible
Notes.
"Senior Subordinated Indebtedness" of the Company means the Notes and
any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Notes in right of payment and is not
----------
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary which would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.03.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase, redemption or repayment of such security at the option of the holder
thereof upon the happening of any contingency unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50,000,000 (or the
foreign currency equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing more than 90 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United States
of America, any state thereof or the District of Columbia or any foreign country
recognized by the United States of America, with a rating at the time as of
which any investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher)
16
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according to Standard and Poor's Ratings Group, and (v) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's
Investors Service, Inc.
"Total Assets" means the total consolidated assets of the Company and
its Restricted Subsidiaries, as shown on the most recent balance sheet
(excluding the footnotes thereto) of the Company.
"Trading Day" means, with respect to any security, each Monday,
Tuesday, Wednesday, Thursday and Friday, other than any day on which securities
are not traded on the exchange or market on which such security is traded.
"Trustee" means the person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, and as in force at the date as of which this instrument was executed,
except as provided in Section 9.05; provided, however, that in the event the
-------- -------
Trust Indenture Act is amended after such date, the Trust Indenture Act means,
to the extent required by such amendment, the Trust Indenture Act as so amended.
"Unrestricted Global Note" means a permanent Global Note in the form
of Exhibit B bearing the Global Note Legend and deposited with or on behalf of
and registered in the name of the Depository or its nominee.
"Unrestricted Definitive Notes" means Notes that are in the form of
the Notes attached hereto as Exhibit B, that do not include the Global Note
Legend.
"Unrestricted Notes" means the Unrestricted Global Notes and
Unrestricted Definitive Notes.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries
owns any Capital Stock or Indebtedness of, or holds any Lien on any property of,
the Company or any other Subsidiary of the Company that is not a Subsidiary of
the Subsidiary to be so designated; provided, however, that either (A) the
-------- -------
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under Section 10.11 hereof. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
-------- -------
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under paragraph (a) of Section 10.10 hereof and
(y) no Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be notified by the Company to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complies with the foregoing provisions.
"U.S. Government Obligation" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for
17
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the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by the
Company and/or one or more Wholly Owned Subsidiaries.
Section 1.02. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he or
she has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of
18
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reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.04. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as otherwise expressly provided herein, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.01) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future Holder of
the same Note and the Holder of every Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such Note.
(e) Except for matters arising under Article Five (in which event any
record date shall be set by the Trustee), the Company may set any day as a
record date for the purpose of determining the Holders of Outstanding Notes
entitled to give, make or take any request, demand, authorization, direction,
notice, consent, waiver or other action provided or permitted by this Indenture
to be given, made or taken by Holders of Notes. If any record date is set
pursuant to this paragraph, the Holders of Outstanding Notes on such record
date, and no other Holders, shall be entitled to take the relevant action,
whether or not such Holders remain Holders after such record date; provided that
--------
no such action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date (as defined below) by Holders of the requisite
principal amounts of Outstanding Notes on such record date. Nothing in this
paragraph shall be construed to prevent the Trustee from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Notes on the date such action
is taken. Promptly after receiving written notice of a
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<PAGE>
record date set by the Company pursuant to this paragraph, the Trustee, at the
Company's expense, shall cause notice of such record date, the proposed action
by Holders and the applicable Expiration Date to be given to the Company in
writing and to each Holder of Notes in the manner set forth in Section 1.06.
The Trustee may set any day as a record date for the purpose of
determining the Holders entitled to join in the giving or making of (i) any
Notice of Default, (ii) any declaration of acceleration referred to in Section
5.02, (iii) any request to institute proceedings referred to in Section 5.07(b),
or (iv) any direction referred to in Section 5.12. If any record date is set
pursuant to this Section 1.04(e), the Holders on such record date, and only such
Persons, shall be entitled to join in such notice, declaration, request or
direction, whether or not such Holders remain Holders after such record date;
provided that no such action shall be effective hereunder unless taken on or
prior to the applicable Expiration Date by Holders of the requisite principal
amount of Notes on such record date. Nothing in this Section 1.04(e) shall be
construed to prevent the Trustee from setting a new record date for any action
for which a record date has previously been set pursuant to this Section 1.04(e)
(whereupon the record date previously set shall automatically and with no action
by any Person be cancelled and of no effect), and nothing in this Section
1.04(e) shall be construed to render ineffective any action taken by Holders of
the requisite principal amount of Notes on the date such action is taken.
Promptly after any record date is set pursuant to this Section 1.04(e), the
Trustee, at the Company's expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Company in writing and to each Holder of Notes in the manner set forth in
Section 1.06.
(f) With respect to any record date set pursuant to Sections 1.04(e)
or 1.04(f), the party hereto which sets such record date may designate any day
as the "Expiration Date" and from time to time may change the Expiration Date to
any earlier or later day; provided that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other party hereto in
writing, and to each Holder of Notes in the manner set forth in Section 1.06, on
or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section or
Section 1.04(e), the party hereto which set such record date shall be deemed to
have initially designated the 180th day after such record date as the Expiration
Date with respect thereto, subject to its right to change the Expiration Date as
provided in this Section 1.04(f). Notwithstanding the foregoing, no Expiration
Date shall be later than the 180th day after the applicable record date.
Section 1.05. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with, (i) the Trustee by any
Holder or by the Company, shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Administration, or (ii) the
Company by the Trustee or by any Holder shall be sufficient for every purpose
hereunder (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to the Company at 1875 South Grant Avenue, Suite
650, San Mateo, California 94402 or at any other address previously furnished in
writing to the Trustee by the Company.
Section 1.06. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Note Register, not later than
the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to
20
<PAGE>
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 1.07. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
Section 1.08. Book-Entry System.
-----------------
If the Notes cease to trade in the Depository's book-entry settlement
system, the Company covenants and agrees that it shall use reasonable efforts to
make such other book-entry arrangements that it determines are reasonable for
the Notes.
Section 1.09. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not effect the construction hereof.
Section 1.10. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 1.11. Separability Clause.
-------------------
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.12. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness and the Holders of Notes, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 1.13. Governing Law.
-------------
This Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York without regards to the
conflicts of law principles as applied in such state.
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Section 1.14. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any security or the last date on which a Holder has the right to
convert his Notes shall not be a Business Day, then (notwithstanding any other
provision of this Indenture or of the Notes) payment of interest or principal on
the Notes need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Redemption Date or at the stated maturity, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption
Date, or Stated Maturity, as the case may be.
Section 1.15. Immunity of Incorporators, Stockholders, Officers and Directors.
---------------------------------------------------------------
No recourse shall be had for the payment of the principal of or the
interest, if any, on any Note, or for any claim based thereon, or upon any
obligation, covenant or agreement of this Indenture, against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or indirectly through
the Company or of any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment of
penalty or otherwise; it being expressly agreed and understood that this
Indenture and all of the Notes are solely corporate obligations, and that no
personal liability whatsoever shall attach to, or is incurred by, any
incorporator, stockholder, officer or director, past, present or future, of the
Company or of any successor corporation, either directly or indirectly through
the Company or any successor corporation, because of the incurring of the
Indebtedness hereby authorized or under or by reason of any of the obligations,
covenants or agreements contained in this Indenture or in the Notes, or to be
implied herefrom or therefrom; and that all such personal liability is hereby
expressly released and waived as a condition of, and as part of the
consideration for, the execution of this Indenture and the issuance of the
Notes.
ARTICLE 2
NOTE FORMS
Section 2.01. Generally.
---------
The Private Placement Notes and the Trustee's certificate of
authentication shall be in substantially the form of Exhibit A, and the Exchange
---------
Notes shall be in substantially the form of Exhibit B hereto, which exhibits are
---------
part of this Indenture with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such notations, letters, numbers or other marks of
identification and such notations, legends or endorsements placed thereon as may
be required to comply with law, the rules of any securities exchange, the Code
and the regulations thereunder, or as may, consistently herewith, be determined
by the officers executing such Notes, as evidenced by their execution of the
Notes. The Notes shall bear legends as appropriate in accordance with Sections
2.02 and 2.07 hereof.
Section 2.02. Form and Dating.
---------------
The Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of a Rule 144A Global Note. Notes offered and sold to
Accredited Investors in transactions exempt from registration under the
Securities Act not made in reliance on Rule 144A or Regulation S shall be issued
initially in the form of Restricted Definitive Notes. Notes offered and sold in
reliance on Regulation S shall be issued initially in the form of the Regulation
S Temporary Global Note, which shall be deposited on behalf of the purchasers of
the Notes represented thereby with the Trustee, at its Minneapolis, Minnesota
office, as custodian for the Depository, and registered in the name of the
Depository or the nominee of the Depository for the
22
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accounts of designated agents holding on behalf of Euroclear or Cedel Bank, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The Restricted Period shall be terminated upon the receipt by the
Trustee of (i) a written certificate from the Depository, together with copies
of certificates from Euroclear and Cedel Bank certifying that they have received
certification of non-United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Note, and (ii) an
Officers' Certificate from the Company to such effect. Following the termination
of the Restricted Period, beneficial interests in the Regulation S Temporary
Global Note shall be exchanged for beneficial interests in Regulation S
Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously
with the authentication of Regulation S Permanent Global Notes, the Trustee
shall cancel the Regulation S Temporary Global Note.
Notes issued in global form shall be substantially in the form of
Exhibit A and B attached hereto (including the Global Note Legend). Notes issued
in definitive form shall be substantially in the form of Exhibit A or B attached
hereto (but without the Global Note Legend). Each Global Note shall represent
such of the outstanding Notes as shall be specified therein and each shall
provide that it shall represent the aggregate principal amount of outstanding
Notes from time to time endorsed thereon and that the aggregate principal amount
of Outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of a Global Note to reflect the amount of any increase or decrease in the
aggregate principal amount of outstanding Notes represented thereby shall be
made by the Trustee or in the Depository, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.07 hereof.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by the
Agent Members through Euroclear or Cedel Bank.
Section 2.03. Execution and Authentication.
----------------------------
An Officer of the Company shall sign the Notes by manual or facsimile
signature. If an Officer whose signature is on a Note no longer holds that
office at the time the Trustee authenticates the Note, the Note shall be valid
nevertheless. A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture. The Trustee shall authenticate and make available for
delivery (i) Private Placement Notes for original issue in an aggregate
principal amount of $200,000,000 and (ii) Exchange Notes from time to time for
issue only in exchange for a like principal amount of Private Placement Notes,
in each case, upon a written order of the Company signed by an Officer of the
Company. Such order shall specify the amount of the Notes to be authenticated
and the date on which the Notes are to be authenticated. The aggregate principal
amount of Notes outstanding at any time may not exceed $200,000,000 except as
provided in Section 2.08. The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate the Notes, upon the consent of the
Company to such appointment. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as any
Note Registrar, Paying Agent or agent for service of notices and demands.
Section 2.04. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange (the "Note Registrar")
23
<PAGE>
and an office or agency where Notes may be presented for payment (the "Paying
Agent"). The Note Registrar, acting on behalf of and as agent for the Company,
shall keep a register (the "Notes Register") of the Notes and of their transfer
and exchange. The Company may appoint one or more co-registrars and one or more
additional Paying Agents, the term "Note Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Company
may change any Note Registrar or Paying Agent without notice to any Holder.
The Company shall enter into an appropriate agency agreement with any
Note Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the Trust Indenture Act. The agreement
shall implement the provisions of this Indenture that relate to such agent. The
Company shall notify the Trustee of the name and address of any agent not a
party to this Indenture. If the Company fails to maintain a Note Registrar or
Paying Agent, the Trustee shall act as such and shall be entitled to appropriate
compensation therefor pursuant to Section 6.07. The Company or any of its
Subsidiaries may act as Paying Agent, Note Registrar, co-Registrar or transfer
agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Notes, until such time as the Trustee has resigned
or a successor has been appointed. Any of the Note Registrar, the Paying Agent,
the Depository or any other agent may resign upon 30 days' notice to the
Company.
Section 2.05. Paying Agent To Hold Money in Trust.
-----------------------------------
On or prior to each due date of the principal and interest on any
Note, the Company shall deposit with the Paying Agent a sum sufficient to pay
such principal and interest when so becoming due. The Company shall require each
Paying Agent (other than the Trustee) to agree in writing that the Paying Agent
shall hold in trust for the benefit of Noteholders or the Trustee all money held
by the Paying Agent for the payment of the principal of or interest on the Notes
and shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section 2.05, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
Section 2.06. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders and shall otherwise comply with Section 312(a) of the Trust
Indenture Act. If the Trustee is not the Note Registrar, the Company shall
furnish to the Trustee, in writing at least five Business Days before each
interest payment date and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Noteholders; provided that as long as the
--------
Trustee is the Note Registrar, no list need be furnished.
Section 2.07. Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Global Notes. A Global Note may not be
-------------------------------------
transferred as a whole except by the Depository to a nominee of the Depository,
by a nominee of the Depository to the Depository or to another nominee of the
Depository, or by the Depository or any such nominee to a successor Depository
or a nominee of such successor Depository. All Global Notes will be exchanged
by the Company for Definitive Notes in registered certificated form if (i) the
Company delivers to the Trustee notice from the Depository that it is unwilling
or unable to continue to act as Depository or that it is no longer a clearing
agency registered under the Exchange Act and,
24
<PAGE>
in either case, a successor Depository is not appointed by the Company within
120 days after the date of such notice from the Depository, (ii) the Company in
its sole discretion determines that the Global Notes (in whole but not in part)
should be exchanged for Definitive Notes and delivers a written notice to such
effect to the Trustee or (iii) there shall have occurred and be continuing an
Event of Default or any event which after notice or lapse of time or both would
be an Event of Default with respect to the Notes; provided that in no event
shall the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Note Registrar of any certificates identified by the Company
or its counsel to be required pursuant to Rule 903 under the Securities Act.
Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above,
Definitive Notes shall be issued in such names as the Depository shall instruct
the Trustee. Global Notes also may be exchanged or replaced in whole or in
part, as provided in Sections 2.08 and 2.10 hereof. Every Note authenticated
and delivered in exchange for, or in lieu of, a Global Note or any portion
thereof, pursuant to Section 2.08 or 2.10 hereof, shall be authenticated and
delivered in the form of, and shall be, a Global Note. A Global Note may not be
exchanged for another Note other than as provided in this Section 2.07(a);
however, beneficial interests in a Global Note may be transferred and exchanged
as provided in Section 2.07(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in Global Notes.
-------------------------------------------------------------
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depository, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer described in the
Private Placement Legend to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
--------------------------------------------------------
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). Beneficial interests in any Unrestricted
Global Note may be transferred only to Persons who take delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note. No
written orders or instructions shall be required to be delivered to the
Registrar to effect the transfers described in this Section 2.07(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
------------------------------------------------------------
Global Notes. In connection with all transfers and exchanges of beneficial
------------
interests (other than a transfer of a beneficial interest in a Global Note
to a Person who takes delivery thereof in the form of a beneficial interest
in the same Global Note), the transferor of such beneficial interest must
deliver to the Note Registrar either (A) (1) a written order from an Agent
Member to the Depository in accordance with the Applicable Procedures
directing the Depository to credit or cause to be credited a beneficial
interest in another Global Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given in
accordance with the Applicable Procedures containing information regarding
the Agent Member account to be credited with such increase or (B) (1) a
written order from an Agent Member given to the Depository in accordance
with the Applicable Procedures directing the Depository to cause to be
issued a Definitive Note in an amount equal to the beneficial interest to
be transferred or exchanged and (2) instructions given by the Depository to
the Note Registrar
25
<PAGE>
containing information regarding the Person in whose name such Definitive
Note shall be registered to effect the transfer or exchange referred to in
(1) above; provided that in no event shall Definitive Notes be issued upon
the transfer or exchange of beneficial interests in the Regulation S
Temporary Global Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Note Registrar of any certificates identified by
the Company or its counsel to be required pursuant to Rule 903 under the
Securities Act. Upon an Exchange Offer by the Company in accordance with
Section 2.07(f) hereof, the requirements of this Section 2.07(b)(ii) shall
be deemed to have been satisfied upon receipt by the Note Registrar of the
instructions contained in the Letter of Transmittal delivered by the
Holder of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture, the Notes
and otherwise applicable under the Securities Act, the Trustee shall adjust
the principal amount of the relevant Global Note(s) pursuant to Section
2.07(g) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
-------------------------------------------------------------
Note. A beneficial interest in any Restricted Global Note may be
----
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of clause (ii) above and the Note Registrar
receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit C hereto, including the
certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit C hereto, including the
certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
-------------------------------------------------------------
Global Note for Beneficial Interests in the Unrestricted Global Note. A
--------------------------------------------------------------------
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of clause (ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer, is
not (1) a Broker-Dealer, (2) a Person participating in the
distribution of the Notes issued in the Exchange Offer or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement (as defined in the Registration Rights
Agreement) in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by an Exchanging Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Note Registrar receives the following:
26
<PAGE>
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit D
hereto, including the certifications in item (1)(a) thereof;
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Note
Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are
not required in order to maintain compliance with the Securities
Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.03 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to
the principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests in Global Notes for
----------------------------------------------------------------
Definitive Notes.
- ----------------
(i) If any holder of a beneficial interest in a Restricted Global Note
proposes to exchange such beneficial interest for a Restricted Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Restricted Definitive Note then, upon receipt by
the Note Registrar of the following documentation:
(A) if the holder of such beneficial interest proposes to
exchange such beneficial interest for a Restricted Definitive Note, a
certificate from such holder in the form of Exhibit D hereto,
including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit C hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit C hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities
27
<PAGE>
Act, a certificate to the effect set forth in Exhibit C hereto,
including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Accredited Investor in reliance on an exemption from the registration
requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit C hereto, including the certifications, certificates
and Opinion of Counsel required by item (3)(d) thereof, if applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit C hereto, including the certifications in item (3)(b)
thereof;
(G) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit C hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Restricted Global Note to be reduced accordingly pursuant to Section
2.07(g) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Restricted Definitive Note in the appropriate principal amount. Any
Restricted Definitive Note issued in exchange for a beneficial interest in
a Restricted Global Note pursuant to this Section 2.07(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Note Registrar through instructions from the Depository and the Agent
Member. The Trustee shall deliver such Restricted Definitive Notes to the
Persons in whose names such Notes are so registered. Any Restricted
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.07(c)(i) shall bear the
Private Placement Legend and shall be subject to all restrictions on
transfer contained therein.
(ii) Notwithstanding Sections 2.07(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
(A) exchanged for a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Note Registrar of any
certificates required pursuant to Rule 903(c)(B) under the Securities Act
or (B) transferred to a Person who takes delivery thereof in the form of a
Definitive Note prior to the satisfaction of the conditions set forth in
clause (A) above or unless the transfer is pursuant to an exemption from
the registration requirements of the Securities Act other than Rule 903 or
Rule 904.
(iii) Notwithstanding Section 2.07(c)(i) hereof, a holder of a
beneficial interest in a Restricted Global Note may exchange such
beneficial interest for an Unrestricted Definitive Note or may transfer
such beneficial interest to a Person who takes delivery thereof in the form
of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, is not (1) a
Broker-Dealer, (2) a Person participating in the distribution of the
Notes issued in the Exchange Offer or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
28
<PAGE>
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by an Exchanging Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Note Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for an Unrestricted Definitive Note, a certificate from
such holder in the form of Exhibit D hereto, including the
certifications in item (1)(b) thereof;
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a certificate from such
holder in the form of Exhibit C hereto, including the
certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Company,
to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are not
required in order to maintain compliance with the Securities Act.
(iv) If any holder of a beneficial interest in an Unrestricted Global
Note proposes to exchange such beneficial interest for an Unrestricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of an Unrestricted Definitive Note,
then, upon satisfaction of the conditions set forth in Section 2.07(b)(ii)
hereof, the Trustee shall cause the aggregate principal amount of the
applicable Unrestricted Global Note to be reduced accordingly pursuant to
Section 2.07(g) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions an
Unrestricted Definitive Note in the appropriate principal amount. Any
Unrestricted Definitive Note issued in exchange for a beneficial interest
pursuant to this Section 2.07(c)(iv) shall be registered in such name or
names and in such authorized denominations as the holder of such beneficial
interest shall instruct the Note Registrar through instructions from the
Depository and the Agent Member. The Trustee shall deliver such
Unrestricted Definitive Notes to the Persons in whose names such Notes are
so registered. Any Unrestricted Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.07(c)(iv) shall not bear the
Private Placement Legend. A beneficial interest in an Unrestricted Global
Note cannot be exchanged for a Restricted Definitive Note or transferred to
a Person who takes delivery thereof in the form of a Restricted Definitive
Note.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests
------------------------------------------------------------------
in Global Note.
- --------------
(i) If any Holder of a Restricted Definitive Note proposes to exchange
such Note for a beneficial interest in a Restricted Global Note or to
transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Note Registrar of the following documentation:
29
<PAGE>
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit D hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit C hereto, including the
certifications in item (1) thereof; or
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit C hereto, including the certifications in item (2)
thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note and, in the case of clause (C) above, the
Regulation S Global Note.
(ii) A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, is not (1) a Broker-Dealer, (2) a Person
participating in the distribution of the Notes issued in the Exchange
Offer or (3) a Person who is an affiliate (as defined in Rule 144) of
the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by an Exchanging Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Note Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the
form of Exhibit D hereto, including the certifications in item
(1)(c) thereof;
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(4) thereof; and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Company
to the effect that such exchange or transfer is in compliance
with the Securities Act, that the restrictions on transfer
contained herein and in the Private Placement
30
<PAGE>
Legend are not required in order to maintain compliance with the
Securities Act, and that such Restricted Definitive Notes are
being exchanged or transferred in compliance with any applicable
blue sky or securities laws of any State of the United States.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.07(d)(ii), the Trustee shall cancel the Restricted Definitive
Notes and increase or cause to be increased the aggregate principal amount
of the Unrestricted Global Note.
(iii) A Holder of an Unrestricted Definitive Note may exchange such
Note for a beneficial interest in an Unrestricted Global Note or transfer
such Unrestricted Definitive Note to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraph (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an authentication
order in accordance with Section 2.O3 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of beneficial interests
transferred pursuant to subparagraph (ii)(B), (ii)(D) or (iii) above.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
--------------------------------------------------------------
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.07(e), the Note Registrar shall register the
transfer or exchange, the requesting Holder shall present or surrender to the
Note Registrar the Definitive Notes duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Note Registrar duly executed
by such Holder or by his attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, pursuant to the provisions of this Section 2.07(e).
(i) Restricted Definitive Notes may be transferred to and registered
in the name of Persons who take delivery thereof if the Note Registrar
receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit C hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit C hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit C hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person or
Persons who take delivery thereof in the form of an Unrestricted Definitive
Note if:
31
<PAGE>
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, is not (1) a Broker-Dealer, (2) a Person
participating in the distribution of the Notes issued in the Exchange
Offer or (3) a Person who is an affiliate (as defined in Rule 144) of
the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by an Exchanging Dealer
pursuant to the Exchange Offer registration statement in accordance
with the Registration Rights Agreement; or
(D) the Note Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit D
hereto, including the certifications in item (1)(d) thereof;
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note,
a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Company
to the effect that such exchange or transfer is in compliance
with the Securities Act, that the restrictions on transfer
contained herein and in the Private Placement Legend are not
required in order to maintain compliance with the Securities
Act, and that such Restricted Definitive Note is being exchanged
or transferred in compliance with any applicable blue sky or
securities laws of any State of the United States.
