As filed with the Securities and Exchange Commission on August , 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ROYAL ALOHA DEVELOPMENT COMPANY
(Exact name of small business issuer in its charter)
Nevada 6552 86-0858827
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
ROYAL ALOHA DEVELOPMENT COMPANY
1505 Dillingham Blvd., Suite 212
Honolulu, Hawaii 96817
(808) 847-8050
(800) 367-5212
(Address and telephone number of principal executive offices)
360 East Desert Inn Road Las
Vegas, Nevada 89109
(Address of principal place of business
or intended principal place of business.)
JACK R. CORTEWAY, PRESIDENT AND CEO
ROYAL ALOHA DEVELOPMENT COMPANY
1505 Dillingham Blvd. Suite 212
Honolulu, Hawaii 96817
(808) 847-8050
(800) 367-5212
(Name, address and telephone number of agent for service)
Copies of communications to:
RICHARD T. BEARD, ESQ.
JEANENE F. PATTERSON, ESQ.
HARRY E. McCOY II, ESQ.
Ballard Spahr Andrews & Ingersoll
201 South Main Street, Suite 1200
Salt Lake City, UT 84111
Approximate date of commencement of proposed sale to the public: As soon as
possible after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
Title of Each Class Proposed Maximum Proposed Maximum
of Securities Dollar Amount to Offering Price Aggregate Amount of
to be Registered be Registered Per Note(1) Offering Price(1) Registration Fee
____ % Eight Year $8,500,000 100% $8,500,000 $2,576
Deferred Interest
Subordinated Notes
</TABLE>
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1 Estimated solely for the purpose of calculating the registration fee.
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
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 AUGUST 1, 1997
PROSPECTUS
$8,500,000
ROYAL ALOHA DEVELOPMENT COMPANY
_______ % Eight Year Deferred Interest Subordinated Notes
Royal Aloha Development Company, a Nevada corporation (the "Company"), is
hereby offering (the "Offering") for sale its ____ % Eight Year Deferred
Interest Subordinated Notes (the "Notes") up to an aggregate of $8,500,000. The
proceeds from the Notes will be used to fund in part the construction and
development of a time-share resort in Las Vegas, Nevada (the "Resort") located
on property formerly owned by Royal Aloha Vacation Club, a Hawaii not-for-profit
corporation ("RAVC") and the parent of the Company. The initial Offering period
will remain open for 90 days, which period may be extended by the Board of
Directors for up to two additional successive 90-day periods.
Interest on the Notes will accrue from the Issuance Date, as defined
herein, and will be compounded semi-annually. After repayment of the borrowings
under a Construction Loan Agreement (together with any take-out loan, the
"Construction Loan") which the Company will obtain from a construction lender
(the "Construction Lender"), interest which accrues during each semi-annual
period at the rate of _____% per annum will be paid semi-annually. The Company
estimates, assuming the maximum offering is sold, construction begins as planned
and up to 3,650 vacation ownership interests ("VOIs") in the Resort are sold
within the first three years after the commencement of construction, that
accrued interest will begin paying on the Notes within three years after the
commencement of construction. There can be no assurance that interest payments
will commence at that time.
The Notes may be redeemed, at the option of the Company, in whole or in
part, at any time on or after the third anniversary of the Issuance Date at ___%
of their principal amount, plus accrued interest, and declining to 100% of such
principal amount, plus accrued interest, on the sixth anniversary of the
Issuance Date and thereafter.
The Notes are unsecured and subordinated to all existing and future Senior
Indebtedness of the Company, including the Construction Loan. See "Description
of Securities."
SEE "RISK FACTORS" COMMENCING ON PAGE OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
NOTES OFFERED HEREBY.
-------------------
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.
--------------------
<PAGE>
===========================================================================
Price to Proceeds to
Public(1) Commission (2) Company (3)
- ---------------------------------------------------------------------------
Per Note........... % None %
- ---------------------------------------------------------------------------
Total Minimum (4) $ 4,500,000 None $ 4,500,000
- ---------------------------------------------------------------------------
Total Maximum (4) $ 8,500,000 None $ 8,500,000
===========================================================================
(1) The Notes will be sold on a "best efforts, minimum-maximum" basis.
Accordingly, at least $4,500,000 principal amount of Notes must be sold if any
are sold. See "Plan of Distribution."
(2) The Notes will be sold directly by the Company through officers and
employees of the Company or its parent who will receive no commission or other
remuneration therefor. The Company may also offer the Notes through one or more
brokers and dealers. The Company will pay a commission to any broker or dealer
of up to six percent (6%) of the principal amount of the Notes sold.
(3) Before deducting expenses of the Offering payable by the Company
estimated at $250,000.
(4) All proceeds received under this Offering will be mailed within three
business days following receipt to First Trust of California N.A., until at
least $4,500,000 has been deposited therein. In the event that less than
$4,500,000 in gross proceeds is deposited within 90 days from the date hereof,
or such later date as shall be determined by the Board of Directors, or if the
Construction Loan as hereinafter defined is not obtained within 60 days after
the end of the Offering period, all proceeds received will be returned to the
investor, with interest accrued at a rate established by the escrow agent.
Investors will have no right to withdraw funds deposited in the escrow account.
--------------------
The date of this Prospectus is , 1997.
--------------------
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (which term shall include
all amendments, exhibits, and schedules thereto) under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Notes. This
prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and to which reference is hereby made. Statements
made in this prospectus as to the contents of any contract, agreement, or other
document referred to are not necessarily complete. With respect to each such
contract, agreement, or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement, including exhibits and
schedules filed therewith, and the reports, proxy statements, and other
information filed by the Company with the Commission may be inspected without
charge at the public reference facilities maintained by the Commission at its
principal office at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at regional offices of the Commission located at
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661, and Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
its public reference facilities in Chicago, Illinois, and New York, New York, at
prescribed rates. The Commission also maintains a Web site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the Commission. The Commission's Web site
address is http://www.sec.gov. The Company has electronically filed the
Registration Statement, including exhibits and schedules filed therewith, with
the Commission, and such information is available at the Commission's Web site.
As a result of the filing of the Registration Statement with the
Commission, the Company will become subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will be required to file reports and other information with
the Commission. The Company's obligation to file periodic reports with the
Commission will be suspended if the Notes are held of record by fewer than 300
holders at the beginning of any fiscal year of the Company other than the fiscal
year in which the Registration Statement becomes effective. Accordingly, if
there are fewer than 300 holders of the Notes as of the beginning of any such
fiscal year, the Company may cease to file reports with the Commission in
respect of such fiscal year. However, the Company would nevertheless be required
to continue to file reports with the Commission if the Notes are listed on a
national securities exchange. There is no current intent to seek a listing of
the Notes on an exchange.
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PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed information
and financial statements and related notes appearing elsewhere in this
prospectus. See "Risk Factors" for a discussion of certain factors to be
considered in evaluating the Company and its business.
The Company
The Company was incorporated on February 27, 1997, by Royal Aloha Vacation
Club ("RAVC"), a Hawaii not-for-profit corporation, to develop timeshare
resorts. The Company will develop and construct a resort in Las Vegas, Nevada
(the "Resort"), located on property formerly owned by RAVC. The Resort will
consist of 119 units (if the maximum amount of Notes is sold) or 60 units (if
the minimum amount of Notes is sold) built upon .86 acres of land (the
"Property") located approximately one-quarter mile from Las Vegas Boulevard,
also known as the "Strip." The Company is seeking to acquire a contiguous parcel
of land upon which the Company could build an additional 40 units; however,
there can be no assurance such parcel can be purchased. Until the Notes are
repaid, the Company will restrict its activities to the development,
construction, operation and sale of the Resort and any additions thereto.
The Las Vegas Resort
The Property is currently improved with a timeshare project consisting of
20 units. The current project is below the standard the Company believes is
necessary for a timeshare resort in Las Vegas. This project will be razed and
replaced with upgraded facilities. RAVC contributed the Property and cash to the
Company in exchange for 100% of the outstanding capital stock of the Company.
The Resort will consist of from 60 units, if only the minimum offering is
sold, to 119 units if all the Notes are sold. The Resort will include such
amenities as a lobby, an owner's lounge, a fitness room, a swimming pool, a sun
area, various meeting rooms, a "kids room," offices, a delicatessen/convenience
store and covered and open parking. The residential floors will include one and
two bedroom units on three different floor plans in addition to units designed
to accommodate the physically challenged.
The Company will oversee construction of the Resort and sale of the VOIs in
the Resort through a third party marketing company. RAVC will provide total
resort management through a management agreement between RAVC and the
association of owners of VOIs in the Resort. See "Business--The Las Vegas
Resort" and "Certain Relationships and Related Transactions--Resort Management."
RAVC
RAVC was founded in 1977 in Hawaii as a timesharing organization with one
property in Waikiki. RAVC now owns, directly or through subsidiaries, and
manages seven additional properties in Kona and Maui, Hawaii; Las Vegas and Lake
Tahoe, Nevada; Chandler, Arizona; Acapulco, Mexico; and Marbella, Spain.
Currently, RAVC has approximately 8,500 members residing in all 50 states as
well as approximately 23 foreign countries.
The Offering
Securities Offered:
Minimum...................... $4,500,000 principal amount of __% Eight Year
Deferred Interest Subordinated Notes
Maximum...................... $8,500,000 principal amount of __% Eight Year
Deferred Interest Subordinated Notes
Interest Payment Dates......... Interest will accrue from the Issuance Date and
will compound semi-annually (on the sixth month
and annual anniversary of the Issuance Date). On
each semi-annual interest payment date that
occurs after the repayment of the Construction
Loan, interest which has accrued during the
semi-annual period will be paid. Interest that
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has accrued from the Issuance Date until six
months prior to the initial interest payment
date (the "Development Period Interest") will
be paid as the Company's cash flow allows, but
in any event no later than the maturity date of
the Notes.
............................. The Company estimates, assuming construction
begins as planned, the maximum Offering is sold
and up to 3,650 VOIs in the Resort are sold
within the first three years after the
commencement of construction, that currently
accruing interest will begin to be paid on the
Notes within three years after the
commencement of construction. There can be no
assurance that interest payments will commence
at that time.
Optional Redemption........... The Notes will be redeemable at the option of
the Company, at any time on or after the third
anniversary after the Issuance Date, at __%
of their principal amount and declining to 100%
of such principal amount, plus accrued interest,
on the sixth anniversary after the Issuance Date
and thereafter.
Subordination................. The Notes will be subordinated to all existing
and future Senior Indebtedness (as defined
herein) of the Company, including the
Construction Loan (which is estimated to be
approximately $15 million if 119 units are
built). The Notes will not restrict the
incurrence of any Senior Indebtedness or other
indebtedness ranking pari passu (equally) with
or subordinate to the Notes. The Notes are
unsecured obligations of the Company and are
not guaranteed by RAVC.
Use of Proceeds............... The net proceeds from the sale of the Notes
will be used to partially fund the construction
and development of the Resort.
Use of Brokers and Dealers.... The Offering may be made directly by the Company
or through one or more brokers and dealers. The
Company has agreed to pay a commission to any
broker or dealer of up to six percent (6%) of
the principal amount of the Notes sold.
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RISK FACTORS
In addition to the other information contained in this prospectus, the
following risk factors should be carefully considered in evaluating the Company
and its business before purchasing the Notes offered hereby. The Company
cautions the reader that this list of risk factors may not be exhaustive.
Subordination; Unsecured Nature of Note
The Notes are subordinate to the Construction Loan and all other future
indebtedness incurred by the Company designated as senior debt ("Senior
Indebtedness"). No payments can be made on the Notes until the Construction Loan
has been paid. Payment also cannot be made if any other Senior Indebtedness is
in default, or if payment is restricted by the terms of the Senior Indebtedness.
No sinking fund is provided for the Notes and the Notes are not guaranteed by
RAVC. There can be no assurance that the Company will generate sufficient
revenue to pay the Construction Loan, other future Senior Indebtedness, and the
Notes. If sufficient funds are not available, the Construction Loan and other
Senior Indebtedness will be repaid first. Remaining funds, if any, will be used
to repay the Notes on a pro rata basis. Noteholders cannot look to RAVC for
repayment of their Notes.
In addition, the Construction Loan will be secured by the Resort and
Property and other collateral. The Company intends to pledge receivables from
the sale of vacation ownership interests (together with the Resort and Property,
the "Collateral") as security for additional Senior Indebtedness from the
Construction Lender or another lender. Future indebtedness may also be secured,
whether or not it is senior to the Notes. Therefore, if the Company fails to
repay the Construction Loan or other indebtedness and the Notes, the
Construction Lender and other creditors would be able to benefit from the sale
of the Collateral and be paid in full before the holders of the Notes.
Indenture Covenants
The Notes are governed by the terms of the Indenture. See "Description
of Securities." The Indenture sets forth, among other things, the conditions
under which the Notes may be accelerated upon a default by the Company and the
rights of the Trustee to enforce the Notes against the Company. The Indenture
does not restrict the Company's ability to take actions which may be detrimental
to its ability to make payments on the Notes. For example, the Indenture does
not limit distributions from the Company to RAVC nor does it limit the Company's
ability to incur Senior Indebtedness. Furthermore, the Indenture does not
require the Company to establish a sinking fund to accumulate funds for the
repayment of the Notes when they come due. The terms of the Notes and the
Indenture were established by the Company without arms length negotiation. Due
to the terms of the Indenture and the subordinated nature of the Notes, the
holders of the Notes will have substantially fewer legal safeguards against
defaults than would typically be available to holders of long term debt
securities.
Risks of Obtaining Construction Loan and Customer Financing
The Construction Loan has not yet been obtained by the Company.
However, the Company has received letters from several Construction Lenders
regarding their interest, subject to certain conditions, including the
completion of this Offering, to enter into a Construction Loan. There can be no
assurance that all conditions will be met and the Construction Loan will be
provided by the prospective Construction Lenders or from other lenders. There
can be no assurance that the interest rate on the Construction Loan or other
terms and conditions will be satisfactory to the Company. The proceeds from the
Offering will be placed in escrow pending the closing of the Construction Loan.
If the Construction Loan is not obtained with the Construction Lender or other
lender and on terms acceptable to the Company, all funds will be returned to the
purchasers and the Notes will not be issued.
With respect to sales of VOIs at the Resort, the Company will offer
financing to the buyers who make a down payment generally of at least 10% of the
purchase price. This financing will be evidenced by a note that generally will
bear interest at fixed rates and will be collateralized by a first deed of trust
on the underlying VOI. The Company intends to enter into an agreement with a
lender (who may be the Construction Lender) for the financing of these customer
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receivables. The Company expects this agreement to provide an aggregate of up to
approximately $65 million of available financing to the Company (based on the
construction of 119 units) bearing interest at variable rates tied to either the
prime rate or the London Interbank Offer Rate ("LIBOR"). Under these
arrangements, the Company will pledge the promissory notes and deeds of trust as
security to the lender, who typically will lend the Company 75% to 90% of the
principal amount of such notes. Payments under these promissory notes will be
made by the purchaser borrowers directly to a payment processing center and such
payments will be credited against the Company's outstanding balance with the
lender. Although RAVC has such financing arrangements, the Company presently
does not have a binding agreement for this financing, and there can be no
assurance that arrangements can be made on terms that are satisfactory to the
Company. However, if the Company obtains the Construction Loan, it expects to be
able to obtain receivables financing arrangements. Sales of VOIs will be
substantially limited if the Company is unable to provide financing to buyers of
VOIs.
Lack of Liquidity; Absence of Market Maker
There is no existing trading market for the Notes and there can be no
assurance regarding the future development of a market for the Notes, or the
ability of holders of the Notes to sell their Notes or the price at which such
holders may be able to sell their Notes. If such a market were to develop, the
Notes could trade at prices that may be higher or lower than the initial
offering price depending on many factors, including prevailing interest rates,
the successful completion of the Resort, the rate and amount of VOIs sold and
the market for similar securities. The Company does not intend to apply for
listing or quotation of the Notes on any securities exchange or stock market and
there is no market maker for the Notes. The liquidity of the Notes will also be
affected by several factors, including the fact that the Noteholders will not
receive interest on their Notes for several years, and the Notes are unsecured.
Risks of Development and Construction Activities
The Company's success depends upon the development and construction of
the Resort. There can be no assurance that the Company will complete development
and construction of the Resort. The Company will restrict its activities to the
development of the Resort and any additions thereto until repayment of Notes.
Risks associated with the Company's development and construction activities may
include the risks that construction costs of the Resort may exceed original
estimates, possibly making the Resort uneconomical or unprofitable; sales of
VOIs at the 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 VOIs at, the Property; and construction may not be completed
on schedule, resulting in decreased revenues and increased interest expense. In
addition, third party contractors will perform the Company's construction
activities, the timing, quality, and completion of which cannot be controlled by
the Company. Even though construction work is done by third party contractors,
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.
Management is only available on a part-time, as-needed basis. Management will
retain architects, construction supervisors and other professionals to provide
substantial services in connection with the construction of the Resort. The
Company will be dependent on these third parties to complete the Resort at the
agreed upon cost. The cost of constructing the Resort depends on many factors,
including cost of material and labor, performance of subcontractors, labor
relations and weather, all of which are beyond control of the Company.
Substantial cost overruns could delay or impair construction of the Resort.
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, and the
ability of the Company to coordinate construction activities with the process of
obtaining such permits and authorizations.
Limited Operating History
The Company was recently formed by RAVC in order to develop the Resort
and to conduct the Offering. RAVC will not guarantee or have any responsibility
for payment on the Notes. Although RAVC and management of the Company have
experience managing and operating timeshare resorts, the Company and its
management have no operating history as developers of resorts. There can be no
assurance that the Company will be able to complete the Resort.
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Lack of Appraisals; No Assurance as to Value
Although management has discussed valuations with various industry
consultants, no independent valuations or appraisals were obtained in connection
with the anticipated pricing of the VOIs in the Resort. Accordingly, there can
be no assurance that the Company will be able to generate sufficient revenue
from the sale of VOIs to repay the Notes.
General Economic Conditions
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 ability to
sell the VOIs and repay the Notes. 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 ability to sell the VOIs and repay the Notes. Furthermore,
adverse changes in general economic conditions may adversely affect the
collectibility of the Company's loans to VOI buyers, described above under
"--Risks of Obtaining Construction Loan and Customer Financing."
Limitation of Activities to Timeshare Industry
As a result of certain activities by some participants in the timeshare
industry, including marketing problems, the timeshare industry has in the past
experienced negative public perceptions. Although the image of the timeshare
industry may have improved, some reputation problems continue. Because the
Company's operations are conducted solely within the timeshare industry, any
adverse changes affecting the timeshare industry such as an oversupply of
timeshare units, a reduction in demand for timeshare units, changes in travel
and vacation patterns, changes in governmental regulations of the timeshare
industry, and increases in construction costs or taxes, as well as negative
publicity for the timeshare industry, could have a material adverse effect on
the Company's ability to sell the VOIs and repay the Notes.
Risks of Hedging Activities
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. The Company will place no more than 5%
of its assets into hedge funds. 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.
Risks Associated With Customer Default
The Company bears the risk of defaults by buyers who financed the
purchase of their VOIs. If a buyer of a VOI defaults on the loan made by the
Company, the Company generally must either pay in cash the net value of the
promissory note and deed of trust or replace it with a performing note and deed
of trust. To offset Company losses in connection with such defaulting loans, the
Company will take back any such VOI and attempt to resell it. However, the
associated marketing costs may not have been recovered by the Company and must
be incurred again after their VOI has been returned to the Company's inventory
for resale. Commissions paid in connection with the sale of VOIs 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 (not to exceed one year) and the number of payments made prior to such
default. Private mortgage insurance or its equivalent is generally not available
to cover VOIs, and the Company has never purchased such insurance. In addition,
although the Company will have recourse against VOI buyers for the purchase
price paid, the practice of the industry is not to proceed against defaulting
purchasers but rather to take back the VOI. Consequently, no assurance can be
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given that the VOI purchase price or any commissions will be fully or partially
recovered in the event of buyer defaults under such financing arrangements. See
"Business--Customer Financing."
Competition
Las Vegas has a timeshare history dating back to the mid 1970s. Of the
12 existing timeshare resorts in Las Vegas (including the current RAVC
property), six are still actively selling VOIs and one is inactive. The
remaining five are sold out or no longer selling VOIs. Of the six active
projects, four, Hilton Grand Vacations at the Flamingo, Polo Towers, the Jockey
Club (each of which is located on the Strip), and the Grand Flamingo Club are
the primary competitors of the Resort. The Company believes that although none
of these resorts has units superior to those planned for the Resort, the Hilton
Grand Vacations at the Flamingo, which is owned by Hilton Grand Vacations
Company ("Hilton"), Polo Towers, Jockey Club, and Grand Flamingo Club, which is
owned by Mego Financial Corp. (aka Ramada Vacation Suites) ("Ramada"), have
experienced marketing and management teams and may have other competitive
advantages. Mirage and Circus-Circus have tentative plans to build timeshare
projects that would be in direct competition with the Company. Marriott
International Inc., which owns Marriott Vacation Club International
("Marriott"), recently announced that it will be managing a 1,500 room Marriott
Marquis Hotel and a 500 room Ritz Carlton Hotel to be built in Las Vegas.
Marriott projects in Las Vegas may include a timeshare component. The
Marriott Marquis Hotel is projected to be completed by the fall of 1998 and work
on the Ritz Carlton is planned to commence by the year 2000. A 500-room project
by Hyatt Hotel, which owns Hyatt Vacation Ownerships, Inc. ("Hyatt"), at Lake
Las Vegas is also in the planning stage and could contain a timeshare component.
Other timeshare resorts are also in the planning stage in Las Vegas. If any of
these are developed, they would compete with the Resort.
Major companies that now operate or are developing or planning to
develop VOI resorts in the United States such as Disney Vacation Development,
Inc. ("Disney"), Four Seasons Hotels & Resorts ("Four Seasons"),
Inter-Continental Hotels and Resorts ("Inter-Continental"), Westin Hotels &
Resorts ("Westin"), and Promus Hotel Corporation (aka Embassy Suites) ("Promus")
have not yet entered the Las Vegas market but may do so in the future. 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 profitability as a result. Moreover, Las Vegas, Nevada has
many hotel resort destinations with a large number of low cost rooms. These
hotel resorts, although not timeshares, will compete with the Resort. See
"Business--Competition."
VOI Exchange Networks
The attractiveness of interval ownership is enhanced significantly by
the availability of exchange networks allowing owners to exchange in a
particular year the occupancy rights in their VOIs for an occupancy right in
another participating network resort. Several companies, including Interval
International, Inc. ("Interval"), provide broad-based VOI exchange networks, and
the Company plans to qualify the Resort for participation in the Interval
network. Although the Company has received preliminary approval from Interval
stating that based on a review of the plans for the proposed Resort, the Resort
would qualify for participation in Interval with a five star rating, no
assurance can be given that the Company will be able to qualify the Resort for
participation in the Interval network or any other exchange network or that it
will be able to obtain such rating. Moreover, if such exchange networks cease to
function effectively, or if the Resort is not accepted as an exchange for other
desirable resorts, sales of VOIs in the Resort could be materially adversely
affected. The parent companies of the two major exchanges, Resort Condominiums
International, Inc. ("RCI") and Interval, have announced a proposed merger of
the parent companies. This proposed merger has created uncertainty in the future
competitive nature of VOI exchange networks. If only one major exchange network
were to exist and the Resort did not qualify for membership, the ability of the
Company to sell the VOIs in the Resort would be significantly affected. In
addition, RAVC intends to allow purchasers of VOIs in the Resort, for a minimal
8
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fee, the opportunity to exchange their occupancy rights in a given year for an
occupancy right in another RAVC Resort. Such rights may be discontinued by RAVC
at any time. See "Business--Participation in VOI Exchange Networks."
Dependence on Key Personnel
The Company has no full-time personnel. The Company's success depends
to a large extent upon the experience and abilities of the key management. RAVC
pays the salary of the Company's management, who are also paid officers of RAVC.
Accordingly, the Company's management spends a significant portion of its time
working for RAVC. Conflicts of interest may arise between RAVC and the Company.
In the event of a conflict of interest, management may have an obligation to
resign from the Company. The loss of the services of any one of these
individuals could have a material adverse effect on the Company, its operations
and its business prospects.
Regulation of Marketing and Sales of VOIs; Other Laws
The Company's marketing and sales of VOIs and other operations are
subject to extensive regulation by the federal government, the State of Nevada,
and the states in which VOIs are marketed and sold, which are expected to be
Arizona, California, Hawaii, Nevada and Utah. 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 of 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 Credit
Opportunity Act and Regulation B, the Interstate Land Sales Full Disclosure Act,
the Real Estate Standards Practices Act, the Telephone Consumer Protection Act,
the Telemarketing and Consumer Fraud and Abuse Prevention Act, the 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 interval ownership
programs. The laws of most states 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 VOIs. Certain
states, including California, have extensive regulatory requirements which may
delay the sale of VOIs in such states. Sales in California will be unable to
commence until construction is completed. In other states, application may be
made to sell VOIs once construction has commenced. The Company is required to
deliver an offering statement or public report to all prospective purchasers of
a VOI, together with certain additional information concerning the terms of the
purchase. Laws in each state where the Company plans to sell VOIs generally
grant the purchaser of a VOI 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 that 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 subject. However, no assurance can
be given that the cost of qualifying under VOI ownership regulations in all
jurisdictions in which the 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. In addition, the
Company may experience delays in registration. Any failure to comply with
applicable laws or regulations or delays in registration could have a material
adverse effect on the Company and its ability to sell VOIs in sufficient
quantifies to enable it to repay the Notes. See "Business--Governmental
Regulation."
Year 2000 Computer Problem
The Company will enter into a management agreement with RAVC that
includes reservation, accounting, member records and other functions that are
computerized. The use of certain computer programs that rely on two-digit date
programs may cause computer systems to malfunction in the Year 2000. Although
RAVC modified its custom computer programs in 1996 to address this problem, the
year 2000 problem is pervasive and complex and there can be no assurance that
the 1996 modifications correct every instance of the potential problem. In
addition, there can be no assurance that the systems of other companies upon
which RAVC's systems rely will also be timely and correctly converted. The
failure of RAVC's and other companies' systems to timely and correctly address
9
<PAGE>
the problem would have an adverse effect on the Company's operations and its
ability to repay the Notes. See "Certain Relationships and Related
Transactions--Year 2000 Computer Problem."
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 damages. 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.
An environmental report commissioned by the Company has disclosed the
existence of some asbestos in the current structure on the Resort property which
will require proper removal during demolition. The Company is not aware of any
other 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 current reports reveal all environmental liabilities or that a
prior owner has not created any material environmental condition not known to
the Company.
The Company believes that it is in compliance in all material respects
with all federal, state, and local ordinances and regulations regarding
hazardous or toxic substances and, except as described above, the Company has
not been notified by any governmental authority or third party of any
non-compliance, liability, or other claim in connection with the Resort.
Limited Resale Market for VOIs
The Company will sell the VOIs to buyers for leisure and not investment
purposes. The market for resale of VOIs by the buyers is presently limited, and
any resales of VOIs are typically at prices substantially less than the original
purchase price. These factors may make ownership of VOIs less attractive to
prospective buyers, and attempts by buyers to resell their VOIs will compete
with sales of VOIs by the Company. In addition, the market price of VOIs sold by
the Company at the Resort or by its competitors in Las Vegas could be depressed
by a substantial number of VOIs offered for resale.
Forward-looking Statements
Statements regarding the Company's expectations as to demand for the
VOIs in the Resort, its ability to pay its obligations under the Notes, and
certain other information presented in this Registration Statement constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. All projections for revenue for the Resort are
forward looking statements which are estimates and are subject to a number of
uncertainties. The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made. The Company
does not undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences or unanticipated events or
circumstances after the date of this Registration Statement. "See Plan of
Operation--Forward-looking Statements."
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USE OF PROCEEDS
The Notes will be sold on a "best efforts, minimum-maximum" basis.
Accordingly, at least $4,500,000 principal amount of Notes must be sold if any
are sold. See "Plan of Distribution." Unless $4,500,000 principal amount of
Notes are sold within 90 days of the date hereof, or such later date as shall be
determined by the Board of Directors, and the Construction Loan is obtained
within 60 days after the end of the Offering period, all proceeds received will
be returned to the purchaser, with interest accrued at a rate established by the
escrow agent, and no Notes will be sold.
The table set forth below the estimated application of the proceeds
from the sale of the Notes to construct the Resort. Pending use of such funds,
such proceeds will be invested in short-term, investment-grade securities or
money market accounts.
<TABLE>
<CAPTION>
If the minimum offering If the maximum offering
($4,500,000) is sold (1) ($8,500,000) is sold (2)
<S> <C> <C>
Sources of Funds
Capital Contribution by RAVC $ 192,500 $ 192,500
Gross Proceeds from Note Offering 4,500,000 8,500,000
Less Cost of Offering (250,000) (250,000)
Construction Loan 8,300,000 14,750,000
----------- -----------
Total Proceeds $12,742,500 $23,192,500
=========== ===========
Uses of Funds
Design & Professional Fees $ 1,071,000 $ 1,100,000
Building Construction Cost 8,353,000 17,000,000
Furniture, Fixtures & Equipment Package 1,150,000 2,300,000
Site Work 1,710,000 1,710,000
Pre-sale Legal & Accounting 250,000 250,000
Construction Loan Points 125,000 250,000
Marketing Setup/Miscellaneous 83,500 582,500
----------- -----------
Total Uses $12,742,500 $23,192,500
=========== ===========
</TABLE>
- -----------------------------
1 Assumes 60 units are built.
2 Assumes 119 units are built.
See "Business of the Company - The Las Vegas Resort" for a description
of the proposed Resort improvements.
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SELECTED FINANCIAL DATA
The following selected financial data of the Company should be read in
conjunction with the financial statements and related notes thereto. The
selected financial data set forth below as of June 30, 1997, and from inception
of the Company, February 27, 1997, to June 30, 1997, have been derived from
financial statements of the Company which have been audited by Ernst & Young
LLP, independent auditors. Operations of the Company reflect ownership and
operations of its assets only for the period June 24 through June 30, 1997, and
in management's opinion are not representative of future operations.
From Inception,
February 27, 1997,
Statement of Operations Data to June 30, 1997
Rental income $2,500
Expenses 3,767
Net (loss) (1,267)
Balance Sheet Data: June 30, 1997
Cash $192,500
Property and equipment 704,573
Total assets 972,697
Total liabilities 76,285
Total shareholder's equity 896,412
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PLAN OF OPERATION
The Company was established on February 27, 1997, as a wholly owned
subsidiary of RAVC for the purpose of developing timeshare resorts. The Company
will develop and construct the Resort on the Las Vegas Property and market VOIs
in the Resort. Until the Notes are repaid, the Company will restrict its
activities to the Resort and any additions thereto. The Company will sell new
VOIs in the Resort that will not be memberships in RAVC. See "Business--The Las
Vegas Resort."
RAVC has transferred the Property and the current 20-unit timeshare
project and $192,500 to the Company as of June 30, 1997. See "Selected Financial
Data." As of June 30, 1997, the book value of the Property and the 20-unit
timeshare project is $704,573, which was its carrying value when it was acquired
from RAVC, less depreciation expense for one week in the amount of $606. The
most recent appraisal, dated May 14, 1997 (a copy of the report relating thereto
is filed as an exhibit to the Registration Statement of which this Prospectus is
part), values the land at $2,800,000. Copies of the appraisal can be obtained
from the Company without charge, upon request, by each person to whom a copy of
this Prospectus has been delivered. No income statement with respect to the
Property for the two years ended June 30, 1997, has been provided because the
improvements on the Property will be razed upon commencement of construction of
the new resort, and in management's opinion such information would not be
meaningful.
The cash contributed to the Company by RAVC plus the proceeds of the
sale of the Notes will allow the Company to borrow sufficient construction and
takeout funds to undertake the development of the Resort on the Property. See
"Use of Proceeds." Once the funds are raised and the Construction Loan obtained,
the Company will contract with an architectural firm, a structural engineering
firm, an environmental consulting and geo-technical consulting firm, a
mechanical and electrical engineering firm, and a construction company who will
be the contractors of the building. There are no current contracts in place for
such services.
The Company has contracted with Success of Las Vegas, Inc. ("Success")
to undertake the sales and marketing of the new memberships. See
"Business--Sales and Marketing." It is expected that sales and marketing will
begin at the time construction begins or within 6 months thereafter.
During the first 12 months of operation of the Company, the Company
will market the Notes, secure the Construction Loan, takeout loan and
receivables loan commitments, and contract for all of the vendors listed above
who, as soon as the Construction Loan is obtained, will begin to undertake their
various assignments. It is expected that all of the architectural and
engineering work will take six to nine months prior to the beginning of
construction. Depending on the length of time to market the Notes, it is
expected that construction may begin in the summer or fall of 1998.
During the first 12 months of operation, the Company will be run by the
officers and employees of RAVC. It is not anticipated that any employees will be
transferred to the Company until construction is undertaken. The Company plans
to hire a construction manager to oversee the project prior to undertaking
construction. Once construction is underway and marketing begins, additional
employees will be hired by the Company as needed, and some employees of RAVC may
be transferred to the Company.
The Company is also seeking to acquire a contiguous parcel of land
upon which the Company could build an additional 40 units. Additional funds have
been budgeted to acquire and develop the property as part of the Resort. There
can be no assurance that this parcel will be acquired by the Company. See
"Business--The Las Vegas Resort."
The Company does not have any present business plans other than the
construction and the marketing of the Resort but may undertake the development
of other resorts in the future after the Notes have been repaid.
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<PAGE>
Forward-looking Statements
Statements regarding the Company's expectations as to demand for the
VOIs in the Resort, its ability to pay its obligations under the Notes, and
certain other information presented in this Registration Statement constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. In addition to matters
affecting the economy and the Company's industry generally, factors that could
cause actual results to differ from expectations include, but are not limited
to, the following: (i) the Company's ability to procure financing for the
construction of the resort; (ii) the timely development and construction of the
resort; (iii) the growing concentration and competition in the timeshare
industry; (iv) the Company's provision of customer financing and risks of
customer default; (v) the existence of and ongoing relationships with exchange
networks; and (vi) regulation by governmental authorities. The Company cautions
readers not to place undue reliance on any forward-looking statements, which
speak only as of the date made. The Company does not undertake, and specifically
disclaims any obligation, to update any forward-looking statements to reflect
occurrences or unanticipated events or circumstances after the date of this
Prospectus.
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<PAGE>
BUSINESS OF THE COMPANY
Overview
The Company was incorporated by RAVC in 1997 in order to develop
timeshare resorts. The Company will initially develop and construct the Resort
and market VOIs in the Resort. Until the Notes are repaid, the Company will
restrict its activities to the Resort and any additions thereto.
The Timeshare Industry
The Market. The resort component of the leisure industry for overnight
facilities consists of (i) commercial lodging establishments and (ii) timeshare
or vacation ownership resorts. Commercial lodging establishments consist of
hotels and motels where a room is rented on a nightly, weekly, or monthly basis,
in addition to privately owned condominiums and homes that are rented. The rooms
at hotels and motels typically are relatively small and usually do not have
kitchen facilities. Condominiums and homes available for short term rentals tend
to be more costly than hotels. For many vacationers, especially those with
families, a lengthy stay at a quality commercial lodging establishment can be
expensive. Room rates and availability are also subject to change periodically
by commercial establishments. Timeshare resorts provide vacationers with an
alternative to commercial lodging establishments providing such amenities as
larger suites, kitchen facilities, and predictable availability.
Ownership of accommodations is available through a variety of different
products, including ownership of an entire home or condominium, interval
ownership plans, which include fractional ownership of weekly or other periodic
intervals, condominium hotels, campgrounds, and ranch acreage land. Unlike
renting a room in a commercial lodging establishment, the vacationer purchasing
one of the foregoing products acquires an ownership interest in the underlying
property or in the entity that owns the property.
According to the American Resort Development Association ("ARDA"),
approximately 218,000 VOIs were sold in 1996 in the United States with a sales
volume of $2.18 billion, a 65% increase over 1992, when approximately 170,000
VOIs were sold with a sales volume of $1.32 billion. First introduced in the
United States in the early 1970s, ownership of VOIs has been a fast growing
segment of the hospitality industry over the past two decades. According to
ARDA, the worldwide timeshare industry has expanded significantly during the
last 15 years both in VOI sales volume and number of VOIs sold. ARDA estimates
that, from 1980 to 1994, the most recent year for which worldwide information is
available, sales of VOIs increased from $.49 billion to $4.76 billion and the
number of VOIs sold increased from 100,000 to 560,000 per year during the same
period.
The Company believes that the following factors have contributed to the
increased acceptance of the timeshare concept among the general public and the
growth of the timeshare industry over the past 15 years:
o Increased consumer confidence resulting from extensive consumer
protection regulation of the timeshare industry;
o The addition of brand name national lodging companies and their
increasingly flexible use programs to the industry;
o Increased flexibility of time share ownership as a result of the
growth of exchange organizations such as Interval and RCI;
o Improvement in the quality of both the timeshare facilities and the
management of timeshare resorts;
o Increased consumer awareness of the value and benefits of timeshare
ownership, including the cost savings relative to other lodging
alternatives; and
o Improved availability of financing for purchasers of VOIs.
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<PAGE>
The timeshare 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 timeshare industry is the entry into the market of some
of the world's major lodging, hospitality, and entertainment companies. Major
companies that now operate or are developing timeshare resorts include Marriott,
Disney, Hilton, Hyatt, Four Seasons, Inter-Continental, Promus, and Westin.
The Consumer. According to information compiled by ARDA for 1996, the
median age of a VOI buyer in the United States at the time of purchase is 50.
The median annual household income of current VOI owners in the United States is
approximately $71,000. The Company expects the timeshare industry to continue to
grow as more members of the baby boom generation enter the 45-54 year age
bracket, the age group that historically purchased the most VOIs, according to
the 1997 ARDA study.
According to the 1995 ARDA study, the three primary reasons cited by
consumers in the United States for purchasing a VOI are (i) the ability to
exchange the VOI for accommodations at other resorts through exchange networks
such as Interval and RCI (cited by 82% of VOI purchasers), (ii) the money
savings over traditional resort vacations (cited by 65% of purchasers), and
(iii) the quality and appeal of the resort at which they purchased a VOI (cited
by 49% of purchasers).
Despite the growth in the timeshare industry, as of December 31, 1996,
vacation interval ownership has achieved only an approximate 2.0% market
penetration among United States consumers. In light of the quality of the Resort
and the Company's planned qualification of the Resort for participation in the
Interval network, the Company believes it will be positioned to take advantage
of these trends in demographics. The Company has received preliminary approval
from Interval stating that based on a review of the plans for proposed Resort,
the Resort would qualify for participation in Interval with a five star rating.
See "--Participation in VOI Exchange Networks."
The Las Vegas Resort
The proceeds from this Offering and the Construction Loan will be used
to develop and construct the Resort. The Resort will consist of 119 units (the
"Units") (if the maximum amount of Notes is sold) or 60 units (if the minimum
amount of Notes is sold) built upon .86 acres of land (the "Property") located
approximately one-quarter mile from Las Vegas Boulevard, also known as the
"Strip." The Property is located at 360 East Desert Inn Road, close to several
major casinos and the Las Vegas Convention Center. The Company is seeking to
acquire a contiguous parcel of land upon which the Company could build an
additional 40 Units. The Company does not have any agreement to purchase this
parcel. Because no assurance can be given that this parcel will be acquired, the
prospectus, unless otherwise stated, assumes that between 60 and 119 Units will
be constructed.
The main floor of the Resort will primarily be devoted to common areas
and will include such amenities as a lobby, an owner's lounge, a fitness room,
various meeting rooms, a "kids room," offices and a delicatessen/convenience
store. Some residential units designed to accommodate the physically challenged
will also be included on the main floor. The upper four to ten floors, depending
on the number of units built, will house the Units, of which there are three
floor plans: (i) a one bedroom with 904 square feet; (ii) a two bedroom with
1,318 square feet; and (iii) a two bedroom with 1,370 square feet. The Resort
will also have amenities such as a pool and sun area. Underground and surface
level parking will be provided.
Various aspects of the development, sale, and ultimate operation of the
Resort will be undertaken by three companies -- RAVC, the Company, and the
homeowners association of VOI owners (the "Owners Association"). RAVC, which
owns all of the issued and outstanding stock of the Company, has transferred the
Property to the Company. The Property is currently improved with a timeshare
project consisting of 20 units. The existing improvements will be razed and
replaced by the Resort. RAVC contributed the Property to the Company in exchange
for 100% of the outstanding capital stock of the Company.
The Company is a newly formed corporation that was organized for the
purpose of developing and constructing the Resort. The Company will oversee
construction and, through a third party marketing company, sale of the VOIs. See
16
<PAGE>
"--Sales and Marketing." As a timeshare Resort, each of the 119 condominium
Units (if the maximum amount of Notes is sold) has 51 VOIs which results in a
total of 6,069 VOIs available for sale, or 60 units (if the minimum amount of
Notes is sold) with a total of 3,060 VOIs available for sale. The Company, as
developer, owns the Resort and has entered into a contract with Success for the
sale of the VOIs. The net proceeds from the sale of the VOIs will be used to
first pay the Construction Loan and then to pay principal and interest on the
Notes.
The Company will initially own all of the condominium Units in the
Resort. As Units are divided into VOIs, the Company will continue to own the
undivided condominium Units and unsold VOIs. Members who purchase VOIs in the
Resort will receive an undivided fee simple interest as tenants in common to a
condominium Unit in the Resort. They will also become members of the Owners
Association, to be formed in connection with the development of the Resort. The
Owners Association will have the primary responsibility to operate the Resort
and the use program associated with the Resort, and will contract with RAVC for
the actual day-to-day operational responsibility for the Resort. See "Certain
Relationships and Related Transactions--Resort Management." At the later to
occur of the retirement of all of the indebtedness secured by the Resort or the
sale of 80% of the VOIs in the Resort, the operation of the Resort will be
turned over to the Owners Association. Personal property needed for the
operation of the Resort and not previously transferred to the VOI owners as
tenants in common will be transferred to the Owners Association. The Company
will retain all unsold VOIs and continue to offer them for sale to the public.
The states in which VOIs are sold will require the Company to agree to subsidize
the Owners Association during the period that the Company is in control of the
Project for any shortfall in its operating costs (including reserves) and the
budgeted maintenance fees received from unaffiliated owners. This subsidy may be
more or less than the maintenance fees the Company would otherwise be paying on
the unsold VOIs. The Company will also be required to bond or otherwise
collateralize its obligation to subsidize the Owners Association.
RAVC Operations
RAVC was founded in 1977 in Hawaii as a "floating-time, floating-space"
timesharing organization with condominium apartments located in Waikiki, Hawaii.
RAVC now manages eight resorts in Waikiki, Kona, and Maui, Hawaii; Las Vegas and
Lake Tahoe, Nevada; Chandler, Arizona; Acapulco, Mexico; and Marbella, Spain.
