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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1998
REGISTRATION NO. 333-49065
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CLUB REGINA RESORTS, INC.
CR RESORTS CAPITAL, S. DE R. L. DE C. V.*
(Exact name of registrant as specified in its charter)
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NEVADA 6552 76-0549149
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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10,000 MEMORIAL DRIVE
HOUSTON, TEXAS 77024
(713) 613-2800
(Address, including zip code, and telephone number including area code of
registrants' principal executive offices)
DOUGLAS Y. BECH
CHAIRMAN
10,000 MEMORIAL DRIVE
HOUSTON, TEXAS 77024
(713) 613-2800
(Name, address, including zip code, and telephone number, including area code of
agent for service)
Copies to:
JULIEN R. SMYTHE
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
1900 PENNZOIL PLACE, SOUTH TOWER
711 LOUISIANA STREET
HOUSTON, TEXAS 77002
(713) 220-5800
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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100,000 Senior Notes,
Series B, due 2004..... $100,000,000 100% $100,000,000 $29,500.00
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(1) Estimated solely for the purpose of calculating the registration fee.
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(*) CR Resorts Capital, S. de R.L. de C.V., a subsidiary of Club Regina Resorts,
Inc., is a co-registrant, formed under the laws of the United Mexican States
(Mexican tax identification number CRC970811E5A).
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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CLUB REGINA RESORTS, INC.
CROSS REFERENCE SHEET
BETWEEN ITEMS IN PART I OF THE REGISTRATION STATEMENT
(FORM S-4) AND PROSPECTUS PURSUANT TO ITEM 501(B)
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ITEM OF FORM S-4 LOCATION IN PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.......................... Facing Page of the Registration
Statement; Cross Reference Sheet;
Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front Cover Page of Prospectus;
Available Information; Outside Back
Cover Page of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................. Summary Historical Financial Data;
Summary Pro Forma Financial Data;
Prospectus Summary; Risk Factors
4. Terms of the Transaction............................ Outside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors; The
Private Placement; Use of Proceeds;
The Exchange Offer; Description of
Notes; Transfer Restrictions on
Outstanding Notes; Plan of
Distribution
5. Pro Forma Financial Information..................... Unaudited Pro Forma Financial Data
6. Material Contracts with the Company Being
Acquired.......................................... *
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters..... *
8. Interest of Named Experts and Counsel............... Legal Matters
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.................... *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants......... *
11. Incorporation of Certain Information by Reference... *
12. Information with Respect to S-2 or S-3
Registrants....................................... *
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ITEM OF FORM S-4 LOCATION IN PROSPECTUS
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13. Incorporation of Certain Information by Reference... *
14. Information with Respect to Registrants Other than
S-2 or S-3 Registrants............................ Outside Front Cover Page; Available
Information; Prospectus Summary; Risk
Factors; Private Placement; Use of
Proceeds; Capitalization; Unaudited
Pro Forma Financial Data; Selected
Combined Historical Financial Data;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Financial
Statements.
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies........... *
16. Information with Respect to S-2 or S-3 Companies.... *
17. Information with Respect to Companies other than S-2
or S-3 Companies.................................. *
18. Information if Proxies, Consents or Authorizations
are to be Solicited............................... *
19. Information if Proxies, Consents or Authorizations
are not to be Solicited in an Exchange Offer...... Management; Principal Stockholders;
Certain Transactions; Description of
Capital Stock and Warrants
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* Not applicable
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 22, 1998
PROSPECTUS
$100,000,000
CLUB REGINA RESORTS, INC.
CR RESORTS CAPITAL, S. DE R. L. DE C. V.
OFFER TO EXCHANGE
13% SENIOR NOTES DUE 2004, SERIES B
FOR ALL OUTSTANDING 13% SENIOR NOTES DUE 2004, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED
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Club Regina Resorts, Inc., a Nevada corporation ("CR US"), and CR Resorts
Capital, S. de R. L. de C. V., a Mexican Sociedad de Responsabilidad Limitada de
Capital Variable and an indirect wholly-owned subsidiary of CR US ("CR Mexico"
and together with CR US, the "Issuers") hereby offer, upon the terms and
conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal," and together with this Prospectus, the
"Exchange Offer"), as required in accordance with the Indenture (as defined) and
the Registration Rights Agreement (as defined), to exchange $1,000 principal
amount of its 13% Senior Notes due 2004, Series B (the "Registered Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein) of
which this Prospectus constitutes a part, for each $1,000 principal amount of
its outstanding 13% Senior Notes due 2004, Series A (the "Outstanding Notes"),
of which $100.0 million principal amount is outstanding. The form and terms of
the Registered Notes are identical in all material respects to the form and
terms of the Outstanding Notes except for certain transfer restrictions and
registration rights relating to the Outstanding Notes. The Registered Notes will
evidence the same debt as the Outstanding Notes and will be issued under and be
entitled to the benefits of the Indenture (as defined herein). The Registered
Notes and the Outstanding Notes are collectively referred to herein as the
"Notes."
As required by the Indenture and the Registration Rights Agreement, the
Company will accept for exchange any and all Outstanding Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1998, unless the Exchange Offer is
extended. See "The Exchange Offer -- Expiration Date; Extensions; Amendment."
Tenders of Outstanding Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the business day prior to the Expiration Date (as defined
herein), unless previously accepted for exchange. The Exchange Offer is not
conditioned upon any minimum principal amount of Outstanding Notes being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions which may be waived by the Issuers and to the terms and provisions of
the Registration Rights Agreement (as defined herein). Outstanding Notes may be
tendered only in denominations of $1,000 principal amount and integral multiples
thereof. The Issuers have agreed to pay the expenses of the Exchange Offer. See
"The Exchange Offer."
The Registered Notes will bear interest at the rate of 13% per annum,
payable semi-annually on June 1 and December 1 of each year, commencing June 1,
1998. Holders of Registered Notes of record on May 15, 1998 will receive
interest on June 1, 1998 from the date of issuance of the Registered Notes, plus
an amount equal to the accrued interest on the Outstanding Notes from the date
of issuance of the Outstanding Notes, December 5, 1997, to the date of exchange
thereof. Interest on the Outstanding Notes accepted for exchange will cease to
accrue upon issuance of the Registered Notes. The Notes will be redeemable at
the option of
(cover continued on next page)
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SEE "RISK FACTORS" COMMENCING ON PAGE 19 FOR A DISCUSSION OF
CERTAIN MATTERS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
NOTES.
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, 1998
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(Continued from cover page)
the Issuers, in whole or in part, on or after December 1, 2000, at the
redemption prices set forth herein, plus accrued and unpaid interest and
Liquidated Damages (as defined), if any, to the date of redemption.
Notwithstanding the foregoing, at any time prior to December 1, 2000, the
Issuers may redeem up to 35% of the original principal amount of the Notes at
the redemption price of 113% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, through the date of redemption,
with the net cash proceeds of a Public Equity Offering (as defined); provided,
that at least $65.0 million in aggregate principal amount of the Notes remain
outstanding immediately thereafter. Upon the occurrence of a Change of Control,
the Issuers are required to offer to repurchase all of the outstanding Notes at
101% of the principal amount thereof, together with accrued and unpaid interest
and Liquidated Damages, if any, to the date of repurchase. See "Description of
Notes."
The Notes are senior obligations of the Issuers and rank senior in right of
payment to all subordinated Indebtedness (as defined) of the Issuers, and pari
passu in right of payment with all existing and future unsecured senior
Indebtedness of the Issuers. Substantially all of the operations of CR US are
conducted through its subsidiaries (other than CR Mexico) (the "Operating
Subsidiaries") and, therefore, the Issuers are dependent upon the cash flow of
the Operating Subsidiaries to meet their obligations, including their
obligations under the Notes. The Notes are effectively subordinated to all
Indebtedness and other liabilities and commitments (including trade payables and
lease obligations) of CR US's Operating Subsidiaries. At December 31, 1997, the
total amount of Indebtedness and other obligations of the Operating Subsidiaries
that effectively ranked senior in right of payment to the obligations of the
Issuers under the Notes was approximately $4.6 million.
The Outstanding Notes were sold by the Issuers on December 5, 1997 to the
Initial Purchaser (as defined herein) in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The
Outstanding Notes were thereupon offered and sold by the Initial Purchaser only
to "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act) and to a limited number of institutional "accredited investors"
(as defined in Rule 501(a)(1),(2),(3) or (7) under the Securities Act), each of
whom agreed to comply with certain transfer restrictions and other conditions.
Accordingly, the Outstanding Notes may not be offered, resold or otherwise
transferred unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Registered Notes are being offered hereunder to satisfy the obligations of
the Issuers under the Registration Rights Agreement entered into with the
Initial Purchaser in connection with the offering of the Outstanding Notes. See
"The Exchange Offer," "Description of Notes," and "Registration Rights;
Additional Interest."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission" or "SEC") to third parties, including
Exxon Capital Holdings Corporation, SEC No-Action Letter (available April 13,
1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991)
(the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC No-Action Letter
(available June 5, 1991), the Issuers believe that the Registered Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by the respective holders thereof (other than a "Restricted Holder,"
being (i) a broker-dealer who purchased Outstanding Notes exchanged for such
Registered Notes directly from the Issuers to resell pursuant to Rule 144A or
any other available exemption under the Securities Act or (ii) a person that is
an affiliate of the Issuers within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Registered Notes are
acquired in the ordinary course of such holder's business and such holder is not
participating in, and has no arrangement with any person to participate in, the
distribution (within the meaning of the Securities Act) of such Registered
Notes. Eligible holders wishing to accept the Exchange Offer must represent to
the Issuers that such conditions have been met. Holders who tender Outstanding
Notes in the Exchange Offer with the intention to participate in a distribution
of the Registered Notes may not rely upon the Morgan Stanley Letter or similar
no-action letters. See "The Exchange Offer -- General." Each broker-dealer that
receives Registered Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any resale
of such Registered Notes. A broker-dealer that delivers
i
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such a prospectus to purchasers in connection with such resales will be subject
to certain of the civil liability provisions under the Securities Act and will
be bound by the provisions of the Registration Rights Agreement (including
certain indemnification rights and obligations). This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Registered Notes received in exchange for Outstanding
Notes where such Outstanding Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. The Issuers have
agreed that they will make this Prospectus and any amendment or supplement to
this Prospectus available to any broker-dealer for use in connection with any
such resale for up to 180 days after consummation of the Exchange Offer. See
"Plan of Distribution."
The Issuers will not receive any proceeds from the Exchange Offer which is
being performed to satisfy the Issuers' obligations under the Indenture and the
Registration Rights Agreement.
The Registered Notes will constitute a subsequent issue of securities
pursuant to the Indenture, and the Registration Rights Agreement and as
described in the Offering Circular with no established trading market, and there
can be no assurance as to the liquidity of any markets that may develop for the
Registered Notes or as to the ability of or price at which the holders of
Registered Notes would be able to sell their Registered Notes. Future trading
prices of the Registered Notes will depend on many factors, including, among
others, prevailing interest rates, the Issuers' operating results and the market
for similar securities. The Issuers do not intend to apply for listing of the
Registered Notes on any securities exchange. Jefferies & Company, Inc. (the
"Initial Purchaser") has informed the Issuers that it currently intends to make
a market for the Registered Notes. However, it is not so obligated, and any such
market making may be discontinued at any time without notice. Accordingly, no
assurance can be given that an active public or other market will develop for
the Registered Notes or as to the liquidity of or the trading market for the
Registered Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OUTSTANDING NOTES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
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AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 under the Securities Act, for the registration of the Registered Notes
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in the financial statement
schedules and exhibits to the Registration Statement as permitted by the rules
and regulations of the Commission. For further information, please see the
Registration Statement, including the financial statement schedules and exhibits
filed as a part thereof. Statements made in this Prospectus concerning the
contents of any document referred to herein are not necessarily complete. With
respect to each such document filed with the Commission as an exhibit to the
Registration Statement, please see 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 and the exhibits thereto
that the Issuers have filed with the Commission may be inspected and copied at
the public reference facilities the Commission maintains at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's following
regional offices: Seven World Trade Center, Suite 1300, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials can be obtained by mail from the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition the Commission maintains a site on the
World Wide Web that contains reports, proxy and information statements and other
information filed electronically by the Company with the Commission which can be
accessed over the Internet at http://www.sec.gov.
As a result of this Exchange Offer the Issuers will be subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). As long as the Issuers
are subject to such periodic reporting and informational requirements, the
Issuers will furnish all reports and other information required thereby to the
Commission and pursuant to the Indenture will furnish copies of such reports and
other information to the Trustee.
The Issuers have agreed that, whether or not they are required to do so by
the rules and regulations of the Commission, for so long as any of the Notes
remain outstanding, the Issuers will furnish to the Holders of Notes (excluding
exhibits, which will be available upon request) and file with the Commission
(unless the Commission will not accept such a filing) (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company were required to file
such forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants, and
(ii) all reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports. In addition, for so long as any
of the Notes remain outstanding, the Company has agreed to make available, upon
request, to any prospective purchaser of the Notes and beneficial owner of the
Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act. Information may be obtained from the
Company at 10,000 Memorial Drive, Suite 480, Houston, Texas 77024 (telephone
number: (713) 613-2800), Attention: George D. Stroesenreuther.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY
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ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
ENFORCEABILITY OF CIVIL OR CRIMINAL LIABILITIES
CR Mexico is a limited liability corporation with variable capital
(sociedad de responsabilidad limitada de capital variable) organized under the
laws of the United Mexican States ("Mexico"). One of its directors and officers
resides in Mexico, and all or a substantial portion of the assets of this person
and of CR Mexico and CR US are in Mexico. As a result, it may not be possible
for investors to effect service of process within the United States upon such
person or to enforce against him, or against CR Mexico in United States courts,
judgments predicated upon the civil or criminal liability provisions of the
federal securities laws of the Untied States. CR Mexico has been advised by its
Mexican counsel, Santamarina y Steta, S.C., that there is doubt as to the
enforceability, in original actions in Mexican courts, of civil or criminal
liabilities predicated solely on the U.S. federal securities laws and as to the
enforceability in Mexican courts of judgments of U.S. courts obtained in actions
predicated upon the civil or criminal liability provisions of the U.S. federal
securities laws.
The laws of Mexico require service of process to be made personally upon CR
Mexico or any process agent duly appointed by CR Mexico in order for a foreign
judgment to be enforceable by a Mexican court. Because service of process by
mail does not constitute personal service under the laws of Mexico, if for the
purpose of proceedings outside Mexico, service of process is made by mail, a
final judgment issued in connection with such proceedings may not be enforced by
the courts of Mexico. Enforceability is also subject to the satisfaction of
certain other specific requirements.
In any proceedings brought before the courts of Mexico (including
proceedings for the enforcement of a foreign judgment), Mexican courts would
apply Mexican procedural laws, including laws, statutes of limitations and
expiration (prescripcion). A Spanish translation of any documents originally
executed in any other language would be required to be prepared by a
court-approved translator, and approved by the court once the defendant had been
given an opportunity to be heard with respect to the accuracy of any such
translation, and proceedings would thereafter be based upon the translated
documents.
Covenants of CR Mexico, which purport or may purport to (i) bind it on
matters reserved by Mexican law to shareholders or partners, (ii) bind
shareholders or partners to vote or refrain from voting their shares or equity
interests, or (iii) bind CR Mexico on matters relating to its ability to
transfer, convey, sell or otherwise dispose of or encumber any of its assets to
any person, are not enforceable in Mexico through specific performance.
ON NOVEMBER 27, 1997, THE NOTES WERE REGISTERED (THE "NOTE REGISTRATION")
BY THE COMISION NACIONAL BANCARIA Y DE VALORES (THE MEXICAN NATIONAL BANKING AND
SECURITIES COMMISSION OR THE "CNBV") WITH THE SPECIAL SECTION OF THE NATIONAL
REGISTRY OF SECURITIES AND INTERMEDIARIES MAINTAINED BY THE CNBV (THE "RNVI").
REGISTRATION OF THE NOTES WITH THE RNVI DOES NOT IMPLY ANY CERTIFICATION AS TO
THE INVESTMENT QUALITY OF THE NOTES OR AS TO THE SOLVENCY OF EITHER ISSUER OR
THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN. THE NOTES MAY
NOT BE PUBLICLY OFFERED OR SOLD IN MEXICO.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Except as otherwise noted, (i) all information in this
Prospectus gives effect to the Purchase Transactions (as defined), the Offering
of the Outstanding Notes and the application of the proceeds thereof, (ii) all
references to the "Company" or "Club Regina" are to Club Regina Resorts, Inc.
and its subsidiaries and to the vacation ownership segment of the predecessor
business (the "Predecessor Business") that the Company purchased in the Purchase
Transactions, (iii) all references to "CR US" are to Club Regina Resorts, Inc.
and references to "CR Mexico" are to CR Resorts Capital, S. de R. L. de C. V.,
(iv) all references to "pesos" or "Ps." are to the lawful currency in Mexico and
all references to "dollars" or "$" are to U.S. dollars, and (v) all references
to the "Operating Subsidiaries" are to CR US's direct and indirect subsidiaries,
excluding CR Mexico. Certain industry, Company and other terms herein are
defined in "Defined Terms."
THE COMPANY
Club Regina owns and operates three luxury vacation ownership resorts on
prime beachfront sites at three of Mexico's most popular beach destinations:
Cancun, Puerto Vallarta and Los Cabos (the "Regina Resorts"). Club Regina
markets and sells Vacation Intervals in its resorts which generally entitle the
owner, or Member, to use a fully-furnished vacation residence typically for one
week each year until 2047. Prior to March 1998, Vacation Intervals had been sold
for a 30 year period. At each location, the Regina Resorts share common
facilities with, and are adjacent to, "five-star" Westin Regina Hotels (the
"Westin Hotels"). Starwood Lodging Corporation ("Starwood") indirectly owns the
Westin Hotels, which are managed by Westin Resorts & Hotels ("Westin"). The
Regina Resorts and the Westin Hotels are collectively referred to as the
"Combined Resorts." Together, the Combined Resorts contain 402 one- and
two-bedroom vacation ownership units and 908 luxury hotel rooms. The Company
intends to use the Regina Resorts as its flagship platform for expansion through
future acquisitions and internal growth in the United States, Canada, Mexico and
elsewhere. The Company believes it is one of the leading developers focused
primarily on the "luxury" level of the vacation ownership market, which is
characterized by elegant accommodations and personal service.
As part of the Mexican government's economic development program, Bancomer
S.A., Institucion de Banca Multiple, Grupo Financiero ("Bancomer"), the second
largest bank in Mexico (which was owned by the Mexican government until 1991),
developed the Combined Resorts between 1991 and 1996 as its luxury flagships for
tourism development. The vacation ownership units within the Regina Resorts were
developed to appeal to the most sophisticated segments of the vacation ownership
market throughout the world. In recognition of this fact, the Regina Resorts
have been awarded the "Gold Crown" resort designation by Resort Condominiums
International, Inc. ("RCI"), RCI's highest designation. According to RCI, the
Regina Resorts have consistently obtained among the highest rankings of guest
satisfaction among RCI members on all counts not only in Mexico but also in the
world.
The Company believes that its Vacation Interval business is particularly
attractive in the vacation ownership market in terms of appeal to more affluent
customers and profitability, because of the close association with and
availability of high quality, luxury resort amenities of a "five star" hotel
(such as restaurants and bars, maid and room service, recreational facilities,
health clubs and spas, and other luxury amenities) at the Regina Resorts and
because of the Company's flexible "floating time," "floating unit," and
"floating location" program. Under this program, each Member is entitled to stay
at any of the Regina Resorts currently operated by the Company. In addition,
depending on the type of Vacation Interval purchased, the program gives a Member
the flexibility to: (i) elect the time of year to vacation at the Regina
Resorts, (ii) stay at the Regina Resorts at different times during a single year
by dividing such Member's week-long Vacation Interval into more than one
segment, (iii) increase the number of weeks that such Member is entitled to stay
at the Regina Resorts by dividing such Member's unit into smaller units, and
(iv) buy an annual or bi-annual Vacation Interval. The price of a Vacation
Interval ranges from $27,000 for a two-bedroom "Holiday" annual interval to
$8,000 for a studio "Prime" annual interval. Members also benefit from
1
<PAGE> 10
the Company's participation in the vacation interval exchange network operated
by RCI, the world's largest vacation interval exchange organization with more
than two million vacation interval owners as members. Membership in RCI entitles
Members, subject to availability, to exchange their Vacation Intervals for
occupancy at any of the approximately 3,100 other resorts participating in the
RCI network. The Company believes that the combination of these attributes makes
its vacation ownership product one of the more innovative vacation ownership
concepts in the world-wide vacation ownership market. The Company intends to
grow into other vacation ownership markets utilizing whenever possible the close
association with "five-star" hotels and the floating time, unit, and location
opportunities for its Members.
The Company's principal operations currently consist of (i) marketing and
selling Vacation Intervals, (ii) operating the Regina Resorts, for which it
receives an annual service fee from each Member, and (iii) providing financing
for the purchase of Vacation Intervals. In 1997, the Company sold approximately
4,200 Vacation Intervals, producing $53.9 million in Vacation Interval sales
revenue. The Company had an unsold inventory as of December 31, 1997 of
approximately 12,500 (approximately 6,000 annual and 6,500 biannual) Vacation
Intervals, and the Company has plans to develop approximately 20,000 Vacation
Intervals on land it has contracted to purchase that is adjacent to the Regina
Resort in Los Cabos, Mexico, at a new resort to be developed on land it owns in
Cozumel, Mexico, and at the Villa Vera Hotel and Racquet Club in Acapulco,
Mexico, the acquisition of which is expected to be completed in April 1998. For
the twelve months ended December 31, 1997, the Company provided financing for
approximately 70% of its buyers (or approximately 75% of its Vacation Interval
revenue). For such period, cash sales plus down payments on financed sales
represented approximately 46% of Vacation Interval revenue. Assuming an average
sales rate of 4,000 Vacation Intervals per year, the Company anticipates that
the existing Regina Resorts will provide sufficient inventory for approximately
three years of Vacation Interval sales and that the planned development at
resort property development sites in Cozumel, Los Cabos and Acapulco will
provide approximately five additional years of inventory.
The Company believes that it has some of the most innovative marketing
programs in the vacation ownership industry. In addition to lead generation
points in airports or shopping centers, independently or in association with
other businesses such as auto rental companies and restaurants, the Company
operates "theme locations" which provide the Company with an innovative,
alternative marketing venue. These are retail businesses with a strong
contemporary appeal to affluent tourists, offering products associated with
ecological consciousness, wildlife, conservation and local culture, while at the
same time promoting the Regina Resorts and inviting customers to attend sales
presentations. A share of the profits of these stores is contributed to causes
related to the stores' themes. The Company also markets and sells Vacation
Intervals at off-site centers in eleven cities in Mexico. And finally, the
Company's access to guests staying at the Westin Hotels provides it with a
steady source of high quality sales leads for potential Members. These guests
are particularly attractive to the Company because they generally are from high
income households and, based on the Company's past experience, have lower
default rates. In 1997, approximately 16% of Vacation Interval sales were made
to persons frequenting the Westin Hotels, approximately 51% of Vacation Interval
sales were made at the Regina Resorts to non-hotel patrons (with approximately
9.5% of total sales being made to theme store visitors), and the remaining 33%
of the Vacation Intervals were sold at off-site sales offices.
The Company has historically provided financing for approximately 70% of
Vacation Interval buyers. Buyers who finance through the Company are required to
make a down payment of at least 15% of the Vacation Interval's sales price and
to pay the balance of the purchase price over a period of one to seven years.
For the twelve months ended December 31, 1997, the average down payment on a
financed Vacation Interval was approximately 28% of its purchase price. The
Company believes its high percentage of U.S., Canadian and other non-Mexican
Members (currently, approximately 56%) reduces the impact of downturns in the
Mexican economy both on sales of Vacation Intervals and on the collectibility of
vacation interval contract receivables ("Vacation Interval Receivables"). In
addition, the Company is able to mitigate the effects of Mexican inflation on
Vacation Interval Receivables payable by Mexican citizens because most of those
Vacation Interval Receivables are payable in Unidades de Inversion, or UDIs, an
obligation denominated in pesos which is adjusted for Mexican inflation. At
December 31, 1997, the Company had a portfolio of approximately 5,500 loans to
Vacation Interval buyers amounting to approximately $43.0 million in
2
<PAGE> 11
outstanding principal amount, and the Vacation Interval Receivables had a
weighted average maturity of approximately five years. As of December 31, 1997,
approximately (i) 64% of all of the Vacation Interval Receivables were U.S.
dollar denominated and had a weighted average interest rate of 12.8%, (ii) 32%
of all Vacation Interval Receivables were denominated in UDIs and had a weighted
average interest rate of 25.8%, and (iii) 4% of all Vacation Interval
Receivables were denominated in pesos and had a weighted average interest rate
of 19.2%.
BUSINESS STRATEGY
The Company's long-term growth strategy is to develop a world-wide brand
name vacation ownership club, providing its Members with vacation opportunities
of consistent quality and luxury and the amenities generally associated with
"five-star" hotels in destination resort or tourist locations. Accordingly, the
Company plans to acquire and develop other vacation ownership resorts or
vacation ownership clubs in other locations in the Western Hemisphere, as well
as other parts of the world that appeal to the luxury segment of the market.
Among other things, in the near-term, the Company's strategy includes:
- Mexican Expansion. The Company intends to capitalize on its management's
expertise in Mexico by implementing currently available expansion
opportunities as well as acquisition opportunities. This will include
expanding the existing Regina Resort in Los Cabos by approximately 20
units and developing a Regina Resort at the Company's property in Cozumel
containing approximately 220 units, for an aggregate of 10,192 annual and
5,720 biannual Vacation Intervals. Furthermore, the Company is evaluating
opportunities to purchase additional inventory in Cancun and selected
other top resort destinations in Mexico. Finally, the Company anticipates
completion of the acquisition of the land and facilities of the Villa
Vera Hotel & Racquet Club in Acapulco (the "Villa Vera") for $4.5 million
in April 1998. The Villa Vera, consisting of 74 hotel units, suites and
villas, is planned to be converted into 57 units consisting of 20 hotel
rooms, 34 one-bedroom suites and villas and three two-bedroom villas. The
Company estimates this conversion will cost approximately $2.5 million.
Also, included in this conversion, the Company plans to build eight
two-bedroom suites on land within the property. Upon completion of this
conversion, the Company's inventory of Vacation Intervals should increase
by approximately 4,000.
- International Expansion. The Company intends to add vacation ownership
resort locations in areas other than Mexico. Initially, the Company
intends to focus on adding a resort or resorts in mountain regions, such
as the western United States and Canada, that will cater to snowskiing in
the winter and golf, hiking, fishing and similar activities in the summer
as well as provide the availability of amenities of a "five-star" hotel.
The Company also plans to add vacation ownership clubs in urban
destinations, such as New York City, San Francisco, London and other
popular business and tourist locations worldwide, which would provide
Members with the opportunity to enjoy the many attractions that such
large cities have to offer.
- Marketing and Sales. The Company intends to continue upgrading its
marketing efforts by opening more theme stores, consolidating its
telemarketing operations, and enhancing its marketing and sales hardware
and software. The Company plans to accelerate the implementation of its
"universal salesman" program by which potential Members work with only
one employee of the Company from first contact with the Company through
the sale of the Vacation Interval. Furthermore, the Company intends to
establish sales offices in other locations in Mexico and the rest of the
Western Hemisphere. Finally, the Company intends to further exploit its
current Member base to (i) determine the best locations and strategic
relationships with "five-star" quality hotel operators to expand its
operations, (ii) provide referrals for potential new Members, (iii) sell
additional Vacation Intervals to such Members, and (iv) sell additional
days or weeks to such Members and their guests at both preferential and
standby rates.
- Improving Operating Margins. The Company believes that its current
administrative and marketing infrastructure in Mexico is sufficient to
support its growth plans in Mexico over the next several years.
3
<PAGE> 12
Accordingly, the Company expects to reduce its general and administrative
costs as a percentage of revenues. Additionally, the Company plans to
seek ways to reduce its borrowing costs as it grows.
The Company intends initially to fund its business strategy through the use
of a portion of the proceeds of the Offering and cash flow from operations.
THE VACATION OWNERSHIP INDUSTRY
The Company believes the luxury segment is the fastest growing and most
stable segment of the vacation ownership market. Management believes that
vacation ownership sales to this high-end segment, in terms of both units and
dollars, tend to fluctuate less with the general economy than does the industry
as a whole. On a broader level, the entry of major lodging and hospitality
companies, such as Marriott, Disney, Hilton, Hyatt, Four Seasons,
Intercontinental, and Westin (each as defined herein), into vacation ownership
operations in the past decade is a strong contributing influence to the growth
and stability of the industry.
First introduced in Europe in the mid-1960's, vacation ownership has been
one of the fastest growing segments of the hospitality industry over the past
two decades. According to the American Resort Development Association, a private
industry organization ("ARDA"), during the fifteen-year period ending in 1994
(the most recent year for which worldwide ARDA statistics are available),
worldwide vacation ownership sales volume for the vacation ownership industry
increased from approximately $490 million in 1980 to approximately $4.8 billion
in 1994. In addition, according to Interval International, the number of
vacation ownership resorts worldwide has grown from 1,550 in 1985 to an
estimated 5,000 in 1996. This growth rate does not reflect the addition of units
within existing resorts. The Company expects the vacation ownership industry to
continue growing as consumer awareness of the attractiveness of vacation
ownership as a vacation alternative increases.
THE PURCHASE TRANSACTIONS
On December 20, 1996, the Company and Bancomer executed a definitive
purchase agreement pursuant to which the Company agreed to purchase the Regina
Resorts for approximately $121.5 million, subject to certain price adjustments,
and the Westin Hotels for approximately $110 million. In May 1997, the Company
agreed to sell the Westin Hotels and 20% of CR US's common stock to Starwood
Capital Group, L.L.C. ("Starwood Capital") for an aggregate of approximately
$133.5 million. On August 18, 1997, the Company consummated these transactions.
The consummation of these transactions involved a series of substantially
contemporaneous transactions (the "Purchase Transactions"), which included: (i)
Bancomer's segregation of each Combined Resort into two condominium units with
related common areas so that after the closing of the Purchase Transactions the
Regina Resorts and Westin Hotels would be able to be owned by separate
companies, (ii) the transfer of the condominium units with respect to the Regina
Resorts into three separate trusts, under which the Company now has the right to
use the condominium units at the Regina Resorts for 50 years and a former
subsidiary of CR Mexico has the right to use the condominium units at the Regina
Resorts after the expiration of such 50-year period (the "Remainder Rights)
which subsidiary the Company has disposed of (the "Remainder Interest
Disposition") (see "Description of Notes -- Certain Covenants"), (iii) the
borrowing of approximately $83.0 million (the "Bancomer Loan") from Bancomer,
(iv) the Company's purchase of the ownership rights to the Regina Resorts and
the Westin Hotels and related operations for approximately $219.0 million
($231.5 million less price adjustments of approximately $12.5 million) from
Bancomer, (v) the separation of the Combined Resorts and related operations into
separate legal entities, (vi) the sale by the Company of the Westin Hotels to an
indirect wholly-owned subsidiary of Starwood, (vii) the issuance of 20% of CR
US's outstanding common stock to an affiliate of Starwood Capital ("GLLC"), and
(viii) the entry by Starwood and the Company into an Asset Management Agreement
(the "Asset Management Agreement") by which the Company will provide certain
advisory services to Starwood in return for which the Company will be paid a
management fee of up to 20% of the net cash flow (as defined in the Asset
Management Agreement) after certain adjustments, of the Westin Hotels.
4
<PAGE> 13
In connection with the Purchase Transactions, the Company and affiliates of
Starwood entered into various operating agreements (the "Operating Agreements")
related to the joint operation and ownership of certain common facilities at the
Combined Resorts as well as certain matters related to the conduct of vacation
ownership sales and marketing activities, the rental of excess Regina Resort
vacation ownership units by Starwood, the rental of available Westin Hotel rooms
by Club Regina, the continued use of hotel facilities and amenities by Members,
the management of the Westin Hotels and other related matters. The Company
believes that these Operating Agreements will allow it to provide its Members
with high quality amenities and services at prices lower to the Company than if
the Company were to arrange for such amenities and services on a separate basis.
The Company is also performing certain administrative services for Starwood
in Mexico until August 18, 1998. In addition, the Company is continuing to
provide certain asset management services to Bancomer with respect to other
hotel, resort and marina facilities owned or controlled by Bancomer. Although
the revenues from these activities are not material, the Company believes that
the continued relationship with Bancomer is beneficial. For a more complete
description of the Purchase Transactions and the Remainder Interest Disposition,
see "Business -- Description of Purchase Transactions," "Risk Factors -- Company
Risks -- Risk of New Venture and Recent Acquisition; Lack of Prior Operating
History" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Introduction."
RECENT EVENTS
The Company has executed a letter of intent to acquire the land and
facilities of the Villa Vera Hotel & Racquet Club in Acapulco (the "Villa Vera")
for $4.5 million. The Villa Vera, consisting of 74 hotel units, suites and
villas, is planned to be converted into 57 units consisting of 20 hotel rooms,
34 one-bedroom suites and villas and three two-bedroom villas. The Company
estimates this conversion will cost approximately $2.5 million. Also, included
in this conversion, the Company plans to build eight two-bedroom suites on land
within the property. Upon completion of this conversion, the Company's inventory
of Vacation Intervals should increase by approximately 4,000. The Villa Vera has
been operating on a limited basis during the year ended December 31, 1997 and
its unaudited revenues and net loss for 1997 were approximately $0.4 million and
$0.4 million respectively.
During 1997, amendments to Mexico's value added tax laws were enacted which
subject sales of vacation intervals such as those sold by the Company to a value
added tax of approximately 10% in Cancun and Los Cabos and 15% in Puerto
Vallarta. To counteract the imposition of this value added tax on sales of
Vacation Intervals, the Company has raised its prices, but by less than the
amount of such tax, thereby placing downward pressure on the Company's margins.
The Company's executive offices are located at 10,000 Memorial Drive, Suite
480, Houston, Texas 77024, and its telephone number is (713) 613-2800.
5
<PAGE> 14
STRUCTURE
The following chart shows generally the corporate structure of the Company
and its relationship with the Westin Hotels and Starwood.
CORPORATE STRUCTURE CHART
- ---------------
(1) Starwood and its affiliates and CR US and its Operating Subsidiaries have
executed Operating Agreements providing for the day-to-day operating
relationship between the Westin Hotels and the Regina Resorts. In addition,
Starwood and the Company have entered into an Asset Management Agreement
pursuant to which the Company is entitled to 20% of the net cash flow (as
defined in such agreement) of the Westin Hotels in excess of certain
priority returns to Starwood. See "Business -- Description of Purchase
Transactions -- Description of Starwood Agreements."
(2) The Westin Hotels are managed by Westin.
(3) CR US operates its business in Mexico through a series of direct and
indirect holding company subsidiaries and indirect wholly-owned operating
subsidiaries. CR Mexico is an indirect wholly-owned subsidiary organized
under Mexican law and a co-issuer with CR US of the Notes. Under the
Indenture, CR Mexico is required to maintain promissory notes with respect
to any funds transferred from CR Mexico to any other subsidiaries of CR US.
See "Use of Proceeds" and "Description of Notes -- Certain Covenants."
RISK FACTORS; RECENT DEVELOPMENT
An investment in the Notes involves a high degree of risk. For a discussion
of certain other matters that should be considered by prospective investors in
connection with the Exchange Offer, see "Risk Factors."
6
<PAGE> 15
SUMMARY OPERATING DATA
The following tables set forth certain information regarding the Company's
operations, including resort location, inauguration date, resort size, the
number of current and planned units at the Company's resort locations, the
Vacation Interval inventory, and the number and average price of Vacation
Intervals sold for the years ending December 31, 1995, 1996 and 1997. See
"Business -- The Company" and "Business -- The Resorts." There can be no
assurance that the Company's planned expansion will occur within the time
currently established for such expansion or that the number of Vacation
Intervals added to the Company's inventory from such development will equal the
estimates set forth below. See "Risk Factors -- Company Risks -- Development and
Construction Risks."
RESORT DATA
<TABLE>
<CAPTION>
COMBINED UNITS(2)
DATE RESORT ------------------
RESORT AND LOCATION OPENED PROPERTY SIZE(1) CURRENT PLANNED
------------------- ------ ---------------- ------- -------
<S> <C> <C> <C> <C>
Los Cabos......................................... 1/94 15 130 20
Puerto Vallarta................................... 6/92 21 203
Cancun............................................ 3/91 11 69
Cozumel........................................... 54 220
Villa Vera(3)..................................... 8 65
--- ---
Total................................... 402 240
</TABLE>
- ---------------
(1) Acres.
(2) A unit is an apartment in which a Member using his or her Vacation Interval
stays. Units may be studios, or may contain one or two bedrooms and a common
room with a kitchen.
(3) The Company has signed a letter of intent to purchase the Villa Vera which
is intended to close in April 1998.
VACATION INTERVAL INVENTORY
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997 PLANNED
---------------------------------------------- ------------------------------------------------
2 1 1 2 1 2 1
BEDROOM BEDROOM STUDIO BEDROOM BEDROOM BEDROOM STUDIO BEDROOM BEDROOM
SEASONS(1) ANNUAL ANNUAL ANNUAL BIANNUAL TOTAL ANNUAL ANNUAL ANNUAL BIANNUAL BIANNUAL
---------- ------- ------- ------ -------- ------ ------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Holiday.............. 41 1,170 1,211 377 1,050 100
Prime................ 304 407 603 5,803 7,117 2,168 3,854 1,181 165 4,161
Select............... 791 2,747 3 697 4,238 1,275 2,329 753 2,069
----- ----- --- ----- ------ ----- ----- ----- --- -----
Total......... 1,136 4,324 606 6,500 12,566 3,820 7,233 2,034 165 6,230
<CAPTION>
PLANNED
-----------------
STUDIO
SEASONS(1) BIANNUAL TOTAL
---------- -------- ------
<S> <C> <C>
Holiday.............. 1,527
Prime................ 300 11,829
Select............... 6,426
--- ------
Total......... 300 19,782
</TABLE>
- ---------------
(1) Vacation Intervals are sold for any one of three "seasons," Holiday, Prime
and Select, corresponding to varying levels of seasonal demand. See
"Business -- The Company -- The Product."
VACATION INTERVALS SOLD/AVERAGE PRICE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1995 1996 1997(1)
---------------- ---------------- ----------------
# SOLD PRICE # SOLD PRICE # SOLD PRICE
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
2 bedroom annual............................... 840 $12,008 1,003 $16,663 514 $17,324
1 bedroom annual............................... 942 9,568 1,214 12,514 2,478 12,871
Biannual & studio.............................. 1,014 5,862 582 9,210 1,261 8,331
----- ------- ----- ------- ----- -------
Total sold/average price.............. 2,796 $ 8,957 2,799 $13,313 4,253 $12,063
</TABLE>
- ---------------
(1) Includes Vacation Intervals sold by the Predecessor Business and the Company
for the period.
7
<PAGE> 16
THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Issuers sold the Outstanding Notes on December 5, 1997 to the Initial
Purchaser, reflected in the offering circular dated December 5, 1997 (the
"Offering Circular") and the Initial Purchaser thereupon offered and sold them
only to certain qualified buyers. The $96 million of net proceeds the Issuers
received in connection with the sale of the Outstanding Notes, and warrants (the
"Warrants") to purchase an aggregate of 1,869,962 shares of CR US's $.001 par
value common stock, ("Common Stock"), as described in the Offering Circular,
were used as follows: (i) approximately $83.0 million to repay indebtedness owed
to Bancomer under the Bancomer Loan, (ii) approximately $7.5 million was
reserved for the first stage of development of a new resort at Cozumel and for
the development of additional units at Los Cabos and at other areas, (iv)
approximately $1.2 million to repay debt owed to affiliates (the "Affiliate
Debt") which the Company incurred in connection with the Purchase Transactions,
and (v) the remainder for working capital, certain advisory fees and other
general corporate purposes. See "Use of Proceeds." The Warrants have an exercise
price of $.01 per share, and are exercisable at any time prior to the maturity
date of the Notes. The Warrants are not being registered in the Exchange Offer,
but are subject to a registration rights agreement. See "Private Placement,"
"Capitalization" and "Description of Capital Stock and Warrants."
THE EXCHANGE OFFER
The Exchange Offer, the consummation of which is required by the Indenture
and Registration Rights Agreement (as defined herein) and described in the
Offering Circular, relates to the exchange of up to $100,000,000 principal
amount of Registered Notes for up to $100,000,000 principal amount of
Outstanding Notes. The form and terms of the Registered Notes are identical in
all material respects to the form and terms of the Outstanding Notes except that
the Registered Notes have been registered under the Securities Act and will not
contain certain transfer restrictions and hence are not entitled to registration
rights with respect to the Registered Notes. The Registered Notes will evidence
the same debt as the Outstanding Notes and will be issued under and be entitled
to the benefits of the Indenture governing the Outstanding Notes. See
"Description of Notes."
The Exchange Offer......... The registration rights agreement (the
"Registration Rights Agreement"), by and among the
Issuers and Initial Purchaser, provided that (i)
the Issuers will file a registration statement (the
"Exchange Offer Registration Statement") with the
Commission on or prior to the March 31, 1998, (ii)
the Issuers will use their best efforts to have the
Exchange Offer Registration Statement declared
effective by the Commission on or prior to May 31,
1998, (iii) unless the Exchange Offer would not be
permitted by applicable law or Commission policy,
the Issuers will commence the Exchange Offer and
use their best efforts to issue on or prior to 30
business days after the date on which the Exchange
Offer Registration Statement was declared effective
by the Commission, Registered Notes in exchange for
all Outstanding Notes tendered prior thereto in the
Exchange Offer and (iv) if obligated to file a
registration statement (the "Shelf Registration
Statement"), the Issuers will use their best
efforts to file the Shelf Registration Statement
with the Commission on or prior to 30 days after
such filing obligation arises (provided that the
Issuers shall not be obligated to file such Shelf
Registration Statement earlier than March 31, 1998)
and to cause the Shelf Registration Statement to be
declared effective by the Commission on or prior to
90 days after such obligation arises. If the
Issuers fail to satisfy these registration
obligations, they will be required to pay
liquidated damages ("Liquidated Damages") to the
Holders of the Notes under certain circumstances.
Each $1,000 principal amount of Registered Notes
will be issued in exchange for each $1,000
principal amount of outstanding Outstanding Notes.
As of the date hereof, $100,000,000
8
<PAGE> 17
principal amount of Outstanding Notes are issued
and outstanding. The Issuers will issue the
Registered Notes to tendering holders of
Outstanding Notes on or promptly after the
Expiration Date.
Resale..................... The Issuers believe that the Registered Notes
issued pursuant to the Exchange Offer generally
will be freely transferable by the holders thereof
without registration or any prospectus delivery
requirement under the Securities Act. See "The
Exchange Offer -- General" and "Plan of
Distribution."
The Outstanding Notes were not registered under the
Securities Act and unless so registered may not be
offered or sold except pursuant to an exemption
from, or in a transaction not subject to, the
registration requirements of the Securities Act.
See "Transfer Restrictions on the Outstanding
Notes."
Expiration Date............ 5:00 p.m., New York City time, on March [ ], 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date to which the Exchange Offer is extended. See
"The Exchange Offer -- Expiration Date; Extensions;
Amendments."
Procedures for Tendering
Outstanding Notes........ Each Holder of Outstanding Notes wishing to accept
the Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Outstanding Notes to be exchanged and any
other required documentation to the Exchange Agent
at the address set forth herein and therein or
effect a tender of Outstanding Notes pursuant to
the procedures for book-entry transfer as provided
for herein. See "The Exchange Offer -- Procedures
for Tendering."
Special Procedures for
Beneficial Holders......... Any beneficial holder whose Outstanding Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender in the Exchange Offer should
contact such registered holder promptly and
instruct such registered holder to tender on
beneficial holder's behalf. If such beneficial
holder wishes to tender directly, such beneficial
holder must, prior to completing and executing the
Letter of Transmittal and delivering the
Outstanding Notes, either make appropriate
arrangements to register ownership of the
Outstanding Notes in such holder's name or obtain a
properly completed bond power from the registered
holder. The transfer of record ownership may take
considerable time. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery........ Procedures Holders of Outstanding Notes who wish to
tender their Outstanding Notes and whose
Outstanding Notes are not immediately available or
who cannot deliver their Outstanding Notes and a
properly completed Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely
basis, must tender their Outstanding Notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery
Procedures."
9
<PAGE> 18
Withdrawal Rights.......... Tenders of Outstanding Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on
the business day prior to the Expiration Date,
unless previously accepted for exchange. See "The
Exchange Offer -- Withdrawal of Tenders."