(iii) A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request for such a transfer, the Note
Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof. Unrestricted Definitive Notes cannot
be exchanged for or transferred to Persons who take delivery thereof in the
form of a Restricted Definitive Note.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
--------------
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an authentication order in accordance with Section 2.03, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
are not (x) Broker-Dealers, (y) Persons participating in the distribution of the
Notes issued in the Exchange Offer or (z) Persons who are Affiliates (as defined
in Rule 144) of the Company and accepted for exchange in the Exchange Offer and
(ii) Unrestricted Definitive Notes in an aggregate principal amount equal to the
principal amount of the Restricted Definitive Notes accepted for exchange in the
Exchange Offer. Concurrent with the issuance of such Notes, the Trustee shall
cause the aggregate principal amount of the applicable Restricted Global Notes
to be reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the
32
<PAGE>
Persons designated by the Holders of Definitive Notes so accepted Unrestricted
Definitive Notes in the appropriate principal amount.
(g) Cancellation and/or Adjustment of Global Notes. At such time as
----------------------------------------------
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note, by the
Trustee or by the Depository at the direction of the Trustee, to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note, by the Trustee or by the
Depository at the direction of the Trustee, to reflect such increase.
(h) General Provisions Relating to Transfers and Exchanges.
------------------------------------------------------
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon receipt of a Company Order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Sections
2.10, 9.06, 10.13, 10.15 and 11.01 hereof).
(iii) The Note Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange Notes during a period beginning at the opening
of business 15 days before the day of any selection of Notes for redemption
under Section 11.03 hereof and ending at the close of business on the day
of selection, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part, or (C) to register the transfer of or
to exchange a Note between a record date and the next succeeding Interest
Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
33
<PAGE>
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.03 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Note Registrar pursuant to this Section
2.07 to effect a transfer or exchange may be submitted by facsimile.
Section 2.08. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Trustee or Note Registrar or
if the Holder of a Note claims that the Note has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee, upon written order of
the Company signed by an officer of the Company, shall authenticate a
replacement Note if the requirements of Section 8-405 of the Uniform Commercial
Code are met and the Holder satisfies any other reasonable requirements of the
Trustee and the Company. Such Holder shall furnish an indemnity bond sufficient
in the judgment of the Company and the Trustee to protect the Company, the
Trustee, the Paying Agent, the Note Registrar and any co-registrar from any loss
which any of them may suffer if a Note is replaced. The Company and the Trustee
may charge the Holder for their expenses in replacing a Note.
Every replacement Note issued pursuant to the terms of this Section
shall constitute an additional obligation of the Company under this Indenture.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.09. Outstanding Notes.
-----------------
Notes outstanding at any time are all Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation
and those described in this Section as not outstanding. Except as otherwise
provided herein, a Note does not cease to be Outstanding because the Company or
an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.08, it ceases to be
Outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Note is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or Stated Maturity or, pursuant to Section
4.02, within 91 days prior thereto, money sufficient to pay all principal and
interest payable on that redemption or Stated Maturity date with respect to the
Notes (or portions thereof) to be redeemed or maturing, as the case may be, then
on and after such date such Notes (or portions thereof) cease to be outstanding
and on and after such redemption or Stated Maturity interest on them ceases to
accrue.
Section 2.10. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive Notes
and deliver them in exchange for temporary Notes. Holders of temporary Notes
shall be entitled to all the benefits of this Indenture.
34
<PAGE>
Section 2.11. Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Note Registrar and the Paying Agent shall forward to the
Trustee any Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Notes surrendered for
registration of transfer, exchange, payment or cancellation and deliver such
canceled Notes to the Company. The Trustee shall from time to time provide the
Company a list of all Notes that have been canceled as requested by the Company.
The Company may not issue new Notes to replace Notes it has redeemed, paid or
delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Notes, the
Company shall pay defaulted interest (plus interest on such defaulted interest
to the extent lawful) in any lawful manner in accordance with Section 3.03. The
Company may pay the defaulted interest to the persons who are Noteholders on a
subsequent Special Record Date. The Company shall fix or cause to be fixed any
such Special Record Date and payment date to the reasonable satisfaction of the
Trustee and shall promptly mail to each Noteholder a notice that states the
Special Record Date, the payment date and the amount of defaulted interest to be
paid.
Section 2.13. CUSIP Numbers.
-------------
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the CUSIP numbers.
Section 2.14. Restrictive Legends.
-------------------
The legends set forth in this Section 2.14 shall appear on the face of
all Global Notes and Definitive Notes issued under this indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(a) Private Placement Legend.
------------------------
(A) Except as permitted by subparagraph (b) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or in substitution thereof) shall bear the legend in
substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY,
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING
THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(K) (TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144(D) UNDER THE
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SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE
DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM
THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
(E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF NOTES AT THE TIME OF TRANSFER OF LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE
TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING RESTRICTIONS."
(B) Notwithstanding the foregoing, any Unrestricted Global Note
or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(iii),
(c)(iv), d(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of Section 2.07
(and all Notes issued in exchange therefor or substitution thereof)
shall not bear the Private Placement Legend.
(b) Global Note Legend. Each Global Note shall also bear the
------------------
following legend on the face thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR
ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO AN ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.07 OF THE INDENTURE.
(c) Regulation S Temporary Global Note Legend.
-----------------------------------------
The Regulation S Temporary Global Note shall also bear the following
legend on the face thereof:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
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HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S
TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE CASH PAYMENTS OF
INTEREST DURING THE PERIOD WHICH SUCH HOLDER HOLDS THIS NOTE. NOTHING IN
THIS LEGEND SHALL BE DEEMED TO PREVENT INTEREST FROM ACCRUING ON THIS
NOTE."
ARTICLE 3
THE NOTES
Section 3.01. Title and Terms.
---------------
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $200,000,000, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 2.07, 2.08, 2.10, 9.06, or
11.08.
The Notes shall be known and designated as the "9.75% Senior
Subordinated Notes due October 1, 2007" of the Company. Their final Stated
Maturity shall be October 1, 2007, and they shall bear interest at the rate of
9.75% per annum, from the date of initial issuance or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, as
the case may be, payable semi-annually on April 1 and October 1, commencing
October 1, 1997 until the principal thereof is paid or made available for
payment.
The principal of and interest on the Notes shall be payable at the
office or agency of the Company in Minneapolis, Minnesota or the city in which
the Corporate Trust Office of the Trustee is located for such purpose and at any
other office or agency maintained by the Company for such purpose; provided,
however, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Note Register.
The Notes shall be redeemable as provided in Article Eleven.
The Notes shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Twelve.
The Notes shall be subject to repurchase at the option of the Holder
as provided in Sections 10.13 and 10.15.
Section 3.02. Denominations.
-------------
The Notes shall be issuable only in fully registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 3.03. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special
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Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Note and the date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as in
this clause provided. Thereupon the Trustee shall fix a Special Record
Date for the payment of such Defaulted Interest which shall be not more
than 15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of the
notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder at his address as it appears in the Note
Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following clause (ii).
(ii) The Company may make payment of any Defaulted Interest in any
other lawful manner, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.03, each Note
delivered under this Indenture upon registration of, transfer of, or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
Section 3.04. Persons Deemed Owners.
---------------------
Prior to due presentment of a Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Note is registered as the owner of such Note for the
purpose of receiving payment of principal of and (subject to Section 3.03)
interest on such Note and for all other purposes whatsoever, whether or not such
Note be overdue, and neither the Company, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.
Section 3.05. Computation of Interest.
-----------------------
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
ARTICLE 4
SATISFACTION AND DISCHARGE; DEFEASANCE
Section 4.01. Satisfaction and Discharge of Indenture.
---------------------------------------
(a) This Indenture shall cease to be of further effect (except as to
any surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(i) either
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(A) all Notes theretofore authenticated and delivered (other than
(1) Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.08 and (2) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section
10.03) have been delivered to the Trustee for cancellation; or
(B) all such Notes not theretofore delivered to the Trustee for
cancellation (1) have become due and payable, (2) will become due and
payable at their Stated Maturity within one year, or (3) are to be
called for redemption within one year pursuant to Article 11 hereof
and under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the expense,
of the Company, and, the Company, in the case of (1), (2) or (3)
above, has deposited or caused to be deposited with the Trustee as
trust in trust for the purpose an amount of United States dollars or
U.S. Government Obligations sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the Trustee
for cancellation of principal and interest to the date of such deposit
(in the case of Notes which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be; and
(ii) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07, the obligations of
the Trustee to any Authenticating Agent under Section 6.14 and, if money shall
have been deposited with the Trustee pursuant to subclause (i)(B) of clause (a)
of this Section, the obligations of the Trustee under Section 4.05 and the last
paragraph of Section 10.03 shall survive. Except as specifically agreed in
writing, the Trustee shall not be responsible for the payment of interest upon
money deposited with it under this Indenture.
Section 4.02. Option To Effect Legal Defeasance Or Covenant Defeasance.
--------------------------------------------------------
The Company may, at its option and, at any time, elect to have either
Section 4.03 or 4.04 hereof be applied to all outstanding Notes upon compliance
with the conditions set forth below in this Article Four.
Section 4.03. Legal Defeasance and Discharge.
------------------------------
Upon the Company's exercise under Section 4.02 hereof of the option
applicable to this Section 4.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 4.05 hereof, be deemed to have been
discharged from their obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be outstanding only for
the purposes of Section 4.06 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all their other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders
of outstanding Notes to receive payments
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in respect of the principal of, and interest on, the Notes when such payments
are due from the trust referred to in Section 4.06 hereof, (ii) the Company's,
obligations with respect to such Notes under Article Two and Section 10.02
hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee
hereunder, and the Company's obligations in connection therewith and (iv) this
Article Four. Subject to compliance with this Article Four, the Company may
exercise their option under this Section 4.03 notwithstanding the prior exercise
of their option under Section 4.04 with respect to the Notes.
Section 4.04. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 4.02 hereof of the option
applicable to this Section 4.04, the Company shall, subject to the satisfaction
of the conditions set forth in Section 4.05 hereof, be released from its
obligations under the covenants contained in Sections 10.10, 10.11, 10.12,
10.13, 10.14, 10.15, 10.17 and 10.18 hereof with respect to the outstanding
Notes on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not outstanding for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 5.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 4.02 hereof of
the option applicable to this Section 4.04, subject to the satisfaction of the
conditions set forth in Section 4.05 hereof, Sections 5.01(c) through 5.01(g)
hereof shall not constitute Events of Default.
Section 4.05. Conditions to Defeasance.
------------------------
The Company may exercise Legal Defeasance or Covenant Defeasance only
if:
(1) the Company irrevocably deposits with the Trustee, in trust (the
"defeasance trust") for the benefit of the Holders, cash in U.S. dollars,
U.S. Government Obligations or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay principal and interest on the
outstanding Notes on the Stated Maturity or the applicable Redemption Date,
as the case may be, of such principal or installment of principal or
interest on the Outstanding Notes;
(2) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel (which counsel may be an employee of
the Company or any Subsidiary of the Company) reasonably acceptable to the
Trustee confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the
Issuance Date, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the Outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
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(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel (which counsel may be an
employee of the Company or any Subsidiary of the Company) reasonably
acceptable to the Trustee confirming that the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time during the period ending on the 91st day after the
date of deposit (or greater period of time in which any such deposit of
trust funds may remain subject to bankruptcy or insolvency laws insofar as
those apply to the deposit by the Company);
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(6) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that, as of the date of such opinion, (A) the trust
funds will not be subject to any rights of holders of Indebtedness other
than the Notes and (B) assuming no intervening bankruptcy of the Company
between the date of deposit and the 91st day following the deposit and
assuming no Holder of Notes is an insider of the Company, after the 91st
day following the deposit, the trust funds will not be subject to the
effects of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally under any applicable United
States or state law;
(7) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(8) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel (which counsel may be an employee of
the Company), each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Opinions of Counsel required to be delivered under this Section 4.05
may have qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact.
Section 4.06. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.03 or 4.04 shall be held
in trust and applied by the Trustee, in accordance with the provisions of the
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
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ARTICLE 5
DEFAULTS AND REMEDIES
Section 5.01. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest upon any Note when it
becomes due and payable, and continuance of such default for a period of 30
days, whether or not such payment is prohibited by the subordination provisions
contained in Article Twelve; or
(b) default in the payment of the principal of any Note when due,
whether or not such payment is prohibited by the subordination provisions
contained in Article Twelve; or
(c) default in the performance, or breach, of any covenant of the
Company in this Indenture (other than a covenant a default in whose performance
or whose breach is elsewhere in this Section 5.01 specifically dealt with), and
continuance of such default or breach for a period of 30 days after there has
been given, by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in principal amount
of the Outstanding Notes, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(d) a failure by the Company or any Significant Subsidiary to make
any payment in respect of any Indebtedness (other than Non-Recourse Debt) in an
amount in excess of $15 million and continuance of such failure for at least
ninety (90) days, or a default by the Company or any Significant Subsidiary with
respect to any Indebtedness, which default results in the acceleration of the
Indebtedness in an amount in excess of $15 million, without such Indebtedness
having been discharged or such acceleration having been cured, waived, rescinded
or annulled within 90 days of such acceleration; or
(e) a final judgment or judgments for payment of money against the
Company or any Significant Subsidiary which remains undischarged for a period
ending on the later of (i) 60 days after the entry of such judgment, as extended
by any effective stay of its execution; or (ii) the date on which any payment is
or becomes due and payable pursuant to such judgment in accordance with its
terms, other than final judgments with respect to Non-recourse Debt of the
Company or any of its Significant Subsidiaries, provided that the aggregate of
--------
all such outstanding judgments exceed $15 million (excluding any amounts covered
by insurance as to which the insurer has not denied liability); or
(f) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding under any applicable Federal
or state bankruptcy, insolvency, reorganization or other similar law or (ii) a
decree or order adjudging the Company or any of its Significant Subsidiaries a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company or any of its Significant Subsidiaries under any applicable Federal or
state law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company or any of its Significant
Subsidiaries or of any substantial part of their property, or ordering the
winding up or liquidation
42
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of its affairs, and the continuance of any such decree or order for relief or
any such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(g) the commencement by the Company or any of its Significant
Subsidiaries of a voluntary case or proceeding under any applicable Federal or
state bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of the
Company or any of its Significant Subsidiaries in an involuntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable Federal
or state law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or any of its
Significant Subsidiaries or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company or any of its Significant
Subsidiaries in substantial furtherance of any such action.
Section 5.02. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than an Event of Default specified in
Section 5.01(f) or 5.01(g) with respect to the Company) occurs and is
continuing, then and in every such case either the Trustee or the Holders of at
least 25% in principal amount of the Outstanding Notes may declare the principal
of all the Notes to be due and payable immediately, by a notice in writing to
the Company (and to the Trustee if given by Holders), and upon any such
declaration such principal shall become immediately due and payable. If an
Event of Default specified in Section 5.01(f) or 5.01(g) occurs and is
continuing with respect to the Company, the principal and any accrued interest
thereon, of all the then Outstanding Notes shall ipso facto become due and
---- -----
payable immediately without any declaration or other act on the part of the
Trustee or any Holder.
At any time after such a declaration of acceleration has been made,
the Holders of a majority in principal amount of the Outstanding Notes, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if the Company has paid or deposited with the
Trustee a sum sufficient to pay
(a) all overdue interest on all Notes,
(b) the principal of any Notes which have become due otherwise than
by such declaration of acceleration and interest thereon at the rate of 9.75%
per annum,
(c) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate of 9.75% per annum,
(d) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel and
(e) all Events of Default, other than the non-payment of the
accelerated principal and interest of Notes which have become due solely by such
declaration of acceleration, have been cured or waived (as provided in Section
5.13).
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
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Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee.
---------------------------------------------------------------
The Company covenants that if
(a) default is made in the payment of any interest on any Note when
such interest becomes due and payable and such default continues for a period of
30 days; or
(b) default is made in the payment of the principal of any Note when
due, the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Notes, the whole amount then due and payable on such Notes
for principal and interest, and, to the extent that payment of such interest
shall be legally enforceable, interest on any overdue principal and on any
overdue interest, at a rate of 9.75% per annum, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may (i)
institute a judicial proceeding for the collection of the sums so due and
unpaid, (ii) prosecute such proceeding to judgment or final decree and may (iii)
enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
Section 5.04. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the Notes
or the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Notes shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Trustee shall have made any demand on the Company for the payment
of overdue principal or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and take such other actions,
including participating as a member, voting or otherwise, of any official
committee of creditors appointed in such matter and to file such other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including, without limitation, any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and of the Holders of Notes allowed in such judicial proceeding;
and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses,
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disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding; provided, however, that the
Trustee may, on behalf of such Holders, vote for the election of a trustee in
bankruptcy or similar official and may serve on a creditor's committee.
Section 5.05. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Notes in respect of which such judgment has been recovered.
Section 5.06. Application of Money Collected.
------------------------------
Subject to Article Twelve, any money collected by the Trustee pursuant
to this Article Five shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal or interest, upon presentation of the Notes and the
notation thereon of the payment if only partially paid, and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due to the Trustee under Section
6.07; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest on the Notes in respect of which or for the
benefit of which such money has been collected, ratably, without preference
or priority of any kind, according to the amounts due and payable on such
Notes for principal and interest, respectively.
THIRD: Any remaining amounts, if any, shall be repaid to the Company,
its successors or assigns, or to whomever may be lawfully entitled to the
same, or as a court of competent jurisdiction may determine.
Section 5.07. Limitation on Suits.
-------------------
No Holder of any Note shall have any right to institute any action,
suit or proceeding, judicial or otherwise, with respect to this Indenture, or
for the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
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(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such action, suit or
proceeding; and
(e) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Notes; it being understood and intended that
no one or more Holders shall have any right in any manner whatever by virtue of,
or by availing itself of, any provision of this Indenture to affect, disturb or
prejudice the rights of any other Holders, or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all the Holders.
Section 5.08. Unconditional Right of Holders To Receive Principal and Interest.
----------------------------------------------------------------
Notwithstanding any other provision in this Indenture, but subject to
the provisions of Article Twelve, the Holder of any Note shall have the right,
which is absolute and unconditional, to receive payment of the principal of and
(subject to Section 3.03) interest on such Note on the respective Stated
Maturities expressed in such Note (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the prior written consent of such
Holder.
Section 5.09. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 5.10. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of
Section 2.08, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 5.12. Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding Notes
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust
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or power conferred on the Trustee, provided that (i) such direction shall not be
in conflict with (x) any rule of law, (y) this Indenture, or (z) the
indemnification provided by the Holder or Holders to the Trustee pursuant to
Section 5.07, and (ii) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
Section 5.13. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Notes may on behalf of the Holders of all the Notes waive any past
default hereunder and its consequences, except a default
(a) in the payment of the principal of or interest on any Note, or
(b) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of each
Outstanding Note affected; provided, however, that no such waiver shall be
effected until all amounts then due to the Trustee under Section 6.07 have been
paid.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 5.14. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Note by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Notes, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of or interest on any Note on or after the respective Stated
Maturities expressed in such Note (or, in the case of redemption, on or after
the Redemption Date) or for the enforcement of the right to require the Company
to repurchase any Notes in accordance with the provisions of Section 10.15.
Section 5.15. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE 6
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture, but need not verify the
accuracy of the contents thereof.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(i) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section 6.01;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in principal amount of the
Outstanding Notes relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
Section 6.02. Notice of Defaults.
------------------
Within 90 days after the occurrence of any default hereunder, the
Trustee shall transmit by mail to all Holders, as their names and addresses
appear in the Note Register, notice of such default hereunder known to the
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Trustee, unless such default shall have been cured or waived; provided, however,
that, except in the case of a default in the payment of the principal of or
interest on any Note, the Trustee shall be protected in withholding such notice
if and so long as the board of directors, the executive committee or a trust
committee of directors or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default.
Section 6.03. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) the permissive right of the Trustee to take or refrain from taking
any actions enumerated in this Indenture shall not be construed as a duty and
the Trustee shall not be answerable in such actions other than for its own
negligence or bad faith; and
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(i) the Trustee shall not be deemed to know of any fact or event upon
the occurrence of which it may be required to take action hereunder (except with
respect to monetary defaults) unless one of its Responsible Officers shall have
actual knowledge thereof.
Section 6.04. Not Responsible for Recitals or Issuance of Notes.
-------------------------------------------------
The recitals contained herein and in the Notes, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Notes. The Trustee shall not be accountable for the use or application
by the Company of Notes or the proceeds thereof.
Section 6.05. May Hold Notes.
--------------
The Trustee, any Authenticating Agent, any Paying Agent, any Note
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Notes and, subject to Sections 6.08
and 6.13, may otherwise deal with the Company with the same rights it would have
if it were not Trustee, Authenticating Agent, Paying Agent, Note Registrar or
such other agent.
Section 6.06. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company in writing.
Section 6.07. Compensation and Reimbursement.
------------------------------
The Company agrees:
(a) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
trust, including the costs, expenses and reasonable attorneys' fees of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
Section 6.08. Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire any conflicting interest, within
the meaning of the Trust Indenture Act, it shall, within 90 days after
ascertaining that it has such conflicting interest, either eliminate such
conflicting interest or resign in accordance with the provisions of the Trust
Indenture Act.
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Section 6.09. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by Federal and
State or District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article and a
successor shall be appointed pursuant to Section 6.10.
Section 6.10. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Notes, delivered to the Trustee
and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.08 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Note for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.09 and
shall fail to resign after written request therefor by the Company or by
any such Holder (as described in the preceding subsection (d)(i)), or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation
then, in any such case, (1) the Company by a Board Resolution may remove the
Trustee, or (2) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Notes delivered to
the Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the
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Company. If no successor Trustee shall have been so appointed by the Company or
the Holders and accepted appointment in the manner hereinafter provided, any
Holder who has been a bona fide Holder of a Note for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to all Holders as
their names and addresses appear in the Note Register. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
Section 6.11. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article Six.
Section 6.12. Merger, Consolidation or Succession to Business.
-----------------------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article Six,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Notes shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Trustee had itself authenticated such Notes.
Section 6.13. Preferential Collection of Claims Against Company.
-------------------------------------------------
If the Trustee shall be or shall become a creditor, directly or
indirectly, secured or unsecured, of the Company or any other obligor on the
Notes, the Trustee shall be subject to and comply with the provisions of the
Trust Indenture Act regarding the collection of claims against the Company or
such other obligor.
Section 6.14. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Notes issued upon
original issue and upon exchange, registration of transfer, or partial
redemption or pursuant to Section 2.07, and Notes so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and
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delivery of Notes by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be subject to acceptance by the Company and shall at
all times be a corporation organized and doing business under the laws of the
United States of America, any State thereof or The District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be subject to acceptance by the Company and shall mail written
notice of such appointment by first-class mail, postage prepaid, to all Holders
as their names and addresses appear in the Note Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.07.
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If an appointment is made pursuant to this Section 6.14, the Notes may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Notes described in the within-mentioned Indenture.
Norwest Bank Minnesota, National Association
As Trustee
By: ___________________________
Authorized Officer
By: ___________________________
As Authenticating Agent
By: ___________________________
Authorized Officer
ARTICLE 7
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01. Company to Furnish Trustee Names and Addresses of Holders.
---------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
Excluding from any such list names and addresses received by the
Trustee in its capacity as Note Registrar.
Section 7.02. Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in its capacity as Note Registrar.
The Trustee may destroy any list furnished to it as provided in Section 7.01
upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Notes, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.
(c) Every Holder of Notes, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
made pursuant to the Trust Indenture Act.