The members of RAVC do not own a real estate interest in any properties owned by
RAVC but have a right in perpetuity to use the properties based on their
memberships. Currently, RAVC has approximately 8,500 members representing over
10,000 membership weeks (a member may own and have the right to use more than
one week). RAVC members reside in all 50 states as well as 23 foreign countries.
All of RAVC's resorts have an affiliation with Interval and RCI, allowing RAVC's
members who are members of such exchange networks to exchange their RAVC VOI for
time in other resorts in the exchange network.
Sales and Marketing
The Company has entered into a marketing and selling agreement with
Success, an independent marketing agent. Success is an affiliate of The Success
Companies, Inc., which has sold timeshare properties over the last several years
in the Nevada, California, Colorado, and Arizona markets. RAVC is using the
services of an affiliate of Success to sell membership weeks in its inventory to
existing members and to nonmembers in Arizona. Success will be compensated based
on sales of VOIs in the Las Vegas Resort. Success's intended activities are
described below:
On-Site/In-House Programs. On-site resort programs at RAVC's existing
resorts in the United States will solicit existing RAVC members. RAVC members
will also be requested to provide referrals.
All exchange guests and rental guests will also be solicited through a
concierge, activities desk, and parties.
Las Vegas Off-Premise Contacts. Success will institute off-premise
contact ("OPC") programs. OPC locations include area events, shopping centers,
strip retail locations, casino hotels, and attractions such as water parks and
theme restaurants.
17
<PAGE>
Las Vegas Locals. Success will utilize its telemarketing capabilities
to contact prospects in the Las Vegas area with an offer to tour the Las Vegas
Resort.
Travel Alliances. Success will use its strategic alliance with a Las
Vegas travel wholesaler to arrange access to visitors.
Registration and Multi-State Marketing. The Company intends to register
the project in Arizona, California, Hawaii, Nevada, and Utah and possibly other
western states. Success intends to contact prospects with a mini-vacation offer
in Las Vegas that includes promotion of the Resort.
The Company believes that this diversified mix of marketing programs
will maximize potential sales without relying too heavily on any one program.
Customer Financing
The Company will offer financing to the purchasers of VOIs in the
Resort who make a down payment generally of at least 10% of the purchase price.
This financing generally will bear interest at fixed rates and will be
collateralized by a first deed of trust on the underlying VOI. A portion of the
proceeds of such financing will be used to obtain releases of the VOI from any
underlying debt. The Company intends to enter into an agreement with a
receivables lender (which may be the Construction Lender) for the financing of
customer receivables. The Company expects this agreement will provide an
aggregate of up to approximately $65 million of available financing to the
Company (based on the construction of 119 Units) bearing interest at variable
rates tied to either the prime rate or LIBOR. Under these arrangements, the
Company will pledge as security qualified purchaser promissory notes to the
lender, who typically will lend the Company 75% to 90% of the principal amount
of such notes. Payments under these promissory notes will be made by the
purchaser borrowers directly to a payment processing center and such payments
will be credited against the Company's outstanding balance with the lender. The
Company does not presently have a binding agreement for this financing, and
there can be no assurance that arrangements can be made on terms that are
satisfactory to the Company. However, if the Company obtains the Construction
Loan, it expects to obtain receivables financing arrangements. Sales of VOIs
will be substantially limited if the Company is unable to provide financing to
purchasers of VOIs.
Because the Company's borrowings will bear interest at variable rates
and the Company's loans to purchasers of VOIs will bear interest at fixed rates,
the Company bears the risk of increases in interest rates with respect to the
loans it will have from lenders. The Company intends to 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 will
place no more than 5% of its assets in hedge funds. See "Risk Factors--Risk of
Hedging Activities."
The Company will also bear the risk of purchaser default. The Company
will continue to accrue interest on its loans to purchasers of VOIs until such
loans are deemed to be uncollectible, at which point it will expense the
interest accrued on such loan, commence foreclosure proceedings and, upon
obtaining title, return the VOI to the Company's inventory for resale. The
Company will monitor its loan accounts and determine whether to foreclose on a
case-by-case basis. See "Risk Factors--Risks of Obtaining Construction Loan and
Customer Financing" and "--Risks Associated with Customer Default."
Participation in VOI Exchange Networks
The Company has applied for membership in Interval. The Company has
received preliminary approval but cannot receive final approval from Interval
until, among other things, construction on the Resort has commenced. The Company
believes that sales of its VOIs are made more attractive by the Company's
planned participation in an exchange program operated by Interval, a leading
exchange network. In the 1995 ARDA study, the exchange opportunity was cited by
purchasers as one of the most significant factors in determining whether to
purchase a VOI. Membership in Interval allows the members to exchange in a
particular year their occupancy right in the unit in which they own a VOI for an
occupancy right at the same time or a different time in another participating
resort, based upon availability and the payment of an exchange fee described
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below. A member may exchange his VOI for an occupancy right in another
participating resort by listing his VOI 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, the quality of the resort and the period during
which the VOI is available. The exchange organization attempts to satisfy the
exchange request by providing an occupancy right in another VOI with a similar
rating. If Interval is unable to meet the member's initial request, it suggests
alternative resorts based on availability.
Founded in mid 1970s, Interval has a total of more than 1,100
participating resort facilities and approximately 750,000 member owners
worldwide. During 1996, Interval processed approximately 400,000 exchanges. The
current cost of the annual membership fee in Interval, which typically is at the
option and expense of the owner of the VOI, is $66 per year. In addition,
members pay an additional fee that is currently $94 for properties in the United
States and $114 for those outside the United States when a reservation is made
in another project in the Interval exchange program.
Competition
Las Vegas has a timeshare history dating back to the mid 1970s. Of the
12 existing timeshare resorts in Las Vegas (including the current RAVC
property), six are still actively selling VOIs and one is inactive. The
remaining five are sold out or no longer selling. Of these six, four projects,
Hilton Grand Vacations at the Flamingo, Polo Towers, the Jockey Club (each of
which is located on the Strip), and the Grand Flamingo Club are the primary
competitors of the Resort. The Company believes that although none of these
resorts has units superior to those planned at the Resort, Hilton, Polo Towers,
Jockey Club, and Grand Flamingo Club have experienced marketing and management
teams and may have other competitive advantages. Mirage and Circus-Circus have
tentative plans to build timeshare projects that would be in direct competition
with the Company. Marriott recently announced that it will be managing a 1,500
room Marriott Marquis Hotel and a 500 room Ritz Carlton Hotel to be built in Las
Vegas. Marriott projects in Las Vegas may include a timeshare component. The
Marriott Marquis Hotel is projected to be completed by the fall of 1998 and work
on the Ritz Carlton is planned to commence by 2000. A project by Hyatt at Lake
Las Vegas is also in the planning stage and could contain a timeshare component.
Other timeshare resorts are also in the planning stage in Las Vegas and, if
developed, would compete with the Resort. Other major companies operating and
developing timeshare resorts in the United States, such as Disney, Four Seasons,
Inter-Continental, Promus, and Westin have not yet entered the Las Vegas market
but may do so in the future.
In Las Vegas, the Resort will also compete with approximately 270
existing hotels and motels with approximately 100,000 rooms. Some of such hotels
and resorts provide a large number of rooms at low nightly rates Sunday through
Thursday and constitute strong competition for the Resort. According to the Las
Vegas Convention and Visitors Authority, the 1996 occupancy rate during midweek
was 88.7% and on weekends was 94.4%.
Governmental Regulation
General. The Company's marketing and sales are subject to extensive
regulation by the federal government, the State of Nevada, and the states in
which the VOIs 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 includes the Truth in Lending Act and Regulation Z, the Equal Credit
Opportunity Act and Regulation B, the Interstate Land Sales Full Disclosure Act,
the Real Estate Standards Practices Act, the Telephone Consumer Protection Act,
the Telemarketing and Consumer Fraud and Abuse Prevention Act, the 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 interval ownerships
programs. The Company currently plans to register the Resort in Arizona,
California, Hawaii, Nevada, and Utah, and possibly other western states. The
laws of these states 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 VOIs before it can promote
or sell VOIs in that state. These laws require the Company to file numerous
documents and supporting information with the agency responsible for the
regulation of VOIs. When the agency determines that a project has complied with
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state 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
purchasers of a VOI, together with certain additional information concerning the
terms of the purchase. Laws in each state where the Company plans to sell VOIs
generally grant the purchaser of a VOI 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 that 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 interval
ownership regulations in all jurisdictions in which the Company desires to
conduct sales will not be significant. In addition, the Company may experience
delays in registration. Any failure to comply with applicable laws or
regulations or delays in registration could have a material adverse effect on
the Company. See "Risk Factors--Regulation of Marketing and Sales of VOIs; Other
Laws."
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. The architectural plans for the Resort will comply with these laws
as currently in effect.
Environmental Matters. 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. Nevada and the local governments have certain laws, rules and
regulations concerning the emission of airborne asbestos fibers, air pollution,
airborne substances and contamination of land, surface and subsurface hazardous
substances. The Company has sought and is continuing to seek advice on the
methods to properly follow such environmental laws, rules, regulations and
ordinances. Such laws may impose liability for release of ACMs and may provide
for third parties to seek recovery from owners or operators of real properties
for personal injury associated with ACMs. In connection with demolition of the
previous resort in Las Vegas, the Company may be potentially liable for such
costs.
A Phase I assessment has been conducted at the Resort in order to
identify potential environmental concerns. The Phase I assessment was carried
out in accordance with accepted industry practices and consisted of non-invasive
investigations of environmental conditions at the property, including a
preliminary investigation of the site and identification of publicly known
conditions concerning properties in the vicinity of the site, a physical site
inspection, review of aerial photographs and relevant governmental records where
readily available, interviews with knowledgeable parties, investigation for the
presence of above ground and underground storage tanks presently or formerly at
the site, a visual inspection of suspect friable and non-friable ACMs,
collection and laboratory analysis of ACMs, and the preparation and issuance of
written reports. Recommendations have been made regarding the abatement of ACMs.
Except for the presence of asbestos described more fully above, the Company's
assessments of the property have not revealed any environmental liability that
the Company believes would have a material adverse effect on the Resort, 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
Resort.
The Company believes that the Property is in compliance in all material
respects with all federal, state, and local laws, ordinances, and regulations
regarding hazardous or toxic substances. 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 the Property.
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Employees
As of June 30, 1997, the Company employed no full-time employees. RAVC
pays the salary of the Company's management and such management works on a
part-time, as-needed basis for the Company.
Legal Proceedings
As of the date of this prospectus, the Company is not aware of any
pending legal proceedings involving the Company or the Property.
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DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY
The following table sets forth the names and ages of the members of the
Company's Board of Directors and its executive officers, and sets forth the
position with the Company held by each:
Name Age Position
Jack R. Corteway 62 Director, Chief Executive Officer,
President, and Treasurer
Bernard J. McKenna 64 Director
Theodore A. Rohde 67 Director
Stephen C. W. Lin 41 Vice President, Controller and Secretary
Directors of the corporation hold office for one year or until their
successors are elected and qualified. The current directors were elected on May
9, 1997.
Jack R. Corteway. Mr. Corteway has been a director of the Company and
its President since its incorporation in 1997. He has been Treasurer of the
Company since May 9, 1997. From February 27, 1997, until May 9, 1997, he also
served as Secretary of the Company and has served as Chief Executive Officer
since July 15, 1997. Mr. Corteway has been President and Chief Executive Officer
of RAVC since 1990. Mr. Corteway formerly served as President, Chief Executive
Officer, and Director of Bank of Honolulu for 14 years. Prior to coming to
Hawaii, he held various positions in corporate finance and banking.
Bernard J. McKenna. Mr. McKenna has been a director of the Company since
its incorporation in 1997. Mr. McKenna has also been a director of RAVC since
1990. Mr. McKenna has been self employed since 1993 and has served as a director
of Sanwa Business Credit Corp. ("Sanwa"), a finance company, since 1985. From
1980 until his retirement in 1993, Mr. McKenna was President and Chief Executive
Officer of Sanwa.
Theodore A. Rohde. Mr. Rohde has been a director of the Company since
its incorporation in 1997. Mr. Rohde has been a director of RAVC since 1994. For
the past 10 years, Mr. Rohde has been a consultant for troubled companies. Since
1995, Mr. Rohde has been president and a director of Tar Enterprises, Inc., a
consulting business for troubled companies, which is owned by Mr. Rohde. From
1979 to 1981, Mr. Rohde was vice president of finance and operations, and from
1981 to 1986 he was president, of Armstrong Containers Inc. Prior to his
association with Armstrong Containers, Inc., Mr. Rohde was employed as a vice
president of Wilbert, Inc. and a consultant to C. J. Wood Company, and was
employed by Wheelabrator-Frye Group and Arthur Andersen & Company.
Stephen C. W. Lin. Mr. Lin has been Vice President, Controller and
Secretary of the Company since May 9, 1997. Mr. Lin has been employed by RAVC
since 1981. He was a Vice President of RAVC between August 1990 and January 1995
and has been a Senior Vice President since January 1995. Mr. Lin has been
Treasurer of RAVC since August 1990 and Secretary since October 1994. Prior to
his employment by RAVC, Mr. Lin was employed by Ernst & Whinney and other
accounting firms. Mr. Lin is a Certified Public Accountant.
A bankruptcy petition was filed on February 28, 1997 by McKenna
Inc. under Chapter 11 of the United States Bankruptcy Code. Bernard J. McKenna
is a 90% stockholder and the uncompensated President, Secretary, and Treasurer
of McKenna Inc., a retail party supply store. Reorganization of McKenna Inc. is
pending.
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EXECUTIVE COMPENSATION
Mr. Corteway and Mr. Lin receive no compensation from the Company for
services rendered to the Company. Any and all compensation earned by them is
paid by RAVC. Members of the Company's Board of Directors who are not employees
of the Company receive directors' fees of $500 per diem, along with travel
expenses. Members of the Board of Directors who are employees of RAVC or may be
employees of the Company do not receive directors' fees.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding capital stock of the Company, consisting of one
share of common stock, is owned by RAVC.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Resort Management
Upon completion of the Resort, and upon formation of the Owners
Association, it is intended that RAVC will enter into a management agreement
(the "Management Agreement") with the Owners Association to provide for
management and maintenance of the Resort. Pursuant to the Management Agreement,
RAVC will be paid a monthly management fee equal to 7% of the total expenses
incurred by the Owners Association, excluding expenses incurred for capital
repair and replacements, based on the annual budget of the Owners Association.
Pursuant to the Management Agreement, RAVC will have sole responsibility and
exclusive authority for all activities necessary for the day-to-day operation of
the Resort, including administrative services; procurement of inventories and
supplies; maintaining the units, the furnishings, and the common areas;
contracting for furnishing cleaning, maintenance, laundry, housekeeping, and
other services; making or contracting for all repairs, decorations, renewals,
replacements, and improvements; obtaining all required licenses and permits; and
promotion and publicity. RAVC also will obtain comprehensive and general public
liability insurance, all-risk property insurance, business interruption
insurance, and such other insurance as is customarily obtained for similar
properties. RAVC also will provide all managerial and other employees necessary
for the Resort, including review of the operation and maintenance of the Resort;
preparation of reports, budgets, and projections; collection of assessments; and
employee training.
Potential Distributions and Use of VOIs
The Notes and the Indenture do not restrict the Company's ability to
pay dividends or make other distributions to RAVC. Nevada corporate law
prohibits the Company from making any distribution to its stockholder which
renders it insolvent at the time the distribution is made, but circumstances
could render the Company insolvent subsequent to the time that a distribution
allowable by Nevada law was made. RAVC has informed its members of its intent to
obtain up to 1020 VOIs in Las Vegas to replace the 20 condominium Units RAVC
previously owned on the Company's property. The Company currently intends to
distribute such VOIs to RAVC, if available, after the Notes have been paid. The
Company's current intent is to refrain from selling such VOIs to third parties
in order to keep them available for distribution, but the Company may attempt to
sell the VOIs if necessary to meet its cash flow requirements. The Company may
allow RAVC to utilize unsold VOIs in consideration of the related maintenance
fees, which may be less than the fair market rental value of the VOIs. The
Company does not have a current intent to make other distributions to RAVC.
Operating Agreement, Tax Sharing Agreement
Pursuant to an Operating Agreement dated June 24, 1997, RAVC is
entitled to utilize the existing 20 condominium units on the Property until such
time as the Company has obtained the Construction Loan and demolition of the
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existing structure is scheduled to begin. RAVC will pay the Company the costs of
operating and maintaining these units, which may be less than the fair rental
value of the units. Pursuant to a Tax Sharing Agreement dated June 24, 1997,
RAVC and the Company have agreed that, although the two companies will file
consolidated federal income tax returns, the Company will reimburse RAVC for
federal income taxes which would have been payable if the Company were a
separate company and will share the cost of preparing the consolidated returns
with RAVC.
Year 2000 Computer Problem
The widespread use of computer programs that rely on two-digit date
programs to manage and manipulate may cause computer systems to malfunction in
the Year 2000. The Year 2000 problem is pervasive and complex because virtually
every computer operation will be affected in some way by the rollover of the two
digit year value to 00. Computer systems may not recognize this date as 2000 but
as 1900 or not at all. Systems that do not recognize such information could
generate erroneous data or fail.
The Company will be dependent on RAVC to supply reservation,
accounting, member records and other functions that are computerized. The
ability of RAVC to address the Year 2000 problem will have a direct impact on
the Company and its operations. In addition, there can be no assurance that the
systems of other companies upon which RAVC's systems rely will also be timely
converted.
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DESCRIPTION OF SECURITIES
The Notes will be issued under an Indenture, dated as of _________,
199_ (the "Indenture"), between the Company and First Trust of New York, N.A.,
trustee under the Indenture ("Trustee"). A form of the Indenture is being filed
as an exhibit to the Registration Statement of which this prospectus is a part.
The Indenture is not subject to and governed by the Trust Indenture Act of 1939,
as amended. The following summary of the material provisions of the Indenture
does not purport to be complete, and where reference is made to particular
provisions of the Indenture, such summary or terms, including definitions of
certain terms, are incorporated by reference as part of such summaries or terms,
which are qualified in their entirety by such reference.
General
The Notes will be unsecured subordinated obligations of the Company
limited to $8,500,000 principal amount, and will be junior in right of payment
to the Construction Loan and other Senior Indebtedness. The Notes will not be
guaranteed by RAVC. Principal of (and premium, if any) and interest on the Notes
will be payable, and the Notes will be exchangeable and transferable, at the
office or agency of the Company in the City of New York maintained for such
purposes (which initially is the corporate trust office of the Trustee in the
City of New York maintained at 100 Wall Street, New York, New York 10005);
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the person entitled thereto as shown on the security
register. The Notes will be issued only in fully registered form without coupons
and in denominations of $1,000 or any integral multiple thereof. No service
charge will be made for any registration of transfer or exchange of Notes,
except for any tax or other governmental charge that may be imposed in
connection therewith.
Interest on the Notes will accrue from the Issuance Date (defined
below) but will not be paid until the Construction Loan has been repaid. The
Company estimates, assuming construction begins as planned, the maximum offering
is sold and 3,650 VOIs in the Resort are sold within the first three years after
the commencement of construction, that accrued interest will begin to be paid on
the Notes within three years after the commencement of construction. There can
be no assurance that interest payments will commence at that time. In the event
there are insufficient sales of VOIs, payment of principal and interest on the
Notes may be delayed or the Company may be unable to repay the Notes.
All funds invested will be held in escrow until the minimum amount of
$4,500,000 contemplated by this Offering is raised and the Construction Loan has
been obtained. Funds held in escrow will be invested in short-term,
investment-grade securities or money market accounts. The minimum amount of
$4,500,000 was established by the Company based on management's estimate of
minimum Project costs and Construction Loan availability. In the event the
Company does not raise the minimum amount, all funds will be returned, with
interest accrued at a rate established by the escrow agent. The Notes will be
unsecured obligations of the Company.
Payment on the Notes
The Notes will become due and payable eight years from the date of
issuance (the "Issuance Date") of the Notes. The Issuance Date will be the date
on which the Company obtains a binding commitment for the Construction Loan and
the proceeds from the sale of the Notes are released from the escrow. The
Company presently anticipates that the Issuance Date will be no later than
January 15, 1998, unless the offering period is extended.
Interest at _____ % per annum will be compounded semi-annually on the
sixth month after the Issuance Date and on the anniversary of the Issuance Date
(a "semi-annual interest payment date"). As set forth above, interest will not
be paid until the Construction Loan is paid. Interest at the prescribed rate
shall accrue from the Issuance Date. On the first semi-annual interest payment
date that occurs after repayment of the Construction Loan, and on each
semi-annual interest payment date thereafter, the Company will pay interest that
has accrued since the preceding semi-annual interest payment date. Such payments
will be made to holders of record at the close of business 15 days before such
interest payment date. Development Period Interest which accrues prior to
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repayment of the Construction Loan will be paid on semi-annual interest payment
dates as the Company's cash flow permits. If it has not previously been paid,
the Development Period Interest will be paid on maturity or redemption of the
Notes.
Optional Redemption
The Notes are subject to redemption at the option of the Company, in
whole or in part, at any time on or after the third anniversary of the Issuance
Date upon not less than 30 nor more than 60 days' notice to each holder of the
Notes, at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the 12-month period beginning on the
anniversary of the Issuance Date of the years indicated below, in each case
together with accrued interest thereon to the redemption date:
Year Percentage
Year 3............................. %
Year 4.............................
Year 5.............................
Year 6 and thereafter.............. 100.00
Subordination
The indebtedness represented by the Notes and the payment of the
principal of (and premium, if any) and interest on, and any other amounts
payable with respect to, such Notes are subordinated in right of payment to the
prior payment in full of the Construction Loan and any refinancing thereof and
any other Senior Indebtedness in cash or cash equivalents.
In the event of 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, as such, or to its assets, or any
liquidation, dissolution or other winding up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or any
assignment for the benefit of creditors or other marshalling of assets or
liabilities of the Company, the holders of the Construction Loan and Senior
Indebtedness will be entitled to receive payment in full of all amounts due on
or in respect of the Construction Loan and Senior Indebtedness in cash of cash
equivalents, or provision must be made for such payment in cash or cash
equivalents, before the holders of the Notes are entitled to receive any payment
or distribution of any assets of the Company of any kind or character on account
of principal of (or premium, if any) or interest on, or other amounts payable
with respect to, the Notes. In the event that, notwithstanding the foregoing,
the Company or any holder of such Notes receives any payment or distribution of
assets of the Company of any kind or character before the Construction Loan or
Senior Indebtedness is paid or provided for in full in cash or cash equivalents,
then such payment or distribution will be received and held in trust for the
holders of the Construction Loan or Senior Indebtedness and paid over or
delivered to the trustee, receiver, custodian, assignee, agent or other person
making payment or distribution of assets of the Company, in trust for the
holders of, and for application to the payment of, the Construction Loan and
Senior Indebtedness remaining unpaid, to the extent necessary to pay the
Construction Loan and Senior Indebtedness in full. By reason of such
subordination, in the event of liquidation or insolvency, creditors of the
Company who are holders of the Construction Loan and Senior Indebtedness may
recover more, ratably, than the holders of the Notes.
No payment or distribution of any assets of the Company of any kind or
character shall be made by the Company on account of the principal of (or
premium, if any) or interest on, or any other amounts payable with respect to,
the Notes, or on account of the purchase, redemption or other acquisition of the
Notes, upon the occurrence of an event of default on Senior Indebtedness and
receipt by the Company of written notice thereof, until such event of default
shall have been cured or waived.
"Senior Indebtedness" with respect to the Notes means the principal of,
premium, if any, and interest on, and any fees, costs, expenses, and any other
amounts (including indemnity payments) related to the following, whether
outstanding on the date of the Indenture or thereafter incurred or created: (i)
indebtedness, matured or unmatured, whether or not contingent, of the Company
for money borrowed evidenced by notes or other written obligations, including
the Construction Loan, (ii) any interest rate contract, interest rate swap
agreement, or other similar agreement or arrangement designed to protect the
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Company or any of its subsidiaries against fluctuations in interest rates, (iii)
indebtedness, matured or unmatured, whether or not contingent, of the Company
evidenced by notes, debentures, bonds, or similar instruments or letters of
credit (or reimbursement agreements in respect thereof), (iv) obligations of the
Company as lessee under capitalized leases and under leases of property made as
part of any sale and leaseback transactions, (v) indebtedness of others of any
of the kinds described in the preceding clauses (i) through (iv) assumed or
guaranteed by the Company and (vi) renewals, extensions, modifications,
amendments, and refundings of, and indebtedness and obligations of a successor
person issued in exchange for or in replacement of, indebtedness obligations of
the kinds described in the preceding clauses (i) through (iv), unless the
agreement pursuant to which any such indebtedness described in clauses (ii)
through (vi) is created, issued, assumed or guaranteed expressly provides that
such indebtedness is not senior or superior in right of payment to the Notes;
provided, however, that the following shall not constitute Senior Indebtedness;
(i) any indebtedness or obligation of the Company in respect of the Notes; (ii)
any indebtedness of the Company to any of its subsidiaries or other affiliates;
(iii) any indebtedness that is subordinated or junior in any respect to any
other indebtedness of the Company other than Senior Indebtedness; (iv) any
indebtedness incurred for the purchase of goods or materials in the ordinary
course of business; and (v) any liability for federal, state, local or other
taxes owed or owing by the Company.
In the event that the Trustee (or paying agent if other than the
Trustee) or any Noteholder receives any payment of principal, or interest with
respect to the Notes at a time when such payment is prohibited under the
Indenture, such payment shall be held in trust for the benefit of, and
immediately shall be paid over and delivered to, the holders of Senior
Indebtedness or their representative as their respective interests may appear.
After all Senior Indebtedness is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the Holders have been applied to
the payment of Senior Indebtedness.
Events of Default and Remedies
An "Event of Default," as defined in the Notes, is (i) the failure of
the Company to pay principal of or premium on the Notes when due; (ii) the
failure of the Company to pay interest on the Notes for a period of 30 days when
due; (iii) default by the Company for 90 days after notice in the observance or
performance of any other covenants in the Indenture; (iv) an event of default
occurs under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company or any of its subsidiaries (or the payment of which is
guaranteed by the Company or any of its subsidiaries), whether such indebtedness
or guarantee now exists or shall be created after the date hereof, which default
(a) is caused by a failure to pay principal or interest on such indebtedness
prior to the expiration of the grace period provided in such indebtedness (a
"Payment Default") or (b) results in the acceleration of such indebtedness prior
to its expressed maturity and, in each case, the principal amount of such
indebtedness, together with the principal amount of such indebtedness, together
with the principal amount of any other such indebtedness under which there has
been a Payment Default or the maturity of which has been so accelerated,
aggregates $1 million, or (v) certain events involving bankruptcy, insolvency,
or reorganization of the Company. The Indenture provides that the Trustee may
withhold notice to the holders of Notes of any default (except in payment of
principal, premium, if any, or interest with respect to the Notes) if the
Trustee, in good faith, considers it in the interest of the Noteholders of the
Notes to do so.
The Indenture provides that if an Event of Default (other than an Event
of Default with respect to certain events, including bankruptcy, insolvency, or
reorganization of the Company) shall have occurred and be continuing, the
Trustee or the holders of not less than 25% in principal amount of the Notes
then outstanding may declare the principal of and premium, if any, on the Notes
to be due and payable immediately, but if the Company shall pay or deposit with
the Trustee a sum sufficient to pay all matured installments of interest on all
Notes and the principal and premiums, if any, on all Notes that have become due
other than by acceleration and certain expenses and fees of the Trustee, and if
all defaults (except the nonpayment of interest on, premium, if any, and
principal of any Notes which shall have become due by acceleration) shall have
been cured or waived and certain other conditions are met, such declaration may
be canceled and past defaults may be waived by the holders of a majority in
principal amount of the Notes then outstanding.
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The holders of a majority in principal amount of the Notes then
outstanding shall have the right to direct the time, method and place of
conducting any proceedings for any remedy available to the Trustee, subject to
certain limitations specified in the Indenture. The Indenture provides that,
subject to the duty of the Trustee following an Event of Default to act with the
required standard of care, the Trustee will not be under an obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the holders, unless the Trustee receives satisfactory
indemnity against any associated costs, liability, or expense.
Successor Corporation
The Notes provide that the Company may not consolidate or merge with or
into or transfer all or substantially all of its assets to any other person
unless the corporation or entity formed by or surviving such consolidation or
merger (if other than the Company), or to which such sale or conveyance shall
have been made, expressly assumes all the obligations of the Notes and
immediately after giving effect to such transaction no Event of Default shall
occur or be continuing.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of Notes,
as expressly provided for in the Indenture) as to all outstanding Notes issued
under the Indenture when either (i) all such Notes theretofore authenticated and
delivered (except lost, stolen or destroyed Notes which have been replaced or
paid) have been delivered to the Trustee for cancellation and the Company has
paid all sums payable by it under the Indenture or (ii) all such Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable, or will become due and payable or are to be called for redemption
within one year, the Company has irrevocably deposited or caused to be deposited
with the Trustee money or U.S. government obligations, or a combination thereof,
in such amounts as will be sufficient to pay the entire indebtedness on such
Notes and the Company has paid all sums payable by it under the Indenture. In
addition, the Company must deliver an opinion of counsel stating that all
conditions precedent to satisfaction and discharge have been complied.
Modification and Waiver
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the holders of not less than a
majority in aggregate principal amount of the outstanding Notes issued under the
Indenture; provided, however, that no such modification or amendment may,
without the consent of the holder of each outstanding Note affected thereby, (i)
change the stated maturity of the principal of, or any installment of interest
on, any Note, (ii) reduce the principal amount of, or the premium or interest
on, the Notes (iii) change the coin or currency in which any Notes or any
premium or the interest thereon is payable, (iv) impair the right to institute
suit for the enforcement of any payment on or with respect to the Notes, (v)
reduce the percentage in principal amount of outstanding Notes necessary to
waive compliance with certain provisions of the Indenture or to waive certain
defaults, (vi) modify any of the provisions relating to supplemental indentures
requiring the consent of holders or relating to the waiver of past defaults,
except to increase the percentage of outstanding Notes required for such actions
or to provide that certain other provisions of the Indenture cannot be modified
or waived without the consent of the holder of each Note affected thereby, or
(vii) modify any of the provisions of the Indenture relating to the
subordination of the Notes in a manner adverse to the holders.
The Company and the Trustee may amend or supplement the Indenture
without notice to or consent of any Noteholder, in certain events, such as to
correct or supplement any inconsistent or deficient provision in the Indenture,
to comply with the provisions of the Trust Indenture Act of 1939 if the
Indenture becomes qualified under such Act, or to appoint a successor Trustee.
28
<PAGE>
Trustee and Escrow Agent
First Trust of New York, N.A. of New York, New York, will serve as
Trustee under the Indenture and First Trust of California, N.A., will act as
Escrow Agent for the funds.
29
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain federal income tax
consequences applicable to purchasers of Notes in the offering. The tax
consequences to certain purchasers, such as dealers in securities, foreign
persons, mutual funds, insurance companies and tax-exempt entities, that are
subject to special treatment under the Internal Revenue Code of 1986, as amended
(the "Code") or under the laws of other jurisdictions may differ materially from
those outlined below. The following discussion is also not intended to describe
the tax consequences to persons acquiring the Notes subsequent to the Offering,
which are affected by other statutory provisions. All prospective investors are
accordingly urged to consult their own tax advisors as to the specific
consequences to them of acquisition of the Notes, including the applicability
and effect of federal, state, local, foreign and other tax laws.
For federal income tax purposes, all holders of the Notes will be
required to include accrued interest in their taxable income under the "original
issue discount" ("OID") rules of the Code, regardless of whether such interest
has been paid or whether such holders generally employ a cash or accrual method
of accounting. Holders will increase their tax basis for the Notes by the amount
of accrued OID and decrease such tax basis by the amount of principal and
interest actually paid.
Upon a sale or exchange of the Notes, holders will recognize gain or
loss measured by the difference between the amount realized from the sale or
exchange and their adjusted tax basis for the Notes at the time of such
transaction. Provided that the Notes are held as capital assets as of the date
of their disposition, any gain or loss recognized by a holder will be capital
gain or loss and will be long-term capital gain or loss if the Notes have been
held for more than one year. A short-term or long-term capital loss is only
allowable as a current deduction to the extent of capital gains plus, in the
case only of a non-corporate taxpayer, $3,000 of ordinary income ($1,500 in the
case of a married individual filing a separate return).
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT VIOLATIONS
Under Section 78.751 of the Nevada Revised Statutes and the Company's
Articles of Incorporation and Bylaws, the Company's directors and officers may
be indemnified against certain liabilities which they may incur in their
capacities as such.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, it is the position of
the Commission that such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or controlling
person of the Company 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 Company 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 Securities
Act and will be governed by the final adjudication of such issue.
PLAN OF DISTRIBUTION
The Notes offered hereby are being offered to the public by the Company
on a "best efforts, minimum-maximum" basis. There can be no assurance that any
of the Notes will be sold. Unless $4,500,000 principal amount of Notes are sold
within 90 days of the date hereof, or such later date as shall be determined by
the Board of Directors (but not to exceed two extension periods of 90 days
each), all proceeds received will be returned to the investor, with interest
accrued at the rate established by the escrow agent, and no sale of Notes will
be made. All payments will be mailed within three business days following
receipt to an escrow account maintained by First Trust of California N.A., as
30
<PAGE>
escrow agent, and held pending the sale of such minimum principal amount of
Notes within the specified period and satisfaction of other closing conditions.
Such payments will only be withdrawn from the escrow account for the purpose of
(i) paying the Company for the Notes hereunder if at least $4,500,000 principal
amount of Notes are sold within the Offering period, as extended, and the
Construction Loan is received within 60 days following the end of the Offering
period, or (ii) returning payments to purchasers. If the minimum amount is sold
within the Offering period and the other closing conditions are satisfied,
subscribers will receive, in addition to their Notes, the interest earned on
their deposit in the escrow account if such interest is more than $5.00 per
subscriber.
First Trust of California is acting only as an escrow agent in
connection with the offering of the Notes described herein, and has not
endorsed, recommended or guaranteed the purchase, value or repayment of such
Notes.
Initially, the Company does not plan to employ any brokers, dealers,
placement agents, or finders in connection with the Offering. Certain employees
of the Company or RAVC may solicit responses to the Offering, but such employees
will not receive any commissions or compensation for such services other than
their normal employment compensation. However, the Company may offer the Notes
through brokers or dealers who may receive a commission or fees of up to 6% of
the amount sold by such person. No such fees shall be paid in states that
prohibit such fees.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Ballard Spahr Andrews & Ingersoll, Salt Lake City, Utah.
EXPERTS
The financial statements of Royal Aloha Development Company at June 30,
1997, and from inception of the Company, February 27, 1997, to June 30, 1997,
appearing in this prospectus and Registration Statement, have been audited by
Ernst & Young LLP, independent auditors, and the information under caption
"Selected Financial Data" at June 30, 1997 and from inception of the Company,
February 27, 1997, to June 30, 1997, appearing in this Prospectus and
Registration Statement, have been derived from financial statements audited by
Ernst & Young LLP, as set forth in their report appearing elsewhere herein. Such
financial statements and selected financial data are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The references to Donald R. Beach, Appraiser-Consultant, and the
appraisal given by him in the Prospectus and the appraisal made by him and filed
as an exhibit to the Registration Statement have been included in reliance upon
his authority as an expert with respect to the matters contained therein. In the
opinion of Donald R. Beach, the appraisal was prepared in accordance with the
standards and reporting requirements of the Uniform Standards of Professional
Appraisal Practice as outlined in Chapter 645C of the Nevada Administrative
Code.
31
<PAGE>
FINANCIAL STATEMENTS
Royal Aloha Development Company
From inception, February 27, 1997, to June 30,
1997 with Report of Independent Auditors
<PAGE>
Royal Aloha Development Company
Financial Statements
From inception, February 27, 1997, to June 30, 1997
Contents
Page
Report of Independent Auditors.....................................F-3
Balance Sheet......................................................F-4
Statement of Operations............................................F-5
Statement of Cash Flows............................................F-6
Notes to Financial Statements......................................F-7
F-2
<PAGE>
Report of Independent Auditors
Board of Directors
Royal Aloha Development Company
We have audited the accompanying balance sheet of Royal Aloha Development
Company as of June 30, 1997, and the related statements of operations and cash
flows from inception, February 27, 1997 to June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Royal Aloha Development Company
at June 30, 1997, and the results of its operations and its cash flow from
inception, February 27, 1997 to June 30, 1997, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Honolulu, Hawaii
July 11, 1997
F-3
<PAGE>
<TABLE>
<CAPTION>
ROYAL ALOHA DEVELOPMENT COMPANY
Balance Sheet
June 30, 1997
Assets
Current Assets:
<S> <C> <C>
Cash $192,500
--------
Total current assets 192,500
Property and equipment:
Land $ 304,762
Improvement and fixtures 965,459
----------
1,270,221
Less accumulated depreciation 565,648 704,573
---------
Deferred financing costs (Note 4) 75,624
--------
Total Assets $972,697
========
Liabilities and shareholder's equity Current liabilities:
Accounts payable $ 76,285
--------
Total current liabilities 76,285
Contingent liability (Note 5)
Shareholder's equity (Note 7):
Common stock, non-par value; authorized 2,500
shares, issued and outstanding 1 share 1
Additional paid-in capital 897,678
Accumulated deficit (1,267)
--------
Total shareholder's equity 896,412
--------
Total liabilities and shareholder's equity $972,697
========
</TABLE>
See accompanying notes.
F-4
<PAGE>
ROYAL ALOHA DEVELOPMENT COMPANY
Statement of Operations
From inception, February 27, 1997 to June 30, 1997
Rental income (Note 2) $ 2,500
Expenses
Maintenance and operating expenses (Note 2) 2,500
Depreciation 606
Director fees and expenses 661
-------
3,767
-------
Net loss before income taxes (1,267)
Income taxes --
-------
Net Loss $(1,267)
-------
See accompanying notes.
F-5
<PAGE>
ROYAL ALOHA DEVELOPMENT COMPANY
Statement of Cash Flows
From inception, February 27, 1997 to June 30, 1997
Operating activities
Net loss $ (1,267)
Adjustments to reconcile excess of expenses over
income to net cash provided by operating activities:
Depreciation 606
Deferred financing costs (75,624)
Accounts payable 76,285
---------
Net cash provided by operating activities --
Investing activities
Sale of common stock 1
Additional cash contribution by shareholder 192,499
---------
Net cash provided by investing activities 192,500
Increase in cash 192,500
Cash at date of inception, February 27, 1997 --
---------
Cash at June 30, 1997 $ 192,500
=========
Supplemental disclosure of non-cash activity
Capital contribution - property and equipment $ 705,179
See accompanying notes.
F-6
<PAGE>
Royal Aloha Development Company
Notes to Financial Statements
June 30, 1997
1. Formation and Purpose of the Company
Royal Aloha Development Company (the Company), is a wholly-owned subsidiary of
Royal Aloha Vacation Club (RAVC). It was incorporated in Nevada, on February 27,
1997 and commenced operation on June 24, 1997 upon the transfer of cash and land
and improvements in Las Vegas, Nevada comprising a 20 unit timeshare resort.
Such assets are recorded at RAVC's historical cost basis on the date of the
transfer.
The Company intends to construct a new timeshare resort of up to 119 units on
the property resulting in the creation of 6,069 vacation ownership interests
(VOIs). Currently, it is the intent of the Company to retain up to 1,020 VOIs
for use by RAVC members, who have been previously informed by RAVC to this
effect. However, the ultimate number of VOIs retained will depend on the success
of the project, market conditions at the time of completion of the project, and
other factors.
See Note 5 regarding preliminary planning and design costs incurred by RAVC
prior to June 30, 1997.
2. Operations
The Company's existing timeshare units are leased to RAVC for an amount equal to
the cost of operating and maintaining them. Thus, the Company will not realize
any cash flow from the operations thereof. Administrative expenses incurred by
RAVC on behalf of the Company have been nominal in amount and management
anticipates that such costs will continue to be nominal until construction of
the resort is completed. RAVC has not charged these expenses to the Company.
3. Accounting Policies
Property and Equipment
Property and equipment are recorded at the historical cost incurred by RAVC.
Depreciation is recorded for the improvements and fixtures using the
straight-line method over the estimated useful lives of 30 to 40 years.
The carrying value of the property and equipment at the time the existing
improvements and fixtures are razed and construction of the new resort commences
will be assigned to the cost of the new resort.
Construction Costs of New Resort
All costs incurred subsequent to July 1, 1997 in connection with planning,
design, and construction of the planned resort will be capitalized. See Note 5.
Uses of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Income Taxes
The Company is included in the consolidated federal income tax return of RAVC.
Federal income taxes are allocated to the Company on a separate company basis
pursuant to an intercompany federal income tax sharing agreement. At June 30,
F-7
<PAGE>
1997, the Company has a net operating loss carry forward of approximately $1,200
for income tax purposes that will expire in 2012. For financial reporting
purposes, a deferred tax asset of approximately $200 has been fully offset by a
valuation allowance because of the uncertainty of its realization.
4. Deferred Financing Costs
Costs incurred through June 30, 1997 consist principally of legal fees related
to the Company's planned public offering of subordinated notes. Such costs,
together with all other costs incurred in connection with registering and
selling the notes will be deferred and amortized over the life of the notes
using the interest method.
5. Contingent Liability
RAVC incurred approximately $177,000, through June 30, 1997, in costs to
organize the Company and for the preliminary planning and design of the new
resort. These costs have not been charged or transferred to the Company.
However, to the extent funds are available after payment of all other costs to
complete construction of the resort, RAVC intends to reimburse itself for these
expenditures. It is not currently possible to determine if such payment will
occur.
6. Related Party Transactions
As sole shareholder, RAVC controls the Company and provides administrative and
operating support to it. Two of the three directors of the Company are also
directors of RAVC, and the other one is an officer of RAVC. The officers of the
Company are also officers of RAVC.
7. Changes in Shareholder's Equity
On June 24, 1997 the Company issued one share of its non-par common stock to
RAVC in exchange for cash, property and equipment with a carrying value of
$897,679. $1 was recorded as common stock and $897,678 was recorded as
additional paid-in capital.
F-8
<PAGE>
ROYAL ALOHA DEVELOPMENT COMPANY
__% EIGHT YEAR DEFERRED INTEREST SUBORDINATED NOTES
SUBSCRIPTION AGREEMENT
1. The undersigned hereby tenders this Subscription Agreement
("Subscription") to Royal Aloha Development Company, a Nevada corporation (the
"Company"), to purchase the Company's __% Eight Year Deferred Interest
Subordinated Notes (the "Notes") in the principal amount indicated on the
signature page hereof. The undersigned acknowledges that this Subscription shall
not become effective until it has been properly executed by the undersigned and
accepted by the Company. The Company may reject Subscriptions, in whole or in
part, for any reason.
2. The undersigned acknowledges receipt of a Prospectus dated
_____________, 1997, (the "Prospectus"), describing the Company and the terms of
the Company's offer to sell the Notes. The undersigned further acknowledges that
he or his representative has read carefully and understands the Prospectus and
the terms of the offering. In particular, the undersigned acknowledges that the
Notes are the unsecured, subordinated obligations of the Company, that no
payments will be made on the Notes until the Company has fully paid the
Construction Loan, and that there is no guaranty that the Company will be able
to pay the Notes when due.