Termination of the Exchange
Offer.................... The Company may terminate the Exchange Offer if it
determines that the Exchange Offer violates any
applicable law or interpretation of the staff of
the SEC. Holders of Outstanding Notes have certain
rights against the Issuers under the Registration
Rights Agreement should the Issuers fail to
consummate the Exchange Offer. See "The Exchange
Offer -- Termination" and "Description of the
Notes -- Registration Rights; Additional Interest."
Acceptance of Outstanding
Notes and Delivery of
Registered Notes......... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and
described more fully in "The Exchange
Offer -- Termination"), the Company will accept for
exchange any and all Outstanding Notes which are
properly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration
Date. The Registered Notes issued pursuant to the
Exchange Offer will be delivered promptly following
the Expiration Date. See "The Exchange
Offer -- General."
Exchange Agent............. IBJ Schroder Bank & Trust Company is serving as
exchange agent (the "Exchange Agent") in connection
with the Exchange Offer. The mailing address of the
Exchange Agent is: IBJ Schroder Bank & Trust
Company, P. O. Box 84, Bowling Green Station, New
York, New York 10274-0084, Attention Reorganization
Operations Department; and hand and overnight
delivery: IBJ Schroder Bank & Trust Company, One
State Street, New York, New York 10004, Attention:
Securities Processing Window, Subcellar One,
(SC-1). For information with respect to the
Exchange Offer, the telephone number for the
Exchange Agent is (212) 858-2103 and the facsimile
number for the Exchange Agent is (212) 858-2611.
See "The Exchange Offer -- Exchange Agent."
Use of Proceeds............ There will be no cash proceeds payable to the
Company from the issuance of the Registered Notes
pursuant to the Exchange Offer. See "Use of
Proceeds." For a discussion of the use of the net
proceeds received by the Company from the sale of
the Outstanding Notes, see "Private Placement."
Transfer Restrictions...... The Securities may not be publicly issued, offered
or sold in Mexico.
THE NOTES
Notes Outstanding.......... $100 million principal amount of 13% Senior Notes
due 2004.
Maturity................... December 1, 2004.
Interest Rate and Payment
Dates.................... The Notes bear interest at the rate of 13% per
annum. Interest has accrued from the Issue Date and
will be payable semi-annually on June 1 and
December 1 of each year, commencing on June 1,
1998.
10
<PAGE> 19
Holders of the Exchange Notes of record on May 15,
1998 will receive interest on June 1, 1998 from the
date of issuance of the Exchange Notes, plus an
amount equal to the accrued interests on the
Outstanding Notes from the date of issuance of the
Outstanding Notes, December 5, 1997, to the date of
exchange thereof. Consequently, assuming the
Exchange Offer is consummated prior to the record
date in respect of the June 1, 1998 interest
payment for the Outstanding Notes, holders who
exchange their Outstanding Notes for Exchange Notes
will receive the same interest payment on June 1,
1998 that they would have received had they not
accepted the Exchange Offer. Interest on the
Outstanding Notes accepted for exchange will cease
to accrue upon issuance of the Exchange Notes. See
"The Exchange Offer -- Interest on the Exchange
Notes."
Optional Redemption........ The Notes are redeemable at the option of the
Issuers, in whole or in part, on or after December
1, 2000, at the redemption prices set forth herein,
plus accrued and unpaid interest and Liquidated
Damages (as defined), if any, to the date of
redemption. Notwithstanding the foregoing, at any
time prior to December 1, 2000, the Issuers may
redeem up to 35% of the original principal amount
of the Notes at the redemption price of 113% of the
principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, through
the date of redemption, with net cash proceeds of a
Public Equity Offering (as defined); provided, that
at least $65.0 million in aggregate principal
amount of the Notes remain outstanding immediately
thereafter.
Change of Control.......... Upon the occurrence of a Change of Control (as
defined), the Issuers will be required to offer to
repurchase all of the outstanding Notes at 101% of
the principal amount thereof, together with accrued
and unpaid interest and Liquidated Damages, if any,
to the date of repurchase.
Ranking.................... The Notes are general unsecured obligations of the
Issuers. The Notes are pari passu in right of
payment with all existing and future unsecured
senior Indebtedness (as defined) of the Issuers and
senior in right of payment to all future
subordinated Indebtedness of the Issuers. However,
the Notes are effectively junior to all present and
future secured Indebtedness of the Issuers to the
extent of the assets securing such Indebtedness.
Substantially all of the operations of CR US are
conducted through the Operating Subsidiaries and,
therefore, the Issuers are dependent upon the cash
flow of the Operating Subsidiaries to meet their
obligations, including their obligations under the
Notes. The Notes are effectively subordinated to
all Indebtedness and other liabilities and
commitments (including trade payables and lease
obligations) of the Company's Operating
Subsidiaries.
Covenants.................. The indenture pursuant to which the Notes were
issued (the "Indenture") contains certain covenants
that, among other things, limit the ability of the
Issuers to incur additional Indebtedness and issue
preferred stock, pay dividends or make other
distributions, repurchase Equity Interests (as
defined) or subordinated Indebtedness, create
certain liens, enter into certain transactions with
affiliates, sell assets of the Issuers, issue or
sell Equity Interests of CR US's subsidiaries, or
enter into certain mergers and consolidations. In
addition, under certain circumstances, the Issuers
are required to offer to purchase Notes at a price
equal to 100% of the principal amount thereof, plus
accrued and unpaid
11
<PAGE> 20
interest and Liquidated Damages, if any, to the
date of purchase, with the proceeds of certain
Asset Sales (as defined). See "Description of
Notes -- Certain Covenants."
Additional Amounts......... Any payments in respect of the Notes will be made
free and clear of and without any withholding or
deduction for or on account of any present or
future taxes, duties, levies, imposts, assessments
or other governmental charges of whatever nature
imposed or levied by or on behalf of Mexico or any
subdivision thereof or by any authority or agency
therein or thereof having power to tax ("Taxes"),
unless such Taxes are required by law, rule or
regulation or by the interpretation or
administration thereof to be withheld or deducted,
in which case, subject to certain exceptions, the
Issuers will pay such additional amounts
("Additional Amounts") as may be necessary so that
the net amount received by holders (the "Holders")
of the Notes (including Additional Amounts) after
such withholding or deduction will not be less than
the amount that would have been received in the
absence of such withholding or deduction. See
"Description of Notes -- Additional Amounts."
Governing Law.............. The Notes and the Indenture are governed by the
laws of the State of New York.
12
<PAGE> 21
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The summary pro forma financial data for the year ended December 31, 1996
and for the period January 1, 1997 through August 18, 1997 have been derived
from the audited combined historical financial statements of the Predecessor
Business. These data include both vacation ownership and hotel operations. The
historical and pro forma income statement data shown below present only the data
relating to the vacation ownership segment of the Predecessor Business. The
summary pro forma financial data for the year ended December 31, 1997 have been
derived from the audited historical financial statements of the Predecessor
Business for the period from January 1, 1997 through August 18, 1997 and the
audited historical financial statements of the Company for the period from
August 18, 1997 through December 31, 1997. The pro forma financial data do not
purport to (i) represent what the Company's results of operations would have
been had the Offering, the Purchase Transactions and the Remainder Interest
Disposition occurred on the assumed dates or (ii) project the Company's results
of operations for any future period. These data should be read in conjunction
with "Business -- Description of Purchase Transactions," "Selected Combined
Historical Financial Data," "Other Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the financial statements of the Company and the Predecessor Business together
with the notes thereto included elsewhere herein.
PRO FORMA INCOME STATEMENTS FOR THE VACATION OWNERSHIP SEGMENT
UNAUDITED
<TABLE>
<CAPTION>
VACATION OWNERSHIP SEGMENT
OF THE PREDECESSOR BUSINESS
-------------------------------------------------
TWELVE MONTHS ENDED
DECEMBER 31, 1996 SEVEN
------------------------------------ AND 1/2
MONTHS
ENDED TWELVE
PRO FORMA AUGUST 18, MONTHS
ADJUSTMENTS 1997 COMPANY'S ENDED
INCREASE ---------- RESULTS DECEMBER 31,
HISTORICAL (DECREASE) PRO FORMA HISTORICAL FOR 1997(1) 1997
---------- ----------- --------- ---------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA INCOME
STATEMENT DATA:
Revenues --
Vacation Interval
sales............... $ 2,867 $34,396 $37,263 $ 2,476 $18,513 $20,989
Interest income on
Vacation Interval
Receivables......... 3,294 3,294 3,277 995 4,272
Service fees and
rental of vacant
units............... 5,497 455 5,952 7,021 4,089 11,110
Other revenues........ 760 760 1,329 1,957 3,286
------- ------- ------- ------- -------
Total revenues.......... 12,418 47,269 14,103 25,554 39,657
------- ------- ------- ------- -------
Operating expenses --
Vacation Interval cost
of sales............ 7,512 7,512 4,941 4,941
Commission expense.... 1,604 5,504 7,108 412 2,194 2,606
Advertising, sales and
marketing........... 3,829 3,829 4,899 4,174 9,073
Maintenance and
energy.............. 3,798 3,798 4,669 1,846 6,515
Provision for
uncollectible
accounts............ 3,400 3,400 2,349 2,349
General and
administrative...... 5,400 1,500 6,900 4,503 6,394 10,897
------- ------- ------- ------- -------
Total operating
expenses.............. 14,631 32,547 14,483 21,898 36,381
------- ------- ------- ------- -------
Operating income
(loss)................ (2,213) 14,722 (380) 3,656 3,276
Depreciation and
amortization........ 78 78 61 61
Non-cash interest
expense............. 2,278 2,278 551 551
Cash interest
expense............. 3,108 10,542 13,650 2,827 3,726 6,553
Exchange and
translation loss,
net................. 75 992 1,067
------- ------- ------- ------- -------
Income (loss) before
provision for taxes... (5,321) (1,284) (3,282) (1,674) (4,956)
Mexican taxes......... 3,312 (12) 3,300 1,756 1,662 3,418
------- ------- ------- ------- -------
Net income (loss) before
preferred dividends... (8,633) (4,584) (5,038) (3,336) (8,374)
Preferred dividends..... 0 619 619 232 232
------- ------- ------- ------- -------
Net income (loss) to
common stockholders... $(8,633) $(5,203) $(5,038) $(3,568) $(8,606)
======= ======= ======= ======= =======
<CAPTION>
TWELVE
MONTHS
PRO FORMA ENDED
ADJUSTMENTS DECEMBER 31,
INCREASE 1997
(DECREASE) PRO FORMA
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
PRO FORMA INCOME
STATEMENT DATA:
Revenues --
Vacation Interval
sales............... $29,003(2) $49,992
Interest income on
Vacation Interval
Receivables......... 4,272
Service fees and
rental of vacant
units............... 11,110
Other revenues........ 3,286
-------
Total revenues.......... 68,660
-------
Operating expenses --
Vacation Interval cost
of sales............ 6,474(2) 11,415
Commission expense.... 5,100(2) 7,706
Advertising, sales and
marketing........... 9,073
Maintenance and
energy.............. 6,515
Provision for
uncollectible
accounts............ 2,611(4) 4,960
General and
administrative...... (287)(5) 10,610
-------
Total operating
expenses.............. 50,279
-------
Operating income
(loss)................ 18,381
Depreciation and
amortization........ 49(6) 110
Non-cash interest
expense............. 1,708(7) 2,259
Cash interest
expense............. 6,697(7) 13,250
Exchange and
translation loss,
net................. 1,067
-------
Income (loss) before
provision for taxes... 1,695
Mexican taxes......... 920(8) 4,338
-------
Net income (loss) before
preferred dividends... (2,643)
Preferred dividends..... 387(9) 619
-------
Net income (loss) to
common stockholders... $(3,262)
=======
</TABLE>
13
<PAGE> 22
<TABLE>
<CAPTION>
VACATION OWNERSHIP SEGMENT
OF THE PREDECESSOR BUSINESS
-------------------------------------------------
TWELVE MONTHS ENDED
DECEMBER 31, 1996 SEVEN
------------------------------------ AND 1/2
MONTHS
ENDED TWELVE
PRO FORMA AUGUST 18, MONTHS
ADJUSTMENTS 1997 COMPANY'S ENDED
INCREASE ---------- RESULTS DECEMBER 31,
HISTORICAL (DECREASE) PRO FORMA HISTORICAL FOR 1997(1) 1997
---------- ----------- --------- ---------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER PRO FORMA
FINANCIAL DATA:
Pro forma EBITDA(10).. $(2,213) 16,935 $14,722 $ (455) $ 2,664 $ 2,209
Ratio of earnings to
fixed charges(11)... -- -- -- -- --
<CAPTION>
TWELVE
MONTHS
PRO FORMA ENDED
ADJUSTMENTS DECEMBER 31,
INCREASE 1997
(DECREASE) PRO FORMA
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OTHER PRO FORMA
FINANCIAL DATA:
Pro forma EBITDA(10).. 15,105 $17,314
Ratio of earnings to
fixed charges(11)... 1.1x
</TABLE>
- ---------------
(1) Reflects the results of operations of the Company for the twelve months
ended December 31, 1997 including for the period from August 18, 1997
through December 31, 1997, and does not include results of operations of
the Predecessor Business.
(2) On August 18, 1997, in the Purchase Transactions, the Company acquired the
Combined Resorts, and the hotel portion of the Combined Resorts was sold to
Starwood. The pro forma income statement data give effect to the Offering
and application of the estimated net proceeds therefrom, the Purchase
Transactions, the Remainder Interest Disposition and certain stockholder
investments as if such transactions had occurred as of January 1st of each
period presented. In particular, gives effect to the pro forma recognition
of revenue using the full accrual method of accounting, by which all
revenue and associated direct expense is accrued at the time of sale,
instead of the installment method, by which revenue and associated direct
expense were recognized over 30 years.
(3) Records the cost of the acquired inventory of Vacation Intervals to be sold
(as determined through an initial allocation of the acquisition purchase
price) and the related charge-off of these inventory costs as Vacation
Interval cost of sales.
(4) Provision for uncollectible accounts related to the revenues recognized
under the full accrual method for revenue recognition.
(5) Assumes increased expense of $1.5 million on an annual basis to provide for
the estimated additional cost of corporate staff, office and overhead which
the Company expects to incur as an independent corporate entity.
(6) Reflects depreciation of office furniture and equipment, not held for sale
as Vacation Intervals, assuming ten-year lives.
(7) Non-cash and cash interest expense represents total interest expense and
includes (i) non-cash interest expense of approximately $1.16 million
representing annual amortization of debt issuance costs, (ii) approximately
$0.65 million of annual withholding taxes, and (iii) non-cash interest
expenses of approximately $1.12 million representing annual amortization of
original issue discount of the Notes, as a portion of the issue price of
the Units offered hereby that has been allocated to the Warrants. Does not
include the pro forma net effect of interest income which would have been
earned on excess cash. On a pro forma basis the Company believes it would
have earned at least 5% interest income on excess cash (approximately $0.7
million interest income for the twelve months ended December 31, 1995 and
1996 and 1997.
(8) Reflects an estimate of the Mexican taxes that would have been incurred if
the pro forma results had been obtained and the Company's currently
existing legal structure had been in place during the periods presented.
(9) Represents dividends payable on Class A Preferred Stock of CR US. See
"Business -- Description of Purchase Transactions -- Description of Class A
Preferred Stock."
(10) EBITDA represents net income before interest expense, preferred dividends,
taxes, depreciation and amortization. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service
and/or incur indebtedness. However, EBITDA should not be construed as a
substitute for income from operations, net income or cash flows from
operating activities in analyzing the Company's operating performance,
financial position and cash flows. The EBITDA measure presented herein may
not be comparable to EBITDA as presented by other companies and is not the
same as "Consolidated Cash Flow" under the Indenture. See "Description of
Notes -- Certain Definitions."
The following table reconciles pro forma EBITDA to pro forma net income (loss)
applicable to common stockholders:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1996 1997
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Pro forma net income (loss) applicable to common
stockholders.............................................. $(5,203) $(3,262)
Non-cash interest expense................................... 2,278 2,259
Cash interest expense....................................... 13,650 13,250
Mexican taxes............................................... 3,300 4,338
Depreciation and amortization............................... 78 110
Preferred dividends......................................... 619 619
------- -------
Pro forma EBITDA............................................ $14,722 $17,314
======= =======
</TABLE>
(11) The ratio of earnings to fixed charges has been computed by dividing
earnings before Mexican taxes plus fixed charges by fixed charges. Fixed
charges consist of interest and preferred stock dividends. Fixed charges
exceed earnings before Mexican taxes by approximately $5.3 million for the
historical twelve months ended December 31, 1996 ($1.3 million pro forma)
and $3.3 million for the historical seven and a half months ended August
18, 1997. Fixed Charges exceed earnings before Mexican taxes by $1.7
million for the Company's results for 1997.
14
<PAGE> 23
SUMMARY COMBINED HISTORICAL FINANCIAL DATA
The Summary Combined Historical Financial Data presented below reflect (i)
the combined historical income statement data of the Predecessor Business and
(ii) the historical financial data of the vacation ownership segment of the
Predecessor Business. The historical income statement data presented below were
derived from the combined historical financial statements of the Predecessor
Business and prepared in accordance with U.S. GAAP. These data include the use
of the installment method of accounting for the vacation ownership sales margins
reported by the Combined Resorts, because the Remainder Interest was owned by
the Predecessor Business.
Because the Company has completed a disposition of the Remainder Interest
the Company will use the full accrual method of accounting on a going-forward
basis from August 18, 1997. Accordingly, the Company has also presented
elsewhere in this Prospectus Unaudited Pro Forma Financial Data of the vacation
ownership segment of the Predecessor Business which eliminates the effect of the
installment method of accounting and instead recognizes vacation ownership
revenues and related direct costs of sales in the period that the sales
agreement was executed (and reflect other pro forma adjustments as discussed in
the related notes thereto). See "Unaudited Pro Forma Financial Data."
The following summary combined financial data for the years ended December
31, 1995 and 1996 are derived from the audited consolidated financial statements
of the Predecessor Business. The Summary Combined Financial Data for the year
ended December 31, 1997 have been derived from the consolidated financial
statements of the Predecessor Business for the period January 1, 1997 through
August 18, 1997 and the consolidated financial statements of the Company for the
period from August 18, 1997 through December 31, 1997.
These data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
"Business -- Description of Purchase Transactions" and the financial statements
of the Company and the Predecessor Business and the notes thereto included
elsewhere in this Prospectus.
15
<PAGE> 24
HISTORICAL INCOME STATEMENT DATA OF THE PREDECESSOR BUSINESS
<TABLE>
<CAPTION>
SEVEN AND
ONE-HALF MONTHS
YEAR ENDED DECEMBER 31, ENDED AUGUST 18,
----------------------------------------------------- -------------------------
1995 1996 1997
------------------------- ------------------------- -------------------------
VACATION VACATION VACATION
OWNERSHIP OWNERSHIP OWNERSHIP
COMBINED(1) SEGMENT(2) COMBINED(1) SEGMENT(2) COMBINED(1) SEGMENT(2)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(AUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL INCOME STATEMENT DATA:
Vacation ownership revenues:
Vacation Interval sales.................. $ 25,034 $ 25,034 $37,263 $37,263 $31,479 $31,479
Less amounts deferred(3)............... (24,461) (24,461) (36,435) (36,435) (30,653) (30,653)
Plus amounts recognized(3)............. 1,131 1,131 2,039 2,039 1,650 1,650
Interest income on Vacation Interval
Receivables............................ 1,839 1,839 3,294 3,294 3,277 3,277
Rental of vacant units................... 2,043 2,043 2,898 2,898 4,560 4,560
Service fee income....................... 2,062 2,062 2,599 2,599 2,461 2,461
Other revenues........................... 690 690 760 760 1,329 1,329
-------- -------- ------- ------- ------- -------
Total vacation ownership
revenues................................. 8,338 8,338 12,418 12,418 14,103 14,103
Total hotel revenues less direct hotel
expenses................................. 23,368 30,718 24,977
Other operating expenses:
Commissions paid......................... 4,919 4,919 7,108 7,108 5,512 5,512
Less amounts deferred(3)............... (4,824) (4,824) (5,807) (5,807) (5,413) (5,413)
Plus amounts recognized(3)............. 178 178 303 303 313 313
Advertising, sales and marketing......... 8,526 4,128 7,928 3,829 7,863 4,899
Maintenance and energy................... 8,475 3,183 9,209 3,798 9,517 4,669
General and administrative............... 12,023 6,052 13,086 5,745 10,274 3,963
Other expenses........................... 1,473 585 485 (345) 1,517 540
-------- -------- ------- ------- ------- -------
Total operating expenses................... 30,770 14,221 32,312 14,631 29,583 14,483
-------- -------- ------- ------- ------- -------
Operating income (loss).................... 936 (5,883) 10,824 (2,213) 9,497 (380)
Depreciation and amortization(4)......... 0 0 0 0 0 0
Interest expense......................... 10,357 3,884 8,287 3,108 7,539 2,827
Exchange and translation loss, net....... 75
-------- -------- ------- ------- ------- -------
Income (loss) before provision for taxes... (9,421) (9,767) 2,537 (5,321) 1,958 (3,282)
Mexican taxes............................ 5,294 3,356 4,633 3,312 4,694 1,756
-------- -------- ------- ------- ------- -------
Net income (loss).......................... $(14,715) $(13,123) $(2,096) $(8,633) $(2,736) $(5,038)
======== ======== ======= ======= ======= =======
OTHER HISTORICAL FINANCIAL DATA:
EBITDA(5)................................ $ (5,883) $(2,213) $ (455)
Ratio of earnings to fixed charges(6)....
</TABLE>
- ---------------
(1) These financial data were derived from the Combined Historical Financial
Statements of the Predecessor Business which were prepared in accordance
with U.S. GAAP. See the Historical Combined Financial Statements of the
Predecessor Business. The historical combined financial data includes the
combined results of both the vacation ownership and hotel segments of the
Predecessor Business which, prior to August 18, 1997, were owned by
Bancomer.
(2) The historical vacation ownership segment information was prepared by
identifying the direct vacation ownership revenues and expenses and
allocating the hotel and vacation ownership shared expenses based on the
relative number of total rooms at the beginning of each period.
(3) Because the Company acquired perpetual ownership of the Regina Resorts and
sells 30 to 50 year memberships to its customers, the historical financial
information has been prepared by using the installment method of accounting
as required by U.S. GAAP, which required the Predecessor Business to
recognize annually only 1/30th of cumulative vacation ownership revenues,
net of cumulative provisions for doubtful accounts and cumulative commission
expenses. For periods after August 18, 1997 financial data are presented
using the full accrual method of accounting in accordance with SFAS No. 66
rather than the installment method of accounting. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company's Historical Consolidated Statement of Operations for the year
ended December 31, 1997 includes the operations of the purchased Club Regina
Resorts only for the period August 19, 1997 through December 31, 1997. Pro
forma unaudited Statements of Operations, which combine the operations of
the Predecessor Businesses for the period January 1, 1997 through August 18,
1997, using the full accrual method of accounting, with the Company's 1997
historical results are presented elsewhere herein in order to provide pro
forma operating data for the full year ended December 31, 1997 along with
comparative pro forma operating data of the Predecessor Business for the
year ended December 31, 1996. The 1996 pro forma operating data has been
provided, using the full accrual method of accounting in order to provide
relevant comparative operating information.
(4) Depreciation was not recognized by the Predecessor Business during the
periods presented because the prior owner had recorded a significant
impairment loss in 1994 and the assets of the Combined Resorts were held for
sale from then until their sale on August 18, 1997.
16
<PAGE> 25
(5) EBITDA represents net income before interest expense, taxes, depreciation
and amortization. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service and/or incur
indebtedness. However, EBITDA should not be construed as a substitute for
income from operations, net income or cash flows from operating activities
in analyzing the Company's operating performance, financial position and
cash flows. The EBITDA measure presented herein may not be comparable to
EBITDA as presented by other companies and is not the same as "Consolidated
Cash Flow" under the Indenture. See "Description of Notes -- Certain
Definitions."
The following table reconciles historical EBITDA to historical net
income (loss) reported for the vacation ownership segment:
<TABLE>
<CAPTION>
SEVEN AND
ONE-HALF
MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------- AUGUST 18,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net income (loss)........................................... $(13,123) $(8,633) $(5,038)
Interest expense............................................ 3,884 3,108 2,827
Mexican taxes............................................... 3,356 3,312 1,756
Depreciation and amortization(4)............................ 0 0 0
-------- ------- -------
EBITDA...................................................... $ (5,883) $(2,213) $ (455)
======== ======= =======
</TABLE>
(6) The ratio of earnings to fixed charges has been computed by dividing
earnings before Mexican taxes plus fixed charges by fixed charges. Fixed
charges consist of interest, amortization of debt issue costs and original
issue discount and preferred stock dividends. Fixed charges exceed net
income (loss) before Mexican taxes and fixed charges by approximately $9.8
million, $5.3 million and $3.3 million for the years ended December 31, 1995
and 1996 and the seven and one-half months ended August 18, 1997,
respectively.
17
<PAGE> 26
SUMMARY HISTORICAL INCOME STATEMENT DATA
<TABLE>
<CAPTION>
VACATION OWNERSHIP SEGMENT OF
PREDECESSOR BUSINESS
----------------------------------
SEVEN AND
YEARS ENDED 1/2 MONTHS
DECEMBER 31, ENDED
-------------------- AUGUST 18, COMPANY
1995 1996 1997 1997
-------- -------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Vacation ownership revenues:
Vacation intervals sales.............................. $ 25,034 $ 37,263 $31,479 $ 18,513
Less amounts deferred............................... (24,461) (36,435) (30,653)
Plus amounts recognized............................. 1,131 2,039 1,650
Interest income on Vacation Interval Receivables...... 1,839 3,294 3,277 995
Rental of vacant units................................ 2,043 2,898 4,560 3,142
Service fee income.................................... 2,062 2,599 2,461 1,987
Other revenues........................................ 690 760 1,329 917
-------- -------- ------- --------
Total vacation ownership revenues....................... 8,338 12,418 14,103 25,554
-------- -------- ------- --------
Cost of vacation intervals sales...................... 4,941
Commissions paid...................................... 4,919 7,108 5,512
Less amounts deferred............................... (4,824) (5,807) (5,413)
Plus amounts recognized............................. 178 303 313
Advertising, sales and marketing...................... 4,128 3,829 4,899 6,368
Maintenance and energy................................ 3,183 3,798 4,669
General and administrative............................ 6,052 5,400 3,963 8,240
Other expenses........................................ 585 540 2,349
-------- -------- ------- --------
Total operating expenses................................ 14,221 14,631 14,483 21,898
-------- -------- ------- --------
Operating income (loss)................................. (5,883) (2,213) (380) 3,656
Depreciation and amortization......................... 612
Interest expense...................................... 3,884 3,108 2,827 3,726
Exchange and translation loss......................... 75 992
-------- -------- ------- --------
Income (loss) before provision for Mexican taxes........ (9,767) (5,321) (3,282) (1,674)
Provision for Mexican taxes........................... 3,356 3,312 1,756 1,662
-------- -------- ------- --------
Net income (loss)....................................... $(13,123) $ (8,633) $(5,038) $ (3,336)
======== ======== ======= ========
</TABLE>
HISTORICAL CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
BALANCE
BALANCE SHEET DATA
SHEET DATA AT DECEMBER 31,
AT AUGUST 18, 1997 1997
------------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and temporary investments.............................. $ 2,056 $ 8,995
Vacation ownership and trade receivables.................... 37,180 39,952
Land, office furniture and equipment........................ 13,014 13,798
Total assets................................................ 95,749 118,164
Long-term debt, net of unamortized original issue
discount.................................................. 87,854 90,780
Stockholders' investment (deficit).......................... (315) 14,352
</TABLE>
18
<PAGE> 27
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act, and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") which represent the Issuers'
expectations and beliefs concerning future events that involve risks and
uncertainties, including those associated with the effects of national and
regional economic conditions. Investors are cautioned that all forward-looking
statements involve risks and uncertainty. Discussions containing such
forward-looking statements may be found in the material set forth under
"Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources,"
"Unaudited Pro Forma Financial Statements," "Business" and "Description of
Notes," as well as elsewhere herein. Actual results may differ materially from
those projected in the forward-looking statements. Although the Issuers believe
that the assumptions underlying the forward-looking statements contained herein
are reasonable, any of the assumptions could be inaccurate, and therefore, there
can be no assurance that the forward-looking statements included in this
Prospectus will prove to be accurate. Important factors that could cause actual
results to differ materially from the Issuers' expectations are disclosed in
this Prospectus. Considering the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Issuers or any other person
that the objectives and plans of the Issuers will be achieved. The reader should
note that initial public offerings are excluded from Section 27A of the
Securities Act and Section 21E of the Exchange Act.
RISK FACTORS
Prior to making an investment decision, prospective investors in the
Registered Notes offered hereby should carefully consider all the information
herein and, in particular, the following risk factors. The following information
was derived in part from the Form 18-K, as amended, filed by the United Mexican
States with the Commission on June 20, 1997. The Company does not warrant the
accuracy or completeness of such information.
FACTORS RELATING TO MEXICO
Adverse Mexican Economic Conditions and Government Policies. Because each
Regina Resort is located in Mexico and a significant percentage of the owners of
Vacation Intervals are Mexican nationals (approximately 44% as of December 31,
1997), the Company's financial condition and results of operations are greatly
affected by the strength of the Mexican economy.
During the late 1980s and early 1990s, as a result of Mexican government
initiatives and the attendant increase in foreign investment, Mexico's growth
rate increased, the inflation rate was reduced significantly and the U.S.
dollar/peso exchange rate was relatively stable. During 1994, however, Mexico
experienced an economic crisis caused in part by a series of internal
disruptions and political events, including a large current account deficit
(8.0% of gross domestic product in 1994), reduced level of domestic savings (15%
of gross domestic product in 1994), civil unrest in the southern state of
Chiapas, the assassination of two prominent political figures and significant
devaluation of the peso. These events undermined the confidence of investors in
Mexico during 1994 and, combined with an increase in interest rates, led to a
substantial outflow of capital. The weaker value of the peso relative to the
dollar increased the cost, in peso terms, of imported goods and services, and
thereby increased the rate of inflation in Mexico to 52.0% in 1995 (as compared
to 7.1% in 1994). To the extent that employers adjusted wages upward to
compensate for the decline in purchasing power resulting from the devaluation of
the peso, and then adjusted prices to reflect increased wage costs, additional
inflationary pressures arose. The devaluation of the peso also led to a lack of
confidence on the part of investors in Mexico's ability to repay its short-term
obligations and, consequently, a reluctance of investors to reinvest in Mexico's
maturing government bonds. As a result, Mexico experienced a liquidity crisis
closely linked to the $29.2 billion of short-term government bonds (Tesobonos)
outstanding at the end of 1994 and maturing in 1995.
Since 1995, the Mexican government has instituted programs which sought to
(i) stabilize the exchange rate and maintain the current floating rate exchange
policy, (ii) stabilize the Mexican banking sector,
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(iii) establish tax incentives for business to increase productivity and
employment, (iv) increase exports, (v) reform the pension system to encourage
private domestic savings, (vi) control inflation by decreasing public spending
and implementing a restrictive monetary policy, (vii) increase private sector
investment through privatization of transportation and telecommunications and
(viii) increase public-sector revenues, in part through increases in the general
rate of the value-added tax for certain goods and services from 10% to 15%
(except for certain "free zones" such as Cancun, Cozumel and Los Cabos, where
the rate continues to be 10%), increases in prices of fuel oil, natural gas and
electricity and increases in the minimum wage. In addition, the Mexican
government sought to minimize inflation by promoting the gradual implementation
of price increases.
Economic conditions in Mexico improved somewhat in 1996, with gross
domestic product in 1996 5.1% higher than gross domestic product in 1995, and
interest rates on 28-day Cetes declining to an average of 31.4% (from an average
of 48.4% in 1995). According to preliminary figures, in the first quarter of
1997, gross domestic product increased by 5.1% as compared to the same period in
1996. On January 15, 1997, the Mexican government repaid the remaining balance
that it borrowed on the line of credit extended by the United States and Canada.
There can be no assurance that the economic plan of the Mexican government will
achieve its stated goals or the improvement of the Mexican economy in 1996 will
continue in future periods.
The future performance of the Mexican economy may be adversely affected by
political instability in Mexico. On August 28, 1996, a little-known group
calling itself the Ejercito Popular Revolucionario (the Popular Revolutionary
Army, or "EPR") initiated attacks in various parts of Mexico, concentrating on
military and police targets, and since that date has claimed responsibility for
a number of other attacks and has been involved in direct skirmishes with
Mexican government troops. Although the extent of popular support enjoyed by the
EPR is not known, and none of the attacks occurred within 600 miles of any of
the Regina Resorts, the attacks adversely affected Mexico's foreign exchange and
securities markets. No assurance can be given that attacks in the future by the
EPR or any other insurgent group will not have a similar, or worse, effect on
such markets.
The Mexican government has exercised, and continues to exercise,
significant influence over the Mexican economy. Accordingly, Mexican
governmental actions could have a significant effect on companies with Mexican
operations (including the Company), market conditions, prices and returns on
securities of companies with significant Mexican operations (including those of
the Company). On July 6, 1997, national elections were held in Mexico in which
parties opposed to the ruling Institutional Revolutionary Party ("PRI")
increased their representation in the Mexican legislature and captured the
mayoralty of Mexico City and the governorship of several states of Mexico.
Although the term of President Ernesto Zedillo, a member of the PRI, is
scheduled to continue until the year 2000, there can be no assurance that the
increased political power of parties opposed to the PRI will not result in a
change in Mexico's economic policies or the ability of President Zedillo to
implement plans or agreements similar to those referred to above. Any change in
Mexico's economic policies could have a material adverse effect on the Company's
business, results of operations, financial condition, ability to obtain
financing and prospects.
Future declines in the gross domestic product of Mexico, continued high
rates of inflation in Mexico or other adverse social, political or economic
developments in or affecting Mexico or other emerging market countries could
have a generally adverse effect on the Mexican economy, which could result in a
material adverse effect on the Company's business, results of operations,
financial condition, ability to obtain financing and prospects and on the market
price of the Issuers' securities. Finally, Mexican securities such as the Notes
are, to varying degrees, influenced by economic and market conditions in other
emerging market countries. Although economic conditions are different in each
country, investors' reactions to developments in one country may have effects on
the securities of issuers in other countries, including Mexico. There can be no
assurance that the trading price of the Notes or the Issuers' ability to meet
their obligations under the Notes would not be adversely affected by events
elsewhere, especially in emerging market countries.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Currency Fluctuations" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
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Exchange Rates. The value of the peso has been subject to significant
fluctuations with respect to the U.S. dollar in the past and may be subject to
significant fluctuations in the future. The value of the peso declined by 60.8%
against the U.S. dollar, from Ps.3.33 at December 31, 1993 to Ps.5.00 at
December 31, 1994. Significant fluctuations in the value of the peso in short
time periods included a major decline in March 1994 (following the assassination
of a leading candidate in Mexico's presidential elections) of that year and a
decline by 42.9% from December 19, 1994 to December 31, 1994. See "-- Factors
Relating to Mexico -- Adverse Mexican Economic Conditions and Government
Policies." Between January 1, 1995 and March 31, 1996, the Mexican peso
depreciated an additional 50.8% to Ps.7.54 per U.S. dollar and fluctuated from a
high, relative to the U.S. dollar, of Ps.5.00 to a low, relative to the U.S.
dollar, of Ps.8.14. From March 31, 1996 to September 30, 1996, the peso/U.S.
dollar exchange rate was relatively stable, although the peso did depreciate
from Ps.7.55 per U.S. dollar at September 30, 1996 to Ps.8.06 per U.S. dollar at
December 30, 1997. At March 20, 1998, the peso/U.S. dollar exchange rate was
Ps.8.55 per U.S. dollar. No assurance can be given that the peso will not
further depreciate in value relative to the U.S. dollar in the future. See
"Exchange Rates" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Currency Fluctuations."
The Mexican economy has suffered balance of payment deficits and shortages
in foreign exchange reserves. While the Mexican government does not currently
restrict the ability of Mexican or foreign persons or entities to convert pesos
to U.S. dollars, no assurance can be given that the Mexican government will not
institute a restrictive exchange control policy in the future. Any such
restrictive exchange control policy could adversely affect the Issuers' ability
to convert dividends or other payments received in pesos into U.S. dollars for
purposes of making payments to the Holders of the Notes, and could also have a
material adverse effect on the Company's business and financial condition.
COMPANY RISKS
Risk of New Venture and Recent Acquisition; Lack of Prior Operating
History. Club Regina was organized in August 1996, but started operations as of
the closing of the Purchase Transactions on August 18, 1997. Prior to such
closing, the Combined Resorts were under common ownership of Bancomer, but the
Regina Resorts were operated separately from the Westin Hotels. There can be no
assurance that the Company will be able to operate the Regina Resorts on a
profitable basis or that the Regina Resorts can be operated as effectively under
separate ownership from the Westin Hotels as they were operated while Bancomer
owned the Regina Resorts and the Westin Hotels. Accordingly, the Company and
Starwood and Westin will be required to cooperate in the provision of such
services because the Regina Resorts and the Westin Hotels rely on certain common
and shared facilities to provide required services to Members and hotel guests,
respectively. To effect such cooperation, the Company and Starwood have entered
into the Operating Agreements by which their relationship is governed. Although
the Company believes that its relations with Starwood and Westin are good, there
can be no assurance that operating issues will not arise that could affect such
relationship or that if a third party were to succeed to the interests of
Starwood or Westin that the same level of cooperation between the Company and
any such successor would continue. See "Business -- Description of Purchase
Transactions."
Prior to the closing of the Purchase Transactions, the Combined Resorts had
been operating as a division of Bancomer, the second largest bank in Mexico, and
as such has systems in place for accounting and financial reporting under
Mexican generally accepted accounting principles ("Mexican GAAP"). The Company
has adapted such systems to comply with accounting and financial reporting
required for U.S. companies using U.S. GAAP.
In connection with the Purchase Transactions, it was determined that there
were certain irregularities in title to the Combined Resort at Cancun and that
certain formalities were required to be taken with respect to the deeds to the
Company's property at Cozumel and additional property adjacent to the Regina
Resort at Los Cabos. The Company does not expect the correction and
formalization of these matters to have a material impact, if any, on its
business although there can be no assurance that this will be the case. See
"Business -- Description of Purchase Transactions -- Description of Stock
Purchase Agreement" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recent Acquisition."
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A portion of the Company's management group, located in both Houston, Texas
and Mexico City, Mexico has been assembled only recently, and there can be no
assurance that the management group will be able to operate the Regina Resorts
or implement the Company's acquisition and internal growth strategy effectively.
The combined historical financial results of the vacation ownership segment of
the Predecessor Business cover periods when it was not under control or
management of the Company and, therefore, may not be indicative of the Company's
future financial or operating results. The prospects for the Company's success
must be considered in light of the risks, expenses and difficulties often
encountered in the establishment of a new business in a continually evolving
industry characterized by an increasing number of market competitors. See
"Business -- Business Strategy" and "Management."
Development and Construction Risks. The Company intends to construct,
redevelop, convert and expand additional resorts. There can be no assurance that
the Company will complete the expansion plans set forth in "Business -- The
Resorts" and "Business -- Business Strategy" or undertake to develop other
resorts or complete such development if undertaken. Risks associated with the
Company's development, construction and redevelopment/conversion activities may
include the risks that: (i) acquisition and/or development opportunities may be
abandoned; (ii) construction costs of a property may exceed original estimates,
possibly making the resort uneconomical or unprofitable; (iii) sales of Vacation
Intervals at a newly completed property may be insufficient to make the property
profitable; (iv) financing may not be available on favorable terms for the
development of, or the continued sales of Vacation Intervals at, a property; and
(v) construction may not be completed on schedule, resulting in decreased
revenues and increased interest expense. In addition, the Company's construction
activities will typically be performed by third-party contractors, the timing,
quality and completion of which the Company will be unable to control.
Furthermore, 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 they are ultimately successful,
typically require a substantial portion of management's time and attention.
Development activities are also subject to risks relating to the Company's
inability to: (i) obtain, or avoid delays in obtaining, all necessary zoning,
land-use, building, occupancy and other required governmental permits and
authorizations, (ii) coordinate construction activities with the process of
obtaining such permits and authorizations, and (iii) obtain the financing
necessary to complete the necessary acquisition, construction, and/or conversion
work. In addition, local laws may impose liability on property developers with
respect to construction defects discovered, or repairs made by future owners of
such property. Pursuant to such laws, future owners may recover from the Company
amounts in connection with any repairs made to the developed property. Finally,
to the extent the Company elects to develop properties adjacent to luxury hotels
to provide Members with service offered to guests of such hotels, the Company
will need to negotiate the terms by which such hotels would provide services to
the Company and the Members. There can be no assurance that the Company will be
able to negotiate such terms on a basis that is favorable to the Company,
including negotiations for its planned developments in Los Cabos and Cozumel, if
at all. See "-- Risk of New Venture and Recent Acquisition; Lack of Prior
Operating History," "Business -- Business Strategy," and "Management's
Discussion and Analysis of Financing Condition and Results of Operations."
Acquisition Strategy Risks. The Company intends to grow primarily through
the development and acquisition of additional resorts, including locations
outside of Mexico. The Company's future growth and financial success will depend
upon a number of factors, including its ability to identify attractive resort
acquisition opportunities, consummate the acquisitions of such resorts on
favorable terms, convert such resorts to use as vacation ownership resorts and
profitably sell Vacation Intervals at such resorts. In addition, to the extent
the Company acquires and develops resorts outside of Mexico, the Company's
management will face the challenge of conducting operations in countries where
the Company has not previously operated. Increased competition for acquisition
candidates may develop, in which event there may be fewer acquisition
opportunities available to the Company as well as higher acquisition prices.
There can be no assurance that the Company will be able to finance, identify,
acquire or profitably manage additional businesses, or successfully integrate
acquired businesses, if any, into the Company without substantial costs, delays
or other operational or financial problems. Further, acquisitions involve a
number of special risks, including (i) possible adverse effects on the Company's
operating results, (ii) diversion of management's attention, (iii) lack of local
market knowledge and experience, (iv) inability to hire, train and retain key
acquired personnel, (v) inability to
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secure sufficient marketing relationships with local hospitality, retail and
tourist attraction operators, (vi) risks associated with unanticipated events or
liabilities, and (vii) amortization of acquired intangible assets, some or all
of which could have a material adverse effect on the Company's business,
financial condition and results of operations. Customer dissatisfaction or
performance problems at a single acquired company could have an adverse effect
on the reputation of the Company and render ineffective the Company's sales and
marketing initiatives. In addition, there can be no assurance that the Company
or other businesses acquired in the future will achieve anticipated revenues and
earnings. See "Business -- Business Strategy."
Customer Financing Risks. The Company offers financing to the buyers of
Vacation Intervals who make a down payment of at least 15% of the purchase price
of each Vacation Interval under title retention agreements. This financing
generally bears interest at fixed rates and is effectively collateralized by the
purchased Vacation Interval. To obtain future financing, the Company may seek to
enter into agreements with lenders pursuant to which the Company would pledge,
as collateral, its Vacation Interval Receivables from the financing that the
Company offers its customers. There can be no assurance that any such financing
will be available on terms that are acceptable to the Company or otherwise.
Moreover, if, in connection with any such financing, the Company is required to
sell its Vacation Interval Receivables to lenders, discounts from the face value
of such receivables may be required by such lenders. At December 31, 1997, the
Company had a portfolio of approximately 5,500 Vacation Interval Receivables
amounting to approximately $43.0 million in outstanding principal amount. At
December 31, 1997, the Vacation Interval Receivables had a weighted average
maturity of approximately five years. At December 31, 1997, approximately (i)
64% of all of the Vacation Interval Receivables were U.S. dollar denominated and
had a weighted average interest rate of 12.8%, (ii) 32% of all Vacation Interval
Receivables were denominated in UDIs, an obligation denominated in pesos which
is adjusted for Mexican inflation, and had a weighted average interest rate of
25.8%, and (iii) 4% of all Vacation Interval Receivables were denominated in
Mexican pesos and had a weighted average interest rate of 19.2%. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Customer Default Risks. The Company bears the risk of defaults by buyers
who financed the purchase of their Vacation Intervals. If a Member defaults on a
Vacation Interval Receivable, the Company generally will terminate the
underlying conditional sale agreement and return the promissory note with
respect thereto to the customer. In connection with the Company terminating such
sale agreements, the relatively substantial associated marketing costs other
than certain sales commissions will not be recovered by the Company, and they
must be incurred again after the Vacation Interval has been returned to the
Company's inventory for resale (commissions paid in connection with the sale of
Vacation Intervals may be recoverable from the Company's sales personnel and
from independent contractors upon default in accordance with contractual
arrangements with the Company, depending upon the amount of time that has
elapsed between the sale and the default and the number of payments made prior
to such default). Although the Company in many cases may have recourse against
buyers of Vacation Intervals, sales personnel and independent contractors for
the purchase price paid and for commissions paid, respectively, no assurance can
be given that the Vacation Interval purchase price or any commissions will be
fully or partially recovered in the event of buyer defaults on Vacation Interval
Receivables. See "Business -- The Company -- Customer Financing."