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Section 7.03. Reports by Trustee.
------------------
(a) On or about each May 15, the Trustee shall transmit to Holders
such reports, if any, concerning the Trustee and its actions under this
Indenture as may be required pursuant to the Trust Indenture Act in the manner
provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Notes are listed (if applicable), with the Commission and with the Company. The
Company will notify the Trustee when the Notes are listed on any stock exchange
(if applicable).
Section 7.04. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to the Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to the Trust Indenture Act; provided
that any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed
with the Trustee within 15 days after the same is so required to be filed with
the Commission.
ARTICLE 8
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 8.01. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not consolidate with or merge into any other Person
or, transfer or lease all or substantially all of its properties and assets to
any Person unless:
(a) the Person formed by such consolidation or into which the Company
is merged or the Person to which the properties and assets of the Company are so
transferred or leased (the "Successor Company") (i) shall be a corporation,
partnership or trust, organized and existing under the laws of the United
States, any State thereof or the District of Columbia and (ii) shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the payment of the principal of
and interest on the Notes and the performance of the other covenants of the
Company under this Indenture;
(b) immediately after giving effect to such consolidation, merger,
transfer or lease of all or substantially all of its properties and assets, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing;
(c) except in the case of a merger, the sole purpose of which is to
change the Company's jurisdiction of incorporation, immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to Section 10.10(a); and
(d) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
transfer or lease and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture, complies with this Article
Eight, and that all conditions precedent herein provided relating to such
transaction have been complied with.
55
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Section 8.02. Successor Substituted.
---------------------
Upon any consolidation of, merger of, transfer or lease of all or
substantially all of the assets of the Company in accordance with Section 8.01
the Successor Company shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture with the same effect
as if such Successor Company had been named as the Company herein, and the
Company shall be released from its obligations under this Indenture and the
Notes.
ARTICLE 9
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein and
in the Notes; or
(b) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the Company;
or
(c) to secure the Notes; or
(d) to make provision with respect to the repurchase obligations of
the Company pursuant to the requirements of Section 10.13 or Section 10.15; or
(e) to add any additional Events of Default; or
(f) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(g) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this
Indenture, provided such action pursuant to this clause (g) shall not adversely
affect the interests of the Holders.
Section 9.02. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Notes, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board Resolution,
and the Trustee may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture; provided, however, that
no such supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(a) (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, (ii) reduce the principal amount of, or
interest on, any Note, (iii) reduce the amount payable upon an optional
redemption, (iv) modify the provisions with respect to the repurchase right of
the Holders in a manner adverse to the Holders, (v) change the place or currency
of payment of principal of, or interest on, any Note, (vii) impair the right to
institute suit for the enforcement of any payment on or with
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respect to any Note, (viii) modify the subordination provisions in a manner
adverse to the Holders of the Notes, or
(b) reduce the percentage in principal amount of the Outstanding Notes
the consent of whose Holders is required for any such supplemental indenture, or
the consent of whose Holders is required for any waiver (of compliance with
certain provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or
(c) reduce the above stated percentage of Outstanding Notes necessary
to modify or amend the Indenture.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 9.03. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.01) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which, in the Trustee's
sole discretion, affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
Section 9.05. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.06. Reference in Notes to Supplemental Indentures.
---------------------------------------------
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
Section 9.07. Notice of Supplemental Indentures.
---------------------------------
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 9.01 or Section
9.02, the Company shall give notice to all Holders of Notes of such fact,
setting forth in general terms the substance of such supplemental indenture, in
the manner provided in Section 1.06. Any failure of the Company to give such
notice, or any defect therein, shall not in any way impair or affect the
validity of any such supplemental indenture.
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ARTICLE 10
COVENANTS
Section 10.01. Payment of Principal and Interest.
---------------------------------
The Company will duly and punctually pay the principal of and interest
on the Notes in accordance with the terms of the Notes and this Indenture.
Section 10.02. Maintenance of Office or Agency.
-------------------------------
The Company hereby appoints the Corporate Trust Office of the Trustee,
as its agent in the city of Minneapolis, Minnesota where Notes may be presented
or surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange, may be delivered and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served.
The Company hereby also appoints the Corporate Trust Office of the
Trustee as Paying Agent for the payment of principal of, and interest on the
Notes and appoints the Corporate Trust Office of the Trustee as transfer agent
where Notes may be surrendered for registration of transfer or exchange.
Until all of the Notes have been delivered to the Trustee for
cancellation, or moneys sufficient to pay the principal of and interest on Notes
have been made available for payment and either paid or returned to the Company
pursuant to the provisions of Section 10.03, the Company will maintain in the
city of Minneapolis, Minnesota an office or agency where Notes may be presented
or surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange, where Notes may be surrendered for redemption and where
notices and demand to or upon the Company, in respect of the Notes and this
Indenture may be served. The Company will give prompt written notice to the
Trustee, and will give notice to Holders of Notes in the manner specified in
Section 1.06 of the appointment or termination of any such agents and of the
location and any change in the location of any such office or agency.
If at any time the Company shall fail to maintain any such required
office or agency, or shall fail to furnish the Trustee with the address thereof,
presentations and surrenders may be made and notice and demands may be served on
and Notes may be surrendered for redemption to the Corporate Trust Office of the
Trustee, and the Company hereby appoints the same as its agent to receive such
respective presentations, surrenders, notices and demands.
Section 10.03. Money for Note Payments to Be Held in Trust.
-------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of or interest on any of the Notes,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided and
will promptly notify the Trustee of its action or failure so to act. Whenever
the Company shall have one or more Paying Agents, it will, prior to each due
date of the principal of or interest on any Notes, deposit with a Paying Agent a
sum sufficient to pay the principal or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
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shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(i) hold all sums held by it for the payment of the principal of or
interest on Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as
herein provided;
(ii) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal or
interest; and
(iii) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on any
Note and remaining unclaimed for two years after such principal or interest has
become due and payable shall, subject to applicable escheat and abandoned
property law, be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may, at the
expense of the Company, cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York and in the city in which the Corporate Trust
Office of the Trustee is located, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 10.04. Statement by Officers as to Default.
-----------------------------------
The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year of the Company, an Officer's Certificate stating whether or
not to the knowledge of the signers thereof the Company is in compliance with
all conditions and covenants under the Indenture (without regard to any period
of grace or requirement of notice provided hereunder). The Company will deliver
to the Trustee, within 3 Business Days after becoming aware of any default or
Event of Default under this Indenture, an Officers' Certificate specifying with
particularity such default or Event of Default and further stating what action
the Company has taken, is taking or proposes to take with respect thereto. For
the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default. The
Company shall also comply with Trust Indenture Act Section 314(a)(4).
Any notice required to be given under this Section 10.04 shall be
delivered to the Trustee at its Corporate Trust Office.
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Section 10.05. Existence.
---------
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
Section 10.06. Maintenance of Properties.
-------------------------
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section 10.06 shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
Section 10.07. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (ii)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the real or personal property of the Company or any
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which disputed amounts adequate reserves in
accordance with generally accepted accounting principles have been made.
Section 10.08. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 10.02, 10.03, 10.05, 10.06, 10.10,
10.11, 10.12, 10.13, 10.14, 10.15, 10.17 and 10.18 if before the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Notes shall, by Act of such Holders, either waive such compliance in
such instance or generally waive compliance with such covenant or condition, but
no such waiver shall extend to or affect such covenant or condition except to
the extent so expressly waived, and, until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in respect of any
such covenant or condition shall remain in full force and effect.
Section 10.09. Book-Entry System.
-----------------
If the Notes cease to trade in the Depository's book-entry settlement
system, the Company covenants and agrees that it shall use reasonable efforts to
make such other book-entry arrangements that it determines are reasonable for
the Notes.
Section 10.10. Limitation on Indebtedness.
--------------------------
(a) The Company will not, and will not permit any Restricted
Subsidiary to, Incur, directly or indirectly, any Indebtedness unless,
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immediately after giving effect to such Incurrence, the Consolidated Coverage
Ratio exceeds 2.0 to 1.
(b) Notwithstanding Section 10.10(a), the Company and its Restricted
Subsidiaries may Incur any or all of the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Credit Agreements; provided,
--------
however, that, after giving effect to any such Incurrence, the aggregate
-------
principal amount of such Indebtedness then outstanding does not exceed the
greater of (x) $200 million and (y) 90% of the Mortgages Receivable of the
Company and its Restricted Subsidiaries;
(ii) Indebtedness represented by the Notes issued in the Note Offering
(and the Exchange Notes);
(iii) Indebtedness outstanding pursuant to the Convertible Notes, or,
in the event that all or any portion of the Convertible Notes have been
converted into the Capital Stock of the Company, other Indebtedness of the
Company which is subordinated to the Notes at least to the same extent that
the Convertible Notes are subordinated to the Notes, in a principal amount
not to exceed the principal amount of the Convertible Notes that have been
so converted;
(iv) Indebtedness of the Company owed to and held by any Wholly Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by
the Company or a Wholly Owned Subsidiary; provided, however, that any
-------- -------
subsequent issuance or transfer of any Capital Stock which results in any
such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of such Indebtedness (other than to the Company or
Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the issuer thereof;
(v) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (ii) or (iii) or this
clause (v) of this Section 10.10(b);
(vi) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds entered into by
the Company and the Restricted Subsidiaries in the ordinary course of their
business;
(vii) Hedging Obligations consisting of Interest Rate Agreements and
Currency Agreements entered into in the ordinary course of business and not
for the purpose of speculation;
(viii) Purchase Money Indebtedness and Capital Lease Obligations
Incurred to finance the acquisition, lease or improvement either directly
or indirectly, through the purchase of Capital Stock, by the Company or a
Restricted Subsidiary of any assets in the ordinary course of business and
which do not exceed $25 million in the aggregate at any time outstanding;
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business, provided that such Indebtedness
--------
is extinguished within five business days of Incurrence;
(x) Indebtedness of the Company and its Restricted Subsidiaries
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, in any case Incurred in connection
with the disposition of any assets of the Company or any Restricted
Subsidiary (other than Guarantees of Indebtedness Incurred by
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any Person acquiring all or any portion of such assets for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition;
(xi) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including, without
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; provided, however, that
-------- -------
upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
(xii) Indebtedness or Disqualified Capital Stock of Persons that are
acquired by the Company or any of its Restricted Subsidiaries or merged
into the Company or a Restricted Subsidiary in accordance with the terms of
this Indenture; provided that such Indebtedness or Disqualified Capital
--------
Stock is not incurred in contemplation of such acquisition or merger; and
provided further that after giving effect to such acquisition, either (x)
-------- -------
the Company would be permitted to incur at least $1.00 of additional
Indebtedness or (y) the Consolidated Coverage Ratio is greater than
immediately prior to such acquisitions; and
(xiii) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the date of such Incurrence (other than Indebtedness
permitted by clauses (i) through (xii) above or paragraph (a)), does not
exceed $25 million.
(c) Notwithstanding Section 10.10(a) or (b), the Company shall not
Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking
in any respect to any Senior Indebtedness of the Company unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in
right of payment to the Senior Subordinated Indebtedness.
(d) For purposes of determining compliance with this Section 10.10,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described in Section 10.10(b), the Company, in
its sole discretion, will classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of the
clauses contained therein and (ii) an item of Indebtedness may be divided and
classified in more than one of the types of Indebtedness described in Section
10.10(b).
Section 10.11. Limitation on Restricted Payments.
---------------------------------
(a) The Company will not, and will not permit any Restricted
Subsidiary, directly or indirectly, to make a Restricted Payment if at the time
the Company or such Restricted Subsidiary makes such Restricted Payment: (i) a
Default shall have occurred and be continuing (or would result therefrom); (ii)
the Company is not able to Incur an additional $1.00 of Indebtedness under
Section 10.10(a); or (iii) the aggregate amount of such Restricted Payment
together with all other Restricted Payments (the amount of any payments made in
property other than cash to be valued at the fair market value of such property,
as determined in good faith by the Board of Directors) declared or made since
the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Notes are
originally issued to the end of the most recent fiscal quarter prior to the
date of such Restricted Payment for which financial statements of
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the Company are available (or, in case such Consolidated Net Income accrued
during such period (treated as one accounting period) shall be a deficit,
minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company);
(C) the amount by which Indebtedness of the Company or its Restricted
Subsidiaries is reduced on the Company's balance sheet upon the conversion
or exchange (other than by a Subsidiary of the Company) subsequent to the
Issue Date, of any Indebtedness (issued subsequent to the Issue Date) of
the Company or its Restricted Subsidiaries convertible or exchangeable for
Capital Stock (other than Disqualified Capital Stock) of the Company (less
the amount of any cash, or the fair market value of any other property,
distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange);
(D) an amount equal to the sum of (i) the reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, repayments of loans or
advances or other transfers of assets subsequent to the Issue Date, in each
case to the Company or any Restricted Subsidiary from Unrestricted
Subsidiaries, and (ii) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of
an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, however, that the foregoing
-------- -------
sum shall not exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made (and treated as a Restricted Payment)
by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary; and
(E) $15 million.
(b) The provisions of Section 10.11(a) will not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company or any Restricted Subsidiary made in exchange
for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Capital Stock and
other than Capital Stock issued or sold to a Subsidiary of the Company);
provided, however, that (x) such purchase or redemption shall be excluded
-------- -------
from the calculation of the amount of Restricted Payments and (y) the Net
Cash Proceeds from such sale (to the extent used for such purchase or
redemption) shall be excluded from the calculation of amounts under Section
10.11(a)(iii)(B);
(ii) any purchase or redemption of Subordinated Obligations of the
Company made in exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of the Company which is permitted to be
Incurred pursuant to Section 10.10(a), (b) or (c); provided, however, any
-------- -------
Indebtedness incurred pursuant to this clause 10.11(b)(ii) shall be
subordinated to the Notes, to at least the same extent as such Subordinated
Obligations; provided, further, that such purchase or redemption shall be
-------- -------
excluded from the calculation of the amount of Restricted Payments;
(iii) any purchase or redemption of Disqualified Capital Stock of the
Company made in exchange for, or out of the proceeds of the substantially
concurrent sale of, Disqualified Capital Stock of the Company; provided,
--------
however, that (x) at the time of such exchange, no Default or Event of
-------
Default shall have occurred and be continuing or would result therefrom and
(y) such purchase or redemption will be excluded from the calculation of
the amount of Restricted Payments;
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<PAGE>
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this Section 10.11; provided, however; that such dividend shall be
-------- -------
included in the calculation of the amount of Restricted Payments;
(v) repurchase of Capital Stock of the Company from current or former
directors, officers or employees, employee benefit plans or 401(k) plans of
the Company; provided that such repurchases shall not exceed $1 million in
--------
any year plus any amounts available for such repurchases under this Section
10.11(b)(v) since the Issue Date which have not been used for such purpose
but in no event shall such repurchases exceed $5 million in any year;
provided, further, that (x) at the time of such repurchase, no Default or
-------- -------
Event of Default shall have occurred and be continuing or would result
therefrom and (y) such repurchases shall be included in the calculation of
the amount of the Restricted Payments;
(vi) repurchases of Capital Stock deemed to occur upon exercise of
stock options if such Capital Stock represents a portion of the exercise
price of such options; or
(vii) the payment of any dividend by a Subsidiary of the Company to
the holders of its Capital Stock on a pro rata basis.
Section 10.12. Limitation on Restrictions on Distributions from Restricted
-----------------------------------------------------------
Subsidiaries.
------------
The Company will not, and will not permit any Restricted Subsidiary
to, create or otherwise cause or permit to exist or become effective any
consensual encumbrance or consensual restriction on the ability of any
Restricted Subsidiary (a) to pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) to make any loans or advances to the
Company or (c) to transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to the Senior Credit
Facility or any other agreement in effect at or entered into on the Issue
Date, including, without limitation, the Indenture, the Notes and the
Credit Agreements, if any;
(ii) any encumbrance or restriction with respect to a Person acquired
by the Company or any Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Person which was entered into
on or prior to the date on which such Person was acquired by the Company or
such Restricted Subsidiary (other than as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate,
the transaction or series of related transactions pursuant to which such
Person was acquired by the Company or such Restricted Subsidiary) and
outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting Refinancing Indebtedness Incurred pursuant to an agreement
referred to in clauses (i)-(xi) of this Section 10.12 (or effecting a
Refinancing of such Refinancing Indebtedness pursuant to this clause (iii))
or contained in any amendment, modification, restatement, renewal or
supplement to an agreement referred to in clauses (i)-(xi) of this Section
10.12 or this clause (iii); provided, however, that the encumbrances or
-------- -------
restrictions with respect to such Restricted Subsidiary contained in any
such agreements or amendments effecting Refinancing Indebtedness are no
more restrictive in any material respect than encumbrances and restrictions
with respect to such Restricted Subsidiary contained in such agreements or
amendments;
64
<PAGE>
(iv) any such encumbrance or restriction consisting of customary
provisions in leases governing leasehold interests or other agreements
entered into in the ordinary course of business;
(v) in the case of Section 10.12(c), restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages;
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition;
(vii) any restriction imposed by applicable law, rule, regulation or
order;
(viii) any encumbrance or restriction pursuant to Purchase Money
Indebtedness for property acquired in the ordinary course of business that
imposes restrictions of the nature discussed in clause 10.12(c) on the
property so acquired;
(ix) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(x) any encumbrance or restriction pursuant to other Indebtedness of
Receivables Subsidiaries permitted to be incurred subsequent to the Issue
Date pursuant to the provisions of Section 10.10; and
(xi) any encumbrance or restriction pursuant to customary provisions
in joint venture agreements and other similar agreements entered into in
the ordinary course of business.
Section 10.13. Limitation on Sales of Assets and Subsidiary Stock.
--------------------------------------------------
(a) The Company will not, and will not permit any Restricted
Subsidiary to, consummate any Asset Disposition unless the Company or such
Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to the value
of all non-cash consideration), as determined in good faith by the Board of
Directors, of the shares and assets subject to such Asset Disposition and at
least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents.
For the purposes of this Section 10.13, the following are deemed to be
cash or cash equivalents: (x) the assumption of Indebtedness of the Company or
any Restricted Subsidiary, (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are converted by the Company or
such Restricted Subsidiary into cash within 180 days after receipt thereof and
(z) any Designated Noncash Consideration received by the Company or any of its
Restricted Subsidiaries in such Asset Sale having an aggregate fair market
value, taken together with all other Designated Noncash Consideration received
pursuant to this clause (z) that is at that time outstanding and taken together
with all Permitted Investments made pursuant to clause (ix)(1) of the definition
of "Permitted Investment" that are at that time outstanding, not to exceed 10%
of the Company's Total Assets at the time of the receipt of such Designated
Noncash Consideration (with the fair market value of each item of Designated
Noncash Consideration being measured at the time received and without giving
effect to subsequent changes in value), shall be deemed to be cash or cash
equivalents for the purposes of this provision.
65
<PAGE>
With respect to any Asset Disposition occurring on or after the Issue
Date from which the Company or any Restricted Subsidiary receives Net Available
Cash, the Company or such Restricted Subsidiary shall (i) within 360 days after
the date such Net Available Cash is received and to the extent the Company or
such Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness) to (A) apply an amount equal to such Net Available Cash to prepay,
repay or purchase Senior Indebtedness of the Company or such Restricted
Subsidiary, in each case owing to a Person other than the Company or any
Affiliate of the Company, or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A), in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net Available
Cash received by the Company or another Restricted Subsidiary) and (ii) apply
such excess Net Available Cash (to the extent not applied pursuant to clause
(i)) as provided in the following paragraphs of this Section 10.13; provided,
--------
however, that in connection with any prepayment, repayment or purchase of Senior
- -------
Indebtedness pursuant to clause (A) above, the Company or such Restricted
Subsidiary shall retire such Senior Indebtedness and shall cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. The amount of Net Available
Cash required to be applied pursuant to clause (ii) above and not theretofore so
applied shall constitute "Excess Proceeds." Pending application of Net Available
Cash pursuant to this provision, such Net Available Cash shall be invested in
Temporary Cash Investments.
If at any time the aggregate amount of Excess Proceeds not theretofore
subject to an Excess Proceeds Offer (as defined below) totals at least $15
million the Company shall, not later than 30 days after the end of the period
during which the Company is required to apply such Excess Proceeds pursuant to
clause (i) of the immediately preceding paragraph of this Section 10.13(a) (or,
if the Company so elects, at any time within such period), make an offer (an
"Excess Proceeds Offer") to purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess Proceeds (rounded down
to the nearest multiple of $1,000) on such date, at a purchase price equal to
100% of the principal amount of such Notes, plus, in each case, accrued interest
(if any) to the date of purchase (the "Excess Proceeds Payment"). Upon
completion of an Excess Proceeds Offer the amount of Excess Proceeds remaining
after application pursuant to such Excess Proceeds Offer, (including payment of
the purchase price for Notes duly tendered) may be used by the Company for any
corporate purpose (to the extent not otherwise prohibited by this Indenture).
(b) Unless the Company shall have theretofore called for redemption
all the outstanding Notes pursuant to Article Eleven hereof, on or before the
30th day after its becomes obligated to make an Excess Proceeds Offer, the
Company or, at the written request of the Company, the Trustee, shall be
obligated to mail to each Holder (and the Trustee, if applicable) at the address
appearing on the Note Register, a written notice as prepared by the Company
stating that the Holder may elect to have his Notes purchased by the Company
either in whole or in part (subject to prorationing as hereinafter described in
the event the Excess Proceeds Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price on a date that is
60 days after the date of such notice (the "Purchase Date"). The Company shall
also deliver a copy of such notice of Excess Proceeds Offer to the Trustee.
(c) Each notice, which shall govern the terms of the Excess Proceeds
Offer, shall state:
(i) that an Excess Proceeds Offer is being made and that such
Holder has the right to require the Company to purchase such Notes on the
Purchase Date pursuant to this Section 10.13;
(ii) the date by which the purchase right must be exercised;
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<PAGE>
(iii) the price at which such Notes will be purchased pursuant
to the Excess Proceeds Offer; (iv) a description of the procedures that a
Holder must follow in order to tender their Notes pursuant to such Excess
Proceeds Offer;
(v) the place or places where such Notes must be tendered for
payment pursuant to the Excess Proceeds Offer.
(vi) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than three business day prior to the
Purchase Date, a telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes the Holder delivered for
purchase, the Note certificate number (if any) and a statement that such
Holder is withdrawing its election to have such Notes purchased.
(d) Not later than the date upon which written notice of an Excess
Proceeds Offer is delivered to the Trustee as provided below, the Company shall
deliver to the Trustee an Officers' Certificate as to (i) the amount of the
Excess Proceeds Offer (the "Excess Proceeds Offer Amount"), (ii) the allocation
of the Net Available Cash from the Asset Dispositions pursuant to which such
Excess Proceeds Offer is being made and (iii) the compliance of such allocation
with the provisions of Section 10.13(a). Upon the expiration of the period for
which the Excess Proceeds Offer remains open (the "Excess Proceeds Offer
Period"), the Company shall deliver to the Trustee for cancellation the Notes or
portions thereof which have been properly tendered to and are to be accepted by
the Company. Not later than 11:00 a.m. (New York City time) on the Purchase
Date, the Company shall irrevocably deposit with the Trustee or with a paying
agent (or, if the Company is acting as Paying Agent, segregate and hold in
trust) an amount in cash sufficient to pay the Excess Proceeds Offer Amount for
all Notes properly tendered to and accepted by the Company. The Trustee shall,
on the Purchase Date, mail or deliver payment to each tendering Holder in the
amount of the purchase price.