3. In evaluating an investment in the Notes, the undersigned has not
relied upon any representations or other information (whether oral or written)
from the Company other than as set forth in the Prospectus. The undersigned has
carefully considered and has, to the extent the undersigned believes such
discussion necessary, discussed with the undersigned's professional legal, tax,
accounting, and financial advisors the suitability of an investment in the Notes
for the undersigned's particular tax and financial condition. In particular, the
undersigned understands that Development Period Interest will be taxable as it
accrues, rather than when it is paid.
4. The undersigned acknowledges that there are various substantial
risks attendant to the Company's business and an investment in the Notes,
including loss of the entire amount of such investment. The undersigned has
considered the risks associated with such an investment, including, but not
limited to, those set forth under the caption "Risk Factors" in the Prospectus.
No representations or warranties have been made concerning the success of the
business or the potential return on an investment in the Notes.
5. The undersigned acknowledges that no market is expected to develop
in the Notes. Therefore, the undersigned does not expect to be able to transfer
his Notes.
6. The undersigned acknowledges and agrees that except as otherwise
provided in the Prospectus, he is not entitled to cancel, terminate, or revoke
this Subscription or any agreements of the undersigned hereunder, and such
Subscription shall survive the death or disability of the undersigned. As
described in the Prospectus, the original ninety (90) day Offering period may be
extended for up to two additional ninety (90) day periods, and subscription
funds may remain in escrow for up to sixty (60) days following the Offering
period while the Construction Loan is being obtained.
7. If this Subscription is executed and delivered on behalf of a
partnership, corporation, trust or estate, or retirement plan: (i) such
partnership, corporation, trust or estate or retirement plan has been duly
authorized and is duly qualified (a) to execute and deliver this Subscription
and all other instruments executed and delivered on behalf of such partnership,
corporation, trust or estate or retirement plan in connection with the purchase
of the Notes, and (b) to purchase and hold such Note; and (ii) the signature of
the party signing on behalf of such partnership, corporation, trust or estate or
retirement plan is binding upon such partnership, corporation, trust or estate
or retirement plan.
8. The undersigned has completed and signed the attached Form W-8
or Substitute Form W-9 as applicable.
[Signature page to follow]
<PAGE>
[Signature page]
Principal amount of Notes subscribed for: $__________________.
DATED this ___ day of __________, 199__.
------------------------------------------------
(Signature)
------------------------------------------------
(Name - Please Print)
------------------------------------------------
(Signature of Spouse if Natural Persons Purchasing
Jointly or if Community Property State)
------------------------------------------------
(Name of Spouse if Natural Persons Purchasing
Jointly or if Community Property State)
------------------------------------------------
(Primary Place of Residence)
------------------------------------------------
(City, State and ZIP Code)
------------------------------------------------
(Telephone Number - Business)
------------------------------------------------
(Social Security or Taxpayer I.D. No.)
ACCEPTED this ___ day of __________, 199___.
ROYAL ALOHA DEVELOPMENT COMPANY
By: __________________________________________
Print Name:
Title:
S-2
<PAGE>
INSTRUCTIONS
The instructions below should be followed in purchasing the Notes
described in the Subscription Agreement.
1. Your Subscription Agreement, your completed Substitute Form W-9, and
a check for the principal amount of Note purchased, made payable to First Trust
of California, National Association as Escrow Agent for Royal Aloha Development
Company (collectively, the "Subscription Documents"), must be properly filled
in, signed, dated, and sent or delivered to the Company at the address shown in
the Prospectus. If you are a not a United States citizen or resident, you should
file a Form W-8 instead of a Substitute Form W-9. Please contact the Company for
a copy of Form W-8.
2. Substitute Form W-9. Under the Federal Income Tax Law, a non-exempt
Subscriber is required to provide the Company with a correct Taxpayer
Identification Number ("TIN") on the Substitute Form W-9, which is provided
under "Important Tax Information" below. Failure to provide the information on
the Substitute Form W-9 may subject the Subscriber to 31% Federal income tax
backup withholding on the payment of any interest on the Notes. The box in Part
2 of Substitute Form W-9 may be checked if the Subscriber has not been issued a
TIN and has applied for a number or intends to apply for a number in the near
future. If the box in Part 2 is checked and the Escrow Agent or the Trustee is
not provided with a TIN by the time of payment, the Escrow Agent or Trustee will
withhold 31% on all payments to such Subscriber of any interest accrued on the
Subscriber's Note. Please review the section "Important Tax Information" for
additional details on what TIN to give the Company.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a Subscriber who purchases Notes from the
Company is required to provide the Company with such Subscriber's correct TIN on
Substitute Form W-9 below. If such Subscriber is an individual, the TIN is his
or her social security number. For businesses and other entities, the TIN is the
employer identification number. If the Company is not provided with the correct
TIN, the Subscriber may be subject to a $50 penalty imposed by the Internal
Revenue Service. In addition, payments that are made to such Subscriber with
respect to interest on the Notes may be subject to backup withholding.
If Federal income tax backup withholding applies, the Company is
required to withhold 31% of any payments made to the Subscriber. Backup
withholding is not an additional tax. Rather, the Federal income tax liability
of persons subject to backup withholding will be reduced by the amount of the
tax withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
Purpose of Substitute Form W-9
To avoid backup withholding on payments that are made to a Subscriber
with respect to Notes purchased, the Subscriber is required to notify the
Company of his or her correct TIN by completing the Substitute Form W-9 attached
hereto certifying that the TIN provided on Substitute Form W-9 is correct and
that (a) the Subscriber has not been notified by the Internal Revenue Service
that he or she is subject to Federal income tax backup withholding as a result
of failure to report all interest or dividends or (b) the Internal Revenue
Service has notified the Subscriber that he or she is no longer subject to
Federal income tax backup withholding.
S-3
<PAGE>
- --------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN IN THE Social security
BOX AT RIGHT AND CERTIFY BY SIGNING number Or Employee
AND DATING BELOW: Identification
SUBSTITUTE Number
TIN _______________
----------------------------------------------------------
Form W-9 Name (Please Print)_____________________ Part 2
Department of the Address_________________________________ Awaiting TIN [ ]
Treasury Internal
Revenue Service City ___________ State __ Zip Code _____
----------------------------------------------------------
Payer's Request for 3--CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I
Part Taxpayer CERTIFY THAT:
Identification (1) The number shown on this form is my correct taxpayer
Number (TIN) and identification number (or a TIN has not been issued
Certification to me but I have mailed or delivered an application
to receive a TIN or intend to do so in the near
future).
(2) I am not subject to backup withholding either because
I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report all
interest or dividends or the IRS has notified me that
I am no longer subject to backup withholding.
(3) All other information provided on this form is true,
correct and complete.
----------------------------------------------------------
SIGNATURE:____________________________ DATE: ____________
You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to
backup withholding because of underreporting interest
or dividends on your tax return.
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS OF INTEREST ACCRUED ON YOUR
INVESTMENT. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART 2 OF THE SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments of the purchase price of the Shares made to me will be withheld until I
provide a number.
SIGNATURE: ________________________________
- --------------------------------------------------------------------------------
S-4
<PAGE>
============================
NO PERSON IS AUTHORIZED TO GIVE ANY OFFERING INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
NOTES OFFERED BY THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY NOTES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED BY REFERENCE HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-------------------
TABLE OF CONTENTS
AVAILABLE INFORMATION....................................................... 2
PROSPECTUS SUMMARY.......................................................... 3
RISK FACTORS................................................................ 5
USE OF PROCEEDS............................................................. 11
SELECTED FINANCIAL DATA..................................................... 12
PLAN OF OPERATION........................................................... 13
BUSINESS OF THE COMPANY..................................................... 15
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY............................. 22
EXECUTIVE COMPENSATION...................................................... 23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............. 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................. 23
DESCRIPTION OF SECURITIES................................................... 25
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................................... 30
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT VIOLATIONS................................................. 30
PLAN OF DISTRIBUTION........................................................ 30
LEGAL MATTERS............................................................... 31
EXPERTS ................................................................... 31
FINANCIAL STATEMENTS...................................................... F-1
SUBSCRIPTION AGREEMENT..................................................... S-1
=========================
=========================
ROYAL ALOHA DEVELOPMENT COMPANY
$8,500,000
% EIGHT YEAR DEFERRED INTEREST
SUBORDINATED NOTES
--------------------
PROSPECTUS
--------------------
, 1997
====================
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
Section 78.751 of the Nevada Revised Statutes provides that a
corporation may indemnify its officers, directors, employees, and agents (or
persons who have served, at the corporation's request, as officers, directors,
employees, or agents of another corporation) against certain expenses, including
attorneys' fees, actually and reasonably incurred by them in connection with the
defense of any action by reason of being or having been directors, officers,
employees or agents.
The Company's Articles of Incorporation and Bylaws provide that the
Company shall indemnify its officers and directors to the fullest extent
permitted by the Nevada Law.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
ITEM 25. Other Expenses of Issuance and Distribution
The estimated expenses in connection with this Offering are set forth
below:
Securities and Exchange Commission filing fee.................$2,576
Blue Sky fees and expenses....................................50,410
Accounting fees and expenses..................................30,000
Legal fees and expenses......................................100,000
Trustee and Escrow Agent Fees.................................40,000
Printing and electronic transmission expenses.................20,000
Postage........................................................5,000
Miscellaneous............................................... 12,014
------
Total.......................................... $ 250,000
==========
ITEM 26. Recent Sales of Unregistered Securities
On or about June 24, 1997,the Company issued all of its currently
issued and outstanding common stock to its parent corporation RAVC in exchange
for the Property and cash. No commissions or similar remuneration were paid with
respect to such issuance. The issuance was a limited offering to a single entity
which completely controlled the issuer before and after the issuance. The
offering is believed exempt from registration pursuant to Section 4(2) of the
Securities Act.
II-1
<PAGE>
ITEM 27(a). Index of Exhibits
Exhibit Number
3.1 Articles of Incorporation of Royal Aloha Development Company, filed
February 27, 1997.
3.2 Bylaws of Royal Aloha Development Company adopted by the Board of
Directors on March 5, 1997.
4 Form of Indenture, dated __________, between Royal Aloha Development
Company and First Trust of New York, N.A., as Trustee, including Form
of Note.
5 Opinion of Ballard Spahr Andrews & Ingersoll.*
10.1 Escrow Agreement, dated ______, 1997 between Royal Aloha Development
Company and First Trust of California, N.A., as Escrow Agent.
10.2 Form of Marketing Agreement between Success of Las Vegas Inc.
and Royal Aloha Development Company for sale of VOIs.*
10.3 Form of Management Agreement between Royal Aloha Vacation Club
and Royal Aloha Development Company.*
10.4 Operating Agreement between Royal Aloha Vacation Club and Royal
Aloha Development Company.
10.5 Tax Sharing Agreement between Royal Aloha Vacation Club and Royal
Aloha Development Company.
10.6 Interval International, Inc. Preliminary Qualification letter dated
July 30, 1997.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in its opinion
filed as Exhibit 5).*
23.3 Consent of Donald R. Beach.
24 Power of Attorney (included on signature pages to this Registration
Statement).
27 Financial Data Schedule.
99 Appraisal of Property by Donald R. Beach, C.A.E.S.P.A.
- ------------------
* To be filed by Amendment.
ITEM 28. Undertakings
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers, and
controlling persons of the registrant pursuant to its Certificate of
Incorporation, as amended, its Bylaws, as amended 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.
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.
<PAGE>
(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.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Honolulu, State of Hawaii, on ________, 1997.
ROYAL ALOHA DEVELOPMENT COMPANY
By:_____________________________________
Jack R. Corteway
President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Jack R. Corteway, Bernard J.
McKenna, Theodore Rohde and Stephen C.W. Lin and each or any one of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of
1933, this registration statement has been signed by the following persons in
the capacities and on the date stated.
Signature Title Date
____________________ President, Chief Executive Officer, __________, 1997
Jack R. Corteway Treasurer and Director (Principal
Executive Officer)
____________________ Vice President, Controller and __________, 1997
Stephen C. W. Lin Secretary (Principal Financial
Officer and Principal Accounting
Officer)
____________________ Director __________, 1997
Bernard J. McKenna
____________________ Director __________, 1997
Theodore A. Rohde
<PAGE>
INDEX OF EXHIBITS
Exhibit Number
3.1 Articles of Incorporation of Royal Aloha Development Company, filed
February 27, 1997.
3.2 Bylaws of Royal Aloha Development Company adopted by the Board of
Directors on March 5, 1997.
4 Form of Indenture, dated __________, between Royal Aloha Development
Company and First Trust of New York, N.A., as Trustee, including Form
of Note.
5 Opinion of Ballard Spahr Andrews & Ingersoll.*
10.1 Escrow Agreement, dated ______, 1997 between Royal Aloha Development
Company and First Trust of California, N.A., as Escrow Agent.
10.2 Form of Marketing Agreement between Success of Las Vegas Inc.
and Royal Aloha Development Company for sale of VOIs.*
10.3 Form of Management Agreement between Royal Aloha Vacation Club
and Royal Aloha Development Company.*
10.4 Operating Agreement between Royal Aloha Vacation Club and Royal
Aloha Development Company.
10.5 Tax Sharing Agreement between Royal Aloha Vacation Club and Royal
Aloha Development Company.
10.6 Interval International, Inc. Preliminary Qualification letter dated
July 30, 1997.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in its opinion
filed as Exhibit 5).*
23.3 Consent of Donald R. Beach.
24 Power of Attorney (included on signature pages to this Registration
Statement).
27 Financial Data Schedule.
99 Appraisal of Property by Donald R. Beach, C.A.E.S.P.A.
- ------------------
* To be filed by Amendment.
ARTICLES OF INCORPORATION
OF
ROYAL ALOHA DEVELOPMENT COMPANY
The undersigned, for the purpose of forming a corporation, pursuant
to and by virtue of Chapter 78 of the Nevada Revised Statutes, hereby adopts,
executes and acknowledges the following Articles of Incorporation.
ARTICLE I
NAME
The name of the corporation shall be Royal Aloha Development
Company.
ARTICLE II
REGISTERED OFFICE
The name of the initial resident agent and the street address of
the initial registered office in the State of Nevada where process may be served
upon the corporation is Bible, Haney, Hoy, Trachok, Wadhams & Woloson, 301 East
Clark Avenue, Las Vegas, Clark County, Nevada 89101. The corporation may, from
time to time, in the manner provided by law, change the resident agent and the
registered office within the State of Nevada. The corporation may also maintain
an office or offices for the conduct of its business, either within or without
the State of Nevada.
ARTICLE III
CAPITAL STOCK
Section 1. Authorized Shares. The aggregate number of shares which the
corporation shall have authority to issue shall consist of two thousand five
hundred (2,500) shares of common stock at no par value.
<PAGE>
Section 2. Consideration for Shares. The common stock authorized by Section
1 of this Article shall be issued for such consideration as shall be fixed, from
time to time, by the Board of Directors.
Section 3. Assessment of Stock. The capital stock of this corporation,
after the amount of the subscription price has been fully paid in, shall not be
assessable for any purpose, and no stock issued as fully paid shall ever be
assessable or assessed. No stockholder of the corporation is individually liable
for the debts or liabilities of the corporation.
Section 4. Cumulative Voting For Directors. No stockholder of the
corporation shall be entitled to cumulative voting of his shares for the
election of directors.
Section 5. Preemptive Rights. No stockholder of the corporation shall have
any preemptive rights.
ARTICLE IV
DIRECTORS AND OFFICERS
Section 1. Number of Directors. The members of the governing board of the
corporation are styled as directors. The Board of Directors of the corporation
shall consist of at least one (1) individual who shall be elected in such manner
as shall be provided in the bylaws of the corporation. The number of directors
may be changed from time to time in such manner as shall be provided in the
bylaws of the corporation.
Section 2. Initial Directors. The names and post office box or street
addresses of the directors constituting the first Board of Directors, which
shall be three (3) in number, are:
NAME ADDRESS
---- -------
Jack R. Corteway 301 E. Clark Ave., Ste. 700
Las Vegas, NV 89101
<PAGE>
Bernard J. McKenna 301 E. Clark Ave., Ste. 700
Las Vegas, NV 89101
Theodore A. Rohde 301 E. Clark Ave., Ste. 700
Las Vegas, NV 89101
Section 3. Limitation of Personal Liability. No director or officer of the
corporation shall be personally liable to the corporation or its stockholders
for damages for breach of fiduciary duty as a director or officer, provided,
however, that the foregoing provision does not eliminate or limit the liability
of a director or officer of the corporation for:
(a) Acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law; or
(b) The payment of distributions in violation of Nevada
Revised Statutes 78.300.
Section 4. Payment of Expenses. In addition to any other rights of
indemnification permitted by the law of the State of Nevada as may be provided
for by the corporation in its bylaws or by agreement, the expenses of officers
and directors incurred in defending a civil or criminal action, suit or
proceeding, involving alleged acts or omissions of such officer or director in
his or her capacity as an officer or director of the corporation, must be paid,
by the corporation or through insurance purchased and maintained by the
corporation or through other financial arrangements made by the corporation, as
they are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
corporation.
<PAGE>
Section 5. Repeal And Conflicts. Any repeal or modification of Sections 3
or 4 above approved by the stockholders of the corporation shall be prospective
only. In the event of any conflict between Sections 3 or 4 of this Article and
any other Article of the corporation's Articles of Incorporation, the terms and
provisions of Sections 3 or 4 of this Article shall control.
ARTICLE V
INCORPORATOR
The name and post office box or street address of the incorporator signing
these Articles of Incorporation is:
NAME ADDRESS
---- -------
Dennis R. Haney 301 E. Clark Ave., Ste. 700
Las Vegas, Nevada 89101
IN WITNESS WHEREOF, I have executed these Articles of Incorporation
this 27th day of February, 1997.
/s/ Dennis R. Haney
---------------------
Dennis R. Haney, Esq.
State of Nevada )
) SS.
County of Clark )
This instrument was acknowledged before me on February 27, 1997 by Dennis
R. Haney, Esq. as Incorporator of Royal Aloha Development Company.
/s/ Cheryl Gex
------------------
Notary Public
(My commission expires: 3/2/98)
<PAGE>
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT
BY RESIDENT AGENT
IN THE MATTER OF ROYAL ALOHA DEVELOPMENT COMPANY
1. The undersigned, Bible, Haney, Hoy, Trachok, Wadhams & Woloson,
hereby certifies that on the 27th day of February, 1997, it accepted the
appointment as Resident Agent of the above corporation.
2. The registered office in this State is located at 301 East Clark
Ave., Ste. 700, City of Las Vegas, County of Clark, State of Nevada 89101.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of
February, 1997.
RESIDENT AGENT,
BIBLE, HANEY, HOY, TRACHOK,
WADHAMS, & WOLOSON
By: /s/ Dennis R. Haney
------------------------
Dennis R. Haney, Esq.
Authorized Signatory
BYLAWS
of
ROYAL ALOHA DEVELOPMENT COMPANY
ARTICLE I
STOCKHOLDERS
Section 1.01 Annual Meeting. An annual meeting of the stockholders of the
corporation shall be held on the second Saturday of May in each year, commencing
after the first anniversary of incorporation, but if such date is a legal
holiday, then on the next succeeding business day, for the purpose of electing
directors of the corporation to serve during the ensuing year and for the
transaction of such other business as may properly come before the meeting. If
the election of the directors is not held on the day designated herein for any
annual meeting of the stockholders, or at any adjournment thereof, the president
shall cause the election to be held at a special meeting of the stockholders as
soon thereafter as is convenient.
Section 1.02 Special Meetings.
(a) Special meetings of the stockholders may be called by
the Chairman of the Board of Directors or the president and shall be called
by the Chairman of the Board of Directors, the president or the Board of
Directors at the written request of the holders of not less than 51% of the
voting power of any class of the corporation's stock entitled to vote.
(b) No business shall be acted upon at a special meeting
except as set forth in the notice calling the meeting, unless one of the
conditions for the holding of a meeting without notice set forth in Section 1.05
shall be satisfied, in which case any business may be transacted and the meeting
shall be valid for all purposes.
Section 1.03 Place of Meetings. Any meeting of the stockholders of the
corporation may be held at its registered office in the State of Nevada or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by stockholders entitled to vote may
designate any place for the holding of such meeting.
Section 1.04 Notice of Meetings.
(a) The president, a vice president, the secretary, an
assistant secretary or any other individual designated by the Board of
Directors shall sign and deliver written notice of any meeting at least ten (10)
days, but not more than sixty (60) days, before the date of such meeting. The
notice shall state the place, date and time of the meeting and the purpose or
purposes for which the meeting is called.
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<PAGE>
(b) In the case of an annual meeting, any proper business
may be presented for action, except that action on any of the following
items shall be taken only if the general nature of the proposal is stated in the
notice:
(1) Action with respect to any contract or transaction
between the corporation and one or more of its directors or officers or
between the corporation and any corporation, firm or association in which one or
more of the corporation's directors or officers is a director or officer or is
financially interested;
(2) Adoption of amendments to the Articles of
Incorporation; or
(3) Action with respect to a merger, share exchange,
reorganization, partial or complete liquidation, or dissolution of the
corporation.
(c) A copy of the notice shall be personally delivered or mailed
postage prepaid to each stockholder of record entitled to vote at the
meeting at the address appearing on the records of the corporation, and the
notice shall be deemed delivered the date the same is deposited in the United
States mail for transmission to such stockholder. If the address of any
stockholder does not appear upon the records of the corporation, it will be
sufficient to address any notice to such stockholder at the registered office of
the corporation.
(d) The written certificate of the individual signing a notice of
meeting, setting forth the substance of the notice or having a copy thereof
attached, the date the notice was mailed or personally delivered to the
stockholders and the addresses to which the notice was mailed, shall be prima
facie evidence of the manner and fact of giving such notice.
(e) Any stockholder may waive notice of any meeting by a signed
writing, either before or after the meeting.
Section 1.05 Meeting Without Notice.
(a) Whenever all persons entitled to vote at any meeting
consent, either by:
(1) A writing on the records of the meeting or filed with the
secretary; or
(2) Presence at such meeting and oral consent entered on the
minutes; or
(3) Taking part in the deliberations at such meeting without
objection;
the doings of such meeting shall be as valid as if had at a meeting
regularly called and noticed.
2 of 18
<PAGE>
(b) At such meeting any business may be transacted which is not
excepted from the written consent or to the consideration of which no objection
for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or of such
consent, provided a quorum was present at such meeting, the proceedings of the
meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties having
the right to vote at such meeting.
(d) Such consent or approval may be by proxy or attorney, but all
such proxies and powers of attorney must be in writing.
Section 1.06 Determination of Stockholders of Record.
(a) For the purpose of determining the stockholders entitled to
notice of and to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any distribution or the allotment of any rights,
or entitled to exercise any rights in respect of any change, conversion, or
exchange of stock or for the purpose of any other lawful action, the directors
may fix, in advance, a record date, which shall not be more than sixty (60) days
nor less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
(b) If no record date is fixed, the record date for determining
stockholders: (i) entitled to notice of and to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; (ii) entitled to express
consent to corporate action in writing without a meeting shall be the day on
which the first written consent is expressed; and (iii) for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote an any meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 1.07 Quorum; Adjourned Meetings.
(a) Unless the Articles of Incorporation provide for a different
proportion, stockholders holding at least a majority of the voting power of the
corporation's stock, represented in person or by proxy, are necessary to
constitute a quorum for the transaction of business at any meeting. If, on any
issue, voting by classes is required by the laws of the State of Nevada, the
Articles of Incorporation or these Bylaws, at least a majority of the voting
power within each such class is necessary to constitute a quorum of each such
class.
(b) If a quorum is not represented, a majority of the voting
power so represented may adjourn the meeting from time to time until holders of
the voting power required to constitute a quorum shall be represented. At any
such adjourned meeting at which a quorum shall be represented, any business may
3 of 18
<PAGE>
be transacted which might have been transacted as originally called. When a
stockholders' meeting is adjourned to another time or place hereunder, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. The stockholders
present at a duly convened meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum of the voting power.
Section 1.08 Voting.
(a) Unless otherwise provided in the Articles of Incorporation,
or in the resolution providing for the issuance of the stock adopted by the
Board of Directors pursuant to authority expressly vested in it by the
provisions of the Articles of Incorporation, each stockholder of record, or such
stockholder's duly authorized proxy or attorney-in-fact, shall be entitled to
one (1) vote for each share of voting stock standing registered in such
stockholder's name on the record date.
(b) Except as otherwise provided herein, all votes with respect
to shares standing in the name of an individual on the record date (including
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting
trust. With respect to shares held by a representative of the estate of a
deceased stockholder, guardian, conservator, custodian or trustee, votes may be
cast by such holder upon proof of capacity, even though the shares do not stand
in the name of such holder. In the case of shares under the control of a
receiver, the receiver may cast votes carried by such shares even though the
shares do not stand in the name of the receiver; provided, that the order of the
court of competent jurisdiction which appoints the receiver contains the
authority to cast votes carried by such shares. If shares stand in the name of a
minor, votes may be cast only by the duly appointed guardian of the estate of
such minor if such guardian has provided the corporation with written proof of
such appointment.
(c) With respect to shares standing in the name of another
corporation, partnership, limited liability company or other legal entity on the
record date, votes may be cast: (i) in the case of a corporation, by such
individual as the bylaws of such other corporation prescribe, by such individual
as may be appointed by resolution of the board of directors of such other
corporation or by such individual (including the officer making the
authorization) authorized in writing to do so by the Chairman of the Board of
Directors, president or any vice president of such corporation and (ii) in the
case of a partnership, limited liability company or other legal entity, by an
individual representing such stockholder upon presentation to the corporation of
satisfactory evidence of his authority to do so.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast for shares owned by this corporation or its subsidiaries, if
any. If shares are held by this corporation or its subsidiaries, if any, in a
fiduciary capacity, no votes shall be cast with respect thereto on any matter
except to the extent that the beneficial owner thereof possesses and exercises
either a right to vote or to give the corporation holding the same binding
instructions on how to vote.
4 of 18
<PAGE>
(e) Any holder of shares entitled to vote on any matter may cast
a portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder is
casting affirmative votes with respect to all shares held.
(f) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise and shares held by two or more persons (including proxy holders)
having the same fiduciary relationship in respect to the same shares, votes may
be cast in the following manner:
(1) If only one person votes, the vote of such person binds
all.
(2) If more than one person casts votes, the act of the
majority so voting binds all.
(3) If more than one person casts votes, but the vote is
evenly split on a particular matter, the votes shall be deemed cast
proportionately, as split.
(g) If a quorum is present, unless the Articles of Incorporation
provide for a different proportion, the affirmative vote of holders of at least
a majority of the voting power represented at the meeting and entitled to vote
on any matter shall be the act of the stockholders, unless voting by classes is
required for any action of the stockholders by the laws of the State of Nevada,
the Articles of Incorporation or these Bylaws, in which case the affirmative
vote of holders of a least a majority of the voting power of each such class
shall be required.
Section 1.09 Proxies. At any meeting of stockholders, any holder of shares
entitled to vote may designate, in a manner permitted by the laws of the State
of Nevada, another person or persons to act as a proxy or proxies. No proxy is
valid after the expiration of six (6) months from the date of its creation,
unless it is coupled with an interest or unless otherwise specified in the
proxy. In no event shall the term of a proxy exceed seven (7) )ears from the
date of its creation. Every proxy shall continue in full force and effect until
its expiration or revocation in a manner permitted by the laws of the State of
Nevada.
Section 1.10 Order of Business. At the annual stockholder's meeting, the
regular order of business shall be as follows:
1. Determination of stockholders present and existence of quorum,
in person or by proxy;
2. Reading and approval of the minutes of the previous meeting or
meetings;
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<PAGE>
3. Reports of the Board of Directors, and, if any, the president,
treasurer and secretary of the corporation;
4. Reports of committees;
5. Election of directors;
6. Unfinished business;
7. New business;
8. Adjournment.
Section 1.11 Absentees' Consent to Meetings. Transactions of any meeting of
the stockholders are as valid as though had at a meeting duly held after regular
call and notice if a quorum is represented, either in person or by proxy, and
if, either before or after the meeting, each of the persons entitled to vote,
not represented in person or by proxy (and those who, although present, either
object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person objects at the beginning of the meeting to the transaction of
any business because the meeting is not lawfully called or convened and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters not properly included in the notice if such objection
is expressly made at the time any such matters are presented at the meeting.
Neither the business to be transacted at nor the purpose of any regular or
special meeting of stockholders need be specified in any written waiver of
notice or consent, except as otherwise provided in Section 1.04(a) and (b) of
these Bylaws.
Section 1.12 Telephonic Meetings. Stockholders may participate in a meeting
of the stockholders by means of a telephone conference or similar method of
communication by which all individuals participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 1.12
constitutes presence in person at the meeting.
Section 1.13 Action Without Meeting. Any action required or permitted to
be taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by the holders of the voting power of the
corporation that would be required at a meeting to constitute the act of the
stockholders. Whenever action is taken by written consent, a meeting of
stockholders need not be called or notice given. The written consent may be
signed in counterparts and must be filed with the minutes of the proceedings of
the stockholders.
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<PAGE>
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure, and Qualifications. Unless a larger number is
required by the laws of the State of Nevada or the Articles of Incorporation or
until changed in the manner provided herein, the Board of Directors of the
corporation shall consist of at least one (1) individual who shall be elected at
the annual meeting of the stockholders of the corporation and who shall hold
office for one (1) year or until his or her successor or successors are elected
and qualify. A director need not be a stockholder of the corporation.
Section 2.02 Change In Number. Subject to any limitations in the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, the number
of directors may be changed from time to time by resolution adopted by the Board
of Directors or the stockholders.
Section 2.03 Reduction In Number. No reduction of the number of directors
shall have the effect of removing any director prior to the expiration of his
term of office.
Section 2.04 Resignation. Any director may resign effective upon giving
written notice to the Chairman of the Board of Directors, the president, the
secretary, or in the absence of all of them, any other officer, unless the
notice specifies a later time for effectiveness of such resignation. A majority
of the remaining directors, though less than a quorum, may appoint a successor
to take office when the resignation becomes effective, each director so
appointed to hold office during the remainder of the term of office of the
resigning director.
Section 2.05 Removal.
(a) The Board of Directors of the corporation, by majority vote,
may declare vacant the office of a director who has been declared incompetent by
an order of a court of competent jurisdiction or convicted of a felony.
(b) Any director may be removed from office by the vote or
written consent of stockholders representing not less than two-thirds of the
voting power of the issued and outstanding stock entitled to vote, except that
if the corporation's Articles of Incorporation provide for the election of
directors by cumulative voting, no director may be removed from office except
upon the vote of stockholders owning sufficient shares to have prevented such
director's election to office in the first instance.
Section 2.06 Vacancies.
(a) All vacancies, including those caused by an increase in the
number of directors, may be filled by a majority of the remaining directors,
though less than a quorum, unless it is otherwise provided in the Articles of
Incorporation unless, in the case of removal of a director, the stockholders by
a majority of voting power shall have appointed a successor to the removed
director. Subject to the provisions of Subsection (b) below, (i) in the case of
the replacement of a director, the appointed director shall hold office during
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the remainder of the term of office of the replaced director, and (ii) in the
case of an increase in the number of directors, the appointed director shall
hold office until the next meeting of stockholders at which directors are
elected.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office, any holder or
holders of an aggregate of five percent (5%) or more of the total voting power
entitled to vote may call a special meeting of the stockholders to elect the
entire Board of Directors. The term of office of any director shall terminate
upon such election of a successor.
Section 2.07 Annual and Regular Meetings. Immediately following the
adjournment of, and at the same place as, the annual or any special meeting of
the stockholders at which directors are elected other than pursuant to Section
2.06 of this Article, the Board of Directors, including directors newly elected,
shall hold its annual meeting without notice, other than this provision, to
elect officers and to transact such further business as may be necessary or
appropriate. The Board of Directors may provide by resolution the place, date,
and hour for holding regular meetings between annual meetings.
Section 2.08 Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board of Directors, or if there be no
Chairman, by the president or secretary, and shall be called by the Chairman of
the Board of Directors, the president or the secretary upon the request of any
two (2) directors. If the Chairman of the Board of Directors, or if there be no
Chairman, both the president and secretary, refuses or neglects to call such
special meeting, a special meeting may be called by notice signed by any two (2)
directors.
Section 2.09 Place of Meetings. Any regular or special meeting of the
directors of the corporation may be held at such place as the Board of
Directors, or in the absence of such designation, as the notice calling such
meeting, may designate. A waiver of notice signed by directors may designate any
place for the holding of such meeting.
Section 2.10 Notice of Meetings. Except as otherwise provided in Section
2.07, there shall be delivered to all directors, at least forty-eight (48) hours
before the time of such meeting, a copy of a written notice of any meeting by
delivery of such notice personally by mailing such notice postage prepaid or by
telegram. Such notice shall be addressed in the manner provided for notice to
stockholders in Section 1.04(c). If mailed, the notice shall be deemed delivered
two (2) business days following the date the same is deposited in the United
States mail, postage prepaid. Any director may waive notice of any meeting, and
the attendance of a director at a meeting and oral consent entered on the
minutes of such meeting shall constitute waiver of notice of the meeting unless
such director objects, prior to the transaction of any business, that the
meeting was not lawfully called or convened. Attendance for the express purpose
of objecting to the transaction of business because the meeting was not properly
called or convened shall not constitute presence nor a waiver of notice for
purposes hereof.
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Section 2.11 Quorum; Adjourned Meetings.
(a) A majority of the directors in office, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is
not present, a majority of those present may adjourn, from time to time, until a
quorum is present, and no notice of such adjournment shall be required. At any
adjourned meeting where a quorum is present, any business may be transacted
which could have been transacted at the meeting originally called.
Section 2.12 Board of Directors' Decisions. The affirmative vote of a
majority of the directors present at a meeting at which a quorum is present is
the act of the Board of Directors.
Section 2.13 Telephonic Meetings. Members of the Board of Directors or of
any committee designated by the Board of Directors may participate in a meeting
of the Board of Directors or such committee by means of a telephone conference
or similar method of communication by which all persons participating in such
meeting can hear each other. Participation in a meeting pursuant to this Section
2.13 constitutes presence in person at the meeting.
Section 2.14 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the Board of Directors or of a committee thereof may be
taken without a meeting if, before or after the action, a written consent
thereto is signed by all of the members of the Board of Directors or the
committee. The written consent may be signed in counterparts and must be filed
with the minutes of the proceedings of the Board of Directors or committee.
Section 2.15 Powers and Duties.
(a) Except as otherwise restricted in the laws of the State of
Nevada or the Articles of Incorporation, the Board of Directors has full control
over the affairs of the corporation. The Board of Directors may delegate any of
its authority to manage, control or conduct the business of the corporation to
any standing or special committee or to any officer or agent and to appoint any
persons to be agents of the corporation with such powers, including the power to
subdelegate, and upon such terms as may be deemed fit.
(b) The Board of Directors may present to the stockholders at
annual meetings of the stockholders, and when called for by a majority vote of
the stockholders at an annual meeting or a special meeting of the stockholders
shall so present, a full and clear report of the condition of the corporation.
(c) The Board of Directors, in its discretion, may submit any
contract or act for approval or ratification at any annual meeting of the
stockholders or any special meeting properly called for the purpose of
considering any such contract or act, provided a quorum is present.
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Section 2.16 Compensation. The directors and members of committees shall be
allowed and paid all necessary expenses incurred in attending any meetings of
the Board of Directors or committees. Subject to any limitations contained in
the laws of the State of Nevada, the Articles of Incorporation or any contract
or agreement to which the corporation is a party, directors may receive
compensation for their services as directors as determined by the Board of
Directors, but only during such times as the corporation may legally declare and
pay distributions on its stock, unless the payment of such compensation is first
approved by the stockholders entitled to vote for the election of directors.
Section 2.17 Board of Directors' Officers; Chairman Presiding Over
Meetings.
(a) At its annual meeting, the Board of Directors may elect,
from among its members, a Chairman of the Board of Directors, who may serve as
the chief executive officer of the corporation and who may preside at meetings
of the Board of Directors and at meetings of the stockholders. If no Chairman of
the Board of Directors is elected, or if the stockholders or the Board of
Directors determine that the Chairman of the Board of Directors shall not
preside at a meeting of the stockholders or of the Board, respectively, or if
the Chairman of the Board of Directors elects not to preside at a meeting or is
absent, the stockholders and the Board of Directors may appoint a chairman, who
need not be from among their or its members, who may preside over such meetings
of the stockholders and the Board of Directors, respectively, or, in the absence
of any such appointment, the president shall preside at such meetings and
perform such other duties as shall be prescribed by the Board of Directors. The
Board of Directors shall also elect such other officers of the Board of
Directors and for such term as it may, from time to time, determine advisable.
(b) Any vacancy in any office of the Board of Directors because
of death, resignation, removal or otherwise may be filled by the Board of
Directors for the unexpired portion of the term of such office.
Section 2.18 Order of Business. The order of business at any meeting of the
Board of Directors shall be as follows:
1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting
or meetings;
3. Reports of officers and committeemen;
4. Election of officers (annual meeting);
5. Unfinished business;
6. New business;
7. Adjournment.
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ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its annual meeting, shall
elect a president, a secretary and a treasurer to hold office for a term of one
(1) year or until their successors are chosen and qualify. Any individual may
hold two or more offices. The Board of Directors may, from time to time, by
resolution, elect a chief executive officer and one or more vice presidents,
assistant secretaries and assistant treasurers and appoint agents of the
corporation, prescribe their duties and fix their compensation.
Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without cause.
Any officer may resign at any time upon written notice to the corporation. Any
such removal or resignation shall be subject to the rights, if any, of the
respective parties under any contract between the corporation and such officer
or agent.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 President; Chief Executive Officer.
(a) The president may also be the chief executive officer of the
corporation, or, if the Chairman of the Board of Directors or any other
individual has been designated as the chief executive officer, the president
shall be the chief operations officer of the corporation, in either case subject
to the supervision and control of the Board of Directors. The president shall
direct the corporate affairs, with full power to execute all resolutions and
orders of the Board of Directors not expressly delegated to some other officer
or agent of the corporation.
(b) The president shall have full power and authority on behalf
of the corporation to attend and to act and to vote, or designate such other
officer or agent of the corporation to attend and to act and to vote, at any
meetings of the stockholders of any corporation in which the corporation may
hold stock and, at any such meetings, shall possess and may exercise any and all
rights and powers incident to the ownership of such stock. The Board of
Directors, by resolution from time to time, may confer like powers on any person
or persons in place of the president to exercise such powers for these purposes.
(c) The chief executive officer shall perform such duties as
usually pertain to the position of chief executive officer and such duties as
may be prescribed by the Board of Directors.
Section 3.05 Vice Presidents. The Board of Directors may elect one or more
vice presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act and
such other duties as shall be prescribed by the Board of Directors or the
president.
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Section 3.06 Secretary. The secretary shall keep, or cause to be kept, the
minutes of proceedings of the stockholders and the Board of Directors in books
provided for that purpose. The secretary shall attend to the giving and service
of all notices of the corporation, may sign with the president in the name of
the corporation all contracts in which the corporation is authorized to enter,
shall have the custody or designate control of the corporate seal, shall affix
the corporate seal to all certificates of stock duly issued by the corporation,
shall have charge or designate control of stock certificate books, transfer
books and stock ledgers, and such other books and papers as the Board of
Directors or appropriate committee may direct, and shall, in general, perform
all duties incident to the office of the secretary.
Section 3.07 Assistant Secretaries. The Board of Directors may appoint one
or more assistant secretaries who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the secretary.
Section 3.08 Treasurer. The treasurer shall be the chief financial officer
of the corporation subject to the supervision and control of the Board of
Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes, and other obligations, and shall
deposit all monies to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer may sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities, and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these Bylaws, or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter, or cause to be entered, regularly in the financial
records of the corporation, to be kept for that purpose, full and accurate
accounts of all monies received and paid on account of the corporation and,
whenever required by the Board of Directors, the treasurer shall render a
statement of any or all accounts. The treasurer shall at all reasonable times
exhibit the books of account to any director of the corporation and shall
perform all acts incident to the position of treasurer subject to the control of
the Board of Directors. The treasurer shall, if required by the Board of
Directors, give bond to the corporation in such sum and with such security as
shall be approved by the Board of Directors for the faithful performance of all
the duties of treasurer and for restoration to the corporation, in the event of
the treasurer's death, resignation, retirement or removal from office, of all
books, records, papers, vouchers, money and other property in the treasurer's
custody or control and belonging to the corporation. The expense of such bond
shall be borne by the corporation.
Section 3.09 Assistant Treasurers. The Board of Directors may appoint one
or more assistant treasurers who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the treasurer. The Board of
Directors may require an assistant treasurer to give a bond to the corporation
in such sum and with such security as it may approve, for the faithful
performance of the duties of assistant treasurer, and for restoration to the
corporation, in the event of the assistant treasurer's death, resignation,
retirement or removal from office, of all books, records, papers, vouchers,
money and other property in the assistant treasurer's custody or control and
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belonging to the corporation. The expense of such bond shall be borne by the
corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of the corporation's authorized stock shall,
subject to any provisions or limitations of the laws of the State of Nevada, the
Articles of Incorporation or any contracts or agreements to which the
corporation may be a party, be issued in such manner, at such times, upon such
conditions and for such consideration as shall be prescribed by the Board of
Directors.
Section 4.02 Certificates. Ownership in the corporation shall be evidenced
by certificates for shares of stock in such form as shall be prescribed by the
Board of Directors, shall be under the seal of the corporation and shall be
manually signed by the president or a vice president and also by the secretary
or an assistant secretary; provided, however, whenever any certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk,
and by a registrar, then a facsimile of the signatures of said officers of the
corporation may be printed or lithographed upon the certificate in lieu of the
actual signatures. If the Corporation uses facsimile signatures of its officers
on its stock certificates, it shall not act as registrar of its own stock, but
its transfer agent and registrar may be identical if the institution acting in
those dual capacities countersigns any stock certificates in both capacities.
Each certificate shall contain the name of the record holder, the number,
designation, if any, class or series of shares represented, a statement or
summary of any applicable rights, preferences, privileges or restrictions
thereon, and a statement, if applicable, that the shares are assessable. All
certificates shall be consecutively numbered. If provided by the stockholder,
the name, address and federal tax identification number of the stockholder, the
number of shares, and the date of issue shall be entered in the stock transfer
records of the corporation.