Regulation of Marketing and Sales of Vacation Intervals; Other Laws. In
March 1998, the Company became subject to Mexican "timeshare" laws and
regulations. The Company does not believe that becoming subject to such laws and
regulations has had a material adverse effect on its business. The Company's
marketing and sales of Vacation Intervals and other operations are subject to
other regulations under Mexican law. Other laws, such as real estate licensure;
travel agent licensure; anti-fraud laws; telemarketing laws; price, gift and
sweepstakes laws; and labor laws, also affect the Company's business. The
Company believes that it is in material compliance with all laws and regulations
to which it is currently subject. However, no assurance can be given that the
Company is in fact in compliance with all applicable laws and regulations.
During 1997 amendments to Mexico's value added tax laws were enacted which
subject sales of vacation intervals such at those sold by the Company to a value
added tax of approximately 10% in Cancun and Los Cabos and 15% in Puerto
Vallarta. To counteract the imposition of this value added tax on sales of
Vacation
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Intervals, the Company has raised its prices, but by less than the amount of
such tax, thereby placing downward pressure on the Company's margins.
In addition, the Company's operations are subject to a number of other
Mexican and U.S. federal, state and local laws, regulations and taxation
regimes. The Company believes that it is currently in material compliance with
all such laws, regulations and regimes; however, there can be no assurance that
such laws, regulations and regimes may not change, that interpretations with
respect thereto may not be modified, or that the Company is in fact in
compliance with all such laws, regulations and regimes. Any failure to comply
with applicable laws, regulations or taxation regimes could have a material
adverse effect on the Company. See "Business -- Governmental Regulation."
Expansion and Regulation of Company's Business Outside of Mexico. Club
Regina may expand its business, including Vacation Interval marketing and sales
and acquisition and development of additional resorts outside of Mexico. See
"Business -- Business Strategy -- Future Acquisitions." These activities would
be subject to extensive regulation by the applicable jurisdictions in which its
resort properties were located and in which Vacation Intervals were marketed and
sold. While the Company will use its best efforts to be in material compliance
with all foreign laws and regulations to which it may become subject, no
assurance can be given that the cost of qualifying under vacation interval
ownership regulations and other regulations in any jurisdiction in which the
Company desires to conduct sales and operate its business would not be
significant. Any failure to comply with applicable laws or regulations could
have a material adverse effect on the Company. See also "-- Company
Risks -- Regulation of Marketing and Sales of Vacation Intervals; Other Laws."
Hedging Activities. The Company does not engage in speculative or
profit-motivated hedging activities. However, to reduce the risks associated
with peso inflation, the Company denominates many of its Vacation Interval
Receivables in UDIs. See "Business -- The Company -- Customer Financing."
Although the Company believes that its UDI program protects it from peso
inflation, it does not insulate the Company from foreign currency risk, and
there can be no assurance that the rate of return on the Company's UDI
denominated loans will not be adversely affected by a change in dollar/peso
exchange rates. In addition the Company may engage in other hedging transactions
to manage currency risks. To manage risks associated with any future borrowings
of the Company bearing interest at variable rates, the Company may from time to
time purchase interest rate caps, interest rate swaps or similar instruments.
The nature and quantity of the hedging transactions for the variable rate debt
will be determined by the management of the Company based on various factors,
including market conditions, and there have been no limitations placed on
management's use of certain instruments in such hedging transactions. No
assurance can be given that any such hedging transactions will offset the risks
of changes in interest rates or currency fluctuations, or that the costs
associated with hedging activities will not increase the Company's operating
costs.
Seasonality. In general, the Mexican vacation ownership industry tends to
follow seasonal buying patterns with peak sales occurring during the peak
travel/tourism seasons, usually December through April and July through August.
The timing of these purchases, however, may be affected by weather conditions
and general or local economic conditions. Seasonal influences may also affect
the Company's earnings in a manner that could limit the ability of the Company
to fund its capital and debt service requirements, including making payments of
interest on the Notes, during off-peak seasons. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Seasonality."
General Economic Conditions; Concentration in Vacation Ownership
Industry. Any downturn in economic conditions or any price increases (e.g.,
airfares) related to the travel and tourism industry could depress discretionary
consumer spending and have a material adverse effect on the Company's business.
Any such economic conditions, including recessions, may also adversely affect
the future availability of attractive financing for the Company or its customers
and may materially adversely affect the Company's business, financial condition
and results of operations. Furthermore, adverse changes in general economic
conditions may adversely affect the collectibility of the Vacation Interval
Receivables. Because the Company's operations are conducted almost entirely
within the vacation ownership industry, any adverse changes affecting the
vacation ownership industry such as an oversupply of vacation ownership units, a
reduction in demand for
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vacation ownership units, changes in travel and vacation patterns, changes in
governmental regulations of the vacation ownership industry and increases in
construction costs or taxes, as well as negative publicity, could have a
material adverse effect on the Company's operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Sales Volume Risks. The Company depends on sales leads generated from
guests of the Westin Hotels, other local offices and off-site offices. With
respect to off-site offices, as the number of potential customers in the
geographic area of a sales office who have attended a sales presentation
increases, the Company may have increasing difficulty in attracting additional
potential customers to a sales presentation at that office, and it may become
increasingly difficult for the Company to maintain current sales levels at its
existing sales offices. Accordingly, the Company anticipates that a substantial
portion of its future sales growth will depend on opening additional off-site
sales offices which may be subject to local taxes and compliance with additional
registration and other requirements. There can be no assurance, however, that
sales from existing or new off-site sales offices will meet the Company's
expectations. If the Company does not open additional sales offices or if
existing or new sales offices do not perform as expected, the Company's
business, results of operations and financial condition could be materially
adversely affected. See "Business -- The Company -- Sales and Marketing."
Geographic Concentration in Mexico; Concentration of Customers in North
America. The Company currently sells Vacation Intervals only in Mexico, and at
December 31, 1997 approximately 44% of Members reside in Mexico. The Company
intends to continue to sell Vacation Intervals in Mexico and to initiate
registration to permit sales in selected locations in the United States. Since
all of the Company's sales offices are currently located in Mexico, any economic
downturn in Mexico could have a disproportionate material adverse effect on the
Company's business, results of operations and financial condition. See
"-- Factors Relating to Mexico." In addition, at September 30, 1997,
approximately 48% and 5% of the Company's Members resided in the United States
and Canada, respectively, and, as a result, the Company may be vulnerable to
downturns in the U.S. and Canadian economies as well. See "Business -- The
Company."
Competition. The Company is subject to significant competition from other
entities engaged in the business of resort development, sales and operation,
including vacation interval ownership, condominiums, hotels and motels. Some of
the world's most recognized lodging, hospitality and entertainment companies
have begun to develop and sell vacation intervals in resort properties. Major
companies that now operate or are developing or planning to develop vacation
ownership resorts include Marriott International, Inc., The Walt Disney Company,
Hilton Hotels Corporation, Hyatt Corporation, Four Seasons Hotels & Resorts,
Inc., Intercontinental Hotels and Resorts, Inc., and Westin. In addition, other
publicly-traded companies in the vacation ownership industry, such as Signature
Resorts, Inc., Fairfield Communities, Inc., Vistana, Inc., Trendwest Resorts,
Inc. and SilverLeaf, Inc. currently compete, or may compete, with the Company.
Many of these entities possess significantly greater financial, marketing and
other resources than those of the Company. Management believes that recent and
potential future consolidation in the vacation interval industry will increase
industry competition. See "Business -- Competition."
Vacation Interval Exchange Networks. The attractiveness of Vacation
Interval ownership is enhanced significantly by the availability of exchange
networks that allow Members to exchange in a particular year the occupancy right
in their Vacation Interval for an occupancy right in another participating
network resort. According to the ARDA, buyers cited the ability to exchange a
vacation interval as a primary reason for purchasing a vacation interval.
Several companies, including RCI, provide broad-based vacation interval exchange
services, and the Regina Resorts are currently qualified for participation in
the RCI exchange network. However, no assurance can be given that the Company
will continue to be able to qualify the Regina Resorts, or will be able to
qualify its future resorts, for participation in the RCI network or any other
exchange network. Moreover, if such exchange networks cease to function
effectively, or if the Company's resorts are not accepted as exchanges for other
desirable resorts, the Company's Vacation Interval sales could be materially
adversely effected. See "Business -- The Company -- Participation in Vacation
Interval Exchange Networks."
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Resale Market for Vacation Intervals. The Company sells Vacation Intervals
to buyers for leisure and not for investment purposes. The Company believes that
the market for resale of Vacation Intervals by Members is limited, and that any
resales of Vacation Intervals are typically at prices substantially less than
the original purchase price. These factors may make ownership of Vacation
Intervals less attractive to prospective buyers, and attempts by Members to
resell their Vacation Intervals will compete with sales of Vacation Intervals by
the Company. In addition, the market price of Vacation Intervals sold by the
Company or by its competitors in the market could be depressed by a substantial
number of Vacation Intervals offered for resale. See "Business -- The
Company -- Participation in Vacation Interval Exchange Networks."
Possible Environmental Liabilities. The Company's activities are subject to
Mexican environmental laws and regulations, which consist mostly of the Mexican
General Law of Ecological Balance and Environmental Protection ("Ley General del
Equilibrio Ecologico y la Proteccion del Ambiente") and the regulations enacted
thereunder. Under such laws and regulations, the Regina Resorts are subject to
the regulatory jurisdiction of the Mexican Ministry of the Environment, Natural
Resources and Fishing ("Secretaria de Medio Ambiente, Recursos Naturales y
Pesca"), which has broad discretion in executing its statutory mandate. Although
the Company believes it is in compliance in all material respects with all
applicable environmental laws and regulations to which the Regina Resorts are
subject, no assurance can be given that the Regina Resorts will not be subject
to inspections, sanctions, fines, or temporary or definitive suspensions that
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Government
Regulation -- Environmental Matters."
Independent Contractors. A portion of the Company's sales force has been
comprised of independent contractors. From time to time, Mexican federal and
state authorities have asserted that independent contractors are employees,
rather than independent contractors. If, as a result of any such assertion the
Company were required to pay for and administer added benefits and taxes related
to the time such persons have been classified as independent contractors, the
Company's operating costs would increase. See "Business -- Employees and
Independent Contractors."
Natural Disasters; Uninsured Loss. The Company's resorts may be subject to
hurricanes, earthquakes and adverse weather patterns such as "El Nino" and
damages as a result thereof. There are certain types of losses for which the
Company does not have insurance coverage because they are either uninsurable or
not economically insurable. Should an uninsured loss or a loss in excess of
insured limits occur, the Company could lose its capital invested in a resort,
as well as the anticipated future revenues from such resort and would continue
to be obligated on any mortgage indebtedness or other obligations related to the
property. Any such loss could have a material adverse effect on the Company. See
"-- Factors Relating to Mexico -- Adverse Mexican Economic Conditions and
Government Policies" and "Business -- Insurance; Legal Proceedings."
Dependence on Key Personnel. The Company's success depends to a large
extent upon the experience and abilities of John McCarthy, the Company's
President. The loss of the services of Mr. McCarthy could have a material
adverse effect on the Company's business, results of operations and financial
condition. The Company has entered into an employment agreement with Mr.
McCarthy. The Company's success is also dependent upon its ability to attract
and retain qualified development, acquisition, marketing, management,
administrative and sales personnel for which there is keen competition. In
addition, the cost of retaining such key personnel could escalate over time.
There can be no assurance that the Company will be successful in attracting and
retaining such personnel. See "Management."
Control by Existing Stockholders. CR US is a closely-held private company
under the control of its directors and executive officers and their affiliates.
These persons, if acting in concert, will be able to continue to exercise
control over the Company's affairs and to elect the entire board of directors of
CR US and its subsidiaries. See "Principal Stockholders."
Limited Inventory. The Company believes that its remaining inventory of
Vacation Intervals at the Regina Resorts will provide it with sufficient cash
flow to fund its capital and debt service requirements for approximately three
years assuming a sales rate of 4,000 Vacation Intervals per year. There can be
no assurance that the Company will be able to implement its internal growth and
acquisition strategy successfully and thereby increase its inventory of Vacation
Intervals. If the Company is unable to acquire or develop
26
<PAGE> 35
additional inventory, the Company's ability to fund its capital and debt service
requirements will be materially impaired. See "Business -- Business Strategy."
Real Estate Investment Risks. The Company is subject to varying degrees of
risk incident to the ownership of real estate. Income of the Company may be
adversely affected by adverse changes in zoning laws, ongoing need for capital
improvements, changes in real estate tax rates and other operating expenses, and
other factors beyond the control of the Company.
FACTORS RELATED TO THE SECURITIES
Leverage; Net Capital Investment. The Company has substantial indebtedness
and debt service obligations. As of December 31, 1997, the Company's total
consolidated indebtedness was $103.8 million, its consolidated total assets were
$118.2 million, and its stockholders' equity was $14.4 million. In addition,
subject to the restrictions under the Indenture, the Issuers and their
subsidiaries may incur additional indebtedness from time to time. See
"Summary -- The Offering," "Description of Other Debt," "Use of Proceeds,"
"Capitalization," and "Description of Notes -- Certain Covenants."
The level of the Company's indebtedness could have important consequences
to the Holders, including: (i) a substantial portion of the Company's cash flow
from operations will have to be dedicated to debt service and will not be
available for other purposes; (ii) the Company's ability to obtain additional
debt financing in the future for working capital, capital expenditures, research
and development or acquisitions may be limited; and (iii) the Company's level of
indebtedness could increase its vulnerability to general adverse economic and
industry conditions and limit its flexibility to react to changes in its
operating environment and in economic conditions generally. In addition, the
Indenture contains financial and other restrictive covenants that limit the
ability of the Issuers and the Operating Subsidiaries to, among other things,
borrow additional funds. Failure by the Issuers to comply with such covenants
could result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company.
To the extent that cash flow from operations is insufficient to cover the
Company's fixed charges and fund the Company's capital expenditure requirements,
the Company, to pay such expenses, may use the remaining net proceeds, if any,
from the Offering, may obtain funds from additional borrowings, if permitted,
and may seek to sell a portion of its business or other assets, engage in
sale/leaseback transactions, raise additional equity capital and/or acquire
other businesses that would provide additional positive cash flow. No assurance
can be given as to the availability or accessibility of sufficient financing
from these or other similar transactions, or that these or other similar
transactions could be accomplished on terms favorable to the Company.
The ability of the Issuers to pay principal, interest or Liquidated
Damages, if any, on the Notes and to meet their other debt service obligations
will depend on the future operating performance and financial results of the
Company, which will be subject in part to factors beyond the Company's control,
such as prevailing economic conditions and financial, business, and other
factors. For the years ended December 31, 1995 and 1996, the Company's vacation
ownership segment of the Predecessor Business realized a net loss applicable to
common stockholders (giving pro forma effect to the separation of the vacation
ownership business and the hotel business) of approximately $13.1 million and
$8.6 million, respectively. There can be no assurance that the Company's
business will generate sufficient cash flow from operations or that anticipated
revenue growth and operating improvements will be realized in an amount
sufficient to enable the Issuers to service their indebtedness, including the
Notes, or to fund the Company's other liquidity needs. The Indenture contains
certain restrictive covenants, including, but not limited to, limitations on the
Company's ability to incur debt, issue preferred stock and effect asset
dispositions. The highly leveraged position of the Company and the restrictive
covenants contained in the Indenture could significantly limit its ability to
withstand competitive pressures or adverse economic conditions, make
acquisitions, or take advantage of business opportunities that may arise. See
"Description of Notes."
Ranking of the Notes. The Notes are effectively subordinated to all secured
senior indebtedness of the Issuers, to the extent of the assets which secure
such indebtedness. Upon any distribution or payment of the assets of the Issuers
in any foreclosure, dissolution, winding-up, liquidation, reorganization, or
other
27
<PAGE> 36
bankruptcy proceeding, holders of secured indebtedness will have a prior claim
to the assets of the Issuers that constitute their collateral. Holders will
participate ratably with all holders of unsecured indebtedness of the Issuers
that is deemed to be of the same class as the Notes, and potentially with all
other general creditors of the Issuers, based upon the respective amounts owed
to each holder or creditor, in the remaining assets of the Issuers. In any of
the foregoing events, there can be no assurance that there would be sufficient
assets to pay amounts due on the Notes. As a result, Holders may receive less,
ratably, than holders of secured indebtedness. The Indenture permits the Company
to incur additional indebtedness, including secured indebtedness of CR US's
Operating Subsidiaries, subject to certain limitations. See "-- Fraudulent
Transfer and Bankruptcy Considerations" and "Description of Notes -- Certain
Covenants."
Holding Company Structure; Dependence on Subsidiaries; Limitations on
Access to Cash Flow of the Subsidiaries. CR US is structured as a holding
company which owns all of the capital stock of Canarias Future, SRL ("Canarias")
which, in turn, holds the equity interests, directly and indirectly, of the
Company's Operating Subsidiaries and CR Mexico. CR US's current operations are
conducted exclusively through its Operating Subsidiaries, and its only
significant asset is the capital stock of Canarias which, in turn, owns,
directly and indirectly, the capital stock of the other Operating Subsidiaries
and CR Mexico. As a holding company, CR US is dependent on dividends or other
intercompany transfers of funds from its Operating Subsidiaries to meet its debt
service and other liquidity needs. CR Mexico is a wholly-owned subsidiary of
Canarias. CR Mexico's major asset is approximately $86.9 million of intercompany
notes owed to it by the Company's Operating Subsidiaries, which subsidiaries are
not direct or indirect subsidiaries of CR Mexico. Under the terms of the
Indenture, such indebtedness is required to be assumed by other Operating
Subsidiaries of the Company, which subsidiaries are also not direct or indirect
subsidiaries of CR Mexico. CR Mexico is therefore dependent (and will continue
to be dependent) on interest payments under such intercompany obligations to
meet its debt service and other liquidity needs. The Notes are obligations
exclusively of the Issuers and are not guaranteed by any of the Issuers'
Operating Subsidiaries. Consequently, the Issuers' cash flow and ability to
service their debt, including the Notes, are dependent upon the earnings of the
Operating Subsidiaries and the distribution of those earnings to CR US, or upon
loans, advances or other payments made by the Operating Subsidiaries to the
Issuers. The Notes are effectively subordinated to all Indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Operating Subsidiaries. Furthermore, the terms of the permitted indebtedness
and other agreements of CR US's subsidiaries may have the effect of limiting the
ability of CR US's subsidiaries to pay dividends or other payments to either
Issuer. See "Description of Notes -- Certain Covenants." At December 31, 1997,
the total amount of Indebtedness and other obligations of the Operating
Subsidiaries that effectively ranked senior in right of payment to the
obligations of the Issuers under the Notes was approximately $4.6 million.
Fraudulent Transfer and Bankruptcy Considerations. The obligations of each
Issuer under the Indenture may be subject to review under applicable fraudulent
transfer or similar laws in the event of the bankruptcy or other financial
difficulty of an Issuer. In the United States, under such laws, if a court in a
lawsuit by an unpaid creditor or representative of creditors of any such person,
such as a trustee in bankruptcy or any such person as debtor-in-possession, were
to find that at the time such person incurred its obligations, it (i) received
less than fair consideration or reasonably equivalent value therefor; and (ii)
either (a) was insolvent, (b) was rendered insolvent by such guarantee or
pledge, (c) was engaged in a business or transaction for which its remaining
unencumbered assets constituted unreasonably small capital, or (d) intended to
incur or believed that it would incur debts beyond its ability to pay such debts
as they matured, such court could void such obligations under its guarantee
and/or the security interest in its assets and direct the return of any amounts
paid with respect thereto. Moreover, regardless of the factors identified in the
foregoing clauses (i) and (ii), a court could take such action if it found that
the guarantee was entered into or the security interest granted with actual
intent to hinder, delay, or defraud creditors. The measure of insolvency for
purposes of the foregoing will vary depending on the law of the jurisdiction
being applied. Generally, however, an entity would be considered insolvent if
the sum of its debts (including contingent or unliquidated debts) is greater
than all of its property at a fair valuation or if the present fair salable
value of its assets is less than the amount that would be required to pay its
probable liability on its existing debts as they become absolute and matured.
28
<PAGE> 37
The enforceability of the rights and obligations of CR Mexico under the
Indenture may be subject to limitations imposed by bankruptcy, insolvency,
liquidation, suspension of payments, moratorium, or similar laws relating to or
affecting the enforcement of creditors' rights generally. In any bankruptcy
proceeding initiated in Mexico pursuant to the laws of Mexico, labor claims,
claims of tax authorities for unpaid taxes, social security quota, workers'
housing fund quota, and retirement fund quota will have priority over claims of
the Holders of the Notes.
Payment of Judgments in Pesos; Currency Conversions in Bankruptcy. If
proceedings are brought in Mexico seeking to enforce obligations of CR Mexico
under the Notes, CR Mexico may not be required to discharge such obligations in
a currency other than Mexican currency. Under the Mexican Monetary Law ("Ley
Monetaria de los Estados Unidos Mexicanos"), an obligation in a currency other
than Mexican currency, which is payable in Mexico, may be satisfied in Mexican
currency at the rate of exchange in effect on the date on which payment is made.
This rate is currently determined by Banco de Mexico every business banking day
in Mexico and published the following business banking day in the Diario Oficial
de la Federacion. Upon declaration of bankruptcy or suspension of payments of CR
Mexico in Mexico, the obligations of CR Mexico under the Notes (i) would be
converted into pesos at the exchange rate prevailing at the time of such
declaration, and payment would occur at the time claims of the unsecured
creditors of CR Mexico are satisfied, (ii) would be dependent upon the outcome
of the bankruptcy proceedings, and (iii) would not be adjusted to consider
depreciation of the peso against the U.S. dollar occurring after such
declaration of bankruptcy. To the extent there is a deficiency in the amount
paid to Holders in a Mexican bankruptcy, CR US would still be liable for any
such deficiency.
Certain Tax Considerations. The Notes were issued with original issue
discount for U.S. federal income tax purposes in an amount equal to the excess
of the principal amount due at maturity on the Notes over their deemed "issue
price" (as described in "Taxation -- United States Federal Income Taxation
Considerations -- Allocation of Purchase Price Among Notes and Warrants" and
"Taxation -- United States Federal Income Taxation Considerations -- Original
Issue Discount"). Each U.S. Holder of a Note is required to include in taxable
income for any particular taxable year a portion of such original issue discount
in advance of the receipt of the cash to which such original issue discount is
attributable. For additional information regarding the original issue discount
associated with the Notes, as well as certain other federal income tax
considerations relevant to the purchase, ownership and disposition of the Notes,
Warrants and Warrant Shares, see "Taxation -- United States Federal Income
Taxation Considerations."
Potential Inability to Fund a Change of Control Offer. Upon a Change of
Control, the Issuers will be required to offer to repurchase all outstanding
Notes at 101% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of repurchase. However, there can be
no assurance that sufficient funds will be available at the time of any Change
of Control to make any required repurchases of Notes tendered or that
restrictions in any new credit facility will allow the Issuers to make such
required repurchases. Notwithstanding these provisions, the Issuers could enter
into certain transactions, including certain recapitalizations, that would not
constitute a Change of Control but would increase the amount of debt outstanding
at such time. See "Description of Notes -- Repurchase at the Option of Holders."
29
<PAGE> 38
EXCHANGE RATES
Effective January 1, 1993, the Mexican peso replaced its former currency
(also called the "peso") at a rate of one new peso per one thousand old pesos.
During the transition period from January 1, 1993 through December 31, 1995, the
new currency was referred to as the "nuevo peso," and from January 1, 1996 is
referred to as the "peso." All amounts set forth herein in Mexican currency are
stated in pesos, even if such amounts relate to a period before January 1, 1996,
with respect to which the amounts are restated herein to reflect the value of
the new currency relative to the old.
From November 11, 1991 to December 21, 1994, Banco de Mexico maintained a
policy pursuant to which the peso-U.S. dollar exchange rate was kept within a
range prescribed by the Mexican government through intervention in the foreign
exchange market. Within a specified band, Banco de Mexico generally intervened
to reduce day-to-day fluctuations in the exchange rate. From November 11, 1991
through October 20, 1992, the upper limit of the prescribed range, expressed in
terms of pesos per U.S. dollar, rose by Ps.0.0002 per day, equivalent to a
maximum devaluation of the peso with respect to the U.S. dollar of approximately
2.4% per year. From October 20, 1992 until December 19, 1994, the upper limit of
the prescribed band increased by Ps.0.0004 per day, equivalent to a maximum
devaluation of the peso of approximately 4.5% per year. On December 20, 1994,
the Mexican government increased the ceiling of the trading band by Ps.0.53,
equivalent to an effective devaluation of the peso of 15.3%.
On December 21, 1994, the Mexican government announced its decision to
suspend intervention by Banco de Mexico and to allow the peso to float freely
against the U.S. dollar. By December 31, 1994, the exchange rate was Ps.5.00 per
U.S. dollar, as compared to Ps.3.47 per U.S. dollar on December 19, 1994 (a
devaluation of the peso of approximately 42.4%). The peso was highly volatile
throughout 1995, fluctuating between Ps.5.00 and Ps.8.20 per U.S. dollar. The
Mexican government has indicated that the band will not be reinstated and that
the exchange rate will be permitted to fluctuate according to supply and demand.
There can be no assurance that the Mexican government will maintain its current
policies with regard to the peso or that the peso will not further depreciate or
appreciate significantly in the future. See "Risk Factors -- Factors Relating to
Mexico -- Exchange Rates."
The following table sets forth, for the periods indicated, the high, low,
average and period-end free market rate for the purchase and sale of U.S.
dollars (presented in each case as the average between such purchase and sale
rates), expressed in pesos per U.S. dollar.
<TABLE>
<CAPTION>
FREE MARKET RATE
------------------------------------
PERIOD
YEAR ENDED DECEMBER 31, HIGH LOW AVERAGE(1) END
----------------------- ---- ---- ---------- ------
<S> <C> <C> <C> <C>
1992............................................... 3.12 3.08 3.10 3.12
1993............................................... 3.33 3.12 3.17 3.33
1994............................................... 5.75 3.11 3.39 5.00
1995............................................... 8.05 5.27 6.42 7.69
1996............................................... 8.05 7.33 7.61 7.88
1997............................................... 8.43 7.71 8.07 8.06
1998 (through March 20)............................ 8.65 8.03 8.34 8.55
</TABLE>
- ---------------
(1) Average exchange rates represent the annual average of the daily free
exchange rates.
Source: Banco de Mexico until November 5, 1993, with the free market rate
representing the average of the buy and sell rates on the relevant
dates. Commencing November 8, 1993, the free market rate is the Noon
Buying Rate for Mexican pesos reported by the Federal Reserve of the
United States.
30
<PAGE> 39
PRIVATE PLACEMENT
The Issuers sold the Outstanding Notes on December 5, 1997 to the Initial
Purchaser and the Initial Purchaser thereupon offered and sold them only to
certain qualified buyers. The $96 million of net proceeds the Issuers received
in connection with the sale of the Outstanding Notes and Warrants were used as
follows: (i) approximately $83.0 million to repay indebtedness owed to Bancomer
under the Bancomer Loan, (ii) approximately $7.5 million was reserved for the
first stage of development of a new resort at Cozumel and for the development of
additional units at Los Cabos and at other areas, (iv) approximately $1.2
million to repay debt owed to affiliates (the "Affiliate Debt") which the
Company incurred in connection with the Purchase Transactions, and (v) the
remainder for working capital, certain advisory fees and other general corporate
purposes. See "Use of Proceeds." The Warrants have an exercise price of $.01 per
share, and are exercisable at any time prior to the maturity date of the Notes.
The Warrants are not being registered in the Exchange Offer, but are subject to
a registration rights agreement. See "Capitalization" and "Description of
Capital Stock and Warrants."
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Registered Notes offered hereby. In consideration for issuing the Registered
Notes as contemplated in this Prospectus, the Company will receive in exchange a
like principal amount of Outstanding Notes, the terms of which are identical in
all material respects to the Registered Notes. The Outstanding Notes surrendered
in exchange for the Registered Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the Registered Notes will not result in any
change in capitalization of the Company. The Exchange Offer is being implemented
to satisfy the Issuers obligations under the Registration Rights Agreement and
the Indenture and for the fulfillment of the Offering as described in the
Offering Circular.
31
<PAGE> 40
CAPITALIZATION
The following table sets forth the current maturities of long-term
obligations and capitalization as of December 31, 1997 of CR US. See "Selected
Combined Historical Financial Data." This table should be read in conjunction
with "Unaudited Pro Forma Financial Data" and Audited Consolidated Financial
Statements of the Company as of December 31, 1997 and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1997
------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Bank loans under lines of credit............................ $ 1,000(1)
Stockholder loans........................................... --
Current maturities of long-term obligations................. --
Long term obligations, less current maturities.............. 100,000
Less -- original issue discount............................. (9,220)
--------
Total debt, net of original issue discount........ 91,780
Stockholders' investment:
Preferred Stock: $.001 par value, 5,000,000 shares
authorized; 37,500 shares issued and outstanding....... --
Common Stock; $.001 par value, 45,000,000 shares
authorized; 10,701,000 shares issued and outstanding... 11
Warrants to purchase 1,869,962 shares of Common Stock for
$.01 per share......................................... 9,331(2)
Additional paid-in capital................................ 7,046
Accumulated deficit....................................... (3,336)
--------
Total stockholders' investment.................... 13,052(2)
--------
Total capitalization.............................. $104,832
========
</TABLE>
- ---------------
(1) The Company has received approval from Bancomer for the extension of a four
year, 13% line of credit of $20.0 million. This line of credit requires an
upfront payment of a 2% fee and is secured by all of the Accounts Vacation
Interval Receivables of CR Resorts Puerto Vallarta both present and future
(which at December 31, 1997, represented substantially all of the Company's
Vacation Interval Receivables). The Company has also received approval from
Bancomer for the extension of an additional line of credit of $6.0 million.
These funds are required to be used to complete the purchase of the Villa
Vera and for the conversion cost of 62 units into vacation ownership units.
This line of credit will be secured by a Mortgage Trust on the Villa Vera
property and by the Vacation Interval Receivables of CR Resorts Puerto
Vallarta both present and future. This line of credit also requires a 2% fee
to be paid to the bank before the funds may be borrowed.
(2) Reflects the allocation of a portion of the net offering proceeds to the
Warrants to purchase 1,869,962 shares of Common Stock for $.01 per share
based on the Company's estimate of the fair value of the Warrants on the
issue date of $9.3 million (reduced by an allocable portion of the Offering
expenses). Such amount is treated as original issue discount. In addition,
in connection with the Offering, CR US has agreed to issue the Initial
Purchaser Warrants to the Initial Purchaser. The number of shares of Common
Stock to be issued upon exercise of the Initial Purchaser Warrants will be
determined pursuant to a formula. Such formula currently results in the
Initial Purchaser having a warrant to purchase 571,429 shares of Common
Stock with an exercise price of $7.00 per share.
32
<PAGE> 41
UNAUDITED PRO FORMA FINANCIAL DATA
The summary pro forma financial data for the year ended December 31, 1996
and for the period January 1, 1997 through August 18, 1997 have been derived
from the audited combined historical financial statements of the Predecessor
Business. These data include both vacation ownership and hotel operations. The
historical and pro forma income statement data shown below present only the data
relating to the vacation ownership segment of the Predecessor Business. The
Summary Pro Forma financial data for the year ended December 31, 1997 have been
derived from the audited historical financial statements of the Predecessor
Business for the period from January 1, 1997 through August 18, 1997 and the
audited historical financial statements of the Company for the period from
August 19, 1997 through December 31, 1997. The pro forma financial data do not
purport to (i) represent what the Company's results of operations would have
been had the Offering, the Purchase Transactions and the Remainder Interest
Disposition occurred on the assumed dates or (ii) project the Company's results
of operations for any future period. These data should be read in conjunction
with "Business -- Description of Purchase Transactions," "Selected Combined
Historical Financial Data," "Other Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the financial statements of the Company and the Predecessor Business together
with the notes thereto included elsewhere herein.
PRO FORMA INCOME STATEMENTS FOR THE VACATION OWNERSHIP SEGMENT
UNAUDITED
<TABLE>
<CAPTION>
VACATION OWNERSHIP SEGMENT
OF THE PREDECESSOR BUSINESS
-------------------------------------------------
TWELVE MONTHS ENDED
DECEMBER 31, 1996 SEVEN
------------------------------------ AND 1/2
MONTHS
ENDED TWELVE
PRO FORMA AUGUST 18, MONTHS
ADJUSTMENTS 1997 COMPANY'S ENDED
INCREASE ---------- RESULTS DECEMBER 31,
HISTORICAL (DECREASE) PRO FORMA HISTORICAL FOR 1997(1) 1997
---------- ----------- --------- ---------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA INCOME STATEMENT DATA:
Revenues --
Vacation Interval sales........... $ 2,867 $34,396 $37,263 $ 2,476 $18,513 $20,989
Interest income on Vacation
Interval
Receivables..................... 3,294 3,294 3,277 995 4,272
Service fees and rental of vacant
units........................... 5,497 455 5,952 7,021 4,089 11,110
Other revenues.................... 760 760 1,329 1,957 3,286
------- ------- ------- ------- -------
Total revenues...................... 12,418 47,269 14,103 25,554 39,657
------- ------- ------- ------- -------
Operating expenses --
Vacation Interval cost of sales... 7,512 7,512 4,941 4,941
Commission expense................ 1,604 5,504 7,108 412 2,194 2,606
Advertising, sales and
marketing....................... 3,829 3,829 4,899 4,174 9,073
Maintenance and energy............ 3,798 3,798 4,669 1,846 6,515
Provision for uncollectible
accounts........................ 3,400 3,400 2,349 2,349
General and administrative........ 5,400 1,500 6,900 4,503 6,394 10,897
------- ------- ------- ------- -------
Total operating expenses............ 14,631 32,547 14,483 21,898 36,381
------- ------- ------- ------- -------
Operating income (loss)............. (2,213) 14,722 (380) 3,656 3,276
Depreciation and amortization..... 78 78 61 61
Non-cash interest expense......... 2,278 2,278 551 551
Cash interest expense............. 3,108 10,542 13,650 2,827 3,726 6,553
Exchange and translation loss,
net............................. 75 992 1,067
------- ------- ------- ------- -------
Income (loss) before provision for
taxes............................. (5,321) (1,284) (3,282) (1,674) (4,956)
Mexican taxes..................... 3,312 (12) 3,300 1,756 1,662 3,418
------- ------- ------- ------- -------
Net income (loss) before preferred
dividends......................... (8,633) (4,584) (5,038) (3,336) (8,374)
Preferred dividends................. 0 619 619 232 232
------- ------- ------- ------- -------
Net income (loss) to common
stockholders...................... $(8,633) $(5,203) $(5,038) $(3,568) $(8,606)
======= ======= ======= ======= =======
OTHER PRO FORMA FINANCIAL DATA:
Pro forma EBITDA(10).............. $(2,213) $14,722 $ (455) $ 2,664 $ 2,209
Ratio of earnings to fixed
charges(11)..................... -- -- -- -- --
<CAPTION>
TWELVE
MONTHS
PRO FORMA ENDED
ADJUSTMENTS DECEMBER 31,
INCREASE 1997
(DECREASE) PRO FORMA
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
PRO FORMA INCOME STATEMENT DATA:
Revenues --
Vacation Interval sales........... $29,003(2) $49,992
Interest income on Vacation
Interval
Receivables..................... 4,272
Service fees and rental of vacant
units........................... 11,110
Other revenues.................... 3,286
-------
Total revenues...................... 68,660
-------
Operating expenses --
Vacation Interval cost of sales... 5,904(3) 10,845
Commission expense................ 5,100(2) 7,706
Advertising, sales and
marketing....................... 9,073
Maintenance and energy............ 6,515
Provision for uncollectible
accounts........................ 2,611(4) 4,960
General and administrative........ 283(5) 11,180
-------
Total operating expenses............ 50,279
-------
Operating income (loss)............. 18,381
Depreciation and amortization..... 49(6) 110
Non-cash interest expense......... 1,708(7) 2,259
Cash interest expense............. 6,697(7) 13,250
Exchange and translation loss,
net............................. 1,067
-------
Income (loss) before provision for
taxes............................. 1,695
Mexican taxes..................... 920(8) 4,338
-------
Net income (loss) before preferred
dividends......................... (2,643)
Preferred dividends................. 387(9) 619
-------
Net income (loss) to common
stockholders...................... $(3,262)
=======
OTHER PRO FORMA FINANCIAL DATA:
Pro forma EBITDA(10).............. $17,314
Ratio of earnings to fixed
charges(11)..................... 1.1x
</TABLE>
- ---------------
33
<PAGE> 42
(1) Reflects the results of operations of the Company for the twelve months
ended December 31, 1997 including for the period from August 18, 1997
through December 31, 1997, and does not include results of operations of
the Predecessor Business.
(2) On August 18, 1997, in the Purchase Transactions, the Company acquired the
Combined Resorts, and the hotel portion of the Combined Resorts was sold to
Starwood. The pro forma income statement data give effect to the Offering
and application of the estimated net proceeds therefrom, the Purchase
Transactions, the Remainder Interest Disposition and certain stockholder
investments as if such transactions had occurred as of January 1st of each
period presented. In particular, gives effect to the pro forma recognition
of revenue using the full accrual method of accounting, by which all
revenue and associated direct expense is accrued at the time of sale,
instead of the installment method, by which revenue and associated direct
expense were recognized over 30 years.
(3) Records the cost of the acquired inventory of Vacation Intervals to be sold
(as determined through an initial allocation of the acquisition purchase
price) and the related charge-off of these inventory costs as Vacation
Interval cost of sales.
(4) Provision for uncollectible accounts related to the revenues recognized
under the full accrual method for revenue recognition.
(5) Assumes increased expense of $1.5 million on an annual basis to provide for
the estimated additional cost of corporate staff, office and overhead which
the Company expects to incur as an independent corporate entity.
(6) Reflects depreciation of office furniture and equipment, not held for sale
as Vacation Intervals, assuming ten-year lives.
(7) Non-cash and cash interest expense represents total interest expense and
includes (i) non-cash interest expense of approximately $1.16 million
representing annual amortization of debt issuance costs, (ii) approximately
$0.65 million of annual withholding taxes, and (iii) non-cash interest
expenses of approximately $1.12 million representing annual amortization of
original issue discount of the Notes, as a portion of the issue price of
the Units offered hereby that has been allocated to the Warrants. Does not
include the pro forma net effect of interest income which would have been
earned on excess cash. On a pro forma basis the Company believes it would
have earned at least 5% interest income on excess cash (approximately $0.7
million interest income for the twelve months ended December 31, 1995 and
1996 and 1997.
(8) Reflects an estimate of the Mexican taxes that would have been incurred if
the pro forma results had been obtained and the Company's currently
existing legal structure had been in place during the periods presented.
(9) Represents dividends payable on Class A Preferred Stock of CR US. See
"Business -- Description of Purchase Transactions -- Description of Class A
Preferred Stock."
(10) EBITDA represents net income before interest expense, preferred dividends,
taxes, depreciation and amortization. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service
and/or incur indebtedness. However, EBITDA should not be construed as a
substitute for income from operations, net income or cash flows from
operating activities in analyzing the Company's operating performance,
financial position and cash flows. The EBITDA measure presented herein may
not be comparable to EBITDA as presented by other companies and is not the
same as "Consolidated Cash Flow" under the Indenture. See "Description of
Notes -- Certain Definitions."
The following table reconciles pro forma EBITDA to pro forma net income (loss)
applicable to common stockholders:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1996 1997
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Pro forma net income (loss) applicable to common
stockholders.............................................. $(5,203) $(3,262)
Non-cash interest expense................................... 2,278 2,259
Cash interest expense....................................... 13,650 13,250
Mexican taxes............................................... 3,300 4,338
Depreciation and amortization............................... 78 110
Preferred dividends......................................... 619 619
------- -------
Pro forma EBITDA............................................ $14,722 $17,314
======= =======
</TABLE>
(11) The ratio of earnings to fixed charges has been computed by dividing
earnings before taxes plus fixed charges by fixed charges. Fixed charges
consist of interest, amortization of debt issue costs and original issue
discount and preferred stock dividends. Fixed charges exceed earnings
before taxes and fixed charges by approximately $5.3 million for the
historical twelve months ended December 31, 1996 ($1.3 million pro forma)
and $3.3 million for the historical seven and a half months ended August
18, 1997 ($1.7 million pro forma).
34
<PAGE> 43
SELECTED COMBINED HISTORICAL FINANCIAL DATA
The Selected Combined Historical Financial Data presented below reflect (i)
the combined historical income statement data of the Predecessor Business and
(ii) the historical financial data of the vacation ownership segment of the
Predecessor Business. The historical income statement data presented below were
derived from the combined historical financial statements of the Predecessor
Business and prepared in accordance with U.S. GAAP. These data include the use
of the installment method of accounting for the vacation ownership sales margins
reported by the Combined Resorts, because the Remainder Interest was owned by
the Predecessor Business.
Because the Company has completed a disposition of the Remainder Interest
the Company has used the full accrual method of accounting since it purchased
the vacation ownership segment of the Predecessor Business. Accordingly, the
Company has also presented elsewhere in this Prospectus Unaudited Pro Forma
Financial Data of the vacation ownership segment of the Predecessor Business
which eliminates the effect of the installment method of accounting and instead
recognizes vacation ownership revenues and related direct costs of sales in the
period that the sales agreement was executed (and reflect other pro forma
adjustments as discussed in the related notes thereto). See "Unaudited Pro Forma
Financial Data."
The following selected combined financial data for the years ended December
31, 1995 and 1996 are derived from the audited consolidated financial statements
of the Predecessor Business. The Selected Combined Financial Data for the year
ended December 31, 1997 have been derived from the consolidated financial
statements of the Predecessor Business for the period January 1, 1997 through
August 18, 1997 and the consolidated financial statements of the Company for the
period from August 18, 1997 through December 31, 1997.
These data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
"Business -- Description of Purchase Transactions" and the financial statements
of the Company and the Predecessor Business and the notes thereto included
elsewhere in this Prospectus.
35
<PAGE> 44
HISTORICAL INCOME STATEMENT DATA OF THE PREDECESSOR BUSINESS
<TABLE>
<CAPTION>
SEVEN AND
ONE-HALF MONTHS
YEAR ENDED DECEMBER 31, ENDED AUGUST 18,
----------------------------------------------------- -------------------------
1995 1996 1997
------------------------- ------------------------- -------------------------
VACATION VACATION VACATION
OWNERSHIP OWNERSHIP OWNERSHIP
COMBINED(1) SEGMENT(2) COMBINED(1) SEGMENT(2) COMBINED(1) SEGMENT(2)
----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL INCOME STATEMENT DATA:
Vacation ownership revenues:
Vacation Interval sales.................. $ 25,034 $ 25,034 $37,263 $37,263 $31,479 $31,479
Less amounts deferred(3)............... (24,461) (24,461) (36,435) (36,435) (30,653) (30,653)
Plus amounts recognized(3)............. 1,131 1,131 2,039 2,039 1,650 1,650
Interest income on Vacation Interval
Receivables............................ 1,839 1,839 3,294 3,294 3,277 3,277
Rental of vacant units................... 2,043 2,043 2,898 2,898 4,560 4,560
Service fee income....................... 2,062 2,062 2,599 2,599 2,461 2,461
Other revenues........................... 690 690 760 760 1,329 1,329
-------- -------- ------- ------- ------- -------
Total vacation ownership
revenues................................. 8,338 8,338 12,418 12,418 14,103 14,103
Total hotel revenues less direct hotel
expenses................................. 23,368 30,718 24,977
Other operating expenses:
Commissions paid......................... 4,919 4,919 7,108 7,108 5,512 5,512
Less amounts deferred(3)............... (4,824) (4,824) (5,807) (5,807) (5,413) (5,413)
Plus amounts recognized(3)............. 178 178 303 303 313 313
Advertising, sales and marketing......... 8,526 4,128 7,928 3,829 7,863 4,899
Maintenance and energy................... 8,475 3,183 9,209 3,798 9,517 4,669
General and administrative............... 12,023 6,052 13,086 5,745 10,274 3,963
Other expenses........................... 1,473 585 485 (345) 1,517 541
-------- -------- ------- ------- ------- -------
Total operating expenses................... 30,770 14,221 32,312 14,631 29,583 14,484
-------- -------- ------- ------- ------- -------
Operating income (loss).................... 936 (5,883) 10,824 (2,213) 9,497 (381)
Depreciation and amortization(4)......... 0 0 0 0 0 0
Interest expense......................... 10,357 3,884 8,287 3,108 7,539 2,827
Exchange and translation loss, net....... 75
-------- -------- ------- ------- ------- -------
Income (loss) before provision for taxes... (9,421) (9,767) 2,537 (5,321) 1,958 (3,283)
Mexican taxes............................ 5,294 3,356 4,633 3,312 4,694 1,756
-------- -------- ------- ------- ------- -------
Net income (loss).......................... $(14,715) $(13,123) $(2,096) $(8,633) $(2,736) $(5,039)
======== ======== ======= ======= ======= =======
OTHER HISTORICAL FINANCIAL DATA:
EBITDA(5)................................ $ (5,883) $(2,213) $ (455)
Ratio of earnings to fixed charges(6)....