(e) Holders electing to have a Note purchased will be required to
surrender the Note, together with all necessary endorsements and other
appropriate materials duly completed, to the Company at the address specified in
the notice at least eight Business Days prior to the Purchase Date. Holders
will be entitled to withdraw their election in whole or in part if the Trustee
or the Company receives not later than three Business Days prior to the Purchase
Date, a facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Note (which shall be $1,000 or an integral multiple
thereof) which was delivered for purchase by the Holder, the aggregate principal
amount of such Note (if any) that remains subject to the original notice of the
Excess Proceeds Offer and that has been or will be delivered for purchase by the
Company and a statement that such Holder is irrevocably withdrawing his election
to have such Note purchased. If at the expiration of the Excess Proceeds Offer
Period the aggregate principal amount of Notes surrendered by Holders exceeds
the Excess Proceeds Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased). Holders whose Notes are
purchased only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
(f) A Note shall be deemed to have been accepted for purchase at the
time the Trustee, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder.
(g) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations thereunder in the event that Excess Proceeds are received by the
Company in connection with the repurchase of Notes pursuant to this Section
10.13 and the Company is required to repurchase Notes pursuant to this Section
10.13. To the extent that the provisions of any securities laws or
67
<PAGE>
regulations conflict with provisions of this Section 10.13, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue thereof.
Section 10.14. Limitation on Affiliate Transactions.
------------------------------------
(a) The Company will not, and will not permit any Restricted
Subsidiary to, enter into or permit to exist any transaction or series of
related transactions (including the purchase, sale, lease or exchange of any
property, employee compensation arrangements or the rendering of any service)
with any Affiliate of the Company (an "Affiliate Transaction") unless the terms
thereof (1) are materially no less favorable to the Company or such Restricted
Subsidiary than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate, (2) if such
Affiliate Transaction (or series of related Affiliate Transactions) involves
aggregate payments in an amount in excess of $5.0 million in any one year, (i)
comply with clause (1) of this Section 10.14 and (ii) have been approved by a
majority of the disinterested members of the Board of Directors, and (3) if such
Affiliate Transaction (or series of related Affiliate Transactions) involve
aggregate payments in an amount in excess of $10.0 million in any one year, (i)
comply with clause (2) of this Section 10.14 and (ii) have been determined by a
nationally recognized investment banking, accounting or qualified appraisal firm
to be fair, from a financial standpoint, to the Company and its Restricted
Subsidiaries.
(b) Section 10.14(a) shall not prohibit (i) any Restricted Payment
permitted to be paid pursuant to Section 10.11, (ii) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise, pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans in the ordinary course of business and approved by the Board of
Directors, (iii) the grant of stock options or similar rights to employees,
officers and directors of the Company or any Subsidiary in the ordinary course
of business and pursuant to plans approved by the Board of Directors, (iv) loans
or advances to employees, officers or directors in the ordinary course of
business of the Company or its Subsidiaries, (v) fees, compensation or employee
benefit arrangements paid to and indemnity provided for the benefit of
directors, officers or employees of the Company or any Subsidiary in the
ordinary course of business, (vi) any Affiliate Transaction (including any
purchase of Mortgages Receivable between the Company and a Subsidiary or Joint
Venture, or between Subsidiaries or Joint Ventures, in the ordinary course of
business (so long as the other stockholders of any participating Subsidiaries or
Joint Ventures which are not Wholly Owned Restricted Subsidiaries are not
themselves Affiliates of the Company) and (vii) any transactions effected
pursuant to agreements in effect on the Issue Date; provided that such
--------
transactions are effected pursuant to the terms of such agreements as in effect
on the Issue Date.
Section 10.15. Change of Control.
-----------------
(a) In the event that a Change of Control shall occur, then each
Holder shall have the right, at the Holder's option, to require the Company to
repurchase, and upon the exercise of such right the Company shall repurchase,
all of such Holder's Notes, or any portion of the principal amount thereof that
is an integral multiple of $1,000, on the date (the "Repurchase Date") that is
45 days after the date of the Company Notice (as defined in Section 10.15(b)) at
a price in cash equal to 101% of the principal amount of the Notes to be
repurchased (the "Repurchase Price"), together in each case with accrued
interest to the Repurchase Date. Such right to require the repurchase of the
Notes shall not continue after a discharge of the Company from its obligations
with respect to the Notes in accordance with Article Four, unless a Change of
Control shall have occurred prior to such discharge. The failure of the Company
to pay the Repurchase Price in cash on the Repurchase Date shall constitute an
Event of Default for purposes of Section 5.01(b) hereof notwithstanding the
Company's inability to comply with provisions of or satisfy any conditions set
forth in this Section 10.15.
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<PAGE>
Whenever in this Indenture (including Sections 3.01, 5.01(b) and 5.08) there is
a reference, in any context, to the principal of any Note as of any time, such
reference shall be deemed to include reference to the Repurchase Price payable
in respect of such Note to the extent that such Repurchase Price is, was or
would be so payable at such time, and express mention of the Repurchase Price in
any provision of this Indenture shall not be construed as excluding the
Repurchase Price in those provisions of this Indenture when such express mention
is not made.
(b) Unless the Company shall have theretofore called for redemption
all the outstanding Notes pursuant to Article Eleven hereof, on or before the
30th day after the occurrence of a Change of Control, the Company shall be
obligated to mail, by first class mail, to each Holder (and the Trustee, if
applicable) at the address appearing on the Note Register, a written notice (the
"Company Notice") as prepared by the Company of the occurrence of the Change of
Control and of the repurchase right set forth herein arising as a result
thereof. The Company shall also deliver a copy of such notice of a repurchase
right to the Trustee.
(c) Each notice of a repurchase right shall state:
(i) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's Notes
on the Repurchase Date,
(ii) the date by which the repurchase right must be exercised,
(iii) the Repurchase Price,
(iv) the circumstances and relevant facts and relevant financial
information regarding such Change of Control,
(v) a description of the procedure which a Holder must follow to
exercise a repurchase right, and
(vi) the place or places where such Notes may be surrendered for
repurchase.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Notes.
If any of the foregoing provisions are inconsistent with applicable
law, such law shall govern.
(d) To exercise a repurchase right, a Holder shall deliver to the
Trustee on or before the 30th day after the date of the Company Notice (i)
written notice of the Holder's exercise of such right, which notice shall set
forth the name of the Holder, the principal amount of the Notes to be
repurchased, and a statement that an election to exercise the repurchase right
is being made thereby, and (ii) the Notes with respect to which the repurchase
right is being exercised, duly endorsed for transfer to the Company. Such
written notice shall be executed by the Holder and shall be irrevocable.
(e) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid the Repurchase
Price in cash as provided above, to the Holder on the Repurchase Date, together
with accrued and unpaid interest to the Repurchase Date payable with respect to
the Notes as to which the repurchase right has been exercised; provided,
--------
however, that installments of interest that mature on or prior to the Repurchase
- -------
Date shall be payable in cash to the Holders of such Notes, or one or more
predecessor Notes, registered as such at the close of business on the relevant
Regular Record Date according to the terms and provisions of Article Three.
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(f) If any Note surrendered for repurchase shall not be so paid on the
Repurchase Date, the principal shall, until paid, bear interest to the extent
permitted by applicable law from the Repurchase Date at the rate of 9.75%.
(g) All Notes delivered for repurchase shall be delivered to the
Trustee the Paying Agent or any other agents (as shall be set forth in the
Company Notice) to be cancelled by or at the direction of the Trustee, which
shall dispose of the same as provided in Section 2.11.
(h) Any Note which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Note without service
charge, a new Note or Notes, of any authorized denomination as requested by such
Holder in aggregate principal amount equal to and in exchange for the portion of
the principal of the Note so surrendered and not so repurchased.
(i) The Company shall comply, to the extent applicable, with the
requirements of Rule 13e-4 and Rule 14e-1 of the Exchange Act and any other
securities laws or regulations in connection with the repurchase of Notes
pursuant to this Section. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue thereof.
Section 10.16. Further Instruments and Acts.
----------------------------
Upon request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
Section 10.17. Limitation on Liens.
-------------------
The Company will not, directly or indirectly, Incur or permit to exist
any Lien of any nature whatsoever on any property of the Company or any
Restricted Subsidiary (including Capital Stock of a Restricted Subsidiary),
whether owned at the Issue Date or thereafter acquired, which secures
Indebtedness that ranks pari passu with or is subordinated to the Notes unless
---- -----
(i) if such Lien secures Indebtedness that ranks pari passu with the
---- -----
Notes, the Notes are secured on an equal and ratable basis with the
obligation so secured until such time as such obligation is no longer
secured by a Lien; or
(ii) if such Lien secures Indebtedness that is subordinated to the
Notes, such Lien shall be subordinated to a Lien granted to the Holders on
the same collateral as that securing such Lien to the same extent as such
subordinated Indebtedness is subordinated to the Notes (other than Liens
pursuant to Indebtedness of Persons that are acquired by the Company or any
of its Restricted Subsidiaries or merged into the Company or a Restricted
Subsidiary, provided such Indebtedness is not incurred in contemplation of
such acquisition or merger).
Section 10.18. Commission Reports.
------------------
Notwithstanding that the Company may not be required to remain subject
to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall file with the Commission and provide the Trustee, the Noteholders
and prospective Noteholders (upon request) with such annual
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reports and such information, documents and other reports as are specified in
Section 13 or 15(d) of the Exchange Act and applicable to a U.S. corporation
subject to such Sections, and such information, documents and other reports to
be so provided at the times specified for filing of such information, documents
and reports under such Sections; provided, however, that the Company shall not
-------- -------
be required to file any report, document or other information with the
Commission if the Commission does not permit such filing.
ARTICLE 11
REDEMPTION OF NOTES
Section 11.01. Right of Redemption.
-------------------
(a) Except as set forth in the following paragraph, the Notes may not
be redeemed at the option of the Company prior to October 1, 2002. Thereafter,
the Notes may be redeemed, in whole or in part, at the option of the Company,
upon not less than 30 nor more than 60 days' notice by mail.
(b) The Redemption Prices (expressed as a percentage of principal
amount), and in each case plus accrued and unpaid interest to the date of
redemption, and subject to the rights of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date, are as
follows for the 12-month period (unless otherwise noted) beginning on October 1
of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- -------------
<S> <C>
2002.................................. 104.875%
2003.................................. 103.250%
2004.................................. 101.625%
2005 and thereafter................... 100.000%
</TABLE>
(c) In addition, at any time and from time to time prior to October 1,
2000, the Company may redeem in the aggregate up to 40% of the original
principal amount of the Notes with the proceeds of one or more Equity Offerings,
at a redemption price (expressed as a percentage of principal amount) of 109.
3/4% plus accrued and unpaid interest, if any, to the redemption date (subject
to the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date); provided, however, that at
-------- -------
least 60% of the original aggregate principal amount of the Notes must remain
outstanding after each such redemption.
Section 11.02. Applicability of Article.
------------------------
Redemption of Notes at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article Eleven.
Section 11.03. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Notes pursuant to Section
11.01 shall be evidenced by a Board Resolution. In case of any redemption at
the election of the Company of less than all the Notes, the Company shall, at
least 60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Notes to be redeemed.
Section 11.04. Selection by Trustee of Notes To Be Redeemed.
--------------------------------------------
If less than all the Notes are to be redeemed, the particular Notes to
be redeemed shall be selected not more than 30 days prior to the Redemption Date
by the Trustee, from the Outstanding Notes not previously
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called for redemption, by lot, pro rata, or by such other method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to $1,000 or any integral multiple thereof) of the
principal amount of Notes of a denomination larger than $1,000.
The Trustee shall promptly notify the Company and each Note Registrar
in writing of the Notes selected for redemption and, in the case of any Notes
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Notes redeemed or to be redeemed only in part, to the portion of
the principal amount of such Notes which has been or is to be redeemed.
Section 11.05. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Notes to be redeemed, at such Holder's address appearing
in the Note Register.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Outstanding Notes are to be redeemed, the
identification (and, in the case of partial redemption, the principal amounts)
of the particular Notes to be redeemed,
(d) that on the Redemption Date the Redemption Price will become due
and payable upon each such Note to be redeemed and that interest thereon will
cease to accrue on and after said date,
(e) the place or places where such Notes are to be surrendered for
payment of the Redemption Price and accrued interest, if any.
Notice of redemption of Notes to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
Section 11.06. Deposit of Redemption Price.
---------------------------
Not less than one Business Day prior to any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.03) an amount of money (which shall be in immediately
available funds on such Redemption Date) sufficient to pay the Redemption Price
of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Notes which are to be redeemed on that date.
Section 11.07. Notes Payable on Redemption Date.
--------------------------------
Notice of redemption having been given as aforesaid, the Notes so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price specified in Section 11.01, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such Notes shall cease to bear interest. Upon surrender of
any such Note for redemption in accordance with said notice, such Note shall be
paid by the Company at the Redemption Price, together with accrued interest to
the Redemption Date; provided, however, that installments of interest whose
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Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Notes, or one or more Predecessor Notes, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 3.03.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal thereof shall, until paid, bear interest
from the Redemption Date at the rate of 9.75% per annum.
Section 11.08. Notes Redeemed in Part.
----------------------
Any Note which is to be redeemed only in part shall be surrendered at
an office or agency of the Company designated for that purpose pursuant to
Section 10.02 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Note without service charge, a new Note or
Notes, of any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Note so surrendered.
ARTICLE 12
SUBORDINATION OF NOTES
Section 12.01. Securities Subordinate to Senior Indebtedness.
---------------------------------------------
The Company covenants and agrees, and each Holder of a Note, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article Twelve (subject to the
provisions of Article Four), the indebtedness represented by the Notes and the
payment of the principal of and interest on (including any amounts payable upon
redemption or repurchase of the Notes permitted by this Indenture), each and all
of the Notes are hereby expressly made subordinate in right of payment to the
prior payment in full of all of the principal of, interest on and other amounts
in respect of all Senior Indebtedness. Whenever in this Article Twelve there is
a reference, in any context, to the principal of any Note as of any time, such
reference shall be deemed to include reference to the Repurchase Price or
Redemption Price payable in cash in respect of such Note to the event that such
Repurchase Price or Redemption Price payable in cash is, was or would be so
payable at such time, and express mention of the Repurchase Price and the
Redemption Price in any provision of this Article Twelve shall not be construed
as excluding the Repurchase Price or Redemption Price payable in cash in those
provisions of this Article Twelve when such express mention is not made. This
Article Twelve is made for the benefit of existing and future holders of Senior
Indebtedness, and such holders are made obligees hereunder and they or each of
them may enforce such provisions.
Section 12.02. No Payments in Certain Circumstances; Payment Over of Proceeds
--------------------------------------------------------------
upon Dissolution, Etc.
---------------------
No payment (with the exception of payment in Junior Securities, if
acceptable to the Note Holders in their individual discretion), upon or with
respect to the Notes shall be made if: (i) a default in the payment of
principal, of interest or other amounts due on any Senior Indebtedness occurs
and is continuing beyond any applicable period of grace specified in the
instrument evidencing such Senior Indebtedness; or (ii) any other default occurs
and is continuing with respect to Designated Senior Indebtedness that permits
holders of the Designated Senior Indebtedness as to which such default relates
to accelerate the maturity thereof and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from any lender of such Designated Senior
Indebtedness (or agent bank on behalf of such lender) or other Person permitted
to give such notice under this Indenture.
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Notwithstanding the foregoing, the Company may make, and the Trustee may receive
and shall apply, any payment in respect of the Notes (for principal or interest
or redemption or repurchase) if such payment was made prior to the occurrence of
any of the contingencies specified in clauses (i) and (ii) above. The Company
shall promptly notify holders of Senior Indebtedness if payment of the Notes is
accelerated because of an Event of Default.
If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective and no new
payment blockage may be commenced for purposes of this Section 12.02 unless and
until (A) 365 days have also elapsed since the effectiveness of the immediately
prior Payment Blockage Notice, and (B) all scheduled payments of principal and
interest on the Notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Notes: (i) in the case of a payment default or a non-payment
default pursuant to which the Senior Indebtedness has been declared due and
payable in its entirety, upon the date on which such default is cured or waived
in accordance with the agreements evidencing such Senior Indebtedness, or (ii)
in the case of a non-payment default, the earlier of the date on which such non-
payment default is cured or waived in accordance with the agreements evidencing
such Senior Indebtedness or 179 days after the date on which the applicable
Payment Blockage Notice is received.
In the event of (i) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (ii) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of the Company, then and in any
such event, upon any acceleration of the principal due on the Notes or payment
or distribution of assets of the Company to creditors, the holders of Senior
Indebtedness shall be entitled to receive payment in full of all principal and
interest or other amounts due on all Senior Indebtedness, before the Holders of
the Notes are entitled to receive any payment (with the exception of payment in
Junior Securities, if acceptable to the Holders in their individual discretion)
on account of principal or interest on the Notes, and to that end the holders of
Senior Indebtedness shall be entitled to receive, for any application to the
payment thereof, any payment or distribution of any kind or character, whether
in cash, property or securities, which may be payable or deliverable in respect
of the Notes in any such case.
In the event that, notwithstanding the foregoing provisions of this
Section 12.02, the Trustee or the Holder of any Note shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, securities or other property, before all Senior Indebtedness is
paid in full or payment thereof provided for, and if such fact shall, at or
prior to the time of such payment or distribution, have been made known to the
Trustee or, as the case may be, such Holder, then in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words, "cash, securities or
other property" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
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corporation provided for by a plan of reorganization or readjustment which
shares of stock are subordinated in right of payment to all then outstanding
Senior Indebtedness to substantially the same extent as, or to a greater event
than, the Notes are so subordinated as provided in this Article Twelve.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the transfer of all or substantially all of its properties and assets to another
Person upon the terms and conditions set forth in Article Eight shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshaling of assets and liabilities, of the
Company for the purposes of this Section 12.02 if the Person formed by such
consolidation or into which the Company is merged or which acquires by transfer
all or substantially all of such properties and assets, as the case may be,
shall, as a part of such consolidation, merger or transfer, comply with the
conditions set forth in Article Eight.
Section 12.03. Prior Payment to Senior Indebtedness upon Acceleration of Notes.
---------------------------------------------------------------
In the event that any Notes are declared due and payable before their
Stated Maturity, then and in such event the Company shall give (i) prompt
written notice of such acceleration of the Notes to the holders of the Senior
Indebtedness outstanding at the time such Notes so become due and payable and
(ii) payment in full of all amounts due or to become due on or in respect of
such Senior Indebtedness, or, with respect to this clause (ii) provision shall
be made for such payment in money or monies worth, before the Holders of the
Notes are entitled to receive any payment (with the exception of payment in
Junior Securities, if acceptable to the Note Holders in their individual
discretion) by the Company on account of the principal of or interest on the
Notes or on account of the purchase or other acquisition of Notes.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Note prohibited by the
foregoing provisions of this Section 12.03 of such fact shall, at or prior to
the time of such payment, have been made known to the Trustee, or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the holders of Senior Indebtedness, or as a court of
competent jurisdiction shall direct, for application to the payment of any due
and unpaid Senior Indebtedness, to the extent necessary to pay all such due and
unpaid Senior Indebtedness in cash or other immediately available funds, after
giving effect to any concurrent payment to or for the holders of Senior
Indebtedness.
The provisions of this Section shall not apply to any payment with
respect to which Section 12.02 would be applicable.
Section 12.04. Payment Permitted if No Default.
-------------------------------
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in any of the Notes shall prevent (a) the Company, at any time
except during the pendency of any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshaling of
assets and liabilities of the Company referred to in Section 12.02 or under the
conditions described in Section 12.02, from making payments at any time of
principal of or interest on the Notes, or (b) the application by the Trustee of
any money deposited with it hereunder to the payment of or on account of the
principal of or interest on the Notes or the retention of such payment by the
Holders, if, at the time of such application by the Trustee, it did not have
knowledge that such payment would have been prohibited by the provisions of this
Article Twelve.
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Section 12.05. Subrogation of Rights to Holders of Senior Indebtedness.
-------------------------------------------------------
Subject to the payment in full of all Senior Indebtedness, the Holders
of the Notes shall be subrogated to the extent of the payments or distributions
made to the holders of such Senior Indebtedness pursuant to the provisions of
this Article Twelve to the rights of the holders of such Senior Indebtedness to
receive payments and distributions of cash, property and securities applicable
to the Senior Indebtedness until the principal of and interest on the Notes
shall be paid in full. For purposes of such subrogation, no payment or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the Holders of the Notes or the Trustee would be entitled
except for the provisions of this Article Twelve, and no payments over pursuant
to the provisions of this Article Twelve to the holders of Senior Indebtedness
by Holders of the Notes or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Notes, be deemed to be a payment or distribution by the Company to or on account
of the Senior Indebtedness.
Section 12.06. Provisions Solely To Define Relative Rights.
-------------------------------------------
The provisions of this Article Twelve are and are intended solely for
the purpose of defining the relative rights of the Holders of the Notes on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Notes, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders of the
Notes the principal of and interest on the Notes as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the Holders of the Notes and creditors of
the Company other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or the Holder of any Note from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article Twelve of the holders of Senior Indebtedness
to receive cash, property, and securities otherwise payable or deliverable to
the Trustee or such Holder.
Section 12.07. Trustee To Effectuate Subordination.
-----------------------------------
Each holder of a Note by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes.
Section 12.08. No Waiver of Subordination Provisions.
-------------------------------------
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder of any Senior
Indebtedness, or by any non-compliance by the Company with the terms, provisions
and covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the Notes,
without incurring responsibility to the Holders of the Notes or the obligations
hereunder of the Holders of the Notes to the holders of Senior Indebtedness, do
any one or more of the following: (i) change the manner, place or terms of
payment, or the amount of interest, fees or other amounts payable in respect of,
or extend the time of payment of, or renew, increase, or otherwise alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange,
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release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (iii) release any Person liable in any manner for
the payment or collection of Senior Indebtedness; (iv) exercise or refrain from
exercising any rights or remedies against the Company or any other Person; (v)
give or fail to give any notice, or take or fail to take any other action,
required by law, by agreement or otherwise to preserve the rights of any holder
of Senior Indebtedness against the Company or any other Person liable in respect
of Senior Indebtedness or with respect to any property pledged, mortgaged, or
otherwise subject to a security interest or lien securing Senior Indebtedness;
(vi) perform or fail to perform any obligation of such holders of Senior
Indebtedness under any instrument or agreement evidencing, guaranteeing,
securing or otherwise affecting or relating to Senior Indebtedness; or (vii)
take or fail to take any action that might otherwise constitute a defense
available to, or a discharge of, the Company or any other Person liable in
respect of Senior Indebtedness.
Section 12.09. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
insolvency or bankruptcy proceeding in respect of the Company, of and
proceedings for voluntary liquidation, dissolution, or other winding up of the
Company (whether or not involving insolvency or bankruptcy), or of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Notes. Notwithstanding the provisions of this Article
Twelve or any other provisions of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of or payment to or by the Trustee in respect of the Notes, unless and
until the Trustee shall have received written notice thereof from the Company or
a holder of Senior Indebtedness or from any trustee therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 6.01, shall be entitled in all respects to assume that no such facts
exist; provided that if the Trustee shall not have received the notice provided
for in this Section 12.09 at least two Business Days prior to the date upon
which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of or interest on
any Note), then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within two
Business Days prior to such date.