Section 4.03 Surrendered; Lost or Destroyed Certificates. All certificates
surrendered to the corporation, except those representing shares of treasury
stock, shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been canceled, except that in
case of a lost, stolen, destroyed or mutilated certificate, a new one may be
issued therefor. However, any stockholder applying for the issuance of a stock
certificate in lieu of one alleged to have been lost, stolen, destroyed or
mutilated shall, prior to the issuance of a replacement, provide the corporation
with his, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and, if required by the Board of Directors, an
indemnity bond in an amount not less than twice the current market value of the
stock, and upon such terms as the treasurer or the Board of Directors shall
require which shall indemnify the corporation against any loss, damage, cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
Section 4.04 Replacement Certificate. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, in the discretion of the Board of Directors,
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including, without limitation, the merger of the corporation with another
corporation or the reorganization of the corporation, to cancel any outstanding
certificate for shares and issue a new certificate therefor conforming to the
rights of the holder, the Board of Directors may order any holders of
outstanding certificates for shares to surrender and exchange the same for new
certificates within a reasonable time to be fixed by the Board of Directors. The
order may provide that a holder of any certificate(s) ordered to be surrendered
shall not be entitled to vote, receive distributions or exercise any other
rights of stockholders of record until the holder has complied with the order,
but the order operates to suspend such rights only after notice and until
compliance.
Section 4.05 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation of the certificates
therefor accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer in the records of the
corporation.
Section 4.06 Transfer Agent; Registrars. The Board of Directors may appoint
one or more transfer agents, transfer clerk and registrars of transfer and may
require all certificates for shares of stock to bear the signature of such
transfer agent, transfer clerk and/or registrar of transfer.
Section 4.07 Stock Transfer Records. The stock transfer records shall be
closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of distributions as provided in
Article V hereof and during such periods as, from time to time, may be fixed by
the Board of Directors, and, during such periods, no stock shall be transferable
for purposes of Article V and no voting rights shall be deemed transferred
during such periods. Subject to the forgoing limitations, nothing contained
herein shall cause transfers during such periods to be void or voidable.
Section 4.08 Miscellaneous. The Board of Directors shall have the power and
authority to make such rules and regulations not inconsistent herewith as it may
deem expedient concerning the issue, transfer, and registration of certificates
for shares of the corporation's stock.
ARTICLE V
DISTRIBUTIONS
Section 5.01 Distributions may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of Directors
may fix in advance a record date, as provided in Section 1.06, prior to the
distribution for the purpose of determining stockholders entitled to receive any
distribution. The Board of Directors may close the stock transfer books for such
purpose for a period of not more than ten (10) days prior to the date of such
distribution.
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ARTICLE VI
RECORDS; REPORTS; SEAL; AND FINANCIAL MATTERS
Section 6.01 Records. All original records of the corporation shall be kept
by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
Section 6.02 Directors' and Officers' Right of Inspection. Every director
and officer shall have the absolute right at any reasonable time for a purpose
reasonably related to the exercise of such individual's duties to inspect and
copy all of the corporation's books, records, and documents of every kind and to
inspect the physical properties of the corporation and/or its subsidiary
corporations. Such inspection may be made in person or by agent or attorney.
Section 6.03 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
Section 6.04 Fiscal Year-End. The fiscal year-end of the corporation shall
be such date as may be fixed from time to time by resolution of the Board of
Directors.
Section 6.05 Reserves. The Board of Directors may create, by resolution,
such reserves as the directors may, from time to time, in their discretion,
think proper to provide for contingencies, or to equalize distributions or to
repair or maintain any property of the corporation, or for such other purpose as
the Board of Directors may deem beneficial to the corporation, and the directors
may modify or abolish any such reserves in the manner in which they were
created.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification and Insurance.
(a) Indemnification of Directors and Officers.
(i) For purposes of this Article, (A) "Indemnitee" shall
mean each director or officer who was or is a party to, or is threatened to be
made a party to, or is otherwise involved in, any Proceeding (as hereinafter
defined), by reason of the fact that he or she is or was a director or officer
of the corporation or is or was serving in any capacity at the request of the
corporation as a director, officer, employee, agent, partner, or fiduciary of,
or in any other capacity for, another corporation or any partnership, joint
venture, trust, or other enterprise; and (B) "Proceeding" shall mean any
threatened, pending or completed action or suit (including without limitation an
action, suit or proceeding by or in the right of the corporation), whether
civil, criminal, administrative or investigative.
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(ii) Each Indemnitee shall be indemnified and held harmless
by the corporation for all actions taken by him or her and for all omissions
(regardless of the date of any such action or omission), to the fullest extent
permitted by Nevada law, against all expense, liability and loss (including
without limitation attorneys' fees, judgments, fines, taxes, penalties, and
amounts paid or to be paid in settlement) reasonably incurred or suffered by the
Indemnitee in connection with any Proceeding.
(iii) Indemnification pursuant to this Section shall
continue as to an Indemnitee who has ceased to be a director or officer and
shall inure to the benefit of his or her heirs, executors and administrators.
(b) Indemnification of Employees and Other Persons.
The corporation may, by action of its Board of Directors and
to the extent provided in such action, indemnify employees and other persons as
though they were Indemnitees.
(c) Non-Exclusivity of Rights.
The rights to indemnification provided in this Article shall
not be exclusive of any other rights that any person may have or hereafter
acquire under any statute, provision of the corporation's Articles of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise.
(d) Insurance.
The corporation may purchase and maintain insurance or make
other financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for any
liability asserted against him or her and liability and expenses incurred by him
or her in his or her capacity as a director, officer, employee or agent, or
arising out of his or her status as such, whether or not the corporation has the
authority to indemnify him or her against such liability and expenses.
(e) Other Financial Arrangements.
The other financial arrangements which may be made by the
corporation may include the following (i) the creation of a trust fund; (ii) the
establishment of a program of self-insurance; (iii) the securing of its
obligation of indemnification by granting a security interest or other lien on
any assets of the corporation; (iv) the establishment of a letter of credit,
guarantee or surety. No financial arrangement made pursuant to this subsection
may provide protection for a person adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable for
intentional misconduct, fraud, or a knowing violation of law, except with
respect to advancement of expenses or indemnification ordered by a court.
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(f) Other Matters Relating, to Insurance or Financial
Arrangements.
Any insurance or other financial arrangement made on behalf
of a person pursuant to this section may be provided by the corporation or any
other person approved by the Board of Directors, even if all or part of the
other person's stock or other securities is owned by the corporation. In the
absence of fraud:
(i) the decision of the Board of Directors as to the
propriety of the terms and conditions of any insurance or other financial
arrangement made pursuant to this section and the choice of the person to
provide the insurance or other financial arrangement is conclusive; and
(ii) the insurance or other financial arrangement:
(A) is not void or voidable; and
(B) does not subject any director approving it to
personal liability for his action, even if a
director approving the insurance or other financial
arrangement is a beneficiary of the insurance or
other financial arrangement.
Section 7.02 Amendment. The provisions of this Article relating to
indemnification shall constitute a contract between the corporation and each of
its directors and officers which may be modified as to any director or officer
only with that person's consent or as specifically provided in this Section.
Notwithstanding any other provision of these Bylaws relating to their amendment
generally, any repeal or amendment of this Article which is adverse to any
director or officer shall apply to such director or officer only on a
prospective basis and shall not limit the rights of an Indemnitee to
indemnification with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other provision of
these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of
this Article so as to limit or reduce the indemnification in any manner unless
adopted by (a) the unanimous vote of the directors of the corporation then
serving, or (b) by the stockholders as set forth in Article VIII hereof;
provided that no such amendment shall have retroactive effect inconsistent with
the preceding sentence.
Section 7.03 Changes in Nevada Law. References in this Article to Nevada
law or to any provision thereof shall be to such law as it existed on the date
this Article was adopted or as such law thereafter may be changed; provided that
(a) in the case of any change which expands the liability of directors or
officers or limits the indemnification rights or the rights to advancement of
expenses which the corporation may provide, the rights to limited liability, to
indemnification and to the advancement of expenses provided in the corporation's
Articles of Incorporation and/or these Bylaws shall continue as theretofore to
the extent permitted by law; and (b) if such change permits the corporation,
without the requirement of any further action by stockholders or directors, to
limit further the liability of directors (or limit the liability of officers) or
to provide broader indemnification rights or rights to the advancement of
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expenses than the corporation was permitted to provide prior to such change,
then liability thereupon shall be so limited and the rights to indemnification
and the advancement of expenses shall be so broadened to the extent permitted by
law.
ARTICLE VIII
AMENDMENT OR REPEAL
Section 8.01 Amendment. Except as otherwise restricted in the Articles of
Incorporation or these Bylaws:
(a) Any provision of these Bylaws may be altered, amended or
repealed at the annual or any regular meeting of the Board of Directors without
prior notice, or at any special meeting of the Board of Directors if notice of
such alteration, amendment or repeal be contained in the notice of such special
meeting.
(b) These Bylaws may also be altered, amended, or repealed at a
duly convened meeting of the stockholders by the affirmative vote of the holders
of 51% of the voting power of the corporation entitled to vote. The
stockholders may provide by resolution that any Bylaw provision repealed,
amended, adopted or altered by them may not be repealed, amended, adopted or
altered by the Board of Directors.
CERTIFICATION
The undersigned duly elected secretary of the corporation, does
hereby certify that the foregoing Bylaws were adopted by the Board of Directors
on the 5 day of March, 1997.
/s/ Jack R. Corteway
--------------------------
Jack R. Corteway, Secretary
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ROYAL ALOHA DEVELOPMENT COMPANY
Issuer
AND
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
Trustee
INDENTURE
Dated as of __________, 199_
[__]% Eight Year Deferred Interest Subordinated Notes
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.................................................... 2
Section 1.2 Incorporation by Reference of Trust Indenture Act.............. 6
Section 1.3 Rules of Construction.......................................... 6
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue of Notes......................... 7
Section 2.2 Form of Notes.................................................. 7
Section 2.3 Date and Denomination of Notes; Payments of Interest........... 7
Section 2.4 Execution of Notes............................................. 8
Section 2.5 Exchange and Registration of Transfer of Notes................. 9
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes..................... 10
Section 2.7 Temporary Notes................................................ 11
Section 2.8 Cancellation of Notes Paid, Etc................................ 12
Section 2.9 CUSIP Numbers.................................................. 12
ARTICLE III
REDEMPTION AND REPURCHASE OF NOTES
Section 3.1 Redemption Prices.............................................. 12
Section 3.2 Notice of Redemption; Selection of Notes....................... 12
Section 3.3 Payment of Notes Called for Redemption......................... 14
ARTICLE IV
PARTICULAR COVENANTS OF THE COMPANY
Section 4.1 Payment of Principal, Premium and Interest..................... 14
Section 4.2 Maintenance of Office or Agency................................ 15
Section 4.3 Appointments to Fill Vacancies in Trustee's Office............. 15
Section 4.4 Provisions as to Paying Agent.................................. 15
Section 4.5 Corporate Existence............................................ 16
Section 4.6 Stay, Extension and Usury Laws................................. 17
Section 4.7 Compliance Statement; Notice of Defaults ...................... 17
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Section 4.8 Taxes.......................................................... 17
Section 4.9 Insurance...................................................... 17
ARTICLE V
NOTEHOLDERS' LISTS AND REPORTS BY
THE COMPANY
Section 5.1 Noteholders' Lists............................................. 18
Section 5.2 Reports by Company............................................. 18
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.............................................. 18
Section 6.2 Payments of Notes on Default; Suit Therefor.................... 20
Section 6.3 Application of Monies Collected by Trustee..................... 22
Section 6.4 Proceedings by Noteholder...................................... 23
Section 6.5 Proceedings by Trustee......................................... 24
Section 6.6 Remedies Cumulative and Continuing............................. 24
Section 6.7 Direction of Proceedings and Waiver of Defaults by
Majority of Noteholders...................................... 24
Section 6.8 Notice of Defaults............................................. 25
Section 6.9 Undertaking to Pay Costs....................................... 25
ARTICLE VII
CONCERNING THE TRUSTEE
Section 7.1 Duties and Responsibilities of Trustee......................... 25
Section 7.2 Reliance on Documents, Opinions, Etc........................... 26
Section 7.3 No Responsibility for Recitals, Etc............................ 27
Section 7.4 Trustee, Paying Agents or Registrar May Own Notes.............. 27
Section 7.5 Monies to Be Held in Trust..................................... 27
Section 7.6 Compensation and Expenses of Trustee........................... 28
Section 7.7 Officers' Certificate as Evidence.............................. 28
Section 7.8 Resignation or Removal of Trustee.............................. 28
Section 7.9 Acceptance by Successor Trustee................................ 29
Section 7.10 Successor, by Merger, Etc...................................... 30
ARTICLE VIII
CONCERNING THE NOTEHOLDERS
Section 8.1 Action by Noteholders.......................................... 30
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PAGE
Section 8.2 Proof of Execution by Noteholders.............................. 31
Section 8.3 Who Are Deemed Absolute Owners................................. 31
Section 8.4 Company-Owned Notes Disregarded................................ 31
Section 8.5 Revocation of Consents, Future Holders Bound................... 32
ARTICLE IX
NOTEHOLDERS' MEETINGS
Section 9.1 Purposes for Which Meetings May be Called...................... 32
Section 9.2 Manner of Calling Meetings; Record Date........................ 32
Section 9.3 Call of Meeting by Company or Noteholders...................... 33
Section 9.4 Who May Attend and Vote at Meetings............................ 33
Section 9.5 Manner of Voting at Meetings and Record to be Kept............. 33
Section 9.6 Exercise of Rights of Trustee and Noteholders Not To
Be Hindered or Delayed....................................... 34
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.1 Supplemental Indentures Without Consent of
Noteholders................................................. 34
Section 10.2 Supplemental Indentures With Consent of Noteholders........... 35
Section 10.3 Effect of Supplemental Indentures............................. 36
Section 10.4 Notation on Notes............................................. 36
Section 10.5 Evidence of Compliance of Supplemental Indenture to
Be Furnished to the Trustee................................. 36
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE
Section 11.1 Company May Consolidate, Etc. on Certain Terms................ 37
Section 11.2 Successor Company To Be Substituted........................... 37
Section 11.3 Opinion of Counsel To Be Given to Trustee..................... 37
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
Section 12.1 Termination of Obligations upon Cancellation of the
Notes....................................................... 38
Section 12.2 Survival of Certain Obligations............................... 38
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Section 12.3 Acknowledgment of Discharge by Trustee........................ 38
Section 12.4 Application of Trust Assets................................... 39
Section 12.5 Repayment to the Company; Unclaimed Money..................... 39
Section 12.6 Reinstatement................................................. 39
ARTICLE XIII
IMMUNITY OF INCORPORATORS, SHAREHOLDERS,
OFFICERS AND DIRECTORS
Section 13.1 Indenture and Notes Solely Corporate Obligations.............. 40
ARTICLE XIV
SUBORDINATION
Section 14.1 Agreement to Subordinate...................................... 40
Section 14.2 Certain Definitions........................................... 40
Section 14.3 Liquidation; Dissolution; Bankruptcy.......................... 41
Section 14.4 Default on Senior Indebtedness................................ 42
Section 14.5 When Distribution Must Be Paid Over........................... 42
Section 14.6 Notice by Company............................................. 43
Section 14.7 Subrogation................................................... 43
Section 14.8 Relative Rights............................................... 43
Section 14.9 Subordination May Not Be Impaired by Company.................. 43
Section 14.10 Distribution or Notice to Representative..................... 44
Section 14.11 Rights of Trustee and Paying Agent........................... 44
Section 14.12 Authorization to Effect Subordination........................ 45
Section 14.13 Amendments................................................... 45
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1 Provisions Binding on Company's Successors.................... 45
Section 15.2 Official Acts by Successor Company............................ 45
Section 15.3 Addresses for Notices, Etc.................................... 45
Section 15.4 Communications by Holders with Other Holders.................. 46
Section 15.5 Governing Law................................................. 47
Section 15.6 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee..................................... 47
Section 15.7 Legal Holidays................................................ 47
Section 15.8 No Security Interest Created.................................. 48
Section 15.9 Benefits of Indenture......................................... 48
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Section 15.10 Table of Contents, Headings Etc.............................. 48
Section 15.11 Authenticating Agent......................................... 48
Section 15.12 Execution in Counterparts.................................... 49
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INDENTURE, dated as of _________ __, 199_, by and between
ROYAL ALOHA DEVELOPMENT COMPANY, a Nevada corporation (the "Company"), and FIRST
TRUST OF NEW YORK, NATIONAL ASSOCIATION, a national banking corporation (the
"Trustee").
W I T N E S S E T H :
WHEREAS, for its lawful corporate purposes, the Company has
duly authorized the issuance of its [__]% Eight Year Deferred Interest
Subordinated Notes (the "Notes"), in an aggregate principal amount not to exceed
$8,500,000 and to provide the terms and conditions upon which the Notes are to
be authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be
borne by the Notes, a form of assignment and a certificate of transfer to be
borne by the Notes are to be substantially in the forms hereinafter provided
for; and
WHEREAS, all acts and things necessary to make the Notes, when
executed by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issuance hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which
the Notes are, and are to be, authenticated, issued and delivered, and in
consideration of the premises and of the purchase and acceptance of the Notes by
the holders thereof, the Company covenants and agrees with the Trustee for the
equal and proportionate benefit of the respective holders from time to time of
the Notes (except as otherwise provided below) as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The terms defined in this Section 1.1
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.1. All
other terms used in this Indenture that are defined in the Trust Indenture Act
(as hereinafter defined) or that are by reference defined in the Securities Act
(as hereinafter defined), except as herein otherwise expressly provided for or
unless the context otherwise requires, shall have the meanings assigned to such
terms in said Trust Indenture Act and in said Securities Act as in force on the
date of this Indenture. The words "herein," "hereof," "hereunder" and words of
similar import refer to this Indenture as a whole and not to any particular
Article or Section.
Board of Directors: The term "Board of Directors" shall mean
the Board of Directors of the Company or a committee of such Board of Directors
duly authorized to act for it.
Board Resolution: The term "Board Resolution" shall mean 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.
Business Day: The term "Business Day" shall mean a day, other
than a Saturday, a Sunday or a day on which the banking institutions in the
State and City of New York are authorized or obligated by law or executive order
to close or a day that is declared a national or New York state holiday.
Commission: The term "Commission" shall mean the Securities
and Exchange Commission, as from time to time constituted, created under the
Exchange Act 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, the body performing such duties at such time.
Company: The term "Company" shall mean Royal Aloha Development
Company, a Nevada corporation, and subject to the provisions of Article XI,
shall include its successors and assigns.
Construction Loan: The term "Construction Loan" shall mean the
Construction Loan Agreement, dated ____________, 1997, between the Company and
__________________, and any amendment thereto or successor agreement.
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Corporate Trust Office of the Trustee: The term "Corporate
Trust Office of the Trustee," or other similar term, shall mean the office of
the Trustee at which at any particular time its corporate trust business shall
be principally administered, which office is, at the date as of which this
Indenture is dated, located at 100 Wall Street, New York, New York, 10005,
Attention: Corporate Trust Administration.
default: The term "default" shall mean any event that is, or
after notice or passage of time, or both, would be, an Event of Default.
Development Period Interest: The term "Development Period
Interest" shall have the meaning specified in Section 2.3.
Event of Default: The term "Event of Default" shall mean any
event specified in Section 6.1(a) through (d).
Exchange Act: The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Indenture: The term "Indenture" shall mean this instrument as
originally executed or, if amended or supplemented as herein provided, as so
amended or supplemented.
Interest Payment Date: The term "Interest Payment Date" shall
mean each ______ and __________, beginning ______, 199_.
Nonpayment Default: The term "Nonpayment Default" shall have
the meaning specified in Section 14.4(b).
Note or Notes: The terms "Note" or "Notes" shall mean any one
or more, as the case may be, of the [___]% Eight Year Deferred Interest
Subordinated Notes authenticated and delivered under this Indenture.
Noteholder; holder: The terms "Noteholder" or "holder" as
applied to any Note, or other similar terms (but excluding the term "beneficial
holder"), shall mean any person in whose name at the time a particular Note is
registered on the Note registrar's books.
Note register: The term "Note register" shall have the meaning
specified in Section 2.5.
Note registrar: The term "Note registrar" shall have the
meaning specified in Section 2.5.
Officers' Certificate: The term "Officers' Certificate," when
used with respect to the Company, shall mean a certificate signed by two
authorized officers which shall include (a) any of the President, the Chief
Executive Officer, or the Chief Financial Officer and (b) any Treasurer or
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Assistant Treasurer or Secretary or any Assistant Secretary of the Company, that
is delivered to the Trustee. Each such certificate shall include the statements
provided for in Section 15.6 if and to the extent required by the provisions of
such Section.
Opinion of Counsel: The term "Opinion of Counsel" shall mean
an opinion in writing signed by legal counsel, who may be an employee of or
counsel to the Company or other counsel acceptable to the Trustee, that is
delivered to the Trustee. Each such opinion shall include the statements
provided for in Section 15.6 if and to the extent required by the provisions of
such Section.
outstanding: The term "outstanding" with reference to Notes as
of any particular time shall mean, subject to the provisions of Section 8.4, all
Notes authenticated and delivered by the Trustee under this Indenture, except
(a) Notes theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Notes, or portions thereof, for which monies in the
necessary amount shall have been deposited in trust with the Trustee
for payment, redemption or repurchase; provided that if such Notes are
to be redeemed prior to the maturity thereof, notice of such redemption
shall have been given pursuant to Article III or provision satisfactory
to the Trustee shall have been made for giving such notice;
(c) Notes paid pursuant to Section 2.6 hereof or Notes in lieu
of or in substitution for which other Notes shall have been
authenticated and delivered pursuant to the terms of Section 2.6 unless
proof satisfactory to the Trustee is presented that any such Notes are
held by bona fide holders in due course; and
(d) Notes not deemed outstanding pursuant to Section 3.2.
Payment Default: The term "Payment Default" shall have the
meaning specified in Section 14.4(a).
person: The term "person" shall mean a corporation, an
association, a partnership, an individual, a joint venture, a joint stock
company, a trust, an unincorporated organization or a government or an agency or
a political subdivision thereof.
Predecessor Note: The term "Predecessor Note" of any
particular Note shall mean every previous Note evidencing all or a portion of
the same debt as that evidenced by such particular Note; and, for the purposes
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of this definition, any Note authenticated and delivered under Section 2.6 in
lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the lost, destroyed or stolen Note.
record date: The term "record date" with respect to any
Interest Payment Date shall have the meaning set forth in Section 2.3 hereof.
Responsible Officer: The term "Responsible Officer" with
respect to the Trustee, shall mean an officer of the Trustee assigned and duly
authorized by the Trustee to administer its corporate trust matters.
Securities Act: The term "Securities Act" shall mean the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
Subsidiary: The term "Subsidiary" of any specified person
shall mean (i) a corporation a majority of whose capital stock with voting power
under ordinary circumstances to elect directors is at the time directly or
indirectly owned by such person or (ii) any other person (other than a
corporation) in which such person or such person and a Subsidiary or
Subsidiaries of such person or a Subsidiary or Subsidiaries of such person
directly or indirectly, at the date of determination thereof, has at least
majority ownership.
Successor Company: The term "Successor Company" shall have the
meaning specified in Section 11.1.
Trust Indenture Act: The term "Trust Indenture Act" shall mean
the Trust Indenture Act of 1939, as amended, as it was in force at the date of
execution of this Indenture, except as provided in Section 10.3; provided that
in the event said Trust Indenture Act of 1939 is amended after the date hereof,
the term "Trust Indenture Act" shall mean, to the extent required by such
amendment, said Trust Indenture Act of 1939 as so amended.
Trustee: The term "Trustee" shall mean First Trust of New
York, National Association, its successors and any corporation resulting from or
surviving any consolidation or merger to which it or its successors may be a
party and any successor trustee at the time serving as successor trustee
hereunder.
U.S. Government Obligations: The term "U.S. Government
Obligations" shall mean securities that are (i) direct obligations of the United
States of America for the payment of which its full faith and credit is pledged
or (ii) obligations of a person controlled or supervised by, and acting as an
agency or instrumentality of, the United States of America the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any such U.S. Government Obligation or a specific
payment of principal or interest on any such U.S. Government Obligation held by
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such custodian for the account of the holder of such depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by such custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
Section 1.2 Incorporation by Reference of Trust
Indenture Act.
Whenever this Indenture refers to a provision of the Trust
Indenture Act, the provision is incorporated by reference in and made a part of
this Indenture.
The following Trust Indenture Act terms used in this Indenture
have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a holder of Notes;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" on the Notes means the Company and any other obligor
on the Notes.
All other terms used in this Indenture that are defined by the
Trust Indenture Act, defined by Trust Indenture Act reference to another statute
or defined by Commission rule under the Trust Indenture Act have the meanings so
assigned to them.
Section 1.3 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular; and
(5) provisions apply to successive events and
transactions.
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ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue of Notes. The Notes
shall be designated as "[__]% Eight Year Deferred Interest Subordinated Notes."
Notes not to exceed the aggregate principal amount of $8,500,000 upon the
execution of this Indenture, or from time to time thereafter, may be executed by
the Company and delivered to the Trustee for authentication, and the Trustee
shall thereupon authenticate and make available for delivery said Notes upon the
written order of the Company, signed by its (a) Chief Executive Officer, Presi-
dent, or Chief Financial Officer, and (b) any Treasurer or Assistant Treasurer
or Secretary or any Assistant Secretary, without any further action by the
Company hereunder.
Section 2.2 Form of Notes. The Notes will be issued in
definitive form in substantially the form of Exhibit A hereto, and registered in
the name of the holders thereof, and shall be duly executed by the Company and
authenticated by the Trustee or the authenticating agent as provided herein.
Any of the Notes may have such letters, numbers or other marks
of identification and such notations, legends and endorsements as the Company
officers executing the same may approve (execution thereof to be conclusive
evidence of such approval) and as are not inconsistent with the provisions of
this Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Notes may be listed, or to conform to usage.
The terms and provisions contained in the form of Note
attached as Exhibit A hereto shall constitute, and are hereby expressly made, a
part of this Indenture and to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of
Interest. The Notes shall be issuable in registered form only without coupons in
denominations of $1,000 principal amount and integral multiples thereof. Every
Note shall be dated the date of its authentication, shall bear interest from
___________, 199_, which interest shall be payable semiannually on each ______,
and __________, commencing on the first Interest Payment Date occurring after
the principal of and interest on the Construction Loan is paid in full, as
specified on the face of the form of Note.
That interest which accrues from the original date of issuance
of the Notes through the Interest Payment Date preceding the first Interest
Payment Date occurring after the principal of and interest on the Construction
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Loan is paid in full is hereinafter referred to as "Development Period
Interest."
The person in whose name any Note (or its Predecessor Note) is
registered at the close of business on any record date with respect to any
Interest Payment Date shall be entitled to receive the interest payable on such
Interest Payment Date notwithstanding the cancellation of such Note upon any
transfer or exchange subsequent to the record date and prior to such Interest
Payment Date. Interest may be paid by check mailed to the address of such person
as it appears on the Note register. The term "record date" with respect to any
Interest Payment Date shall mean the ______ or ___________ preceding said ______
or ____________.
Interest on the Notes shall be computed on the basis of a
360-day year composed of twelve 30-day months.
Development Period Interest that is not paid on the first
Interest Payment Date occurring after the principal of and interest on the
Construction Loan is paid in full shall forthwith cease to be payable to the
Noteholder on the relevant record date by virtue of his having been such
Noteholder. The Company may elect to make payment of any or all Development
Period Interest to the persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special record
date for the payment of such Development Period Interest, which shall be fixed
in the following manner. The Company shall notify the Trustee in writing of the
amount of Development Period Interest to be paid on each Note and the date of
the payment (which shall be not less than 25 days after the receipt by the
Trustee of such notice, unless the Trustee shall consent to an earlier date for
its convenience), and at the same time, the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount to be paid in respect
of such Development Period 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 Development Period Interest as in this clause provided. Thereupon, the
Trustee shall fix a special record date for the payment of such Development
Period Interest, which shall be not more than 15 days and not less than 10 days
prior to the date of the 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 payment of such Development
Period Interest and the special record date therefor to be mailed, first-class
postage prepaid, to each Noteholder 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 Development Period Interest and the special record date
therefor having been so mailed, such Development Period Interest shall be paid
to the persons in whose names the Notes (or their respective Predecessor Notes)
were registered at the close of business on such special record date.
Section 2.4 Execution of Notes. The Notes shall be signed in
the name and on behalf of the Company by the signature of its Chief Executive
Officer, President, or Chief Financial Officer and attested by the signature of
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its Treasurer, Assistant Treasurer, Secretary or any of its Assistant
Secretaries (any of which signatures may be printed, engraved or otherwise
reproduced thereon, by facsimile or otherwise). Only such Notes as shall bear
thereon a certificate of authentication substantially in the form set forth on
form of Note attached as Exhibit A manually executed by the Trustee (or an
authenticating agent appointed by the Trustee as provided by Section 15.12),
shall be entitled to the benefits of this Indenture or be valid or obligatory
for any purpose. Such certificate by the Trustee (or such an authenticating
agent) upon any Note executed by the Company shall be conclusive evidence that
the Note so authenticated has been duly authenticated and delivered hereunder
and that the holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any
of the Notes shall cease to be such officer before the Notes so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Notes nevertheless may be authenticated and delivered or disposed
of as though the person who signed such Notes had not ceased to be such officer
of the Company; and any Note may be signed on behalf of the Company by such
persons as, at the actual date of the execution of such Note, shall be the
proper officers of the Company, although at the date of the execution of this
Indenture any such person was not such an officer.
Section 2.5 Exchange and Registration of Transfer of Notes.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office and in any other office or
agency of the Company designated pursuant to Section 4.2 being herein sometimes
collectively referred to as the "Note register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Notes and of transfers of Notes. Such Note register shall be in
written form or in any form capable of being converted into written form within
a reasonable period of time. The Trustee is hereby appointed "Note registrar"
for the purpose of registering Notes and transfers of Notes as herein provided.
The Company may appoint one or more co-registrars.
Upon surrender for registration of transfer of any Note to the
Note registrar or any co-registrar and satisfaction of the requirements for such
transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, in the name of the
designated transferee or transferees, one or more new Notes of any authorized
denominations and of a like aggregate principal amount.
Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Notes to be exchanged at any such office or agency. Whenever any Notes are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, the Notes that the Noteholder
making the exchange is entitled to receive bearing certificate numbers not
contemporaneously outstanding.
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All Notes presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company, the Trustee, the
Note registrar or any co-registrar) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Company, executed by
the Noteholder thereof or his attorney duly authorized in writing.
No service charge shall be charged to the Noteholder for any
exchange or registration of transfer of Notes, but the Company may require
payment of a sum sufficient to cover any tax, assessments or other governmental
charges that may be imposed in connection therewith.
None of the Company, the Trustee, the Note registrar or any
co-registrar shall be required to exchange or register a transfer of (a) any
Notes for a period of 15 days next preceding the mailing of a notice of
redemption, (b) any Notes called for redemption or, if a portion of any Note is
selected or called for redemption, such portion thereof selected or called for
redemption.
All Notes issued upon any transfer or exchange of Notes shall
be the valid obligations of the Company, evidencing the same debt and entitled
to the same benefits under this Indenture as the Notes surrendered upon such
registration of transfer or exchange. All Notes, the transfer, exchange and/or
registration of which is effectuated by the Trustee pursuant to this Section
2.5, shall be accompanied by an Officers' Certificate of the Company, executed
by a Responsible Officer thereof, certifying that such transfer, exchange and/or
registration is authorized by the Company and permitted hereunder.
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes. In
case any Note shall become mutilated or be destroyed, lost or stolen, the
Company in its discretion may execute, and upon its request, the Trustee or an
authenticating agent appointed by the Trustee shall authenticate and make
available for delivery a new Note bearing a number not contemporaneously
outstanding in exchange and substitution for the mutilated Note or in lieu of
and in substitution for the Note so destroyed, lost or stolen. The Company may
charge such applicant for the expenses of the Company in replacing a Note. In
every case the applicant for a substituted Note shall furnish to the Company, to
the Trustee and, if applicable, to such authenticating agent such security or
indemnity as may be required by them to save each of them harmless from any
loss, liability, cost or expense caused by or connected with such substitution,
and in every case of destruction, loss or theft, the applicant shall also
furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent evidence to their satisfaction of the destruction, loss or
theft of such Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any
such substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
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therewith. In case any Note that has matured or is about to mature or has been
called for redemption shall become mutilated or be destroyed, lost or stolen,
the Company may, instead of issuing a substitute Note, pay or authorize the
payment of the same (without surrender thereof, except in the case of a
mutilated Note), as the case may be, if the applicant for such payment shall
furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless from any loss, liability, cost or expense caused by
or connected with such substitution, and in case of destruction, loss or theft,
evidence satisfactory to the Company, the Trustee and, if applicable, any paying
agent, of the destruction, loss or theft of such Note and of the ownership
thereof.
Every substitute Note issued pursuant to the provisions of
this Section 2.6 in lieu of any Note that is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be enforceable by anyone, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement or payment of negotiable instruments or other
securities without their surrender.
Section 2.7 Temporary Notes. Pending the preparation of
definitive Notes, the Company may execute and the Trustee or an authenticating
agent appointed by the Trustee shall, upon written request of the Company,
authenticate and make available for delivery temporary Notes (printed or
lithographed). Temporary Notes shall be issuable in any authorized denomination
and shall be substantially in the form of the definitive Notes but with such
omissions, insertions and variations as may be appropriate for temporary
Notes, all as may be determined by the Company. Every such temporary Note shall
be executed by the Company and authenticated by the Trustee or such
authenticating agent upon the same conditions and in substantially the same
manner, and with the same effect, as the definitive Notes. Without unreasonable
delay the Company shall execute and deliver to the Trustee or such
authenticating agent definitive Notes and thereupon any or all temporary Notes
may be surrendered in exchange therefor, at each office or agency maintained by
the Company pursuant to Section 4.2 and the Trustee or such authenticating agent
shall authenticate and make available for delivery in exchange for such
temporary Notes an equal aggregate principal amount of definitive Notes. Such
exchange shall be made by the Company at its own expense and without any charge
therefor. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits and subject to the same limitations under this
Indenture as definitive Notes authenticated and delivered hereunder.
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Section 2.8 Cancellation of Notes Paid, Etc. All Notes
surrendered for the purpose of payment, redemption, exchange or registration of
transfer shall, if surrendered to the Company or any paying agent or any Note
registrar, be surrendered to the Trustee and promptly canceled by it or, if
surrendered to the Trustee, shall be promptly canceled by it and no Notes shall
be issued in lieu thereof except as expressly permitted by any of the provisions
of this Indenture. If required by the Company, the Trustee shall return canceled
Notes to the Company. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Notes unless and until the same are delivered
to the Trustee for cancellation.
Section 2.9 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 shall
promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE III
REDEMPTION AND REPURCHASE OF NOTES
Section 3.1 Redemption Prices. The Notes are not redeemable at
the option of the Company prior to __________, 200_. At any time on or after
that date, the Notes may be redeemed at the Company's option, upon notice as set
forth in Section 3.2, in whole at any time or in part from time to time, at the
declining redemption prices set forth below (expressed in percentages of the
principal amount) plus accrued and unpaid interest (including any unpaid
Development Period Interest) thereon to the applicable redemption date if
redeemed during the twelve-month period beginning:
Redemption
Date Price
[Year 3] ...................................... %
[Year 4] ......................................
[Year 5] ......................................
[Year 6] and thereafter................................
Section 3.2 Notice of Redemption; Selection of Notes. In case
the Company shall desire to exercise the right to redeem all or, as the case may
be, any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption and, in the case of any redemption pursuant to Section 3.1, it or, at
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its written request accompanied by the proposed form of notice of redemption
(which must be received by the Trustee at least 10 days prior to the date the
Trustee is requested to give notice as described below, unless a shorter period
is agreed to by the Trustee for its convenience), the Trustee in the name of and
at the expense of the Company, shall mail or cause to be mailed a notice of such
redemption at least 30 and not more than 60 days prior to the date fixed for
redemption to the holders of Notes so to be redeemed as a whole or in part at
their last addresses as the same appear on the Note register, provided that
subject to the approval of the form of notice by the Trustee if the Company
shall give such notice, it shall also give such notice, and notice of the Notes
to be redeemed, to the Trustee. Such mailing shall be by first class mail. The
notice, if mailed in the manner herein provided, shall be conclusively presumed
to have been duly given, whether or not the holder receives such notice. In any
case, failure to give such notice by mail or any defect in the notice to the
holder of any Note designated for redemption as a whole or in part shall not
affect the validity of the proceedings for the redemption of any other Note.
Each such notice of redemption shall identify the Notes to be
redeemed (including CUSIP numbers), specify the aggregate principal amount of
Notes to be redeemed, the date fixed for redemption, the redemption price at
which Notes are to be redeemed, the place or places of payment, that payment
shall be made upon presentation and surrender of such Notes, that interest
accrued to the date fixed for redemption shall be paid as specified in said
notice and that on and after said date, interest thereon or on the portion
thereof to be redeemed shall cease to accrue. If fewer than all the Notes are to
be redeemed, the notice of redemption shall identify the Notes to be redeemed.
In case any Note is to be redeemed in part only, the notice of redemption shall
state the portion of the principal amount thereof to be redeemed and shall state
that on and after the date fixed for redemption, upon surrender of such Note, a
new Note or Notes in principal amount equal to the unredeemed portion thereof
shall be issued.
On or prior to the Business Day prior to the redemption date
specified in the notice of redemption given as provided in this Section 3.2, the
Company shall deposit with the Trustee or with one or more paying agents (or, if
the Company is acting as its own paying agent, set aside, segregate and hold in
trust as provided in Section 4.4) an amount of money sufficient to redeem on the
redemption date all the Notes so called for redemption at the appropriate
redemption price, together with accrued interest to the date fixed for
redemption. If fewer than all the Notes are to be redeemed, the Company shall
give the Trustee written notice in the form of an Officers' Certificate not
fewer than 45 days (or such shorter period of time as may be acceptable to the
Trustee) prior to the redemption date as to the aggregate principal amount of
Notes to be redeemed.
If fewer than all the Notes are to be redeemed, the Trustee
shall select the Notes or portions thereof to be redeemed (in principal amounts
of $1,000 or integral multiples thereof), by lot or, in its discretion, on a pro
rata basis. The Notes (or portions thereof) so selected shall be deemed duly
selected for redemption for all purposes hereof.
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Section 3.3 Payment of Notes Called for Redemption. If notice
of redemption has been given as above provided, the Notes or portion of Notes
with respect to which such notice has been given shall become due and payable on
the date and at the place or places stated in such notice at the applicable
redemption price, together with interest thereon accrued to the date fixed for
redemption, and on and after said date (unless the Company shall default in the
payment of such Notes at the redemption price, together with interest thereon
accrued to said date), interest on the Notes or portion of Notes so called for
redemption shall cease to accrue, and such Notes shall cease except as provided
in Sections 7.5 and 12.3 to be entitled to any benefit or security under this
Indenture, and the holders thereof shall have no right in respect of such Notes
except the right to receive the redemption price thereof and unpaid interest
thereon to the date fixed for redemption. On presentation and surrender of such
Notes at a place of payment in said notice specified, the said Notes or the
specified portions thereof shall be paid and redeemed by the Company at the
applicable redemption price, together with interest accrued thereon to the date
fixed for redemption; provided that any semi-annual payment of interest becoming
due on the date fixed for redemption shall be payable to the holders of such
Notes registered as such on the relevant record date subject to the terms and
provisions of Section 2.3 hereof.
Upon presentation of any Note redeemed in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the holder thereof, at the expense of the Company, a new Note or
Notes, of authorized denominations, in principal amount equal to the unredeemed
portion of the Notes so presented.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium, if any, shall,
until paid or duly provided for, bear interest from the date fixed for
redemption at the rate borne by the Note.
ARTICLE IV
PARTICULAR COVENANTS OF THE COMPANY
Section 4.1 Payment of Principal, Premium and Interest. The
Company covenants and agrees that it shall duly and punctually pay or cause to
be paid the principal of and premium, if any, and interest on each of the Notes
at the places, at the respective times and in the manner provided herein and in
the Notes. Each installment of interest on the Notes due on any semi-annual
Interest Payment Date may be paid by mailing checks for the interest payable to
or upon the written order of the holders of Notes entitled thereto as they shall
appear on the Note register. An installment of principal or interest shall be
considered paid on the date due if the Trustee or paying agent (other than the
Company, a Subsidiary of the Company or any Affiliate of any of them) holds on
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that date money designated for and sufficient to pay the installment of
principal or interest and is not prohibited from paying such money to the
holders of the Notes pursuant to the terms of this Indenture.
Section 4.2 Maintenance of Office or Agency. The Company shall
maintain an office or agency where the Notes may be surrendered for registration
of transfer or exchange or for presentation for payment or for redemption and
where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby initially designates the Trustee as paying
agent, Note registrar and the office of Corporate Trust Administration of the
Trustee located in New York, New York, as the office or agency of the Company
for the purposes set forth in the first paragraph of this Section 4.2.
So long as the Trustee is the Note registrar, the Trustee
agrees to mail, or cause to be mailed, the notices set forth in Section 7.8(a).
Section 4.3 Appointments to Fill Vacancies in Trustee's
Office. The Company, whenever necessary to avoid or fill a vacancy in the office
of Trustee, shall appoint, in the manner provided in Section 7.8, a Trustee, so
that there shall at all times be a Trustee hereunder.
Section 4.4 Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee, or if the Trustee shall appoint such a paying agent, the Company or the
Trustee, as the case may be, shall cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 4.4:
(1) that it shall hold all sums held by it as such agent for
the payment of the principal of, premium, if any, or interest on the
Notes (whether such sums have been paid to it by the Company or by any
other obligor on the Notes) in trust for the benefit of the holders of
the Notes;
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(2) that it shall give the Trustee written notice of any
failure by the Company (or by any other obligor on the Notes) to make
any payment of the principal of, premium, if any, or interest on the
Notes when the same shall be due and payable; and
(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it shall forthwith pay to the
Trustee all sums so held in trust.
The Company shall, before each due date of the principal of,
premium, if any, or interest on the Notes, deposit with the paying agent a sum
sufficient to pay such principal, premium, if any, or interest, and (unless such
paying agent is the Trustee) the Company shall promptly notify the Trustee of
any failure to take such action.
(b) If the Company shall act as its own paying agent, it
shall, on or before each due date of the principal of, premium, if any, or
interest on the Notes, set aside, segregate and hold in trust for the benefit of
the holders of the Notes a sum sufficient to pay such principal, premium, if
any, or interest so becoming due and shall notify the Trustee of any failure to
take such action and of any failure by the Company (or any other obligor under
the Notes) to make any payment of the principal of, premium, if any, or interest
on the Notes when the same shall become due and payable.
(c) Anything in this Section 4.4 to the contrary
notwithstanding, the Company may, at any time, for the purpose of obtaining a
satisfaction and discharge of this Indenture, or for any other reason, pay or
cause to be paid to the Trustee all sums held in trust by the Company or any
paying agent hereunder as required by this Section 4.4, such sums to be held by
the Trustee upon the trusts herein contained and upon such payment by the
Company or any paying agent to the Trustee, the Company or such paying agent
shall be released from all further liability with respect to such sums.
(d) Anything in this Section 4.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this Section
4.4 is subject to Sections 12.2 and 12.3.