</TABLE>
- ---------------
(1) These financial data were derived from the Combined Historical Financial
Statements of the Predecessor Business which were prepared in accordance
with U.S. GAAP. See the Historical Combined Financial Statements of the
Predecessor Business. The historical combined financial data includes the
combined results of both the vacation ownership and hotel segments of the
Predecessor Business which, prior to August 18, 1997, were owned by
Bancomer.
(2) The historical vacation ownership segment information was prepared by
identifying the direct vacation ownership revenues and expenses and
allocating the hotel and vacation ownership shared expenses based on the
relative number of total rooms at the beginning of each period.
(3) Because the Company acquired perpetual ownership of the Regina Resorts and
sells a 30 to 50 year memberships to its customers, the historical financial
information has been prepared by using the installment method of accounting
as required by U.S. GAAP, which required the Predecessor Business to
recognize annually only 1/30th of cumulative vacation ownership revenues,
net of cumulative provisions for doubtful accounts and cumulative commission
expenses. For periods after August 18, 1997 financial data are presented
using the full accrual method of accounting in accordance with SFAS No. 66
rather than the installment method of accounting. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(4) Depreciation was not recognized by the Predecessor Business during the
periods presented because the prior owner had recorded a significant
impairment loss in 1994 and the assets of the Combined Resorts were held for
sale from then until their sale on August 18, 1997. The Company's Historical
Consolidated Statement of Operations for the year ended December 31, 1997
includes the operations of the purchased Club Regina Resorts only for the
period August 19, 1997 through December 31, 1997. Pro forma unaudited
Statements of Operations, which combine the operations of the Predecessor
Businesses for the period January 1, 1997 through August 18, 1997, using the
full accrual method of accounting on a pro forma basis, with the Company's
1997 historical results are presented elsewhere herein in order to provide
pro forma operating data for the full year ended December 31, 1997 along
with comparative pro forma operating data of the Predecessor Business for
the year ended December 31, 1996. The 1996 pro forma operating data has been
provided, using the full accrual method of accounting in order to provide
relevant comparative operating information.
36
<PAGE> 45
(5) EBITDA represents net income before interest expense, taxes, depreciation
and amortization. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service and/or incur
indebtedness. However, EBITDA should not be construed as a substitute for
income from operations, net income or cash flows from operating activities
in analyzing the Company's operating performance, financial position and
cash flows. The EBITDA measure presented herein may not be comparable to
EBITDA as presented by other companies and is not the same as "Consolidated
Cash Flow" under the Indenture. See "Description of Notes -- Certain
Definitions."
The following table reconciles historical EBITDA to historical net
income (loss) reported for the vacation ownership segment:
<TABLE>
<CAPTION>
SEVEN AND
ONE-HALF
MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------- AUGUST 18,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net income (loss)........................................... $(13,123) $(8,633) $(5,038)
Interest expense............................................ 3,884 3,108 2,827
Mexican taxes............................................... 3,356 3,312 1,576
Depreciation and amortization(4)............................ 0 0 0
-------- ------- -------
EBITDA...................................................... $ (5,883) $(2,213) $ (455)
======== ======= =======
</TABLE>
(6) The ratio of earnings to fixed charges has been computed by dividing
earnings before Mexican tax plus fixed charges by fixed charges. Fixed
charges consist of interest and preferred stock dividends. Fixed charges
exceed net income (loss) by approximately $9.2 million, $5.3 million and
$3.3 million for the years ended December 31, 1996 and 1995 and the seven
and one-half months ended August 18, 1997, respectively.
37
<PAGE> 46
HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
VACATION OWNERSHIP SEGMENT OF PREDECESSOR BUSINESS
(UNAUDITED)
------------------------------------------------------
SEVEN AND
1/2 MONTHS
ENDED
AUGUST 18, COMPANY
1993 1994 1995 1996 1997 1997
-------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Vacation ownership revenues:
Vacation intervals sales............ $ 6,329 $ 24,500 $ 25,034 $ 37,263 $31,479 $ 18,513
Less amounts deferred............. (6,277) (24,064) (24,461) (36,435) (30,653)
Plus amounts recognized........... 196 1,131 2,039 1,650
Interest income on Vacation Interval
Receivables....................... 197 1,042 1,839 3,294 3,277 995
Rental of vacant units.............. 546 1,313 2,043 2,898 4,560 3,142
Service fee income.................. 2,062 2,599 2,461 1,987
Other revenues...................... 1,521 2,631 690 760 1,329 917
-------- -------- -------- -------- ------- --------
Total vacation ownership revenues..... 2,316 5,618 8,338 12,418 14,103 25,554
-------- -------- -------- -------- ------- --------
Cost of vacation intervals sales.... 4,941
Commissions paid.................... 972 4,782 4,919 7,108 5,512
Less amounts deferred............. (965) (4,697) (4,824) (5,807) (5,413)
Plus amounts recognized........... 31 178 303 313
Advertising, sales and marketing.... 8,611 15,407 4,128 3,829 4,899 6,368
Maintenance and energy.............. 1,493 3,969 3,183 3,798 4,669
General and administrative.......... 6,985 12,333 6,052 5,400 3,963 8,240
Other expenses...................... 2,064 3,355 585 541 2,349
-------- -------- -------- -------- ------- --------
Total operating expenses.............. 19,160 35,180 14,221 14,631 14,484 21,898
-------- -------- -------- -------- ------- --------
Operating income (loss)............... (16,844) (29,562) (5,883) (2,213) (381) 3,656
Depreciation and amortization....... 7,733 10,118 612
Interest expense.................... 3,884 3,108 2,827 3,726
Exchange and translation loss....... 381 4,266 75 992
-------- -------- -------- -------- ------- --------
Income (loss) before provision for
Mexican taxes....................... (24,958) (43,946) (9,767) (5,321) (3,283) (1,674)
Provision for Mexican taxes......... 2,414 5,881 3,356 3,312 1,756 1,662
-------- -------- -------- -------- ------- --------
Net income (loss)..................... $(27,372) $(49,827) $(13,123) $ (8,633) $(5,039) $ (3,336)
======== ======== ======== ======== ======= ========
</TABLE>
HISTORICAL CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
BALANCE
BALANCE SHEET DATA
SHEET DATA AT DECEMBER 31,
AT AUGUST 18, 1997 1997
------------------ ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and temporary investments.............................. $ 2,056 $ 8,995
Vacation ownership and trade receivables.................... 37,180 39,952
Land, office furniture and equipment........................ 13,014 13,798
Total assets................................................ 95,749 118,164
Long-term debt, net of unamortized original issue
discount.................................................. 87,854 90,780
Stockholders' investment (deficit).......................... (315) 14,352
</TABLE>
38
<PAGE> 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Unaudited
Pro Forma Financial Data" and the "Selected Combined Historical Financial Data"
and related notes thereto appearing elsewhere in this Prospectus.
INTRODUCTION
CR US was organized in August 1996 to seek acquisition opportunities within
the vacation ownership industry. On August 18, 1997, the Company acquired the
Regina Resorts. The Company generates revenue from the sale and financing of
Vacation Intervals which generally entitle the Member to use a fully-furnished
vacation residence typically for one week annually for 30 years (50 years for
memberships purchased after March , 1998). The Company generates additional
revenues from the service fees it collects from Members and earns revenues from
Starwood relating to the rental of certain vacant vacation ownership units. The
Company's operating expenses consist primarily of sales and marketing expenses,
Vacation Interval cost of sales, maintenance, energy and general and
administrative expenses. General and administrative expenses consist primarily
of compensation and related benefits, office leases, communications, customer
service and professional fees. On a pro forma basis the Company anticipates that
it will normally incur an additional expense of approximately $1.5 million per
year for the estimated cost of corporate staff, office and overhead which the
Company expects to incur as an independent corporate entity.
In connection with the Purchase Transactions, the Company placed the
property underlying each Regina Resort into three separate trusts. See
"Business -- Description of Purchase Transactions -- Description of Trusts." At
August 18, 1997, under the applicable original trust agreements, the Operating
Subsidiaries had the right to use the Regina Resorts for 30 years until August
18, 2027. A subsidiary of CR Mexico owned rights (the "Remainder Interests")
pursuant to which it had the right to use the Regina Resorts as of after August
19, 2027. Subsequent to August 18, 1997 these trust agreements were amended to
extend the rights to the Regina Resorts for an additional 20 years until August
18, 2047. Because at August 18, 1997 the Company owned a perpetual interest in
the Regina Resorts but sold 30-year Memberships, U.S. GAAP would have required
the Company to use the installment method of accounting for the recognition of
sales margins (gross revenues less the direct cost to sell Vacation Intervals).
Under these circumstances, the installment method of accounting would have
required the Company to recognize vacation ownership revenues, Vacation Interval
costs of sale, provisions for doubtful accounts and commission expenses in equal
amounts over 30 years instead of recognizing such revenues and expenses in the
period that the sale of a Vacation Interval is made. In accordance with the
Indenture, CR US effected the disposition of the Remainder Interests by
contributing all of the outstanding stock of the subsidiary holding only the
Remainder Interests to an unaffiliated charitable institution. Accordingly the
Company has used the full accrual method of accounting for periods after August
18, 1997.
The following discussion relates to the financial condition and results of
operations of the Company and the vacation ownership segment of the Predecessor
Business giving pro forma effect to the adoption of the full accrual method of
accounting as discussed above. In addition, the discussion below is based on the
"Unaudited Pro forma Financial Data" contained elsewhere in this Prospectus,
which apply the full accrual method of accounting, rather than the installment
method of accounting used to develop the financial information included in
"Selected Combined Historical Financial Data." The pro forma data discussed
below does not purport to represent what the Company's results of operations
would have been had the Purchase Transactions, the Offering, the Remainder
Interest Disposition and certain stockholder investments occurred on the assumed
dates. See "Description of Notes -- Certain Covenants," "Unaudited Pro Forma
Financial Data," and "Selected Historical Combined Financial Data."
39
<PAGE> 48
RESULTS OF OPERATIONS
Comparison of the pro forma year ended December 31, 1997 to the pro forma year
ended December 31, 1996.
PRO FORMA INCOME STATEMENT PERCENTAGES
OF THE VACATION SEGMENT OF THE PREDECESSOR BUSINESS
FOR PERIODS PRIOR TO AUGUST 19, 1997 AND THE
COMPANY FOR THE PERIOD AUGUST 19, 1997 THROUGH
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA INCOME STATEMENT DATA 1995 1996 1997
AS A PERCENTAGE OF TOTAL REVENUES ------ ------ ------
<S> <C> <C> <C> <C>
Vacation Interval sales............................ 79.1% 78.8% 72.8%
Interest income.................................... 5.8% 7.0% 6.2%
Service fee and rental income...................... 13.0% 12.6% 16.2%
Other income....................................... 2.2% 1.6% 4.8%
Total vacation ownership revenues.................. 100.0% 100.0% 100.0%
PRO FORMA INCOME STATEMENT DATA
AS A PERCENTAGE OF VACATION INTERVAL SALES
Vacation Interval cost of sales.................... 25.8% 20.2% 22.8%
Commissions expenses............................... 19.6% 19.1% 15.4%
Advertising, sales and marketing expenses.......... 16.5% 10.3% 18.1%
PRO FORMA INCOME STATEMENT DATA
AS A PERCENTAGE OF TOTAL REVENUES
General and administrative expenses................ 23.8% 14.6% 15.5%
Maintenance and energy expenses.................... 10.1% 8.0% 9.5%
Provision for doubtful accounts.................... 7.2% 7.2% 7.2%
</TABLE>
Comparison of the pro forma twelve months ended December 31, 1997 to the pro
forma twelve months ended December 31, 1996.
Total revenue increased $21.4 million, or 45.3%, from $47.3 million for the
twelve months ended December 31, 1996, to $68.7 million for the twelve months
ended December 31, 1997. This increase was primarily due to a 34.2% increase in
Vacation Interval sales, a 29.7% increase in interest income, a 62.0% increase
in service fee income, a 112.7% increase in rental income and a 332.4% increase
in other income. Vacation Interval sales grew $12.7 million, or 34.2%, from
$37.3 million for the twelve months ended December 31, 1996, to $50.0 million
for the twelve months ended December 31, 1997. The number of Vacation Intervals
sold increased 51.9% from 2,799 for the twelve months ended December 31, 1996,
to 4,253 for the same period in 1997. The average price of Vacation Intervals
sold decreased $1,558, or 11.7%, from $13,313 for the twelve months ended
December 31, 1996, to $11,755 for the twelve months ended December 31, 1997, due
to an increase in sales of alternating year (or biannual) Vacation Intervals.
Management attributes the increase in the number of Vacation Intervals sold to
improved marketing efforts, stronger demand and the introduction of the lower
cost biannual product. Interest income grew primarily due to a corresponding
increase in Vacation Interval Receivables from $30.0 million at December 31,
1996 to approximately $43.0 million at December 31, 1997. Service fee income
increased $1.9 million, or 62.0%, for the twelve months ended December 31, 1997
over the same period in 1996 which increase resulted from the overall increase
in the number of Members during the 1997 period. Rental income increased $3.3
million, or 112.7% from $2.9 million in 1996 to $6.2 million in 1997. This
increase was due to an overall increase in vacation ownership units which were
available to the Company to rent because of the late 1996 completion of an
expansion of units at the Los Cabos location, and to an improved rental market
demand. Other revenues increased $2.5 million, or 332.4%, from $0.8 million in
1996 to $3.3 million in 1997, due to the additional revenue stream provided by
retail business of the Company's theme stores.
40
<PAGE> 49
Vacation Interval cost of sales increased $3.9 million, or 52.0%, from $7.5
million for 1996 to $11.4 million in 1997. Pro forma Vacation Interval cost of
sales was calculated each period for the Predecessor Business by multiplying the
estimated average cost of unsold inventory of Vacation Intervals ($2,684) by the
number of Vacation Intervals sold during each period by the Predecessor
Business. Commission expenses decreased as a percentage of Vacation Interval
sales from 19.1% in 1996 to 15.4% in 1997. This decrease was due, in part, to
the reduced commissions amount paid in connection with the increasing level of
alternating year (biannual) interval sales, and because of an overall reduction
in the commission structure related to new marketing programs started in 1997.
Advertising, sales and marketing costs increased as a percentage of Vacation
Interval sales from 10.3% to 18.1%, reflecting the increased investment in
marketing programs which enabled the Predecessor Business to report significant
growth in Vacation Interval sales during 1997.
As a percentage of total revenues, maintenance and energy expenses
increased from 8.0% to 9.5% reflecting the 1997 increased usage of the vacation
ownership facilities by an increasing number of members and because of the
effects of inflation.
Provision for doubtful accounts increased $1.6 million, or 47.1%, from $3.4
million in 1996, to $5.0 million in 1997. This increase is related to the
increased Vacation Interval sales during the 1997 period.
General and administrative expenses increased $3.7 million, or 53.8%, from
$6.9 million for 1996, to $10.6 million in 1997. As a percentage of total
revenues, general and administrative expenses grew from 14.6% in 1996, to 15.5%
in 1997. The increase in general and administrative expenses was the result of
the increased level of support necessary to serve the larger number of members,
the related growth in the number of Vacation Intervals used by such Members, and
the increased number of sales and marketing programs in the 1997 period. These
expenses also reflect some general inflationary increases during the 1997
period.
Pro forma depreciation and amortization was not material in any of the
periods presented. Depreciation and amortization is attributable to the office
furniture and equipment of the marketing and administrative functions only.
The pro forma level of interest expense decreased $0.4 million in 1997
because of the capitalization of interest during the period August 19, through
December 31, 1997 related to Cozumel land under development.
Mexican taxes represent value added taxes for these periods and were $3.3
million and $4.3 million for the 1996 and 1997 periods, respectively.
The actual net exchange loss of $1.0 million during the period August 19
through December 31, 1997 resulted because of the decline in the peso exchange
rate relative to U.S. dollar during this period. The pro forma financial
statements of the Predecessor Business, for periods prior to 1997, do not
reflect any exchange or translation gains or losses.
As a result of the changes in revenues and expenses discussed above, the
pro forma net income (loss) to common stockholders increased $1.9 million, from
a loss of $5.2 million in 1996 to a loss of $3.3 million in 1997.
Comparison of the pro forma year ended December 31, 1996 to the pro forma year
ended December 31, 1995.
Total revenue increased $15.6 million, or 49.2%, from $31.7 million for the
year ended December 31, 1995, to $47.3 million for the year ended December 31,
1996. This increase was primarily due to a 48.9% increase in Vacation Interval
sales, a 79.1% increase in interest income, a 48.1% increase in service fee
income, and a 33.9% increase in rental and other income. Vacation Interval sales
increased $12.3 million, or 49.2%, from $25.0 million for the year ended
December 31, 1995, to $37.3 million for the year ended December 31, 1996. This
increase was the result of a 48.6% increase in the average price of Vacation
Intervals for 1996, while the number of Vacation Intervals sold was nearly the
same at 2,796 for the year ended December 31, 1995 and 2,799 for the year ended
December 31, 1996. This increase in average price was due to a reduction in the
number of relatively low priced biannual and studio Vacation Intervals sold and
a general increase in Vacation Interval sales prices. The increase in interest
income was due to the growth in the level of Vacation
41
<PAGE> 50
Interval Receivables outstanding from $25.9 million in 1995 to $31.7 million in
1996. Service fee income increased $1.0 million, or 47.6%, from $2.1 million for
the year ended December 31, 1995, to $3.1 million for the year ended December
31, 1996. This increase reflects the overall increase in the average number of
Members during 1996. Rental and other income increased $0.9 million or 33.3%,
from $2.7 million in 1995, to $3.6 million in 1996 due to an increase in
available vacation ownership units resulting from the expansion of units at the
Los Cabos location during the latter half of 1996.
Operating costs increased $3.4 million, or 11.7%, from $29.1 million for
the year ended December 31, 1995, to $32.5 million for the year ended December
31, 1996. However, as a percentage of total revenues, operating costs decreased
from 91.9% of total revenues for the year ended December 31, 1995, to 68.8% of
total revenues for the year ended December 31, 1996. These decreases in cost
percentages in relation to total revenues resulted from the impact of the higher
revenues earned in 1996, while the pro forma operating expenses were semi-fixed
in nature. Vacation Interval cost of sales increased from $6.5 million at
December 31, 1995 to $7.5 million at December 31, 1996. Pro forma Vacation
Interval cost of sales is calculated for each period by multiplying the average
cost of unsold inventory of Vacation Intervals ($2,684) by the number of
Vacation Intervals sold during each period. Commission expenses decreased as a
percentage of Vacation Interval sales from 19.6% for the year ended December 31,
1995 to 19.1% for the year ended December 31, 1996. Commission expenses
decreased slightly in 1996 because of the mix of sales and due to improved 1996
marketing programs. Advertising, sales and marketing costs decreased as a
percentage of Vacation Interval sales from 16.5% for the year ended December 31,
1995 to 10.3% for the year ended December 31, 1996. The relative increases in
maintenance and energy expenses resulted from increases in the number of Members
using the vacation ownership facilities during 1996.
General and administrative expenses decreased 9.2%, from $7.6 million for
the year ended December 31, 1995, to $6.9 million for the year ended December
31, 1996. The reduction in general and administrative expenses in 1996 was due
to cost cutting measures taken by management and because the 1995 expense levels
included certain one time expenses related to management activities regarding
the attempts to sell the Predecessor Business.
Pro forma depreciation and amortization remained constant for both periods
and was not significant. Depreciation and amortization is that attributable to
the office furniture and equipment of the marketing and administrative functions
only.
Interest expense on a pro forma basis (which gives effect to the Offering)
remained constant for both periods. The interest expense pro forma adjustment
gives effect to the portion of the proceeds of the Offering allocated to the
Warrants based on their estimated fair value. Such amount has been recorded as
original issue discount and has been amortized as non-cash interest expense,
along with deferred Offering costs, over the Notes' lives.
Mexican taxes represent value added taxes for these periods and were
estimated to be $3.1 million and $3.3 million for the 1995 and 1996 periods,
respectively.
As a result of the changes in revenues and expenses discussed above, pro
forma net loss decreased to $5.2 million in 1996 from a loss of $17.1 million in
1995.
SEASONALITY
The Mexican vacation ownership industry in general tends to follow seasonal
buying patters with peak sales occurring during the peak travel/tourism seasons,
usually December through April and July through August. Seasonal influences also
affect the Company's earnings so that net income is typically higher in the
first and fourth calendar quarters. American tourists tend to vacation in the
destinations where the Regina Resorts are located in the December through April
season while Mexican tourists tend to travel to these destinations more
frequently during the summer months.
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LIQUIDITY AND CAPITAL RESOURCES
The Company will generate cash for operations from the sale of Vacation
Intervals, financing activities related to the sales of Vacation Intervals,
rental of unsold Vacation Interval units to Starwood, and from the receipt of
service fees charged to Members. With respect to the sale of Vacation Intervals,
the Company generates cash from the receipt of down payments and payments on
account from new Members acquiring Vacation Intervals. The Company generates
profits related to the financing of Vacation Interval sales based on the
interest charged on the Vacation Interval Receivables. At December 31, 1997,
approximately (i) 64% of all of the Vacation Interval Receivables were U.S.
dollar denominated and had a weighted average interest rate of interest of
12.8%, (ii) 32% of all Vacation Interval Receivables were denominated in UDIs,
an obligation denominated in pesos which is adjusted for Mexican inflation, and
had a weighted average interest rate of interest of 25.8%, and (iii) 4% of all
Vacation Interval Receivables were denominated in pesos and had a weighted
average interest rate of interest of 19.2%. See "Risk Factors -- Company
Risks -- Customer Financing Risks" and "Risk Factors -- Company
Risks -- Customer Default Risks."
The Company requires funds to finance the future acquisition and
development of vacation ownership resorts and properties and to finance customer
purchases of Vacation Intervals. To finance anticipated development costs at the
Regina Resorts, the Company intends to rely on cash generated from operations,
borrowing capacity available on existing $26 million of credit facilities, the
remaining proceeds of the Offering, and possible additional construction
financing.
Over the next twelve months, the Company anticipates spending approximately
$7.5 million for expansion and development activities at Cozumel, Los Cabos and
other locations. The Company plans to fund these expenditures with the net
proceeds of the Offering, cash generated from operations, and construction
financing. See "Risk Factors -- Company Risks -- Risk of New Venture and Recent
Acquisition; Lack of Prior Operating History." If the Company fails to obtain
title to its land adjacent to the Los Cabos Regina Resort, the Company will have
an additional $4.0 million in cash available as a result of the Offering. In
such event, the Company intends to invest such funds in a manner consistent with
its business strategy as discussed herein. See "Business -- Business Strategy."
The Company intends to pursue a growth-oriented strategy. From time to
time, the Company may acquire, among other things, additional vacation ownership
properties, resorts and completed vacation ownership intervals, land upon which
additional vacation ownership resorts may be built (which may require capital
expenditures by the Company) and/or other operations in the vacation ownership
industry. The Company is evaluating certain resort asset acquisition or
development opportunities, but it currently has no contracts or capital
commitments relating to any potential acquisitions or developments other than
the agreement to acquire and make certain conversions to the Villa Vera
representing commitments of approximately $6.5 million, for which the financing
has been arranged. In addition, the Company is evaluating several strategic
partnership opportunities, but it likewise has no agreements relating to any
such potential strategic partnership opportunities. The Company is highly
leveraged. Under the Indenture, there are limitations on the Company's ability
to borrow funds to finance its expansion plans. See "Risk Factors -- Factors
Relating to the Securities -- Leverage; Net Capital Deficiency."
The Company believes that, with respect to its current operations, the net
proceeds to the Company from the Offering, together with cash to be generated
from operations and future borrowings, are sufficient to meet the Company's
working capital and capital expenditure needs for the near future. However,
depending upon conditions in the capital and other financial markets and other
factors, the Company may from time to time consider the issuance of debt, equity
or other securities, the proceeds of which would be used to finance
acquisitions, to refinance debt or for other general corporate purposes. The
Company believes that its properties are adequately covered by insurance. See
"Business -- Insurance; Legal Proceedings."
IMPACT OF YEAR 2000
The Company utilizes RCI's System to manage all of its timeshare
operations. In contrast with traditional software run on mainframe systems, the
RCI software was developed in the late 1980's, and has
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been Year 2000 compliant since 1994. Additionally, the Company has initiated
discussions with all significant suppliers including the Westin Hotel
properties. No significant Year 2000 issues have been identified.
The Company believes that there are no significant Year 2000 issues and
that this conclusion is based on a comprehensive study of this issue.
Accordingly, management has concluded that no significant costs will be incurred
to address this issue.
CURRENCY FLUCTUATIONS
Since December 1994, Mexico has experienced difficult economic conditions,
including significant devaluation and volatility of the peso with respect to the
U.S. dollar, reduced economic activity, higher inflation, and high interest
rates. See "Risk Factors -- Factors Relating to Mexico -- Adverse Mexican
Economic Conditions and Government Policies." The effects of the Mexican
economic crisis on the Company have been tempered because a significant portion
of the Company's revenues is in U.S. dollars. The principal effects are
summarized below.
Effect of Devaluation and Inflation on Revenues, Costs, Operating Margins
and Vacation Interval Receivables. Because the Company sells certain of its
Vacation Intervals for U.S. dollars and adjusts the price of Vacation Intervals
sold for pesos to keep the revenue from such sales constant in dollar terms,
historically the Company's revenue from customers who purchase Vacation
Intervals without financing them has not been affected by devaluations and
inflation of the peso. Approximately 70% of the Company's customers elect to
finance their purchase of Vacation Intervals through the Company. Approximately
32% of the Vacation Interval Receivables are denominated in UDIs. The effect of
such receivables being denominated in UDIs is to insulate the Company from
effects of peso inflation over extended time periods with respect to those
receivables. However, the Company is not insulated from the effect of changes in
the dollar/peso exchange rate with respect to those receivables. Accordingly, to
the extent the rate of Mexican inflation exceeds the rate of devaluation of the
peso during any period, the Company's rate of return in constant dollar terms on
UDI denominated Vacation Interval Receivables will increase during such period.
Conversely, to the extent the rate of peso inflation is less than the rate of
devaluation of the peso, the Company's rate of return in constant dollar terms
on UDI denominated Vacation Interval Receivables will decrease during such
period. See "Risk Factors -- Company Risks -- Customer Financing Risks," "Risk
Factors -- Company Risks -- Customer Default Risks," and "Business -- The
Company -- Customer Financing."
Because only 4% of the Vacation Interval Receivables are denominated in
pesos, the effect of inflation and deflation of the peso on the Company's
Vacation Interval Receivables and the Company is immaterial.
When the rate of devaluation of the peso in any fiscal period exceeds the
rate of inflation of the peso for such period, the cost of the Company's other
transactions (such as labor expenses and general and administrative expense in
Mexico) denominated in pesos will decrease when translated into constant
dollars. During 1995, the effects of the sharply lower value of the peso against
the U.S. dollar decreased the Company's general and administrative costs
compared to prior fiscal periods. In contrast, in fiscal periods when the rate
of inflation exceeds the rate of devaluation, as occurred during most of 1994
until the onset of the crisis, and again during most of 1995 and 1996, peso
denominated expenses increase when translated into constant dollars.
RECENT ACQUISITIONS
In the Purchase Transactions the Company purchased from Bancomer the
capital stock of the entity which, in turn, owned through various subsidiaries
the combined hotel and vacation ownership operations. The Company immediately
sold the hotel facilities and related hotel operations to an indirect
wholly-owned subsidiary of Starwood. In connection with the Purchase
Transactions, the Company and Starwood have entered into various agreements
which provide, among other things, for the sharing of various acquisition costs
and also provide a framework for these two strategic partners to divide up
certain segments of the net working capital assets that the Company acquired
from Bancomer. The Company has allocated net purchase price paid to acquire the
vacation ownership net assets and has recorded various accounts receivable which
it believes are owed by Starwood in accordance with the various contracts and
agreements.
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Finally, the Company anticipates completing the acquisition of the Villa
Vera Hotel & Raquet Club ("The Villa Vera") located in Acapulco, Mexico from
Bancomer for $4.5 million during April 1998. The Villa Vera was built over a 30
year period and consists of 74 hotel units which the Company plans to convert
into 34 one-bedroom and 3 two-bedroom vacation ownership units plus new
construction of eight two-bedroom units that will increase the Company's
inventory by approximately 4,000 vacation intervals. The Company estimates
conversion costs to be $2.5 million. See "Risks Factors -- Company Risks -- Risk
of New Venture and Recent Acquisition; Lack of Prior Operating History,"
"Business -- Description of Purchase Transactions."
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BUSINESS
Club Regina owns and operates three luxury vacation ownership resorts on
prime beachfront sites at three of Mexico's most popular beach destinations:
Cancun, Puerto Vallarta and Los Cabos. Club Regina markets and sells Vacation
Intervals at its resorts which generally entitle the owner, or Member, to use a
fully-furnished vacation residence typically for one week each year for thirty
years. At each location, the Regina Resorts share common facilities with, and
are adjacent to, the "five-star" Westin Hotels. Starwood owns the Westin Hotels,
which are managed by Westin. The Company believes that its Vacation Interval
business is particularly attractive in the vacation ownership market, in terms
of appeal to more affluent customers and profitability, because of the close
association with and availability of high quality, luxury resort amenities of a
"five star" hotel (such as restaurants and bars, maid and room service,
recreational facilities, health clubs and spas, and other luxury amenities) at
the Regina Resorts and because of the Company's flexible "floating time,"
"floating unit," and "floating location" program. Together, the Combined Resorts
contain 402 one-and two-bedroom vacation ownership units and 908 luxury hotel
rooms. The Company intends to use the Regina Resorts as its flagship platform
for expansion through future acquisitions and internal growth in the United
States, Canada, Mexico and elsewhere. The Company believes it is one of the
leading developers focused primarily on the "luxury" level of the vacation
ownership market, which is characterized by elegant accommodations and personal
service.
As part of the Mexican government's economic development program, Bancomer,
the second largest bank in Mexico (which was owned by the Mexican government
until 1991), developed the Combined Resorts between 1991 and 1996 as its luxury
flagships for tourism development. The vacation ownership units within the
Regina Resorts were developed to appeal to the most sophisticated segments of
the market for vacation ownership properties throughout the world. In
recognition of this fact, the Regina Resorts have been awarded RCI's highest
designation as "Gold Crown" resorts. Furthermore, according to RCI, the Regina
Resorts have consistently obtained among the highest rankings of guest
satisfaction among RCI members on all counts not only in Mexico but also in the
world.
The Company's principal operations currently consist of (i) marketing and
selling Vacation Intervals, (ii) operating the Regina Resorts, for which it
receives an annual service fee from each Member, and (iii) providing financing
for the purchase of Vacation Intervals. In 1997, the Company sold approximately
4,200 Vacation Intervals, producing $53.9 million in Vacation Interval sales
revenue. The Company had unsold inventory as of December 31, 1997 of
approximately 12,500 (approximately 6,000 annual and 6,500 biannual) Vacation
Intervals, and the Company has plans to develop an aggregate of approximately
20,000 Vacation Intervals at the Villa Vera in Acapulco, Mexico, on land it
plans to purchase that is adjacent to the Regina Resort in Los Cabos, Mexico and
at a new resort to be developed in Cozumel, Mexico. For the twelve months ended
December 31, 1997, the Company provided financing for approximately 70% of its
buyers (or approximately 75% of its Vacation Interval revenue). For such period,
cash sales plus down payments on financed sales represented approximately 50% of
Vacation Interval revenue. Assuming an average sales rate of 4,000 Vacation
Intervals per year, the Company anticipates that the existing Regina Resorts
will provide sufficient inventory for approximately four years of Vacation
Interval sales and that the planned development at its resort property
development sites in Cozumel and Los Cabos will provide approximately four
additional years of inventory.
THE COMPANY
The Product. Club Regina offers each customer who purchases a club
membership the flexibility to use a specific type of unit, during any week
within a specific seasonal category, in any of the Regina Resorts at Cancun,
Puerto Vallarta and Los Cabos. During the year ended December 31, 1997, a
Vacation Interval ranged in price from approximately $8,000 for a studio unit
with a maximum occupancy of two, $6,000 to $17,500 for a one-bedroom unit with a
maximum occupancy of four, to approximately $13,000 to $27,000 for a two-bedroom
unit with a maximum occupancy of six. Each one- and two-bedroom unit contains a
separate living room and kitchen area. Vacation Intervals can be purchased for
any one of three seasons: Holiday, Prime and Select. Holiday Vacation Intervals
allow Members to use the Regina Resorts during any time of
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the year including the five weeks of highest demand. Prime Vacation Intervals
allow Members to use the Regina Resorts during any time of the year except the
five weeks of highest demand, while Select Vacation Intervals allow Members to
use the Regina Resorts during 17 weeks of traditionally lower demand. Vacation
Intervals are sold under the Company's flexible "floating time," "floating
unit," and "floating location" program. This program allows a Member to use his
or her Vacation Interval at any time during the season to which it relates, or
any less expensive season. Furthermore, Members may divide their Vacation
Intervals into three split-week segments and thereby spend a portion of a week
at a resort at one time and the other two portions at the same or other resorts
at other times. Finally, Members with Vacation Intervals representing one- and
two-bedroom units can divide their Vacation Intervals and use a single module
within any such unit over two weeks. For example, under this program, subject to
availability, a Member that purchased a two-bedroom unit could divide that unit
into six different split week stays (three in one-bedroom accommodations and
three in studio accommodations) over the year. Members who are at least 55 years
of age have the option, subject to availability, to accelerate the use of their
Vacation Interval up to one extra week during the "Prime" season or two extra
weeks during the "Select" season so long as such Members pay an additional
service fee for each year that is accelerated.
Currently the Company sells a 50-year contractual right to use Vacation
Interval units. Until March 13, 1998, purchasers of Memberships, with the
corresponding rights to use the Vacation Intervals, were formally issued a share
(a "Class B Share") of Class B Common Stock of Club Regina, S.A. de C.V. ("Club
Regina Mexico") a subsidiary of the Company. The Company retains voting control
of Club Regina Mexico by virtue of its ownership of all of the outstanding
shares of Class A Common Stock which represent voting control of Club Regina
Mexico under its charter. Club Regina Mexico has contractual arrangements with
the subsidiaries of the Company that operate the Regina Resorts and, through
those arrangements, by paying his or her annual service fee, each Member
purchasing before such date holding a Class B Share has the right to stay at the
Regina Resorts operated by those subsidiaries under the circumstances described
above. Prior to using the Class B Share as a means to sell Vacation Intervals,
the Company used a different means for evidencing Vacation Intervals which
approximately 15% of current Vacation Interval owners continue to hold.
Sales and Marketing. As a leading developer and operator of vacation
ownership resorts in Mexico, the Company believes that it has acquired extensive
skill and expertise in developing, managing and operating vacation ownership
resorts and in marketing Vacation Intervals. The Company sells Vacation
Intervals through both on-site sales personnel at each of its resorts and at
sales offices in eight major Mexican cities. A variety of marketing programs are
employed to generate prospects for these sales efforts, which include
presentations to Westin Hotel guests, as well as overnight mini-vacation
packages, certificate programs, theme stores, travel agencies, telemarketing,
owner referrals and various destination-specific local marketing efforts.
Additionally, incentive premiums are offered to guests to encourage resort
tours, in the form of entertainment tickets, hotel stays, gift certificates or
free meals. The Company's sales process is tailored to each prospective buyer
based upon the marketing program that brought the prospective buyer to the
resort for a sales presentation. Prospective target customers are identified
through various means of profiling.
Approximately 67% of all Vacation Interval sales are made from leads
generated locally in the Los Cabos, Cancun and Puerto Vallarta areas.
Approximately one third of such sales, or 16% of total sales, are made to guests
of the Westin Hotels. Programs directed to these guests have been consistently
successful both in the number of prospects generated and in the closing rate,
due to the direct experience of such guests with the quality of the
installations and the likelihood that such guests, who typically belong to high
income households, will prequalify to purchase Vacation Intervals. Also these
guests have historically lower default rates on Vacation Interval Receivables.
The remainder of local sales, or 51% of total sales, are made through
Company-owned theme stores, travel agencies and ground operators and other lead
generation points located in airports or shopping centers, independently or in
association with other businesses such as auto rental companies and restaurants.
The Company's theme stores, which generate leads resulting in approximately 9.5%
of its total sales, are retail businesses with a strong contemporary appeal to
affluent tourists, offering products associated with ecological consciousness,
wildlife, conservation and local culture, while at the same time promoting the
resort and inviting customers to attend sales presentations. A share of these
stores' profits is contributed to causes related
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to the stores' themes. There are theme locations in Los Cabos, Puerto Vallarta,
and Cancun. The Company also operates travel agencies in Los Cabos, Cancun and
Puerto Vallarta which provide traditional travel services to Westin Hotel guests
and potential members and also encourage their customers to attend a Club Regina
presentation. Under the Company's ground operator program, the Company provides
local transport and other services in each of Los Cabos, Puerto Vallarta and
Cancun to visitors of many different resorts in these destinations and
encourages those visitors to attend a Club Regina presentation. In Los Cabos,
prospects are also generated through the offer of "day passes" allowing tourists
lodged elsewhere in the city to spend the day at the Combined Resort, using its
recreational and public facilities like any guest.
Approximately 34% of all Vacation Intervals are sold through off-site sales
centers in eleven of Mexico's largest urban centers. The proportion of off-site
sales is gradually increasing, reflecting the growing prestige of the Regina
Resorts, the increased efficacy of the Company's off-site marketing and sales
techniques, and gradual improvement in the Mexican economy. Off-site sales
programs center on sales offices in eight of Mexico's largest cities: Mexico
City, Guadalajara, Monterrey, Morelia, Hermosillo, Torreon, Leon and Tijuana.
Using sophisticated data base -- based marketing approaches including
telemarketing, qualified prospects are offered mini-vacations, fly-in and
drive-in programs as a method to introduce the benefits of membership and the
Regina Resorts to potential Members. Members are also contacted for referrals.
Most recently, the "universal salesman" program has been instituted whereby
potential Members are contacted by one representative of the Company, who is the
potential Member's only contact with the Company through closing of the
purchase. The Company believes that this program solves a significant problem in
traditional vacation ownership marketing approaches which is the lack of
continuity in a customer's relationship with the seller.
Finally, the Company believes that one of its best marketing resources is
its current Members. Accordingly, the Company directs programs at these Members
to encourage them to recommend Club Regina Memberships. These programs include a
points-based program by which Members who refer potential Members to the Company
are given awards, and its bonus week program whereby every new buyer is given a
week to give to a friend or relative. The Company also markets upgrades, either
in the size of the unit to which the Member has access or the time of year the
Member may use that unit. Finally, the Company markets the opportunity to stay
at the resort for additional days or weeks to Members as well as the right to
rent additional units for guests accompanying the Member to the resort.
Because the Company permits Vacation Interval purchasers to cancel their
purchases within five days of purchase, all successful sales presentations
conclude with a careful verification of the customer's understanding of his
rights and obligations, and of the benefits of the product, by a non-sales staff
member. See "Risk Factors -- Company Risks -- Sales Volume Risks."
Customer Financing. The Company has historically provided financing for
approximately 70% of its Vacation Interval buyers and approximately 30% of all
Vacation Interval buyers either pay cash at or within 60 days of closing. Buyers
who finance through the Company are required to make a down payment of at least
15% of the Vacation Interval's sales price and pay the balance of the purchase
price over a period of one to seven years. For the year ended December 31, 1997,
the average down payment on a financed Vacation Interval was approximately 28%
of its purchase price. At December 31, 1997, the Company had a portfolio of
approximately 5,500 Vacation Interval Receivables amounting to approximately
$43.0 million in outstanding principal amount, as compared to 3,750 Vacation
Interval Receivables amounting to approximately $29.0 million in outstanding
principal amount at December 31, 1996. At December 31, 1997, the outstanding
loans had a weighted average maturity of approximately four years. At December
31, 1997, approximately (i) 64% of all of the Vacation Interval Receivables were
U.S. dollar denominated and had a weighted average interest rate of interest of
12.8%, (ii) 32% of all Vacation Interval Receivables were denominated in UDIs
and had a weighted average interest rate of 25.8%, and (iii) 4% of all Vacation
Interval Receivables were denominated in pesos and had a weighted average
interest rate of 19.2%. Because approximately 57% of Vacation Intervals have
been sold to U.S. citizens, Canadians and other foreigners and approximately 64%
of all Vacation Interval Receivables are U.S. dollar denominated, the Company
believes its foreign exchange risk with respect to the Mexican economy is
mitigated.
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Due to its ownership of Vacation Interval Receivables, the Company bears
the risk of purchaser default. The Company's practice has been to continue to
accrue interest on its loans to purchasers of Vacation collectible, at which
point it expenses the interest accrued on such loan, terminates the underlying
conditional sale agreement and returns the Vacation Interval to the Company's
inventory for resale. The Company closely monitors its loan accounts and
determines whether to foreclose on a case-by-case basis. As of December 31,
1997, approximately 3.5% of the Company's Vacation Interval Receivables were
more than 60 days overdue. At that date, approximately 2.2% of the principal
amount of the Company's outstanding Vacation Interval Receivables were more than
120 days past due. See "Risk Factors -- Company Risks -- Customer Financing
Risks" and "Risk Factors -- Company Risks -- Risk of Customer Defaults."
Approximately 32%, or $14.5 million, of the Company's Vacation Interval
Receivables at December 31, 1997 were denominated in UDIs. The UDI (Unidad de
Inversion, or Unit of Investment) is an obligation denominated in pesos which is
adjusted for Mexican inflation. The value of the UDI is tied to the Consumer
Price Index of Mexico (Indice Nacional de Precios al Consumidor). The proceeds
of loans denominated in UDI's are paid to a borrower in pesos at the applicable
UDI-peso conversion ratio on the day of the loan. Payments of both principal and
interest to the lender are made in pesos. The amount of payments in pesos to be
made as of any date depend on the applicability of the UDI-peso conversion ratio
at that date. The effect of denominating Vacation Interval Receivables in UDIs
is to protect the Company from inflation in Mexico, but not from variations in
the exchange rate between the peso and the U.S. dollar. An additional effect is
that when Mexican inflation is high, that inflation rate is effectively added to
the Company's Vacation Interval Receivable income, thereby increasing the
Company's Mexican peso revenue. Conversely, if the Mexican inflation rate should
decline, Vacation Interval Receivable interest rates would decline. At December
31, 1997, UDI denominated Vacation Intervals carried an interest rate of
approximately 25.8%. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation -- Currency Fluctuations" and "Risk
Factors -- Company Risks -- Customer Financing Risks."
Room Rental Operations. To generate additional revenue at the Los Cabos and
Puerto Vallarta Regina Resorts, the Company rents units of excess inventory to
Starwood for use as hotel rooms. The Company has entered into a lease agreement
with Starwood, whereby Club Regina has leased 54 rooms at Los Cabos and 60 rooms
at Puerto Vallarta to Starwood. This lease runs for one year from August 18,
1997 and provides for payment of $1.2 million. The Operating Agreements between
the Company and Starwood with respect to Los Cabos and Puerto Vallarta provide
that the parties will negotiate to enter into a new lease with respect to units
constituting excess inventory for the period commencing August 18, 1998. There
can be no assurance that such a lease will be negotiated, or if negotiated, will
be on favorable terms. In addition, the Company can, subject to significant
limitations set forth in the Operating Agreement, rent unsold units that are not
covered by the lease arrangement with Starwood to Members and guests as well as,
under limited circumstances, third parties. In addition to providing the Company
with supplemental revenue, the Company believes its room-rental operations
provide it with a good source of lead generation for the sale of Vacation
Intervals. As the Company sells its existing inventory of Vacation Intervals, it
will have fewer rooms to rent to Starwood or to other parties. See
"-- Description of Purchase Transactions -- Description of Operating Agreements"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Participation in Vacation Interval Exchange Networks. The Company believes
that its Vacation Intervals are made more attractive by the Company's
participation in interval exchange networks operated by RCI. This is
particularly true because the Regina Resorts have been rated "Gold Crown" by
RCI, thus giving Members superior interval exchange opportunities. In a 1995
study sponsored by the Alliance for Timeshare Excellence and ARDA, the exchange
opportunity was cited by purchasers of Vacation Intervals as one of the most
significant factors in determining whether to purchase a vacation ownership
interval. This is particularly true given most vacation interval owners'
propensity to travel. According to RCI, its members in the United States engage
in an average of 25.7 personal travel days per year and an average of 6.2
domestic trips per year with an average duration of 4.2 days. Membership in RCI
allows the Company's customers to exchange one or more years of their Vacation
Interval for an occupancy right in another participating resort, based upon
availability and the payment of a variable exchange fee. A Member may exchange
his Vacation Interval for an occupancy right in another participating resort by
listing his Vacation Interval as available with the exchange organization
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and by requesting occupancy at another participating resort, indicating the
particular resort or geographic area to which the Member desires to travel, the
size of the unit desired and the period during which occupancy is desired. RCI
assigns a rating to each listed interval, based upon a number of factors,
including the location and size of the unit, the quality of the resort and the
period during which the interval is available, and attempts to satisfy the
exchange request by providing an occupancy right in another interval with a
similar rating. If RCI is unable to meet the member's initial request, it
suggests alternative resorts based on availability.