Notwithstanding anything in this Article Twelve to the contrary,
nothing shall prevent any payment by the Trustee to the Holders of monies
deposited with it pursuant to Section 4.01, and any such payment shall not be
subject to the provisions of Section 12.02 or 12.03.
Subject to the provision of Section 6.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or an agent bank or
a trustee therefor) to establish that such notice has been given by a holder of
Senior Indebtedness (or any agent bank or a trustee therefor). In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article, the Trustee
may request such Person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article Twelve, and if such evidence is not furnished, the Trustee may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment.
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Section 12.10. Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article Twelve, the Trustee, subject to the provisions of Section 6.01,
and the Holders of the Notes shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Notes, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Twelve.
Section 12.11. Trustee Not Fiduciary for Holders of Senior Indebtedness.
--------------------------------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Notes or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.
Section 12.12. Rights of Trustee as Holder of Senior Indebtedness; Preservation
----------------------------------------------------------------
of Trustee's Rights.
-------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Twelve with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
Nothing in this Article Twelve shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 6.07.
Section 12.13. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the contest otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided that
--------
Section 12.12 shall not apply to the Company or any Affiliate of this Company if
it or such Affiliate acts as Paying Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, as of the day and year first above written.
SIGNATURE RESORTS, INC.
By: /s/ Andrew D. Hutton
--------------------------
Its: Vice President and General Counsel
------------------------------------
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By: /s/ Raymond S. Haverstock
-----------------------------
Its: Vice President
------------------------------------
S-1
<PAGE>
EXHIBIT A
---------
[THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY,
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING
THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(K) (TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144(D) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES
ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND,
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES AT
THE TIME OF TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND, IN EACH CASE IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.]/1/
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR
ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO AN ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR
- --------------------------
/1/Legend appears on all Private Placement Notes.
A-1
<PAGE>
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.07 OF THE INDENTURE.]/2/
[THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE IDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNER OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL
BE ENTITLED TO RECEIVE CASH PAYMENTS OF INTEREST DURING THE PERIOD WHICH
SUCH HOLDER HOLDS THIS NOTE. NOTHING IN THIS LEGEND SHALL BE DEEMED TO
PREVENT INTEREST FROM ACCRUING ON THIS NOTE.]/3/
- -------------------------
/2/Legend appears on all Global Notes.
/3/Legend appears on all Regulation S Temporary Global Notes.
A-2
<PAGE>
REGISTERED $___________
NO. _________________ CUSIP: ___________
Signature Resorts, Inc.
9.75% Senior Subordinated Note due October 1, 2007
Signature Resorts, Inc., a corporation duly organized and existing
under the laws of Maryland (herein called the "Company", which term includes any
successor person under the Indenture hereinafter referred to), for value
received hereby promises to pay to ________________ or registered assigns, the
principal sum of $___________ on October 1, 2007, and to pay interest thereon
from the date of the initial issuance or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semiannually on April
1 and October 1 in each year, commencing October 1, 1997, at the rate of 9.75%
per annum, until the principal hereof is paid or made available for payment. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest, which shall be the March
15 or September 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Except as otherwise provided in the
Indenture, any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee, notice whereof
shall be given to Holders of Notes not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner, all as more
fully provided in said Indenture. Payment of the principal of and interest on
this Note will be made at the office or agency of the Company maintained for
that purpose in Minneapolis, Minnesota or the city in which the Corporate Trust
Office of the Trustee is located, in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place. Unless the certificate of
authentication hereon has been executed by the Trustee referred to on the
reverse hereof by manual signature, this Note shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: SIGNATURE RESORTS, INC.
Attest:____________________ By:________________________
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, certifies
that this is one of the Notes referred to in the within-mentioned Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:_____________________________________
Name:
Title:
A-4
<PAGE>
[Form of Reverse of Note]
This Note is one of a duly authorized issue of securities of the
Company designated as its 9.75% Senior Subordinated Notes due October 1, 2007
(herein called the "Notes"), limited in aggregate principal amount to
$200,000,000 issued and to be issued under an Indenture, dated as of August 1,
1997 (herein called the "Indenture"), between the Company and Norwest Bank
Minnesota, National Association, as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee, the holders of Senior Indebtedness and the Holders
of the Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes are issuable in registered form only
without coupons in denominations of $1,000 and any integral multiple thereof.
The holder of this Note is entitled to the benefits of a Registration
Rights Agreement, dated as of August 8, 1997, among the Company and the Initial
Purchasers named therein (as such may be amended from time to time, the
"Registration Agreement"). Capitalized terms used in this paragraph but not
defined herein have the meanings assigned to them in the Registration Agreement.
In the event that (i) within 75 days after the Issue Date, the
Exchange Offer Registration Statement has not been filed with the Commission or
the Shelf Registration Statement has not been filed with the Commission within
75 days after such obligation arises, (ii) within 150 days after the Issue Date,
the Exchange Offer Registration Statement has not been declared effective by the
Commission, (iii) within 30 days after the date on which the Exchange Offer
Registration Statement is declared effective by the Commission, the Registered
Exchange Offer has not been consummated, or within the time period specified in
the Registration Agreement, the Shelf Registration Statement has not been
declared effective, or (iv) after either the Exchange Offer Registration
Statement or the Shelf Registration Statement has been declared effective, such
Registration Statement thereafter ceases to be effective or usable (subject to
certain exceptions) in connection with resales of the Notes or Exchange Notes at
any time that the Company is obligated to maintain the effectiveness thereof
pursuant to the Registration Agreement (each such event referred to in clauses
(i) through (iv) above being referred to herein as a "Registration Default"),
interest ("Special Interest") will accrue on this Note (in addition to the
interest described above) from and including the date on which any Registration
Default shall occur but excluding the date on which all Registration Defaults
have been cured. Special Interest shall accrue at a rate of 0.25% per annum
during the 90-day period immediately following the occurrence of any
Registration Default and shall increase by 0.25% per annum at the end of each
subsequent 90-day period, but in no event shall Special Interest accrue at a
rate in excess of 1.00% per annum.
The Notes are subject to redemption upon not less than 30 days' nor
more than 60 days' notice by mail, at any time on or after October 1, 2002, as a
whole or in part, at the election of the Company. The Redemption Prices
(expressed as percentages of the principal amount), and in each case, plus
accrued and unpaid interest to the date of Redemption, and subject to the rights
of Holders of record on the relevant Regular Record Date to receive interest due
on an Interest Payment Date, are as follows for the 12-month period (unless
otherwise noted) beginning on October 1 of the following years:
A-5
<PAGE>
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2002........................... 104.875%
2003........................... 103.250%
2004........................... 101.625%
2005 and thereafter............ 100.000%
</TABLE>
In addition, at any time and from time to time prior to October 1,
2000, the Company at its option may redeem in the aggregate up to 40% of the
original principal amount of the Notes with the proceeds of one or more Equity
Offerings at a redemption price (expressed as a percentage of principal amount)
of 109.75% plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided, however,
-------- -------
that at least 60% of the original aggregate principal amount of the Notes must
remain outstanding after each such redemption.
Interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such Notes, or one or more
Predecessor Notes, of record at the close of business on the relevant Record
Dates referred to on the face hereof, all as provided in the Indenture.
In the event of redemption of this Note in part only, a new Note or
Notes for the unredeemed portion hereof will be issued in the name of the Holder
hereof upon the cancellation hereof.
Upon a Change in Control (as defined in the Indenture), the Company
will be required to offer to repurchase all of the Notes at 101% of their
principal amount plus accrued interest. In addition in the event of certain
Asset Dispositions, the Company will be required to make an offer to purchase
the Notes at a purchase price of 100% of their principal amount plus accrued
interest (if any) to the date of purchase (subject to the rights of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date) as provided in, and subject to the terms of the
Indenture.
The indebtedness evidenced by this Note is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, and this Note is issued subject to the
provisions of the Indenture with respect thereto. Each holder of this Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee as his attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Notes may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of not less
than a majority in aggregate principal amount of the Notes at the time
outstanding. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding, on
behalf of the Holders of all the Notes, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such
A-6
<PAGE>
consent or waiver by the Holder of this Note shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency, herein prescribed.
As provided in and subject to the provisions of the Indenture, the
Holder of this Note shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless (i) such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, (ii) the Holders of
not less than 25% in principal amount of the Outstanding Notes shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity with respect
thereto, and the Trustee shall not have received from the Holders of a majority
in principal amount of the Notes Outstanding a direction inconsistent with such
request, and (iii) the Trustee shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Note for the enforcement of any payment of principal hereof, if any, or
interest hereon on or after the respective due date expressed herein.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Note
Register, upon surrender of this Note for registration of transfer at the office
or agency of the Company in the city of Minneapolis, Minnesota, or the city in
which the Corporate Trust Office of the Trustee is located, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made to a Holder for any such registration
of transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary. All
terms used in this Note which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.
A-7
<PAGE>
The Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York, without regards to the
conflicts of law principles as applied in such state.
No recourse shall be had for the payment of the principal or the
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture or any indenture supplemental
thereto, against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the considerations for the issue hereof, expressly waived
and released.
All terms used in this Note that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
A-8
<PAGE>
ASSIGNMENT FORM
For value received_________________ hereby sell(s), assign(s) and transfer(s)
unto _________________ (please insert name and social security or other
identifying number of assignee) the within Note, and hereby irrevocably
constitutes and appoints ________________________ as attorney to transfer the
said Note on the books of the Company, with full power of substitution in the
premises.
Dated:_________________________ ____________________________________
Signature(s)
Signature(s) must be guaranteed by an Eligible Guarantor Institution with member
ship in an approved signature guarantee program pursuant to Rule 17Ad-15 under
the Securities Exchange Act of 1934.
______________________________Signature Guaranteed
A-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 10.13 or 10.15 of the Indenture, check the box: [_]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 10.13 or 10.15 of the Indenture, state the
amount you elect to have purchased: $
Date: ______________ Your Signature:___________________________
(Sign exactly as your name
appears on the other side of
the Security)
Signature Guarantee: ______________________________________________
(Signature must be guaranteed)
A-10
<PAGE>
EXHIBIT B
---------
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO AN ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.07 OF THE INDENTURE.]/4/
- ----------------------
/4/Legend appears on all Global Notes.
B-1
<PAGE>
REGISTERED $___________
NO. _________________ CUSIP: ___________
Signature Resorts, Inc.
9.75% Senior Subordinated Note due October 1, 2007
Signature Resorts, Inc., a corporation duly organized and existing
under the laws of Maryland (herein called the "Company", which term includes any
successor person under the Indenture hereinafter referred to), for value
received hereby promises to pay to ________________ or registered assigns, the
principal sum of $___________ on October 1, 2007, and to pay interest thereon
from the date of the initial issuance or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semiannually on April
1 and October 1 in each year, commencing October 1, 1997, at the rate of 9.75%
per annum, until the principal hereof is paid or made available for payment. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest, which shall be the March
15 or September 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Except as otherwise provided in the
Indenture, any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee, notice whereof
shall be given to Holders of Notes not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner, all as more
fully provided in said Indenture. Payment of the principal of and interest on
this Note will be made at the office or agency of the Company maintained for
that purpose in Minneapolis, Minnesota or the city in which the Corporate Trust
Office of the Trustee is located, in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place. Unless the certificate of
authentication hereon has been executed by the Trustee referred to on the
reverse hereof by manual signature, this Note shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
B-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: SIGNATURE RESORTS, INC.
Attest: ________________________ By: ______________________________
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee certifies
that this is one of the Notes referred to in the within-mentioned Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:___________________________
Name:
Title:
B-3
<PAGE>
[Form of Reverse of Note]
This Note is one of a duly authorized issue of securities of the
Company designated as its 9.75% Senior Subordinated Notes due October 1, 2007
(herein called the "Notes"), limited in aggregate principal amount to
$200,000,000 issued and to be issued under an Indenture, dated as of August 1,
1997 (herein called the "Indenture"), between the Company and Norwest Bank
Minnesota, National Association, as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee, the holders of Senior Indebtedness and the Holders
of the Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes are issuable in registered form only
without coupons in denominations of $1,000 and any integral multiple thereof.
The Notes are subject to redemption upon not less than 30 days' nor more than
60 days' notice by mail, at any time on or after October 1, 2002, as a whole or
in part, at the election of the Company. The Redemption Prices (expressed as
percentages of the principal amount), and in each case, plus accrued and unpaid
interest to the date of Redemption, and subject to the rights of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date, are as follows for the 12-month period (unless otherwise
noted) beginning on October 1 of the following years:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2002.......................... 104.875%
2003.......................... 103.250%
2004.......................... 101.625%
2005 and thereafter........... 100.000%
</TABLE>
In addition, at any time and from time to time prior to October 1,
2000, the Company, at its option may redeem in the aggregate up to 40% of the
original principal amount of the Notes with the proceeds of one or more Equity
Offerings at a redemption price (expressed as a percentage of principal amount)
of 109.75% plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided, however,
-------- -------
that at least 60% of the original aggregate principal amount of the Notes must
remain outstanding after each such redemption.
In the event of redemption of this Note in part only, a new Note or
Notes for the unredeemed or unconverted portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
Upon a Change of Control (as defined in the Indenture), the Company
will be required to offer to repurchase all of the Notes at 101% of their
principal amount plus accrued interest. In addition in the event of certain
Asset Dispositions, the Company will be required to make an offer to purchase
the Notes at a purchase price of 100% of their principal amount plus accrued
interest (if any) to the date of purchase (subject to the rights of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date) as provided in, and subject to the terms of the
Indenture.
The indebtedness evidenced by this Note is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, and this Note is
B-4
<PAGE>
issued subject to the provisions of the Indenture with respect thereto. Each
holder of this Note, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
so provided and (c) appoints the Trustee as his attorney-in-fact for any and all
such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Notes may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of not less
than a majority in aggregate principal amount of the Notes at the time
outstanding. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding, on
behalf of the Holders of all the Notes, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency, herein prescribed.
As provided in and subject to the provisions of the Indenture, the
Holder of this Note shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless (i) such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, (ii) the Holders of
not less than 25% in principal amount of the Outstanding Notes shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity with respect
thereto, and the Trustee shall not have received from the Holders of a majority
in principal amount of the Notes Outstanding a direction inconsistent with such
request, and (iii) the Trustee shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Note for the enforcement of any payment of principal hereof, if any, or
interest hereon on or after the respective due date expressed herein.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Note
Register, upon surrender of this Note for registration of transfer at the office
or agency of the Company in the city of Minneapolis, Minnesota, or the city in
which the Corporate Trust Office of the Trustee is located, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Note Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
B-5
<PAGE>
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made to a Holder for any such registration
of transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary. All
terms used in this Note which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.
The Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York, without regards to the
conflicts of law principles as applied in such state. No recourse shall be had
for the payment of the principal or the interest on this Note, or for any claim
based hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture or any indenture supplemental thereto, against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or any successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
considerations for the issue hereof, expressly waived and released.
All terms used in this Note that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
B-6
<PAGE>
ASSIGNMENT FORM
For value received_________________ hereby sell(s), assign(s) and transfer(s)
unto _________________ (please insert name and social security or other
identifying number of assignee) the within Note, and hereby irrevocably
constitutes and appoints ________________________ as attorney to transfer the
said Note on the books of the Company, with full power of substitution in the
premises.
Dated: ______________________ ___________________________________
Signature(s)
Signature(s) must be guaranteed by an Eligible Guarantor Institution with member
ship in an approved signature guarantee program pursuant to Rule 17Ad-15 under
the Securities Exchange Act of 1934.
________________________ Signature Guaranteed
B-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 10.13 or 10.15 of the Indenture, check the box: [_]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 10.13 or 10.15 of the Indenture, state the
amount you elect to have purchased: $
Date: ______________ Your Signature:____________________________
(Sign exactly as your
name appears on the other
side of the Security)
Signature Guarantee: __________________________________________
(Signature must be guaranteed)
B-8
<PAGE>
EXHIBIT C
---------
FORM OF CERTIFICATE OF TRANSFER
$_______________
[ ]
[ ]
Re: 9.75% Senior Subordinated Notes due 2007
Reference is hereby made to the Indenture, dated as of August 1, 1997
(the "Indenture"), between Signature Resorts, Inc., as issuer (the "Company"),
and Norwest Bank Minnesota, National Association, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
__________________, (the "Transferor") owns and proposes to transfer
the Note(s) or interest in such Note(s) specified in Annex A hereto, in the
principal amount of $______ in such Note(s) or interests (the "Transfer"), to
____________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Restricted Definitive Note is being transferred to a
Person that the Transferor reasonably believed and believes is purchasing
the beneficial interest or Restricted Definitive Note for its own account,
or for one or more accounts with respect to which such Person exercises
sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A and such Transfer is in
compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Restricted Definitive Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the 144A Global Note
and/or the Restricted Definitive Note and in the Indenture and the
Securities Act.
2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A
RESTRICTED DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being
effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies
that (i) the Transfer is not being made to a person in the United States
and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was
C-1
<PAGE>
executed in, on or through the facilities of a designated offshore
securities market and neither such Transferor nor any Person acting on its
behalf knows that the transaction was prearranged with a buyer in the
United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act, (iii) the transaction is not part of
a plan or scheme to evade the registration requirements of the Securities
Act and (iv) if the proposed transfer is being made prior to the expiration
of the Restricted Period, the transfer is not being made to a U.S. Person
or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or
Restricted Definitive Note will be subject to the restrictions on Transfer
enumerated in the Private Placement Legend printed on the Regulation S
Global Note, the Temporary Regulation S Global Note and/or the Definitive
Note and in the Indenture and the Securities Act.
3. [_] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A RESTRICTED
DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN
RULE 144A OR REGULATION S. The Transfer is being effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any
applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a
Subsidiary thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [_] such Transfer is being effected to an Accredited Investor
and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the
Transferor hereby further certifies that the Transfer complies with the
transfer restrictions applicable to Restricted Definitive Notes and the
requirements of the exemption claimed, which certification is supported by
(1) a certificate executed by the Transferee in the form of Exhibit E to
the Indenture and (2) if such Transfer is in respect of a principal amount
of Notes at the time of transfer of less than $250,000, an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Restricted Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Definitive Notes and in the Indenture and
the Securities Act.
C-2
<PAGE>
4. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [_] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state
of the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Unrestricted Definitive Note will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [_] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Unrestricted Definitive
Note will no longer be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes, on
Restricted Definitive Notes and in the Indenture.
(c) [_] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule
144, Rule 903 or Rule 904 and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of
any State of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Unrestricted Definitive
Note will not be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
[INSERT NAME OF TRANSFEROR]
By:_____________________________
Name:
Title:
Dated: _______________, ______
C-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP _____), or
(ii) [_] Regulation S Global Note
(CUSIP/CINS ______); or
(b) a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP _____), or
(ii) [_] Regulation S Global Note
(CUSIP/CINS ______), or
(iii) [_] Unrestricted Global Note
(CUSIP ______); or
(b) a Restricted Definitive Note; or
(c) an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
C-4
<PAGE>
EXHIBIT D
---------
FORM OF CERTIFICATE OF EXCHANGE
[ ], [ ]
[ ]
[ ]
Re: 9.75% Senior Subordinated Notes due 2007 (CUSIP )
Reference is hereby made to the Indenture, dated as of August 1, 1997 (the
"Indenture"), between Signature Resorts, Inc. as issuer (the "Company") and
Norwest Bank Minnesota, National Association, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
___________, the ("Owner") owns and proposes to exchange the Note(s) or
interest in such Note(s) specified herein, in the principal amount of
$__________ in such Note(s) or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. [_] EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the United States
Securities Act of 1933, as amended (the "Securities Act"), (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the beneficial interest in an Unrestricted Global Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(b) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the
D-1
<PAGE>
Securities Act and (iv) the Unrestricted Definitive Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(c) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. [_] EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b)[_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] [_] 144A Global Note or [_] Regulation S Global Note, with an
equal principal amount, the Owner hereby certifies (i) such Owner acquired such
Restricted Definitive Note in a transaction pursuant to Rule 144A or Regulation
S, (ii) the beneficial interest is being acquired for the Owner's own account
without transfer and (iii) such Exchange has been effected in compliance with
the transfer restrictions applicable to the Restricted Global Notes and pursuant
to and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed
D-2
<PAGE>
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
D-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
_________________________________
[Insert Name of Owner]
By:______________________________
Name:
Title:
Dated: _________, ______
D-4
<PAGE>
EXHIBIT E
---------
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
[ ], [ ]
[ ]
[ ]
Re: 9.75% Senior Subordinated Notes due 2007
---------------------------------------------
We are delivering this letter in connection with an offering of 9.75%
Senior Subordinated Notes due October 1, 2007 (the "Notes") of Signature
Resorts, Inc., a Maryland corporation (the "Company"), all as described in the
Offering Memorandum (the "Offering Memorandum") relating to the offering.
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities
Act"), or an entity in which all of the equity owners are accredited investors
within the meaning of Rule 501(a)(1), (2), (3), or (7) under the Securities Act
(an "Institutional Accredited Investor");
(ii) any purchase of Notes by us will be for our own account or for the
account of one or more other Institutional Accredited Investors;
(iii) in the event that we purchase any Notes, we will acquire Notes
having a minimum purchase price of at least $250,000 for our own account and for
each separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing
Notes;
(v) we are not acquiring Notes with a view to any distribution thereof in a
transaction that would violate the Securities Act or the securities laws of any
State of the United States or any other applicable jurisdiction; provided that
the disposition of our property and the property of any accounts for which we
are acting as fiduciary shall remain at all times within our control; and
(vi) we have received a copy of the Offering Memorandum and acknowledge
that we have had access to such financial and other information, and have been
afforded the opportunity to ask such questions
E-1
<PAGE>
of representatives of the Issuer and receive answers thereto, as we deem
necessary in connection with our decision to purchase Notes.
We represent that: (i) we are not an employee benefit plan or other
arrangement that is subject to the Employee Retirement Income Security Act of
1974, as amended, or Section 4975 or the Internal Revenue Code of 1986, as
amended, or an entity whose underlying assets include assets of such a plan or
arrangement (pursuant to 29 C.F.R. Section 2510.3-101 or otherwise), and we are
not purchasing (and will not hold) the Notes on behalf of, or with the assets
of, any such plan, arrangement or entity; or (ii) our purchase and holding of
the Notes are completely covered by the full exemptive relief provided by U.S.
Department of Labor Prohibited Transaction Class Exemption 96-23, 95-60, 91-38,
90-1 or 84-14.
We understand that the Notes are being offered in a transaction not
involving any public offering within the meaning of the Securities Act and that
the Notes have not been registered under the Securities Act, and we agree, on
our own behalf an don behalf of each account for which we acquire any Notes,
that we will not, within the time period referred to under Rule 144(k) (taking
into account the provisions of Rule 144(d) under the Securities Act, if
applicable) under the Securities Act as in effect on the date of the transfer of
this Note, resell or otherwise transfer this Note except (a) to the Company or
any subsidiary thereof, (b) to a person whom we reasonably believe is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) ("QIB") purchasing for its own account or for the account of a QIB in
compliance with Rule 144A under the Securities Act, (c) outside the United
States in an offshore transaction in compliance with Rule 904 under the
Securities Act, (d) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available), (e) to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act (an "IAI") that, prior to such transfer, furnishes to the
trustee a signed letter containing certain representations and agreements
relating to the registration of transfer of the Notes (the form of which letter
can be obtained from the Trustee) and, if such transfer is in respect of an
aggregate principal amount of Notes at the time of transfer of less than
$250,000, an opinion of counsel acceptable to the Company that such transfer is
in compliance with the Securities Act or (f) pursuant to an effective
Registration Statement under the Securities Act and, in each case, in accordance
with applicable state securities laws, and we agree that we will deliver to each
person to whom the Notes or an interest therein are transferred a notice
substantially to the effect hereof. As used herein, the terms "Offshore
Transaction," "United States" and "U.S. Person" have the meanings given to them
by Rule 902 of Regulation S under the Securities Act. The indenture pursuant to
which the Notes were issued contains a provision requiring the Trustee to refuse
to register any transfer of Note in violation of the foregoing restrictions. We
further understand that the Notes purchased by us will be in the form of
definitive physical certificates and that such certificates will bear a legend
reflecting the substance of this paragraph.