Section 4.5 Corporate Existence. Subject to Article XI, the
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect (i) its corporate existence, and the corporate,
partnership or other existence of any Subsidiary of the Company, in accordance
with the respective organizational documents (as the same may be amended from
time to time) of the Company or any such Subsidiary and (ii) the rights (charter
and statutory), licenses and franchises of the Company and its Subsidiaries;
provided that the Company shall not be required to preserve any such right,
license or franchise, or the corporate, partnership or other existence of any of
its Subsidiaries 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
its Subsidiaries, taken as a whole, and that the loss thereof is not materially
adverse to the holders of the Notes.
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Section 4.6 Stay, Extension and Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, plead or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law or other law that would prohibit
or forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or that may affect the covenants or the performance of
this Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.7 Compliance Statement; Notice of Defaults
(a) The Company shall deliver to the Trustee within 120 days
after the end of each fiscal year of the Company an Officers' Certificate
stating whether or not to the best knowledge of the signers thereof the Company
is in compliance (without regard to periods of grace or notice requirements)
with all conditions and covenants under this Indenture, and if the Company shall
not be in compliance, specifying such non-compliance and the nature and status
thereof of which such signer may have knowledge.
(b) The Company shall file with the Trustee written notice of
the occurrence of any default or Event of Default within 10 days of its becoming
aware of any such default or Event of Default.
Section 4.8 Taxes. The Company shall pay or discharge or cause
to be paid or discharged, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon the Company
or its Subsidiaries or upon the income, profits or property of the Company or
any such Subsidiary and (ii) all lawful claims for labor, materials and supplies
that, if unpaid, might by law become a lien upon the property of the Company or
any such Subsidiary; provided 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 have
been made.
Section 4.9 Insurance. The Company shall provide, or cause to
be provided, for itself and its Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including, but
not limited to, public liability insurance, with reputable insurers or with the
government of the United States of America or an agency or instrumentality
thereof, in such amounts with such deductibles and by such methods as shall be
determined in good faith by the Board of Directors to be appropriate.
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ARTICLE V
NOTEHOLDERS' LISTS AND REPORTS BY
THE COMPANY
Section 5.1 Noteholders' 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 holders of Notes. If the Trustee is not the
Note registrar, the Company shall furnish to the Trustee on or before at least
seven Business Days preceding 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 reasonably may require of the names and addresses of holders of
Notes.
Section 5.2 Reports by Company. The Company shall deliver to
the Trustee within 15 days after it files the same with the Commission, copies
of all reports and information (or copies of such portions of any of the
foregoing as the Commission may by its rules and regulations prescribe), if any,
which the Company is required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default. In case one or more of the
following Events of Default (whatever the reason for such Event of Default and
whether it shall 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) shall have occurred and
be continuing:
(a) default in the payment of the principal of or premium,
if any, on the Notes when due at maturity, upon redemption or
otherwise; or
(b) except for Development Period Interest, default in the
payment of any installment of interest on the Notes as and when the
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same shall become due and payable (whether or not such payment shall be
prohibited by Article XIV of this Indenture), and continuance of such
default for a period of 30 days; or
(c) a failure on the part of the Company to duly observe or
perform any other covenants or agreements on the part of the Company in
this Indenture (other than a default in the performance or breach of a
covenant or agreement that is specifically dealt with elsewhere in this
Section 6.1) that continues for a period of 90 days after the date on
which written notice of such failure, requiring the Company to remedy
the same, shall have been given to the Company by the Trustee, or to
the Company and a Responsible Officer of the Trustee, by the holders of
at least 25% in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 8.4; or
(d) an event of default occurs under any mortgage, indenture
or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by the Company
or any of its Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Subsidiaries), whether such indebtedness or
guarantee now exists or shall be created after the date hereof, which
default (i) is caused by a failure to pay principal or interest on such
indebtedness prior to the expiration of the grace period provided in
such indebtedness (a "Payment Default") or (ii) results in the
acceleration of such indebtedness prior to its expressed maturity and,
in each case, the principal amount of such indebtedness, together with
the principal amount of any other such indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $1 million or more; or
(e) the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect, or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for
the benefit of creditors or shall fail generally to pay its debts as
they become due; or
(f) an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a
period of 60 consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 6.1(e) or (f)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding hereunder
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determined in accordance with Section 8.4, by notice in writing to the Company
(and to the Trustee if given by Noteholders), may declare the principal of,
premium, if any, on the Notes and the interest accrued thereon to be due and
payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 6.1(e) or (f) occurs and is continuing, the principal of all the Notes
and the interest accrued thereon shall be immediately due and payable. The
foregoing provision is subject to the conditions that if, at any time after the
principal of the Notes shall have been so declared due and payable, and before
any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all Notes and the principal of and premium, if any, on any and all
Notes that shall have become due otherwise than by acceleration (with interest
on overdue installments of interest (to the extent that payment of such interest
is enforceable under applicable law) and on such principal and premium, if any,
at the rate borne by the Notes, to the date of such payment or deposit) and
amounts due to the Trustee pursuant to Section 7.6, and if any and all defaults
under this Indenture, other than the nonpayment of principal of, premium, if
any, and accrued interest on Notes that shall have become due by acceleration,
shall have been cured or waived pursuant to Section 6.7, then and in every such
case the holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults or Events of Default and rescind and annul such declaration and its
consequences; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or Event of Default, or shall impair any
right consequent thereto. The Company shall notify a Responsible Officer of the
Trustee, promptly upon becoming aware thereof, of any Event of Default.
In case the Trustee shall have proceeded to enforce any right
under this Indenture and such proceedings shall have been discontinued or
abandoned because of such waiver or rescission and annulment or for any other
reason or shall have been determined adversely to the Trustee, then and in every
such case the Company, the holders of Notes and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes and the Trustee shall
continue as though no such proceeding had been taken.
Section 6.2 Payments of Notes on Default; Suit Therefor. The
Company covenants that (a) in case a default shall be made in the payment of any
installment of interest upon any of the Notes as and when the same shall have
become due and payable and such default shall have continued for a period of 30
days, or (b) in case a default shall be made in the payment of the principal of
or premium, if any, on any of the Notes as and when the same shall have become
due and payable, whether at maturity of the Notes or in connection with any
redemption, then, upon demand of the Trustee, the Company shall pay to the
Trustee, for the benefit of the holders of the Notes, the whole amount that then
shall have become due and payable on all such Notes for principal of, premium,
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if any, or interest, or both, as the case may be, with interest upon the overdue
principal, premium, if any, and (to the extent that payment of such interest is
enforceable under applicable law) upon the overdue installments of interest at
the rate borne by the Notes; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee, the Company may
pay the principal of and premium, if any, and interest on the Notes to the
registered holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any actions or proceedings
at law or in equity for the collection of the sums so due and unpaid and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or any other
obligor on the Notes and collect in the manner provided by law out of the
property of the Company or any other obligor on the Notes wherever situated the
monies adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy
or for the reorganization of the Company or any other obligor on the Notes under
Title 11 of the United States Code or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, 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 pursuant to the provisions of this Section 6.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Notes and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
of the Noteholders allowed in such judicial proceedings relative to the Company
or any other obligor on the Notes, its or their creditors, or its or their
property and to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same after the deduction of
any amounts due the Trustee under Section 7.6; and any receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, custodian or similar
official is hereby authorized by each of the Noteholders 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 Noteholders, to pay to the Trustee any amount due
it for reasonable compensation, expenses, advances and disbursements, including
counsel fees incurred by it up to the date of such distribution. To the extent
that such payment of reasonable compensation, expenses, advances and
disbursements out of the estate in any such proceedings shall be denied for any
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reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
that the holders of the Notes may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or adopt on behalf of any Noteholder any plan
of reorganization or arrangement affecting the Notes or the rights of any
Noteholder, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding.
All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Trustee without the
possession of any of the Notes or the production thereof on any trial or other
proceeding relative thereto, and any such suit or 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 any proceedings brought by the Trustee pursuant to this
Indenture or any supplement hereto (and in any proceedings involving the
interpretation of any provision of this Indenture to which the Trustee shall be
a party), the Trustee shall be held to represent all the holders of the Notes,
and it shall not be necessary to make any holders of the Notes parties to any
such proceedings.
Section 6.3 Application of Monies Collected by Trustee. Any
monies collected by the Trustee pursuant to this Article VI shall be applied in
the order following, at the date or dates fixed by the Trustee for the
distribution of such monies, upon presentation of the several Notes and stamping
thereon the payment, if only partially paid, and upon surrender thereof, if
fully paid:
First: To the payment of all amounts due the Trustee under
Section 7.6;
Second: Subject to the provisions of Article XIV, in case the
principal of the outstanding Notes shall not have become due and be
unpaid, to the payment of interest on the Notes in default in the order
of the maturity of the installments of such interest, with interest (to
the extent that such interest has been collected by the Trustee) upon
the overdue installments of interest at the rate borne by the Notes,
such payments to be made ratably to the persons entitled thereto; and
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Third: Subject to the provisions of Article XIV, in case the
principal of the outstanding Notes shall have become due, by
declaration or otherwise, and be unpaid, to the payment of the whole
amount then owing and unpaid upon the Notes for principal, premium, if
any, and interest, with interest on the overdue principal and premium,
if any, and (to the extent that such interest has been collected by the
Trustee) upon overdue installments of interest at the rate borne by the
Notes; and in case such monies shall be insufficient to pay in full the
whole amounts so due and unpaid upon the Notes, then to the payment of
such principal, premium, if any, and interest without preference or
priority of principal and premium, if any, over interest, or of
interest over principal and premium, if any, or of any installment of
interest over any other installment of interest, or of any Note over
any other Note, ratably to the aggregate of such principal and premium,
if any, and accrued and unpaid interest.
Section 6.4 Proceedings by Noteholder. No holder of any Note
shall have any right by virtue of or by availing of any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture, or for the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of an Event of Default and of the continuance thereof, as
hereinbefore provided, and unless also the holders of not less than 25% in
aggregate principal amount of the Notes then outstanding shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding, and no direction inconsistent
with such written request shall have been given to the Trustee pursuant to
Section 6.7; it being understood and intended, and being expressly covenanted by
the taker and holder of every Note with every other taker and holder and the
Trustee, that no one or more holders of Notes shall have any right in any manner
whatever by virtue of or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of any other holder of Notes, to obtain
or seek to obtain priority over or preference to any other such holder or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal, ratable and common benefit of all holders of Notes (except as
otherwise provided herein). For the protection and enforcement of this Section
6.4, each and every Noteholder and the Trustee shall be entitled to such relief
as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any
provision of any Note, the right of any holder of any Note to receive payment of
the principal of, premium, if any, and interest on such Note, on or after the
respective due dates expressed in such Note, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder
except as otherwise set forth herein.
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Section 6.5 Proceedings by Trustee. In case of an Event of
Default and subject to the provisions of Section 7.6 hereof, the Trustee may in
its discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either by suit in
equity or by action at law or by proceeding in bankruptcy or otherwise, whether
for the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture or to
enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
Section 6.6 Remedies Cumulative and Continuing. Except as
provided in Section 2.6, all powers and remedies given by this Article VI to the
Trustee or to the Noteholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of such powers and remedies or of any other powers
and remedies available to the Trustee or the holders of the Notes, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Notes to exercise any right or
power accruing upon any default or Event of Default occurring and continuing as
aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such default or any acquiescence therein; and, subject to the
provisions of Section 6.4, every power and remedy given by this Article VI or by
law to the Trustee or to the Noteholders may be exercised from time to time, and
as often as shall be deemed expedient, by the Trustee or by the Noteholders.
Section 6.7 Direction of Proceedings and Waiver of Defaults by
Majority of Noteholders. The holders of a majority in aggregate principal amount
of the Notes at the time outstanding (determined in accordance with Section 8.4)
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 or
power conferred on the Trustee; provided that (a) such direction shall not be in
conflict with any rule of law or with this Indenture and (b) the Trustee may
take any other action deemed proper by the Trustee that is not inconsistent with
such direction. The holders of a majority in aggregate principal amount of the
Notes at the time outstanding (determined in accordance with Section 8.4) may on
behalf of the holders of all of the Notes waive any past default or Event of
Default hereunder and its consequences except (i) a default in the payment of
interest or premium, if any, on, or the principal of, the Notes or (ii) a
default in respect of a covenant or provisions hereof that under Article X
cannot be modified or amended without the consent of the holders of all Notes
then outstanding. Whenever any default or Event of Default hereunder shall have
been waived as permitted by this Section 6.7, said default or Event of Default
shall for all purposes of the Notes and this Indenture be deemed to have been
cured and to be not continuing and the Company, the Trustee and the holders of
the Notes shall as reasonably possible be restored to their former positions and
rights hereunder; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
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Section 6.8 Notice of Defaults. The Trustee shall, within 90
days after the occurrence of a default, mail to all Noteholders, as the names
and addresses of such holders appear upon the Note register, notice of all
defaults of which a Responsible Officer has actual knowledge, unless such
defaults shall have been cured or waived before the giving of such notice;
provided that, except in the case of default in the payment of the principal of,
premium, if any, or interest on any of the Notes, the Trustee shall be protected
in withholding such notice if and so long as a Responsible Officer of the
Trustee in good faith determine that the withholding of such notice is in the
interests of the Noteholders.
Section 6.9 Undertaking to Pay 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 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 and expenses, 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; provided that the provisions of this
Section 6.9 shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Noteholder or group of Noteholders holding in the aggregate
more than 10% in principal amount of the Notes at the time outstanding
determined in accordance with Section 8.4 or to any suit instituted by any
Noteholder for the enforcement of the payment of the principal of, premium, if
any, or interest on any Note on or after the due date expressed in such Note.
ARTICLE VII
CONCERNING THE TRUSTEE
Section 7.1 Duties and Responsibilities of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise as
a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties
that are specifically set forth in this Indenture and no
others; 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
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therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture;
provided that in the case of any such certificates or opinions
that 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 confirm or
investigate the accuracy of mathematical calculations or other
facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph (c) does not limit the effect
of paragraph (b) of this Section 7.1;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the
Trustee unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts reasonably available to the
Trustee; and
(iii) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
6.7.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this
Section 7.1.
(e) The Trustee may refuse to perform any duty or exercise any
right or power or extend or risk its own funds or otherwise incur any
financial liability unless it receives indemnity satisfactory to it
against any loss, liability or expense.
Section 7.2 Reliance on Documents, Opinions, Etc. Except as
otherwise provided in Section 7.1:
(a) The Trustee may rely and shall be protected in acting upon
any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, coupon or other paper
or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed or required by the Trust Indenture Act); and
any resolution of the Board of Directors may be evidenced to the
Trustee by a copy thereof certified by the Secretary or an Assistant
Secretary of the Company;
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(c) The Trustee may consult with counsel of its selection and
any advice or opinion of counsel shall be full and complete
authorization and protection in respect of any action taken or omitted
by it hereunder in good faith and in accordance with such advice or
opinion of counsel;
(d) 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 by it with due care hereunder; no paying agent who is not the
Trustee shall be deemed an agent of the Trustee, and the Trustee (in
its capacity as Trustee) shall not be responsible for any act or
omission by any such paying agent;
(e) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by the Indenture at the request or
direction of any of the holders pursuant to this Indenture unless such
holders have offered the Trustee reasonable security or indemnity
against the costs, expenses and liabilities that would be incurred by
it in compliance with such request or direction.
(f) Subject to the provisions of Section 7.1(c), the Trustee
shall not be liable for any action it takes or omits to take in good
faith that it believes to be authorized or within its rights or powers;
(g) The Trustee shall not be deemed to have knowledge of any
Event of Default or other fact or event upon the occurrence of which it
may be required to take action hereunder unless one of its Responsible
Officers has actual knowledge thereof obtained by a written statement.
Section 7.3 No Responsibility for Recitals, Etc. The recitals
contained herein and in the Notes (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. 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 any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 7.4 Trustee, Paying Agents or Registrar May Own Notes.
The Trustee, any paying agent or any Note registrar, in its individual or any
other capacity, may become the owner or pledgee of Notes with the same rights it
would have if it were not Trustee, paying agent or Note registrar.
Section 7.5 Monies to Be Held in Trust. Subject to the
provisions of Section 12.4, all monies received by the Trustee shall, until used
or applied as herein provided, be held in trust for the purposes for which they
were received. Money held by the Trustee in trust hereunder need not be
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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 may be agreed to in writing from time to time by the Company and the
Trustee.
Section 7.6 Compensation and Expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, such compensation as the Company and the Trustee shall
from time to time agree in writing, for all services rendered by it hereunder in
any capacity (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust), and the Company shall pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith. The Company also covenants to indemnify
each of the Trustee or any predecessor Trustee in any capacity under this
Indenture and its agents and any authenticating agent for, and to hold them
harmless against, any and all loss, liability, damage, claim or expense,
including taxes (other than taxes based on the income of the Trustee) incurred
without negligence or bad faith on the part of the Trustee or such agent or
authenticating agent, as the case may be, and arising out of or in connection
with the acceptance or administration of this trust or in any other capacity
hereunder, including the costs and expenses of defending themselves against any
claim of liability in the premises. The obligations of the Company under this
Section 7.6 to compensate or indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall be secured by a lien
prior to that of the Notes upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the benefit of the holders of
particular Notes. The obligation of the Company under this Section shall survive
the satisfaction and discharge of this Indenture.
Section 7.7 Officers' Certificate as Evidence. Except as
otherwise provided in Section 7.1, whenever in the administration of the
provisions of this Indenture the Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such Officers' Certificate,
in the absence of negligence or bad faith on the part of the Trustee, shall be
full warrant to the Trustee for any action taken or omitted by it under the
provisions of this Indenture upon the faith thereof.
Section 7.8 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving written
notice of such resignation to the Company; and the Company shall mail,
or cause to be mailed, notice thereof to the holders of Notes at their
addresses as they shall appear on the Note register. Upon receiving
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such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument, in duplicate, executed by
order of the Board of Directors, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor
trustee.
(b) In case 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, the Company may remove the Trustee and appoint a successor
trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to
the Trustee so removed and one copy to the successor trustee, or any
Noteholder who has been a bona fide holder of a Note or Notes 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. Such court
may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of
the Notes at the time outstanding may at any time remove the Trustee
and nominate a successor trustee, which shall be deemed appointed as
successor trustee unless within ten days after notice to the Company of
such nomination the Company objects thereto, in which case the Trustee
so removed or any Noteholder, upon the terms and conditions and
otherwise as provided in the next paragraph, may petition any court of
competent jurisdiction for an appointment of a successor trustee.
If no successor trustee shall have been so appointed and have
accepted appointment within 60 days after removal or the mailing of such notice
of resignation to the Noteholders, the Trustee resigning or being removed may
petition any court of competent jurisdiction for the appointment of a
successor trustee, or, in the case of either resignation or removal, any
Noteholder who has been a bona fide holder of a Note or Notes for at least six
months may, on behalf of himself and all others similarly situated, petition any
such court for the appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe, appoint a
successor trustee.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this
Section 7.8 shall become effective upon acceptance of appointment by
the successor trustee as provided in Section 7.9.
Section 7.9 Acceptance by Successor Trustee. Any successor
trustee appointed as provided in Section 7.8 shall execute, acknowledge and
deliver to the Company and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon, the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
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powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but on the written request of the Company
or of the successor trustee, the Trustee ceasing to act shall, upon payment of
any amounts then due it pursuant to the provisions of Section 7.6, execute and
deliver an instrument transferring to such successor trustee all the rights and
powers of the Trustee so ceasing to act. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien
upon all property and funds held or collected by such trustee as such, except
for funds held in trust for the benefit of holders of particular Notes, to
secure any amounts then due it pursuant to the provisions of Section 7.6.
Upon acceptance of appointment by a successor trustee as
provided in this Section 7.9, the Company shall mail or cause to be mailed
notice of the succession of such Trustee hereunder to the holders of Notes at
their addresses as they shall appear on the Note register. If the Company fails
to mail such notice within 10 days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of the Company.
Section 7.10 Successor, by Merger, Etc. 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 of the corporate trust business of the
Trustee, shall be the successor to the Trustee hereunder without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided that such successor trustee shall have combined capital and
surplus immediately following such succession which is not significantly less
than that of the Trustee immediately prior to such succession.
ARTICLE VIII
CONCERNING THE NOTEHOLDERS
Section 8.1 Action by Noteholders. Whenever in this Indenture
it is provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article IX or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
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of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than 15 days
prior to the date of commencement of solicitation of such action.
Section 8.2 Proof of Execution by Noteholders. Subject to the
provisions of Sections 7.1 and 9.5, proof of the execution of any instrument by
a Noteholder or by agent or proxy shall be sufficient if made in accordance with
Section 7.2 hereof. The holding of Notes shall be proved by the Note register or
by a certificate of the Note registrar.
The record of any Noteholders' meeting shall be proved in the
manner provided in Section 9.5.
Section 8.3 Who Are Deemed Absolute Owners. The Company, the
Trustee, any paying agent and any Note registrar may deem the person in whose
name such Note shall be registered upon the books of the Company to be, and may
treat such person as, the absolute owner of such Note (whether or not such Note
shall be overdue and notwithstanding any notation of ownership or other writing
thereon) for the purpose of receiving payment of or on account of the principal
of, premium, if any, and interest on such Note and for all other purposes; and
neither the Company nor the Trustee nor any paying agent nor any Note registrar
shall be affected by any notice to the contrary. All such payments so made to
any holder for the time being, or upon order of such holder, shall be valid and,
to the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for monies payable upon any such Note.
Section 8.4 Company-Owned Notes Disregarded. In determining
whether the holders of the requisite aggregate principal amount of Notes have
concurred in any direction, consent, waiver or other action under this
Indenture, Notes that are owned by the Company or any other obligor on the Notes
or by any person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any other obligor on the
Notes shall be disregarded and deemed not to be outstanding for the purpose of
any such determination; provided that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, consent, waiver
or other action, only Notes that a Responsible Officer of the Trustee actually
knows are so owned shall be so disregarded. Notes so owned that have been
pledged in good faith may be regarded as outstanding for the purposes of this
Section 8.4 if the pledgee shall establish to the satisfaction of the Trustee
the pledger's right to vote such Notes and that the pledgee is not the Company,
any other obligor on the Notes or a person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
such other obligor. In the case of a dispute as to such right, any decision by
the Trustee taken upon the advice of counsel shall be full protection to the
Trustee. Upon request of the Trustee, the Company shall furnish to the Trustee
promptly an Officers' Certificate listing and identifying all Notes, if any,
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known by the Company to be owned or held by or for the account of any of the
above described persons; and subject to Section 7.1, the Trustee shall be
entitled to accept such Officers' Certificate as conclusive evidence of the
facts therein set forth and of the fact that all Notes not listed therein are
outstanding for the purpose of any such determination.
Section 8.5 Revocation of Consents, Future Holders Bound. At
any time prior to (but not after) the evidencing to the Trustee, as provided in
Section 8.1, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Notes specified in this Indenture in
connection with such action, any holder of a Note that is shown by the evidence
to be included in the Notes the holders of which have consented to such action
may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 8.2, revoke such action so far as
concerns such Note. Except as aforesaid, any such action taken by the holder of
any Note shall be conclusive and binding upon such holder and upon all future
holders and owners of such Note and of any Notes issued in exchange or
substitution therefor, irrespective of whether any notation in regard thereto is
made upon such Note or any Note issued in exchange or substitution therefor.
ARTICLE IX
NOTEHOLDERS' MEETINGS
Section 9.1 Purposes for Which Meetings May be Called. A
meeting of Noteholders may be called at any time and from time to time pursuant
to the provisions of this Article IX for any of the following purposes:
(i) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to consent to the waiving of any
default hereunder and its consequences, or to take any other action
authorized to be taken by Noteholders pursuant to any of the provisions
of Article VI;
(ii) to remove the Trustee and appoint a successor trustee
pursuant to the provisions of Article VII;
(iii) to consent to the execution of an indenture
or indentures supplemental hereto pursuant to the provisions of Section
10.2; or
(iv) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Notes under any other provisions of this Indenture or under
applicable law.
Section 9.2 Manner of Calling Meetings; Record Date. The
Trustee may at any time call a meeting of Noteholders to take any action
specified in Section 9.1, to be held at such time and at such place in the City
of New York, State of New York, as the Trustee shall determine. Notice of
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every meeting of the Noteholders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be mailed not less than 30 nor more than 60 days prior to the date fixed
for the meeting to such Noteholders at their addresses as such addresses appear
in the Note register. For the purpose of determining Noteholders entitled to
notice of any meeting of Noteholders, the Company, upon written notice to the
Trustee, shall fix in advance a date as the record date for such determination,
such date to be a business day not more than 10 days prior to the date of the
mailing of such notice as hereinabove provided. Only persons in whose name any
Note shall be registered in the Note register at the close of business on a
record date fixed by the Trustee as aforesaid, or by the Company or the
Noteholders as provided in Section 9.3, shall be entitled to notice of the
meeting of Noteholders with respect to which such record date was so fixed.
Section 9.3 Call of Meeting by Company or Noteholders. In case
at any time the Company, pursuant to a resolution of its Board of Directors or
the holders of at least 10% in aggregate principal amount of the Notes then
outstanding shall have requested the Trustee to call a meeting of Noteholders to
take any action authorized in Section 9.1 by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed notice of such meeting within 20 days after
receipt of such request, then the Company or the holders of Notes in the amount
above specified, as the case may be, may fix the record date with respect to,
and determine the time and the place for, such meeting and may call such meeting
to take any action authorized in Section 9.1, by mailing notice thereof as
provided in Section 9.2. The record date fixed as provided in the preceding
sentence shall be set forth in a written notice to the Trustee and shall be a
business day not less than 15 nor more than 20 days after the date on which the
original request is sent to the Trustee.
Section 9.4 Who May Attend and Vote at Meetings. Only persons
entitled to receive notice of a meeting of Noteholders and their respective
proxies duly appointed by an instrument in writing shall be entitled to vote at
such meeting. The only persons who shall be entitled to be present or to speak
at any meeting of Noteholders shall be the persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its counsel
and any representatives of the Company and its counsel. When a determination of
Noteholders entitled to vote at any meeting of Noteholders has been made as
provided in this Section, such determination shall apply to any adjournments
thereof.
Section 9.5 Manner of Voting at Meetings and Record to be
Kept. The vote upon any resolution submitted to any meeting of Noteholders shall
be by written ballots on each of which shall be subscribed the signature of the
Noteholder or proxy casting such ballot and the identifying number or numbers of
the Notes held or represented in respect of which such ballot is cast. The
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Noteholders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
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the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 9.2. The record shall show the identifying numbers of the Notes voting
in favor of or against any resolution. Each counterpart of such record shall be
signed and verified by the affidavits of the chairman and secretary of the
meeting and one of the counterparts shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee.
Any counterpart record so signed and verified shall be
conclusive evidence of the matters therein stated and shall be the record
referred to in clause (b) of Section 8.1.
Section 9.6 Exercise of Rights of Trustee and Noteholders Not
To Be Hindered or Delayed. Nothing in this Article IX contained shall be deemed
or construed to authorize or permit, by reason of any call of a meeting of
Noteholders or any rights expressly or impliedly conferred hereunder to make
such call, any hinderance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Noteholders under any of the
provisions of this Indenture or of the Notes.
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.1 Supplemental Indentures Without Consent of
Noteholders. The Company, when authorized by a Board Resolution, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto for one or more of the following purposes:
(a) subject to Article XIV, to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the Notes, any
property or assets;
(b) to evidence the succession of another person to the
Company, or successive successions, and the assumption by the
Successor Company of the covenants, agreements and obligations of the
Company pursuant to Article XI;
(c) to add to the covenants of the Company such further
covenants, restrictions or conditions as the Board of Directors and the
Trustee shall consider to be for the benefit of the holders of Notes
and to make the occurrence, or the occurrence and continuance, of a
default in any such additional covenants, restrictions or conditions a
default or an Event of Default permitting the enforcement of all or any
of the several remedies provided in this Indenture as herein set forth;
provided that in respect of any such additional covenant, restriction
or condition, such supplemental indenture may provide for a particular
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period of grace after default (which period may be shorter or longer
than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default;
(d) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture that may
be defective or inconsistent with any other provision contained herein
or in any supplemental indenture, or to make such other provisions in
regard to matters or questions arising under this Indenture that shall
not adversely affect the interests of the holders of the
Notes as evidenced by an Officers' Certificate or opinion of counsel to
such effect;
(e) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to the
Notes; or
(f) to modify, eliminate or add to the provisions of this
Indenture to such extent necessary to effect the qualification of this
Indenture under the Trust Indenture Act (if applicable), or under any
similar federal statute hereafter enacted (if applicable).
The Trustee is hereby authorized to join with the Company in
the execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations that may be therein contained and to
accept the conveyance, transfer and assignment of any property thereunder, but
the Trustee shall not be obligated to, but may in its discretion, enter into any
supplemental indenture that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of
this Section 10.1 may be executed by the Company and the Trustee without the
consent of the holders of any of the Notes at the time outstanding,
notwithstanding any of the provisions of Section 10.2.
Section 10.2 Supplemental Indentures With Consent of
Noteholders. With the consent (evidenced as provided in Article VIII) of the
holders of not less than a majority in aggregate principal amount of the Notes
at the time outstanding, the Company, when authorized by a Board Resolution and
the Trustee, may from time to time and at any time 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
any supplemental indenture or of modifying in any manner the rights of the
holders of the Notes; provided that no such supplemental indenture shall (i)
without the consent of the holders of each Note so affected, extend the fixed
maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or premium, if any,
thereon or reduce any amount payable on redemption thereof, or impair or affect
the right of any Noteholder to institute suit for the payment thereof or make
the principal thereof or interest or premium, if any, thereon payable in any
coin or currency other than that provided in the Notes, modify the subordination
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provisions in a manner adverse to the holders of the Notes, or (ii) without the
consent of the holders of all the Notes then outstanding, reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture.
Upon the request of the Company, accompanied by a copy of a
Board Resolution certified by its Secretary or Assistant Secretary authorizing
the execution of any such supplemental indenture, and upon the filing with the
Trustee of evidence of the consent of Noteholders as aforesaid, the Trustee
shall join with the Company in the execution of such supplemental indenture
unless such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Noteholders
under this Section 10.2 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.
Section 10.3 Effect of Supplemental Indentures. Any
supplemental indenture executed pursuant to the provisions of this Article X
shall comply with the Trust Indenture Act, as then in effect, if such
supplemental indenture is then required to so comply. Upon the execution of
any supplemental indenture pursuant to the provisions of this Article X, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Notes shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 10.4 Notation on Notes. Notes authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article X may bear a notation in form approved by the Company
as to any matter provided for in such supplemental indenture, but they need not
do so. After notice to the Trustee, if the Company shall determine to add such a
notation, new Notes so modified as to conform, in the opinion of the Board of
Directors, to any modification of this Indenture contained in any such
supplemental indenture may, at the Company's expense, be prepared and executed
by the Company, authenticated by the Trustee (or an authenticating agent duly
appointed by the Trustee pursuant to Section 15.11) and delivered in exchange
for the Notes then outstanding, upon surrender of such Notes then outstanding.
Section 10.5 Evidence of Compliance of Supplemental Indenture
to Be Furnished to the Trustee. The Trustee shall be furnished with and, subject
to the provisions of Section 7.1, may rely conclusively upon an Officers'
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Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article X.
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE,
TRANSFER AND LEASE
Section 11.1 Company May Consolidate, Etc. on Certain Terms.
The Company shall not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all of its assets (determined on a
consolidated basis) to any person unless: (i) either the Company is the
resulting, surviving or transferee person (the "Successor Company") or the
Successor Company is a person organized and existing under the laws of the
United States or any State thereof or the District of Columbia, and the
Successor Company (if not the Company) expressly assumes by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under this Indenture and the Notes,
(ii) immediately after giving effect to such transaction, no Event of Default
has happened and is continuing and (iii) the Company delivers to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
Section 11.2 Successor Company To Be Substituted. In case of
any such consolidation, merger, sale, conveyance, transfer or lease and upon the
assumption by the Successor Company, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of, premium, if any, and interest on all of
the Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such Successor
Company shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party hereto. When a Successor
Company duly assumes all the obligations of the Company pursuant to this
Indenture and the Notes, the predecessor shall be released from all such
obligations.
Section 11.3 Opinion of Counsel To Be Given to Trustee. The
Trustee, subject to Section 7.1, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance, transfer or lease and any such assumption complies with the
provisions of this Article XI.
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ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
Section 12.1 Termination of Obligations upon Cancellation of
the Notes. The Company may terminate all of its obligations under this Indenture
(subject to Section 12.2) when:
(a) (i) all Notes theretofore authenticated and delivered
(other than Notes that have been destroyed, lost or stolen and that
have been replaced or paid as provided in Section 2.6) have been
delivered to the Trustee for cancellation; and
(ii) the Company has paid or caused to be paid
all other sums payable hereunder and under the Notes by the Company; or
(b) (i) the Notes not previously delivered to the Trustee for
cancellation shall have become due and payable or are by their terms to
become due and payable within one year or are to be called for
redemption under arrangements satisfactory to the Trustee upon delivery
of notice, (ii) the Company shall have irrevocably deposited with the
Trustee, as trust funds, cash in an amount sufficient to pay principal
of, premium, if any, and interest on the outstanding Notes, to maturity
or redemption, as the case may be, (iii) such deposit shall not result
in a breach or violation of, or constitute a default under, any
agreement or instrument pursuant to which the Company is a party or by
which it or its property is bound and (iv) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel in form
and substance reasonably satisfactory to the Trustee, each stating that
all conditions related to such defeasance have been complied with.
Section 12.2 Survival of Certain Obligations. Notwithstanding
the satisfaction and discharge of this Indenture and of the Notes referred to in
Section 12.1, the respective obligations of the Company and the Trustee under
Sections 2.3, 2.4, 2.5, 2.6, 3.1, 4.2, 5.1, 6.4, 6.9, 7.5, 7.8, 12.4, 12.5,
12.6, Article XIV shall survive until the Notes are no longer outstanding, and
thereafter, the obligations of the Company and the Trustee under Sections 6.9,
7.5, 12.4, 12.5 and 12.6 shall survive. Nothing contained in this Article XII
shall abrogate any of the rights, obligations or duties of the Trustee under
this Indenture.
Section 12.3 Acknowledgment of Discharge by Trustee. Subject
to Section 12.6, after (i) the conditions of Section 12.1 have been satisfied,
(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 referred to in clause (i) above relating to the satisfaction and
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discharge of this Indenture have been complied with, the Trustee upon written
request shall acknowledge in writing the discharge of the Company's obligations
under this Indenture except for those surviving obligations specified in
Section 12.2.
Section 12.4 Application of Trust Assets. The Trustee shall
hold any cash or U.S. Government Obligations deposited with it in the
irrevocable trust established pursuant to Section 12.1. The Trustee shall apply
the deposited cash or the U.S. Government Obligations, together with earnings
thereon in accordance with this Indenture and the terms of the irrevocable trust
agreement established pursuant to Section 12.1 to the payment of principal of,
premium, if any, and interest on the Notes. The cash or U.S. Government
Obligations so held in trust and deposited with the Trustee in compliance with
Section 12.1 shall not be part of the trust estate under this Indenture, but
shall constitute a separate trust fund for the benefit of all holders entitled
thereto. Except as specifically provided herein, the Trustee shall not be
requested to invest any amounts held by it for the benefit of the holders or pay
interest on uninvested amounts to any holder.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 12.1 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the holders of outstanding Notes.
Section 12.5 Repayment to the Company; Unclaimed Money.
Subject to applicable laws governing escheat of such property, and upon
termination of the trust established pursuant to Section 12.1 hereof, the
Trustee shall promptly pay to the Company upon written request any excess cash
or U.S. Government Obligations held by them. Additionally, if amounts for the
payment of principal, premium, if any, or interest remains unclaimed for two
years, the Trustee shall, upon written request, pay such amounts back to the
Company forthwith. Thereafter, all liability of the Trustee with respect to
such amounts shall cease. After payment to the Company, holders entitled to such
payment must look to the Company for such payment as general creditors unless an
applicable abandoned property law designates another person.
Section 12.6 Reinstatement. If the Trustee is unable to apply
any cash or U.S. Government Obligations in accordance with Section 12.1 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.1 until such time as the Trustee is permitted to apply all such cash
or U.S. Government Obligations in accordance with Section 12.1; provided that if
the Company makes any payment of principal of, premium, if any, or interest on
any Notes following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the holders of such Notes to receive such payment
from the amounts held by the Trustee.
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ARTICLE XIII
IMMUNITY OF INCORPORATORS, SHAREHOLDERS,
OFFICERS AND DIRECTORS
Section 13.1 Indenture and Notes Solely Corporate Obligations.
No recourse for the payment of the principal of, or premium, if any, or interest
on any Note, or for any claim based thereon or otherwise in respect thereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
in this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, shareholder, officer or director, as such, past, present or
future, of the Company or of any successor entity, either directly or through
the Company or any successor entity, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that all such liability is hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issuance of the Notes.
ARTICLE XIV
SUBORDINATION
Section 14.1 Agreement to Subordinate. The Company agrees, and
each Noteholder by accepting a Note agrees, that the indebtedness evidenced by
the Notes is subordinated in right of payment, to the extent and in the manner
provided in this Article XIV, to the prior payment in full of all Senior
Indebtedness and that the subordination is for the benefit of the holders of
Senior Indebtedness.
Section 14.2 Certain Definitions. For purposes of this Article
XIV, the following terms shall have the meaning indicated:
(1) "Representative" shall mean a duly authorized indenture
trustee or other trustee, agent or representative for any Senior
Indebtedness.
(2) "Senior Indebtedness" with respect to the Notes means the
principal of, premium, if any, and interest on, and any fees, costs,
expenses and any other amounts (including indemnity payments) related
to the following, whether outstanding on the date hereof or hereafter
incurred or created: (a) indebtedness, matured or unmatured, whether or
not contingent, of the Company for money borrowed evidenced by notes or
other written obligations, (b) any interest rate contract, interest
rate swap agreement or other similar agreement or arrangement designed
to protect the Company or any of its Subsidiaries against
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fluctuations in interest rates, (c) indebtedness, matured or unmatured,
whether or not contingent, of the Company evidenced by notes,
debentures, bonds or similar instruments or letters of credit (or
reimbursement agreements in respect thereof), (d) obligations of the
Company as lessee under capitalized leases and under leases of property
made as part of any sale and leaseback transactions, (e) indebtedness
of others of any of the kinds described in the preceding clauses (a)
through (d) assumed or guaranteed by the Company and (f) renewals,
extensions, modifications, amendments, and refundings of, and
indebtedness and obligations of a successor person issued in exchange
for or in replacement of, indebtedness or obligations of the kinds
described in the preceding clauses (a) through (e), unless the
agreement pursuant to which any such indebtedness described in clauses
(a) through (f) is created, issued, assumed or guaranteed expressly
provides that such indebtedness is not senior or superior in right of
payment to the Notes; provided that the following shall not constitute
Senior Indebtedness: (i) any indebtedness or obligation of the
Company in respect of the Notes; (ii) any indebtedness of the Company
to any of its Subsidiaries or other Affiliates; (iii) any indebtedness
that is subordinated or junior in any respect to any other indebtedness
of the Company other than Senior Indebtedness; (iv) any indebtedness
incurred for the purchase of goods or materials in the ordinary course
of business; and (v) any liability for federal, state, local or other
taxes owed or owing by the Company.
For the purposes of this Indenture, Senior Indebtedness shall
not be deemed to have been paid in full until the holders of the Senior
Indebtedness shall have indefeasibly received payment in full in cash of all
Senior Indebtedness; provided that if any holder of Senior Indebtedness agrees
to accept payment in full of such Senior Indebtedness for consideration other
than cash, such holder shall be deemed to have indefeasibly received payment in
full of such Senior Indebtedness. The provisions of this Article XIV shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Senior Indebtedness is rescinded or must otherwise be
returned by any holder of Senior Indebtedness upon the insolvency, bankruptcy or
organization of the Company or otherwise, all as though such payment had not
been made.
A distribution may consist of cash, securities or other
property, by set-off or otherwise.
Section 14.3 Liquidation; Dissolution; Bankruptcy. Upon any
distribution to creditors of the Company in a liquidation or dissolution of the
Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property, in an assignment for the
benefit of creditors or any marshalling of the Company's assets and liabilities,
(a) holders of all Senior Indebtedness shall first be entitled to receive pay-
ment in full of all amounts due or to become due thereon before Noteholders
shall be entitled to receive any payment with respect to the principal of,
premium, if any, or interest on the Notes (except that Noteholders may receive
securities that are subordinated to at least the same extent as the Notes to
Senior Indebtedness and any securities issued in exchange for Senior
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Indebtedness) and (b) until all Senior Indebtedness (as provided in clause (a)
above) is paid in full, any distribution to which Noteholders would be entitled
but for this Article shall be made to holders of Senior Indebtedness (except
that Noteholders may receive securities that are subordinated to at least the
same extent as the Notes to (x) Senior Indebtedness and (y) any securities
issued in exchange for Senior Indebtedness), as their interests may appear.
Section 14.4 Default on Senior Indebtedness. The Company may
not make any payment upon or in respect of the Notes (except in such
subordinated securities) and may not acquire from the Trustee or any Noteholder
any Note for cash or property (other than securities that are subordinated to at
least the same extent as the Note to (i) Senior Indebtedness and (ii) any
securities issued in exchange for Senior Indebtedness) until all Senior
Indebtedness has been paid in full if:
(a) a default in the payment of the principal of, premium,
if any, or interest on Senior Indebtedness occurs and is continuing
beyond any applicable period of grace (a "Payment Default"); or
(b) a default, other than a Payment Default, on Senior
Indebtedness occurs and is continuing that permits holders of the
Senior Indebtedness as to which such default relates to accelerate its
maturity (a "Nonpayment Default") and the Trustee receives a notice of
the default from the Representative or Representatives of holders of at
least a majority in principal amount of Senior Indebtedness then
outstanding.
The Company may and shall resume payments on and distributions
in respect of the Notes and may acquire them upon the date on which the default
is cured or waived if this Article XIV otherwise permits the payment,
distribution or acquisition at the time of such payment or acquisition.
Section 14.5 When Distribution Must Be Paid Over. In the event
that the Trustee (or paying agent if other than the Trustee) or any Noteholder
receives any payment of principal or interest with respect to the Notes at a
time when such payment is prohibited by Section 14.3 or 14.4 hereof, such
payment shall be held by the Trustee (or paying agent if other than the Trustee)
or such Noteholder, in trust for the benefit of, and immediately shall be paid
over and delivered, upon written request, to, the holders of Senior Indebtedness
as their interests may appear or their Representative under the indenture or
other agreement (if any) pursuant to which Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the payment
of all Senior Indebtedness remaining unpaid to the extent necessary to pay all
Senior Indebtedness in full in accordance with its terms, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform only such obligations on the part of the Trustee
as are specifically set forth in this Article XIV, and no implied covenants or
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obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. 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 the Trustee shall pay over or distribute to or on behalf
of Noteholders or the Company or any other person money or assets to which any
holders of Senior Indebtedness shall be entitled by virtue of this Article XIV,
except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
Section 14.6 Notice by Company. The Company shall promptly
notify the Trustee and the paying agent in writing of any facts known to the
Company that would cause a payment of any principal or interest with respect to
the Notes to violate this Article XIV, but failure to give such notice shall not
affect the subordination of the Notes to the Senior Indebtedness as provided in
this Article XIV.