Founded in 1974, RCI has grown to be the world's largest interval exchange
organization, with a total of more than 3,100 participating resort facilities
and over two million members worldwide. During 1995, RCI processed over 2.0
million interval exchanges. The cost of the annual membership fee in RCI, which
typically is at the option and expense of the interval owner, ranges from $74 to
$90 per year depending on the country of residence. In the past, Vacation
Intervals have been exchanged for intervals at other highly-rated member
resorts. According to RCI, during 1996, approximately 98% of exchange requests
of all RCI Members were fulfilled by RCI. See "Risk Factors -- Company
Risks -- Vacation Interval Exchange Networks."
Other Operations. The Company provides Bancomer with certain asset
management services for its hotel, resort and marina facilities. Although the
Company receives minimal revenue with respect to these services, it believes
that the continued relationship with Bancomer is beneficial.
BUSINESS STRATEGY
The Company's long-term growth strategy is to develop a world-wide brand
name vacation ownership club, providing its Members with vacation opportunities
of consistent quality and luxury and the amenities generally associated with
"five-star" hotels in destination resort or tourist locations. Accordingly, the
Company plans to acquire and develop other vacation ownership resorts or
vacation ownership clubs in other locations in the Western Hemisphere, as well
as other parts of the world that appeal to the luxury segment of the market.
Among other things, in the near-term, the Company's strategy includes:
- Mexican Expansion. The Company intends to capitalize on its management's
expertise in Mexico by implementing currently available expansion
opportunities as well as acquisition opportunities. This will include
expanding the existing Regina Resort in Los Cabos by approximately 20
units and developing a Regina Resort at the Company's property in Cozumel
containing approximately 220 units, for an aggregate of 10,192 annual and
5,720 biannual Vacation Intervals. Furthermore, the Company is evaluating
opportunities to purchase additional inventory in Cancun and selected
other top resort destinations in Mexico. Finally, the Company anticipates
completion of the acquisition of the land and facilities of the Villa Vera
for $4.5 million in April 1998. The Villa Vera, consisting of 74 hotel
units, suites and villas is planned to be converted into 57 units
consisting of 20 hotel rooms, 34 one-bedroom suites and villas and three
two-bedroom villas. The Company estimates this conversion will cost
approximately $2.5 million. Also, included in this conversion, the Company
plans to build eight two-bedroom suites on land within the property. Upon
completion of this conversion, the Company's inventory of Vacation
Intervals should increase by approximately 4,000.
- International Expansion. The Company intends to add vacation ownership
resort locations in areas other than Mexico. Initially, the Company
intends to focus on adding a resort or resorts in mountain regions, such
as the western United States and Canada, that will cater to snowskiing in
the winter and golf, hiking, fishing and similar activities in the summer
as well as provide the availability of amenities of a "five-star" hotel.
The Company also plans to add vacation ownership clubs in urban
destinations, such as New York City, San Francisco, London and other
popular business and tourist locations worldwide, which would provide
Members with the opportunity to enjoy the many attractions that such large
cities have to offer.
- Marketing and Sales. The Company intends to continue upgrading its
marketing efforts by opening more theme stores, consolidating its
telemarketing operations, and enhancing its marketing and sales hardware
and software. The Company plans to accelerate the implementation of its
"universal salesman" program by which potential Members work with only one
employee of the Company from first contact with the Company through the
sale of the Vacation Interval. Furthermore, the Company
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intends to establish sales offices in other locations in Mexico and the
rest of the Western Hemisphere. Finally, the Company intends to further
exploit its current Member base to (i) determine the best locations and
strategic relationships with "five-star" quality hotel operators to expand
its operations, (ii) provide referrals for potential new Members, (iii)
sell additional Vacation Intervals to such Members, and (iv) sell
additional days or weeks to such Members and their guests at both
preferential and standby rates.
- Improving Operating Margins. The Company believes that its current
administrative and marketing infrastructure in Mexico is sufficient to
support its growth plans in Mexico over the next several years.
Accordingly, the Company expects to reduce its general and administrative
costs as a percentage of revenues. Additionally, the Company plans to seek
ways to reduce its borrowing costs as it grows.
The Company intends initially to fund its business strategy through the use
of a portion of the proceeds of the Offering and cash flow from operations.
Development. The Company intends to develop additional units on land it
intends to purchase adjacent to the Los Cabos Regina Resort and owns in Cozumel.
In Los Cabos, the Company intends to develop 20 additional units contiguous to
the existing vacation ownership units. At Cozumel, the Company intends to
develop an entirely new resort which is planned to include 220 vacation
ownership units. In addition, the Company intends to structure an arrangement
similar to that at the Combined Resorts by which a third party would develop an
adjacent hotel accessible to Members. See "-- Description of Purchase
Transactions," "Risk Factors -- Company Risks -- Development and Construction
Risks" and "Risk Factors -- Company Risks -- Risk of New Venture and Recent
Acquisition; Lack of Prior Operating History."
Finally, the Company plans to complete the above-described acquisition of
the Villa Vera which is expected to increase the Company's inventory by
approximately 4,000 Vacation Intervals.
Future Acquisitions. In addition to its development plans on the Company's
land acquired by the Company in the Purchase Transactions, the Company intends
to expand its business by acquiring resorts in other attractive resort
destinations and is in the process of evaluating strategic acquisitions in a
variety of locations. Such future acquisition and development of resorts could
have a substantial and material impact on the Company's operations and
prospects. The Company currently is evaluating possible acquisitions of resorts
and development opportunities in Mexico, Canada and the United States. The
Company has not entered into any definitive acquisition agreement with respect
to any such resort or development opportunity, and there can be no assurance
that such an agreement will be negotiated or that any such acquisition will be
consummated. In addition, the Company has also explored the acquisition of
existing management companies, vacation ownership developers and marketers, loan
portfolios or other industry-related operations or assets in the fragmented
vacation ownership development, marketing, finance and management industry.
There can be no assurance that the Company will be able to implement its
acquisition strategy effectively. See "Risk Factors -- Company
Risks -- Acquisition Strategy Risks."
THE VACATION OWNERSHIP INDUSTRY
The Worldwide Market. The resort component of the leisure industry is
primarily served by two separate alternatives for overnight accommodations:
commercial lodging establishments and vacation ownership resorts. Commercial
lodging consists of hotels and motels in which a room is rented on a nightly,
weekly or monthly basis for the duration of the visit and is supplemented by
rentals of privately-owned condominium units or homes. For many vacationers,
particularly those with families, a lengthy stay at a quality commercial lodging
establishment can be very expensive, and the space provided to the guest
relative to the cost can be uneconomical. In addition, room rates and
availability at such establishments are subject to change periodically. Vacation
ownership presents an economical alternative to commercial lodging for
vacationers.
First introduced in Europe in the mid-1960s, vacation ownership has been
one of the fastest growing segments of the hospitality industry over the past
two decades. RCI has estimated that, world-wide, approximately 10 million
tourists travel to vacation ownership resorts each year, spending approximately
20 million roomnights in lodging accommodations. These tourists are part of an
estimated three million plus
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families who own at least one vacation ownership week. According to the ARDA,
during the fifteen-year period ending in 1994 (the most recent year for which
worldwide ARDA statistics are available), worldwide sales volume for the
vacation ownership industry increased from approximately $490 million to
approximately $4.8 billion, and the industry has had a 17% compounded annual
growth rate over the last 15 years. Based on industry data, the Company believes
that the total vacation interval sales volume for the vacation ownership
industry exceeded approximately $6.0 billion in 1996. In addition, according to
Interval International, the number of vacation ownership resorts worldwide has
grown from 1,550 in 1985 to an estimated 5,000 in 1996, an annualized increase
of 11.2%. This growth rate does not reflect the addition of units within
existing resorts. Also, according to ARDA, in 1995 revenues of vacation
ownership companies with annual sales in excess of $20 million grew 28% to $1.33
billion whereas the entire industry grew 16%.
The Company believes that the following factors have contributed to the
increased acceptance of vacation ownership among the general public and the
substantial growth of the vacation ownership industry over the past 15 years:
- increased consumer confidence resulting from consumer protection regulation
of the industry and the entrance of brand name national lodging companies
to the industry;
- increased flexibility of ownership due to the growth of exchange
organizations such as RCI;
- improvement in the quality of the facilities and the management of vacation
ownership resorts;
- increased consumer awareness of the value and benefits of vacation
ownership, including the cost savings relative to other lodging
alternatives; and
- increased availability of financing for purchasers of intervals.
The vacation ownership industry traditionally has been highly fragmented
with 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 industry is the entry into the market of some of the world's
major lodging, hospitality and entertainment companies. These major companies
include Marriott, Disney, Hilton, Hyatt, Four Seasons and Intercontinental, as
well as Westin. Unlike the Company, however, the vacation ownership operations
of each of Marriott, Disney, Hilton, Hyatt, Four Seasons and Intercontinental
comprise only a small portion of such companies' overall operations. See "Risk
Factors -- Company Risks -- Competition."
The Mexican Market. During the last two decades, the Mexican government,
both directly and through government entities such as Bancomer, prior to its
privatization, promoted the growth of the tourism industry. Through the Fondo
Nacional de Fomento al Turismo, the Mexican government established tourist
centers in numerous locations, including Cancun and Cabo San Lucas. Mexico has
increased its hotel and other lodging capacity from approximately 132,700 rooms
in 1970 to an estimated 374,031 in 1996.
Tourism is Mexico's second largest contributor of foreign exchange. During
1996, revenues from international travelers (including both tourists and
visitors who enter and leave the country on the same day) totaled approximately
$6.9 billion, a 12.2% increase from 1995. The number of overnight tourists in
1996, approximately 9.0 million, was 15.6% higher than the level for 1995, while
the average expenditure per tourist decreased by 1.6%. The Company believes that
resort lodging investment will continue to be favored by the Mexican government
because tourism is a rapid and efficient generator of jobs, foreign exchange
income and regional economic development. Since Mexican public policy toward
resort lodging investment has been consistent for over 20 years, the sector has
been relatively stable even during major shocks in the Mexican economic and
political landscape.
Based on industry sources, the Company believes that Mexico ranks third in
the world, following the United States and the combined countries of Europe, in
the number of viable vacation ownership developments, the number of owners in
those projects, and the number of in-country citizens owning vacation ownership
intervals. Vacation interval ownership appeared very early in Mexico, at the end
of 1972. By 1980, several dozen vacation interval ownership sales programs had
been planned or initiated. Commencing in the
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mid-1980s, the Company believes that approximately 20 to 30 new programs entered
the market every year. According to RCI, by the end of 1995, an estimated 372
vacation interval ownership projects were operating in Mexico.
According to RCI, tourists visiting Mexico from abroad and
upper-middle-income Mexican families have accepted vacation ownership, buying an
average of almost 100,000 intervals per year between 1991 and 1995. Of the
vacation intervals with respect to Mexican vacation interval ownership resorts
sold since 1990, Mexicans purchased approximately 55% and non-Mexicans purchased
approximately 45%. However, certain Mexican resorts, including the Regina
Resorts, have a higher percentage of non-Mexican owners. The percentage of the
Company's on-site sales at the applicable Regina Resort to non-Mexicans,
primarily Americans, were as follows: Cancun -- 75.5%, Los Cabos -- 97.4% and
Puerto Vallarta -- 76%.
The demographics of Mexican and U.S. owners of vacation intervals are
similar. According to industry sources, U.S. owners of Mexican vacation
intervals are slightly older and more affluent than the average while Mexican
owners are younger and have larger families than U.S. owners. The Company
believes based on industry surveys, that owner satisfaction in Mexico is
comparable to that reported in the rest of the world. According to ARDA, 75.3%
of all U.S. vacation ownership owners stated that they were satisfied or very
satisfied with their purchase.
Mexico, like most other countries, experienced past problems related to
aggressive vacation ownership sales practices and under-financed or poorly
planned vacation ownership developments. Utilizing the experience of other
countries, professional Mexican vacation ownership industry participants joined
forces in 1987 to create AMDETUR. AMDETUR, whose code of ethics and many of
whose statutes are modeled on those of ARDA, has actively promoted the
professionalization of the vacation ownership industry and policed the
activities of the industry. AMDETUR is believed to have significant influence in
the vacation ownership sector and in the tourism and travel industry in general.
Club Regina is an active member of AMDETUR and ARDA, with John McCarthy, the
Company's President, having served as president and currently serving as
secretary of AMDETUR. See "Management."
AMDETUR has worked closely with the Mexican government in the formulation
of the laws and regulations governing vacation ownership. In Mexico, vacation
ownership is positioned legally as part of the hospitality business rather than
as real estate. Regulatory emphasis is on operational quality as well as on
sales. Mexican governmental regulation of the vacation ownership industry is
less comprehensive than in the United States. The Company believes that it is in
compliance with such regulations. See "Risk Factors -- Company
Risks -- Regulation of Marketing and Sales of Vacation Intervals; Other Laws."
The Consumer. According to information compiled by ARDA for the year ended
December 31, 1994 for U.S. consumers, the prime market for vacation intervals is
customers in the 40-55 year age range who are reaching the peak of their earning
power and are rapidly gaining more leisure time. The median age of an interval
buyer at the time of purchase is 46. The median annual household income of
current interval owners in the United States is approximately $63,000, with
approximately 35% of all interval owners having annual household income greater
than $75,000 and approximately 17% of such owners having annual household income
greater than $100,000. Despite the growth in the vacation ownership industry, as
of December 31, 1994, interval ownership has achieved only an approximate 3.0%
market penetration among United States households with income above $35,000 per
year and 3.8% market penetration among United States households with income
above $50,000 per year.
According to the ARDA study, the three primary reasons cited by consumers
in the United States for purchasing a vacation interval are (i) the ability to
exchange the interval for accommodations at other resorts through exchange
networks such as RCI (cited by approximately 82% of purchasers), (ii) the
ability to save money on future vacation costs (cited by 61% of purchasers) and
(iii) the quality and appeal of the resort at which they purchased an interval
(cited by approximately 54% of purchasers). According to the ARDA study,
vacation interval buyers have a high rate of repeat purchases: approximately 41%
of all interval owners owning more than one interval represent approximately 65%
of the industry inventory and approximately 51% of all owners who bought their
first interval before 1985 have since purchased a second interval. In addition,
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customer satisfaction increases with length of ownership, age, income, multiple
location ownership and accessibility to interval exchange networks.
The Company believes it is well positioned to take advantage of these
demographic trends because of the quality of its resorts and locations and
because its program allows buyers to exchange intervals at the Company's resorts
and the Company's membership in RCI.
THE RESORTS
The Regina Resort at Cancun. Inaugurated in March 1991, the Regina Resort
at Cancun is a design of the architect Ricardo Legorreta, is on an 11-acre site
at Punta Nizuc and is the first landmark tourists see after arriving in the
Cancun hotel zone from the airport. The Combined Resort consists of eight
buildings and all rooms offer views of either the Caribbean or the Nichupte
Lagoon. The total accommodations in the Regina Resort in Cancun consist of 56
one bedroom and 13 two bedroom units.
The Club Regina units are in a self-contained section of three buildings.
This area has its own bar, snack bar, multi-purpose recreation room,
delicatessen, swimming pool and jacuzzi. Of the total of 69 apartments, 56 are
one-bedroom, two-bath units with a maximum occupancy of four, and 13 have two
bedrooms and three baths, with a maximum occupancy of six people. The units all
have views of either the sea or lagoon, fully equipped kitchens, with stoves,
dishwashers, microwave ovens, terraces with small jacuzzis, televisions in both
the living room and bedrooms, and other decorations and furnishings of a home.
Amenities include restaurants and bars, five swimming pools, four
whirlpools, two lighted tennis courts, a fitness center, a business center and
several lobby shops including a boutique, a beauty salon and a sundries shop
with magazines, books, tobacco goods and similar items. Members have priority
access to a nearby Robert Trent Jones, Jr. 18-hole golf course. Additionally,
there are 14,000 square feet of meeting, conference and banquet facilities in
modular design permitting highly varied configurations. The Westin Hotel, open
to Members, contains a ballroom (1,200 person capacity), and 11 multi-purpose
meeting rooms.
The Regina Resort at Puerto Vallarta. The Regina Resort at Puerto Vallarta
was inaugurated in June 1992 on a 21-acre site in the Marina Vallarta
master-planned resort in Puerto Vallarta. Architect Javier Sordo Madaleno
designed the Combined Resort within the framework of Puerto Vallarta's
architectural tradition. The total accommodations in the Regina Resort in Puerto
Vallarta consist of 161 one bedroom and 42 two bedroom vacation ownership units.
All of these facilities are distributed along an 875-foot beach facing the
Pacific Ocean.
The 203 Regina Resort units are distributed among the seven buildings in
the complex. All have views of either the beach or the marina. Of the total, 161
are one-bedroom, two-bath units with a maximum occupancy of four; and 42 have
two bedrooms and three baths, with a maximum occupancy of six. Each unit has a
fully equipped kitchen (including stove, dishwasher, microwave oven) and its own
jacuzzi on a private terrace. Furnishings and decorations are consistent with
the quality of the complex and the idea of a Regina Resort vacation home. In the
Regina Resort area there is a bar, snack bar, multi-purpose recreational room
and delicatessen.
Other amenities include five restaurants and bars, four swimming pools,
three lighted tennis courts, a fitness center, a business center and shops. The
surrounding Marina Vallarta community includes an 18-hole golf course, a marina
with specialty shopping, and a separate large shopping center.
The Regina Resort at Los Cabos. The Combined Resort at Los Cabos was
completed in January 1994 under the direction of architect Javier Sordo Madaleno
on a 15-acre site on the beach where the Pacific Ocean meets the Sea of Cortez.
The two buildings of the Westin Hotel feature a curvilinear design connecting
two hills. Inspired in color and form by the surrounding desert, this eight
story structure was constructed in native red stone. Bright, bold accents of hot
pink, yellow and green highlight the garden oasis of tropical foliage. The 130
Regina Resort apartments are housed in neighboring two-story structures. The
total accommodations in the Regina Resort at Los Cabos consist of 104
one-bedroom and 26 two-bedroom apartments.
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The 130 Regina Resort vacation ownership units have been distributed in
small buildings over the hilly topography to offer views of the beach and ocean.
Of the total, 104 are one-bedroom, two-bath units with a maximum occupancy of
four; and 26 have two bedrooms and three baths, with a maximum occupancy of six
people. Each unit has a fully equipped kitchenette and its own jacuzzi on a
private balcony. Amenities include four restaurants and bars, three swimming
pools, two lighted tennis courts, a fitness center, a business center and shops.
There are four championship golf courses in the area, designed by Pete Dye,
Robert Trent Jones, Jr., and Jack Nicklaus. Nearby, Cabo San Lucas has a marina
with specialty shopping.
As part of the use of proceeds from this Offering, the Company intends to
construct for approximately $4.0 million 20 more two-bedroom units, for 1,040
annual Vacation Intervals, on a property the Company intends to purchase
adjacent to the Regina Resort at Los Cabos. There can be no assurance that such
development will occur within the time contemplated therefore or that the number
of Vacation Intervals added to the Company's inventory from such development
will equal what is presently contemplated. See "Risk Factors -- Company
Risks -- Development and Construction Risks" and "Risk Factors -- Company
Risks -- Risk of New Venture and Recent Acquisition; Lack of Prior Operating
History."
Planned Regina Resort at Cozumel. The Company intends to build a 220 unit
vacation ownership resort on the Company's 54-acre property in Cozumel. For the
Company to provide the services to Members that they currently receive, the
Company intends to also arrange for the development of a hotel at such location.
The Company either intends to enter into an agreement with a hotel owner to
develop such a hotel, or, if necessary, the Company will develop such hotel
itself. There can be no assurance that such development will occur within the
time contemplated or that the number of Vacation Intervals added to the
Company's inventory from such development will equal what is presently
contemplated. See "Risk Factors -- Company Risks -- Development Risks."
Regina Resort at Acapulco. The Company anticipates completion of the
acquisition of the land and facilities of the Villa Vera for $4.5 million in
April 1998. The Villa Vera, consisting of 74 hotel units, suites and villas, is
planned to be converted into 57 units consisting of 20 hotel rooms, 34
one-bedroom suites and villas and three two-bedroom villas. The Company
estimates this conversion will cost approximately $2.5 million. Also, included
in this conversion, the Company plans to build eight two-bedroom suites on land
within the property. Upon completion of this conversion, the Company's inventory
of Vacation Intervals should increase by approximately 4,000.
DESCRIPTION OF PURCHASE TRANSACTIONS
On December 20, 1996, the Company and Bancomer executed a definitive
purchase agreement pursuant to which the Company agreed to purchase the Regina
Resorts for approximately $121.5 million subject to certain price adjustments,
and the Westin Hotels for approximately $110 million. In May 1997, the Company
agreed to sell the Westin Hotels to Starwood and 20% of CR US's common stock to
Starwood Capital for an aggregate of approximately $133.5 million. The
consummation of the Purchase Transactions involved a series of substantially
contemporaneous transactions, which included: (i) Bancomer's segregation of each
Combined Resort into two condominium units with related common areas so that
after the closing of the Purchase Transactions the Regina Resorts and Westin
Hotels would be able to be owned by separate companies, (ii) the transfer of the
condominium units with respect to the Regina Resorts into three separate trusts,
under which the Company now has the right to use the condominium units at the
Regina Resorts for 50 years and a former subsidiary of CR Mexico has the
Remainder Rights which subsidiary the Company disposed of in the Remainder
Interest Disposition, (iii) the borrowing of approximately $83.0 million under
the Bancomer Loan, (iv) the Company's purchase of the Combined Resorts and
related operations for approximately $219.0 million ($231.5 million less price
adjustments of approximately $12.5 million) from Bancomer, (v) the separation of
the Combined Resorts and related operations into separate legal entities, (vi)
the sale by the Company of the Westin Hotels to an indirect wholly-owned
subsidiary of Starwood, (vii) the issuance of 20% of CR US's outstanding common
stock to GLLC, and (viii) the entry by Starwood and the Company into the Asset
Management Agreement by which the Company will provide certain advisory services
to Starwood in return for which the Company will be paid a management fee of up
to 20% of the net cash flow (as defined in the Asset Management Agreement) after
certain adjustments, of the Westin Hotels.
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In connection with the Purchase Transactions, the Company and an affiliate
of Starwood have entered into the Operating Agreements related to the joint
operation and ownership of certain common facilities at the Combined Resorts as
well as certain matters related to the conduct of vacation interval sales and
marketing activities, the rental of vacation interval units by Starwood, the
rental of Westin Hotel rooms by Club Regina from Starwood, the continued use of
hotel facilities and amenities by Members, the management of the Westin Hotels
and other related matters. The Company believes that these Operating Agreements
allow it to provide its Members with high quality amenities and services at
prices lower than if the Company were to arrange for such amenities and services
on a separate basis.
Description of Stock Purchase Agreement. Pursuant to a Second Amended and
Restated Stock Purchase Agreement (the "Stock Purchase Agreement"), dated August
18, 1997 (amending and restating a purchase agreement originally executed on
December 20, 1996), the Company purchased all of the stock of the entities
owning the Combined Resorts for approximately $219.0 million, after giving
effect to approximately $12.5 million in purchase price adjustments. This
agreement contains customary representations and warranties and indemnification
provisions including an indemnity subject to certain limitations, from Bancomer
for breaches of the representations and warranties and all liabilities arising
from operations of the business prior to the closing date. For a description of
certain contingencies arising in connection with the Stock Purchase Agreement,
see "Risk Factors -- Company Risks -- Risk of New Venture and Recent
Acquisition; Lack of Prior Operating History" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Recent
Acquisition."
In connection with the Purchase Transactions the Company engaged in
customary diligence with respect to the Predecessor Business and the Combined
Resorts. Such diligence included an extensive review of various title and other
real estate matters at the Combined Resorts. In connection with such diligence,
the Company decided to purchase title insurance with respect to the Combined
Resorts, a precaution that the Company believes is typically not taken in
Mexico. Accordingly, the Company has purchased title insurance for the Puerto
Vallarta and Los Cabos Regina Resorts.
Prior to the closing of the transactions contemplated by the Stock Purchase
Agreement, it was determined that the recorded title to the Combined Resort at
Cancun was subject to certain irregularities. Prior to the closing, the Company
and Bancomer contacted the Fondo Nacional de Fomento al Turismo ("Fonatur"), the
Mexican governmental public trust which established the tourist center in Cancun
and the public trust from which Bancomer had purchased the site of the Combined
Resort at Cancun. Fonatur informed the Company and Bancomer that such title
irregularity was inadvertent and agreed to execute corresponding correction
deeds. In addition, Bancomer agreed with the Company to indemnify the Company
for the potential liability created by such irregularity. The Company, Fonatur
and Bancomer are currently working to correct such irregularity, and the Company
does not expect the correction to cause a material impact on the Company. An
internationally recognized title insurance company has issued a commitment to
issue a title insurance policy with respect to the Combined Resort at Cancun
upon the filing of such correction deeds. See "Risk Factors -- Company
Risks -- Risk of New Venture and Recent Acquisition; Lack of Prior Operating
History."
Finally, the Company is considering the purchase for approximately
$250,000, of certain land adjacent to the Regina Resort at Los Cabos for the
development of 20 additional vacation ownership units. If the Company purchases
such land it intends to formalize and record title and purchase title insurance
with respect to such land. See "Business -- The Resorts," "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Description of Starwood Agreements. On May 9, 1997, CR US entered into an
agreement (the "Original Agreement") with Starwood Capital pursuant to which
Starwood Capital agreed to purchase the Westin Hotels (which were to be acquired
by CR US from Bancomer under the Asset Purchase Agreement) (subject to the
Company's 20% subordinated interest in the Westin Hotels to which the Company is
entitled under the Asset Management Agreement) and 20% of the capital stock of
CR US for $133.5 million. On May 20, 1997, the Original Agreement was superseded
by two separate agreements between CR US and Starwood Capital and CR US and SLT
Realty Limited Partnership ("Starwood Realty"). Pursuant to one of these
agreements,
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CR US agreed to sell the Westin Hotels to Starwood Realty, instead of Starwood
Capital, for $132.75 million. In connection with the sale of the Westin Hotels
to Starwood Realty, the Company made certain representations and warranties to
Starwood Realty. The Company and Starwood Realty have entered into an agreement
by which Starwood Realty receives the benefit of Bancomer's representations and
warranties to the Company (with respect to the Westin Hotels) under the Stock
Purchase Agreement. Pursuant to the other agreement, CR US agreed to sell 20% of
its capital stock to Starwood Capital and provided that the balance of the
original purchase price of $133.5 million, or $750,000, was paid to CR US by
Starwood Capital. GLLC has assumed Starwood Capital's rights and obligations
under that agreement. See "-- Description of Purchase
Transactions -- Description of Class A Preferred Stock" and "Principal
Stockholders." The closing of the agreements with Starwood Realty and GLLC, as
assignee of Starwood Capital, occurred simultaneously with the closing of the
Stock Purchase Agreement, through a transfer of the stock of the entities
holding the Westin Hotels to an affiliate of Starwood Realty. In addition, CR US
and Starwood Realty agreed on the form of Operating Agreement and entered into
the Asset Management Agreement. See "-- Description of Operating Agreements" and
"-- Description of Asset Management Agreement."
Additionally, the agreement with GLLC provides, among other matters, that
(i) each of Raintree and GLLC has a right of first offer with respect to any
sale of CR US's stock by the other party, (ii) CR US's board of directors will
be comprised of one representative of GLLC, three representatives of Raintree,
John McCarthy and two additional directors selected by Raintree and (iii) GLLC
will have the right to consent to certain affiliated transactions prior to an
initial public offering of CR US's stock. For a description of certain
contingencies arising in connection with the transactions with Starwood, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Recent Acquisition." In addition, the Company has been informed by
Starwood and GLLC that Starwood and GLLC have agreed that an amount equal to
GLLC's deemed share (based on its stock ownership in the Company) of any income
of the Company which is attributable to the Asset Management Agreement will be
paid by GLLC to Starwood, pursuant to an agreement between Starwood and GLLC.
Description of Condominium Regimes. Prior to the closing of the Purchase
Transactions, Bancomer established condominium regimes which run with the land
at each of the Combined Resorts to facilitate the division of the vacation
ownership and hotel businesses upon closing of the Purchase Transactions. The
condominium regime at each Combined Resort divides the property into two
units -- a Westin Hotel unit and a Regina Resort unit. Each unit has an interest
in the common facilities at the Combined Resort. The Regina Resort and Westin
Hotel units each consist primarily of buildings and grounds, pools, and other
associated areas, while the common facilities primarily include roads and beach
areas.
Description of Operating Agreements. As of August 18, 1997, the Company and
an affiliate of Starwood entered into an Operating Agreement for each of the
Combined Resorts establishing the day-to-day operating relationship between the
Westin Hotels and Regina Resorts, including operating standards, plans, budgets,
allocation of services, expansion and construction of additional facilities, and
of allocation labor and other expenses. The Company and Starwood have agreed
that condominium regulations of each condominium regime relating to the Combined
Resorts will be amended to incorporate each Operating Agreement (upon
translation into Spanish and execution) as part of such regulations. To effect
such amendments, the Company and Starwood have agreed to register each Operating
Agreement in the appropriate local Mexican public registry. Upon such
registration, each Operating Agreement will become binding on any future owners
of any Westin Hotel or Regina Resort. The Operating Agreement provides that the
applicable Combined Resort must be operated as a "first class" resort and
establishes a procedure by which a joint operating plan and budget will be
maintained by Starwood and the Company for the applicable Combined Resort.
Additionally, Starwood must provide the same services to each Regina Resort as
it provides to the adjacent Westin Hotel and additional services may be
contracted for, subject to the first class standard and appropriate allocation
of costs between the applicable Westin Hotel and Regina Resort. The form of
Operating Agreement prohibits the applicable Regina Resort from renting, selling
or marketing any units on a transient basis except with respect to: (i) the
provision of complimentary accommodations to prospective members that
participate in marketing presentations arranged by such resort, (ii) the rental
of units to wholesalers specifically targeting potential purchasers, (iii) the
rental of units to persons accompanied by Members, and (iv) the rental of units
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<PAGE> 66
to vacation ownership operators experiencing overflow in their facilities. If
any Regina Resort rents or sells a unit on a transient basis not described
above, then (without limiting Starwood's right to exercise any other legal or
equitable remedies available to it) the Company will be subject to significant
penalties. In addition, Starwood has rented 54 rooms at Los Cabos and 60 rooms
at Puerto Vallarta for a one-year period ending August 18, 1998 for $1.25
million. In addition, Starwood paid the Company an aggregate finder's fee at
closing of $1.95 million and the Company agreed to provide certain services to
Starwood for one year. The parties have agreed to enter into negotiations in
September of 1998 and in September of each subsequent year to provide for
satisfactory rental terms for excess Regina Resort inventory, if any, to the
Westin Hotels. There can be no assurance, however, that the Company and Starwood
will agree on the number of, if any, or the rate for, rooms to be rented to
Starwood.
Description of Asset Management Agreement. On August 18, 1997, Starwood and
the Company entered into an Asset Management Agreement whereby Starwood retained
the Company as its asset manager due to the Company's expertise in the
investment management of hotel properties located within Mexico and specifically
with respect to the properties held by Starwood. Under the Asset Management
Agreement, which has a term of 50 years, the Company is entitled to payments
equal to 20% of the net cash flow (as defined in the Asset Management Agreement)
of the Westin Hotels in excess of $18.0 million per year (the "Base Amount").
After December 31, 2000, the Base Amount under the Asset Management Agreement
will decrease pursuant to a formula. The Company expects to recognize minimal,
if any, revenue from the Asset Management Agreement over the next three years.
Description of Trusts. On August 18, 1997, three separate trust agreements
(the "Trust Agreements") were entered into among the Operating Subsidiaries, a
subsidiary of CR Mexico and Bancomer, as trustee, pursuant to which title to the
Regina Resorts was transferred to Bancomer, acting solely in its capacity as
trustee. Originally, under the Trust Agreements, the Operating Subsidiaries had
the right to use and exploit the vacation ownership condominium units until
August 18, 2027 (the "Initial Term"), and a subsidiary of CR Mexico had the
right to hold direct title to the vacation ownership condominium units after
August 19, 2027. In March 1998, the Trust Agreements were modified to extend the
Initial Term from 30 to 50 years.
Disposition of Remainder Interest. In accordance with the Indenture, CR US
contributed the Remainder Interest to an unaffiliated charitable institution
such that CR US is not required to use the installment method of accounting with
respect to the presentation of its consolidated financial statements under GAAP.
Description of Bancomer Loan. The Company financed the acquisition of the
Regina Resorts primarily with the proceeds of the Bancomer Loan in the
approximate aggregate principal amount of approximately $83.0 million which was
repaid in full on December 5, 1997.
Description of Class A Preferred Stock. At the closing of the Purchase
Transactions CR Mexico issued an aggregate of $3.75 million of non-negotiable
subordinated exchangeable promissory notes to GLLC and CR Management Company. In
October, 1997, GLLC and CR Management exchanged all the subordinated promissory
notes for an aggregate of 37,500 shares of Class A Redeemable Convertible
Preferred Stock (the "Class A Preferred"). Each share of Class A Preferred has a
liquidation preference of $100 and accrues dividends from August 18, 1997, at
the rate of 16.5% per year and 20% per year after August 18, 2002. Cumulated
dividends accrue dividends at the rate of 12% per year. No cash dividends are
required to be paid prior to an initial public offering of the CR US's common
stock or the sale of the Company. Under the Class A Preferred, upon an initial
public offering or stock merger by CR US, CR US may force the redemption of all
cumulated dividends in exchange for either cash or stock of CR US valued at 85%
of the initial public offering price or 100% of the merger consideration value,
as the case may be. Furthermore, in such event, the holders of the Class A
Preferred have the right to convert the liquidation preference of each share of
Class A Preferred into stock of the CR US valued at 85% of the IPO price or 100%
of the merger consideration value, as the case may be.
So long as any shares of the Class A Preferred are outstanding, no dividend
is permitted to be declared or paid or set apart for payment on any other series
of stock rankings on a parity with the Class A Preferred as to dividends, unless
all unpaid dividends on the Class A Preferred are paid. Furthermore, if all
accrued dividends on the Class A Preferred Stock have not been paid, CR US is
not permitted to declare or pay or set apart for
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<PAGE> 67
payment any dividends or make any other distributions on its Common Stock or any
other class of stock or series thereof of CR US ranking, as to distributions in
the event of a liquidation, dissolution or winding up of CR US, voluntary or
involuntary (a "Liquidation"), junior to the Class A Preferred until such
dividends on the Class A Preferred and any redemption obligations due and owing
under the Certificate of Designations governing the Class A Preferred (the
"Certificate of Designation") have been paid. Upon any Liquidation of CR US, the
holders of the Class A Preferred are entitled to receive, out of assets of CR US
which remain after satisfaction in full of all valid claims of creditors of CR
US and which are available for payment to stockholders, and subject to the
rights of the holders of any stock of CR US ranking senior to or on a parity
with the Class A Preferred in respect of distributions upon Liquidation, before
any amount shall be paid to or distributed among the holders of Common Stock or
any other shares ranking junior to the Class A Preferred in respect of
distributions upon Liquidation, liquidating distributions per share of the Class
A Preferred in the amount of $100 per share, plus an amount equal to the accrued
and unpaid dividends thereon.
The Class A Preferred has no voting rights other than those required under
the Nevada General Corporation Law. It requires an 85% of vote of the Class A
Preferred to amend the provisions of the Certificate of Designations. Under the
Certificate of Designations, CR US may authorize additional classes and series
of preferred stock with rights senior to those of the Class A Preferred.
COMPETITION
Although major lodging and hospitality companies such as Marriott, Disney,
Hilton, Hyatt, Four Seasons and Intercontinental, as well as Westin and
Signature, Fairfield and other vacation ownership only companies, have
established or declared an intention to establish vacation ownership operations
in the past decade, the industry remains highly fragmented, with a vast majority
of North America's approximately 4,100 vacation ownership resorts being owned
and operated by smaller, regional companies. Currently none of the large
international hospitality companies offer vacation intervals in Cancun, Puerto
Vallarta or Los Cabos. The largest resorts with which the Company competes in
those markets are Cancun Sunset Club, Hacienda del Mar Resort, and U.V.C. at
Villa del Palmar. See "Risk Factors -- Company Risks -- Competition."
GOVERNMENT REGULATION
General. The Mexican Ministry of Tourism (Secretaria de Turismo) is the
principal regulator of the Company's activities in the tourism services area.
The Company believes that it has obtained from the Mexican Ministry of Tourism,
and registered in the Mexican National Tourism Registry, all material permits
required for the operation of the Regina Resorts. In order to maintain
registration under the Mexican National Tourism Registry, services such as
restaurants and bars must be provided at the Regina Resorts. The Company expects
to cause these services to be rendered by Starwood and Westin pursuant to the
Operating Agreements. See "Risk Factors -- Company Risks -- Risk of New Venture
and Recent Acquisition; Lack of Prior Operating History." The Company also
believes that it is in material compliance with all federal, state, local and
foreign laws and regulations to which it and its Vacation Intervals marketing
and sale activities are or may be subject. However, no assurance can be given
that the cost of qualifying under vacation interval ownership regulations in all
jurisdictions in which the Company desires to conduct sales will not be
significant. Any failure to comply with applicable laws or regulations could
have a material adverse effect on the Company. See "Risk Factors -- Company
Risks -- Regulations of Sales of Vacation Intervals; Other Laws."
Environmental Matters. CR Mexico's operations are subject to Mexican
federal, state and local laws and regulations relating to the protection of the
environment, including those concerning water supply, wastewater, noise, soil
pollution and generation and handling of hazardous waste and materials and
environmental impact. The possibility exists that in the future the company and
its facilities and operations will encounter (i) newer and stricter federal,
state or local environmental laws and regulations, (ii) more rigorous
interpretations of existing environmental laws and regulations, and/or (iii)
stricter enforcement of federal, state and local environmental law regulations.
The Company believes that the Regina Resorts are in compliance in all
material respects with all federal, state and local laws and regulations
relating water, atmospheric pollution, hazardous wastes or substances. The
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<PAGE> 68
Company has not been notified by any environmental authority or any third party,
of any material noncompliance, liability or claim related to those environmental
matters in connection with any of its present properties. See "Risk
Factors -- Company Risks -- Possible Environmental Liabilities."
EMPLOYEES AND INDEPENDENT CONTRACTORS
As of December 31, 1997, the Company employed approximately 107 full-time
employees. The Company believes that its employee relations are good. The
Company sells Vacation Intervals at its resorts through 648 independent sales
agents and contractors. Such independent sales agents and contractors provide
services to the Company under contract and are not employees of the Company. See
"Risk Factors -- Company Risks -- Independent Contractors."
INSURANCE; LEGAL PROCEEDINGS
The Company carries comprehensive liability, fire, hurricane, storm,
earthquake and business interruption insurance with respect to the Company's
resorts, with policy specifications, insured limits and deductibles customarily
carried for similar properties which the Company believes are adequate. There
are, however, certain types of losses that are generally not insured because
they are either uninsurable or not economically insurable. Should an uninsured
loss or a loss in excess of insured limits occur, the Company could lose its
capital invested in a resort, as well as the anticipated future revenues from
such resort and would continue to be obligated on any mortgage indebtedness or
other obligations related to the property. Any such loss could have a material
adverse effect on the Company. See "Risk Factors -- Company Risks -- Natural
Disasters; Uninsured Loss."
The Company is currently subject to litigation with respect to claims that
arose prior to August 18, 1997 respecting employment, contract, construction and
commissions, disputes, among others. In the judgment of management, none of such
lawsuits against the Company is likely to have a material adverse effect on the
Company or its business. Moreover, pursuant to the Stock Purchase Agreement with
Bancomer, the Company is entitled to indemnification for all such claims against
it. In addition, the Company is subject to litigation with respect to a limited
number of claims that arose on or after August 18, 1997. In the judgment of
management, none of such lawsuits against the Company are likely to have a
material adverse effect against the Company. See "-- Description of Purchase
Transactions -- Description of Stock Purchase Agreement."
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<PAGE> 69
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS; OTHER KEY EMPLOYEES
The following table sets forth the names, ages and positions of the
directors, executive officers and other key employees of CR US or its Operating
Subsidiaries and CR Mexico. A summary of the background and experience of each
of these individuals is set forth after the table.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS AGE POSITION
- -------------------------------- --- --------
<S> <C> <C>
Douglas Y. Bech................ 52 Chairman of the Board of Directors of CR US and Manager
and Secretary of CR Mexico
John McCarthy.................. 42 President and Director of CR US and chairman of the Board
of Managers of CR Mexico
Robert L. Brewton.............. 45 Senior Vice President -- Chief Investment Officer
Mario Muro..................... 51 Senior Vice President -- Operations, Sales and Marketing
Gustavo Ripol.................. 34 Senior Vice President -- Club Administration
George D. Stroesenreuther...... 43 Senior Vice President -- Finance and Accounting of CR US
and CR Mexico
Brian R. Tucker................ 35 Vice President -- Planning and Development
Christopher W. Allick.......... 44 Director
Christel DeHaan................ 55 Director
Walker G. Harman............... 50 Director
Merrick Kleeman................ 34 Director
Thomas R. Powers............... 59 Director
</TABLE>
Douglas Y. Bech is a founding principal of Raintree Capital Company, LLC
("Raintree") and the principal promoter in organizing the Company and effecting
the Purchase Transactions. At the closing of the Purchase Transactions, Mr. Bech
became Chairman of the Board of Directors of CR US and a manager and officer of
CR Mexico. From 1994 through October 1997, Mr. Bech was a partner in the Houston
office of the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. From
1993-1994, Mr. Bech was a partner in the Houston office of the law firm of
Gardere & Wynne, L.L.P. Mr. Bech was associated with and a senior partner of
Andrews & Kurth, L.L.P. from 1970 until 1993. Mr. Bech serves as a director of
Wainoco Oil Corporation, a New York Stock Exchange company, Pride Companies,
L.P., a New York Stock Exchange master limited partnership, Jetfax, Inc., a
Nasdaq company, and several private companies. Mr. Bech serves as an advisory
director of The Salvation Army, Houston Metropolitan Area.
John McCarthy has been the President of the Company and a manager and
officer of CR Mexico since August 1997. Mr. McCarthy has been the principal
executive officer of the Regina Resorts since 1992. From 1992 until August 18,
1997, he served first as Vacation Ownership Director and beginning 1993 as
Director General of Bancomer's Tourism Division. During most of this period Mr.
McCarthy was responsible for development and management of the Combined Resorts
as well as the sale of The Westin Regina Resorts for Bancomer. From 1983 to 1992
Mr. McCarthy held several positions in Grupo Los Remedios, a large Construction
and Development Group, where among other projects, he developed The Pacifica
Project in Ixtapa Mexico, where he developed, sold and operated some 6,000
vacation intervals. Mr. McCarthy's previous experience was with the Babcock
International Group and the Tolteca Group where he obtained experience in
Finance, Personnel, Administration and product development. He is the past
President and current Secretary of the Asociacion Mexicana de Desarrolladores
Turisticos (AMDETUR), the Mexican equivalent of ARDA; he is also the past
Secretary and present adviser of the Consejo Nacional Empresarial Turistico,
Mexico's Tourism Board. He serves on the boards of Hoteles Presidente
Intercontinental Mexico (five Hotels) and Complejos Turistico Huatulco (Club Med
Huatulco). Mr. McCarthy acted as an adviser on Tourism to President Zedillo
during his campaign. He is the Treasurer of Brimex, a charitable foundation
funded by the British Government and members of the British community for the
poor, the sick and those who have suffered because of natural disasters.
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<PAGE> 70
Robert L. Brewton was appointed Senior Vice President -- Operations in
April 1998. Prior to that time, Mr. Brewton served as Chief Investment Officer
at Residential Company of America, a privately held multifamily real estate
investment and management company, for more than five years.