E-2
<PAGE>
We acknowledge that you and others will rely upon our confirmations,
acknowledgements and agreements set forth herein, and we agree to notify you
promptly in writing if any of our representations or warranties herein ceases to
be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THAT LAWS OF
THE STATE OF NEW YORK.
___________________________
(Name of Purchaser)
By: _______________________
Name:
Title:
Address:
E-3
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL]
September 8, 1997
Signature Resorts, Inc.
5933 West Century Boulevard
Suite 210
Los Angeles, California 90045
Re: Signature Resorts, Inc., a Maryland
corporation, (the "Company") - Registration
Statement on Form S-1 (Registration No. 333-
30285) and Amendment No. 1 to Form S-1 on Form
S-3, pertaining to Four Million Eight Hundred
Ninety Thousand Seventy-Three (4,890,073)
shares ("Shares") of common stock, par value
one cent ($0.01) per share ("Common Stock") to
be sold by certain stockholders of the Company
-----------------------------------------------
Ladies and Gentlemen:
In connection with the registration of the Shares under the Securities Act
of 1933 as amended (the "Act"), by the Company on Form S-1 filed with the
Securities and Exchange Commission (the "Commission") on or about June 27, 1997
and Amendment No. 1 to Form S-1 on Form S-3 filed or to be filed with the
Commission on or about September 8, 1997 (collectively, the "Registration
Statement"), you have requested our opinion with respect to the matters set
forth below.
We have acted as special Maryland corporate counsel for the Company in
connection with the matters described herein. In our capacity as special
Maryland corporate counsel to the Company, we have reviewed and are familiar
with proceedings taken and proposed to be taken by the Company in connection
with the authorization, issuance and sale of the Shares, and for purposes of
this opinion have assumed such proceedings will be timely completed in the
manner presently proposed. In addition, we have relied upon certificates and
advice from the officers of the Company upon which we believe we are justified
in relying and on various certificates from, and documents recorded with, the
State Department of Assessments and Taxation of Maryland (the "SDAT"), including
the
<PAGE>
BALLARD SPAHR ANDREWS & INGERSOLL
Signature Resorts, Inc.
September 8, 1997
Page 2
charter of the Corporation (the "Charter"), consisting of Articles of
Incorporation filed with the SDAT on May 28, 1996, Articles of Amendment filed
with the SDAT on June 13, 1996 and Articles of Amendment filed with the SDAT on
August 20, 1996. We have also examined the Bylaws of the Company, as amended
through the date hereof (the "Bylaws") and Resolutions of the Board of Directors
of the Company adopted on or before the date hereof and in full force and effect
on the date hereof; and such laws, records, documents, certificates, opinions
and instruments as we deem necessary to render this opinion.
We have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to the originals of
all documents submitted to us as certified, photostatic or conformed copies. In
addition, we have assumed that each person executing any instrument, document or
certificate referred to herein on behalf of any party is duly authorized to do
so.
Based on the foregoing, and subject to the assumptions and qualifications
set forth herein, it is our opinion that the Shares have been duly authorized by
all necessary corporate action on the part of the Company, have been validly
issued and are fully paid and non-assessable.
We consent to your filing this opinion as an exhibit to the Registration
Statement, and further consent to the filing of this opinion as an exhibit to
the applications to securities commissioners for the various states of the
United States for registration of the Shares. We also consent to the
identification of our firm as Maryland counsel to the Company in the section of
the Prospectus (which is part of the Registration Statement) entitled "Legal
Matters."
The opinions expressed herein are limited to the laws of the State of
Maryland and we express no opinion concerning any laws other than the laws of
the State of Maryland. Furthermore, the opinions presented in this letter are
limited to the matters specifically set forth herein and no other opinion shall
be inferred beyond the matters expressly stated.
Very truly yours,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL
<PAGE>
EXHIBIT 10.10
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "Agreement") is made and entered into as
of 28 August, 1997, by and among IAN K. GANNEY and RICHARD HARRINGTON (the
"Holders") and Signature Resorts, Inc., a Maryland corporation (the "Company").
This Agreement is made in connection with the acquisition by the Company of 100%
of the issued share capital of LSI Group Holdings, Plc ("LSI") (the "Purchase"),
pursuant to an Agreement for Purchase and Sale of the entire issued share
capital of LSI, dated June 5, 1997 (the "Purchase Agreement"). As a part of the
Purchase, the Holders will exchange their issued share capital in LSI for an
aggregate number of shares of Company common stock, $0.01 par value per share
(the "Common Stock") as determined in Section 1.3 of the Purchase Agreement. As
used herein the term "Registrable Shares" shall refer to such number of shares
of Common Stock upon original issuance thereof, and at all times subsequent
thereto, until the earlier to occur of such time as (i) a registration statement
of the Company that covers such Registrable Shares has been declared effective
and any such Registrable Shares have been disposed of in accordance with such
effective registration statement and (ii) all such shares are tradeable without
restriction under any applicable rules and regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The "Purchase Date" shall
be the closing date of the Purchase.
The parties hereby agree as follows:
1. Shelf Registration.
------------------
(a) The Company shall prepare or amend and file with the Securities and
Exchange Commission (the "Commission"), a registration statement for
an offering to be made on a continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended (the "Securities Act"),
covering the Registrable Shares (the "Shelf Registration"). The
Shelf Registration shall be on Form S-1 or another appropriate form
(e.g. Form s-3 after having established eligibility therefor)
----
permitting registration of the Registrable Shares for resale by the
Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Company
shall use its maximum reasonable efforts (subject in all cases to
any procedures and limitations which may be imposed by the staff of
the Commission) to (i) cause the Shelf Registration to be declared
effective under the Securities Act with respect to an aggregate of:
(1) as soon as practicable following the Purchase and in no event
later than the date the Company publicly releases financial
statements covering at least 30 days of combined operations of
the Company and LSI, a number of Registrable Shares the sale of
which would generate $9.0 million in gross sales proceeds at a
price equal to the closing sales price for the Company's Common
Stock on the Closing Date of the Purchase;
(2) with respect to all Registrable Shares not included in the Shelf
Registration described in (1) above (the "Remaining Shares"):
(A) 33% of the Remaining Shares as soon as practicable following
the second anniversary of the Purchase Date;
(B) 67% of the Remaining Shares as soon as practicable following
the third anniversary of the Purchase Date;
1
<PAGE>
(C) 100% of the Remaining Shares as soon as practicable
following the fourth anniversary of the Purchase Date;
and (ii) keep the Shelf Registration continuously effective under the
Securities Act for a period (the "Effectiveness Period") of the shorter
of (A) two years from the Purchase Date (or such longer period as may be
required under Rule 144 of the Securities Act to permit non-affiliates
to sell restricted securities without restriction), (B) the date when
all Registrable Shares are tradeable without restriction under any
applicable rules and regulations under the Securities Act and (C) the
date when all Registrable Shares covered by the Shelf Registration have
been disposed of in accordance with the Shelf Registration.
(b) The Company may require in its sole discretion that Registrable
Shares sold pursuant to the Shelf Registration effected pursuant to
this Section 1 be sold in Underwritten Offerings (as defined below)
or in block trades through approved underwriter(s), or broker-
dealers, including Montgomery Securities, Goldman Sachs & Company,
Smith Barney, Donaldson, Lufkin & Jenrette or Prudential Securities,
or such other underwriter(s) or broker-dealers selected by the
Company. Pursuant to Section 6, below, in the event any of the
Registrable Shares covered by the Shelf Registration effected
pursuant to this Section 1 are sold in such an Underwritten
Offering, the investment banker or investment bankers and manager or
managers that will manage such offering will be selected by the
Company.
(c) The Company may include in any such Shelf Registration referred to
in this Section 1 other shares of Common Stock of the Company held
by other security holders of the Company who have registration
rights.
2. Incidental Registration. If, at any time or from time to time during a
-----------------------
period of two years following the Purchase Date, the Company shall propose to
file a registration statement (a "Registration Statement") with the
Commission with respect to the proposed sale by the Company of shares of its
Common Stock (or securities exchangeable or convertible therefor) to an
underwriter(s) for reoffering to the public (an "Underwritten
Offering")(other than in connection with an offering on Form S-4 or Form S-8
or successor forms of such registration statements under the Act), then the
Company shall in each case give written notice (the "Notice") of such
proposed filing to the Holders not less than 30 days before the anticipated
filing date, which shall offer to the Holders the opportunity to include in
such Registration Statement such number of Registrable Shares as each Holder
may request. Upon written request by any Holder given within 15 days after
the giving of the Notice, the Company shall include in any Registration
Statement relating to the Common Stock of the Company all or such portion of
the Registrable Shares as the Holders may request. Neither the delivery of
the Notice by the Company nor of such request by the Holders shall obligate
the Company to file such Registration Statement and, notwithstanding the
filing of such Registration Statement, the Company may, at any time prior to
the effective date thereof, determine not to offer the securities to which
such Registration Statement relates, without liability or obligation to the
Holders. As a condition to any Holder including any Registrable Shares in any
Registration Statement pursuant to this Section 2, such Holder agrees to
effect sales of such Registrable Shares thereunder solely under the plan of
distribution established by the Company and set forth therein.
3. Company Obligations. In connection with the Company's obligation to effect a
-------------------
Shelf Registration pursuant to Section 1, or in the event the Company files a
Registration Statement in connection with an Underwritten Offering pursuant
to Section 2, it shall:
2
<PAGE>
(a) Notify the Holders as to the filing thereof and of all amendments or
supplements thereto filed prior to the effective date of such
Shelf Registration or Registration Statement;
(b) Notify the Holders, promptly after the Company shall receive notice thereof,
of the time when such Shelf Registration or Registration Statement became
effective and the filing of any amendment or supplement to any prospectus
forming a part of such Shelf Registration or Registration Statement;
(c) Notify the Holders promptly of any request by the Commission for the
amending or supplementing of such Shelf Registration or Registration
Statement or prospectus or for additional information;
(d) Prepare and file with the Commission any amendments or supplements to such
Shelf Registration or Registration Statement and the prospectus used in
connection with such Shelf Registration or Registration Statement which may
be necessary or advisable to keep such Shelf Registration or Registration
Statement effective and to comply with the provisions of the Securities Act
with respect to the offer of the Registrable Shares covered by such Shelf
Registration or Registration Statement during the period required for the
distribution of such securities, which, in the case of a Registration
Statement filed pursuant to Section 2 in connection with an Underwritten
Offering, such period shall not be in excess of 120 days from the effective
date of the Registration Statement or post-effective amendment pursuant to
which such Registrable Shares may be sold;
(e) Prepare and promptly file with the Commission and promptly notify the
Holders of the filing of such amendment or supplement to such Shelf
Registration or Registration Statement and the prospectus used in connection
with such Shelf Registration or Registration Statement as may be necessary
to correct any statements therein or omission therefrom if, at any time when
a prospectus relating to such Registrable Shares is required to be delivered
under the Securities Act, any event with respect to the Company shall have
occurred as a result of which any prospectus would include an untrue
statement of material fact or omit to state any material fact necessary to
make the statements therein not misleading;
(f) In case the Holders or any underwriter(s) for the Holders are required to
deliver a prospectus, prepare promptly upon request such amendment or
amendments to such Shelf Registration or Registration Statement and such
prospectus or prospectuses as may be necessary to permit compliance with the
requirements of Section 9(a)(8) of the Securities Act;
(g) Advise the Holders promptly after the Company shall receive notice or obtain
knowledge of the issuance of any stop order by the Commission suspending the
effectiveness of any such Shelf Registration or Registration Statement or
amendment thereto or of the initiation or threatening of any proceedings for
that purpose, and promptly use its maximum reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order
should be issued;
(h) Use its maximum reasonable efforts to qualify such Registrable Shares for
sale under the securities or blue sky laws of such states within the United
States as the Holders may reasonably designate, except that the Company
shall not be
3
<PAGE>
required in connection therewith or as a condition thereto to qualify to
do business in any such state or to take any action which would subject
it to general service of process in any such jurisdiction where it is
not then so subject; and
(i) Furnish to the Holders, as soon as available, copies of any such Shelf
Registration or Registration Statement and each preliminary or final
prospectus, or supplement or amendment prepared thereto, and such other
documents as they may reasonably request in order to facilitate the
disposition of the Registrable Shares, all in such quantities as they
may from time to time reasonably request.
Each Holder of Registrable Shares agrees by acquisition of such Registrable
Shares that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3(e) hereof, such Holder will
forthwith discontinue disposition of Registrable Shares until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated
by Section 3(e) hereof, or until it is advised in writing by the Company that
the use of the prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
prospectus, and, if so directed by the Company, such Holder will deliver to
the Company all copies, other than permanent file copies, then in such
Holder's possession of the prospectus covering such Registrable Shares
current at the time of receipt of such notice.
4. Holders Obligation to Furnish Information. In connection with the Company's
-----------------------------------------
obligation to affect a Shelf Registration pursuant to Section 1, or in the
event the Company files a Registration Statement in connection with an
Underwritten Offering pursuant to Section 2, each Holder shall furnish
information to the Company concerning such Holder, such Holder's holdings of
securities of the Company and the proposed method of sale or other
disposition of the Registrable Shares and such other information and
undertakings related thereto as shall be necessary in connection with the
preparation and filing of the Shelf Registration, any Registration post-
effective amendment covering all or part of the Registrable Shares in
compliance with the Securities Act and the Exchange Act. Each Holder further
agrees to enter into such undertakings and take such other action relating to
the conduct of the proposed offering which the Company or the underwriter(s)
may reasonably request as being necessary to ensure compliance with the
federal and state securities laws and the rules of the National Association
of Securities Dealers, Inc. ("NASD") or otherwise to affectuate the offering.
5. Expenses. The Company shall pay all expenses (the "Registration Expenses")
--------
incident to each registration of the Registrable Shares under Sections 1
and 2, including, without limitation, all registration, filing and NASD fees,
all fees and expenses of complying with state securities or blue sky laws,
all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits or "cold comfort" letters required by or incident to such performance
and compliance, premiums, and other costs of policies of insurance purchased
by the Company at its option against liabilities arising out of the public
offering of such Registrable Shares, but excluding underwriting discounts and
commissions and fees and expenses of underwriter(s), selling brokers, dealer
managers or similar securities industry professionals relating to the
distribution of the Registrable Shares, transfer taxes, fees and
disbursements of counsel for any selling shareholder(s) and other selling
expenses, if any, which shall be paid by the Selling Shareholders.
4
<PAGE>
6. Selection of Underwriter. In the event of any Registration Statement filed
------------------------
in connection with an Underwritten Offering pursuant to Section 2 and in the
event any of the Registrable Shares covered by the Shelf Registration
effected pursuant to Section 1 are to be sold in an Underwritten Offering,
the investment banker or investment bankers and manager or managers that
will manage the offering will be selected by the Company.
7. Priority in Incidental Registration. If in connection with an Underwritten
-----------------------------------
Offering registered pursuant to Section 2, the managing underwriter(s) of
such Underwritten Offering informs the Company and the Holders by letter of
its belief that due to marketing factors the number of securities requested
to be included in such Registration Statement exceeds the number which
should be sold in such Underwritten Offering, than the Company will include
in such Registration Statement, to the extent of the number which the
Company is so advised should be sold in such Underwritten Offering (i)
first, all shares of Common Stock proposed to be sold by the Company for its
own account and (ii) second, the number of Registrable Shares proposed by
the Holders to be included in the registration that, in the opinion of such
managing underwriter(s), can be sold without adversely affecting the price
or probability of success of such Underwritten Offering allocated pro rata
among such Holders, on the basis of the relative amount of Registrable
Shares requested to be included in such Registration Statements; provided
--------
that in all cases the Holders of Registrable Shares shall be entitled to
include in any such registration an aggregate of up to 25% of the total
number of shares sold in any such Underwritten Offering.
8. Underwritten Offerings. In the event that Registrable Shares are to be
----------------------
distributed through an Underwritten Offering, each Holder offering
Registrable Shares in such Underwritten Offering shall be a party to the
underwriting agreement between the Company and such underwriter(s) and may,
at its option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the
benefit of such underwriter(s) shall also be made to and for the benefit of
such Holder. Holders shall not be required to make any representations or
warranties to or agreements with the Company or the underwriter(s), other
than representations, warranties or agreements regarding the Holders, the
Registrable Shares, and the Holders intended method of distribution and any
other representations required by law. Any representations or warranties to
or agreements with the underwriter(s) made by the Holders shall also be made
to and for the benefit of the Company.
9. Indemnification.
---------------
(a) By the Company. In the event of any registration of the Registrable
--------------
Shares of the Company under the Securities Act, the Company will, and
hereby does, indemnify and hold harmless each Holder, any underwriter
(as defined in the Securities Act) for such Holder, with respect to the
Registrable Shares included in such registration, its directors,
officers, underwriters and each other person, if any, who controls any
Holder or underwriter, within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages (including reasonable
attorneys fees) or liabilities, joint or several, to which the Company
or such Holder or any such director or officer or underwriter or
controlling person may become subject under the Securities Act, the
Exchange Act, other applicable federal or state law, or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any
5
<PAGE>
registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstance in which they were made not
misleading, or any violation by the Company of the Securities Act, the
Exchange Act or any state securities laws or any applicable rules or
regulations under the Securities Act, the Exchange Act or any applicable
state securities laws, and the Company will reimburse such Holder and
each such director, officer, underwriter and controlling person for any
legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, liability, action
or proceeding; provided that the Company shall not be liable in any such
--------
case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such underwriter
or such Holder, as the case may be, specifically for use in the
preparation thereof and; provided further that the Company shall not be
----------------
liable to any person in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of such person's failure to send or give a copy of
the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to written confirmation of
the sale of the Registrable Shares to such person if such statement or
omission was corrected in such final prospectus as amended or
supplemented. Such indemnity shall remain in full force and effect
regardless of nay investigation made by or on behalf or such underwriter
or such Holder or any such director, official, underwriter or
controlling person and shall survive the transfer of such securities by
such Holder.
(b) Indemnification by the Holders. Each Holder, severally and not
------------------------------
jointly, agrees that, as a condition to including any Registrable Shares
in any registration statement filed pursuant to Section 1 or 2, that
each such Holder with Registrable Shares included in such registration
statement will and hereby does, indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) of this
Section 9) the Company who has signed the registration statement, each
director of the Company, each officer of the Company, each other person
who participates as an underwriter in the offering or sale of such
securities and each other person, if any, who controls the Company or
any such underwriter within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of such Holder specifically for use in the preparation of such
registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Such indemnity shall remain
in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such Holder.
6
<PAGE>
The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution,
to the same extent as provided above with respect to information so
furnished in writing by such persons specifically for inclusion in
any prospectus or registration statement or any amendment or
supplement thereto, or any preliminary prospectus.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
----------------------
party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this
Section 9, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action; provided
--------
that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this Section 9, except to the
extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against
an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume
the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently
incurred by the party in connection with the defense thereof other
than reasonable costs of investigation. In the event the indemnified
party determines in the reasonable judgment of his counsel that a
conflict of interest between the indemnified and indemnifying
parties exists or may exist, such indemnified party shall have the
right to retain one separate counsel (plus appropriate local
counsel), with the fees and expenses to be paid by the indemnifying
party. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term
thereof, the giving by the claimant or plaintiff to such indemnified
party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that specified in
---------------------
paragraphs (a) through (c) of this Section 9 (with appropriate
modifications) shall be given by the Company and the Holders with
respect to any required registration or other qualification of
securities under any Federal or state law or regulation or any
governmental authority other than the Act.
(e) Indemnification Payment. The indemnification required by this
-----------------------
Section 9 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills
are received or expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in this Agreement
------------
shall for any reason be unavailable or insufficient (other than by
reason of exceptions provided in those sections) to an indemnified
party under paragraphs (a), (b) and (d) of this Section 9 in respect
to any loss, claim, damage or liability, or any action in respect
thereof, or referred to therein, then each indemnifying party shall,
in lieu of indemnifying such party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim,
damage or
7
<PAGE>
liability, or action in respect thereof, in such proportion as shall be
appropriate to reflect the relative fault of the Company on the one
hand and any Holder on the other, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or
action in respect thereof, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or such Holder, the
intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or
omission; provided, however, that in no event shall the liability of
any Holder hereunder be greater in amount than the difference between
the dollar amount of the proceeds received by such Holder upon the sale
of the Registrable Shares giving rise to such contribution obligation
and all amounts previously contributed by such Holder with respect to
such loss, claim, damage or liability. The Company and the Holders
agree that it would not be just and equitable if contribution pursuant
to this Section 9 were to be determined by pro rata allocation or by
any other method of allocation which does not take into account the
equitable considerations referred to herein. The amount paid or payable
by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to in this Section 9
shall be deemed to include, for purposes of this Section 9, any legal
or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
10. Rule 144. So long as the Company has any securities registered under
--------
Section 12 of the Exchange Act, the Company will timely file the reports
and other documents required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, will
upon the request of Holders of a majority of the Registrable Shares, make
publicly available other information for a period of up to four months) and
will take such further action as such Holders may reasonably request,
including, without limitation, causing the Company's legal counsel to issue
applicable opinions to the transfer agent; all to the extent required from
time to time to enable the Holders to sell Registrable Shares without
registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, (b) Regulation S under the Securities
Act, as may be amended from time to time, or (c) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of such
Holders, the Company will deliver to such Holders (i) a written statement
as to whether it has complied with such requirements; (ii) a copy of the
most recent annual and/or quarterly report of the Company and such other
reports and documents so filed by the Company. In addition, the Company
will reasonably cooperate in providing such other information as may be
reasonably requested in availing any Holder of any rule or regulation of
the Commission which permits the selling of any such securities without
registration, provided that the Holder may be required to reimburse the
Company for the reasonable costs and expenses of providing such
information.
11. Amendments and Waivers. This Agreement may be amended and the Company may
----------------------
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of Holders of
a majority of the Registrable Shares.
8
<PAGE>
12. Notices. Any notice from one party to the other shall be in writing and
-------
either delivered personally or by certified or registered mail, postage
prepaid, or by telegram, telecopier, or by overnight mail delivery by a
nationally recognized courier, and shall be deemed given when so delivered
personally or, if mailed or given by telegram or telecopier or overnight
mail, upon receipt thereof by the addressees, as follows:
If to the Company:
Signature Resorts, Inc.
Attention: Andrew D. Hutton, Esq.
5933 Century Boulevard, Suite 210
Los Angeles, California 90045
Telephone: (310) 348-1000
Telecopy: (310) 348-1010
with a copy to:
Edward H. Brown, Esq.
Schreeder, Wheeler & Flint
1600 Candler Building
127 Peachtree Street, N.E.
Atlanta, Georgia 30303
If to any Holder:
At its address as it appears on the register of holders of Common
Stock maintained by the Company.