Section 14.7 Subrogation. Until all Senior Indebtedness is
paid in full and until the Notes are paid in full, Noteholders shall be
subrogated (equally and ratably with all other indebtedness pari passu with the
Notes) to the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness to the extent that distributions otherwise
payable to the Noteholders have been applied to the payment of Senior
Indebtedness. A distribution made under this Article XIV to holders of Senior
Indebtedness that otherwise would have been made to Noteholders is not, as
between the Company and Noteholders, a payment by the Company on the Notes.
Section 14.8 Relative Rights. This Article XIV defines the
relative rights of Noteholders and holders of Senior Indebtedness. Nothing in
this Indenture shall:
(a) impair, as between the Company and the Noteholders,
the obligation of the Company, which is absolute and unconditional,
to pay principal of, premium, if any, and interest on the Notes in
accordance with their terms;
(b) affect the relative rights of Noteholders and
creditors of the Company other than their rights in relation to holders
of Senior Indebtedness; or
(c) prevent the Trustee or any Noteholder from exercising its
available remedies upon a default or Event of Default, subject to the
rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Noteholders.
If the Company fails because of this Article XIV to pay
principal of, premium, if any, or interest on a Note on the due date, the
failure is still a default or Event of Default.
Section 14.9 Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness to enforce the subordination of the
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indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or any holder of Notes or by the failure of the Company or
any holder of Notes to comply with this Indenture.
Section 14.10 Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article XIV, the Trustee and the Noteholders shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other person making any distribution to the
Trustee or to the Noteholders for the purpose of ascertaining the persons
entitled to participate in such 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 XIV.
Section 14.11 Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article XIV or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, and the Trustee and the paying agent may continue to make payments
on the Notes, unless the Trustee shall have received at its Corporate Trust
Office at least three Business Days prior to the date of such payment written
notice of facts that would cause the payment of any principal, premium, if any,
and interest with respect to the Notes to violate this Article XIV. Only the
Company or a Representative may give the notice. Nothing in this Article XIV
shall impair the claims of, or payments to, the Trustee under or pursuant to
Section 7.5 hereof.
The Trustee shall be entitled to rely on the delivery to it of
a written notice by a person representing such person to be a holder of Senior
Indebtedness (or a trustee or agent on behalf of such holder) to establish that
such notice has been given by a holder of Senior Indebtedness (or a trustee or
agent on behalf of any such holder). 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 XIV, 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 XIV, and if such
evidence is not furnished, the Trustee may defer any payment which it may be
required to make for the benefit of such person pursuant to the terms of this
Indenture pending judicial determination as to the rights of such person to
receive such payment.
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The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
Any paying agent, any authenticating agent, any Note registrar and their
successors may do the same with like rights.
Section 14.12 Authorization to Effect Subordination. Each
holder of a Note by the holder's acceptance thereof authorizes and directs the
Trustee on the holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination as provided in this Article XIV and
appoints the Trustee to act as the holder's attorney-in-fact for any and all
such purposes. Without limiting the foregoing, each Representative is hereby
irrevocably authorized and empowered (in its own name or in the name of the
Noteholders or the Trustee or otherwise), but shall have no obligation, to
demand, sue for, collect and receive every payment or distribution referred to
in Section 14.3 above and give acquittance therefor and to file claims and
proofs of claim and take such other action as it may deem necessary or advisable
for the exercise or enforcement of any of the rights or interests of the holders
or owners of the Senior Indebtedness hereunder; provided that for purposes of
this Section 14.12 holders or owners of Senior Indebtedness may act only through
such Representative.
Section 14.13 Amendments. The provisions of this Article XIV
shall not be amended or modified without the written consent of the holders of
Senior Indebtedness.
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1 Provisions Binding on Company's Successors. All
the covenants, stipulations, promises and agreements in this Indenture made by
the Company shall bind its successors and assigns whether so expressed or not.
Section 15.2 Official Acts by Successor Company. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board (including the Board of Directors), committee or
officer of the Company shall and may be done and performed with like force and
effect by the like board, committee or officer of any corporation that shall at
the time be the lawful sole successor of the Company.
Section 15.3 Addresses for Notices, Etc. Any notice or demand
that by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Notes on the Company shall be deemed
to have been sufficiently given or made, for all purposes if given or served by
being sent by prepaid overnight delivery or being deposited postage prepaid by
registered or certified mail in a post office letter box addressed (until
another address is filed by the Company with the Trustee) to Royal Aloha
Development Company, 360 East Desert Inn Road, Las Vegas, Nevada 89119,
45
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Attention: Jack R. Corteway with copies to (i) Jack R. Corteway, Royal Aloha
Development Company, 1505 Dillingham Blvd., Suite 212, Honolulu, Hawaii 96817,
and (ii) Harry E. McCoy II, Ballard Spahr Andrews & Ingersoll, 201 South Main
Street, Suite 1200, Salt Lake City, Utah 84111. Any notice, direction, request
or demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being sent
by prepaid overnight delivery or being deposited postage prepaid by registered
or certified mail in a post office letter box addressed to the Corporate Trust
Office of the Trustee, which office is, at the date as of which this Indenture
is dated, located at 100 Wall Street, Suite 1600, New York, New York, 10005,
Attention: Corporate Trust Administration.
The Trustee, by notice to the Company, may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be
mailed to him by first class mail, postage prepaid, at the address of such
Noteholder as it appears on the Note register and shall be sufficiently given to
such Noteholder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Noteholder or
any defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 15.4 Communications by Holders with Other Holders.
(a) Within five business days after the receipt by the Trustee
of a written application by any three or more Noteholders stating that
the applicants desire to communicate with other Noteholders with
respect to their rights under this Indenture or under the Notes, and
accompanied by a copy of the form of proxy or other communication which
such applicants propose to transmit, and by reasonable proof that each
such applicant has owned a Note for a period of at least six months
preceding the date of such application, such Trustee shall, at its
election, either
(i) afford to such applicants access to all
information so furnished to or received by such Trustee; or
(ii) inform such applicants as to the approximate
number of Noteholders according to the most recent information
so furnished to or received by such Trustee, and as to the
approximate cost of mailing to such Noteholders the form of
proxy or other communication, if any, specified in such
application.
If the Trustee shall elect not to afford to such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to all such Noteholders copies of the form of proxy or
other communication which is specified in such request, with reasonable
46
<PAGE>
promptness after a tender to the Trustee of the material to be mailed
and of payment, or provision for the payment, of the reasonable
expenses of such mailing, unless within five days after such tender,
such Trustee shall mail to such applicants a written statement to the
effect that, in the opinion of such Trustee, such mailing would be
contrary to the best interests of the Noteholders or would be in
violation of applicable law.
(b) The disclosure of any such information as to the names and
addresses of the Noteholders in accordance with the provisions of this
Section 15.4, regardless of the source from which such information was
derived, shall not be deemed to be a violation of any existing law, or
of any law hereafter enacted, nor shall the Trustee be held accountable
by reason of mailing any material pursuant to a request made under
subsection (a) of this Section.
Section 15.5 Governing Law. This Indenture shall be deemed to
be a contract made under the substantive laws of Nevada and for all purposes
shall be construed in accordance with the substantive laws of Nevada without
regard to conflicts of laws principles thereof; provided however that the
rights, duties, privileges and indemnities of the Trustee shall be governed by
the laws of the State of New York.
Section 15.6 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions 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 have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (1) a statement that the person
making such certificate or opinion has read such covenant or condition, (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based, (3) a statement that, in the opinion of such person, he 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 (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 15.7 Legal Holidays. In any case where any Interest
Payment Date, date fixed for redemption or stated maturity of any Note shall not
be a Business Day, then (notwithstanding any other provision of this Indenture
or of the Notes) payment of interest on or principal (and premium, if any) of
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
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Date, date fixed for redemption, or at the stated maturity, provided that no
interest shall accrue for the period from and after such Interest Payment Date,
date fixed for redemption or stated maturity, as the case may be.
Section 15.8 No Security Interest Created. Nothing in this
Indenture or in the Notes, expressed or implied, shall be construed to
constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in any jurisdiction
where property of the Company or its Subsidiaries is located.
Section 15.9 Benefits of Indenture. Nothing in this Indenture
or in the Notes, expressed or implied, shall give to any person, other than the
parties hereto, any paying agent, any authenticating agent, any Note registrar
and their successors hereunder and the holders of Notes, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
Section 15.10 Table of Contents, Headings Etc. The table of
contents and the titles and headings of the articles and sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 15.11 Authenticating Agent. The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents and
purposes as though the authenticating agent had been expressly authorized by
this Indenture and those Sections to authenticate and deliver Notes. For all
purposes of this Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Notes "by the Trustee" and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent shall be deemed to satisfy any
requirement hereunder or in the Notes for the Trustee's certificate of
authentication.
Any corporation into which any authenticating agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
authenticating agent shall be a party, or any corporation succeeding to the
corporate trust business of any authenticating agent, shall be the successor of
the authenticating agent hereunder, if such successor company is otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the parties hereto or the authenticating agent or
such successor company.
Any authenticating agent may at any time resign by giving
written notice of resignation to the Trustee and to the Company. The Trustee may
at any time terminate the agency of any authenticating agent by giving written
notice of termination 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 any authenticating agent shall cease to be eligible under this Section,
the Trustee shall promptly appoint a successor authenticating agent (which may
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<PAGE>
be the Trustee), shall give written notice of such appointment to the Company
and shall mail notice of such appointment to all holders of Notes as the names
and addresses of such holders appear on the Note register.
The Company agrees to pay to the authenticating agent from
time to time reasonable compensation for its services.
The provisions of Sections 7.2, 7.3, 7.4, 7.6, 8.3 and this
Section 15.11 shall be applicable to any authenticating agent.
Section 15.12 Execution in Counterparts. This Indenture may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
49
<PAGE>
[________________________] hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly signed and attested, all as of the date first written
above.
ROYAL ALOHA DEVELOPMENT COMPANY
By:_______________________________
Name:
Title:
Attest:
________________________________
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, as Trustee
By:_______________________________
Name:
Title:
Attest:
_________________________________
<PAGE>
EXHIBIT A - FORM OF DEFINITIVE NOTE
[FORM OF FACE OF NOTE]
No. A-
$
CUSIP [_________]
ROYAL ALOHA DEVELOPMENT COMPANY
[__]% Eight Year Deferred Interest Subordinated Notes
ROYAL ALOHA DEVELOPMENT COMPANY, a corporation duly organized
and validly existing under the laws of the State of Nevada (the "Company"),
which term includes any Successor Company under the Indenture referred to on the
reverse hereof, for value received hereby promises to pay to
___________________________, or registered assigns, the principal sum of
______________________________________ Dollars on [_________________], 200_ at
the office or agency of the Company maintained for that purpose in
[______________________________], or at the option of the holder of this Note,
at the Corporate Trust Office of the Trustee, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, and to pay interest commencing on the first
Interest Payment Date (as hereinafter defined) after the payment of the entire
principal amount and interest on the Construction Loan, semi-annually on
[___________] and [_____________] of each year (each an "Interest Payment
Date"), on said principal sum at said office or agency, in like coin or
currency, at the rate per annum specified in the title of this Note. Interest
accruing from the original date of issuance of the Notes under the Indenture
through the Interest Payment Date preceding the first Interest Payment Date
occurring after the principal of and interest on the Construction Loan is paid
is hereinafter referred to as "Development Period Interest." The interest
payable on the first Interest Payment Date after the payment of the entire
principal interest on the Construction Loan shall be that accrued from the next
preceding Interest Payment Date and, thereafter, interest shall be payable on
any Interest Payment Date from the most recent Interest Payment Date, as the
case may be, next preceding the date of this Note to which interest has been
paid or duly provided for, unless the date hereof is a date to which interest
has been paid or duly provided for, in which case from the date of this Note,
until payment of said principal sum has been made or duly provided for. Any
Development Period Interest not paid on the first Interest Payment Date after
the payment of the entire principal of and interest on the Construction Loan
shall forthwith cease to be payable to the Noteholder on the relevant record
date by virtue of his having been such Noteholder; and such Development Period
Interest shall be paid in whole or in part by the Company, at its election in
each case, either (i) by notifying the Trustee of a special record date, the
amount of interest to be paid on such special record date and the date of
payment (not more than 25 days after receipt by the Trustee of such interest,
A-1
<PAGE>
unless the Trustee shall consent to an earlier date) and depositing with the
Trustee an amount of money equal to the aggregate amount to be paid in respect
of such Development Period Interest on making arrangements satisfactory to the
Trustee for such deposit or (ii) in any lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be listed and
upon notice requested by such exchange, if, after notice to the Trustee, the
Trustee deems such manner of payment to be practicable. The interest so payable
on any [_______________] or [_______________] will 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 record date, which shall be the [_______________]
[_______________] (whether or not a Business Day) next preceding such
[_______________] or [_______________], respectively; provided that any such
interest not punctually paid or duly provided for shall be payable as provided
in the Indenture. Interest shall be paid by check mailed to the registered
holder at the registered address of such person unless other arrangements are
made in accordance with the provisions of the Indenture.
Reference is made to the further provisions of this Note set
forth on the reverse hereof. Such further provisions shall for all purposes have
the same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been manually
signed by the Trustee, or a duly authorized authenticating agent under the
Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed under its corporate seal.
ROYAL ALOHA DEVELOPMENT COMPANY
By:________________________________
Name:
Title:
Attest:
____________________________
Secretary
[FORM OF CERTIFICATE OF AUTHENTICATION]
A-2
<PAGE>
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Notes described in the within-named
Indenture.
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION, as Trustee
By:_______________________________________
Authorized Signatory
A-3
<PAGE>
[FORM OF REVERSE OF NOTE]
ROYAL ALOHA DEVELOPMENT COMPANY
[__]% Eight Year Deferred Interest Subordinated Notes
This Note is one of a duly authorized issue of Notes of the
Company, designated as its [___]% Eight Year Deferred Interest Subordinated
Notes (herein called the "Notes"), limited to the aggregate principal amount of
$8,500,000 all issued or to be issued under and pursuant to an Indenture dated
as of [_______________] (the "Indenture"), between the Company and First Trust
of New York, National Association, as trustee (the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
complete description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the holders of the
Notes. Each Note is subject to, and qualified by, all such terms as set forth in
the Indenture certain of which are summarized hereon and each holder of a Note
is referred to the corresponding provisions of the Indenture for a complete
statement of such terms. To the extent that there is any inconsistency between
the summary provisions set forth in the Notes and the Indenture, the provisions
of the Indenture shall govern. Capitalized terms used but not defined in this
Note shall have the meanings ascribed to them in the Indenture.
In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal of, premium, if any, and
accrued interest on all Notes may be declared, and upon said declaration shall
become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
The payment of principal of, premium, if any, and interest on
the Notes will, to the extent set forth in the Indenture, be subordinated in
right of payment to the prior payment in full of all Senior Indebtedness (as
defined in the Indenture). Upon any distribution to creditors of the Company in
a liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding related to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities, the holders of all Senior Indebtedness
will first be entitled to receive payment in full of all amounts due or to
become due thereon before the holders of the Notes will be entitled to receive
any payment in respect of the principal of, premium, if any, or interest on the
Notes (except that holders of Notes may receive securities that are subordinated
at least to the same extent as the Notes to Senior Indebtedness and any
securities issued in exchange for Senior Indebtedness).
The Company also may not make any payment upon or in respect
of the Notes (except in such subordinated securities) and may not acquire from
the Trustee or the holder of any Note for cash or property (other than
securities subordinated to at least the same extent as the Note to (i) all
Senior Indebtedness and (ii) any securities issued in exchange for Senior
A-4
<PAGE>
Indebtedness) until all Senior Indebtedness has been paid in full if a default
in the payment of the principal of, premium, if any, or interest on Senior
Indebtedness occurs and is continuing beyond any applicable period of grace or
any other default occurs and is continuing with respect to Senior Indebtedness
that permits holders of the Senior Indebtedness as to which such default relates
to accelerate its maturity. Payments on the Notes may and shall be resumed upon
the date on which such default is cured or waived.
In the event that the Trustee (or paying agent if other than
the Trustee) or any holder of the Notes receives any payment of principal or
interest with respect to the Notes at a time when such payment is prohibited
under the Indenture, such payment shall be held in trust for the benefit of, and
immediately shall be paid over and delivered to, the holders of Senior
Indebtedness or their representative as their respective interests may appear.
After all Senior Indebtedness is paid in full and until the Notes are paid in
full, the holders of the Notes shall be subrogated (equally and ratably with all
other Indebtedness pari passu with the Notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the holders of the Notes have
been applied to the payment of Senior Indebtedness.
The Indenture contains provisions permitting 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, evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the holders of the Notes; provided that no such supplemental indenture shall
(i) extend the fixed maturity of any Note, or reduce the rate or extend the time
of payment of interest thereon, or reduce the principal amount thereof or
premium, if any, thereon, or reduce any amount payable on redemption thereof, or
impair or affect the right of any Noteholder to institute suit for the payment
thereof, or make the principal thereof or interest or premium, if any, thereon
payable in any coin or currency other than that provided in the Notes, modify
the subordination provisions in a manner adverse to the holders of the Notes,
without the consent of the holder of each Note so affected or (ii) reduce the
aforesaid percentage of Notes, the holders of which are required to consent to
any such supplemental indenture, without the consent of the holders of all Notes
then outstanding. The Company and the Trustee may amend or supplement the
Indenture without notice to or consent of any holder of Notes in certain events
specified in the Indenture. It is also provided in the Indenture that, prior to
any declaration accelerating the maturity of the Notes, the holders of a
majority in aggregate principal amount of the Notes at the time outstanding may
on behalf of the holders of all of the Notes waive any past default or Event of
Default under the Indenture and its consequences except a default in the payment
of interest or any premium on or the principal of any of the Notes, unless
otherwise excused pursuant to the terms of the Indenture, or a default in
respect of a covenant or provision of the Indenture that under Article X thereof
cannot be modified or amended without the consent of the holders of all Notes
then outstanding. Any such consent or waiver by the holder of this Note (unless
revoked as provided in the Indenture) shall be conclusive and binding upon such
A-5
<PAGE>
holder and upon all future holders and owners of this Note and any Notes that
may be issued in exchange or substitution hereof, irrespective of whether or not
any notation thereof is made upon this Note or such other Notes.
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 any premium and
interest on this Note at the place, at the respective times, at the rate and in
the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a
360-day year composed of twelve 30-day months.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
The Notes are not redeemable at the option of the Company
prior to 200_. At any time on or after that date, the Notes may be redeemed at
the Company's option, upon notice as set forth in the Indenture, in whole at any
time or in part from time to time, at the following prices (expressed in
percentages of the principal amount), together with accrued interest (including
Development Period Interest) to the date fixed for redemption if redeemed during
the 12-month period beginning:
Date Redemption Price
[Year 3] %
[Year 4]
[Year 5]
and 100% on or after [Year 6]; provided that if the date fixed for redemption is
a date on or after the record date and on or before the next following Interest
Payment Date, then the interest payable on such date shall be paid to the holder
of record on the next preceding [_______________] or [_______________],
respectively.
Upon due presentment for registration of transfer of this Note
at the Corporate Trust Office of the Trustee, a new Note or Notes of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange thereof, subject to the conditions and limitations
provided in the Indenture, without charge except for any tax or other
governmental charge imposed in connection therewith.
A-6
<PAGE>
The Company, the Trustee, any authenticating agent, any paying
agent, and any Note registrar may deem and treat the registered holder hereof as
the absolute owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon made by anyone
other than the Company or any Note registrar), for the purpose of receiving
payment hereof, or on account hereof, and for all other purposes, and neither
the Company nor the Trustee nor any other authenticating agent nor any paying
agent nor any Note registrar shall be affected by any notice to the contrary.
All payments made to or upon the order of such registered holder shall, to the
extent of the sum or sums paid, satisfy and discharge liability for monies
payable on this Note.
No recourse for the payment of the principal of or any premium
or interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, shareholder, officer or director, as such,
past, present or future, of the Company or of any Successor Company, either
directly or through the Company or any Successor Company, 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 consideration for the issue hereof, expressly waived and
released.
A-7
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of
the face of this Note, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the entireties _______________ Custodian
JT TEN - as joint tenants with right (Cust)
of survivorship and not as _______________ under
tenants in common (Minor)
Uniform Gifts to
Minors Act _________________
(State)
Additional abbreviations may also be used though not in the
above list.
A-8
<PAGE>
[FORM OF ASSIGNMENT]
For value received _____________________________ hereby
sell(s), assign(s) and transfer(s) unto _________________________ (Please insert
social security or other identifying number of assignee) the within Note, and
hereby irrevocably constitutes and appoints ________________________________
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 (banks, stock brokers, savings and loan
associations and credit unions).
_______________________________________________________
Signature Guarantee
NOTICE: The signature on the assignment must correspond with the name as written
upon the face of the Note in every particular without alteration or enlargement
or any change whatever.
A-9
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") dated as of _______________ is
by and between Royal Aloha Development Company, a Nevada corporation (the
"Company"), and the First Trust of California, National Association (the
"Escrow Agent").
RECITALS
The Company proposes to offer for sale to the general public in certain
states of the United States and in certain provinces in Canada its _____% Eight
Year Subordinated Notes (the "Notes") up to an aggregate of $8,500,000, in
accordance with the registration provisions of the Securities Act of 1933, as
amended, and pursuant to a Registration Statement on Form SB-2 (the
"Registration Statement") on file with the Securities and Exchange Commission.
In accordance with the terms of the Prospectus contained in the Registration
Statement, the Company desires to provide for the escrow of the funds invested
in the Notes until the minimum amount, described below, has been received.
First Trust of California has agreed to act as escrow agent on behalf
of the Company on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises the Parties agree as
follows:
1. Appointment of Escrow Agent. The Escrow Agent is hereby appointed as
escrow agent in accordance with the terms hereof, and the Escrow Agent agrees to
act in such capacity.
2. Establishment of Escrow Account. The Escrow Agent, as agent for the
Company to implement the provisions of this Agreement, has established an escrow
fund ("Escrow Fund") which shall contain all checks, drafts, and money orders
("Subscription Payments") and all Subscription Agreements and other related
documents ("Subscription Documents") received by the Escrow Agent directly from
Purchasers, and Subscription Payments and Subscription Documents received by the
Escrow Agent through the Company. Such Subscription Payments and Documents and
any income resulting from the investment of such Subscription Payments shall be
held, invested, and disbursed pursuant to paragraphs 5, 6, and 7 of this
Agreement.
3. Escrow Fees. The Company hereby agrees to pay the Escrow Agent at
the opening of escrow an advance payment for all ordinary services rendered
hereunder (the "Escrow Fee") which shall be calculated in accordance with the
Escrow Agent's standard rate schedule. The Company further agrees to pay the
Escrow Agent reasonable fees, which shall be agreed upon between the Parties,
for any services in addition to those provided for herein to the extent that the
<PAGE>
Company has expressly requested such extraordinary services and has been made
aware of their cost in advance of their performance.
4. Deposits. The Company shall transmit to the Escrow Agent, within
three business days of receipt by the Company, all Subscription Payments and all
Subscription Agreements and Subscription Documents received by the Company for
the purchase of the Notes from the purchasers thereof ("Subscribers"), including
without limitation an IRS form W-8/W-9 for each Subscriber. All Subscription
Payments shall be made payable to First Trust of California, National
Association as Escrow Agent for Royal Aloha Development Company. Each
transmittal of Subscription Payments shall be accompanied by a schedule listing
the Subscribers whose funds are being transmitted and the amounts of their
investment. The Company shall also provide a signed IRS form W-8/W-9 to the
Escrow Agent.
5. Investment of Funds. All Subscription Payments shall be deposited in
a First Bank System Business Money Market account and shall upon clearance earn
per diem interest at a rate provided by the First Bank System for such account.
Such investments are hereinafter referred to as "Investments."
6. Holding and Disbursement of Funds and Documents. The Escrow Agent is
hereby authorized and directed to hold the Subscription Payments and
Subscription Documents in the Escrow Fund during the term of this Agreement and
to disburse the Subscription Payments and Subscription Documents and any income
resulting from the Investments, or any part thereof, only to persons entitled
thereto in accordance with the provisions of this Agreement. The Escrow Agent
shall be permitted to commingle the Subscription Payments held in the Escrow
Fund, provided upon distribution of the Subscription Payments pursuant to
Paragraph 7 hereof, the Escrow Agent shall furnish to the Company a financial
accounting, including the disbursements made from the Escrow Fund, the expenses,
if any, theretofore charged to the Escrow Fund, and the income earned on the
Investments. All Subscription Payments and Subscription Documents deposited with
the Escrow Agent shall remain the property of the Subscriber and shall not be
subject to any lien or change by the Escrow Agent, or judgment or Creditors'
claims against the Company until released to it in the manner hereinafter
provided.
7. Termination of Escrow; Disbursement of Funds.
A. If at any time prior to termination of the escrow, the sum
of $8,500,000 in Subscription Payments has been deposited pursuant to
this Agreement, the Escrow Agent shall confirm the receipt of such
payments to the Company. The Company shall have sixty (60) days from
such confirmation from the Escrow Agent to enter into a binding
construction loan agreement (the "Construction Loan") and to certify to
the Escrow Agent that the Company has entered the Construction Loan.
Following such certification by the Company, and upon written request
of the Company, the Escrow Agent shall disburse promptly all
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Subscription Payments and all Subscription Documents to the Company in
immediately available funds. The Escrow Agent shall then disburse to
each Subscriber by check the amount of interest accrued on the
Subscription Payments of such Subscriber. All disbursements by the
Escrow Agent to Subscribers pursuant to this Section shall be made by
the Escrow Agent's usual escrow checks and shall be mailed by first
class United States Postal Services mail, postage prepaid, as soon as
practicable but not later than the third business day after the
disbursement of funds to the Company, at which time this Agreement
shall terminate. In the event that the Company is unable to obtain the
Construction Loan within (60) days of the confirmation by the Escrow
Agent of receipt of $8,500,000 in Subscription Payments, this Escrow
Agreement shall terminate and the Escrow Agent shall release all
Subscription Payments and Subscription Documents to the Subscribers
according to the terms of paragraph 7.B below.
B. If within ninety (90) days (or pursuant to any extension by
the Company) after the effective date of the Registration Statement the
Company and any Broker/Dealer have not deposited at least $4,500,000 in
Subscription Payments with the Escrow Agent, the Escrow Agent shall so
notify the Company. The Company at its option may extend the offering
period and this Agreement for up to two (2) additional ninety (90) day
terms. At the end of any such ninety (90) day period, if Subscription
Payments of at least $4,500,000 have not been deposited with the Escrow
Agent, the Company at its option may terminate this Agreement, and upon
written notice of such termination, the Escrow Agent shall release all
Subscription Payments and the corresponding Subscription Documents
together with all interest accrued on such funds to each Subscriber
respectively at the address given by such Subscriber in the
Subscription Agreement. All disbursements by the Escrow Agent pursuant
to this Section shall be made by the Escrow Agent's usual escrow checks
and shall be mailed by first class United States Postal Services mail,
postage prepaid, as soon as practicable but not later than the third
business day after the termination of the escrow. The Escrow Agent
shall furnish to the Company an accounting for the refund in full to
all Subscribers.
C. If after the first ninety (90) days after the effective
date of the Registration Statement the Company and any Broker/Dealer
has deposited at least $4,500,000 in Subscription Payments with the
Escrow Agent, the Escrow Agent shall inform the Company of the amount
of Subscription Payments deposited into escrow, and the Company
promptly shall inform the Escrow Agent of its decision either (i) to
proceed with a distribution of the Subscription Payments deposited in
the escrow account in accordance with the terms of Paragraph 7.A above,
including distribution of interest to each Subscriber, or (ii) to
extend the offering for an additional ninety (90) days. In the event
that the Company decides to extend the offering, and at the end of each
such extension, the Company shall give notice to the Escrow Agent of
its decision to distribute the funds or to further extend the offering
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<PAGE>
time, provided that the Company may not extend the offering time by
more than two (2) extensions of ninety (90) days each. If the Company
elects to distribute the funds, then the Company shall have 60 days
from the end of the applicable ninety (90) day period in which to
certify that it has obtained the Construction Loan.
D. If the Escrow Agent receives a notice in writing from
the Company stating that the Company wishes to withdraw the offering or
to terminate the escrow before a minimum of $4,500,000 in Subscription
Payments has been deposited with the Escrow Agent, the Escrow Agent
shall disburse all funds and documents held in escrow in accordance
with the provisions of paragraph 7.B above.
8. Stop Order; Termination of Escrow. If at any time prior to the
termination of this Agreement, the Escrow Agent is advised by the Securities and
Exchange Commission that a stop order has been issued by the Securities and
Exchange Commission with respect to the Registration Statement, which order has
not been rescinded or stayed within 30 days, the Escrow Agent shall thereupon
return all Subscription Payments and Documents to the respective Subscribers in
accordance with paragraph 7.B above.
9. Collected Funds. No interest shall accrue on any Subscription
Payment and no Subscription Payment shall be disbursed pursuant to Section 7
until such Subscription Payment has been received by the Escrow Agent in
immediately available funds.
10. Liability of Escrow Agent. In performing any duties under the
Escrow Agreement, the Escrow Agent shall not be liable to the Company, any
Subscriber, or any Party for damages, losses, or expenses, except for gross
negligence of willful misconduct on part of the Escrow Agent. The Escrow Agent
shall not incur any such liability for (i) any act or failure to act made or
omitted in good faith, or (ii) any action taken or omitted in reliance upon any
instrument, including any written statement or affidavit provided for in this
Agreement that the Escrow Agent shall in good faith believe to be genuine, nor
will the Escrow Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority. In
addition, the Escrow Agent may consult with legal counsel in connection with the
Escrow Agent's duties under this Agreement and shall be fully protected in any
action taken, suffered, or permitted by it in good faith in accordance with the
advice of counsel. The Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting to act on behalf of
any party to this Agreement.
11. Fees and Expenses. It is understood that the fees and usual charges
agreed upon for services of the Escrow Agent shall be considered compensation
for ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
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<PAGE>
renders any service not provided for in this Agreement, or if the Company
requests a substantial modification of its terms, or if any controversy arises,
or if the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to this escrow or its subject matter, the Escrow Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, including allocated costs of in-house counsel, and
expenses occasioned by such default, delay, controversy, or litigation, and the
Escrow Agent shall have the right to retain all documents and/or other things of
value at any time held by the Escrow Agent in this escrow until such
compensation, fees, costs, and expenses are paid. The Company promises to pay
these sums upon demand. Unless otherwise provided, the Company will pay all of
the Escrow Agent's usual charges and the Escrow Agent may deduct such sums from
the funds deposited.
12. Controversies. If any controversy arises between the Parties to
this Agreement, or with any other Party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and funds and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Escrow Agent's discretion, the Escrow Agent may require, despite what may be set
forth elsewhere in this Agreement. In such event, the Escrow Agent will not be
liable for interest or damage. Furthermore, the Escrow Agent may at its option
file an action of interpleader requiring the Parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized the deposit
with the clerk of the court all documents and funds held in escrow, except all
costs, expenses, charges and reasonable attorney fees incurred by the Escrow
Agent due to the interpleader action and which Company agrees to pay. Upon
initiating such action, the Escrow Agent shall be fully released and discharged
of and from all obligations and liability imposed by the terms of this
Agreement.
13. Indemnification of Escrow Agent. The Company and its successors and
assigns agree jointly and severally to indemnify and hold the Escrow Agent
harmless against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees, including allocated
costs of in-house counsel and disbursements that may be imposed on the Escrow
Agent or incurred by the Escrow Agent in connection with the performance of its
duties under this Agreement, including but not limited to any litigation arising
from this Agreement or involving its subject matter.
14. Withholding of Interest. The Company acknowledges that payment of
any interest earned on the funds invested in this escrow will be subject to
backup withholding penalties unless a properly completed Internal Revenue
Service Form W-8 or W-9 certification is submitted to Escrow Agent.
15. Resignation of Escrow Agent. The Escrow Agent may resign at any
time upon giving at least (30) days written notice to the Company provided,
however, that no such resignation shall become effective until the appointment
of a successor escrow agent which shall be accomplished as follows: The Company
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<PAGE>
shall use its best efforts to obtain a successor escrow agent within thirty (30)
days after receiving such notice. If the Company fails to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the state of California.
The successor escrow agent shall execute and deliver an instrument accepting
such appointment and it shall without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor escrow agent
as if originally named as escrow agent. The Escrow Agent shall thereupon be
discharged from any further duties and liability under this Agreement.
16. Automatic Succession. Any company into which the Agent may be
merged or with which it may consolidated, or any company to whom Agent may
transfer a substantial amount of its Global Escrow business, shall be the
Successor to the Agent without the execution or filing of any paper or any
further act on the part of any of the Parties, anything herein to the contrary
notwithstanding; provided that the combined capital and surplus of such
Successor shall not be, immediately following such transaction, substantially
less than the combined capital and surplus of the Agent immediately prior to
such transaction.
17. Termination. This Agreement shall terminate upon the completion of
the conditions of Section 7.A, 7.B or 7.C hereof, without any notices to any
person except as provided in this Agreement, unless earlier terminated pursuant
to the terms hereof.
18. Miscellaneous.
a. Governing Laws. This Agreement is to be construed and
interpreted according to California law.
b. Counterpart. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
c. Notices. All instructions, notices and demands
herein provided for shall be in writing and shall be mailed postage
prepaid, first class mail, delivered by courier, or telecopies as
follows:
If to the Company: Royal Aloha Development Company
1505 Dillingham Blvd., Suite 212
Honolulu, Hawaii 96871
Telephone No.: (808) 847-8050
Facsimile No.: (808) 841-5467
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If to the Escrow Agent: First Trust of California, National
Association Global Escrow Depository Services
One California Street, 4th Floor
San Francisco, California 94111
Telephone No.: (415) 273-4532
Facsimile No.: (415) 273-4593
d. Amendments. This Agreement may be amended by written
notice signed by the Partnership, except that Section 10 through
Section 16 may be amended only with the consent of the Escrow Agent.
Any notice to be executed by or on behalf of the Company shall be
valid if signed by Jack N. Corteway.
The Company represents and agrees that it has not made nor will it in
the future make any representation that states or implies that the Escrow Agent
has endorsed, recommended or guaranteed the purchase, value, or repayment of the
Securities offered for sale by the Company. The Company further agrees that it
will insert in any prospectus, offering circular, advertisement, subscription
agreement or other document made available to prospective purchasers of the
Securities the following statement in bold face type: "First Trust of
California, National Association is acting only as an escrow agent in connection
with the offering of the Notes described herein, and has not endorsed,
recommended or guaranteed the purchase, value or repayment of such Notes," and
will furnish to the Escrow Agent a copy of each such prospectus, offering
circular, advertisement, subscription agreement, or other document at least 5
business days prior to its distribution to prospective purchasers of the
Securities.
ROYAL ALOHA DEVELOPMENT
COMPANY
By:----------------------
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION GLOBAL
ESCROW DEPOSITORY SERVICES
By:----------------------
Escrow Agent
AGREEMENT
This AGREEMENT ("Agreement") is made this 24th day of June, 1997, by
and between ROYAL ALOHA VACATION CLUB, a Hawaii nonprofit corporation, whose
principal place of business and post office address is 1505 Dillingham
Boulevard, Suite 212, Honolulu, Hawaii 96817 ("RAVC"), and ROYAL ALOHA
DEVELOPMENT COMPANY, a Nevada corporation, whose principal place of business and
post office address is 301 East Clark Avenue, Suite 700, Las Vegas, Nevada 89101
("RADC").
Recitals:
A. RAVC owned the property containing twenty condominium apartments
located at 360 East Desert Inn Road, Las Vegas, Nevada (the
"Apartments").
B. RAVC conveyed its interest in the land and Apartments to RADC on June
24, 1997, in consideration of receiving one hundred percent (100%) of
the stock of RADC.
C. RADC is willing to permit RAVC to continue to use the Apartments under
RAVC's existing timeshare program subject to the terms and conditions
set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. RAVC and its members shall have the right to use the Apartments as part
of RAVC's timeshare program.
2. RAVC will not re required to pay rent to RADC for the use of the
Apartments.
3. RAVC will pay costs and expenses related to the Apartments and RAVC's
use of the Apartments.
4. Either party may terminate this Agreement without statement of cause
at any time by giving written notice of such termination to the other party at
least thirty (30) days before the date of such termination.
5. Both parties agree to comply with all federal, state and county
laws, ordinances, codes, rules, and regulations, as the same may be amended from
time to time, that in any way affect their performance under this Agreement.
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6. RAVC and RADC will at all times during the term of this Agreement
observe and perform all laws, ordinances, rules and regulations now or hereafter
made by any governmental authority applicable to the Apartments and will hold
harmless, defend and indemnify each other against all actions, suits, damages
and claims by whomsoever brought or made by reason of the nonobservance or
nonperformance of said laws, ordinances, rules and regulations or of this
covenant. RAVC will provide full coverage insurance and name RADC as an
additional insured.
7. The validity of this Agreement and any of its terms or provisions, as
well as the rights and duties of the parties of this Agreement, shall be
governed by the laws of the State of Hawaii. Any action at law or in equity to
enforce or interpret the provisions of this Agreement shall be brought in a
state court of competent jurisdiction in the State of Hawaii.
8. In the event that any provision of this Agreement is declared invalid
or unenforceable by a court, such invalidity or unenforceability shall not
affect the validity or enforceability of the remaining terms of this Agreement.
9. The failure of either party to insist upon the strict compliance with
any term, provision or condition of this Agreement shall not constitute or be
deemed to constitute a waiver or relinquishment of that party's right to enforce
the same in accordance with this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
ROYAL ALOHA VACATION CLUB
By: /s/ Jack R. Corteway
------------------------
Its President
------------------
ROYAL ALOHA DEVELOPMENT COMPANY
By: /s/ Jack R. Corteway
--------------------------
Its President
----------------
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT ("Agreement") is entered into as of this
twenty-fourth day of June, 1997, by and between ROYAL ALOHA VACATION CLUB, a
Hawaii nonprofit corporation, whose principal place of business and post office
address is 1505 Dillingham Boulevard, Suite 212, Honolulu, Hawaii 96817
("Parent"), and ROYAL ALOHA DEVELOPMENT COMPANY, a Nevada corporation, whose
principal place of business and post office address is 360 East Desert Inn Road,
Las Vegas, Nevada 89101 ("Subsidiary").
WHEREAS, Parent and Subsidiary are members of an affiliated group of
corporations as defined in section 1504(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), of which Parent is the common parent;
WHEREAS, the parties desire to set forth the method for determining the
financial consequences to Parent and Subsidiary of filing consolidated Federal
income tax returns by Parent and Subsidiary;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties agree as follows:
1. DEFINITIONS
(a) Terms used in this Agreement shall have the meanings ascribed to them
in the Code, and the regulations and rulings issued thereunder, as from time to
time in effect. Concepts referred to in this Agreement shall be interpreted in
view of the provisions of the Code and the regulations and rulings thereunder
then in effect.
(b) For purposes of this Agreement, the terms set forth below shall be
defined as follows:
(i) "Combined Return" means any consolidated, combined or unitary
income or franchise tax returns or reports filed by Parent in any state or local
jurisdiction that includes the income of more than one Member.
(ii) "Consolidated Return" means any consolidated Federal income tax
return.
(iii) "Group" means Parent and all corporations (whether now existing
or hereafter formed or acquired) that at the time would be entitled or required
to join with Parent in filing a Consolidated Return.
(iv) "Member" means any corporate entity entitled to be included in
the Group.
(v) "Other Income Taxes" means all state and local income taxes and
all income taxes imposed by any foreign jurisdiction or taxing authority.
<PAGE>
(vi) "Parent" means Parent, or any successor common parent corporation
of the Group.
(vii) "Subsidiary Tax Liability" means the hypothetical Federal
income tax liability of Subsidiary for a taxable year, beginning with the
taxable year ending November 30, 1997, determined as if Subsidiary had filed its
own separate Federal income tax return for such taxable year, except that
Subsidiary shall be treated as having available as loss or credit carryovers for
purposes of computing Subsidiary's Subsidiary Tax Liability all losses or
credits generated by it and utilized by other Members, except to the extent such
losses or credits were previously taken into account in computing Subsidiary's
Tax Liability or Subsidiary Tax Refund. Such hypothetical Federal income tax
liability shall be finally determined no later than ten days after the date of
the filing of the Consolidated Return of the Group for such taxable year and
shall reflect any tax elections, conventions, treatments or methods which are
actually utilized by the Group in filing its Consolidated Return. Such
hypothetical Federal income tax liability shall not be less than zero, provided,
however, that for this purpose a Subsidiary Tax Refund shall not be considered
to be a Federal income tax liability that is less than zero.
(viii) "Subsidiary Estimated Tax Liability" means the hypothetical
estimated consolidated Federal income tax liability for Subsidiary determined in
accordance with the principles of paragraph (b) (vii).
(ix) "Subsidiary Tax Refund" means the hypothetical Federal income
tax refund for any taxable year to which Subsidiary would be entitled determined
in accordance with the principles of paragraph (b) (vii).
2. ALLOCATIONS OF CONSOLIDATED
FEDERAL INCOME TAX LIABILITY
(a) Filing by Parent
Parent shall file Consolidated Returns for each taxable year ending after
the date hereof.
(b) Payment of Tax Liability
For each taxable year or portion thereof during which Subsidiary is
included in a Consolidated Return with Parent, Subsidiary will pay to Parent an
amount equal to its Subsidiary Tax Liability. To the extent that the obligation
to pay such amount has not been fully satisfied pursuant to paragraph 2(c) of
this Agreement, Subsidiary shall pay any such remaining amount to Parent no
later than ten days after receiving notice from Parent, which notice shall not
be given earlier than fifteen days before Parent is required to make a
corresponding payment on behalf of the Group, or if Parent is not required to
make such a payment, no earlier than fifteen days before the last date on which
a corporate taxpayer with the same taxable year as Parent would be required to
make its final payment of Federal income taxes for the taxable year without
incurring any penalties or additions to tax.
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<PAGE>
(c) Estimated Payments
On or before any date on which a corporate taxpayer is required to make an
estimated payment of Federal income tax under the Code, Subsidiary will make
estimated payments to Parent in an amount such that its aggregate payments under
this paragraph 2 (c) for the taxable year for which such payments are being made
are equal to its aggregate Subsidiary Estimated Tax Liability for such taxable
year. If the total of such estimated payments made by Subsidiary to Parent with
respect to a taxable year shall be in excess of the liability of Subsidiary to
Parent pursuant to paragraph 2 (b) of this Agreement for such taxable year,
Parent shall pay the amount of such excess to Subsidiary no later than the date
on which Parent files the Consolidated Return for the Group.