Mario Muro is Senior Vice President -- Operations. Prior to the closing of
the Purchase Transactions, Mr. Muro was Project Manager, Regional Director of
Bancomer Tourism Division from 1993 to 1997. He was Director of the Los Remedios
Tourism Division from 1992 to 1993, and Director of the Grand Baja Club B.C.
Project from 1991 to 1992. Mr. Muro was President of the Association of
Commercializers of TimeSharing in Puerto Vallarta, First President of the
Association of Tourist Developers in Ixtapa Zihuatanajo and WILL BE the
President of the AMDETUR until the year 2000. Mr. Muro, who has 25-years
experience in the vacation ownership and tourism industry, has developed various
vacation ownership marketing techniques including theme stores, marketing
through travel agencies, and the Club Regina Referral Program. Mr. Muro
graduated from the Instituto Tecnologico Autonomo de Mexico, with a degree in
accounting in 1970.
Gustavo Ripol rejoined the Company in October 1997 as Senior Vice
President -- Finance and Marketing. From 1995 to 1997, he was RCI's Marketing
and Communications Director for Latin America, where he was also responsible for
developing new business units in the region for the marketing, sale and
implementation of vacation ownership services. In 1993 he joined Bancomer's
Tourism Division as Planning Director, where he served until the end of 1994.
While there he was responsible for all short, medium and long term strategic
planning for both the hotel and vacation ownership business units, as well as
for developing and implementing the Club Regina product and its administrative
and operating infrastructure. He served in Grupo los Remedios as Manager of
Planning & Systems, Director of Finance and Administration and Director of
Planning and Business Development from 1987 to 1992. Mr. Ripol graduated from
the Universidad Anahuac with a degree in Engineering, and received a graduate
degree in Finance at the Instituto Tecnologico Autonomo de Mexico.
George D. Stroesenreuther joined the Company in 1998 as Senior Vice
President Finance. From 1996 through early 1998, Mr. Stroesenreuther served as
the Chief Financial Officer for Bethesda, Maryland based U S Assist, Inc., a
provider of international travel related services. In this position, Mr.
Stroesenreuther had financial oversight responsibility for the US business as
well as numerous subsidiaries located throughout Latin America, including
Mexico. Prior to working at U S Assist Mr. Stroesenreuther was employed by Elsag
Bailey Process Automation, NV in various financial positions from 1992 through
1995. Mr. Stroesenreuther received his Bachelor's degree in accounting from the
University of Wisconsin.
Brian R. Tucker has been Vice President -- Planning and Development of the
Company since August 1997. From 1995 through 1997, Mr. Tucker was an associate
of Raintree. Prior to joining Raintree, Mr. Tucker was employed for five years
at Deloitte & Touche Management Consulting Group where he advised clients in
various industries concerning mergers, acquisitions and bankruptcy. Mr. Tucker
also worked for British Petroleum as a drilling and production engineer for
three years prior to receiving an M.B.A. from the Wharton School of Finance in
1990.
Christopher W. Allick has been a Director of the Company since January
1998. He has been a Director and Executive Vice President of Jefferies &
Company, Inc., a registered broker-dealer, since May 1993.
Christel DeHaan has been a director of the Company since January, 1998. She
currently serves as CEO of CD Enterprises, Ltd. and the Christel DeHaan Family
Foundation, Inc. Ms. DeHaan co-founded Resort Condominiums International, Inc.,
("RCI") the world's largest timeshare exchange company, in 1974, and became its
Chairman, CEO and sole shareholder in 1989. In November, 1996 she sold RCI to
Cendant Corporation (formerly known as HFS, Incorporated), and served on its
Board of Directors until January, 1998. She is a founding director of the
International Timeshare Foundation and was elected twice to the American Resort
Development Association Board of Directors. She was appointed by President
Clinton in 1995 to the White House Conference Task Force on Travel and Tourism,
and was named to the British Tourism Hall of Fame in 1997. Ms. DeHaan is
Chairman of the Board of Trustees of the University of Indianapolis, president
of the American Pianists Association and serves on the boards of the Indiana
Symphony Society and Dance Kaleidoscope.
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<PAGE> 71
Walker G. Harman has been a director of the Company since 1997. Mr. Harman
has been the President and Chief Executive Officer of Metro Hotels, Inc.
("Metro") since 1978, and has been its sole owner since 1985. Metro owns,
develops and operates hotels and resorts including franchises such as Hilton,
Radisson, Omni, Holiday Inn and Embassy Suites. Mr. Harman also owns and
operates Sonny Bryan's Smokehouse, which has 11 locations in the Dallas, Texas
area. Mr. Harman currently serves as a member of board of directors of the
Baylor Health Care System, the Board of Regents of Baylor University, and the
board of directors of the Interfaith Housing Coalition. Mr. Harman is a member
of the World Presidents Organization and the American Hotel Motel Management
Association and was president of the Baylor Development Council from 1993 to
1994.
Merrick R. Kleeman has been a managing director of Starwood Capital Group
since 1992, responsible for acquisitions. He serves as a director of ITT
Financial Educational Services, Inc., a New York Stock Exchange Company, and
Starwood Financial Trust, an American Stock Exchange Company.
Thomas R. Powers has been a director of the Company since 1997. Mr. Powers
is a founding principal of Raintree where he has been engaged since 1994. He
served as Chairman, President and CEO of Transamerica Fund Management Company
and its predecessor companies ("TFM") from 1976 to 1993. TFM was the investment
advisor and underwriter for a complex of 21 mutual funds. In 1995, he completed
a three year term as a member of the Board of Governors of the National
Association of Securities Dealers where he also served on the Executive
Committee as well as Chairman of the Audit Committee and the Investment
Companies Committee. For almost 20 years Mr. Powers served on the Board of
Governors of the Investment Company Institute, the national association of
mutual funds. During that time he served on the Executive Committee and was
elected Chairman in 1989 to 1990. From 1988 to 1997, Mr. Powers was a member and
past Chairman of the Board of Regents of Baylor University. Mr. Powers is also a
member of the Baylor University Foundation, a Trustee and member of the Finance
Committee for the Memorial Healthcare System of Houston, Texas and a member and
past President of the Houston Chapter of the Financial Executives Institute as
well as a member of the Texas Society of C.P.A.'s and the American Institute of
C.P.A.'s.
GLLC and the Initial Purchaser each exercised the right to designate one
person for appointment to the Board of Directors including Merrick Kleeman and
Christopher Allick, respectively. Raintree exercised its right to select two
independent directors in 1998 by appointing Christel DeHaan and Christopher
Allick. See "Certain Transactions" and "Business -- Description of Purchase
Transactions -- Starwood Agreements."
Christopher Allick was appointed to CR US's Board of Directors pursuant to
an agreement by and among Jefferies, CR US, and Messrs. Bech, Powers and
McCarthy.
CR US's Board of Directors currently consists of seven members and is
divided into three classes, one class of which is elected each year to hold
office for a three-year term and until successors are elected and qualified. The
terms of the initial Class A, Class B and Class C directors of the Company will
expire at the 1998, 1999 and 2000 annual meetings, respectively. Thomas R.
Powers and Christel DeHaan serve in Class A, Walker Harman and Merrick Kleeman
in Class B and Douglas Y. Bech, John McCarthy and Christopher Allick in Class C.
Successors to the directors whose terms have expired are required to be elected
by stockholder vote while vacancies in unexpired terms and any additional
positions created by board action are filled by action of the existing Board of
Directors. The executive officers named above were elected to serve in such
capacities until the next annual meeting of the Board of Directors, or until
their respective successors have been duly elected and have been qualified, or
until their earlier death, resignation, disqualification or removal from office.
No family relationships exist among the executive officers or directors of CR
US.
DIRECTOR COMPENSATION
Directors will not receive compensation for serving as directors prior to
the earlier of January 1, 1999 or the CR US's initial public offering. After
that date directors' fees customary and usual for comparable companies may be
paid. Directors will be reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board of Directors or committees thereof incurred in
their capacity as directors. See "-- 1997 Non-Employee Directors' Stock Plan."
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<PAGE> 72
COMMITTEES OF THE BOARD OF DIRECTORS
It is intended that CR US will have an Executive Committee, an Audit
Committee and a Compensation Committee. Currently only the Audit Committee has
been appointed.
The Audit Committee reviews and reports to the Board of Directors the scope
and results of audits by the Company's outside auditor. The committee also
recommends the firm of certified public accountants to serve as the Company's
independent public accountants, subject to nomination by the Board of Directors
and approval of the stockholders, authorize all audit and other professional
services rendered by the auditor and periodically review the independence of the
auditor. Membership of the Audit Committee is restricted to those directors who
are not active or retired officers or employees of the Company. Messrs. Harman
and Powers are members of the Audit Committee.
EXECUTIVE COMPENSATION
CR US was incorporated in December 1996, and conducted limited operations
until August 18, 1997. Accordingly, CR US did not pay any of its executive
officers compensation until August 1997.
The following table sets forth certain compensation information for CR US's
highly compensated executive officers (the "Named Executive Officers").
Compensation information is shown for the period from August 19, 1997 to
December 31, 1997.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION SECURITIES
--------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME/PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
----------------------- ---- -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas Y Bech............. 1997 $ 90,000(1) -- -- -- --
Chairman
John McCarthy.............. 1997 87,179(2) -- 20,000
President
Mario Muro................. 1997 39,649(3) -- 6,000 --
Senior Vice President --
Operations and Sales
Gustavo Ripol.............. 1997 23,687(3) 18,000 6,000 --
Senior Vice President --
Finance and Marketing
Brian Tucker............... 1997 45,000(4) 7,500 -- --
Vice President --
Planning and Development
</TABLE>
- ---------------
(1) Mr. Bech's compensation for 1997 was paid at an annual rate of $240,000.
(2) Mr. McCarthy's compensation for 1997 was paid at an annual rate of
$250,000. See "-- Employment Agreements."
(3) Messrs. Muro's and Ripol's base salary for 1997 was paid at an annual rate
of $115,000.
(4) Mr. Tucker's base salary for 1997 was paid at an annual rate of $120,000.
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<PAGE> 73
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table provides certain information regarding the number of
stock options to purchase shares of the Company's Common Stock granted pursuant
to the Plan to the Named Executive Officers during the year ended December 31,
1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENTAGE OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED IN PER SHARE OPTION TERM
OPTIONS FISCAL YEAR EXERCISE OR EXPIRATION ----------------------
NAME GRANTED(1) 1997 BASE PRICE DATE 5% 10%
---- ---------- ---------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
John McCarthy(2)............ 20,000 100% $2.00 8/15/2007 $25,156 $63,750
Mario Muro.................. 6,000 100% $5.00 8/18/2007 18,867 47,812
Gustavo Ripol............... 6,000 100% $5.00 8/18/2007 18,867 47,812
</TABLE>
- ---------------
(1) Except as otherwise noted, these options were issued pursuant to CR US's
1997 Long Term Incentive Plan. See "-- 1997 Long Term Incentive Plan."
(2) Issued pursuant to an option agreement dated August 15, 1997 between CR US
and Mr. McCarthy, CR US issued to Mr. McCarthy 100,000 stock options, 20,000
of which have vested and the remainder shall vest at the rate of 20,000 per
year over four years at an option price of $2 per share.
AGGREGATED OPTION EXERCISED IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END* AT FISCAL YEAR-END*
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John McCarthy........ -- -- 20,000 80,000 $100,000 $400,000
Mario Muro........... -- -- 6,000 24,000 $ 12,000 $ 28,000
Gustavo Ripol........ -- -- 6,000 24,000 $ 12,000 $ 28,000
</TABLE>
- ---------------
* Computed based upon a fair market value of $7.00 per share on December 31,
1997 as determined by the Company
1997 LONG TERM INCENTIVE PLAN
No stock options were granted to, or exercised by or held by an executive
officer in 1996. In August 1997, the Board of Directors of CR US approved CR
US's 1997 Long-Term Incentive Plan (the "Plan"). The purpose of the Plan is to
provide directors, officers, key employees, consultants and other service
providers with additional incentives by increasing their ownership interests in
CR US. Individual awards under the Plan may take the form of one or more of: (i)
either incentive stock options or non-qualified stock options ("NQSOs"), (ii)
stock appreciation rights, (iii) restricted or deferred stock, (iv) dividend
equivalents and (v) other awards not otherwise provided for, the value of which
is based in whole or in part upon the value of the common stock.
The Compensation Committee, or such other committee as the Board of
Directors designates, will administer the Plan and select the individuals who
will receive awards and establish the terms and conditions of those awards. The
maximum number of shares of Common Stock that may be subject to outstanding
awards, determined immediately after the grant of any award, may not exceed the
greater of 800,000 shares or 8% of the aggregate number of shares of Common
Stock outstanding at the time of such grant. Shares of Common Stock which are
attributable to awards which have expired, terminated or been canceled or
forfeited are available for issuance or use in connection with future awards.
The Plan will remain in effect until terminated by the Board of Directors.
The Plan may be amended by the Board of Directors without the consent of the
stockholders of CR US, except that any amendment, although effective when made,
will be subject to stockholder approval if required by any federal or state law
or
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<PAGE> 74
regulation or by the rules of any stock exchange or automated quotation system
on which the Common Stock may then be listed or quoted; provided, however, that,
without the consent of any affected participant in the Plan, no such action may
materially impair the rights of such participant under any award granted to him.
There are currently options to purchase 163,000 shares of the CR US's
Common Stock at a purchase price of $5.00 per share and 30,000 shares of CR US's
Common Stock at a purchase price of $7.00 per share outstanding under the Plan.
EMPLOYMENT AGREEMENTS
CR US has entered into an employment agreement with John McCarthy pursuant
to which he serves as the President of CR US. The employment agreement provides
for a three-year employment term commencing August 18, 1997, at the end of which
it extends for successive one-year terms. The employment agreement provides that
as compensation for all services rendered by Mr. McCarthy thereunder, he will
receive an annual salary of $250,000 plus a bonus of up to 50% of his base pay.
In addition to any other payments to be made to Mr. McCarthy under his
employment agreement, he will be entitled to his salary for one year, earned
bonuses, vested stock options and any other sums due him, if his employment is
terminated thereunder for any reason other than "cause" (as defined in the
employment agreement), resignation, death or disability. Mr. McCarthy is subject
to a one-year non-competition agreement with CR US.
Additionally, CR US has entered into an employment agreement with George D.
Stroesenreuther pursuant to which he serves as the Senior Vice
President -- Finance of CR US. The employment agreement provides for a
three-year employment term commencing February 23, 1998, at the end of which it
extends for successive one-year terms. The employment agreement provides that as
compensation for all services rendered by Mr. George Stroesenreuther, he will
receive an annual salary of $115,000 plus a bonus of up to 50% of his base pay.
In addition to any other payments to be made to Mr. Stroesenreuther under his
employment agreement, he will be entitled to his salary for up to one year,
earned bonuses, vested stock options and any other sums due him, if his
employment is terminated thereunder for any reason other than "cause" (as
defined in the employment agreement), resignation, death or disability. CR US
issued to Mr. Stroesenreuther options to purchase 30,000 shares of Common Stock,
1,500 of which have vested and the remainder shall vest at the rate of 6,000 per
year for four years at an option price of $7 per share. Mr. Stroesenreuther is
subject to a two-year non-competition agreement with CR US.
1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN
CR US's 1997 Non-Employee Directors' Stock Plan (the "Directors' Plan"),
which was adopted by the Board of Directors, becomes effective upon an initial
public offering of CR US's stock. The Director Plan has reserved 200,000 shares
of common stock for issuance. An option to purchase 5,000 shares of Common
Stock, subject to certain adjustments, will be automatically granted to each
non-employee director at the closing of the initial public offering, and
thereafter at the effective date of a non-employee director's initial election
to the Board of Directors. In addition, an option to purchase 5,000 shares of
Common Stock, subject to certain adjustments, will be automatically granted to
each non-employee director at the conclusion of each annual meeting of
stockholders, unless such annual meeting is held within three months of such
person's initial election as a director. All options are immediately vested,
will have an exercise price per share equal to the fair market value of the
Common Stock on the date of grant, and expire on the earlier of ten years from
the date of grant or one year after termination of service as a director.
EXCULPATORY CHARTER PROVISION; LIABILITY AND INDEMNIFICATION OF OFFICERS AND
DIRECTORS
CR US has included in its Amended and Restated Articles of Incorporation
provisions to eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty; provided, however, that
such provision does not eliminate liability for (i) acts or omissions not in
good faith or which involve intentional misconduct, fraud, or a knowing
violation of law, or (ii) violations under Section 78.300 of the NGCL concerning
unlawful distributions to shareholders. However, these provisions will
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<PAGE> 75
not limit the liability of CR US's directors under the federal securities laws.
CR US believes that these provisions are necessary to attract and retain
qualified persons as directors and officers.
CERTAIN TRANSACTIONS
TRANSACTIONS WITH CRMC AND AFFILIATES
During 1997, partners (or affiliates) of CR Management Company ("CRMC"), a
partnership controlled by Raintree, contributed or advanced more than $4.0
million to the Company. On August 18, 1997, the Company issued to CRMC a demand
promissory note for $1.15 million bearing an annual interest rate of 8% which
was repaid with the proceeds of this Offering. See "Use of Proceeds" and "Risk
Factors -- Company Risks -- Benefits to Existing Stockholders and other Persons;
Repayment of Indebtedness to Affiliates." In addition, the Company has issued
30,000 shares of its Class A Preferred to CRMC in consideration of $3.0 million
of the original $4.0 million in advances by CRMC. See "Business -- Description
of Purchase Transactions -- Description of Class A Preferred Stock."
TRANSACTIONS WITH STARWOOD AND ITS AFFILIATES
The Company has entered into a series of transactions with Starwood and its
affiliates in connection with the Purchase Transactions including the issuance
of 7,500 shares of Class A Preferred. These transactions are further described
under "Business -- Description of Purchase Transactions."
EMPLOYMENT AGREEMENTS
Mr. McCarthy and Mr. Stroesenreuther have entered into employment
agreements with the Company. See "Management -- Executive Compensation."
INDEMNITY AGREEMENTS
The Company has entered into indemnification agreements with each of its
directors and certain of its executive officers. The indemnification agreements
provide that the Company shall indemnify these individuals against certain
liabilities (including settlements) and expenses actually and reasonably
incurred by them in connection with any threatened or pending legal action,
proceeding or investigation (other than actions brought by or in the right of
the Company) to which any of them is, or is threatened to be, made a party by
reason of their status as a director, officer or agent of the Company; provided
that, with respect to a civil, administrative or investigative (other than
criminal) action, such individual acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Company, and with respect to any criminal proceedings, he or she had no
reasonable cause to believe his or her conduct was unlawful. With respect to any
action brought by or in the right of the Company, such individuals may be
indemnified, to the extent not prohibited by applicable laws or as determined by
a court of competent jurisdiction, against expenses actually and reasonably
incurred by them in connection with such action if they acted in good faith and
in a manner they reasonably believed to be in, or not opposed to, the best
interests of the Company. The agreements also require indemnification of such
individuals for all reasonable expenses incurred in connection with the
successful defense of any action or claim and provide for partial
indemnification in the case of any partially successful defense.
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<PAGE> 76
PRINCIPAL STOCKHOLDERS
Except as disclosed below, the following table sets forth certain
information regarding the beneficial ownership of CR US's Common Stock as of
April 20, 1998 by (i) each person known by CR US to beneficially own more than
5% of such shares, (ii) the directors of CR US, (iii) the Named Executive
Officers and (iv) all directors and executive officers as a group. Unless
otherwise indicated, each person's address is 10,000 Memorial Drive, Suite 480,
Houston, Texas 77024.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS
---- ------------ --------
<S> <C> <C>
Douglas Y. Bech(2).......................................... 1,554,912 14.5
John McCarthy............................................... 215,367 2.0
Robert L. Brewton........................................... 25,000 *
Mario Muro.................................................. 18,500 *
Gustavo Ripol............................................... 6,000 *
George Stroesenreuther...................................... 3,000 *
Brian R. Tucker............................................. 94,000 *
Christopher Allick(3)....................................... 972,729 9.1
Christel DeHaan............................................. 583,333 5.5
1990 Market Tower
10 West Market Street
Indianapolis, IN 46204
Walker G. Harman(4)......................................... 1,900,000 17.8
Merrick R. Kleeman(5)....................................... 2,000,000 18.7
Thomas R. Powers(2)......................................... 890,213 8.3
William T. Criswell(6)...................................... 1,077,440 10.1
Bert Wollen................................................. 637,062 5.9
All directors and officers as a group (10 people)........... 7,981,420 74.6
</TABLE>
- ---------------
* Less than 1%
(1) To the Company's knowledge, such person has sole voting and investment
power with respect to all Common Stock shown as beneficially owned by such
person, unless otherwise indicated. Common Stock that is not outstanding
but that may be acquired by a person upon exercise of options or warrants
within 60 days of the date of this Prospectus are deemed outstanding for
the purpose of computing the percentage of outstanding shares beneficially
owned by such person. However, such shares are not deemed to be outstanding
for the purpose of computing the percentage of outstanding shares
beneficially owned by any other person.
(2) Includes 30,000 of a total of 60,000 shares of Common Stock to be acquired
in August 1998 from Metro Mexico Investment Partners ("MMIP").
(3) Includes currently exercisable warrants to purchase 571,429 shares of
Common Stock for $7 per share and 401,300 shares of Common Stock that
Jefferies & Company, Inc. ("Jefferies") holds. Mr. Allick is an Executive
Vice President of Jefferies and, as such, can be deemed to have beneficial
ownership of the shares Jefferies holds. Mr. Allick expressly disclaims
beneficial ownership of such shares.
(4) Includes 1,900,000 shares of common stock MMIP holds. Also includes 60,000
shares of Common Stock to be acquired by Messrs. Bech and Powers in August
1998. Mr. Harmon is a general partner of MMHC and as such, can be deemed to
have beneficial ownership of the shares MMHC holds.
(5) Includes 2,000,000 shares of Common Stock Greenmex, LLC ("Greenmex") holds.
Mr. Kleeman is an executive officer of Greenmex and, as such, can be deemed
to have beneficial ownership of the shares Greenmex holds.
(6) Includes 673,400 shares of Common Stock that Criswell Associates, LLC
("CALLC") holds, subject to the claims of two other persons. Mr. Criswell
has the power to vote and direct the disposition of Common Stock CALLC
holds and, as such, is shown as the beneficial owner of those shares.
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<PAGE> 77
THE EXCHANGE OFFER
GENERAL
The Issuers have filed this Prospectus to consummate the Exchange Offer as
required by the Registration Rights Agreement and the Indenture and as described
in the Offering Circular for the fulfillment of the Offering. In connection with
the sale of the Outstanding Notes, the purchasers thereof became entitled to the
benefits of certain registration rights under the Registration Rights Agreement.
The Registered Notes are being offered hereunder to satisfy the obligations of
the Company under the Registration Rights Agreement. See "Description of
Notes -- Registration Rights; Additional Interest."
For each $1,000 principal amount of Outstanding Notes surrendered to the
Company pursuant to the Exchange Offer, the holder of such Outstanding Notes
will receive $1,000 principal amount of Registered Notes. Upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal, the Company will accept all Outstanding Notes properly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date. Holders
may tender some or all of their Outstanding Notes pursuant to the Exchange Offer
in integral multiples of $1,000 principal amount.
Under existing interpretations of the staff of the SEC, including Exxon
Capital Holdings Corporation, SEC No-Action Letter (available April 13, 1989)
("Exxon"), the Morgan Stanley & Co. Incorporated, SEC No-Action Letter
(Available June 5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics,
Inc. ("Mary Kay"), SEC No-Action Letter (available June 5, 1991), the Company
believes that the Registered Notes would in general be freely transferable after
the Exchange Offer without further registration under the Securities Act by the
respective holders thereof (other than a "Restricted Holder," being (i) a
broker-dealer who purchased Outstanding Notes exchanged for such Registered
Notes directly from the Company to resell pursuant o Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
affiliate of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Registered Notes are
acquired in the ordinary course of such holder's business and such holder is not
participating in, and has no arrangement with any person to participate in, the
distribution (within the meaning of the Securities Act) of such Registered
Notes. Eligible holders wishing to accept the Exchange Offer must represent to
the Company that such conditions have been met. Any holder of Outstanding Notes
who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Registered Notes could not rely on the interpretation by the
staff of the SEC enunciated in the Morgan Stanley Letter and similar no-action
letters, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each holder of Outstanding Notes who wishes to exchange Outstanding Notes
for Registered Notes in the Exchange Offer will be required to make certain
representations, including that (i) it is not an affiliate of the Issuers, (ii)
any Registered Notes to be received by it are being acquired in the ordinary
course of its business and (iii) it is not engaged in, and does not intend to
engage in, and has no understanding with any person to participate in, a
distribution of the Registered Notes. In addition, each Holder using the
Exchange Offer to participate in a distribution of the Series B Notes hereby
acknowledges and agrees that, if the resales are of Series B Notes obtained by
such Holder in exchange for Series A Notes acquired directly from the Issuers or
an Affiliate thereof, it (i) could not, under Commission policy as in effect on
December 5, 1997, rely on the position of the Commission enunciated in the
Morgan Stanley Letter as interpreted in the Commission's letter to Shearman &
Sterling (available July 2, 1993) ("Shearman & Sterling"), and similar no-action
letters (including, if applicable, any no-action letter obtained by the
Issuers), and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by an
effective
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<PAGE> 78
registration statement containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K. The staff of the
SEC has taken the position in no-action letters issued to third parties
including Shearman & Sterling, that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to the Registered Notes
(other than a resale of an unsold allotment from the original sale of
Outstanding Notes) with this Prospectus, as it may be amended or supplemented
from time to time. Under the Registration Rights Agreements, the Issuers are
required to effect such exchange and to permit the resale of Registered Notes by
Broker-Dealers that tendered in the Exchange Offer Outstanding Notes and that
such Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Outstanding Notes acquired
directly from the Issuers or any of their Affiliates) being sold in accordance
with the intended method or methods of distribution thereof. See "Plan of
Distribution."
The Exchange Offer shall be deemed to have been consummated upon the
earlier to occur of (i) the Company having exchanged Registered Notes for all
outstanding Outstanding Notes (other than Outstanding Notes held by a Restricted
Holder) pursuant to the Exchange Offer and (ii) the Company having exchanged,
pursuant to the Exchange Offer, Registered Notes for all Outstanding Notes that
have been tendered and not withdrawn on the date that is 30 days following the
commencement of the Exchange Offer. In such event, holders of Outstanding Notes
seeking liquidity in their investment would have to rely on exemptions to
registration requirements under the securities laws, including the Securities
Act.
As of the date of this Prospectus, $100 million principal amount of
Outstanding Notes are issued and outstanding. In connection with the issuance of
the Outstanding Notes, the Company arranged for the Outstanding Notes to be
eligible for trading in the Private Offering, Resale and Trading through
Automated Linkages (PORTAL) Market, the National Association of Securities
Dealers' screen based, automated market trading of securities eligible for
resale under Rule 144A.
The Issuers shall be deemed to have accepted for exchange validly tendered
Outstanding Notes when, as and if the Company has given oral or written notice
thereof to the Exchange Agent. See "-- Exchange Agent." The Exchange Agent will
act as agent for the tendering holders of Outstanding Notes for the purpose of
receiving Registered Notes from the Company and delivering Registered Notes to
such holders. If any tendered Outstanding Notes are not accepted for exchange
because of an invalid tender or the occurrence of certain other events set forth
herein, certificates for any such unaccepted Outstanding Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date. Holders of Outstanding Notes who tender in the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Outstanding Notes pursuant to the Exchange Offer. The
Company will pay all charges and expenses, other than certain applicable taxes,
in connection with the Exchange Offer. See "-- Fees and Expenses."
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of the date of this Prospectus.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means , 1998 unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" means the latest date to which the Exchange Offer is extended.
To extend the Expiration Date, the Company will notify the Exchange Agent of any
extension by oral or written notice and will mail to the record holders of
Outstanding Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Such announcement may state that the Company is extending the Exchange
Offer for a specified period of time. The Company reserves the right (i) to
delay acceptance of any Outstanding Notes, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Outstanding Notes not
previously accepted, if any of the conditions set forth herein under
"-- Termination" have occurred and not have been waived by the Company (if
permitted to be so waived), by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, and (ii) to amend the terms of
the Exchange Offer in any manner it deems by it to be advantageous to the
holders of the Outstanding Notes. Any such delay in
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<PAGE> 79
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment in a manner reasonably calculated
to inform the holders of the Outstanding Notes of such amendment. Without
limiting the manner in which the Company may choose to make public announcements
of any delay in acceptance, extension, termination or amendment of the Exchange
Offer, the Company will have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE REGISTERED NOTES
The Registered Notes will bear interest payable semi-annually on June 1 and
December 1 of each year, commencing June 1, 1998. Holders of Registered Notes of
record on May 15, 1998, will receive interest on June 1, 1998 from the date of
issuance of the Registered Notes, plus an amount equal to the accrued interest
on the Outstanding Notes from the date of issuance of the Outstanding Notes,
December 5, 1997, to the date of exchange thereof. Consequently, assuming the
Exchange Offer is consummated prior to the record date in respect of the June 1,
1998 interest payment for the Outstanding Notes, holders who exchange their
Outstanding Notes for Registered Notes will receive the same interest payment on
June 1, 1998 that they would have received had they not accepted the Exchange
Offer. Interest on the Outstanding Notes accepted for exchange will cease to
accrue upon issuance of the Registered Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile or an Agent's message,
together with the Outstanding Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
The tender by a holder of Outstanding Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal. Delivery of all
documents must be made to the Exchange Agent at its address set forth herein.
Holders may also request that their respective brokers, dealers, commercial
banks, trust companies or nominees effect such tender for such holders. The
method of delivery of Outstanding Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Outstanding Notes
should be sent to the Company. Only a holder of Outstanding Notes may tender
such Outstanding Notes in the Exchange Offer. The term "holder" with respect to
the Exchange Offer means any person in whose name Outstanding Notes are
registered on the books of the Issuers or any other person who has obtained a
properly completed stock power from the registered holder.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Outstanding Notes which are the subject of such
Book-Entry Confirmation that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal, and that the Company may
enforce such agreement against such participant.
Any beneficial holder whose Outstanding Notes are registered in the name of
such holder's broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on behalf of the registered holder. If
such beneficial holder wishes to tender directly, such beneficial holder must,
prior to completing and executing the Letter of Transmittal and delivering his
Outstanding Notes, either make appropriate arrangements to register ownership of
the Outstanding Notes in such holder's name or obtain a properly completed bond
power from the registered holder. The transfer of record ownership may take
considerable time. If the Letter of Transmittal is signed by the record
holder(s) of the Outstanding Notes tendered thereby, the signature must
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<PAGE> 80
correspond with the name(s) written on the face of the Outstanding Notes without
alteration, enlargement or any change whatsoever. If the Letter of Transmittal
is signed by a participant in the Depository, the signature must correspond with
the name as it appears on the security position listing as the holder of the
Outstanding Notes. Signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution")
unless the Outstanding Notes tendered pursuant thereto are tendered (i) by a
registered holder (or by a participant in the Depository whose name appears on a
security position listing as the owner) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the Letter
of Transmittal and the Registered Notes are being issued directly to such
registered holder (or deposited into the participant's account at the
Depository) or (ii) for the account of an Eligible Institution. If the Letter of
Transmittal is signed by a person other than the registered holder of any
Outstanding Notes listed therein, such Outstanding Notes must be endorsed or
accompanied by appropriate bond powers which authorize such person to tender the
Outstanding Notes on behalf of the registered holder, in either case signed as
the name of the registered holder or holders appears on the Outstanding Notes.
If the Letter of Transmittal or any Outstanding Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuers,
evidence satisfactory to the Issuers of their authority to so act must be
submitted with the Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Outstanding
Notes (or a timely confirmation received of a book-entry transfer of Outstanding
Notes into the Exchange Agent's account at the Depository with an Agent's
Message) or a Notice of Guaranteed Delivery from an Eligible Institution is
received by the Exchange Agent. Issuances of Registered Notes in exchange for
Outstanding Notes tendered pursuant to a Notice of Guaranteed Delivery by an
Eligible Institution will be made only against delivery of the Letter of
Transmittal (and any other required documents) and the tendered Outstanding
Notes (or a timely confirmation received of a book-entry transfer of Outstanding
Notes into the Exchange Agent's account at the Depository) with the Exchange
Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Outstanding Notes will be
determined by the Issuers in their sole discretion, which determination will be
final and binding. The Issuers reserve the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Issuers'
acceptance of which would, in the opinion of the Issuers or their counsel, be
unlawful. The Issuers also reserve the absolute right to waive any conditions of
the Exchange Offer or defects or irregularities in tender as to particular
Outstanding Notes. The Issuers' interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Outstanding Notes must be cured
within such time as the Issuers shall determine. Neither the Issuers, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Outstanding Notes nor
shall any of them incur any liability for failure to give such notification.
Tenders of Outstanding Notes will not be deemed to have been made until such
irregularities have been cured or waived. Any Outstanding Notes the Exchange
Agent receives that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Outstanding Notes unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date. In addition, the Issuers reserve the right in its
sole discretion to (i) purchase or make offers for any Outstanding Notes that
remain outstanding subsequent to the Expiration Date, or, as set forth
under"-- Termination," to terminate the Exchange Offer and (ii) to the extent
permitted by applicable law, purchase Outstanding Notes in the open market, in
privately negotiated transactions or otherwise. The terms of any such purchases
or offers may differ from the terms of the Exchange Offer.
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BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the
Outstanding Notes at the Depository within two business days after the date of
this Prospectus, and any financial institution which is a participant in the
Depository may make book-entry delivery of the Outstanding Notes by causing the
Depositary to transfer such Outstanding Notes into the Exchange Agent's account
in accordance with the Depositary's procedure for such transfer. Although
delivery of Outstanding Notes may be effected through book-entry transfer into
the Exchange Agent's account at the Depository, and Agent's Message must be
transmitted to an received by the Exchange Agent on or prior to the Expiration
Date at one of its addresses set forth below under "B Exchange Agent", or the
guaranteed delivery procedure described below must be complied with. DELIVERY OF
DOCUMENTS TO THE DEPOSITORY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
All references in this Prospectus to deposit or delivery of Outstanding Notes
shall be deemed to include the Depositary's book-entry delivery method.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and whose Outstanding
Notes are not immediately available or who cannot deliver their Outstanding
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, or who cannot complete the procedure for
book-entry transfer on a timely basis and deliver an Agent's Message, may effect
a tender if: (i) the tender is made by or through an Eligible Institution; (ii)
prior to the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder of the Outstanding Notes, the registration number or
numbers of such Outstanding Notes (if applicable), and the total principal
amount of Outstanding Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five business days after the Expiration
Date, the Letter of Transmittal, together with the Outstanding Notes in proper
form for transfer (or a confirmation of a book-entry transfer into the Exchange
Agent's account at the Depository) and any other documents required by the
Letter of Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal, together with the certificate(s) representing all tendered
Outstanding Notes in proper form for transfer (or a confirmation of such a
book-entry transfer) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days after
the Expiration Date.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.
Each Holder who participates in the Exchange Offer will be required to
represent that any Registered Notes received by it will be acquired in the
ordinary course of its business, that such Holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Registered Notes, and that such holder
is not a Restricted Holder.
Outstanding Notes tendered in exchange for Registered Notes (or a timely
confirmation of a book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at the Depository) must be received by the Exchange
Agent, with the Letter of Transmittal and any other required documents, by the
Expiration Date or within the time periods set forth above pursuant to a Notice
of Guaranteed Delivery from an Eligible Institution. Each holder tendering the
Outstanding Notes for exchange must sell, assign and transfer the Outstanding
Notes to the Exchange Agent, as agent of the Company, and will irrevocably
constitute and appoint the Exchange Agent as the holder's agent and
attorney-in-fact to cause the Outstanding Notes to be transferred and exchanged.
The holder warrants that it has full power and authority to tender, exchange,
sell, assign and transfer the Outstanding Notes and to acquire the Registered
Notes issuable upon the exchange of such tendered Outstanding Notes, that the
Exchange Agent, as agent of the Company, will acquire good and unencumbered
title to the tendered Outstanding Notes, free and clear of all liens,
restrictions, charges and
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encumbrances, and that the Outstanding Notes tendered for exchange are not
subject to any adverse claims when accepted by the Exchange Agent, as agent of
the Issuers. The holder also warrants and agrees that it will, upon request,
execute and deliver any additional documents deemed by the Issuers or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment and transfer of the Outstanding Notes. All authority conferred or
agreed to be conferred in the Letter of Transmittal by the holder will survive
the death, incapacity or dissolution of the holder and any obligation of the
holder shall be binding upon the heirs, personal representatives, successors and
assigns of such holder.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date, unless previously accepted for exchange. To
withdraw a tender of Outstanding Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the business day prior to the Expiration Date and prior to acceptance for
exchange thereof by the Issuers. Any such notice of withdrawal must (i) specify
the name of the person having deposited the Outstanding Notes to be withdrawn
(the "Depositor"), (ii) identify the Outstanding Notes to be withdrawn
(including, if applicable, the registration number or numbers and total
principal amount of such Outstanding Notes), (iii) be signed by the Depositor in
the same manner as the original signature on the Letter of Transmittal by which
such Outstanding Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to permit the
Trustee with respect to the Outstanding Notes to register the transfer of such
Outstanding Notes into the name of the Depositor withdrawing the tender, (iv)
specify the name in which any such Outstanding Notes are to be registered, if
different from that of the Depositor and (v) if applicable because the
Outstanding Notes have been tendered pursuant to the book-entry procedures,
specify the name and number of the participant's account at the Depository to be
credited, if different than that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Issuers, whose determination shall be final
and binding on all parties. Any Outstanding Notes so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer and no
Registered Notes will be issued with respect thereto unless the Outstanding
Notes so withdrawn are validly retendered. Any Outstanding Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Outstanding Notes may be retendered by following one of the procedures described
above under "-- Procedures for Tendering" at any time prior to the Expiration
Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange any Outstanding Notes not theretofore
accepted for exchange, and may terminate the Exchange Offer if it determines
that the Exchange Offer violates any applicable law or interpretation of the
staff of the SEC.
If the Issuers determine that they may terminate the Exchange Offer, as set
forth above, the Issuers may (i) refuse to accept any Outstanding Notes and
return any Outstanding Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Outstanding Notes tendered prior
to the Expiration of the Exchange Offer, subject to the rights of such holders
of tendered Outstanding Notes to withdraw their tendered Outstanding Notes or
(iii) waive such termination event with respect to the Exchange Offer and accept
all properly tendered Outstanding Notes that have not been withdrawn. If such
waiver constitutes a material change in the Exchange Offer, the Company will
disclose such change by means of a supplement to this Prospectus that will be
distributed to each registered holder of Outstanding Notes, and the Company will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the waiver and the manner of disclosure to the
registered holders of the Outstanding Notes, if the Exchange Offer would
otherwise expire during such period. Holders of Outstanding Notes will have
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certain rights against the Company under the Registration Rights Agreement
should the Company fail to consummate the Exchange Offer.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
Mailing Address:
IBJ Schroder Bank & Trust Company
P. O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attention Reorganization Operations Department
Telephone: (212) 858-2103
Facsimile: (212) 858-2611
Hand and Overnight Delivery:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Securities Processing Window, Subcellar One, (SC-1)
Telephone number for the Exchange Agent: (212) 858-2103
Facsimile number for the Exchange Agent: (212) 858-2611.
FEES AND EXPENSES
The Issuers will bear the expenses of soliciting tenders pursuant to the
Exchange Offer. The principal solicitation for tenders pursuant to the Exchange
Offer is being made by mail. Additional solicitations may be made by officers
and regular employees of the Issuers and their affiliates in person, by
telegraph or telephone. The Issuers will not make any payments to brokers,
dealers or other persons soliciting acceptances of the Exchange Offer. The
Issuers, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse the Exchange Agent for its reasonable
out-of-pocket expenses in connection therewith. The Issuers may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus,
Letters of Transmittal and related documents to the beneficial owners of the
Outstanding Notes and in handling or forwarding tenders for exchange.
The Issuer will pay other expenses incurred in connection with the Exchange
Offer including fees and expenses of the Exchange Agent and Trustee and
accounting and legal fees. The Issuers will pay all transfer taxes, if any,
applicable to the exchange of Outstanding Notes pursuant to the Exchange Offer.
If, however, Registered Notes or Outstanding Notes not tendered or accepted for
exchange are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Outstanding Notes
tendered, or if tendered Outstanding Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of Outstanding Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
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ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Issuers
upon the consummation of the Exchange Offer. The Company will amortize expenses
of the Exchange Offer over the term of the Registered Notes under generally
accepted accounting principles.
DESCRIPTION OF NOTES
GENERAL
The Registered Notes will be issued, and the Outstanding Notes were issued,
pursuant to the indenture (the "Indenture") among the Issuers and IBJ Schroder
Bank & Trust Company, as trustee (the "Trustee"), dated December 5, 1997. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. Copies
of the proposed form of Indenture and Registration Rights Agreement are
available as set forth under "Available Information." The definitions of certain
terms used in the following summary are set forth below under "-- Certain
Definitions."
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be presented
for registration of transfer and exchange at the offices of the Registrar, which
currently is the Trustee's corporate trust office. The Company may change any
Paying Agent and Registrar without notice to Holders of the Notes. The Company
pays principal (and premium, if any) on the Notes at the Trustee's corporate
office in New York, New York. In addition, in the event the Notes do not remain
in book-entry form, interest may be paid at the Company's option, by wire
transfer or check mailed to the registered address of the Holders as shown on
the Note Register.
Any Outstanding Notes that remain outstanding after the completion of the
Exchange Offer, together with the Exchange Notes issued in connection with the
Exchange Offer, are be treated as a single class of securities under the
Indenture.
The Notes are general unsecured obligations of the Issuers and rank pari
passu in right of payment with all current and future unsecured senior
Indebtedness of the Issuers. As of December 31, 1997 on a pro forma basis after
giving effect to the Offering and the application of estimated net proceeds
therefrom, to the Remainder Disposition and certain shareholder investments, the
total amount of Indebtedness of CR US and its subsidiaries that would
effectively rank senior in right of payment to the obligations of the Issuers
under the Notes would have been approximately $4.6 million. The Indenture
permits borrowings under Credit Agreements, which borrowings may be secured by a
first priority Lien on the assets of CR US and its Subsidiaries. See "Risk
Factors -- Factors Related to the Securities."
The operations of CR US are conducted through its Operating Subsidiaries
and, therefore, the Issuers are dependent upon the cash flow of the Operating
Subsidiaries to meet their obligations, including their obligations under the
Notes. As of the date hereof, all of CR US's Operating Subsidiaries are
Restricted Subsidiaries. However, under certain circumstances, CR US may
designate current or future Operating Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries are not be subject to many of the restrictive
covenants set forth in the Indenture.
The Notes are effectively subordinated to all Indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Operating Subsidiaries. Any right of the Issuers to receive assets of any of
the Operating Subsidiaries upon the latter's liquidation or reorganization (and
the consequent right of the Holders to participate in those assets) are
effectively subordinated to the claims of that Operating Subsidiary's creditors,
except to the extent that either of the Issuers is itself recognized as a
creditor of such Operating Subsidiary, in which case the claims of such Issuer
would still be subordinate to any
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security in the assets of such Operating Subsidiary and any Indebtedness of such
Operating Subsidiary. See "Risk Factors -- Factors Related to the
Securities -- Holding Company Structure; Dependence on Subsidiaries; Limitations
on Access to Cash Flow of the Subsidiaries."
To the extent any provision of the Indenture requires the approval of the
Board of Directors of CR US, such requirement may be satisfied if the matter in
question is approved by the Board of Directors of a Wholly Owned Restricted
Subsidiary of CR US, but only if the members of the Board of Directors of such
Restricted Subsidiary are identical to the members constituting the entire Board
of Directors of CR US on the date that the applicable resolution is adopted.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $100.0 million and
will mature on December 1, 2004. Interest on the Notes accrues at the rate of
13% per annum and is payable semi-annually in arrears on June 1 and December 1,
commencing on June 1, 1998, to Holders of record on the immediately preceding
May 15 and November 15 (whether or not a Business Day). Interest on the Notes
accrues from the most recent date to which interest has been paid or, if no
interest has been paid, from the Issue Date. Interest is computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, premium, if any,
and interest and Liquidated Damages on the Notes is payable at the office or
agency of the Issuers maintained for such purpose within the City and State of
New York or, at the option of the Issuers, payment of interest and Liquidated
Damages may be made by check mailed to the Holders at their respective addresses
set forth in the register of Holders of Notes; provided that all payments of
principal, premium, interest and Liquidated Damages with respect to Notes the
Holders of which have given written wire transfer instructions to the Trustee by
no later than the record date for an interest payment is required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Issuers, the Issuers' office
or agency in New York is the office of the Trustee maintained for such purpose.