13. Assignment. This Agreement shall be binding upon and inure to the benefit
----------
of and be enforceable by the parties hereto and their respective successors
and permitted assigns as hereinafter set forth in this Section 13. In
addition, and whether or not any express assignment shall have been made,
the provisions of this Agreement which are for the benefit of the Holders
shall also be for the benefit of and enforceable by any subsequent holder
("Subsequent Holders") of any Registrable Shares, except any Subsequent
Holder with respect to Registrable Shares acquired in a public offering
pursuant to a Registration Statement or an exemption from registration
under Rule 144 under the Securities Act.
14. Descriptive Headings. The descriptive headings of the several sections
---------------------
and paragraphs of this Agreement are inserted for reference only and shall
not limit or otherwise affect the meaning hereof.
15. Governing Law. The validity of this Agreement and all matters relating
--------------
to its interpretation and performance shall be interpreted in accordance
with the laws of this State of California applicable to contracts made and
fully performed therein, but without regard to principles of conflicts of
law. The parties hereby agree that, in order to obtain prompt and
expeditious resolution of any disputes under this Agreement, each claim,
dispute or controversy of whatever nature, arising out of, in connection
with, or in relation to the interpretation, performance or breach of this
Agreement, including without limitation any claim based on contract, tort
or statute, or the arbitrability of any claim hereunder (an "Arbitrable
Claim"), shall be settled, at the request of any party of this Agreement,
exclusively by final and binding arbitration conducted in Los Angeles,
California. All such Arbitrable Claims shall be settled by three
arbitrators in accordance with the Commercial Arbitration Rules then in
effect of
9
<PAGE>
the American Arbitration Association (the "CAR"). Each party hereto
expressly consents to, and waives any future objection to, such forum and
arbitration rules. Judgment upon any award may be entered by any state or
federal court having jurisdiction thereof. Except as required by law
(including, without limitation, the rules and regulations of the Commission
and the Nasdaq Stock Market), no party nor the arbitrator shall disclose
the existence, content, or results of any arbitration hereunder without the
prior written consent of all parties. Except as provided herein, the
California Arbitration Act shall govern the interpretation, enforcement and
all proceedings pursuant to this Section 15. The parties further agree that
the nature, scope and timing of any production of any documents or other
information or witnesses in respect of the resolution of any Arbitrable
Claim pursuant to this Section 15 shall be in accordance with the CAR.
The arbitrators referenced herein shall provide a written statement to all
parties to this Agreement setting forth the substantive basis of such
arbitrators' resolution of any Arbitrable Claim.
Adherence to this dispute resolution process shall not limit the right of
the parties hereto to obtain any provisional remedy, including without
limitation, injunctive or similar relief, from any court of competent
jurisdiction as may be necessary to protect their respective rights and
interests pending arbitration. Notwithstanding the foregoing sentence,
this dispute resolution procedure is intended to be the exclusive method of
resolving any Arbitrable Claims arising out of or relating to this
Agreement.
The arbitration procedures shall follow the substantive law of the State
of California, including the provision of statutory law dealing with
arbitration, as it may exist at the time of the demand for arbitration,
insofar as said provisions are not in conflict with this Agreement and
specifically excepting therefrom sections of any such statute dealing with
discovery and sections requiring notice of the hearing date by registered
or certified mail.
16. Counterparts. This Agreement may be executed simultaneously in any number
------------
of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
17. Entire Agreement; Amendment. This Agreement contains all of the terms
---------------------------
agreed upon by the parties with respect to the subject matter herein and
there are no representations or understandings between the parties except
as provided in this Agreement. This Agreement may not be amended or
modified in any way except by a written amendment duly executed by each of
the parties.
18. Recapitalizations, etc. The provisions of this Agreement (including any
----------------------
calculation of share ownership) shall apply, to the full extent set forth
herein with respect to the Registrable Shares, to any and all shares of
capital stock of the Company or any capital stock, partnership units or any
other security evidencing ownership interests in any successor or assign of
the Company (whether by merger, consolidation, sale of assets or
otherwise) that may be issued in respect of, in exchange for, or in
substitution of the Registrable Shares by reason of any stock dividend,
split, combination, recapitalization, liquidation, reclassification,
merger, consolidation or otherwise.
19. Remedies. The parties hereto acknowledge that it would be impossible to
--------
fix money damages and that violations of this Agreement will cause
irreparable injury for which adequate remedy at law is not available and,
therefore, this Agreement must be enforced by specific performance or
injunctive relief. The parties agree that any party may, in its sole
discretion, apply to any court of competent jurisdiction for specific
10
<PAGE>
performance or injunctive or such other relief as such court may deem just
and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives
any objection or defense to the imposition of such relief. Nothing herein
shall be construed to prohibit any party from bringing any action for
damages in addition to an action for specific performance or an injunction
for a breach of this Agreement.
20. Waiver of Jury Trial. Consistent with Section 15 hereof, each party to
--------------------
this Agreement further waives its respective right to a jury trial of any
claim or cause of action arising out of this Agreement or any dealings
between any of the parties hereto relating to the subject matter of this
Agreement. The scope of this waiver is intended to be all-encompassing of
any and all disputes that may be filed in any court or that relate to the
subject matter of this Agreement, including, without limitation, contract
claims, tort claims, and all other common law and statutory claims. This
waiver is irrevocable, meaning that it may not be modified either orally or
in writing, and this waiver shall apply to any subsequent amendments,
supplements or other modifications to this Agreement or to any other
document or agreement relating to the transactions contemplated by this
Agreement.
21. Cumulative Remedies. All rights and remedies of either party hereto are
-------------------
cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights
or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed and delivered as of the date first above written.
SIGNATURE RESORTS, INC.
By: /s/ ANDREW D. HUTTON
-----------------------------
Andrew D. Hutton
Title: Vice President and
General Counsel
HOLDERS
/s/ IAN K. GANNEY
--------------------------------
Ian K. Ganney
/s/ RICHARD HARRINGTON
--------------------------------
Richard Harrington
11
<PAGE>
EXHIBIT 10.11
SIGNATURE RESORTS, INC.
9 3/4% Senior Subordinated Notes Due 2007
REGISTRATION RIGHTS AGREEMENT
August 8, 1997
MONTGOMERY SECURITIES
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
BT SECURITIES CORPORATION
SOCIETE GENERALE SECURITIES CORPORATION
As Initial Purchasers
c/o Montgomery Securities
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
Signature Resorts, Inc., a Maryland corporation (the "Company"),
proposes to issue and sell to certain purchasers (the "Purchasers"), upon the
terms set forth in a purchase agreement dated August 5, 1997 (the "Purchase
Agreement"), its $200,000,000 aggregate principal amount 9 3/4% Senior
Subordinated Notes due 2007 (the "Notes") (the "Initial Placement"). As an
inducement to the Purchasers to enter into the Purchase Agreement and in
satisfaction of a condition to your obligations thereunder, the Company agrees
with you, (i) for your benefit and the benefit of the other Purchasers and (ii)
for the benefit of the holders from time to time of the Notes (including you and
the other Purchasers) (each of the foregoing, a "Holder" and, together, the
"Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition shall
-----------
have their respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following capitalized defined terms shall have the following
meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
---
regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person which,
---------
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether
<PAGE>
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Closing Date" has the meaning set forth in the Purchase Agreement.
------------
"Commission" means the Securities and Exchange Commission.
----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" means the period following the
----------------------------------
consummation of the Registered Exchange Offer and ending upon the earlier of (i)
the date when all Exchange Notes held by Exchanging Dealers have been sold and
(ii) 180 days after the date the Exchange Offer Registration Statement is
declared effective, exclusive of any period during which any stop order shall be
in effect suspending the effectiveness of the Exchange Offer Registration
Statement.
"Exchange Offer Registration Statement" means a registration statement
-------------------------------------
of the Company on an appropriate form under the Act with respect to the
Registered Exchange Offer, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Exchange Notes" means debt securities of the Company identical in all
--------------
material respects to the Notes (except that the cash interest and interest rate
step-up provisions and the transfer restrictions will be modified or eliminated,
as appropriate) to be issued under the Indenture or the Exchange Notes
Indenture.
"Exchange Notes Indenture" means an indenture between the Company and
------------------------
the Exchange Notes Trustee, identical in all material respects with the
Indenture (except that the cash interest and interest rate step-up provisions
will be modified or eliminated, as appropriate).
"Exchange Notes Trustee" means the Trustee or another bank or trust
----------------------
company reasonably satisfactory to the Purchaser, as trustee with respect to the
Exchange Notes under the Exchange Notes Indenture.
"Exchanging Dealer" means any Holder (which may include the
-----------------
Purchasers) which is a broker-dealer, electing to exchange Notes acquired for
its own account as a result of market-making activities or other trading
activities (provided such Notes do
2
<PAGE>
not constitute any portion of an unsold allotment from the original sale of the
Notes), for Exchange Notes.
"Final Memorandum" means the Offering Memorandum dated August 5, 1997.
----------------
"Holder" has the meaning set forth in the preamble hereto.
------
"Indenture" means the Indenture relating to the Notes dated as of
---------
August 1, 1997, between the Company, and Norwest Bank Minnesota, National
Association, as trustee, as the same may be amended from time to time in
accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble hereto.
-----------------
"Majority Holders" means the Holders of a majority of the aggregate
----------------
principal amount of securities registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
---------------------
bankers and manager or managers that shall administer an underwritten offering.
"Notes" has the meaning set forth in the preamble hereto.
-----
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Notes or the Exchange Notes, covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Registered Exchange Offer" means the proposed offer to the Holders to
-------------------------
issue and deliver to such Holders, in exchange for the Notes, a like principal
amount of the Exchange Notes.
"Registration Statement" means any Exchange Offer Registration
----------------------
Statement or Shelf Registration Statement that covers any of the Notes or the
Exchange Notes pursuant to the provisions of this Agreement, amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
3
<PAGE>
"Shelf Registration" means a registration effected pursuant to Section
------------------
3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
-------------------------
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
----------------------------
of the Company pursuant to the provisions of Section 3 hereof which covers some
or all of the Notes or Exchange Notes, as applicable, on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Trustee" means the trustee with respect to the Notes under the
-------
Indenture.
"underwriter" means any underwriter of Notes in connection with an
-----------
offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer: Resales of Exchange Notes by Exchanging
------------------------------------------------------------------
Dealers: Private Exchange. (a) The Company shall prepare and, not later than 75
- -------------------------
days following the Closing Date, shall file with the Commission the Exchange
Offer Registration Statement with respect to the Registered Exchange Offer. The
Company shall cause the Exchange Offer Registration Statement to become
effective under the Act within 150 days of the Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Notes for Exchange Notes (assuming that such Holder is not
an affiliate of the Company within the meaning of the Act, acquires the Exchange
Notes in the ordinary course of such Holder's business and has no arrangements
with any person to participate in the distribution of the Exchange Notes) to
trade such Exchange Notes from and after their receipt without any limitations
or restrictions under the Act and without material restrictions under the
securities laws of a substantial proportion of the several states of the United
States.
(c) In connection with the Registered Exchange Offer, the Company
shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
4
<PAGE>
(ii) keep the Registered Exchange Offer open for not less than 30
days after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(iii) utilize the services of a depositary for the Registered Exchange
Offer; and
(iv) comply in all respects with all applicable laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so accepted
for exchange; and
(iii) cause the Trustee or the Exchange Notes Trustee, as the case may
be, promptly to authenticate and deliver to each Holder of Notes, Exchange
Notes equal in principal amount to the Notes of such Holder so accepted for
exchange.
(e) The Purchasers and the Company acknowledge that, pursuant to
interpretations by the Commission's staff of Section 5 of the Act, and in the
absence of an applicable exemption therefrom, each Exchanging Dealer is required
to deliver a Prospectus in connection with a sale of any Exchange Notes received
by such Exchanging Dealer pursuant to the Registered Exchange Offer in exchange
for Notes acquired for its own account. Accordingly, the Company shall:
(i) include the information set forth in (A) Annex A hereto on the
cover of the Exchange Offer Registration Statement, (B) Annex B hereto in
the forepart of the Exchange Offer Registration Statement in a section
setting forth details of the Exchange Offer, (C) Annex C hereto in the
underwriting or plan of distribution section of the Prospectus forming a
part of the Exchange Offer Registration Statement, and (D) Annex D hereto
in the Letter of Transmittal delivered pursuant to the Registered Exchange
Offer; and
(ii) use its reasonable best efforts to keep the Exchange Offer
Registration Statement continuously effective under the Act during the
Exchange Offer Registration Period for delivery by Exchanging Dealers in
connection with sales of Exchange Notes received pursuant to the Registered
Exchange Offer, as contemplated by Section 4(h) below.
(f) As a condition to its participation in the Registered Exchange
Offer pursuant to the terms of this Agreement, each Holder shall furnish, upon
the request of the
5
<PAGE>
Company, prior to the consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company (or that if it is an affiliate of the Company it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable), (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes to be issued in the
Registered Exchange Offer and (C) it is acquiring the Exchange Notes in its
ordinary course of business. In addition, all such Holders of the Exchange Notes
shall otherwise reasonably cooperate in the Company's preparations for the
Registered Exchange Offer. Each Holder hereby acknowledges and agrees that any
Exchanging Dealer and any such Holder using the Registered Exchange Offer to
participate in a distribution of the securities to be acquired in the Registered
Exchange Offer (1) could not under Commission policy as in effect on the date of
this Agreement rely on the position of the Commission enunciated in Morgan
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the Commission's letter
to Shearman & Sterling dated July 2, 1993, and similar no-action letters, and
(2) must comply with the registration and prospectus delivery requirements of
the Act in connection with a secondary resale transaction and that such a
secondary resale transaction should be covered by an effective registration
statement containing the selling security holder information required by Items
507 or 508, as applicable, of Regulation S-K if the resales are of Exchange
Notes obtained by such Holder in exchange for the Notes acquired by such Holder
directly from the Company or an affiliate thereof.
3. Shelf Registration. If (i) because of any change in law or
------------------
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Registered Exchange Offer as contemplated by Section 2 hereof, or (ii) for
any other reason the Registered Exchange Offer is not consummated within 30 days
after the date on which the Exchange Offer Registration Statement is declared
effective by the Commission, or (iii) any Purchaser so requests with respect to
Notes not eligible to be exchanged for Exchange Notes in the Registered Exchange
Offer, or (iv) any Holder (other than a Purchaser) is not eligible to
participate in the Registered Exchange Offer or (v) in the case of any Purchaser
that participates in the Registered Exchange Offer, such Purchaser does not
receive freely traceable Exchange Notes in exchange for Notes constituting any
portion of an unsold allotment from the original sale of the Notes (it being
understood that, for purposes of this Section 3, (x) the requirement that a
Purchaser deliver a Prospectus containing the information required by Items 507
and/or 508 of Regulation S-K under the Act in connection with sales of Exchange
Notes acquired
6
<PAGE>
in exchange for such Notes shall result in such Exchange Notes being not "freely
tradeable" but (y) the requirement that an Exchanging Dealer deliver a
Prospectus in connection with sales of Exchange Notes acquired in the Registered
Exchange Offer in exchange for Notes acquired for its own account as a result of
market-making activities or other trading activities shall not result in such
Exchange Notes being not "freely tradeable"), the following provisions shall
apply:
(a) The Company shall as promptly as practicable (but in no event
more than 75 days after so required or requested pursuant to this Section
3), file with the Commission and thereafter shall cause to be declared
effective under the Act a Shelf Registration Statement relating to the
offer and sale of the Notes or the Exchange Notes, as applicable, by the
Holders from time to time in accordance with the methods of distribution
elected by such Holders and set forth in such Shelf Registration Statement;
provided that, with respect to Exchange Notes received by a Purchaser in
exchange for Notes constituting any portion of an unsold allotment, the
Company may, if permitted by current interpretations by the Commission's
staff, file a post-effective amendment to the Exchange Offer Registration
Statement containing the information required by Regulation S-K Items 507
and/or 508, as applicable, in satisfaction of its obligations under this
paragraph (a) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration
Statement.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of one
year from the date the Shelf Registration Statement is declared effective
by the Commission or such shorter period that will terminate when all the
Notes or Exchange Notes, as applicable, covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement (in
any such case, such period being called the "Shelf Registration Period").
The Company shall be deemed not to have used its best efforts to keep the
Shelf Registration Statement effective during the requisite period if the
Company voluntarily takes any action that would result in Holders of
securities covered thereby not being able to offer and sell such securities
during that period, unless (i) such action is required by applicable law or
exchange requirements or Nasdaq requirements, or (ii) such action is taken
by the Company in good faith and for valid business reasons (not including
avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly
7
<PAGE>
thereafter complies with the requirements of Section 4(k) hereof, if
applicable.
4. Registration Procedures. In connection with any Shelf
-----------------------
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing thereof
with the Commission, a copy of any Shelf Registration Statement and any
Exchange Offer Registration Statement, and each amendment thereof and each
amendment or supplement, if any, to the Prospectus included therein and
shall consider in good faith any comments to each such document that you
reasonably may propose.
(b) The Company shall ensure that (i) any Registration Statement and
any amendment thereto and any Prospectus forming part thereof and any
amendment or supplement thereto complies in all material respects with the
Act and the rules and regulations thereunder, (ii) any Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an 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 and (iii) any Prospectus forming part of any
Registration Statement, and any amendment or supplement to such Prospectus,
does not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements, in the light of
the circumstances under which they were made, not misleading.
(c) (1) The Company shall advise you or your representative and, in
the case of a Shelf Registration Statement, the Holders of securities
covered thereby, and, if requested by you or your representative or any
such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto has
been filed with the Commission and when the Registration Statement or
any post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) The Company shall advise you or your representative and, in the
case of a Shelf Registration Statement, the Holders of securities covered
thereby, and,
8
<PAGE>
in the case of an Exchange Offer Registration Statement, any Exchanging
Dealer which has provided in writing to the Company a telephone or
facsimile number and address for notices, and, if requested by you or your
representative or any such Holder or Exchanging Dealer, confirm such advice
in writing:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the securities
included therein for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(iii) of the happening of any event that requires the making of
any changes in the Registration Statement or the Prospectus so that,
as of such date, the statements therein are not misleading and do not
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (which advice
shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made).
(d) The Company shall use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of securities included
within the coverage of any Shelf Registration Statement, without charge, at
least one copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if
the Holder so requests in writing, all exhibits (including those
incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of securities included within the coverage of any Shelf
Registration Statement, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in such Shelf Registration
Statement and any amendment or supplement thereto as such Holder may
reasonably request; and, subject to the occurrence of an event described in
paragraph (c)(2)(iii) above, the Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of the selling
Holders of securities in connection with the offering and
9
<PAGE>
sale of the securities covered by the Prospectus or any amendment or
supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer which so
requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by reference
therein, and, if the Exchanging Dealer so requests in writing, all exhibits
thereto (including those incorporated by reference).
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as many
copies of the Prospectus included in such Exchange Offer Registration
Statement and any amendment or supplement thereto as such Exchanging Dealer
may reasonably request for delivery by such Exchanging Dealer in connection
with a sale of Exchange Notes received by it pursuant to the Registered
Exchange Offer; and, subject to the occurrence of an event described in
paragraph (c)(2)(iii) above, the Company consents to the use of the
Prospectus or any amendment or supplement thereto by any such Exchanging
Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other offering of
securities pursuant to any Registration Statement, the Company shall
register or qualify or cooperate with the Holders of securities included
therein and their respective counsel in connection with the registration or
qualification of such securities for offer and sale under the securities or
blue sky laws of such jurisdictions as any such Holders reasonably request
in writing and do any and all other acts or things necessary or advisable
to enable the offer and sale in such jurisdictions of the securities
covered by such Registration Statement; provided, however, that the Company
-------- -------
will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which
would subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
(j) The Company shall cooperate with the Holders of Notes to
facilitate the timely preparation and delivery of certificates representing
Notes to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names
as Holders may request prior to sales of securities pursuant to such
Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above, the Company shall promptly
10
<PAGE>
prepare a post-effective amendment to any Registration Statement or an
amendment or supplement to the related Prospectus or file any other
required document so that, as thereafter delivered to purchasers of the
Notes included therein, the Prospectus will not include an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Until such post-effective amendment to such
Registration Statement or such amendment or supplement to such related
Prospectus is prepared and effected and/or such other required documents
are filed, the Purchasers and/or Holders of securities included in the
relevant Registration Statement shall not use the subject Prospectus.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the Notes
or Exchange Notes, as the case may be, registered under such Registration
Statement, and provide the applicable trustee with printed certificates for
such Notes or Exchange Notes, in a form eligible for deposit with The
Depository Trust Company.
(m) The Company shall use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable after
the effective date of the applicable Registration Statement an earnings
statement satisfying the provisions of Section 11(a) of the Act.
(n) The Company shall cause the Indenture or the Exchange Notes
Indenture, as the case may be, to be qualified under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act") in a timely manner.
(o) The Company may require each Holder of Notes to be sold pursuant
to any Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of such Notes as the
Company may from time to time reasonably require for inclusion in such
Registration Statement. No Holder may include any of its Notes in any Shelf
Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company, in writing, within 20 days after receipt
of a written request therefor, such information as the Company may
reasonably request, including, but not limited to, information specified by
Regulation S-K or otherwise required by the Commission for use in
connection with any Shelf Registration Statement or Prospectus included
therein. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required
to be disclosed in order to make the
11
<PAGE>
information previously furnished to the Company by such Holder not
materially misleading.
(p) The Company, acting in good faith, shall, if requested, consider
incorporating in a Prospectus supplement or post-effective amendment to a
Shelf Registration Statement, such information as the Managing Underwriters
and Majority Holders request be included therein and shall make all
required filings of such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Company
shall enter into such customary agreements (including underwriting
agreements) and take all other customary and appropriate actions in order
to expedite or facilitate the registration or the disposition of the Notes,
and in connection therewith, if an underwriting agreement is entered into,
cause the same to contain indemnification provisions and procedures no less
favorable than those set forth in Section 6 (or such other provisions and
procedures acceptable to the Majority Holders and the Managing
Underwriters, if any,) with respect to all parties to be indemnified
pursuant to Section 6 from Holders of Notes to the Company; provided that
such Holders agree to provide similar indemnification to the Company as set
forth in Section 6.
(r) In the case of any Shelf Registration Statement, the Company
shall (i) make reasonably available for inspection by the one or more
Managing Underwriter(s) (or, if none, by the Majority Holders) and any
attorney, accountant or other agent retained by such Managing
Underwriter(s) or such Majority Holders all relevant financial and other
records, pertinent corporate documents and properties of the Company and
its subsidiaries; (ii) cause the Company's officers, directors and
employees to supply all relevant information reasonably requested by such
Managing Underwriter(s) or such Majority Holders or any such underwriter,
attorney, accountant or agent in connection with any such Registration
Statement as is customary for similar due diligence examinations; provided,
--------
however, that any information that is designated in writing by the Company,
-------
in good faith, as confidential at the time of delivery of such information
shall be kept confidential by such Managing Underwriter(s) or such Majority
Holders, unless such disclosure is required by law, or such information
becomes available to the public generally or through a third party without
an accompanying obligation of confidentiality; (iii) make such
representations and warranties to the Holders of Notes registered
thereunder and the underwriters, if any, in form, substance and scope as
are customarily made by issuers to underwriters in primary underwritten
offerings and covering matters including, but
12
<PAGE>
not limited to, those set forth in the Purchase Agreement; (iv) obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to
the Managing Underwriters, if any) addressed to each selling Holder of
Notes registered thereunder and the underwriters, if any, in customary form
and covering such matters as are customarily covered in opinions requested
in underwritten offerings; (v) obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder of securities registered
thereunder and the underwriters, if any, in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with primary underwritten offerings; and (vi) deliver such
documents and certificates as may be reasonably requested by the Majority
Holders and the Managing Underwriters, if any, and as are customarily
delivered in similar offerings, including those to evidence compliance with
Section 4(k) and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company. The
foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this
Section 4(r) shall be performed at such times as are customary in primary
underwritten offerings.