(d) Tax Refunds
(i) Parent shall pay to Subsidiary the amount of the Subsidiary Tax
Refund for each taxable year ending after the date hereof.
(ii) The payments described in this paragraph 2 (d) shall be made not
later than ten days after such refund is received by Parent (or would have been
received by Parent if the Group were entitled to a refund for such taxable
year).
3. CHANGES IN TAX LIABILITY
(a) If the Subsidiary Tax Liability is changed as the result of the filing
of an amended Consolidated Return or of any final administrative or judicial
determination (including a final "determination" as defined in Section 1313 (a)
of the Code) with respect to Consolidated Returns actually filed by the Group,
then the amount of the payments required from Subsidiary to Parent under
paragraph 2 (b) or the amount of the payment required from Parent to Subsidiary
under paragraph 2 (d) (i), as the case may be, shall be recomputed by
substituting the amount of Subsidiary Tax Liability (or Subsidiary Tax Refund)
after the adjustments described above, plus the amount of any interest or
penalties incurred with respect to such adjustments that are properly allocable
(as determined by Parent) to Subsidiary, in place of Subsidiary Tax Liability
(or Subsidiary Tax Refund), provided that the principles of paragraph 1 (b)
(vii) shall be applied in connection with such recomputation notwithstanding any
contrary determination. If such filing of an amended Consolidated Return or such
final determination results in an increase in the Subsidiary Tax Liability,
Subsidiary shall pay to Parent not later than ten days after such filing or such
final determination an amount equal to the excess of the new Subsidiary Tax
Liability over the amount previously paid to Parent by Subsidiary. If such
filing of an amended Consolidated Return or such final determination results in
a Subsidiary Tax Refund or increases the amount of a Subsidiary Tax Refund,
Parent shall pay to Subsidiary not later than ten days after such filing or
receiving such refund an amount equal to the excess of the new Subsidiary Tax
Refund over the amount previously paid to Subsidiary by Parent. The parties
recognize that such new liability (or refund) for any taxable year is not
necessarily Subsidiary's final liability (or refund) for that year, and may be
recomputed more than once.
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<PAGE>
(b) Payments made pursuant to paragraph (a) shall bear interest in the same
manner as any late payment or refund of Federal income tax.
4. PAYMENT
Any payment required by Subsidiary to Parent or by Parent to Subsidiary
under this Agreement shall be made in accordance with the method for settling
intercompany accounts then generally in effect between Parent and Subsidiary.
5. INDEMNITY
Parent agrees to indemnify, defend and hold Subsidiary harmless from and
against any and all liabilities for Federal income tax and Federal estimated
income tax (including, in both cases, interest and penalties thereon) with
respect to any taxable year; provided that the amount of such indemnity shall be
reduced by and shall offset any payment required to be made by Subsidiary
pursuant to this Agreement.
6. EFFECT OF AGREEMENT
(a) As between Parent and Subsidiary, the provisions of this Agreement
shall fix the liability of each to the other as to the matters covered
hereunder, even if such provisions are not controlling for tax or other purposes
(including, but not limited to, the computation of earnings and profits for
Federal income tax purposes).
(b) This Agreement shall be effective as between Parent and Subsidiary
beginning with taxable year ending November 30, 1997 and all taxable years
thereafter during which Subsidiary is a member of the Group.
7. STATE AND LOCAL TAXES
In the event Parent actually files Combined Returns in any state or local
jurisdiction on behalf of, and pays such taxes owed by, all or part of the
Group, and Subsidiary joins in such Combined Returns, the principles and
procedures (including the indemnity in paragraph 5) stated in this Agreement
shall apply for purposes of allocating such state tax liability beginning with
the taxable year or period ending November 30, 1997.
8. AGREEMENT OF COOPERATION
Subsidiary hereby designates Parent as its agent with respect to all
matters relating to any Consolidated Returns or Combined Returns beginning with
the taxable year ending November 30, 1997 and all taxable years and periods
4
<PAGE>
thereafter during which Subsidiary is a Member. Subsidiary agrees to cooperate
fully in any action or matter, or whatever nature, related to the preparation,
filing, audit, examination and contest of such Consolidated Returns and Combined
Returns including, but not limited to, (a) taking any action and furnishing
Parent with any and all information requested by Parent that is necessary or
incidental to filing of such Consolidated Returns and Combined Returns or the
filing of any procedural requests of whatever nature with the Internal Revenue
Service or other relevant taxing authority, (b) cooperating fully in connection
with any income tax refund claim and any related administrative or judicial
proceeding with respect to any year, (c) taking any action and furnishing Parent
with any and all information requested by Parent that is necessary or incidental
to the handling of any audit by the Internal Revenue Service or other relevant
taxing authority and any related administrative or judicial proceeding for any
Consolidated Return or Combined Returns for any year such return was or is filed
by or joined in by Subsidiary and cooperating fully with Parent in connection
with any such audit or proceeding and (d) paying its share of any costs or
expenses incurred by Parent in connection with such preparation, filing, audit,
examination or contest, as determined by Parent in good faith.
9. MISCELLANEOUS PROVISIONS
(a) This Agreement contains the entire understanding of the parties hereto
with respect to the subject matter contained herein. No alteration, amendment or
modification of any of the terms of this Agreement shall be valid unless made by
an instrument signed in writing by an authorized officer of each party.
(b) This Agreement has been made in and shall be construed and enforced in
accordance with the law of the State of Hawaii.
(c) This Agreement shall be binding upon and inure to the benefit of each
party hereto and its respective successors and assigns.
(d) All notices and other communications hereunder shall be deemed to have
been duly given if given in writing and delivered by hand or mailed, certified
or registered mail, with postage prepaid addressed to the party to which the
notice or other communication is given.
(e) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not constitute a part hereof.
(g) Subsidiary and Parent agree to not unreasonably withhold their consent
to any amendment to this Agreement that is proposed by Parent, provided that
5
<PAGE>
such amendment cannot reasonably be expected to have the effect of increasing
the aggregate amounts payable by Subsidiary to Parent hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives as of the date first above
written.
ROYAL ALOHA VACATION CLUB
By:_________________________________
Its_________________________________
ROYAL ALOHA DEVELOPMENT COMPANY
By:__________________________________
Its__________________________________
6
[Letterhead]
Interval International
The Quality Vacation Exchange Network
Western Regional Office
4530 South Decatur Boulevard
Suite 202
Las Vegas, Nevada 89103, U.S.A.
702-227-8080
Fax 702-227-8040
World Headquarters
6262 Sunset Drive
Miami, Florida 33143 U.S.A.
July 30, 1997
Mr. Richard Beard
Ballard, Spahr, Andrews & Ingersoll
201 S. Main Street, #1200
Salt Lake City, Utah 84111
Dear Richard,
The purpose of this letter is to inform you of Interval International's desire
to affiliate the project being developed by the Royal Aloha Development Company
in Las Vegas at 360 East Desert Inn Road. We have met on numerous occasions to
review the proposed development plans for the project and barring major
deviations from those plans, and provided the registration and legal
requirements are met, the project meets our criteria for affiliation and would
be a fine addition to our exchange network. We will continue to work with Royal
Aloha Development Company on the affiliation as the development progresses.
If you require any additional information, please contact me.
Yours truly,
/s/ Peter Humber
Peter Humber
Assistant Vice President
Western Region
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 11, 1997, in the Registration Statement (Form SB-2
No. 333-________) and related Prospectus of Royal Aloha Development Company for
the registration of $8,500,000 of its ____% Eight Year Deferred Interest
Subordinated Notes.
Ernst & Young LLP
Honolulu, Hawaii
August 1, 1997
[Letterhead]
Donald R. Beach 2299 Capistrano
Appraiser - Consultant Las Vegas, Nevada 89109
Nevada Certified General Appraiser #01347 (702) 731-3099
CONSENT OF APPRAISER
We hereby consent to the reference made to us by Royal Aloha Development
Company under the captions "Plan of Operation" and "Experts" in the Prospectus
constituting a part of the Registration Statement on Form SB-2. In addition, we
consent to the filing of our appraisal report referred to therein as an exhibit
to the Registration Statement. In giving such consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
By /s/ Donald R. Beach
-----------------------
Donald R. Beach
Las Vegas, Nevada
July 1, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> FEB-27-1997
<PERIOD-END> JUN-30-1997
<CASH> 192,500
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 192,500
<PP&E> 1,270,221
<DEPRECIATION> 565,648
<TOTAL-ASSETS> 972,697
<CURRENT-LIABILITIES> 76,285
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 896,411
<TOTAL-LIABILITY-AND-EQUITY> 972,697
<SALES> 0
<TOTAL-REVENUES> 2,500
<CGS> 0
<TOTAL-COSTS> 3,106
<OTHER-EXPENSES> 661
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,267)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,267)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Appraisal Report
Prepared for
The Royal Aloha Vacation Club, Inc.
360 East Desert Inn Road
Las Vegas, Nevada
[Photograph of Royal Aloha Vegas omitted]
Appraised By
Donald R. Beach
Nevada Certified General Appraiser #01347
2299 Capistrano
Las Vegas, Nevada 89109
<PAGE>
[Letterhead]
Donald R. Beach 2299 Capistrano
Appraiser Consultant Las Vegas, Nevada 89109
Nevada Certified General Appraiser #01347 (702) 731-3099
May 14, 1997
Jack Corteway
Royal Aloha Vacation Club Inc.
150 S. Dillingham Blvd., Suite 212
Honolulu, HI 96817
Re: A.P.N.# 120-130-009
Dear Sir:
As per your request, I have completed a summary appraisal of the above
referenced property for the purpose of estimating the fair market value of the
site as if vacant. The property is legally described as a portion of the
Southeast Quarter (SE 1/4), of Section 9, Township 21 South, Range 61, East of
the Mount Diablo Meridian and Baseline in Clark County, Nevada.
After a careful analysis of all the data collected, a visual inspection of
the property and a computation of all factors affecting the value of the
property, it is my opinion that the fair market value of the subject property as
vacant as of May 14, 1997 is:
Two Million Eight Hundred Dollars
($2,800,000)
This report was prepared with the intent to comply with the Uniform
Standards of Professional Appraisal Practice as outlined in Chapter 645C of the
Nevada Administrative Code.
Thank you for selecting me to complete this report. If you have any
questions concerning the method employed to complete this report or the data
contained herein, do not hesitate to call me at (702) 731-3099.
Sincerely,
/s/ D.R. Beach
D.R. Beach
Nevada Certified General Appraiser #01347
<PAGE>
[Photograph of Mel Avenue and Rear View omitted]
<PAGE>
[Photograph of Mel Avenue North omitted]
<PAGE>
[Photograph of View South omitted]
<PAGE>
[Photograph of Desert Inn Road West omitted]
<PAGE>
[Photograph of Desert Inn Road East omitted]
<PAGE>
LIMITING
CONDITIONS
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
The acceptance of this appraisal assignment and the completion of the appraisal
report submitted herewith are contingent upon the following assumptions and
limiting conditions.
LIMITS OF LIABILITY
The liability of the appraiser is limited to the client only and to the amount
of the fee actually received for this assignment. There is no accountability,
obligation, or liability to any third party. If the appraisal report is
disseminated to anyone other than the client, the client shall make such party
or parties aware of all limiting conditions and assumptions effecting the
appraisal assignment. The appraiser is not in any way to be responsible for any
costs incurred to discover or correct any physical, financial, and/or legal
deficiencies of any type present in the subject property.
COPIES, PUBLICATION, DISTRIBUTION, AND USE OF REPORT
Possession of this report or any copy thereof does not carry with it the right
of publication, nor may it be used for any purposes or function other than its
intended use for which it was written. The appraisal fee represents compensation
only for the services provided by the appraiser.
The client may distribute copies of this appraisal report in its entirety to
such parties as he may select. However, selected portions of this appraisal
report shall not be given to other parties without the prior written consent of
the appraiser signing the appraisal report.
This appraisal is to be used only in its entirety and no part is to be used
without the whole report. All conclusions and opinions concerning the analysis
as set forth in the report were prepared by the appraiser whose signature
appears on the report. No change of any item in the report shall be made by
anyone other than the appraiser.
CONFIDENTIALITY
Except as provided in the report, the appraiser may not divulge the analysis,
opinions, or conclusions developed in the appraisal report, nor may he give a
copy of the report to anyone other than the client for which it was prepared.
This condition does not apply to any order or request issued by a court of law
or any other body with the power of subpoena.
<PAGE>
INFORMATION SUPPLIED BY OTHERS
Information provided by others, such as government agencies, financial
institutions, Realtors, buyers, sellers, property owners, bookkeepers,
accountants, and attorneys, is assumed to be true, correct, and reliable. No
responsibility for the accuracy of such information is assumed by the appraiser.
Neither is the appraiser liable for any information provided by subcontractors.
The comparable data relied upon in this report has been confirmed with one or
more parties familiar with the transaction or from affidavit or other sources
thought reasonable. To the best of our judgment and knowledge, all such
information is considered appropriate for inclusion. In some instances,
expenditure of time would be required in attempt to furnish absolutely
unimpeachable verification. The value conclusions set forth in the appraisal
report are subject to the accuracy of said data.
TESTIMONY, CONSULTATION, COMPLETION OF CONTRACT FOR APPRAISAL SERVICE
The contract for each appraisal or consultation service is fulfilled, and
the total fee is payable upon completion of the report. The appraiser will not
be asked or required to give testimony in court or in any other hearing as a
result of having prepared the appraisal, either in full or in part, except under
separate and special arrangements at an additional fee. If testimony or a
deposition is required because of any subpoena, the client shall be responsible
for any additional time, fees, and charges regardless of the issuing party.
EXHIBITS AND PHYSICAL DESCRIPTIONS
It is assumed that the improvements and the utilization of the land are
within the boundaries of the property lines of the property described in the
report and that there is no encroachment or trespass unless noted otherwise
within the report. No survey of the property has been made by the appraiser, and
no responsibility is assumed in connection with such matters. Any maps, plats,
or drawings reproduced and included in the report are there to assist the reader
in visualizing the property and are not necessarily drawn to scale. The
reliability of the information contained on any such map or drawing is assumed
accurate by the appraiser and is not guaranteed to be correct.
<PAGE>
TITLE, LEGAL DESCRIPTIONS, AND OTHER LEGAL MATTERS
No responsibility is assumed by the appraiser for matters legal in character
or nature. No opinions are rendered as to the status of title to any property.
The title is presumed to be good and merchantable. The property is appraised as
if free and clear, unless otherwise stated in the appraisal report. The legal
description, as furnished by the client, his designee or as derived by the
appraiser, is assumed to be correct as reported.
ENGINEERING, STRUCTURAL, MECHANICAL, ARCHITECTURAL CONDITIONS
This appraisal should not be construed as a report on the physical items
that are a part of any property described in the appraisal report. Although the
appraisal may contain information about these physical items (including their
adequacy and/or condition), it should be clearly understood that this
information is only to be used as a general guide for property valuation and not
as a complete or detailed report on these physical items. The appraiser is not a
construction, engineering, or architectural expert, and any opinion given on
these matters in this report should be considered tentative in nature and is
subject to modification upon receipt of additional information from appropriate
experts. The client is advised to seek appropriate expert opinion before
committing any funds to improving the property described in the appraisal
report.
Any statement in the appraisal regarding the observed condition of the
foundation, roof, exterior walls, interior walls, floors, heating system,
plumbing, insulation, electrical service, all mechanicals, and all matters
relating to construction is based on inspection only. Unless otherwise noted in
the appraisal report, no detailed inspection was made. For instance, the
appraiser is not an expert on heating systems, and no attempt was made to
inspect the interior of the furnace. The structures were not investigated for
building code violations, and it is assumed that all buildings meet the
applicable building code requirements unless stated otherwise in the report.
Such items as conditions behind walls, above ceilings, behind locked doors,
under the floor, or under the ground are not exposed to view and, therefore,
were not inspected, unless specifically so stated in the appraisal. The
existence of installation, if any is mentioned, was discovered through
conversations with others and/or circumstantial evidence. Since it is not
exposed to view, the accuracy of any statements regarding insulation cannot be
guaranteed.
Because no detailed inspection was made, and because such knowledge goes
beyond the scope of this appraisal, any comments on observed conditions given in
this appraisal report should not be taken as a guarantee that a problem does not
exist. Specifically, no guarantee is given as to the adequacy or condition of
the foundation, roof, exterior walls, interior walls, floors, heating systems,
air conditioning systems, plumbing, electrical service, insulation, or any other
detailed construction matters. If any interested party is concerned about the
existence, condition, or adequacy of any particular item, we would strongly
suggest that a mechanical and/or structural engineer, and/or architect or other
expert be consulted.
<PAGE>
This appraisal report is based on the assumption that there are no hidden,
unapparent or apparent conditions on the property site or improvements which
would materially alter the value as reported. No responsibility is assumed for
any such conditions or for any expertise to discover them. All mechanical
components are assumed to be in operable condition and standard for the
properties of the subject type. Conditions of heating, cooling, ventilating,
electrical and plumbing equipment are considered to be commensurate with the
condition of the balance of the improvements unless otherwise stated. No
judgment is made in the appraisal as to the adequacy of insulation, the type of
insulation, or the energy efficiency of the improvements or equipment which is
assumed to be standard for the subject's age, type and condition.
TOXIC MATERIALS AND HAZARDS
Although an inspection has been made as stated in the appraisal report, no
attempt has been made to identify or report any toxic materials and/or
conditions such as asbestos, unreaformaldehyde foam insulation, or soils or
ground water contamination on any land or improvements described in the
appraisal report. Before committing funds to any property, it is strongly
advised that appropriate experts be employed to inspect both the land and
improvements for the existence of such toxic materials and/or conditions if they
are present on the property, the value of the property may be adversely
effected, and a reappraisal at an additional cost may be necessary to estimate
the effects of such circumstances.
SOILS, SUBSOILS AND POTENTIAL HAZARDS
It is assumed that there are no hidden or unapparent conditions of the soils
or subsoils which would render the subject property more or less valuable than
reported in the appraisal. No engineering or percolation tests were made, and no
liability is assumed for soil conditions. Unless otherwise noted, subsurface
rights (mineral and oil) were not considered in making this appraisal. Unless
otherwise noted, the land and the soil in the area being appraised appeared to
be firm but no investigation has been made to determine whether or not any
detrimental subsoil conditions exist. The appraiser is not liable for any
problems arising from soil conditions. This appraiser strongly advises that
before any funds are committed to a property, the advice of appropriate experts
be sought.
If the appraiser has not been supplied with a termite inspection report,
survey, or occupancy permit, no responsibility is assumed and no representation
is made for any costs associated with obtaining same or for any deficiencies
discovered before or after they are obtained.
<PAGE>
The appraiser assumes no responsibility for any costs or for any
consequences arising from the need for flood hazard insurance. An Agent for the
Federal Flood Insurance program should be contacted to determine the actual need
for flood hazard insurance.
LEGALITY OF USE
This appraisal report assumes that there is full compliance with all
applicable federal, state and local environmental regulations and laws, unless
noncompliance is stated, defined and considered in the appraisal report. It is
assumed that all applicable zoning and use regulations and restrictions have
been complied with, unless a nonconformity has been stated, defined and
considered in the appraisal report. It is assumed that all required licenses,
consents, or other legislative or administrative authority from any local, state
or national government, or private entity or organizations have been or can be
obtained or renewed for any use on which the value estimate contained in this
report is based.
COMPONENT VALUES
If the total property value set forth in this report is distributed between
land and improvements, this distribution applies only under the existing program
of utilization as set forth in the appraisal. The separate valuations for land
and buildings must not be used in conjunction with any other appraisal and are
invalid if so used.
DOLLAR VALUES AND PURCHASING POWER
The estimated market value set forth in the appraisal report and any costs
figures utilized are applicable only as of the date of valuation of the
appraisal report. All dollar amounts are based on the purchasing power and price
of the dollar as of the date of value estimates.
VALUE CHANGE, DYNAMIC MARKET, ALTERATION OF ESTIMATE BY APPRAISER
All values shown in the appraisal report are projections based on my
analysis as of the date of valuation of the appraisal. These values may not be
valid in other time periods or as conditions change. Projected mathematical
models set forth in the appraisal are based on estimates and assumptions which
are inherently subject to uncertainty and variations related to exposure, time,
promotional effort, terms, motivation and other conditions. The appraiser does
not represent these models as indicative of results that will actually be
achieved. The value estimates consider the productivity and relative
attractiveness of a property only as of the date of valuation set forth in the
report.
<PAGE>
In case of appraisals involving the capitalization of income benefits, the
estimate of market value, investment value, or value in use is a reflection of
such benefits and of the appraiser's interpretation of income, yields and other
factors derived from general and specific client and market information. Such
estimates are as of the date of valuation of the report. They are subject to
change as market conditions change.
This appraisal is an estimate of value based on analysis of information
known to me at the time the appraisal was made. The appraiser does not assume
any responsibility for incorrect analysis because of incorrect or incomplete
information. If new information of significance comes to light, the value given
in this report is subject to change without notice. The appraisal report itself
and the value estimates set forth herein are subject to change if either the
physical, legal entity, or the terms of financing are different from what is set
forth in the report.
EXCLUSIONS
Furnishings, equipment and other personal property and value associated with
a specific business operation are excluded from the value estimate set forth in
the report unless otherwise stated.
PROPOSED IMPROVEMENTS, CONDITIONED VALUE
It is assumed in the appraisal report that all proposed improvements and/or
repairs, either onsite or offsite, are completed in a good and workmanlike
manner in accord with plans, specifications, or other information supplied to
this appraiser and set forth in the appraisal report. In the case of proposed
construction, the appraisal is subject to change upon inspection of the property
after construction is completed. The estimate of market value is as of the date
specified in the report. Unless otherwise stated, the assumption is made that
all improvements and/or repairs have been completed according to the plans, and
the property is operating at levels projected in the report.
FEES
The fee for any appraisal report, consultation, feasibility, or other study
is for services rendered, and unless otherwise stated in the service agreement,
is not solely based upon the time spent on any assignment.
CHANGES AND MODIFICATIONS
The appraiser reserves the right to alter statements, analysis, conclusions,
or any value estimates in the appraisal if any new facts pertinent to the
appraisal process are discovered which were unknown when the appraisal report
was prepared.
<PAGE>
DEFINITIONS
<PAGE>
APPRAISAL DEFINITIONS
FAIR MARKET VALUE
The revised NRS 37.009 defines market value as:
Value means the most probable price which a property would bring in a
competitive and open market under the conditions of a fair sale, without the
price being affected by undue stimulus, whereby the sale is consummated on the
specified date and the title to the property is passed from the seller to the
buyer under the following conditions:
a. The buyer and the seller acting prudently and knowledgeably;
b. The buyer and the seller are typically motivated;
c. The buyer and seller are well informed or well advised and acting
in what they consider are their own best interest;
d. Reasonable time is allowed to expose the property for sale on the
open market;
e. Payment is made in United States dollars in cash or pursuant to
another financial arrangement comparable thereto; and
f. The sale price represents the normal consideration for the
property and is unaffected by special or creative financing or
sales concessions granted by any person associated with the sale.
FEE SIMPLE DEFINED AND PROPERTY RIGHTS APPRAISED
The subject property is appraised in fee simple ownership. Fee simple
ownership may be defined as, "Absolute ownership unencumbered by any other
interest or estate subject only to the four powers of government".
HIGHEST AND BEST USE
The reasonable probable and legal use of vacant land or an improved
property, which is physically possible, financially feasible, and that results
in the highest rate of return. The four criteria highest and best use must meet
are legal permissibility, physical possibility, financial feasibility, and
maximum profitability.
<PAGE>
HIGHEST AND BEST USE OF PROPERTY AS IMPROVED
The use that should be made of a property as it exists.
SALES COMPARISON APPROACH
A set of procedures in which an appraiser derives a value indication by
comparing the property being appraised to similar properties that have been sold
recently, applying appropriate units of comparison, to the sale prices of the
comparables.
COST APPROACH
A set of procedures in which an appraiser derives a value indication by
estimating the current cost to reproduce or replace the existing structure,
deducting for all accrued depreciation in the property, and adding the estimated
land value.
INCOME CAPITALIZATION APPROACH
A set of procedures in which an appraiser derives a value indication for
income producing property by converting anticipated benefits into property
value. This conversion is accomplished either by; 1) capitalizing a single
year's income expectancy or an annual average of several year's income
expectancies at a market-derived capitalization rate or a capitalization rate
that reflects a specified income pattern, return on investment, and change in
the value of the investment; or 2) discounting the cash flow from an investment.
<PAGE>
CERTIFICATION
<PAGE>
APPRAISER'S CERTIFICATION
I do hereby certify that I, D. R. Beach am a licensed Nevada Certified
General Appraiser. My expertise and experience encompasses 35 years of
appraising. My assignments include commercial real estate, vacant land, shopping
centers, offices and single-use properties. I also have experience appraising
industrial and special-use properties. I further certify that I have competently
appraised hotel and motel properties. My residential experience includes
subdivisions, apartments, planned-unit developments, condominiums and
single-family residences.
The undersigned does hereby certify that, except as otherwise noted in the
appraisal report, the following is to the best of my knowledge and belief.
1. The statements of fact contained in this report are true and correct.
2. The reported analysis, opinions and conclusions are limited only by the
reported assumptions and limiting conditions, and are my personal,
unbiased, professional analysis, opinions and conclusions.
3. I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest with respect to
the parties involved.
4. My compensation is not contingent upon the report of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
5. The analysis, opinion and conclusion were developed, and this report
has been prepared in conformity with and subject to the requirements of
the Uniform Standards of Professional Appraisal practice.
6. The undersigned has made a personal inspection of the property that is
the subject of this report.
7. No one provided significant professional assistance to the person
signing this report.
<PAGE>
APPRAISERS CERTIFICATION
(CONTINUED)
The fair market value reported herein is as of May 14, 1997. The
estimated fair market value is as follows:
39,376 sq. ft. @ $75 per sq. ft. = $2,953,425
Estimated Cost of Demolition of the Improvement = $ 179,000
Indicated Fair Market Value of the land as vacant = $2,774,425
Say $2,800,000
I hereby so certify to that value estimate.
APPRAISER /s/ D. R. BEACH DATE 5-20-97
------------------------- --------------
D. R. BEACH
Nevada Certified General Appraiser
License #01347
<PAGE>
CORRELATION AND FINAL ESTIMATE OF VALUE
All data relative to the value estimate was reviewed. Conditions indicating
an increase in value were indicated in the immediate area. A new hotel is under
construction one block north. The Las Vegas Convention Center is being expanded.
The property across Desert Inn Road south is the site of a new mega resort to be
built in the next two years. Six new resorts have been constructed on the Strip
in the last two years. An addition is to be added to the Sahara Hotel two blocks
north.
The area is on an upward trend, with land parcels becoming more difficult to
obtain. Sales are scarce, but those found indicate a 6% per year increase.
Based on all the data available, the indicated unit of value of $75 per
square foot is a reasonable value. The estimated demolition is difficult to
confirm due to the hauling time to the Apex dump, but is a reasonable expected
cost.
The fair market value is as follows:
39,176 sq. ft. @ $75 per sq. ft. = $2,953,425
Estimated Cost of Demolition of the Improvement = $ 179,000
Indicated Fair Market Value of the land as vacant = $2,774,425
Say $2,800,000
<PAGE>
MAPS & AERIALS
<PAGE>
[Plat map of subject property omitted]
<PAGE>
[Area map of Las Vegas omitted]
<PAGE>
[Area map of Las Vegas omitted]
<PAGE>
[Plot map of subject property omitted]
<PAGE>
[Area map of Las Vegas omitted]
<PAGE>
<TABLE>
<CAPTION>
Clark Clark Comprehensive Planning
County Current Planning Division
401 South Furth Street
P. 0. Box 551744
Las Vegas, Nevada 89155-1744
(702) 455-4314
Non Residential Districts
Property Development Standards
Code Description Min. Lot Setbacks Max. Stories Max. Lot
Area(acres) Front Corner Side Rear Max. Height Coverage
- ---- -------------------- ----------- -------------- ----------------- ---------------- --------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20' for bldg 20' for bldg Adj. Res. 20' Adj. Res. 20'
C-C Shopping Center 5 & parking & parking Adj. Com. 10' Adj. Com. 10' 3/45' 25%
C-P Office & Professional None 15' 20' 0/Adj. Res. 10' 0/Adj. Res. 10' 2/35' 60%
C-1 Local Business None 10' 20' 0/Adj. Res. 10' 0/Adj. Res. 10' 2/35' 60%
C-2 General Commercial None 10' 20' 0/Adj. Res. 10' 0/Adj. Res. 10' 4/50'(2) 60%
C-3 General Commercial None 10' 20' 0/Adj. Res. 10' 0/Adj. Res. 10' 4/50'(2) 60%
10% width of lot 10% width of lot
H-1 Limited Resort & Apt. None 10' 20'min-50'max(1) 5'min-50'max(1) 0/Adj. Res. 20' 9/100'(2) 60%
See 10% width of lot Res 2/35'
H-2 General Highway Frontage 29.32.030 10' 20' 5'min-20'max 0/Adj. Res. 20' Com 4/50' See 29.32
Pub.St.15'(3) Pub. St. 15'(3) Pub. St. 15'(3) Pub. St. 15'(3)
T-C Mobile Home Park 10 Priv. St. 5' Priv. St. 5' others 5' others 5' 2/35' 50%
Pub.St.15' Pub. St. 15' Pub. St. 15' Pub. St. 15'
RVP Recreational Vehicle Park 10 Priv.St.5' Priv. St. 5' others 5' others 5' See (4) See (4)
P-F Public Facility See (4) See (4) See (4) See (4) See (4) See (4) See (4)
15' for bldg 15' for bldg
M-D Designed Manufacturing None & parking & parking 0/Adj. Res. 20' 0/Adj. Res. 20' 4/50' 45%
M-1 Light Manufacturing None 20' 20' O/Adj. Res. 20' 0/Adj. Res. 20' 4/45' 80%
M-2 Industrial None 20'(5) 20'(5) See (5) See (5) 6/75' 80%
M-3 Heavy Industrial None 20'(5) 20'(5) See (5) See (5) 6/75' 80%
</TABLE>
(1) Buildings & Structures over 40' high require 1' additional per story over
40' for side yard setback - See 29.30.040 (H-1)
(2) Higher with conditional use permit.
(3) See R-1 regulations for single family residences.
(4) Determined by conditions of commission approval.
(5) Use separations are also required - See 29.42.010 (M-2) and 29.43.020
(M-3).
General Notes:
1. No structure over 35' allowed where prohibited by 29.50 (Airport Height
Restrictions).
2. Greater setback required where 29.64 (Building Setbacks and Future Width)
applies.
This table is designed to give general information and regulations for the
zoning districts. For specific information and regulations, consult with Title
29 or with Current Planning.
<PAGE>
[Photograph of zoning map of Las Vegas omitted]
<PAGE>
SUMMARY OF
SALIENT FACTS
<PAGE>
SUMMARY OF SALIENT FACTS
PROPERTY LOCATION
The subject property is located on the northeast corner of Desert Inn
Road and Mel Ave. in Clark County, Nevada and is commonly known as 360 Desert
Inn Road and further referenced as Assessors Parcel Number 120-310-009.
HIGHEST AND BEST USE
It's current use as a time share motel is the highest and best use of
the property as improved at the present time. See highest and best use on
following page.
LAND SIZE
The total area is .904 acres. The lot has a frontage of 167'+/- on
Desert Inn Road and 227.95' along Mel Ave. The lot contains 39,379 sq. feet.
PRESENT USE
The property is improved with a one and two story motel type building
which has been sold as time share units which are rented on a weekly basis
predominantly to residents of Hawaii. The property provides lodging, parking,
laundry and recreational facilities to the tenants. The occupancy is considered
to be above average with rentals considered to be economic rent for the service
provided.
DATE OF INSPECTION
May 14, 1997
HIGHEST AND BEST USE
Highest and best use is defined as being that use which produces the
greatest net return to land and/or building. The use must be physically
possible, legally permissible, financially feasible and most profitable.
Property is always appraised at it's highest and best use when estimating market
value.
MARKETING TIME
To sell the total property would require exposure on the market for one
year.
<PAGE>
HIGHEST AND BEST USE
Highest and best use is defined as that use which produces the greatest
net return to land and/or building, over the longest period of time. The age of
the present structure leaves little doubt that the economic life of the
improvement has been extended thru update and good maintenance. However, they
have now reached a point where some drastic improvement is needed. Basic
elements such as plumbing, electrical, and heating and cooling need to be
replaced. Due to the road widening and other factors, the present plan cannot
accommodate its previous use.
The four criteria of highest and best use namely physically possible,
legally permissible, financially feasible and maximally profitable can only be
met by changing the use to a structure which better meets the needs of the area.
The site is adequate to construct a multi level structure. Any
additional land added to the site would enhance the use.
The property is presently zoned H-1 which would allow most tourist
oriented construction. A hotel, time share, commercial business and parking are
all allowed in this zoning category.
It has not been difficult to obtain financing for most business
enterprises related to the "Strip" or convention center and would be available
locally to most investors with a reasonable expectation of success.
Maximally productive properties are those which provide a need of the
area and which have lower expense ratios which occurs primarily with newer
structures. Rental rates are increasing for most types of commercial space
including rental rooms.
The highest and best use of the subject property for multi level, multi
use commercial meets all four criteria.
<PAGE>
EFFECTIVE DATE OF THE VALUE ESTIMATE
The effective date of the value estimate is May 14, 1997.
PROPERTY RIGHTS APPRAISED
Just fee simple interest.
OWNER OF RECORD
Royal Aloha Vacation Club, Inc. a Hawaii Corporation is the owner of
record. According to public record the current owners have held title since
1983.
METHOD OF VALUATION
The Sales Comparison Approach has been used to estimate the value of
the land. This requires the analysis of sales of similar land similarly
situated. Sales are adjusted for differences noted in the comparison. The Cost
Approach was used to estimate the demolition cost of the improvements.
The sales data was obtained from TRW Redi Data and verified by public
record. Buyer, Seller, or the Realtor involved were interviewed where possible.
The availability of a phone number and location of the parties involved made
some verification difficult except by public record. Nevada is a full disclosure
state in regard to transfers, so public record may be more reliable.
<PAGE>
REGIONAL DATA
<PAGE>
REGIONAL DATA
(1996 Las Vegas Perspective)
HISTORY
Clark County, Nevada encompasses approximately 8,000 square miles, of
which approximately 84% is vacant land, with 10% in private ownership.
Las Vegas was incorporated in 1911 with a population of approximately
3,350. It was not until the Hoover Dam Project was started and inexpensive power
and land began attracting industry that Las Vegas started to grow. In 1931, the
Nevada legislature approved gambling. This action provided a growth vehicle
causing the population figures to increase.
RECREATION AREAS
Southern Nevada is located in the southwestern portion of the United
States. Within a 30 mile radius surrounding the Las Vegas area, recreational
facilities include such sites as Lake Mead, Hoover Dam, the Colorado River
recreation area, snow skiing trails at 12,000 foot Mt. Charleston, and views and
hiking areas in the Red Rock mountains.
The Las Vegas Valley is well located to such sites as the Grand Canyon,
Bryce Canyon, Zion National Park, and the Death Valley.
Currently, the city and county parks have 110 facilities. There are 17
golf courses, with 12 new golf courses under different stages of development.
During the winter months, skiing clinics are held at Lee Canyon.
Horseback riding is popular year-round, along with off-road racing and miniature
golf. Wet N' Wild, an all water theme park, is located on the Strip and provides
water sports for children and families.
Other events which take place in the Las Vegas area include the Las
Vegas Symphony Orchestra, Nevada Institute for Contemporary Art, and the Las
Vegas City Arts.
Public communication includes KLVX, Channel 10, which is Southern
Nevada's PBS television affiliate. Southern Nevada's three public radio stations
are KNPR, KUNV, and KCEP.
<PAGE>
POPULATION
In the last ten years, Las Vegas itself has added over 300,000 people
to it's community. The average is 3,000 people moving into our community each
month. The population reached over 1 million in 1995. The fastest growing age
group in the Las Vegas sector is over 65. The proportion of active seniors to
that of the national average is nearly identical, with 12.4 for Las Vegas and
12.5 nationally.
The Nevada per capita income is nearly $21,000. The median household
income for Las Vegas is $36,710, which is higher that the national average.
Las Vegas is often thought of as a transient community. However, over
50% of the population has lived in this area for more than 10 years, and 63% of
the population own their own homes.
Approximately 75% of homes sold in Las Vegas are new homes. The median
price of a new home is $119,200. The average price of all homes sold remains in
the low $100,000's. In the 1995 census, the total population was 1,040,688
people, and total households were 387,097. Children under 18 represented 24.6%
of the population and adults 18 and over 72%.
RELIGION
Las Vegas has over 430 houses of worship representing 48 different
faiths, with services conducted in six different languages.
CLIMATE
Southern Nevada has an average of 310 sunny days per year. The overall
mean temperature is 60 degrees. The coldest average temperature is about 55
degrees from December through February. The hottest months are June through
August, with an average daytime temperature of 102 degrees, the nights averaging
in the low 70's.
Fall and Spring remain a constant 80 degrees during the days and an
average of 50 degrees during the night. The Southern Nevada area receives
approximately three inches of rainfall per year.
<PAGE>
TRANSPORTATION
According to the Federal Aviation Administration, the Las Vegas airport
will be the fastest growing facility in the next 10 years. Currently, McCarran
International Airport ranks as the 18th busiest airport in the U.S. and the 29th
busiest airport in the world. Approximately 28 million passengers visited Las
Vegas in 1995 of which 26% were international travelers.
McCarran is one of the most modem airports in the country. Construction
was completed in 1990 on the fourth runway encompassing 8,900 feet, which has
increased hourly take offs and landings from 110 to 150 per day. A new garage
was added to the airport in 1996 to eliminate some of the parking problems.
MCCARRAN INTERNATIONAL AIRPORT PASSENGER STATISTICS
Year Scheduled Charter & Total Passengers
Passengers All Other
1989 14,338,000 2,769,000 17,107,000
1990 16,051,000 3,039,000 18,619,000
1991 16,977,000 3,195,000 20,172,000
1992 17,048,000 3,865,000 20,914,000
1993 18,155,000 4,337,000 22,492,000
1994 21,577,000 5,273,000 26,950,000
1995 23,247,000 4,780,000 28,027,000
Most major airlines have Las Vegas on their route, and several
international airlines are considering direct service to overseas. Currently,
there are 14 major air freight companies which serve the area's growing needs.
One airline has a one-stop route to Japan. It is estimated that these flights
represent a $700 million impact.
To exploit the benefits of McCarran's Class A Port of Entry status, the
Department of Aviation constructed a Charter/International Terminal. The 183,000
square foot structure houses eight aircraft parking gates, associated ticketing,
baggage claim, and security facilities. To cater to the Las Vegas international
visitors, the new terminal will feature a prototype U.S. Custom clearing
configuration for the latest in quick, convenient passenger processing.
Construction of McCarran's Airpark commenced during 1990. This encompasses 155
acres. McCarran Airpark features direct airfield and roadway access to aviation
support industries, including benefits of the Foreign Trade Zone.
<PAGE>
There are also the Boulder City, Henderson, and North Las Vegas
airports. The North Las Vegas Airport is the General Aviation reliever for
McCarran.
Clark County is approximately the size of the State of New Jersey. It
is located between California and Arizona. There are three major highways
serving to link Las Vegas with major western cities. These highways
include I- 1 5 which runs in an east/West direction, U.S. 95 which runs in a
north/south direction, and U.S. 93 which runs to the south.
Highway plans include $2 billion to be spent on transportation
improvement and mass transportation over IO years.
The Union Pacific Railroad services the Las Vegas area with direct
service to 20 states and connecting service to more than 30 states. Amtrak also
provides passenger service.
GOVERNMENT
The county operates as an independent political entity and is
administered by a County Manager who is supervised by a seven-man Board of
Commissioners. The various city administrations consist of a Mayor, a five-man
City Council, City Managers, and appropriate departments.
UTILITIES
Water is supplied to the Las Vegas metropolitan area from several
sources. Underground facilities contribute approximately 25% of the water to
Southern Nevada, and the Colorado River is also a major water source. The Las
Vegas Valley Water District redistributes the water to Clark County and the City
of Las Vegas. North Las Vegas, Henderson, and Boulder City have their own water
distribution systems.
The Colorado River Commission allocated Southern Nevada an additional
58,000 acre feet of committed and uncommitted water with which to build. This
amount is considered enough for an additional 85,000 single-family residences.
The new water allotment, according to some estimates, will last until the year
2006.
Nevada Power Company's residential rates rank eighth lowest in the
country among investor-owned utilities. Future energy requirements will be
provided by natural gas and coal-fired generation units and coal generating
facilities. Current plans do not include participation in any type of nuclear
plants.
<PAGE>
EDUCATION
The Clark County school District is ranked the 11th largest among the
nation's public school systems. New schools have been opened to accommodate an
average annual growth of just under 6%. The school district now includes 181
schools.
Community College of Southern Nevada is a multicampus institution with
current enrollment of approximately 20,741 students. In 1995, CCSN increased its
faculty by 33% and added 200,000 sq.ft. of new instructional facilities.
The Cheyenne campus is located in North Las Vegas and serves
approximately 22,938 students based on the number enrolled per class. The
Henderson campus enrolls approximately 4,213 students and occupies 33,000 square
feet.
The University of Nevada, Las Vegas has an estimated enrollment of
21,000 students. Completion of three new dormitories and a new dining commons
provides facilities for 500 resident students. The total of resident students is
1,200. Construction of a new 22,000 square-foot alumni center has also been
completed.
COMMUNITY SERVICES
There are currently 9 hospitals with 2,503 licensed beds servicing the
Las Vegas area. Additional facilities include three psychiatric/chemical
dependency in-patient hospitals, plus 11 long-term care facilities with 1,074
licensed beds. There are a total of 6,128 licensed physicians.
Specialized health services include the Nathan Adelson Hospice which is
one of 12 hospices in the nation with in-patient facilities; Angel Plane which
is a nonprofit organization supported by community donations; Children's
Hospital built for special needs for children; Flight for Life; and the
Traumatic Brain Injury Rehabilitation Center. Hospital expansions include St.
Rose Domimcan which expanded to 86,000 square feet with 214 beds at a cost of
$19 million, and the Veteran's Hospital with 129 beds on 49 acres at a proposed
cost of $75 million.
TOURISM AND CONVENTION
Las Vegas has developed a well-known reputation as one of the top
resort and convention destinations in the world. Las Vegas is the location of
nine of the ten largest hotels in the world.
<PAGE>
ECONOMIC BASE
The economic base of the Las Vegas area consists of the tourist
industry, service industry, military bases, the Nevada Test site, governmental
and municipal agencies, and mining and manufacturing.
INDUSTRIAL EMPLOYMENT ANNUAL AVERAGE
Gaming related activities continued to make a strong gain in both
revenue and development of mega hotel/casinos. Hotel construction will slow
after the phenomenal rate of growth of the past few years.