ADDITIONAL AMOUNTS
Any payments made by the Issuers under or with respect to the Notes are
made free and clear of and without withholding or deduction for or on account of
any present or future tax, duty, levy, impost, assessment or other governmental
charge of whatever nature imposed or levied by or on behalf of Mexico or of any
subdivision thereof or by any authority or agency therein or thereof having
power to tax (hereinafter "Taxes"), unless either Issuer is required to withhold
or deduct Taxes by law, rule or regulation or by the interpretation or
administration thereof. If either Issuer is so required to withhold or deduct
any amount for or on account of Taxes from any payment made under or with
respect to the Notes then the Issuers will pay such additional amounts
("Additional Amounts") as may be necessary, so that the net amount received on
the respective due dates of such amounts by each Holder (including Additional
Amounts) after such withholding or deduction will not be less than the amount
such Holder would have received if such Taxes had not been withheld or deducted.
Notwithstanding the foregoing, no such Additional Amounts shall be payable
with respect to:
(a) any Taxes which are imposed on, or deducted or withheld from,
payments made to the Holder or beneficial owner of a Note because of the
existence of any present or former connection between the Holder or
beneficial owner of the Notes (or between a fiduciary, settlor,
beneficiary, member of, or possessor of a power over, such Holder or
beneficial owner, if such Holder or beneficial owner is an estate, a trust
or a partnership) and Mexico, except for a connection relating to or
otherwise arising from the mere ownership of, or receipt of payment under,
such Note or the exercise of rights under such Note or the Indenture
(personally or through the Trustee);
(b) any Taxes that are imposed on, or withheld or deducted from,
payments made to the Holder or beneficial owner of a Note to the extent
such Taxes would not have been so imposed, deducted or withheld but for the
failure by such Holder or beneficial owner of such Note to comply with any
certification, identification, information, documentation or other
reporting requirement concerning the nationality, residence or identity of
the Holder or beneficial owner of such Note if (i) such compliance is
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<PAGE> 86
required or imposed by a statute, treaty, regulation, ruling or
administrative practice to make any claim for exemption from, or reduction
in the rate of, the imposition, withholding or deduction of any Taxes; and
(ii) at least 60 days prior to the first payment date with respect to which
the Issuers shall apply this clause (b), the Issuers shall have notified
such Holders or beneficial owners of the Notes in writing that such Holders
and beneficial owners of the Notes will be required to provide such
information or documentation; provided, however, that CR US's obligation to
pay Additional Amounts shall apply and the limitation set forth in this
clause (b) shall not apply if such Holder or beneficial owner of the Notes,
as the case may be, satisfies the certification or reporting requirement
described in this clause (b) within 30 days of the payment date unless CR
US has already irrevocably paid to the relevant taxing authority or agency
the withheld or deducted amount of Tax in respect of which such Additional
Amounts would have been payable;
(c) any Taxes that would not have been imposed but for the
presentation by such Holder for payment of such Holder's Note (where
presentation for payment is requirement) on a date more than 30 days after
the date on which such payment became due and payable or the date on which
payment thereof is duly provided for and notice thereof given to Holders to
the extent required by the Indenture, whichever occurs later, but only to
the extent that the Holder of such Note would have been entitled to
Additional Amounts in respect of such Taxes on presenting such Note for
payment on any date during such 30-day period;
(d) any Taxes that would not have been imposed if the beneficial owner
of, or person ultimately entitled to obtain an interest in, such Notes had
been the Holder of such Notes; or
(e) Taxes imposed because of any estate, inheritance, gift, sale,
transfer, personal property or similar taxes, duties, assessments or
charges that are payable otherwise than by withholding from a payment of
(or in respect of) principal of, or interest or Liquidated Damages on, the
Notes; or
(f) any combination of (a), (b), (c), (d) or (e) above (the Taxes
described in clauses (a) through (f) for which no Additional Amounts are
payable are hereinafter referred to as "Excluded Taxes").
Notwithstanding the foregoing, the limitations on the Issuers' obligation
to pay Additional Amounts set forth in clause (b) above shall not apply if (i)
the provision of information, certification or other evidence described in such
clause (b) would be materially more onerous, in form, in procedure or in the
substance of information disclosed, to a Holder or beneficial owner of a Note
(taking into account any relevant differences between U.S. and Mexican law,
regulation or administrative practice) than comparable information or other
reporting requirements imposed under U.S. tax law, regulation or administrative
practice (such as IRS Forms 1001, W-8 and W-9) or (ii) Rule 3.32.9 issued by the
Secretaria de Hacienda y Credito Publico (Ministry of Finance and Public Credit)
on March 31, 1998, unless the provision of the information, documentation or
other evidence described in clause (b) is expressly required by statute, rule or
regulation, to apply Rule 3.32.9, the Issuers cannot obtain such information,
documentation or other evidence on their own through reasonable diligence and
the Issuers otherwise would meet the requirements for application of Rule
3.32.9. In addition, such clause (b) shall not be construed to require that a
non-Mexican pension or retirement fund or a non-Mexican financial institution or
any other Holder register with the Ministry of Finance and Public Credit to
establish eligibility for an exemption from or reduction of Mexican withholding
tax or to require that a Holder or beneficial owner certify or provide
information concerning whether it is or is not a tax-exempt pension or
retirement fund.
At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Issuers will be obligated to pay
Additional Amounts with respect to such payment, the Issuers will deliver to the
relevant Trustee and the Paying Agent an Officers' Certificate stating the fact
that such Additional Amounts will be payable and the amounts so payable and will
set forth such other information as is necessary to enable the Trustee or the
Paying Agent, as the case may be, to pay such Additional Amounts to Holders on
the payment date.
Whenever either in the Indenture or in this Prospectus there is mentioned,
in any context, the payment of principal, interest, Liquidated Damages or any
other amount payable under or with respect to any Note, such
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mention shall be deemed to include mention of the payment of Additional Amounts
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof.
The Issuers will provide the Trustee, within 20 business days after the
receipt thereof, with an official receipt of such payment, or, if such receipt
is unavailable, with documentation evidencing the payment of Mexican taxes in
respect of which the Issuers have paid any Additional Amounts. Copies of such
documentation will be made available to the Holders or the Paying Agent, as
applicable, upon request therefor.
In addition, the Issuers will pay any stamp, issue, registration,
documentary or other similar taxes and other duties (including interest and
penalties and fees payable to the RNVI) (i) payable in Mexico or the United
States (or any political subdivision of either jurisdiction) in respect of the
creation, issue and offering of the Notes and (ii) payable in Mexico (or any
political subdivision thereof) in respect of the subsequent redemption or
retirement of the Notes other than, in the case of any subsequent redemption or
retirement, Excluded Taxes.
REDEMPTION
Optional Redemption
The Notes are not redeemable at the Issuers' option prior to December 1,
2000. Thereafter, the Notes are subject to redemption at any time at the option
of the Issuers, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on December 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000........................................................ 107.429%
2001........................................................ 105.571%
2002........................................................ 103.714%
2003........................................................ 101.857%
</TABLE>
Notwithstanding the foregoing, until December 1, 2000, either or both of
the Issuers may redeem up to 35% of the aggregate principal amount of Notes
originally issued under the Indenture at a redemption price of 113% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of a
Public Equity Offering, provided that at least $65.0 million in aggregate
principal amount of Notes remain outstanding immediately after the occurrence of
such redemption (excluding Notes held by CR US and its Subsidiaries); and
provided, further, that the call for such redemption shall occur within 45 days
of the date of the closing of such Public Equity Offering.
Redemption for Tax Reasons
The Notes may be redeemed, at the option either or both of the Issuers, in
whole but not in part, at any time, upon giving not less than 30 nor more than
60 days' notice to the Holders of the Notes, at a redemption price equal to 100%
of the principal amount thereof, together with accrued interest and Liquidated
Damages, if any, to the date fixed for redemption and Additional Amounts, if
any, if the Issuers determine and certify to the Trustee immediately prior to
the giving of such notice (which certification shall include an Opinion of
Mexican Counsel) that (i) as a result of any change in, or amendment to, the
laws (or any rules or regulations promulgated thereunder) of Mexico, or any
political subdivision thereof or any taxing authority thereof or therein
affecting taxation, or any amendment to, change in or expiration of an official
interpretation or application regarding such laws, treaties, rules or
regulations which are of general applicability, which change, amendment,
application, expiration or interpretation becomes effective on or after the
Closing Date, either Issuer would be obligated, for reasons outside its control,
to pay Additional Amounts in respect of interest payments on the Notes pursuant
to the terms and conditions thereof in excess of those attributable to Mexican
withholding tax on the basis of a rate of 15% imposed on interest payments, (ii)
such obligation cannot be avoided by the Issuers after taking reasonable
measures available to them to avoid it, and (iii) such obligation
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<PAGE> 88
(or a separate tax obligation of equal or greater magnitude that arises from the
structuring contemplated by this clause (iii)) cannot be avoided by structuring
the interest payments in such manner that they are paid solely by CR US (rather
than CR Mexico); provided that (a) no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which either Issuer would be
obligated to pay such Additional Amounts and (b) at the time such notice is
given, the Issuers' obligation to pay such Additional Amounts remains in effect.
Before any notice of redemption pursuant to this provision is given to the
Trustee or the Holders, the Issuers shall deliver to the Trustee (i) an
Officers' Certificate to the effect that the Issuers' obligation to pay such
Additional Amounts in respect of the Notes cannot be avoided by either or both
of the Issuers taking reasonable measures available to them and (ii) an Opinion
of Mexican Counsel to the effect that either or both the Issuers would be
obligated to pay Additional Amounts in respect of interest payments on the Notes
pursuant to the terms and conditions thereof in excess of those attributable to
Mexican withholding tax on the basis of a rate of 15% imposed on interest
payments to Holders because of a change, amendment, application, expiration or
interpretation regarding laws, rules or regulations of the kind referred to
above. The Trustee shall accept such certificate and opinion as sufficient
evidence of the satisfaction of the conditions precedent set forth in clauses
(i) and (ii) described in the preceding paragraph (subject to the proviso
thereto), in which event it will be conclusive and binding on the Trustee and
the Holders. Such notice of redemption, once given by the Issuers to the Trustee
or Holders, is irrevocable.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder to be redeemed at its registered address.
Notices of redemption may not be conditional. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
Mandatory Redemption
CR US is not required to make mandatory redemption or sinking fund payments
with respect to the Notes. Repurchase at the Option of Holders
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder has the right to
require the Issuers to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Issuers will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Issuers will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
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On the Change of Control Payment Date, the Issuers must, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Issuers. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Issuers will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above are applicable whether or
not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders to require that the Issuers repurchase or
redeem the Notes in the event of a takeover, recapitalization or similar
transaction.
Any future senior Indebtedness of CR US and its Restricted Subsidiaries may
contain prohibitions of certain events that would constitute a Change of
Control. In addition, the exercise by the Holders of their right to require the
Issuers to repurchase the Notes could cause a default under such other senior
Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchases on the Issuers. Finally, the Issuers'
ability to pay cash to the Holders upon a repurchase may be limited by the
Issuers' then existing financial resources. See "Risk Factors -- Factors Related
to the Securities -- Potential Inability to Fund a Change of Control Offer."
The Issuers are required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by the Issuers and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of CR US and its Restricted Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than a Principal or a Related Party of a Principal (as
defined below), (ii) the adoption of a plan relating to the liquidation or
dissolution of CR US, (iii) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of CR US (measured by voting power rather than number of
shares) or (iv) the first day on which a majority of the members of the Board of
Directors of CR US are not Continuing Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of CR US and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder to require the
Issuers to repurchase Notes as a result of a sale, lease, transfer, conveyance
or other disposition of less than all of the assets of CR US and its Restricted
Subsidiaries taken as a whole to another Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of CR US who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
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"Principals" means Douglas Y. Bech, Thomas R. Powers and Walker G. Harman.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
Asset Sales
The Indenture provides that CR US may not, and may not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) CR US (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 80% of the consideration therefor
received by CR US or such Restricted Subsidiary is in the form of cash or Cash
Equivalents; provided that the amount of (x) any liabilities (as shown on CR
US's or such Restricted Subsidiary's most recent balance sheet), of CR US or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed in connection with such Asset Sale by the transferee of any such assets
pursuant to a novation agreement that releases CR US or such Restricted
Subsidiary from further liability and (y) any securities, notes or other
obligations received by CR US or any such Restricted Subsidiary from such
transferee that are contemporaneously (subject to ordinary settlement periods)
converted by CR US or such Restricted Subsidiary into cash or Cash Equivalents
(to the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Issuers may apply such Net Proceeds to (i) the acquisition of a majority of
the assets of, or a majority of the Voting Stock of, another business that is a
Permitted Business, (ii) the making of a capital expenditure or the acquisition
of other long-term assets that are used or useful in a Permitted Business or
(iii) the payment, redemption, defeasance or other acquisition or retirement for
value of senior Indebtedness of either Issuer or any Restricted Subsidiary in a
manner that results in the permanent retirement of such Indebtedness and, if
applicable, the permanent reduction of the related loan commitment. Pending the
final application of any such Net Proceeds, the Issuers may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Issuers are required to make an offer
to all Holders of Notes and, if the Company is required to do so under the terms
of any other Indebtedness that ranks pari passu to the Notes, to the holders of
such other senior Indebtedness (an "Asset Sale Offer"), to purchase the maximum
principal amount of Notes and principal of such other senior Indebtedness on a
pro rata basis that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase, in accordance with the procedures set forth in the Indenture. To
the extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Issuers may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes tendered
into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
Notwithstanding anything to the contrary contained in the Indenture, CR US
or any of its Restricted Subsidiaries may engage in transactions in which (i)
vacation ownership, hotel or other resort properties, parcel(s) of raw land or
the Asset Management Agreement is transferred in exchange for one or more other
vacation ownership, hotel or other resort properties, or (ii) one or more
parcels of raw land owned by CR US or any Subsidiary are transferred in exchange
for one or more other parcels of raw land; provided that if the fair market
value of the assets to be transferred by CR US or such Restricted Subsidiary,
plus the fair market value of any other consideration paid or credited by CR US
or such Restricted Subsidiary (the "Transac-
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tion Value") exceeds $1.0 million, such transaction requires approval of the
Board of Directors of CR US. In addition, each such transaction shall be valued
at an amount equal to all consideration received by CR US or such Restricted
Subsidiary in such transaction, other than the assets received pursuant to such
exchange (the "Other Consideration") for purposes of determining whether an
Asset Sale has occurred. The Indenture requires that the Other Consideration be
in the form of cash or Cash Equivalents to the extent required by clause (ii) of
the first paragraph of this covenant. If the Other Consideration is of an amount
and character such that such transaction constituted an Asset Sale, then the
first paragraph of this covenant is applicable to any Net Proceeds of such Other
Consideration.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that CR US may not, and may not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of CR US's or any
of its Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation involving CR US or
any of its Restricted Subsidiaries) or to the direct or indirect holders of CR
US's or any of its Restricted Subsidiaries' Equity Interests in their capacity
as such (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of CR US or to CR US or a Restricted Subsidiary
of CR US); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving CR US) any Equity Interests of CR US or any direct or indirect parent
of CR US or other Affiliate of CR US that is not a Restricted Subsidiary of CR
US (other than any such Equity Interests owned by CR US or any Wholly Owned
Restricted Subsidiary of CR US); (iii) make any payment on or with respect to,
or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) CR US would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by CR US and its Restricted Subsidiaries
after the Issue Date (excluding Restricted Payments permitted by clauses
(ii), (iii) and (iv) of the next succeeding paragraph), is less than the
sum, without duplication, of (i) 50% of the Consolidated Net Income of CR
US for the period (taken as one accounting period) from the beginning of
the first fiscal quarter commencing after the Issue Date to the end of CR
US's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds received
by CR US since the Issue Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests of CR US (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of CR US that have been converted into such Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of CR US), plus (iii) to the extent that
any Restricted Investment that was made after the Issue Date is sold for
cash or Cash Equivalents or otherwise liquidated or repaid for cash or Cash
Equivalents, the lesser of (A) the cash return of capital with respect to
such Restricted Investment (less the cost of disposition, if any) and (B)
the initial amount of such Restricted Investment, plus (iv) to the extent
that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary
after the Issue Date, the lesser of (A) the fair market value of
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CR US's or its Restricted Subsidiary's Investment in such Subsidiary as of
the date of such redesignation or (B) such fair market value as of the date
on which such Subsidiary was originally designated as an Unrestricted
Subsidiary.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of CR US in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of CR US) of, other Equity Interests
of CR US (other than any Disqualified Stock) or a substantially concurrent
capital contribution; provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Subsidiary of CR US to the holders of its common Equity Interests on a pro rata
basis; (v) so long as no Default or Event of Default is continuing, loans made
to current officers, directors and employees of CR US or any Restricted
Subsidiary thereof at any one time outstanding not to exceed $2.0 million; and
(vi) repurchases of Capital Stock deemed to occur upon exercise of stock options
to the extent such Capital Stock represents a portion of the price of such
options.
The amount of all Restricted Payments (other than cash) is the fair market
value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by CR US or such Restricted Subsidiary, as
the case may be, pursuant to the Restricted Payment. The fair market value of
any non-cash Restricted Payment shall be determined by the Board of Directors
whose resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, CR US shall deliver to the Trustee an Officers' Certificate of each
Issuer stating that such Restricted Payment is permitted and setting forth the
basis upon which the calculations required by the covenant "Restricted Payments"
were computed, together with a copy of any fairness opinion or appraisal
required by the Indenture as of the Issue Date.
The Board of Directors of CR US may designate any Restricted Subsidiary to
be an Unrestricted Subsidiary if such designation would not cause a Default;
provided that in no event shall the business operated by CR US or its
Subsidiaries (including the planned development of a new resort at Cozumel,
Mexico and additional vacation ownership units in Los Cabos, Mexico) as of the
Issue Date be transferred to or held by an Unrestricted Subsidiary. For purposes
of making such determination, all outstanding Investments by CR US and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the fair market value of
such Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that CR US may not, and may not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that CR US may not issue any Disqualified Stock and may not permit any
of its Subsidiaries to issue any shares of preferred stock; provided, however,
that CR US may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and CR US's Subsidiaries may incur Indebtedness or issue
preferred stock if the Fixed Charge Coverage Ratio for CR US's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock or preferred stock is issued would have
been at least 1.75
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to 1, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred, or
the Disqualified Stock or preferred stock had been issued, as the case may be,
at the beginning of such four-quarter period. The Indenture also provides that
CR US may not incur any Indebtedness that is contractually subordinated in right
of payment to any other Indebtedness of CR US unless such Indebtedness is also
contractually subordinated in right of payment to the Notes on substantially
identical terms; provided, however, that no Indebtedness of CR US shall be
deemed to be contractually subordinated in right of payment to any other
Indebtedness of CR US solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant do not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by CR US or any of its Restricted Subsidiaries of
Indebtedness (including the Cozumel Tranche) under Credit Agreements;
provided that the aggregate principal amount of all Indebtedness (with
letters of credit, guarantees, bid, surety and performance bonds or other
obligations under any Credit Agreement being deemed to have a principal
amount equal to the maximum potential liability of CR US and its Restricted
Subsidiaries thereunder) outstanding under all Credit Agreements after
giving effect to such incurrence does not exceed an amount equal to the
greater of (i) $40.0 million and (ii) 90% of the Vacation Interval
Receivables of CR US and its Restricted Subsidiaries;
(ii) the incurrence by CR US and CR Mexico of Indebtedness represented
by the Notes;
(iii) the incurrence by CR US or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in a Permitted Business,
in an aggregate principal amount, together with any Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (iii), not to exceed $7.5 million at any
time outstanding;
(iv) the incurrence by CR US or any of its Restricted Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new
Restricted Subsidiary; provided that such Indebtedness was incurred by the
prior owner of such assets or such Restricted Subsidiary prior to such
acquisition by CR US or one of its Restricted Subsidiaries and was not
incurred in connection with, or in contemplation of, such acquisition by CR
US or one of it Restricted Subsidiaries; and provided further that after
giving effect to such acquisition, CR US would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the first paragraph of
this covenant;
(v) the incurrence by CR US or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred (a) under the first paragraph of this covenant or under clauses
(iii), (iv) and (x) of this paragraph or (b) under clause (ii) of this
paragraph, but only to the extent that the net proceeds of such Permitted
Refinancing Indebtedness incurred pursuant to this clause (b) are used to
refund, refinance or replace Notes that are repurchased by the Issuers
under the provisions of the covenant described under the caption
"-- Repurchase at the Option of Holders -- Change of Control";
(vi) the incurrence by CR US or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among CR US and any of its Wholly
Owned Restricted Subsidiaries; provided, however, that (i) if either Issuer
is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes, and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than CR US or a Restricted Subsidiary thereof and (B) any sale
or other transfer of any such Indebtedness to a Person that is not either
CR US or a Wholly Owned Restricted Subsidiary thereof shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by CR US or
such Restricted Subsidiary, as the case may be, that was not permitted by
this clause (vi);
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(vii) the incurrence by CR US or any of its Restricted Subsidiaries of
Hedging Obligations incurred in the ordinary course of business for the
purpose of fixing or hedging interest rate risk or currency risk and not
for the purpose of speculation;
(viii) the guarantee by CR US or any of the Subsidiaries of
Indebtedness of CR US or a Restricted Subsidiary of CR US that was
permitted to be incurred by another provision of this covenant (other than
by clauses (x) or (xi) of this covenant);
(ix) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds, in each case,
issued in favor of governmental bodies or quasi-governmental bodies and
entered into in the ordinary course of business consistent with past
practice of CR US and its Subsidiaries (or of the vacation ownership
segment of the Predecessor Business), and not in connection with the
borrowing of money or the obtaining of advances or credit;
(x) the incurrence by CR US or CR Mexico of additional Indebtedness in
an aggregate principal amount (or accreted value, as applicable) at any
time outstanding, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (x), not to exceed $7.5 million; or
(xi) the incurrence by CR US's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of CR US that was not permitted by this clause (xi).
For purposes of determining compliance with this covenant, if an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Debt described in clauses (i) through (x) above or is entitled to be incurred
pursuant to the first paragraph of this covenant, CR US shall, in its sole
discretion, classify such item of Indebtedness in any manner that complies with
this covenant. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Stock in the form of additional shares of the same class of Disqualified Stock
is not be deemed to be an incurrence of Indebtedness or an issuance of
Disqualified Stock for purposes of this covenant; provided, in each such case,
that the amount thereof is included in Fixed Charges of CR US as accrued.
Notwithstanding any of the provisions of this covenant described above, CR
US may not permit any of its Operating Subsidiaries to, directly or indirectly,
incur any Indebtedness in excess of $3.0 million or issue any shares of
preferred stock (whether or not otherwise permitted by this covenant) until such
time as the Regina Operating Subsidiaries have assumed in full the existing
$86.7 million of intercompany indebtedness owed by a separate Operating
Subsidiary to CR Mexico and issued Mirror Notes in favor of CR Mexico in respect
thereof.
Liens
The Indenture provides that CR US may not, and may not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens, unless all payments due under the Notes or the Indenture
are equally and ratably secured with the obligations so secured, in each case,
until such time as such obligations are no longer secured by a Lien.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that CR US may not, and may not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to CR US or any of its Restricted Subsidiaries (1) on its Capital
Stock or (2) with respect to any other interest or participation in, or measured
by, its profits, or (b) pay any indebtedness owed to CR US or any of
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its Restricted Subsidiaries, (ii) make loans or advances to CR US or any of its
Restricted Subsidiaries or (iii) transfer any of its properties or assets to CR
US or any of its Restricted Subsidiaries. However, the foregoing restrictions do
not apply to encumbrances or restrictions existing under or by reason of (a) the
Indenture and the Notes, (b) applicable laws, or governmental regulations or
orders, (c) any instrument governing Indebtedness or Capital Stock of a Person
acquired by CR US or any of its Restricted Subsidiaries as in effect at the time
of such acquisition (except to the extent such Indebtedness or Capital Stock was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred, (d)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (e) Capital Lease
Obligations or purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (f) any agreement for the sale of a
Restricted Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale, (g) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced, (h) secured
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
the covenant described above under the caption "-- Liens" that limits the right
of the debtor to dispose of the assets securing such Indebtedness, (i)
provisions with respect to the disposition or distribution of assets or property
in joint venture agreements (or organizational documents established in
connection with a joint venture) and other similar agreements entered into in
the ordinary course of business, (j) restrictions on cash or other deposits or
net worth imposed by customers under contracts entered into in the ordinary
course of business, or (k) any encumbrance or restriction pursuant to
Indebtedness of Receivables Subsidiaries that is permitted to be incurred
subsequent to the Issue Date pursuant to the provisions of the covenant
described under the caption "-- Incurrence of Indebtedness and Issuance of
Preferred Stock."
Merger, Consolidation, or Sale of Assets
The Indenture provides that CR US may not consolidate or merge with or into
(whether or not CR US is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions, to another corporation, Person or
entity unless (i) CR US is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than CR US) or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than CR US) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of CR US under the Registration Rights Agreement, the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; and (iv) except in the case of a merger of CR US
with or into a Wholly Owned Restricted Subsidiary of CR US, CR US or the entity
or Person formed by or surviving any such consolidation or merger (if other than
CR US), or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of CR US immediately preceding the transaction and (B) will, at the time
of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that CR US may not, and may not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or
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purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to CR US or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by CR US or such Restricted
Subsidiary with an unrelated Person and (ii) CR US delivers to the Trustee (a)
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders (or to CR US and its Subsidiaries, taken as a whole) of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing. Notwithstanding the
foregoing, the following items shall not be deemed to be Affiliate Transactions:
(i) any employment agreement entered into by CR US or any of its Restricted
Subsidiaries in the ordinary course of business and having terms consistent with
industry practice for reasonably similar companies, (ii) transactions between or
among CR US and/or its Restricted Subsidiaries, (iii) payment of reasonable
directors fees to Persons who are not otherwise Affiliates of CR US, (iv)
Restricted Payments that are permitted by the provisions of the Indenture
described above under the caption "-- Restricted Payments," and (v) sales of
Capital Stock (other than Disqualified Stock or preferred stock) of CR US.
Restrictions on Preferred Stock of Subsidiaries
The Indenture provides that CR US may not permit any of its Restricted
Subsidiaries to issue any preferred stock, or permit any Person to own or hold
an interest in any preferred stock of any such Subsidiary, except for preferred
stock issued to CR US or a Wholly Owned Restricted Subsidiary of CR US.
Limitation on Issuances and Sales of Equity Interests in Wholly Owned
Restricted Subsidiaries
The Indenture provides that except as contemplated in clause (viii) of the
definition of Asset Sales, CR US (i) may not, and may not permit any Wholly
Owned Restricted Subsidiary of CR US to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Wholly Owned Restricted
Subsidiary of CR US to any Person (other than CR US or a Wholly Owned Restricted
Subsidiary of CR US), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Wholly Owned Restricted
Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with the covenant described
above under the caption "-- Asset Sales," (ii) may not permit any Wholly Owned
Restricted Subsidiary of CR US to issue any of its Equity Interests (other than,
if necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to CR US or a Wholly Owned Restricted
Subsidiary of CR US, and (iii) may not transfer, convey, sell, lease or
otherwise dispose of any Equity Interest in CR Mexico.
Business Activities
CR US must, and must cause its Subsidiaries to, conduct its and their
respective businesses such that CR US and its Subsidiaries, taken as a whole,
will at all times remain a Permitted Business.
Limitations on CR Mexico
Notwithstanding anything in the Indenture to the contrary, the Indenture
provides that (i) CR Mexico must at all times continue to be a Wholly Owned
Restricted Subsidiary of CR US, (ii) CR Mexico may not consolidate or merge with
or into any Person other than a Wholly Owned Restricted Subsidiary, (iii) CR US
must cause the Regina Operating Subsidiaries to (a) assume, no later than April
30, 1998, the $86.7 million of intercompany indebtedness owed to CR Mexico by a
separate Operating Subsidiary and (b) issue Mirror Notes in favor of CR Mexico
in respect thereof and (iv) CR Mexico must at all times maintain the Mirror
Notes in aggregate principal amount equal to the amount of outstanding loans
from CR Mexico to the
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Operating Subsidiaries (to the extent such loans have not been repaid) and must
not incur or suffer to exist any Lien on the Mirror Notes; provided, however,
that this clause (iv) shall cease to apply if CR Mexico merges with (and the
successor entity of such merger is) a Wholly Owned Restricted Subsidiary that
owns, either directly or indirectly, substantially all of the assets located in
Mexico of CR US and its Restricted Subsidiaries, taken as a whole.
Payments for Consent
The Indenture provides that neither CR US nor any of its Subsidiaries may,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Issuers must furnish to the Holders (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K with respect to
quarterly periods ending after the Issue Date if the Issuers were required to
file such Forms (including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition and
results of operations of CR US and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of CR US and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of CR US)
and, with respect to the annual information only, a report thereon by the
Issuers' certified independent accountants and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Issuers
were required to file such reports, in each case within the time periods
specified in the Commission's rules and regulations. In addition, following the
consummation of the exchange offer contemplated by the Notes Registration Rights
Agreement, whether or not required by the rules and regulations of the
Commission, the Issuers must file a copy of all such information and reports
with the Commission for public availability within the time periods specified in
the Commission's rules and regulations (unless the Commission will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Issuers have agreed that,
for so long as any Notes remain outstanding, they must furnish to the Holders
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
Disposition of Remainder Interest
In accordance with the Indenture, CR US contributed the Remainder Interest
to an unaffiliated charitable institution such that CR US is not required to use
the installment method of accounting with respect to the presentation of its
consolidated financial statements under GAAP.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages or Additional Amounts with respect to, the Notes; (ii)
default in payment when due of the principal of or premium, if any, on the
Notes; (iii) failure by CR US or any of its Subsidiaries to comply with the
provisions described under the captions "-- Repurchase at the Option of
Holders -- Change of Control" (relating to offers to repurchase Notes),
"-- Repurchase at the Option of Holders -- Asset Sales" (relating to offers to
repurchase Notes), "-- Repurchase at the Option of Holders -- Restricted
Payments" or "-- Incurrence of Indebtedness and Issuance of Preferred Stock";
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(iv) failure by CR US or any of its Subsidiaries for 60 days after notice to
comply with any of its other covenants or agreements in the Indenture or the
Notes; (v) default 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 CR US or any of its Subsidiaries (or the payment of which is
guaranteed by CR US or any of its Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any 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 more than the lesser of (a) the amount of stockholder's
equity on CR US's most recent quarterly balance sheet and (b) $10.0 million;
(vi) failure by CR US or any of its Subsidiaries to pay final, non-appealable
judgments (to the extent not covered by insurance for which there is no dispute
as to coverage) aggregating in excess of the lesser of (a) the amount of
stockholders' equity on CR US's most recent quarterly balance sheet and (b)
$10.0 million, which judgments are not paid, discharged or stayed for a period
of 60 days; and (vii) certain events of bankruptcy or insolvency in the United
States or Mexico with respect to CR US or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to CR US, CR Mexico, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of either Issuer with
the intention of avoiding payment of the premium that the Issuers would have had
to pay if the Issuers then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
December 1, 2000 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of either Issuer with the intention of avoiding the
prohibition on redemption of the Notes prior to December 1, 2000, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporation or stockholder of either
Issuer, as such, shall have any liability for any obligations of the Issuers
under the Notes, the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may
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not be effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of
their obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Issuers' obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Issuers' obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Issuers may, at their option and at any time, elect to have the
obligations of the Issuers released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any failure to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the Notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "Events of Default" no longer constitute an
Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as are sufficient, in the
opinion of a nationally recognized firm of independent public accountants, to
pay the principal of, premium, if any, and interest, Liquidated Damages and
Additional Amounts on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Issuers must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Issuers shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (A) the Issuers have received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the Issue
Date, there has been a change in the applicable U.S. federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for U.S. federal income tax purposes as a result of such Legal
Defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Issuers shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to U.S. federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit and the
granting of Liens to secure such Indebtedness) or insofar as Events of Default
from bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) except as contemplated by
clause (iv), such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement or
instrument (other than the Indenture) to which CR US or any of its Subsidiaries
is a party or by which CR US or any of its Subsidiaries is bound; (vi) the
Issuers must have delivered to the Trustee an opinion of counsel to the effect
that, assuming no intervening bankruptcy of either Issuer between the date of
deposit and the 91st day following the deposit and assuming no Holder of Notes
is an insider of either Issuer, after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Issuers must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the intent
of preferring the Holders over the other creditors of the Issuers with the
intent of defeating, hindering, delaying or defrauding creditors of CR US or
others; and (viii) the Issuers must deliver to the Trustee an Officers'
Certificate and an opinion of counsel, each stating
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that all conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any Note
selected for redemption. Also, the Issuers are not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed. See "Exchange Offer."
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders"), (iii) reduce the rate of or change
the time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder, the
Issuers and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Issuers' obligations to Holders in the case of a merger or consolidation
or sale of all or substantially all of CR US's assets, to make any change that
would provide any additional rights or benefits to the Holders or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the Commission to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of CR US, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee is permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
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The Holders of a majority in principal amount of the then outstanding Notes
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that in case an Event of Default shall occur
(which shall not be cured), the Trustee is required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee is under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
On December 5, 1997, the Issuers and the Initial Purchaser entered into the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
the Issuers agreed, as a part of the offering process, to file with the
Commission this Registration Statement on the appropriate form under the
Securities Act with respect to the Registered Notes. Upon the effectiveness of
this Registration Statement, the Issuers will offer to the Holders of Transfer
Restricted Securities pursuant to the Exchange Offer who are able to make
certain representations the opportunity to exchange their Transfer Restricted
Securities for Registered Notes. If (i) the Issuers are not required to file
this Registration Statement or permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any Holder of Transfer Restricted Securities notifies the Issuers
prior to the 20th day following consummation of the Exchange Offer that (A) it
is prohibited by law or Commission policy from participating in the Exchange
Offer (other than through its own acts or omissions constituting gross
negligence or willful misconduct) or (B) that it may not resell the Registered
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in this Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer and
owns Notes acquired directly from the Issuers or an affiliate of the Issuers,
the Issuers will file with the Commission a Shelf Registration Statement (the
"Shelf Registration Statement") to cover resales of the Notes by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Notes Shelf Registration Statement. The Issuers must use
their best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Note until (i) the date
on which such Note has been exchanged by a Person other than a broker-dealer for
a Registered Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of a Note for a Registered Note, the date on
which such Registered Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in this Registration Statement, (iii) the date on which such Note has
been effectively registered under the Securities Act and disposed of in
accordance with the Notes Shelf Registration Statement or (iv) the date on which
such Note is distributed to the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Issuers must file
an Exchange Offer Registration Statement with the Commission on or prior to
March 31, 1998, (ii) the Issuers must use their best efforts to have this
Registration Statement declared effective by the Commission on or prior to May
31, 1998, (iii) unless the Exchange Offer would not be permitted by applicable
law or Commission policy, the Issuers must commence the Exchange Offer and use
their best efforts to issue on or prior to 30 business days after the date on
which this Registration Statement was declared effective by the Commission,
Registered Notes in exchange for all Notes tendered prior thereto in the
Exchange Offer and (iv) if obligated to file the Shelf Registration Statement,
the Issuers must use their best efforts to file the Shelf Registration Statement
with the Commission on or prior to 30 days after such filing obligation arises
(provided that the Issuer shall not be obligated to file such Shelf Registration
Statement earlier than March 31, 1998) and to cause the Shelf Registration
Statement to be declared effective by the Commission on or prior to 90 days
after such obligation arises. If (a) the Issuers fail to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), or (c) the
Issuers fail to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to this Registration Statement, or (d)
the Shelf
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Registration Statement or this Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Issuers must pay Liquidated Damages to each
Holder of Notes, with respect to the first 90-day period immediately following
the occurrence of the first Registration Default in an amount equal to $.05 per
week per $1,000 principal amount of Notes held by such Holder. The amount of the
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Notes with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages for all Registration Defaults of $.25 per week per $1,000 principal
amount of Notes. All accrued Liquidated Damages will be paid by the Issuers on
each Damages Payment Date to the Global Note Holder by wire transfer of
immediately available funds or by federal funds check and to Holders of
Certificated Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Notes must make certain representations to the Issuers (as
described in the Registration Rights Agreement) in order to participate in the
Exchange Offer and must deliver certain information to be used in connection
with the Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have their Notes included in the Shelf Registration
Statement and benefit from the provisions regarding Liquidated Damages set forth
above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness, Disqualified Stock or preferred stock incurred
in connection with, or in contemplation of, such other Person merging with or
into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness,
Disqualified Stock or preferred stock secured by a Lien encumbering any asset
acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control; further provided that GLLC shall not be deemed to be an
Affiliate of CR US and its Subsidiaries so long as GLLC does not own more than
20% of the Capital Stock of CR US and does not own any Capital Stock of a
Subsidiary of CR US.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) (a "Disposition") other than sales of inventory in the ordinary
course of business consistent with industry practice for reasonably similar
companies (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of CR US and its Subsidiaries taken as a
whole are governed by the provisions of the Indenture described above under the
caption "-- Change of Control" and/or the provisions described above under the
caption "-- Merger, Consolidation or Sale of Assets" and not by the provisions
of the Asset Sale covenant), and (ii) the issue or sale by CR US or any of its
Subsidiaries of Equity Interests of any of CR US's Subsidiaries, in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $1.0 million
or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
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foregoing, the following items shall not be deemed to be Asset Sales: (i) a
Disposition of assets by CR US to a Wholly Owned Restricted Subsidiary or by a
Wholly Owned Restricted Subsidiary to CR US or to another Wholly Owned
Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to CR US or to another Wholly Owned Restricted Subsidiary,
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "-- Restricted Payments," (iv) the Disposition of the
Remainder Interest, (v) any Disposition of Cash Equivalents, (vi) any
Disposition of defaulted Vacation Interval Receivables for collection purposes,
(vii) the grant of any Lien securing Indebtedness to the extent such Lien is
granted in compliance with the covenant set forth under "-- Certain Covenants,
Liens," (viii) the sale of Class B shares of CR S.A. to customers of CR US and
its Subsidiaries consistent with past practices (or similar sales of
non-controlling equity interests in any Restricted Subsidiary that is formed to
serve the same purpose as is served by CR S.A. on the Issue Date so long as such
sales are effected for the same reasons that sales of Class B shares of CR S.A.
are made as of the Issue Date); or (ix) the sales of Vacation Intervals in the
ordinary course of business.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association, sociedad de responsabilidad limitada, or
business entity, any and all shares, partes sociales, interests, participations,
rights or other equivalents (however designated) of corporate stock, (iii) in
the case of a partnership or limited liability company, partnership or
membership interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than twelve months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of twelve months or less
from the date of acquisition, bankers' acceptances with maturities not exceeding
six months and overnight bank deposits, in each case with any domestic
commercial bank having capital and surplus in excess of $500 million and a
Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition, (vi) money market funds at least 95%
of the assets of which constitute Cash Equivalents of the kinds described in
clauses (i)-(v) of this definition, (vii) Certificados de la Tesoreria de la
Federacion (Cetes) or Bonos de Desarrollo del Gobierno Federal(Bondes) issued by
the Mexican government and maturing not more than 365 days after the acquisition
thereof, (viii) direct obligations of the Mexican government or obligations
fully and unconditionally guaranteed by the Mexican government, (ix)
certificates of deposit, bank promissory notes and bankers' acceptances
denominated in pesos maturing not more than 365 days after the acquisition
thereof and issued or guaranteed by (a) any one of the five largest banks (based
on assets as of the immediately preceding December 31) organized under the laws
of Mexico and (b) one or more other banks organized under the laws of Mexico,
provided that the aggregate amount of certificates of deposit, bank promissory
notes and banker's acceptances issued or guaranteed by any one such bank
referred to in clause (b) shall not exceed $3.0 million at any one time) and, in
each case, which is not under intervention by the CNBV or controlled by the
Fondo Bancario de Proteccion al Ahorro or by any other governmental body or
agency and (x) Mexican pesos; provided that the aggregate amount of Cash
Equivalents held by CR US and its Restricted Subsidiaries at any one time under
clauses (vii), (viii), (ix) and (x) of this definition is limited to $4.0
million.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus the sum, without
duplication of (i) an amount equal to any extraordinary loss plus any net loss,
together with any related provisions for taxes arising on such loss, realized
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in connection with an Asset Sale (to the extent such losses (and provisions for
taxes) were deducted in computing such Consolidated Net Income), plus (ii)
provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (iii) consolidated
interest expense of such Person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) Consolidated
Lease Expense but only to the extent such expense exceeds $0.5 million for any
four quarter period of such Person and its Subsidiaries for such period, plus
(v) depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period), and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, minus (vi) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Subsidiary CR US shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that the Net Income of such Subsidiary was included
in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to CR US or paid to CR Mexico by such Subsidiary without prior
approval (that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Lease Expense" means, with respect to any Person for any
period, the aggregate rental obligations (other than Capital Lease Obligations)
of such Person and its consolidated Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP payable in respect of such period
under leases of real and/or personal property (net of income from subleases
thereof, but including taxes, insurance, maintenance and similar expenses that
the lessee is obligated to pay under the terms of such leases), whether or not
such obligations are reflected as liabilities or commitments on a consolidated
balance sheet of such Person and its Restricted Subsidiaries or in the notes
thereto.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income (but not loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to CR US or one of its
Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
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any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CR S.A." means Club Regina S.A. de C.V.
"Credit Agreements" means any credit agreement or similar facility
governing Indebtedness entered into by CR US or any Subsidiary, as any such
agreement or facility may be amended, modified, refinanced or replaced from time
to time (except to the extent that any such amendment, modification, refinancing
or replacement would be prohibited by the terms of the Indenture).
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement to which
such Person is a party or a beneficiary.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require CR US to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that CR US may not repurchase or redeem
any such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"fair market value" means the price that would be paid in an arm's length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests that are paid in
Equity Interests of CR US (other than Disqualified Stock) or to CR US or a
Restricted Subsidiary of CR US, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
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each case, on a consolidated basis and in accordance with GAAP and (v) the
Consolidated Lease Expense of such Person and its Restricted Subsidiaries for
such period, but only to the extent such expense exceeds $0.5 million for any
four quarter period.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. If the referent Person or any of
its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by CR US or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under any Interest Rate Agreement or Currency Agreement.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
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"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed to
protect CR US or any Subsidiary against fluctuation in interest rates.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to directors, officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If CR US or any Restricted Subsidiary of CR US sells or otherwise disposes
of any Equity Interests of any direct or indirect Subsidiary of CR US such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of CR US, CR US shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "-- Restricted Payments."
"Issue Date" means the date of original issuance of the Notes.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Mirror Notes" means, (i) the notes outstanding on the Issue Date that are
issued by a certain Operating Subsidiary in favor of CR Mexico, representing
senior obligations of such Operating Subsidiary, in aggregate principal amount
equal to approximately $86.7 million, (ii) the notes to be issued in replacement
of the Mirror Note specified in clause (i) pursuant to the covenant described
under the caption "Certain Covenants -- Limitations on CR Mexico" and (iii) such
other promissory notes issued by Operating Subsidiaries to CR Mexico in exchange
for future advances from CR Mexico to such Operating Subsidiaries.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities (other than sales of Equity Interests of a
Restricted Subsidiary described in clause (viii) of the definition of Asset
Sale) by such Person or any of its Restricted Subsidiaries or the extinguishment
of any Indebtedness of such Person or any of its Restricted Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by CR US or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither CR US nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness, other than Indebtedness ("Non-Recourse Indebtedness"), the
incurrence of which also constitutes an Investment permitted to be made under
the covenant "Restricted Payments" or
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pursuant to clause (k) of the definition of "Permitted Investments"), (b) is
directly or indirectly liable (as a guarantor or otherwise, other than pursuant
to a Guarantee (a "Non-Recourse Guarantee"), the incurrence of which also
constitutes an Investment permitted to be made under the covenant "Restricted
Payment" or pursuant to clause (k) of the definition of "Permitted
Investments"), or (c) constitutes the lender, other than pursuant to loans
("Non-Recourse Loans") that also constitute an Investment permitted to be made
under the covenant entitled "Restricted Payments" or pursuant to clause (k) of
the definition of "Permitted Investments"; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of CR US or
any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing (and, in the case of any Non-Recourse Indebtedness, Non-Recourse
Guarantee or Non-Recourse Loan, have agreed in writing) that they will not have
any recourse to the stock or assets of CR US or any of its Restricted
Subsidiaries (other than the Capital Stock of one or more Unrestricted
Subsidiaries).
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means, with respect to a Person, a certificate
signed by two Officers of such Person.
"Opinion of Mexican Counsel" means a written opinion of independent Mexican
counsel admitted to practice in Mexico and of recognized standing in Mexico who
may be counsel to CR US and who shall be reasonably acceptable to Trustee.