(s) In the case of any Exchange Offer Registration Statement, the
Company shall, to the extent requested by any Purchaser, (i) make
reasonably available for inspection by such Purchaser, and any attorney,
accountant or other agent retained by such Purchaser, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries; (ii) cause the Company's officers,
directors and employees to supply all relevant information reasonably
requested by such Purchaser or any such attorney, accountant or agent in
connection with any such Registration Statement as is customary for similar
due diligence examinations; provided, however, that any information that is
-------- -------
designated in writing by the Company, in good faith, as confidential at the
time of delivery of such information shall be kept confidential by such
Purchaser or any such attorney, accountant or agent, unless such disclosure
is required by law or such information becomes available to the public
generally or through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to such
Purchaser, in form, substance and scope as are customarily made by issuers
to underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of
13
<PAGE>
counsel to the Company and updates thereof (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to such
Purchaser and its counsel, addressed to such Purchaser, covering such
matters as are customarily covered in opinions requested in underwritten
offerings; (v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any business acquired
by the Company for which financial statements and financial data are, or
are required to be, included in the Registration Statement), addressed to
such Purchaser, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with primary
underwritten offerings; and (vi) deliver such documents and certificates as
may be reasonably requested by such Purchaser or its counsel and as are
customarily delivered in similar offerings, including those to evidence
compliance with Section 4(k) and with conditions customarily contained in
underwriting agreements. The foregoing actions set forth in clauses (iii),
(iv), (v), and (vi) of this Section 4(s) shall be performed at such times
as are customary in primary underwritten offerings.
5. Registration Expenses. The Company shall bear all expenses
---------------------
incurred in connection with the performance of its obligations under Sections 2,
3 and 4 hereof and, in the event of any Shelf Registration Statement, will
reimburse, up to a maximum of $35,000, the Holders for the reasonable fees and
disbursements of one firm or counsel designated by the Majority Holders to act
as counsel for the Holders in connection therewith, and, in the case of any
Exchange Offer Registration Statement, will reimburse, up to a maximum of
$35,000, the Purchasers for the reasonable fees and disbursements of one firm or
counsel acting in connection therewith.
6. Indemnification and Contribution.
--------------------------------
(a) Indemnification of the Holders. In connection with any
------------------------------
Registration Statement, the Company agrees to indemnify and hold harmless each
Holder of Notes covered thereby (including each Purchaser and, with respect to
any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging
Dealer) and each person, if any, who controls any Holder within the meaning of
the Act against any losses, claims, damages, liabilities or expenses, joint or
several, to which such Holder or such controlling person may become subject,
under the Act, the Exchange Act, the Trust Indenture Act, or other federal,
state or Canadian statutory laws or regulations, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Company) insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out
14
<PAGE>
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state in any of them a
material fact required to be stated therein or necessary to make the statements
in any of them not misleading, or arise out of or are based in whole or in part
on any inaccuracy in the representations and warranties of the Company contained
herein or any failure of the Company to perform its obligations hereunder or
under law, and will reimburse each Holder and each such controlling person for
any legal and other expenses as such expenses are reasonably incurred by such
Holder or such controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action; provided, however, that the Company will not be liable in any
-----------------
such case to the extent that any such loss, claim, damage, liability, expense or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus, the Prospectus or as a result of any amendment or
supplement thereto in reliance upon and in conformity with the information
furnished to the Company by any such Holder or any such controlling person; and
provided the indemnity agreement contained in this Section 6(a) shall not inure
- --------
to the benefit of any Holder from whom the person asserting any such losses,
claims, damages, liabilities or expenses purchased the securities concerned to
the extent that any such loss, claim, damage liability or expense of such Holder
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 the sale of such
securities to such person as required by the Act. In addition to its other
obligations under this Section 6(a) the Company agrees that it will reimburse
expenses as provided in this Section 6(a) as incurred, but no less frequently
than quarterly, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Company's obligations to reimburse each
Holder 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 Holder shall promptly return it to the Company, together with interest,
compounded daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) announced from time
to time by Bank of America NT&SA, San Francisco, California (the "Prime Rate").
Any such interim reimbursement payments which are not made to an Holder within
30 days of a request for reimbursement shall bear interest at the Prime Rate
from the date of such request. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
15
<PAGE>
(b) Indemnification of the Company, its Directors and Officers. Each
----------------------------------------------------------
Holder of Notes covered by a Registration Statement (including each Purchaser
and, with respect to any Prospectus delivery as contemplated in Section 4(h)
hereof) will severally indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the Act, against
any losses, claims, damages, liabilities or expenses to which the Company, any
such director, officer or controlling person may become subject under the Act,
the Exchange Act, the Trust Indenture Act, or other federal or state statutory
laws or regulations, or at common law or otherwise (including in settlement of
any litigation, if such settlement is effected with the written consent of such
Holder), insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or are based upon
any untrue or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with the information
furnished to the Company by any Holder; and will reimburse the Company, or any
such director, officer or any controlling person of the Company for any legal
and other expense reasonably incurred by the Company, or any such director,
officer or controlling person of the Company in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. In addition to its other obligations under this
Section 6(b), each Holder severally agrees that it will reimburse expenses as
provided in this Section 6(b) as incurred, but no less frequently than
quarterly, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Holders', obligation to reimburse the
Company (and, to the extent applicable, each officer, director or controlling
person of the Company) for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement payment is so held to have
been improper, the Company (and, to the extent applicable, each officer,
director or controlling person of the Company) shall promptly return it to the
Holders 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
16
<PAGE>
indemnity agreement will be in addition to any liability which such Holder may
otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly
--------------------------------------------------
after receipt by an indemnified party under this Section of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section, notify
the indemnifying party in writing of the commencement thereof; but the omission
to notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party for contribution or otherwise under the
indemnity agreement contained in this Section or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it may wish, jointly
with all other indemnifying parties similarly notified, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
- -----------------
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be a conflict between the positions of
the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel representing all indemnified parties who are parties to such
action or set of related actions) or (ii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel shall be at
the expense of the indemnifying party.
(d) Contribution. If the indemnification provided for in this
------------
Section is required by its terms, but is for any
17
<PAGE>
reason held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party under Sections 6(a), 6(b) or 6(c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Holders from the
Initial Placement and the Registration Statement which resulted in such losses
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Holders in connection with the statements or omissions or
inaccuracies in the representations and warranties herein which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. Benefits received by the Company shall be deemed to be
equal to the proceeds from the Initial Placement net of purchase discounts and
commissions (before deducting expenses) as set forth on the cover page of the
Final Memorandum. Benefits received by the Purchasers shall be deemed to be
equal to the total purchase discounts and commissions as set forth on the cover
page of the Final Memorandum, and benefits received by any other Holders shall
be deemed to be equal to the value of receiving Notes or Exchange Notes, as
applicable, registered under the Act. Benefits received by any underwriter shall
be deemed to be equal to the total underwriting discounts and commissions, as
set forth on the cover page of the Prospectus forming a part of the Registration
Statement which resulted in such Losses. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact or the inaccurate or the alleged inaccurate representation and/or
warranty relates to information supplied by the Company or the Holders 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 subsection (c) of this Section, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in subsection (c) of this Section
with respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this subsection (d); provided, however, that no
-------- -------
additional notice shall be required with respect to any action for which notice
has been given under subsection (c) of this Section for purposes of
indemnification. The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section were
18
<PAGE>
determined solely by pro rata allocation (even if the Holders were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section, in no case shall any Purchaser
or any subsequent Holder of any Security or New Security be required to
contribute any amount in excess of the purchase discount or commission
applicable to such Security, or in the case of a New Security, applicable to the
Security which was exchangeable into such New Security, as set forth on the
cover page of the Final Memorandum, nor shall any underwriter be required to
contribute any amount in excess of the underwriting discount or commission
applicable to the Notes purchased by such underwriter under the Registration
Statement which resulted in such Losses. 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 Holders' obligations to contribute pursuant to this
Section are several in proportion to their respective underwriting commitments
and not joint.
(e) Arbitration. It is agreed that any controversy arising out of
-----------
the operation of the interim reimbursement arrangements set forth in Sections
6(a) or 6(b) hereof, including the amounts of any requested reimbursement
payments and the method of determining such amounts, shall be settled by
arbitration conducted under the provisions of the Constitution and Rules of the
Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in Sections 6(a) and 6(b) hereof
and would not resolve the ultimate propriety or enforceability of the obligation
to reimburse expenses which is created by the provisions of such Sections 6(a)
or 6(b) hereof.
7. Miscellaneous.
-------------
(a) No Conflicting Agreements. The Company has not, as of the date
-------------------------
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that conflicts with the provisions
hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be
19
<PAGE>
given, unless the Company has obtained the written consent of the Holders of at
least a majority of the then outstanding aggregate principal amount of Notes
(or, after the consummation of any Exchange Offer in accordance with Section 2
hereof, of Exchange Notes); provided that, with respect to any matter that
--------
directly or indirectly materially and adversely affects the rights of any
Purchaser hereunder, the Company shall obtain the written consent of each such
Purchaser against which such amendment, qualification, supplement, waiver or
consent is to be effective. Notwithstanding the foregoing (except the foregoing
proviso), a waiver or consent to departure from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by the
Majority Holders, determined on the basis of securities being sold rather than
registered under such Registration Statement.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such holder
to the Company in accordance with the provisions of this Section 7(c),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy in
like manner to Montgomery Securities;
(2) if to you, initially at the respective addresses set forth in
the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement with copies as indicated therein.
All such notices and communications shall be deemed to have been duly
given when received.
The Purchasers or the Company by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Notes and/or Exchange Notes. The
Company hereby agrees to extend the benefits of this Agreement to any Holder of
Notes and/or Exchange Notes and any such Holder may specifically enforce the
provisions of this Agreement as if an original party hereto.
20
<PAGE>
(e) Counterparts. This agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed in said State.
(h) Severability. In the event that any one of more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Company etc. Whenever the consent or approval
-----------------------------
of Holders of a specified percentage of principal amount of Notes or Exchange
Notes is required hereunder, Notes or Exchange Notes, as applicable, held by the
Company or its Affiliates (other than subsequent Holders of Notes or Exchange
Notes if such subsequent Holders are deemed to be Affiliates solely by reason of
their holdings of such Notes or Exchange Notes) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
(Signature Page to Follow)
21
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
SIGNATURE RESORTS, INC.
By: /s/ Andrew D. Hutton
----------------------
Name: Andrew D. Hutton
Title: Vice President and
General Counsel
Accepted: August 8, 1997
MONTGOMERY SECURITIES
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
BT SECURITIES CORPORATION
SOCIETE GENERALE SECURITIES CORPORATION
By: MONTGOMERY SECURITIES
By: /s/ Bernard N. Notas
--------------------
Name: Bernard N. Notas
Title: Director of Finance
<PAGE>
EXHIBIT 10.12
AMENDED CONSULTING AGREEMENT
----------------------------
THIS AMENDED CONSULTING AGREEMENT (the "AMENDED AGREEMENT") is made and
entered into this 1 day of August, 1997, by and between SIGNATURE RESORTS, INC.,
a Maryland corporation ("SIGNATURE"), RESORT SERVICES, INC., a Virginia
corporation ("RSI") and DR. KAY F. GOW AND ROBERT T. GOW, together the
principals of RSI (the "PRINCIPALS").
W I T N E S S E T H:
--------------------
WHEREAS, the parties hereto did previously enter into a Consulting
Agreement dated May 15, 1997, concerning certain consulting services to be
provided to Signature by RSI through the activities of the Principals (the
"ORIGINAL AGREEMENT"); and
WHEREAS, Signature acknowledges that RSI and the Principals have and are
continuing to perform their obligations satisfactorily; and
WHEREAS, the parties are desirous of amending the Consulting Agreement to
reflect the termination of the obligations of RSI under the Consulting Agreement
and in lieu thereof to provide for direct delivery of consultation services by
the Principals to Signature.
NOW, THEREFORE, in consideration of the mutual covenants, promises,
agreements, representations and warranties hereinafter set forth, the parties
hereto to covenant, promise and agree that the Original Agreement is hereby
amended and restated, in its entirety, to state as follows:
1. The term of the Original Agreement is hereby amended to extend through
May 31, 1998 (the "TERM"). This Agreement may not be extended beyond the term
unless by agreement signed in writing by the applicable parties.
2. Section 3 is hereby amended by deleting that Section it in its
entirety and in lieu thereof substituting the following:
3. PERFORMANCE OF SERVICES. Effective September 1, 1997 (the "REVISION
-----------------------
EFFECTIVE DATE"), Dr. Kay F. Gow and Robert T. Gow agree to act as a
consultant for Signature with respect to matters concerning the
Williamsburg Resorts as Signature and the Principal may reasonably agree
are necessary and appropriate the Principals shall make themselves
available at such times, and shall undertake such activities in connection
with this consulting arrangement as may be reasonably necessary for the
performance of such services.
3. Section 4 of the Agreement is amended by deleting that Section in its
entirety and in lieu thereof substituting the following:
<PAGE>
4. Compensation.
------------
4.1 In consideration for the services performed by Dr. Kay
F. Gow, signature agrees to pay a monthly consulting fee of $15,000
(plus reasonable pre-approved expenses) for the remaining nine months of
the Agreement following the Revision Effective Date. In addition,
Signature agrees to pay Dr. Kay F. Gow the sum of $108,129, representing
three months of the targeted bonus for Dr. Gow under the initial
agreement and a lump sum reimbursement for a portion of the expenses
subject to the Original Agreement, such payment to be made by Signature
to Dr. Gow upon execution of this Agreement. In consideration for the
services performed by Robert T. Gow, Signature agrees to pay a monthly
consulting fee of $15,624.75 (plus reasonable pre-approved expenses) for
the remaining nine months of the Agreement following the Revision
Effective Date.
4.2 The Principals understand and acknowledge that the
compensation provided in Section 4.1 is in lieu of all compensation,
expense allowances, rent expenses and bonuses, and any other form of
compensation or reimbursement as provided in the Original Agreement. The
Principals further acknowledge that effective immediately, Signature
will no longer be responsible or obligated to provide to either RSI or
the Principals any office space for the provision of their services.
4. Section 7 of the Agreement shall be amended by deleting that
Section in its entirety and in lieu thereof substituting the following:
7. OTHER EFFECTS OF AMENDED AGREEMENT.
----------------------------------
7.1 Each of the Principals hereby agrees to resign
from all offices and directorships held by either of the Principals with
any homeowners associations affiliated with either Williamsburg Resorts,
signature or any affiliate, at the request of Signature.
7.2 All parties acknowledge that as of the date of
this Amended Agreement, all parties are in full compliance with the
Original Agreement that no breach has occurred under the Original
Agreement, and that each of the parties to the Original Agreement hereby
release all other parties, their successors and assigns, insurers,
representatives, attorneys and agents from all actions, causes of
action, claims and demands whatsoever arising out of or in connection
with the Original Agreement and the performance under the Original
Agreement by any parties through the date hereof.
5. Section 9.11 of the Original Agreement is hereby deleted in its
entirety.
2
<PAGE>
6. Except specifically provided herein, the terms of the
Original Agreement shall survive and shall continue to be binding upon
the parties hereto.
7. For purpose of this Agreement the term "Revision
Effective Date" shall be September 1, 1997.
IN WITNESS WHEREOF, the parties have executed, acknowledged,
sealed and delivered this Agreement as of the day and year first set
forth above.
SIGNATURE RESORTS, INC.
By: /s/ Michael Depatie
----------------------------
Title: Senior Vice President
--------------------------
RESORT SERVICES, INC.
By: /s/ Kay F. Gow
----------------------------
Title: President
--------------------------
/s/ Kay F. Gow
---------------------------------
Dr. Kay F. Gow
/s/ Robert T. Gow
---------------------------------
Robert T. Gow
3
<PAGE>
EXHIBIT 11
STATEMENT RE:COMPUTATION OF PER SHARE EARNINGS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (UNAUDITED)
-------------------------------- --------------------------------
SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------------------- --------------------------------
1995 1996 1996 1997
------------- ------------- ----------- -------------
PRIMARY EARNINGS PER SHARE
- --------------------------
<S> <C> <C> <C> <C>
NET INCOME
As reported $19,491,000 $ 8,769,000 $10,678,000 $ 6,887,000
PRO FORMA ADJUSTMENT (UNAUDITED):
Pro forma provision for income taxes (a) (5,989,000) (6,654,000) -- --
----------- ----------- ----------- -----------
Pro forma net income before extraordinary item $13,502,000 $ 2,115,000 $10,678,000 $ 6,887,000
Extraordinary item, net of taxes -- -- -- (518,000)
----------- ----------- ----------- -----------
Pro forma net income $13,502,000 $ 2,115,000 $10,678,000 $ 6,369,000
=========== =========== =========== ===========
APPLICABLE COMMON SHARES:
Average outstanding common shares during the period 14,638,970 16,823,833 14,638,970 22,037,548
Outstanding stock option (b) -- 307,664 -- 533,634
----------- ----------- ----------- -----------
Total primary weighted average number of common
and common share equivalents outstanding 14,638,970 17,131,497 14,638,970 22,571,182
----------- ----------- ----------- -----------
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Pro forma net income per common and common equivalent share
before extraordinary item $ 0.92 $ 0.12 $ 0.73 $ 0.30
Extraordinary item, net of income taxes -- -- -- $ (0.02)
----------- ----------- ----------- -----------
Pro forma net income per common and common equivalent share $ 0.92 $ 0.12 $ 0.73 $ 0.28
=========== =========== =========== ===========
</TABLE>
(a) Reflects the effect on historical operations data, assuming the combined
Company had been treated as a C Corporation rather than as individual
limited partnerships and limited liability companies for federal income tax
purposes.
(b) Based on the treasury stock method.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF SIGNATURE RESORTS, INC.
<TABLE>
<CAPTION>
NAME JURISDICTION OF ORGANIZATION
- ---- ----------------------------
<S> <C>
AKGI Lake Tahoe Investments, Inc................. California
AKGI Poipu Investments, Inc...................... California
AKGI-St. Maarten, N.V............................ Delaware and Netherlands Antilles
All Seasons Construction, Inc.................... Arizona
All Seasons Investments, Inc..................... Arizona
All Seasons Properties, Inc...................... Arizona
All Seasons Realty, Inc.......................... Arizona
All Seasons Resorts, Inc......................... Arizona
All Seasons Resorts, Inc......................... Texas
Argosy Grand Beach, Inc.......................... Georgia
Argosy Hilton Head, Inc.......................... South Carolina
Argosy/KGI Grand Beach Investment Partnership.... California (general partnership)
Argosy/KGI Poipu Investment Partnership, L.P..... Hawaii (limited partnership)
Argosy/KGI Port Royal Partners................... South Carolina (general partnership)
Argosy Partners, Inc............................. Georgia
Arizona Reservations Center, Inc................. Arizona
ASR Realty-Northbay, Inc......................... California
ASR Resort Services, Inc......................... Arizona
AVCOM International, Inc......................... Delaware
Benal Holdings Limited........................... Gibraltar
Floriana Holdings Limited........................ Gibraltar
Grand Beach Partners, L.P........................ California (limited partnership)
Grand Beach Resort, Limited Partnership.......... Georgia (limited partnership)
Great Western Financial Resources, Inc........... Arizona
Great Western Financial Services, Inc............ Arizona
Greensprings Associates.......................... Virginia (joint venture)
Greensprings Plantation Resorts, Inc............. Virginia
Hewicoon SL...................................... Spain
KGI Grand Beach Investments, Inc................. Georgia
KGI Port Royal, Inc.............................. South Carolina
KGK Investors, Inc............................... California
KGK Lake Tahoe Development, Inc.................. California
KGK Partners, Inc................................ California
Lake Tahoe Resort Partners, LLC.................. California (limited liability company)
Los Amigos Beach Club Limited.................... Isle of Man
LS Financial Services Limited.................... United Kingdom
LS International Resort Management Limited....... United Kingdom
LS Interval Ownership Limited.................... United Kingdom
LSI Travel Club Limited.......................... United Kingdom
LS Promotions Limited............................ United Kingdom
Member Privileges International, Inc............. California
Pine Lake plc.................................... United Kingdom
Plantation Resorts Group, Inc.................... Virginia
Poipu Resort Partners, L.P....................... Hawaii (limited partnership)
Port Royal Resort, L.P........................... South Carolina (limited partnership)
Powhatan Associates.............................. Virginia (joint venture)
Premier Resort Management, Inc................... Georgia
Resort Management International, Inc............. Georgia
Resort Management International, Inc............. California
Resort Marketing International-Hawaii, Inc....... Hawaii
Resort Marketing International, Inc.............. California
RKG, Corp........................................ Virginia
RMI Flamingo C.V.o.a............................. Netherlands Antilles (limited partnership)
RMI Royal Palm C.V.o.a........................... Netherlands Antilles (limited partnership)
RPM Management, Inc.............................. Arizona
RPM Services, Inc................................ Arizona
Sedona/Grand Canyon Tours........................ Arizona
Signature Finance Corporation.................... Georgia
Signature Grand Villas, Inc...................... U.S. Virgin Islands
S.V.L.H., Inc.................................... Virginia
The Ridge Spa and Racquet Club, Inc.............. Arizona
Vacation Travel Club, Inc........................ Arizona
Westpro Research Corporation..................... Arizona
Williamsburg Vacations, Inc...................... Virginia
Woodford Bridge Country Club Limited............. United Kingdom
</TABLE>
<PAGE>
EXHIBIT 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in Amendment No. 1 to Registration Statement No.
333-30285 of our report dated August 15, 1997, included in Signature Resorts,
Inc.'s Form 8-K filed on September 8, 1997, and to all references to our Firm
included in this Registration Statement.
September 8, 1997,
Orlando, Florida
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference of our report dated May 31, 1996, except for Note
12, as to which the date is July 1, 1996, with respect to the consolidated
financial statements of AVCOM International, Inc. as of December 31, 1995 and
for each of the two years in the period ended December 31, 1995, in the
Registration Statement (Amendment No. 1 to Form S-1 on Form S-3) and related
Prospectus of Signature Resorts, Inc. for the registration of 4,890,073 shares
of its common stock.
ERNST & YOUNG LLP
Phoenix, Arizona
September 4, 1997
<PAGE>
EXHIBIT 23.4
Consent of Independent Auditors
-------------------------------
The Board of Directors and Shareholders
LSI Group Holdings Plc
We consent to the incorporation by reference in the registration statement (No.
333-30285) on Form S-3 of Signature Resorts, Inc. of our report dated 27 March
1997, except for note 29 which is as of 5 June 1997, with respect to the
consolidated financial statements of LSI Group Holdings Plc at December 31,
1995 and 1996 and for each of the years in the three-year period ended December
31, 1996, which report appears in the Form 8-K of Signature Resorts, Inc. dated
8 September 1997.
(signed) KPMG
Chartered Accountants
Preston, England
5 September 1997