<PAGE>
SUMMARY
The four forces (social, economic, political, environmental) that
influence market values were discussed above. The various governing bodies have
sponsored growth with their pro-development attitudes. The administrations also
promote the funding and infrastructure necessary for growth. These factors,
along with the sunny climate, have helped Las Vegas be a destination of choice
for many as a new home for their families. However, public services have been
hard hit along with infrastructure to provide adequate service for the increased
population.
As the population of Las Vegas reaches one million, it is already
experiencing problems with water service, and the infrastructure of the streets
is becoming burdensome. There appears to be a large amount of traffic and travel
time due to the inadequacies of the roads now servicing the Las Vegas area.
Water becomes a growth constraint unless new water sources are found.
General land supply is adequate; however, it is difficult to obtain
large parcels of property. Present plans show the growth of tourism, at its
existing rate, is indicated to continue. Naturally, this growth would support
the development of new residential, commercial, and industrial properties.
Southern Nevada is growing and will continue to grow. However, the past several
years have shown the largest amount of growth in the history of Southern Nevada.
This growth is not expected to continue at a higher rate. Continued growth at a
more stable rate is expected for the future.
<PAGE>
NEIGHBORHOOD
<PAGE>
NEIGHBORHOOD DATA
BOUNDARIES
The neighborhood of the subject property is bounded on the north by
Riviera Boulevard, on the east by Paradise Road, on the south by Sands
Boulevard, and on the west by Las Vegas Boulevard. Property in the area is of a
compatible use.
ACCESS
Access to the neighborhood is by the boundary streets and by Desert Inn
Road.
RELATIVE LOCATION
The property is located adjacent to the "heart" of the strip within one
mile of the major casinos.
TRANSPORTATION
Bus transportation is provided on the major intersecting streets or by
taxicab.
COMMERCIAL USE
The area is predominantly small casinos and lodging facilities.
UTILITIES
All utility service is available and includes sewer, water, electric,
gas and telephone. Streets are paved and have curb and gutter.
SALIENT FEATURES
The neighborhood is 90% built up with predominantly commercial use. The
Desert Inn Golf Course occupies the south half of the neighborhood. The area is
stable with little changing use. The impact of the Desert Inn Road project is
still to be weighed as to increased traffic and noise. The change in use with
new construction can eliminate most of the problems associated with an arterial
street.
<PAGE>
Survey, Area Description
The Las Vegas Valley coitions 95 percent of the households and population
surveyed in Clark County. Excluded were persons in group quarters, such as
Nellis Air Force Base and populations in institutions.
The outlying areas of Clark County not included in the survey were: Bunkerville,
Indian Springs, Mesquite, Moapa. Laughlin and Cal-Nev-Ari; combined they total
6,487 households.
The primary area contains 29 zip codes. A relatively new zip code, 89139 is not
listed as it did not have sufficient responses due to low population density. In
editions prior to the 1994 Perspective, these zip codes were divided into 10
districts.
The districts were clustered by using demographically comparable zip codes. Four
districts (1, 2, 3 and 5) were sub-divided in 1989 because of population growth
and to provide a greater level of detail for each area.
The original district numbers are unchanged, only the letter "B" was added for
the new districts, allowing for comparisons with previous survey year estimates.
For example, to compare survey dates prior to 1989 with dates subsequent to
1989, District 1A data may be added to 1B data.
The districts and corresponding zip codes have been listed below for comparison.
[Photograph of zip code map of Las Vegas Valley omitted]
District Zip Code(s)
1A 89108
1B 89107, 89128, 89129, 89134
2A 89030, 89031, 89131
2B 89101, 89106
3A 89115
3B 89110, 89122
4 89104
5A 89102, 89103
5B 89113, 89117, 89118
6 89109
7 89120, 89121
8 89119, 89123
9 89014, 89015
10 89005
<PAGE>
<TABLE>
<CAPTION>
Zip Code Profiles
CATEGORIES 89107 89108 89109 89110 89113 89115
<S> <C> <C> <C> <C> <C> <C>
No. of Households 13,322 20,701 22,455 17,193 1,928 19,082
No. of Housing Units 13,641 21,227 23,738 17,797 2,043 19,780
Population 34,187 56,720 41,077 50,307 5,114 55,579
Age of Adults
18-24 8% 7% 11% 9% 7% 11%
25-34 18 25 18 18 19 24
35-44 20 26 19 26 16 24
45-54 15 17 16 19 26 15
55-64 18 13 13 12 17 13
65+ 21 12 23 16 15 13
Education of Adults
SOME HIGH SCHOOL 7% 5% 9% 8% 3% 14%
HIGH SCHOOL DEGREE 30 27 29 31 22 33
SOME COLLEGE 32 37 33 37 34 34
COLLEGE DEGREE 17 16 15 11 19 12
SOME GRADUATE 4 6 4 5 7 4
GRADUATE DEGREE 10 9 10 8 15 3
Children (under 18)
YES 33% 43% 21% 40% 29% 43%
NO 67 57 79 60 71 57
Type of Dwelling
SINGLE-FAMILY 67% 64% 9% 60% 90% 37%
APARTMENT 25 23 74 16 0 25
CONDO-TOWNHOME 8 11 14 10 10 9
MOBILE HOME 0 2 3 14 0 29
Household Income
UNDER $15,000 11% 11% 22% 3% 1% 13%
<PAGE>
$15,000-$19,999 10 5 14 8 1 10
$20,000-$24,999 9 9 11 10 4 18
$25,000-$34,999 20 15 23 19 8 19
$35,000-$49,999 19 24 16 28 13 24
$50,000-$74,999 17 21 10 20 24 14
$75,000-$100,000 8 10 1 8 16 1
$100,000+ 6 5 3 4 33 1
MEDIAN $34,949 $40,869 $26,182 $40,241 $73,100 $40,926
Length of Residence
NEWCOMER 6% 4% 12% 5% 5% 7%
1-5 YEARS 14 23 31 20 30 28
6-10 YEARS 15 13 20 22 13 21
11-20 YEARS 17 22 21 22 15 21
OVER 20 YEARS 48 38 16 31 37 23
</TABLE>
<PAGE>
THE SITE
<PAGE>
ESTIMATED COST OF DEMOLITION
Information relative to the square footage contained in the total
structure were obtained from the records of the Clark County Assessor's Office.
They show a total of 24,030 sq. ft. with an average height of 9' of 306,270
cu. feet.
The cubic area of the pool is 4,752 cubic feet.
There is 1,100 sq. ft. of concrete slab and 4,500 sq. ft. of blacktop.
Although no testing has been done, there is a possibility that the ceiling
finish in all units contains some form of asbestos. A test will determine if
special treatment is needed during demolition. If required, the cost of asbestos
removal could cost $40,000 to $50,000 for 24,000 sq. ft. or $1.85 sq. ft.
The following items could be salvaged if time permits.
1. All appliances
2. Refrigeration and heating units
3. All doors
4. All carports
5. Plumbing and fighting fixtures
6. Steel stairs
The salvage should amount to $25,000 to $32,000.
A composite of demolition costs are as follows:
306,270 cu. feet of razing @ $0.31 = $ 98,000
12,000 sq. ft. of concrete & asphalt to break @ $1.57 = $ 18,840
* 24,030 sq. ft. ceiling @ $1.85 per sq. ft. = $ 44,456
The total cost of demolition and hauling = $161,296
If no salvage is attempted add + $ 17,900
--------
If tests for asbestos are negative - $ 27,200
--------
$151,996
The fair market value contained in this report has been reduced by
$179,000.
<PAGE>
RUN DATE: 05/23/97 11:52 COMMERCIAL APPRAISAL RECORD PAGE 1 OF 2
PARCEL NO: 162-09-806-009 02 SITE: 360 E DESERT INN RD
PROJECT NAME: ROYAL ALOHA VACATION CLUB LAND USE: 1-50-0-0-1 23
LAST UPD: 07/13/96
BASE YR: 1993 EFF YR: 1962 APR NO: 55 APR DT: 08/1993 LAST VST REASON: A
OCCUPANCY #1 OCCUPANCY #2 OCCUPANCY #3 OCCUPANCY #4
OCCUPANCY CODE 352
CLASS C
RANK 1.30
ORIG YEAR BLT 1962
EXTERIOR WALL 6
ROOF TYPE 2
FOUNDATION TYPE 1
PLUMBING FIXTURES 3
INTERIOR FINISH 2
STRUCTURAL TYPE 2
FLOOR TYPE 1
LIGHTING FIXTURE 4
NO OF STORIES 2
AVG STORY HGHT 9.0
PERIMETER (SHAPE) 511
TOTAL FLOOR AREA 14208
TOTAL GROUND AREA 8071
NO OF UNITS 12
ELEVATORS
SPRINKLERS
HEAT/COOL #1 14.100%
HEAT/COOL #2
HEAT/COOL #3
HEAT/COOL #4
NO-WALL AREA
MISC BLDG #1
MISC BLDG #2
MISC BLDG #3
MISC SLOG #4
BLDG ADD. #1 BLDG ADD. #2 BLDG ADD. #3 BLDG ADO. #4 BLDG ADD. #5
OIMPS NET: MULT ADJ: OTH ADJ: OVERRIDE:
REM: PCOMP%
<PAGE>
RUN DATE: 05/23/97 11:52 COMMERCIAL APPRAISAL RECORD PAGE 2 OF 2
PARCEL NO: 162-09-806-009 02 PROJECT NAME: ROYAL ALOHA VACATION CLUB
ADDITIONAL MISC. ITEMS
CODE DESCRIPTION UNITS ADJ.
14 DISHWASHER 12
15 GARBAGE DISPOSAL 12
16 HOOD & FAN 12
18 RANGE & OVEN 12
29 CB WALL, REG 740
44 FENCE SOLID BOARD 6' 488
52 FIREPLACE 1 STORY 1
53 FIREPLACE 2 STORY 5
92 POOL SURFACE AREA 900
155 CONC/STEEL STAIRS(AVG) 2
166 PEO LIGHT W/LANTERN 8' 7
179 CCP - LOW 2390
303 CONCRETE 1000-2999 2085
<PAGE>
RUN DATE: 05/23/97 11:52 COMMERCIAL APPRAISAL RECORD PAGE 1 OF 2
PARCEL @10: 162-09-806-009 01 SITE: 360 E DESERT INN RD
PROJECT NAME: ROYAL ALOHA VACATION CLUB LAND USE: 1-50-0-0-1 23
LAST UPO: 07/13/96
BASE YR: 1993 EFF YR: 1953 APR NO: 55 APR DT: 08/1993 LAST VST REASON: A
OCCUPANCY #1 OCCUPANCY #2 OCCUPANCY #3 OCCUPANCY #4
OCCUPANCY CODE 352
CLASS C
RANK 1.30
ORIG YEAR BLT 1953
EXTERIOR WALL 6
ROOF TYPE 4
FOUNDATION TYPE 1
PLUMBING FIXTURES 3
INTERIOR FINISH 2
STRUCTURAL TYPE 2
FLOOR TYPE 1
LIGHTING FIXTURE 4
NO OF STORIES 2
AVG STORY HGHT 9.0
PERIMETER (SHAPE) 390
TOTAL FLOOR AREA 9723
TOTAL GROUND AREA 9723
NO OF UNITS 1.1
ELEVATORS
SPRINKLERS
HEAT/COOL #1 14.100%
HEAT/COOL #2
HEAT/COOL #3
HEAT/COOL #4
NO-WALL AREA
MISC BLDG #1
MISC BLDG #2
MISC BLDG #3
MISC BLDG #4
BLDG ADD. #1 BLDG ADD. #2 BLDG ADD. #3 BLDG ADD. #4 BLDG ADD. #5
OIMPS NET: MULT ADJ: OTH ADJ: OVERRIDE:
REM: PCOMP%
<PAGE>
RUN DATE: 05/23/97 11:52 COMMERCIAL APPRAISAL RECORD PAGE 2 OF 2
PARCEL NO: 162-09-806-009 01 PROJECT NAME: ROYAL ALOHA VACATION CLUB
ADDITIONAL MISC. ITEMS
CODE DESCRIPTION UNITS ADJ.
29 CB WALL, REG 3020
52 FIREPLACE 1 STORY 1
53 FIREPLACE 2 STORY 1
92 POOL SURFACE AREA 792
155 CONC/STEEL STAIRS(AVG) 1
179 CCP - LOW 2533
197 MULTIPLE CARPORT 22
208 STORAGE 480
208 STORAGE 235
298 ASPHALT 3000 & OVER 9000
303 CONCRETE 1000-2999 1069
<PAGE>
The following picture pages have been included to show the condition of
the improvements and the site advantages prior to the taking in eminent domain
in 1993. Actual date of the start of construction on the Desert Inn Arterial was
1995 and is still not completed. Final completion is anticipated by late summer
1997.
<PAGE>
[Photograph of Royal Aloha Vegas omitted]
LANDSCAPING REMOVED
[Photograph of lot line of Royal Aloha Vegas omitted]
VIEW OF LOT LINE ON MEL AVENUE
<PAGE>
[Photograph of Royal Aloha Vegas omitted]
SOUTH ELEVATION AND FENCE
[Photograph of Royal Aloha Vegas omitted]
CARPORT AT UNIT 1
<PAGE>
[Photograph of Royal Aloha Vegas omitted]
SOUTH WALL OF UNIT 11 (BEDROOM)
[Photograph of Royal Aloha Vegas omitted]
ENTRANCE TO UNIT 11
<PAGE>
[Photograph of Royal Aloha Vegas omitted]
[Photograph of Royal Aloha Vegas omitted]
<PAGE>
[Photograph of Royal Aloha Vegas omitted]
PATIO UNIT 1
[Photograph of Royal Aloha Vegas omitted]
LANDSCAPING ON EAST WALL
<PAGE>
[Photograph of Royal Aloha Vegas omitted]
LANDSCAPING BEFORE TAKING
[Photograph of Royal Aloha Vegas omitted]
UNIT 1 INSIDE FENCE (SOUTH ELEVATION)
<PAGE>
[Photograph of Royal Aloha Vegas omitted]
FENCE IN RELATIONSHIP TO STAKE SHOWING NEW LINE
[Photograph of Royal Aloha Vegas omitted]
UNIT 1 REMOVED
<PAGE>
[Two photographs of Royal Aloha Vegas over plat map of property omitted]
<PAGE>
[Photograph of Royal Aloha Vegas omitted]
SIGN AND UNIT 1
[Photograph of Royal Aloha Vegas omitted]
STAKE SHOWING PROXIMITY OF RIGHT OF WAY
<PAGE>
COMPARABLE
SALES
<PAGE>
COMPARABLE SALE #5
APN# 162-16-510-014
LOCATION On Desert Inn Road
GRANTOR Gary and Susan Hallman
GRANTEE 357 Inc.
DOC.# 940111-00609
DATE OF SALE 1/94
SELLING PRICE $800,000
SQUARE FOOTAGE 18,125 sq. ft.
PRICE PER SQUARE FOOT $44.14
CONFIRMED BY Public Record
ZONING H-1
REMARKS: This sale was adjusted for location, size and access. The property was
improved with a single family residence.
<PAGE>
[Locating parcel map for comparable sale #5 omitted]
<PAGE>
COMPARABLE SALE #6
APN# 162-16-510-017
LOCATION 363 E. Desert Inn Road
GRANTOR
GRANTEE Aronimink Corp.
DOC.# 940930-00305
DATE OF SALE 9/94
SELLING PRICE $825,000
SQUARE FOOTAGE 17,860 sq. ft.
PRICE PER SQUARE FOOT $46.19
CONFIRMED BY Public Record
ZONING H-1
REMARKS: This parcel is located approximately 1/2 block West. Adjustments are
required for time and location. The property was improved with a single family
residence.
<PAGE>
[Locating parcel map for comparable sale #6 omitted]
<PAGE>
SALES GRID
<PAGE>
COMPARABLE SALES ADJUSTMENT GRID
1 2 3
APN# 162-15-101-008 162-16-611-009 162-16-510-005
DATE OF SALE 9/93 8/94 4/94
SALES PRICE $1,840,000 $790,000 $827,500
SQUARE FOOT 27878 15682 18125
SALES PRICE PER SQ.FT. $66.00 $50.37 $45.66
TIME +25% +19% +22%
ADJUSTED S.P. $82.50 $59.94 $55.70
LOCATION POORER POORER POORER
ADJUSTMENT 5% 25% 15%
SIZE SIMILAR SIMILAR SIMILAR
ADJUSTMENT 0% 0% 0%
ACCESS POORER POORER POORER
ADJUSTMENT 5% 20% 5%
NET ADJUSTMENT 10% 45% 20%
INDICATED VALUE $90.75+$5.84 DEMOLITION
OF SUBJECT PROPERTY $96.59 $81.91 $66.84
4 5 6
APN# 162-16-210-001,002,003 162-16-510-014 162-16-510-017
162-16-201-001-002
DATE OF SALE 12/93 1/94 9/94
SALES PRICE $5,551,640 $800,000 $825,000
SQUARE FOOT 70212 18125 17860
SALES PRICE PER SQ.FT. 79.07 44.14 $46.19
TIME +24% +23% 18%
ADJUSTED S.P. $98.04 $54.29 $54.50
LOCATION BETTER POORER POORER
ADJUSTMENT -10% 10% 5%
SIZE LARGER SIMILAR SIMILAR
ADJUSTMENT 5% 0% 0%
ACCESS BETTER POORER POORER
ADJUSTMENT -10% 10% 5%
NET ADJUSTMENT -15% -5% 10%
INDICATED VALUE
OF SUBJECT PROPERTY $83.33 $51.57 $59.95
Indicated value for the subject property of $75.00 per sq. ft
Mean: $74.19
Median: $75.08
<PAGE>
COMPARABLE SALE #1
APN# 162-15-101-008
LOCATION 735 E. Desert Inn Road
GRANTOR Convention Inn Inc.
GRANTEE Clark County
DOC.# 931201-00171
DATE OF SALE 12/93
SELLING PRICE $1,840,000
SQUARE FOOTAGE 27,878 sq. ft.
PRICE PER SQUARE FOOT $66.00
CONFIRMED BY Public Record and Grantor
ZONING H-1
REMARKS: This parcel is located approximately 1 block East. Adjustments required
for tune and location. The property was improved with a 3-story motel.
<PAGE>
[Locating parcel map for comparable sale #1 omitted]
<PAGE>
COMPARABLE SALE #2
APN# 162-16-611-009
LOCATION 75 Country Club Lane
GRANTOR Vincent M. & Dorothy Sanner Tr.
GRANTEE Aronimink Corp.
DOC.# 940802-00164
DATE OF SALE 8/94
SELLING PRICE $790,000
SQUARE FOOTAGE 15,682 sq. ft.
PRICE PER SQUARE FOOT $50.37
CONFIRMED BY Public Record and Grantor
ZONING R-1
REMARKS: This parcel is located approximately 1/2 mile South. Adjustments
required for time and location. The property was improved with a single family
residence.
<PAGE>
COMPARABLE SALE #3
APN# 162-16-510-005
LOCATION 339 E. Desert Inn Road
GRANTOR Lisa Kezmanich Griffin
GRANTEE Aronimink Corp.
DOC.# 94027-498
DATE OF SALE 4/94
SELLING PRICE $827,500
SQUARE FOOTAGE 18,125 sq. ft.
PRICE PER SQUARE FOOT $45.66
CONFIRMED BY Public Record and Grantor
ZONING H-1
REMARKS: This parcel is located approximately 1/2 block West. Adjustments
required for time and location. The property was improved with a single family
residence.
<PAGE>
[Locating parcel map for Comparable Sale #3 omitted]
<PAGE>
COMPARABLE SALE #4
ARN# 162-16-201-001,002 & 162-16-210-001,002 & 003
LOCATION Northeast corner of Sands Ave. and Las Vegas Blvd.
GRANTOR Brent Gramany, Claire Gramany, A. Kent Greene &
Eric Zubel
GRANTEE Sheraton Desert Inn Corp.
DOC.# 931230-00636, 931230-00637, 930924-00181,
931203-00508
DATE OF SALE 12/93, 12/93, 9/93, 12/93
SELLING PRICE $5,552,640
SQUARE FOOTAGE 70,212 sq. ft.
PRICE PER SQUARE FOOT $79.07
CONFIRMED BY Sheraton Desert Inn Corp. Legal Counsel
ZONING H-1
REMARKS: This property consisted of five parcels. The site is vacant and all are
available. At the time of purchase, the property contained a one-story retail
structure. This site is part of an assembly by the Sheraton Desert Inn
Corporation which included the Desert Inn Country Club. This sale is
approximately 1 mile from the subject property. Adjustments were made for
location and time of sale.
<PAGE>
[Locating parcel map for Comparable Sale #4 omitted]
<PAGE>
CORRELATION AND FINAL ESTIMATE OF VALUE
All data relative to the value estimate was reviewed. Economic
conditions indicate an increase in value were indicated in the immediate area. A
new hotel is under construction one block north. The Las Vegas Convention Center
is being expanded. The property across Desert Inn Road south is the site of a
new mega resort to be built in the next two years. Six new resorts have been
constructed on the Strip in the last two years. An addition is to be added to
the Sahara Hotel two blocks north.
The area is on an upward trend, with land parcels becoming more
difficult to obtain. Sales are scarce, but those found indicate a 6% per year
increase.
Based on all the data available, the indicated unit of value of $75 per
square foot is a reasonable value. The estimated demolition is difficult to
confirm due to the hauling time to the Apex dump, but is a reasonable expected
cost.
The fair market value is as follows:
39,376 sq. ft. @ $75 per sq. ft. = $2,953,425
Estimated Cost of Demolition of the Improvement = $ 179,000
Indicated Fair Market Value of the land as vacant = $2,774,425
Say $2,800,000
<PAGE>
ADDENDA
<PAGE>
APPRAISERS
QUALIFICATIONS
<PAGE>
Donald R. Beach
Born November 28, 1928
Attended Southern Illinois University 1947-1948
Served in United States Marine Corps. and U.S. Naval Air Corps.
EMPLOYMENT
1950 Worked for various contractors in the Chicago area.
1959 Obtained Real Estate License in Illinois as a salesman and broker.
Worked for Ed Pocus Inc., Wheaton, IL. as an appraiser and salesman.
1961 Employed by Dupage County, Illinois as a land evaluator and became
Deputy Supervisor of Real Estate Assessment. Prepared a land map
showing base land values for 168,000 parcels of real estate and aided
in the preparation of cost manual to appraise all improvements in the
county.
1970 Employed as Deputy Director of Property Valuation in the state of
Arizona. Worked on cost manual and the first statewide appraisal by
computer involving 1,600,000 parcels of real estate. Assisted in the
preparation of the Personal Property Appraisal manual.
1973 Employed by Michael Baker Jr., Inc., as a Sales/Computer Supervisor.
Sold Computer Valuation Programs and worked Mass Appraisal Programs in
Jacksonville and Sarasota, Florida and Farmington, Connecticut. Sold
Engineering Service.
1975 Became Tax Assessor (Director of Assessment Adm) for Washington, D.C.
Designed and implemented programs in seven different tax areas
including real estate.
1979 Returned to Phoenix, Arizona to be Chief Appraiser of Maricopa County.
1981 Became Assistant Assessor of Clark County Nevada.
1988 Started own Computer Appraisal Company
1988/ Independent appraisal consultant
present
1994 Assistant Property Appraiser; Hillsborough County. Florida
<PAGE>
ACTED AS INSTRUCTOR FOR:
University of Florida Assessor's Association: Kansas
Arizona State University New Mexico
Rutgers University Alaska
Central Arizona University Missouri
State of Arizona Illinois
University of Arizona (Tucson) Tennessee
Oklahoma State University Louisiana
139 SCHOOLS IN 35 STATES
Anchorage, AK 2 Portland, OR 1
Phoenix, AZ 6 Colombia, MO 2
Tucson. AZ 4 LAFAYETTE, LA 5
Auburn, AL 2 Albuquerque, NM 7
Boston, MA 1 Boise, ID 3
St Louis, MO 1 Pocatella, ID 2
Denver, CO 1 Moscow, ID 1
Dallas, TX 1 Peoria, IL 7
Los Angeles, CA 1 Bloomington, IL 3
Yakima, WA 2 Athens, GA 3
Charleston, SC 4 Atlanta, GA 2
Charlottesville, VA 1 West Palm Beach, FL 1
Tampa, FL 4 Daytona Beach, FL 4
Orlando, FL 5 Ames, IA 1
Tallahassee, FL 2 Sioux Falls, SD 2
Miami, FL 6 Vermilion, SD 2
Stillwater, OK 3 Louisville, KY 2
<PAGE>
St. Charles, MO 2 Baltimore, MD 1
Winston Salem, NC 2 St. Paul, MN 1
Nashville, TN 5 LAS Vegas, NV 9
Knoxville, TN 1 Carson City, NV 2
Jackson, TN 2 Little Rock, AR 1
Topeka, KS 2 Toronto, Canada 2
Manhatten, KS 3 Billings, MT 1
Wichita, KS 2 Lincoln, NE 5
Springfield, MO 2 Casper, WY 1
TOTAL 139
I have taught over 5,000 students various subjects at these and other
locations.
SCOPE OF WORK
o Written Appraisal Manuals for three Appraisal Offices.
o Supervised work of fifty or more Appraisers in mass appraisal for Tax
Assessment.
o Supervised complete reappraisal of jurisdictions with 200,000 to over
1,000,000 parcels of real estate.
o Organized and conducted appeals on 6,000 complaints.
o Wrote computer appraisal program to automate all classes of real
estate.
o Taught and organized education for various appraisal staff.
0 Personally appraised individual properties with values in excess of
$200,000,000.00
<PAGE>
APPRAISAL DESIGNATIONS AND CERTIFICATIONS
1963 Certified Assessment Evaluator C.A.E., (Lapsed)
International Association of Assessing Officers
1969 Certified Illinois Assessing Officer C.I.A.0. (Lapsed)
1975 Senior Professional Assessor, S.P.A., (Lapsed)
New England Assessor Association
1978 Certified in Real Estate and Personal Property by the State
of Arizona (Retired from Assessment Appraisal)
1981 Certified in Real Estate and Personal Property by the State
of Arizona (Retired from Assessment Appraisal)
1986 Certified Review Appraiser C.R.A. (Lapsed)
1987 Accredited Nevada Appraiser A.N.A. (Lapsed)
1994 Certified Environmental lwector C.E.I. Environmental
Assessment Association
1994 Certified Environmental Specialist C.E.S. Environmental
Assessment Association
1996 Certified Commercial Real Estate Appraiser C.C.R.A.
1996 Certified Real Estate Appraiser C.R.E.A.
AWARDS
International Assessor Association - Outstanding Member 1973
Donahue Essay Award - 1978, 1979, 1983 and 1985
Outstanding Certified Assessment Evaluation-1975
Outstanding Office Award for: State of Arizona - 1971
Washington, D.C. - 1975
Clark County, Nevada - 1982
TEACHING EXPERIENCE
Senior Instructor I.A.A.0 for approx. 30 years.
Wrote materials for six Appraisal Courses from 1963 to present.
Subjects Taught include Basic Appraisal, Income Approach to Value, Writing a
Narrative Appraisal, Appraisal Administration, Appraisal of Apartments,
Appraisal of Shopping Centers, Appraisal of Farm Land, Land All Uses,
Depreciation, Machinery and Equipment, Appraisal of Industrial Property,
Appraisal of Land with Environmental Damage, Blueprint Reading and Cost
Estimating.
Approved by the State of Nevada as an instructor for Contractors Licensing
Schools, Las Vegas, NV.
Instructor for Value It, Minneapolis, MN.
<PAGE>
APPRAISAL PROJECTS
1968 Lease Hold Improvements at O'Hare Field in Chicago, IL
1969 Abandoned Railroad right of way through Dupage County, IL
1973 Anaconda Smelter Complex, Great Falls, MT
1974 London Bridge, Lake Havasu, AZ
1976 White House, Capitol, Washington Monument and all other Memorials and
foreign Embassies in Washington, D.C.
1982 Pulpmill in Taylor County Florida under court appeal
1988 General Motors Plant near St. Louis, MO, for tax appeal
1989 Refineries in Louisiana Race Track in Louisiana
1993 Phosphate mine in Florida for tax appeal
SUPERVISION
Supervised offices including the Personnel Records and have prepared
budgets involving as many as 136 employees and money in excess of $3,000,000.00
LITIGATION EXPERIENCE (TESTIMONY)
State and Federal Government in Illinois
State Court and Legislature in Arizona
State Court, Legislature and Appeal Boards in Nevada
Courts in Florida
Appeal Boards in Montana
Appeal Boards in Missouri
Appeal Boards in Louisiana
Federal District Court in Washington, D.C.
<PAGE>
MISCELLANEOUS
INFORMATION
<PAGE>
<TABLE>
<CAPTION>
Clark Clark Comprehensive Planning
County Current Planning Division
401 South Furth Street
P. 0. Box 551744
Las Vegas, Nevada 89155-1744
(702) 455-4314
Non Residential Districts
Property Development Standards
Code Description Min. Lot Setbacks Max. Stories Max. Lot
Area(acres) Front Corner Side Rear Max. Height Coverage
- ---- -------------------- ----------- -------------- ----------------- ---------------- --------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20' for bldg 20' for bldg Adj. Res. 20' Adj. Res. 20'
C-C Shopping Center 5 & parking & parking Adj. Com. 10' Adj. Com. 10' 3/45' 25%
C-P Office & Professional None 15' 20' 0/Adj. Res. 10' 0/Adj. Res. 10' 2/35' 60%
C-1 Local Business None 10' 20' 0/Adj. Res. 10' 0/Adj. Res. 10' 2/35' 60%
C-2 General Commercial None 10' 20' 0/Adj. Res. 10' 0/Adj. Res. 10' 4/50'(2) 60%
C-3 General Commercial None 10' 20' 0/Adj. Res. 10' 0/Adj. Res. 10' 4/50'(2) 60%
10% width of lot 10% width of lot
H-1 Limited Resort & Apt. None 10' 20'min-50'max(1) 5'min-50'max(1) 0/Adj. Res. 20' 9/100'(2) 60%
See 10% width of lot Res 2/35'
H-2 General Highway Frontage 29.32.030 10' 20' 5'min-20'max 0/Adj. Res. 20' Com 4/50' See 29.32
Pub.St.15'(3) Pub. St. 15'(3) Pub. St. 15'(3) Pub. St. 15'(3)
T-C Mobile Home Park 10 Priv. St. 5' Priv. St. 5' others 5' others 5' 2/35' 50%
Pub.St.15' Pub. St. 15' Pub. St. 15' Pub. St. 15'
RVP Recreational Vehicle Park 10 Priv.St.5' Priv. St. 5' others 5' others 5' See (4) See (4)
P-F Public Facility See (4) See (4) See (4) See (4) See (4) See (4) See (4)
15' for bldg 15' for bldg
M-D Designed Manufacturing None & parking & parking 0/Adj. Res. 20' 0/Adj. Res. 20' 4/50' 45%
M-1 Light Manufacturing None 20' 20' 0/Adj. Res. 20' 0/Adj. Res. 20' 4/45' 80%
M-2 Industrial None 20'(5) 20'(5) See (5) See (5) 6/75' 80%
M-3 Heavy Industrial None 20'(5) 20'(5) See (5) See (5) 6/75' 80%
</TABLE>
(1) Buildings & Structures over 40' high require 1' additional per story over
40' for side yard setback - See 29.30.040 (H-1)
(2) Higher with conditional use permit.
(3) See R-1 regulations for single family residences.
(4) Determined by conditions of commission approval.
(5) Use separations are also required - See 29.42.010 (M-2) and 29.43.020
(M-3).
General Notes:
1. No structure over 35' allowed where prohibited by 29.50 (Airport Height
Restrictions).
2. Greater setback required where 29.64 (Building Setbacks and Future Width)
applies.
This table is designed to give general information and regulations for the
zoning districts. For specific information and regulations., consult with Title
29 or with Current Planning.
<PAGE>
<TABLE>
<CAPTION>
TRW-REDI Nationwide 1-800-345-7334 Copyright 1994
All Rights Reserved
PARCEL NUMBER DISTRICT LAND USE STRUCTURAL IMPROVEMENT SALE AMOUNT VALUES
OWNERS NAME DIMENSIONS DATA AREA DEED DT/TYP TOTAL -TV
MAILING ADDRESS EXTRA FEATURES SALE DATES LAND-LV
* PROPERTY LOCATION BK-DOCUMENT AGRICULTURAL-AG
LEGAL DESCRIPTION TRUST AMT(T) IMPROVEMENT-IV
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
16218-111-108 470 110-RESID-SINGLE FAMILY BLDG SQFT - 864 YR BLT - 1973 $23,000 $18,980IV
ROY WILLARD M & MARY V 75 X 80 TYPE - ONE STORY ROOMS - 4 08/29/74 N $ 8,09OLV
3484 MYRTLE AVE 6,OOOSF STYLE - CONVENTIONAL BEDROOMS- 2 456-415038 $10,890IV
LAS VEGAS NV 89102 FENCED YARD QUALITY - FAIR BATH F-1
PHONE (702)876-1038 PAVED CONCRETE - 49OSF EXT WALL- FR-SID/SHINGLE EXEMPTIONS:
*3484 MYRTLE AVE CITY-WATER-SEWF-R ROOFING - BUILT UP WINDOW
DRAKE EST PLAT BOOK 9 PAGE 11 TOPOGRAPHY -LEVEL FLOORING- CONCRETE
LOT 13 BLOCK 05 PT NW4 NW4 FLR CVR - 60%-CARPET
SEC 18 TWP 21 RNG 61 FLR CVR - 40%-VINYL
OLD PARCEL NUMBER 130-391-002 HEATING - CENTRAL REFRIG
A/C - CENTRAL REFRIG
CARPORT - 240SF
- ----------------------------------------------------------------------------------------------------------------------------------
250-789-024 340 110-RESID-SINGLE FAMILY BLDG SQFT - 1605 YR BLT - 1983 $81,500 $34,940TV
ROY WILLIAM A & BONNIE R 70 X 104 TYPE - ONE STORY ROOMS - 6 02/25/83 $ 6,98OLV
6390 GOLDMINE DR 7,289SF STYLE - CONVENTIONAL BEDROOMS - 3 02/83 $27,96OIV
LAS VEGAS NV 89115 PORCH 35SF QUALITY - FAIR FAM ROOMS- 1 1695-1654026
PHONE (702) 459-2951 FENCED YARD EXT WALL- FRAME-STUCCO BATH F-1 PRIOR:
*6390 GOLDMINE DR PAVED CONCRETE - 493SF ROOFING - ASPHALT SHNGLE 3/4-1 1445-1404901
KINGSRIDGE 5 PLAT BOOK 27 POOL AREA - 512SF FLOORING- CONCRETE FIREPL - 1
PAGE 34 LOT 15 BLOCK 5 PT SW4 HEATER FLR CVR - 80%-CARPET
SE4 SEC 22 TWP 20 RNG 62 JACUZZI FLR CVR - 20%-VINYL
DECK KOOL DECK - 20OSF HEATING - CENTRAL REFRIG
CITY-WATER-SEWER A/C - CENTRAL REFRIG
TOPOGRAPHY-LEVEL GARAGE - ATTACHED - 431SF
- ----------------------------------------------------------------------------------------------------------------------------------
138-23-310-082 200 110-RESID-SINGLE FAMILY BLDG SQFT - 1780 YR BLT - 1991 $119,000 $39,670TV
ROY WILLIE J & LAVINIA L 50 X 103 TYPE - TWO STORY ROOMS - 7 10/10/91 N $ 6,62OLV
1976 WEENAP DR 5,15OSF STYLE - CONVENTIONAL BEDROOMS- 4 911010-00058 $33,05OIV
LAS VEGAS NV 89108 PORCH 57SF QUALITY - FAIR FAMI RMS- 1 $120,711T
*1976 WEENAP DR FENCED YARD EXT WALL- @E-STUCCO BATH F-2 H-1 PRIOR:
METROPOLITANS FIRST COLONY PAVED CONCRETE - 42OSF ROOFING - TILE/SLATE FIREPL - 1 08/14/90
NORTHPLAT BOOK 35 PAGE 10 LOT POOL AREA - 45OS FLOORING- CONCRETE 900814-00294
29 BLOCK 2 PT NW4 SW4 SEC 23 DECK KOOL DECK - 36OSF FLR CVR - 60%-CARPET
TWP 20 RNG 60 FLR CVR - 40%-VINYL
OLD PARCEL NUMBER 300-615-083 HEATING - FORCED AIR ELEC
A/C - CENTRAL REFRIG
GARAGE - ATTACHED - 475SF
TOPOGRAPHY -LEVEL, CORNER
- -----------------------------------------------------------------------------------------------------------------------------------
162-09-806-009 410 150-APARTMENT YR BLT - 1953 $1,122,250 $285,660TV
ROYAL ALOHA VACATION CLUB 1.02AC UNITS - 23 11/04/83 Y $124,41OLV
1505 DILLINGHAM BLVD #212 11/83 $161,25OIV
HONOLULU HI 96817-4822 1829-1788754
*360 E DESERT INN RD PRIOR:
PT SE4 SE4 SEC 09 21 61 PT 885-844706
SE4 SE4 SEC 09 TWP 21 RNG 61
OLD PARCEL NUMBER 120-310-004
CLARK, NV. P 03
- --- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
[Letterhead]
Clark County PUBLIC WORKS
PROJECTS UNDER CONSTRUCTION
OR PROJECTED TO BEGIN IN 1997
Arterial Projects
<S> <C> <C> <C>
Cheyenne Avenue Lamb to Nellis boulevards widen to four lanes B
Decatur Boulevard * Russell Rd to Tropicana Ave construct five lane roadway A
Desert Inn Road Durango Dr to Jones Blvd construct new road F
Desert Inn Road ** Jones to Valley View boulevards widen and improve existing roadway F
Desert Inn Road Mojave Rd to Boulder Hwy widen to six lanes E
Desert Inn Road Relocation ** Paradise Rd to Swenson St depress & widen road, construct 3 bridgee E
Eastern Avenue * Raven St to Wigwam Ave widen to four lanes A
Industrial Road Hacienda to Tropicana avenues reconstruct to four lanes A
Las Vegas Boulevard * Serene Ave to Warm Springs Rd widen road, new signal at Wigwam A/G
Maryland/Paradise Rd Connect Windmill Ln to Warm Springs Rd construct connector, widen to four lanes A
Oquendo Road Sandhill Rd to Pearl St construct new 60-foot roadway G
Patrick Lane Eastern Ave to Pecos Rd reconstruct roadway, widen to four lanes G
Pebble Road Eastern Ave to Topaz St construct four lanes, Pittman Wash bridge A
Rainbow Boulevard Tropicana Ave to Russell Rd widen to four lanes A
Russell Road - Phase II Decatur to Valley View boulevards construct new six lane roadway A
Russell Road Maryland Pkwy to Eastern Ave reconstruct existing road G
Sahara Avenue ** Orchard Valley to Treeline drives construct new four lane road A
Spring Mountain Road Durango Dr to Rainbow Blvd widen to four lanes F
Spring Mountain Road Rainbow to Valley View boulevards widen roadway, storm drain F
Valley View Boulevard Oquendo Rd to Tropicana Ave widen roadway A
Windmill Lane Las Vegas Blvd to Maryland Pkwy widen to four lanes A
Polaris Avenue Oquendo Rd to Hacienda Ave widen roadway A
Traffic Signal Installation** Buffalo/Tropicana, Durango/Flamingo, Durango /Spring Mountain A/F
Vegas Valley Drive Nellis Blvd to Treeline Dr widen to four lanes E
Vegas Valley Drive Area Eastern Ave to Mojave Rd replace obsolete streetlights E
Flood Control Projects
Hiko Springs Wash Lauglin construct outfall channel A
Pabco Erosion Control Pabco Rd to Wetlands Park construct weir A
Range Wash Nellis Blvd to Detention Basin repair channel lining B
Rawhide Channel ** Mojave Rd to Sagebrush St concrete-line channel G
Sloan Channel Stewart Ave to Charleston Blvd construct channel lining A
* Currently under construction ** Completed (continued on back)
<PAGE>
Outlying Area Projects
<S> <C> <C> <C>
Bilbray Parkway Laughlin widen, realign and extend existing road A
Bunkerville Flood Channel Bunkerville construct detention basin A
Civic & Big Bend Drives * SR163 to Casino Dr in Laughlin widen, realign and extend existing road A
Moapa Road Moapa Valley/McKnight Loop construct two lane roadway A
Muddy river Bridge Moapa Valley construct Yamashita bridge A
Mount Charleston IV Rainbow Subdivision paving improvements C
Searchlight Road Hobson/US 95 to Co maintained road construct two lane paved roadway A
Beltway Projects
Southern Beltway 3A ** Windmill Ln to Eastern Ave two miles of new six lane freeway A
Southern Beltway 3B * Eastern Ave to Pecos Rd construct new six lane freeway A
Southern Beltway 6A * I-15/I-215 future interchange construct new I-15 bridges over I-215 A/G
Southern Beltway 6B * I-15 to Industrial Rd relocated industrial Rd, bridges over I-215 A/G
Southern Beltway 6C * I-15 to Decatur Blvd construct four lanes of new freeway A/G
Southern Beltway 2B Warm Springs Rd to Eastern Ave aesthetic landscaping A
Southern Beltway 4 Pecos Rd to Green Valley Pkwy construct four lanes of new freeway A
Southern Beltway 5 Green Valley Pkwy to I-515 construct four lanes of new freeway A
Southern Beltway 7A Decatur to Rainbow Boulevards four lane "Interim" Beltway frontage rd A
Southern Beltway 7B Rainbow Blvd to Durango Dr four lane "Interim" Beltway frontage rd A
Southern Beltway 8A Durango Dr to Tropicana Ave four lane "Interim" Beltway frontage rd F
Western Beltway Tropicana Ave to Huaiapai Wy four lane "Interim" Beltway facility F
Resort Corridor Projects
Flamingo/Industrial Connect** Flamingo to Industrial Roads construct new four lane juncture F
Hacienda Avenue/Koval Lane Las Vegas Blvd to Sands Ave four lane connector, two traffic signals E/G/A
Hacienda Avenue/I-15 Bridge Polaris Ave to Luxor Dr construct four lane bridge over I-15 F/G
Harmon Avenue Las Vegas Blvd to Paradise Rd construct six lane bridge over I-15 F/G
Industrial Road** Tropicana Ave to Spring Mtn Rd widen/relocate to new I-15 undercrossing F
Resort Boulevard Frontage Rd Russell/Tropicana/Flamingo Las Vegas Blvd/I-15 Frontage Road E/G
Russell Road Bridge* Decatur to Valley View Boulevards bridge over future Russell Road tunnel A
Spring Mtn Rd/Sands Ave Ph I Fashion Show Dr to Paradise Rd drainage improvements E
Spring Mountian Road Spring Mtn Rd at Las Vegas Blvd construct pedestrian walkways E
Tropicana Ave Phase III* Koval Ln to Wilbur St imporve/construct additional travel lanes G
* Currently under construction
** Completed
Prepared by the Administration and Programs Division of Clark County Public June 1997
Works for additional information, contact our office at 455-6000.
</TABLE>