"Permitted Business" means, at any time, any business that is primarily in
the vacation ownership business.
"Permitted Investments" means (a) any Investment in CR US or in a Wholly
Owned Restricted Subsidiary of CR US that is engaged in a Permitted Business;
(b) any Investment in Cash Equivalents; (c) any Investment by CR US or any
Subsidiary of CR US in a Person, if as a result of such Investment (i) such
Person becomes a Wholly Owned Restricted Subsidiary of CR US that is engaged in
a business that is related, ancillary or complementary to, and supportive of,
the vacation ownership business or (ii) such Person is engaged in a business
that is related, ancillary or complementary to, and supportive of, the vacation
ownership business and is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
CR US or a Wholly Owned Restricted Subsidiary of CR US that is engaged in a
business that is related, ancillary or complementary to, and supportive of, the
vacation ownership business; (d) any Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "-- Repurchase at
the Option of Holders -- Asset Sales"; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
CR US; (f) any Investment in a Receivables Subsidiary of Vacation Interval
Receivables and Related Assets in connection with a Receivables Financing; (g)
accounts receivable created or acquired, and prepaid expenses arising, in the
ordinary course of business; (h) the endorsements of negotiable instruments for
collection or deposit in the ordinary course of business; (i) the incurrence,
assumption or creation of Hedging Obligations that CR US or a Restricted
Subsidiary of CR US enters into in the ordinary course of business; (j) a
promissory note or other payment obligation in the original principal amount of
up to $1.8 million to be received in connection with the disposition of the
Remainder Interest; and (k) other Investments in Equity Interests of any Person
engaged in a business that is related to, ancillary or complementary to, and
supportive of, the vacation ownership business having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (k) that are at the time outstanding,
not to exceed $7.5 million.
"Permitted Liens" means (i) Liens securing the Credit Agreements (including
the Cozumel Tranche); provided that the principal amount of Indebtedness secured
by such Liens is not greater than the principal amount of Indebtedness permitted
to be incurred by clause (i) of the second paragraph of the covenant entitled
"-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (ii) Liens in
favor of CR US or its
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Wholly Owned Restricted Subsidiaries; (iii) Liens on property of a Person
existing at the time such Person is merged into or consolidated with CR US or
any Subsidiary of CR US; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with CR US; (iv)
Liens on property existing at the time of acquisition thereof by CR US or any
Subsidiary of CR US, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clauses (iii), (v) (but only to the extent the Indebtedness refinanced pursuant
to such clause (v) was secured by Liens), (vii) and (ix) of the second paragraph
of the covenant entitled "-- Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness; (vii)
Liens existing on the Issue Date; (viii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (ix)
Liens incurred in the ordinary course of business of CR US or any Subsidiary of
CR US with respect to obligations that do not exceed $5.0 million at any one
time outstanding and that (a) are not incurred in connection with the borrowing
of money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by CR US or such Subsidiary; (x) Liens on assets of or
Capital Stock of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries; (xi) Liens in favor of the Trustee under the
Indenture; (xii) judgment Liens with respect to judgments that do not cause an
Event of Default under clause (vi) of the provision of the Indenture described
under "-- Events of Default"; and (xiii) Liens securing guarantees that are
permitted to be incurred under clause (viii) of the second paragraph of the
covenant described under the caption "-- Incurrence of Indebtedness and Issuance
of Preferred Stock," but only if the guarantee proposed to be secured by a Lien
relates to Indebtedness which (a) would be permitted to be secured by a Lien
under the terms of the Indenture and (b) is permitted to be incurred under
clauses (i), (iii), (iv), (v), (vii) and (ix) of the second paragraph of the
covenant described under the caption "-- Incurrence of Indebtedness and Issuance
of Preferred Stock."
"Permitted Refinancing Indebtedness" means any Indebtedness of CR US or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of CR US or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that: (i) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
CR US or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Public Equity Offering" means an underwritten public offering of common
Capital Stock of CR US registered under the Securities Act (other than a public
offering registered on Form S-8 under the Securities Act).
"Receivables Financing" means a financing by CR US or a Restricted
Subsidiary of CR US of Vacation Interval Receivables.
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"Receivables Subsidiary" means a Subsidiary which is established for the
limited purpose of acquiring and financing Vacation Interval Receivables and
Related Assets.
"Regina Operating Subsidiaries" means CR Resorts Cabo, S. de R.L. de C.V.,
CR Resorts Puerto Vallarta, S. de R.L. de C.V., CR Resorts Cancun, S. de R.L. de
C.V. and Desarollos Turisticos Integrales Cozumel, S. de R.L. de C.V.
"Remainder Interest" means the rights under the Trust Agreements to own the
Regina Resorts after August 18, 2027.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means any Subsidiary of CR US (other than CR
Mexico or any other Subsidiary of CR US that exists on the Issue Date) or any
successor to any of them that is designated by the Board of Directors of CR US
as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the
extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse
Debt; (b) is not party to any agreement, contract, arrangement or understanding
with CR US or any Restricted Subsidiary of CR US unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to CR US
or such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of CR US; (c) is a Person with respect to which
neither CR US nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
CR US or any of its Restricted Subsidiaries. Any such designation by the Board
of Directors of CR US shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution of CR US giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "Certain Covenants -- Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of CR
US as of such date (and, if such Indebtedness is not permitted to be incurred as
of such date under the covenant described under the caption "Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," CR US
shall be in default of such covenant). The Board of Directors of CR US may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of CR US of any outstanding Indebtedness
of such Unrestricted Subsidiary and such
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designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation.
"Vacation Interval Receivables" means the gross receivables of CR US and
its Restricted Subsidiaries arising from sales by CR US and its Restricted
Subsidiaries of Vacation Intervals (but excluding any receivables for service or
other fees in respect of such Vacation Intervals) determined on a consolidated
basis in accordance with GAAP.
Vacation Interval Receivables and Related Assets" means Vacation Interval
Receivables and instruments, chattel paper, obligations, general intangibles and
other similar assets, in each case relating to Vacation Interval Receivables.
"Vacation Intervals" means, for purposes of this "Description of Notes,"
the right to use (whether arising by virtue of a club membership or a deeded
interest in real property or otherwise) a fully-furnished vacation residence for
a specified period each year or otherwise.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares or other
shares or other ownership interests required by applicable law to be held by
third parties (but only to the extent of such legal requirement)) shall at the
time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth in the next paragraph, the Registered Notes will be
issued in the form of one or more registered global Notes (collectively, the
"Global Note"). The Global Note will be deposited with, or on behalf of, The
Depositary Trust Company (the "Depositary"), in New York, New York, and
registered in the name of Cede & Co., as nominee of the Depositary (such nominee
being referred to herein as the "Global Note Holder").
Notes (i) originally purchased by or transferred to Accredited Investors
who are not qualified institutional buyers (as defined in "Transfer
Restrictions"), or (ii) held by qualified institutional buyers which elect to
take physical delivery of their certificates instead of holding their interest
through the Global Note (and which are thus ineligible to trade through the
Depositary) (collectively referred to herein as the "Non-Global Purchasers")
will be issued, in registered certificated form ("Certificated Securities").
Upon the transfer to a qualified institutional buyer of any Certificated
Security initially issued to a Non-Global Purchaser, such Certificated Security
will, unless the transferee requests otherwise or the Global Note has previously
been exchanged in whole for Certificated Securities, be exchanged for an
interest in the Global Note, subject to the transfer restrictions set forth in
the Indenture.
The Global Note. The Issuers expect that pursuant to procedures established
by the Depositary (i) upon deposit of the Global Note, the Depositary or its
custodian will credit, on its internal system, portions of the Global Note which
shall be comprised of the corresponding respective principal amount of the
Global Note to the respective accounts of persons who have accounts with such
depositary and (ii) ownership of the Notes
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will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Such accounts initially will be
designated by or on behalf of the Initial Purchaser and ownership of beneficial
interests in the, Global Note will be limited to persons who have accounts with
the Depositary ("participants") or persons who hold interests through
participants. Qualified institutional buyers may hold their interests in the
Global Note directly through the Depositary if they are participants in such
system, or indirectly through organizations which are participants in such
system.
So long as the Depositary, or its nominee, is the registered owner or
holder of the Notes, the Depositary or such nominee will be considered the sole
owner or holder of the Notes represented by the Global Note for all purposes
under the Indenture. No beneficial owner of an interest in the Global Note will
be able to transfer such interest except in accordance with the Depositary's
applicable procedures, in addition to those provided for under the Indenture
with respect to the Notes.
Payments of the principal of, premium, if any, interest and Liquidated
Damages, if any, on the Global Note will be made to the Depositary or its
nominee, as the case may be, as the registered owner thereof. None of the
Issuers, the Trustee or any Paying Agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interest in the Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
The Issuers expect that the Depositary or its nominee, upon receipt of any
payment of the principal of, premium, if any, interest and Liquidated Damages,
if any, on the Global Note, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Note as shown on the records of the Depositary or its
nominee. The Issuers also expect that payments by participants to owners of
beneficial interests in the Global Note held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in the Depository will be effected in the
ordinary way in accordance with the Depositary rules and be settled in
accordance with the Depository rules in same day funds. If a holder requires
physical delivery of a Certificated Security for any reason, including to sell
Notes to persons in states which require physical delivery of such securities or
to pledge such securities, such holder must transfer its interest in the Global
Note in accordance with the normal procedures of the Depository and with the
procedures set forth in the Indenture.
The Depositary has advised the Issuers that the Depositary will take any
action permitted to be taken by a holder of Notes (including the presentation of
Notes for exchange as described below) only at the direction of one or more
participants to whose account the Depository interests in the Global Note are
credited and only in respect to such portion of Notes, the aggregate principal
amount of Notes as to which such participant or participants have given such
direction. However, if there is an Event of Default under the Indenture, the
Depositary will exchange the Global Note for Certificated Securities, which it
will distribute to its participants.
The Depositary has advised the Issuers as follows: the Depositary is a
limited purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary
was created to hold securities for its participants and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and certain other organizations. Indirect access to the Depositary's system is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly ("indirect participants").
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Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform such procedures, and such
procedures may be discontinued at any time. None of the Issuers or the Trustee
will have any responsibility for the performance by the Depositary or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
If the Depositary is at any time unwilling or unable to continue as a
depository for the Global Note and a successor depository is not appointed by
the Company, within 90 days, the Company will issue Certificated Securities in
exchange for the Global Note.
Certificated Securities. If the Depositary is at any time unwilling or
unable to continue as a depositary for the Global Note and a successor
depositary is not appointed by the Issuers, within 90 days, the Issuers will
issue Certificated Securities in exchange for the Global Note.
Same Day Settlement and Payment. The Indenture requires that payments in
respect of the Notes represented by the Global Note (including principal,
premium, if any, interest and Liquidated Damages, if any) be made by wire
transfer of immediately available next day funds to the accounts specified by
the Global Note Holder. With respect to Certificated Securities, the Issuers
will make all payments of principal, premium, if any, interest and Liquidated
Damages, if any, by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such Holder's registered address. The Issuers expect that
secondary trading in the Certificated Securities will also be settled in
immediately available funds.
TRANSFER RESTRICTIONS ON OUTSTANDING NOTES
The Outstanding Notes have not been registered under the Securities Act and
may not be offered or sold except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
Accordingly, the Outstanding Notes were offered and sold by the Initial
Purchaser only (i) to a limited number of "qualified institutional buyers" (as
defined in Rule 144A promulgated under the Securities Act) ("QIBs") in
compliance with Rule 144A; and (ii) to a limited number of other institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7)
promulgated under the Securities Act) ("Accredited Investors") that prior to
their purchase of any Notes delivered to the Initial Purchaser a letter
containing certain representations and agreements.
Each purchaser of Outstanding Notes, by its acceptance thereof, will be
deemed to have acknowledged represented and agreed as follows:
1. It is purchasing the Outstanding Notes for its own account or an
account with respect to which it exercises sole investment discretion and
that it and any such account is (i) a QIB, and is aware that the sale to it
is being made in reliance on Rule 144A; or (ii) an Accredited Investor.
2. It acknowledges that the Outstanding Notes have not been registered
under the Securities Act and may not be offered or sold except as set forth
below.
3. It shall not resell or otherwise transfer the Outstanding Notes
except (i) to the Company or any subsidiary thereof, (ii) to a QIB in
compliance with Rule 144A, (iii) to an Accredited Investor that, prior to
such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Trustee, a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Outstanding Notes (the form of which letter can be obtained from the
Trustee), (iv) pursuant to the exemption from registration provided by Rule
144 promulgated under the Securities Act (if available), or (v) pursuant to
an effective registration under the Securities Act. Each Accredited
Investor that is not a QIB and that is an original purchaser of the
Outstanding Notes will be required to sign an agreement to the foregoing
effect.
4. It agrees that it will give to each person to whom it transfers
Outstanding Notes notice of any restrictions on transfer of Outstanding
Notes.
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5. It understands that the Outstanding Note will bear a legend
substantially to the following effect unless otherwise agreed by the
Company and the holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT) OR
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501
(a)(1), (2), (3) OR (7) PROMULGATED UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE OR WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 PROMULGATED UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE OR WARRANT AGENT
AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
6. It acknowledges that the Trustee will not be required to accept for
registration of transfer any Outstanding Note acquired by it, except upon
presentation of evidence satisfactory to the Company and the Trustee that
the restrictions set forth herein have been complied with.
7. It acknowledges that the Company, the Initial Purchaser and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and agrees that if any of the
acknowledgments, representations or agreements deemed to have been made by
its purchase of Outstanding Notes are no longer accurate, it shall promptly
notify the Company and Initial Purchaser. If it is acquiring any
Outstanding Notes as a fiduciary or agent for one or more investor
accounts, it represents that it has sole investment discretion with respect
to each such account and it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of each account.
The Outstanding Notes may not be sold or transferred to, and each purchaser
by its purchase of the Outstanding Notes shall be deemed to have represented and
covenanted that it is not acquiring the Outstanding Notes for or on behalf of,
any pension or welfare plan (as defined in Section 3 of the Employee Retirement
Income Security Act of 1974 ("ERISA")), except that such a purchase for or on
behalf of a pension or welfare plan shall be permitted:
(1) to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchase in which no plan
(together with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total assets in such
collective
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investment fund and the applicable conditions of Prohibited Transaction
exemption 91-38 issued by the Department of Labor are satisfied;
(2) to the extent such purchase is made by or on behalf of an
insurance company pooled separate account maintained by the purchase in
which, at any time while the Outstanding Notes are outstanding, no plan
(together with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total of all assets
in such pooled separate account and the applicable conditions of Prohibited
Transaction Exemption 90-1 issued by the Department of Labor are satisfied;
(3) to the extent such purchase is made on behalf of a plan by (A) an
investment advisor registered under the Investment Advisers Act of 1940
that had as of the last day of its most recent fiscal year total assets
under its management and control in excess of $50,000,000 and had
shareholders' or partners' equity in excess of $750,000, as shown in its
most recent balance sheet prepared in accordance with generally accepted
accounting principles, (B) a bank as defined in Section 202(a) of the
Investment Advisers Act of 1940 with equity capital in excess of $1,000,000
as of the last day of its most recent fiscal year or (C) an insurance
company which is qualified under the laws of more than on state to manage,
acquire or dispose of any assets of a plan, which company had, as of the
last day of its most recent fiscal year, net worth in excess of $1,000,000
and which is subject to supervision and examination by a state authority
having supervision over insurance companies, in each case, such investment
advisor, bank or insurance company is otherwise a qualified professional
asset manager, as such term is used in the Prohibited Transaction Exemption
84-14 issued by the Department of Labor, and the assets of such plan when
combined with the assets of other plans established or maintained by the
same employer (or affiliate thereof) or employee organization and managed
by such investment advisor, bank or insurance company, do not represent
more than 20% of the total client assets managed by such investment
advisor, bank or insurance company and the applicable conditions or
Prohibited Transaction Exemption 84-14 are otherwise satisfied; or
(4) to the extent such plan is a governmental plan (as defined in
Section 3 of ERISA) which is not subject to the provisions of Title 1 of
ERISA or Section 4975 of the Code.
Each purchaser by its purchase of the Outstanding Notes shall also be
deemed to have represented that (a) if it is an insurance company, no part of
the funds to be used to purchase the Outstanding Notes to be purchased by it
constitutes assets allocated to any separate account maintained by it such that
the use of such funds constitutes a transaction in violation of Section 406 of
ERISA or a Prohibited Transaction, as such term is defined in Section 4975 of
the Code, which could be subject to, respectively, a civil penalty assessed
pursuant to Section 502 of ERISA or a tax imposed by Section 4975 of the Code
and (b) if it is not an insurance company, that no part of the funds to be used
to purchase the Outstanding Notes to be purchased by it constitutes assets
allocated to any trust, plan or account which contains the assets of any
employee pension benefit plan, welfare plan or account prohibited pursuant to
the preceding paragraph of these "Transfer Restrictions."
Purchasers are advised that the Prohibited Transaction Exemptions described
above do not relieve a fiduciary or other party from all prohibited transaction
provisions of the Code and ERISA and from ERISA's general fiduciary
responsibilities including, but not limited to, a fiduciary's obligation to
discharge his or her duties solely in the interests of participants and
beneficiaries.
DESCRIPTION OF OTHER DEBT
The Company currently has $100.0 million of 13% Series A Senior Notes due
2004 outstanding. These notes have customary covenants contained in "high yield"
indentures, including covenants relating to the incurrence of debt, the making
of restricted payments, asset sales, changes of control, affiliate transactions,
permitted investments and various other matters.
On March 27, 1998, the Company entered into an agreement with Bancomer,
expiring in March 2002, by the Bancomer will provide the Company a line of
credit of $20.0 million. All borrowings under the line of
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credit will be payable in U.S. dollars and any loans will bear interest at 13%.
Loans under the line of credit will be secured by all of the present and future
accounts receivable of an indirect wholly-owned subsidiary of the Company. The
Company has agreed to pay Bancomer a 2% funding fee in connection with entering
into the line of credit.
In addition, Bancomer has agreed to lend up to $6.0 million to the Company
to be sued to complete the purchase of the Villa Vera and related conversion
costs. This line of credit will be secured by a Mortgage Trust on the Villa Vera
property and by the accounts receivable of an indirect wholly-owned subsidiary
of the Company. The Company has agreed to pay Bancomer a 2% funding fee in
connection with entering into this facility.
DESCRIPTION OF CAPITAL STOCK AND WARRANTS
The following summary description of the CR US's capital stock does not
purport to be complete and is qualified in its entirety by reference to the CR
US's Amended and Restated Articles of Incorporation (the "Articles") and
By-Laws.
GENERAL
The authorized capital stock of CR US consists of 45 million shares of
Common Stock, par value $0.001 per share ("Common Stock"), of which 10,701,300
are issued and outstanding, and five million shares of Preferred Stock, par
value $0.001 per share ("Preferred Stock"), of which 37,500 shares of Class A
Preferred are issued and outstanding.
COMMON STOCK
Subject to the rights of holders of Preferred Stock then outstanding,
holders of Common Stock are entitled to receive such dividends as may from time
to time be declared by the Board of Directors of CR US. Holders of Common Stock
are entitled to one vote per share on all matters on which the holders of Common
Stock are entitled to vote. Because holders of Common Stock do not have
cumulative voting rights, the holders of a majority of the shares of Common
Stock represented at a meeting can select the directors, except to the extent
that any future class of Preferred Stock confers the right to elect directors on
the holders of such Preferred Stock. In addition, super majority voting
requirements apply in respect of certain stockholder actions.
Holders of Common Stock have no preemptive rights to subscribe for any
additional securities that CR US may issue and there are no redemption
provisions or sinking fund provisions applicable to the Common Stock, nor is the
Common Stock subject to calls or assessments by CR US. All shares of Common
Stock are legally issued, fully paid and nonassessable. Upon the liquidation,
dissolution or winding up of CR US, holders of the shares of Common Stock are
entitled to share equally, share-for-share, in the assets available for
distribution after payment to all creditors of CR US, subject to the rights, if
any, of the holders of any outstanding shares of Preferred Stock.
PREFERRED STOCK
Pursuant to the Articles, the Board of Directors of CR US is authorized,
subject to any limitations prescribed by law, to provide for the issuance of
shares of Preferred Stock from time to time in one or more series and to
establish the number of shares to be included in each such series and to fix the
designation, powers, preferences, and relative participating, optional and other
special rights of the shares of each such series and any qualifications,
limitations or restrictions thereof. Because the Board of Directors has such
power to establish the powers, preferences and rights of each series, it may
afford the holders of Preferred Stock preferences, powers and rights (including
voting rights) senior to the rights of the holders of Common Stock. Although CR
US has no current intention to issue shares of Preferred Stock other than the
shares of Class A Preferred that have already been issued, the issuance of such
shares, or the issuance of rights to purchase such shares, could be used to
discourage an unsolicited acquisition proposal.
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For a description of the 37,500 shares Class A Preferred outstanding, see
"Business -- Description of Purchase Transactions -- Description of Class A
Preferred Stock."
PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECTS
The Articles and the Bylaws of CR US contain provisions that could have an
anti-takeover effect. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the Board of Directors and in the
policies formulated by the Board of Directors and to discourage certain types of
transactions which may involve an actual or threatened change of control of CR
US. The provisions are designed to reduce the vulnerability of CR US to an
unsolicited proposal for a takeover of CR US that does not contemplate the
acquisition of all of its outstanding shares or an unsolicited proposal for the
restructuring or sale of all or part of CR US. The provisions are also intended
to discourage certain tactics that may be used in proxy contests. Set forth
below is a description of such provisions in the Articles and the Bylaws. The
Board of Directors has no current plant to formulate or effect additional
measures that could have an anti-takeover effect.
Pursuant to the Articles, directors, other than those, if any, elected by
the holders of Preferred Stock, can be removed from office by the affirmative
vote of the holders of 66 2/3% of the voting power of the then outstanding
shares of capital stock entitled to vote thereon ("Voting Stock"). Vacancies on
the Board of Directors may be filled by the remaining directors without
stockholder approval.
The Articles provide for the Board of Directors to be divided into three
classes, with staggered three-year terms. As a result, only one class of
directors will be elected at each annual meeting of stockholders of CR US with
the other classes continuing for the remainder of their respective three-year
term. The classification of the Board of Directors makes it more difficult to
replace the Board of Directors as well as for another party to obtain control of
the CR US by replacing the Board of Directors. Since the Board of Directors has
the power to retain and discharge officers of CR US, these provisions could also
make it more difficult for existing stockholders or another party to effect a
change in management.
CR US is subject to the provisions of Sections 78.411 -- 78.444 of the
NGCL. In general, Section 78.439 prohibits a publicly-held Nevada corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination in which
the person became an interested stockholder is approved in a prescribed manner.
A "business combination" generally includes, without limitation, a merger,
assets or stock sale, or a transaction resulting in a financial benefit to the
interested stockholder. An "interested stockholder" generally is a person who,
together with affiliates and associates, owns (or within three years prior, did
own) 10% or more of the corporation's outstanding voting stock.
The Articles provide that, except as otherwise provided for with respect to
the rights of holders of Preferred Stock, no action that is required or
permitted to be taken by the stockholders of CR US at any annual or special
meeting of the stockholders may be effected by written consent of the
stockholders in lieu of a meeting of stockholders, unless the action to be
effected by written consent of the stockholders and the taking of such action by
such written consent has been expressly approved in advance by the Board of
Directors. This provision makes it difficult for stockholders to initiate or
effect an action by written consent, and thereby effect an action opposed by the
Board of Directors. The Articles and Bylaws also provide that special meetings
of stockholders may be called only by the Chairman of the Board of CR US or a
majority of the Board of Directors of CR US. In addition, the Bylaws set forth
an advance notice procedure with regard to business to be brought before an
annual meeting of stockholders of CR US.
The Articles further provide that the Board of Directors, by a majority
vote, may adopt, alter, amend or repeal provisions of the Bylaws. However,
stockholders may only adopt, alter, amend or repeal provisions of the Bylaws by
a vote of 66 2/3% or more of the combined voting power of the then outstanding
Voting Stock. In addition, the Articles provide that whenever any vote of Voting
Stock is required by law to amend, alter, repeal or rescind (a "Change") any
provision of the Articles, then, in addition to any affirmative vote required by
law and any vote of the holders of Preferred Stock, a Change must be approved by
at least a majority of the then-outstanding shares of Voting Stock, voting
together as a single class; provided, however, that (i) the
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affirmative vote of 66 2/3% or more of the combined voting power of the
then-outstanding shares of Voting Stock is required to Change certain provisions
of the Articles, including the provisions referred to above relating to
interested stockholder transactions, the filling of vacancies on the Board of
Directors, the removal of directors, the limitations on stockholder action by
written consent, the calling of special meetings by stockholders and the
approval of amendments to CR US's Bylaws (unless such Change was first approved
by at least two-thirds of the then-authorized number of directors) and (ii) if
at such time there exists one or more interested stockholders, such Change must
also be approved by the affirmative vote of the holders of at least a majority
of the combined voting power of the outstanding shares of Voting Stock
beneficially owned by persons other than the interested stockholder or any
affiliate or associate thereof.
Before a change of control of CR US may occur, the Articles require a
stockholder vote. Any Business Combination requires the affirmative vote of the
holders of shares representing at least 66 2/3% of the outstanding shares of
capital stock of CR US entitled to vote on the election of directors. The
provisions of the previous sentence do not apply to any Business Combination if
(1) the Business Combination is approved by majority of the Continuing
Directors; or (2) the Business Combination is with another corporation, a
majority of the outstanding shares of stock of which is owned of record or
beneficially, directly or indirectly, by CR US or its subsidiaries and none of
which is owned by a Related Person; or (3) the form of consideration and minimum
price requirements described below are satisfied: (i) in a Business Combination,
the cash or consideration to be paid to CR US's stockholders is either cash or
the same type of consideration used by the Related Person in acquiring the
largest portion of its shares of CR US's voting capital stock prior to the first
public announcement of the proposed Business Combination; and (ii) the fair
market value per share of such payments to CR US's stockholders in a Business
Combination is at least equal in value to the higher of (x) the highest per
share price (including brokerage commissions, soliciting dealers' fees,
dealer-manager compensation and other expenses, and as appropriately adjusted to
take account of stock splits, reverse stock splits, stock dividends and similar
transactions) paid or agreed to be paid by the Related Person to acquire any
shares of CR US's voting capital stock during the two years prior to the first
public announcement of the proposed Business Combination (the "Announcement
Date") or in the transaction in which the Related Person first became a Related
Person (the date of such transaction herein referred to as the "Determination
Date"), whichever is higher, or (y) the fair market value per share of the
Common Stock on the Announcement Date or on the Determination Date, whichever is
higher.
Pursuant to the Articles, the Board of Directors is also authorized to
issue shares of "blank check" preferred stock that may have the effect of
discouraging an unsolicited acquisition proposal.
SHAREHOLDERS AGREEMENT
In January 1998, CR US and stockholders of CR US entered into a
shareholders agreement (the "Shareholders Agreement"), which the Board of
Directors of CR US had approved in January 1998. The Shareholders Agreement has
terms and conditions related to affiliated transactions, management of the
Company and transfers of Common Stock by the holders of such stock that are
subject to such agreement. The Shareholders Agreement terminates upon the
occurrence of any of the following: (i) upon the written agreement of certain of
the parties to the Shareholders Agreement, (ii) the date CR US closes a firm
underwritten, public offering of its voting equity securities, (iii) the
bankruptcy or insolvency of CR US or (iv) the merger, consolidation or sale of
all or substantially all assets of CR US with or to an unaffiliated third party.
REGISTRATION RIGHTS AGREEMENT
In January 1998, CR US and stockholders of CR US entered into a
registration rights agreement (the "Registration Rights Agreement"), which the
Board of Directors of CR US had approved in January 1998. The Registration
Rights Agreement grants stockholders "piggyback" registration rights,
terminating two years after the initial public offering of CR US's Common Stock,
which contain the customary terms and conditions and exceptions including an
underwriters' cutback. The Registration Rights Agreement also grants the
stockholders demand registration rights whereby one demand to register such
stockholders' shares may be made after 180 days after an initial public offering
of CR US's Common Stock, which demand could be
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initiated by a vote of 51% of the outstanding shares of Common Stock of CR US
that are subject to the Registration Rights Agreement. The terms of such
agreement not related to registration rights will terminate upon an initial
public offering of the Common Stock.
WARRANTS
The Warrants were issued pursuant to a Warrant Agreement (the "Warrant
Agreement"), dated December 5, 1997, between CR US and IBJ Schroder Bank & Trust
Company, as warrant agent (the "Warrant Agent"). A copy of the form of Warrant
Agreement is available to prospective investors as provided under "Available
Information." The following summary of certain provisions of the Warrant
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Warrant Agreement, including the definitions therein of certain
terms used below.
General. Each Warrant, when exercised, entitles the holder thereof to
receive fully paid and non-assessable shares of Common Stock of CR US, par value
$.001 per share (the "Warrant Shares") at an exercise price of $.01 per share,
subject to adjustment (the "Exercise Price"). The Exercise Price and the number
of Warrant Shares are both subject to adjustment in certain cases referred to
below. The Warrants entitle the holders thereof to purchase in the aggregate
1,869,962 Warrant Shares, representing approximately 15% of CR US's Common Stock
on a fully diluted basis as of the consummation of the Private Offering (without
giving effect to the Initial Purchaser Warrants and the Stock Payment). See
"Private Offering."
The Warrants are exercisable at any time on or after the earlier to occur
of (i) June 30, 2000, (ii) the occurrence of a Change of Control and (iii) the
date that is 180 days after the consummation of a Public Equity Offering (the
"Exercise Commencement Date"). Notwithstanding the foregoing, if the Company
consummates a Public Equity Offering prior to June 30, 2000, the Exercise
Commencement Date shall be the earlier of the occurrence of a Change of Control
or the date that is 180 days after the consummation of such Public Equity
Offering. Unless exercised, the Warrants will automatically expire on December
1, 2004 (the "Expiration Date"). CR US will give notice of expiration not less
than 90 and not more than 120 days prior to the Expiration Date to the
registered holders of the then outstanding Warrants. If CR US fails to give such
notice, the Warrants will not expire until 90 days after CR US gives such
notice.
The Warrants may be exercised by surrendering to CR US the warrant
certificates evidencing the Warrants to be exercised with the accompanying form
of election to purchase properly completed and executed, together with payment
of the Exercise Price. Payment of the Exercise Price may be made (i) in the form
of cash or by certified or official bank check payable to the order of CR US,
(ii) by tendering Notes having a principal amount at the time of tender equal to
the Exercise Price, (iii) by tendering Warrants having a fair market value equal
to the Exercise Price, or (iv) any combination of cash, Notes or Warrants. Upon
surrender of the Warrant certificate and payment of the Exercise Price, CR US
will deliver or cause to be delivered, to or upon the written order of such
holder, stock certificates representing the number of whole Warrant Shares to
which such holder is entitled. If less than all of the Warrants evidenced by a
warrant certificate are to be exercised, a new warrant certificate will be
issued for the remaining number of Warrants.
No fractional Warrant Shares will be issued upon exercise of the Warrants.
CR US will pay to the holder of the Warrant at the time of exercise an amount in
cash equal to the current market value of any such fractional Warrant Share less
a corresponding fraction of the Exercise Price.
The holders of the Warrants have no right to vote on matters submitted to
the stockholders of CR US and have no right to receive dividends. The holders of
the Warrants are not entitled to share in the assets of CR US in the event of
the liquidation, dissolution or winding up of CR US. In the event a bankruptcy
or reorganization is commenced by or against CR US, a bankruptcy court may hold
that unexercised Warrants are executory contracts which may be subject to
rejection by CR US with approval of the bankruptcy court, and the holders of the
Warrants may, even if sufficient funds are available, receive nothing or a
lesser amount as a result of any such bankruptcy case than they would be
entitled to if they had exercised their Warrants prior to the commencement of
any such case.
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In the event of taxable distribution to holders of Common Stock that
results in an adjustment to the number of Warrant Shares or other consideration
for which a Warrant may be exercised, the holders of the Warrants may, in
certain circumstances, be deemed to have received a distribution subject to
United States federal income tax as a dividend. See "Taxation -- United States
Federal Income Tax Considerations."
Adjustments. The number of Warrant Shares purchasable upon exercise of
Warrants and the Exercise Price are subject to adjustment in certain events
including: (i) the issuance by CR US of dividends (and other distributions) on
its Common Stock payable in Common Stock, (ii) subdivisions, combinations and
reclassifications of Common Stock, (iii) the issuance to all holders of Common
Stock of rights, options or warrants entitling them to subscribe for Common
Stock or securities convertible into, or exchangeable or exercisable for, Common
Stock within 60 days after the record date for such issuance of rights, options
or warrants at an offering price (or with an initial conversion, exchange or
exercise price plus such offering price) which is less than the current market
price per share (as defined) of Common Stock, (iv) the distribution to all
holders of Common Stock of any of CR US's assets (including cash), debt
securities, preferred stock or any rights or warrants to purchase any such
securities (excluding those rights and warrants referred to in clause (iii)
above), (v) the issuance of shares of Common Stock for a consideration per share
less than the current market price per share (excluding securities issued in
transactions referred to in clauses (i) through (iv) above), (vi) the issuance
of securities convertible into or for Common Stock for a conversion or exchange
price less than the current market price for a share of Common Stock (excluding
securities issued in transactions referred to in clauses (iii) or (iv) above),
and (vii) certain other events that could have the effect of depriving holders
of the Warrants of the benefit of all or a portion of the purchase rights
evidenced by the Warrants.
No adjustment in the Exercise Price is required unless such adjustment
would require an increase or decrease of at least 1% in the Exercise Price;
provided, however, that any adjustment that is not made will be carried forward
and taken into account in any subsequent adjustment. In addition, CR US may at
any time reduce the Exercise Price to any amount (but not less than the par
value of the Common Stock) for any period of time (but not less than 20 business
days) deemed appropriate by the Board of Directors of CR US.
In the case of certain consolidations or mergers of CR US, or the sale of
all or substantially all of the assets of CR US to another corporation, each
Warrant will thereafter be exercisable for the right to receive the kind and
amount of shares of stock or other securities or property to which such holder
would have been entitled as a result of such consolidation, merger or sale had
the Warrants been exercised immediately prior thereto.
Amendment. From time to time, CR US and the Warrant Agent, without the
consent of the holders of the Warrants, may amend or supplement the Warrant
Agreement for certain purposes, including curing defects or inconsistencies or
making any change that does not materially adversely affect the rights of any
holder. Any amendment or supplement to the Warrant Agreement that has a material
adverse effect on the interests of the holders of the Warrants will require the
written consent of the holders of a majority of the then outstanding Warrants
(excluding Warrants held by CR US or any of its Affiliates). The consent of each
holder of the Warrants affected will be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided in the Warrant Agreement).
Reservation of Shares. CR US has authorized and reserved for issuance and
will at all times keep available such number of Warrant Shares as will be
issuable upon the exercise of all outstanding Warrants. Such shares of Common
Stock, when paid for and issued, will be duly and validly issued, fully paid and
non-assessable, free of preemptive rights and free from all taxes, liens,
charges and security interests with respect to the issuance thereof.
Registration Rights; Liquidated Damages. Subject to applicable federal and
state securities laws, CR US is required under the terms of a warrant shares
registration rights agreement (the "Warrant Shares Registration Rights
Agreement") to file and use its best efforts to make effective by the Exercise
Commencement Date a shelf registration statement (the "Warrant Shares Shelf
Registration Statement") on the appropriate form covering the issuance of the
Warrant Shares upon the exercise of Warrants and to keep
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such registration statement effective for a period of 180 days; provided,
however, that CR US shall not be required to make effective the Warrant Shares
Shelf Registration Statement until the date that is one year after the Issue
Date, and any holders desiring to exercise their Warrants prior to such date (to
the extent they are permitted to do so under the terms of the Warrant Agreement)
will be able to effect such exercise only if an exemption from the registration
requirements of the Securities Act is available to such holders. In addition, CR
US, under certain circumstances, is required under the terms of the Warrant
Shares Registration Rights Agreement to file and use its best efforts to make
effective a shelf registration statement on an appropriate form under the
Securities Act covering the resale of Warrant Shares upon the exercise of the
Warrants by broker-dealers. Holders of the Initial Purchaser Warrants are
entitled to registration rights under the Warrant Shares Registration Rights
Agreement.
If CR US does not comply with its registration obligations under the
Warrant Shares Registration Rights Agreement, it are required to pay liquidated
damages to holders of the Warrants under certain circumstances. Notwithstanding
the foregoing, in no event shall the Warrant Shares Registration Statement be
filed prior to the date on which the Exchange Offer Registration Statement is
declared effective.
Purchasers of Units will be able to exercise the Warrants only if a
registration statement relating to the Warrant Shares underlying the Warrants is
then in effect or if the exercise of such Warrant is exempt from registration
requirements of the Act and only if such securities are qualified for sale or
exempt from qualification under the applicable securities laws of the states in
which the various holders of the Warrants reside. CR US is unable to issue
Warrant Shares to those persons desiring to exercise their Warrants if a
registration statement covering the securities issuable upon the exercise of the
Warrants is not effective (unless the sale and issue of shares upon the exercise
of such Warrant is exempt from the registration requirements of the Act) or if
such securities are not qualified or exempt from qualification in the states in
which the holders of the Warrants reside. See "Risk Factors -- Factors Relating
to the Securities -- Current Registration Required to Exercise Warrants."
In addition, if CR US proposes after the Exercise Commencement Date to
register any of its Common Stock under the Securities Act, either for its own
account or for the account of other security holders, the holders of the
Warrants and the Warrant Shares are entitled to notice of the registration and
are entitled to include, at CR US's sole expense (excluding underwriter
discounts), all or any portion of their Warrants and/or Warrant Shares therein,
subject to pro rata cut-back provisions in the event that the managing
underwriter in any underwritten offering determines that the inclusion of such
Warrants and/or Warrant Shares and any other securities entitled to piggyback
registration rights would adversely affect the offering being registered.
TAXATION
The following summary is based on tax laws of the United States and Mexico
as in effect on the date of this Prospectus, and is subject to changes in United
States or Mexican law, including changes that could have retroactive effect. The
following summary does not take into account or discuss the tax laws of any
country other than the United States or Mexico and does not purport to be a
comprehensive description of all the tax considerations that may be relevant to
a decision to purchase the Units. Prospective purchasers in all jurisdictions
are advised to consult their own tax advisors as to the United States, Mexican
or other tax consequences of the purchase, ownership and disposition of the
Securities.
MEXICAN TAX CONSIDERATIONS
Interest. Under Mexico's income tax law, payments of interest made by CR
Mexico in respect of the Notes (including payments of principal in excess of the
issue price of such Notes, which, under Mexican law are deemed to be interest)
to a Holder that is not resident in Mexico (as described below) for tax purposes
(a "non-resident Holder"), will generally be subject to a Mexican withholding
tax assessed at a rate of 15%, if as expected, the Notes are registered in the
Special Section of the Mexican National Registry of Securities and
Intermediaries (the "Special Section of the Registry") maintained by the Mexican
National Banking and Securities Commission. Pursuant to current legislation,
such rate has been reduced to 4.9% (the "Reduced
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Rate") for payments of interest made to a non-resident Holder, if (i) the Notes
are registered in the Special Section of the Registry, (ii) the non-resident
Holder is the effective beneficiary of the interest paid, (iii) such
non-resident Holder resides in a country with which Mexico has entered a treaty
for the avoidance of double taxation which is in effect, and (iv) all the
requirements specified in such treaty for the application of lower tax rates
therein set-forth are satisfied.
Under Administrative Rule 3.32.11(the "Reduced Rate Rule," which Rule will
become Rule 3.32.9 beginning April 1, 1998, is expected to remain in effect
until March 31, 1999, payments of interest made by CR Mexico in respect of the
Notes to a non-resident Holder, regardless of the place of residence or the tax
regime applicable to said non-resident Holder ultimate beneficiary of the
interest, will be subject to withholding taxes imposed at the Reduced Rate, if
(i) the Notes, as expected, are registered in the Special Section of the
Registry and copies of approval of such registration and other information of
the Offering are provided to the Ministry of Finance and Public Credit, (ii) CR
Mexico timely files with the Ministry of Finance and Public Credit, after
completion of the transaction described in this Prospectus, certain information
relating to the Offering of the Notes, (iii) CR Mexico quarterly files with the
Ministry of Finance and Public Credit, information regarding interest paid in
the immediately preceding quarter, representing that no party related to CR
Mexico (as such terms are detailed in the Reduced Rate Rule), jointly or
individually, directly or indirectly, is the effective beneficiary of more than
5% of the aggregate amount of each such interest payment, and (iv) CR Mexico
maintains records which evidence compliance with item (iii) above. CR Mexico
expects that such conditions will be met and, accordingly, expects to withhold
Mexican tax from interest payments on the Notes made to non-resident Holder at
the Reduced Rate during the effectiveness of the Reduced Rate Rule. Although no
assurances can be given that the Reduced Rate Rule will be extended beyond March
31, 1999, or that an equivalent rule will be issued and become effective. Under
such circumstance, the tax rate described above should be applicable since the
Reduced Rate would be in effect until January 7, 1999.
Under an income tax treaty between the United States and Mexico (the "Tax
Treaty"), the Mexican withholding tax rate applicable to interest payments on
the Notes made to U.S. Holders (as defined below) which are eligible for
benefits under the Tax Treaty, generally will be limited to either (i) 15%
generally or (ii) 10% if the Notes are considered to be "regularly and
substantially traded on a recognized securities market" or "loans granted by
banks, including investment banks and savings banks, and insurance companies"
within the meaning of the Tax Treaty (which 10% rate will be reduced to 4.9%
beginning on January 1, 1999). However, as of the date of this Prospectus, the
Tax Treaty is not expected generally to have any material effect on the Mexican
tax consequences described herein, because, as described above, under the Law as
currently in effect with respect to a U.S. Holder that meets the Reduced Rate
Requirements described above, CR Mexico will be entitled to withhold taxes in
connection with interest payments under the Notes at the Reduced Rate. From 1999
and beyond, prospective purchasers should consult his/her tax advisor as to the
application of the Tax Treaty.
Payments of interest made by CR Mexico with respect to the Notes to
non-Mexican pension or retirement funds will be exempt from Mexican withholding
taxes, provided that any such fund is (i) duly incorporated pursuant to the laws
of its country of origin, (ii) exempt from income tax in such country, (iii)
registered with the Ministry of Finance and Public Credit for that purpose and
(iv) if Mexican pensions or retirement funds are reciprocally exempt from the
payment of withholding taxes in the jurisdiction of incorporation, of any such
fund.
The Issuers have agreed, subject to specified exceptions and limitations,
to pay Additional Amounts to the Holders of the Notes in respect of the Mexican
withholding taxes mentioned above. If the Issuers pay Additional Amounts in
respect of such Mexican withholding taxes, any refunds of such Additional
Amounts will generally be for the account of the Company. See "Description of
Notes -- Additional Amounts."
Holders or beneficial owners of Notes may be requested, subject to
specified exceptions and limitations, to provide certain information or
documentation necessary to enable the Issuers to establish the appropriate
Mexican withholding tax rate applicable to such Holder or beneficial owners. If
the specified information or documentation concerning the Holder or beneficial
owners when requested, is not provided on a timely basis,
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the obligations of the Issuers to pay Additional Amounts will be limited as set
forth under "Description of Notes -- Additional Amounts."
Principal. Under existing Mexican law and regulations, a non-resident
Holder will not be subject to any Mexican taxes in respect of payments of
principal made by the Issuers in connection with the Notes.
Taxation of the Capital Gains. The sale or other disposition of Notes by a
non-resident Holder will not be subject to Mexican taxes.
Other Mexican Taxes. A non-resident Holder will not be liable for estate,
gift, inheritance or similar taxes with respect to its holdings of the Notes.
There are no Mexican stamp, issue, registration or similar taxes payable by a
non-resident Holder with respect to the Notes.
Tax Definitions. For purposes of Mexican taxation, an individual is a
resident of Mexico if he or she has established his or her residence in Mexico,
unless he or she has resided in another country for more than 183 days, whether
consecutive or not, during a calendar year and can demonstrate that he or she
became a resident of that other country for tax purposes. A Mexican national is
presumed to be a resident of Mexico unless he or she demonstrates the contrary.
A legal entity is a resident of Mexico if it is incorporated under Mexican law.
If a foreign legal entity or individual is deemed to have a permanent
establishment or fixed base in Mexico for tax purposes, all income attributable
to such permanent establishment or fixed base will be subject to Mexican taxes,
in accordance with applicable tax laws.
UNITED STATES FEDERAL INCOME TAXATION CONSIDERATIONS
The following is a summary of the principal U.S. Federal income tax
consequences of the acquisition, ownership and disposition of Units by a U.S.
holder thereof. For purposes of this summary, a "U.S. Holder" is a holder of
Units who is a citizen or resident of the United States, a corporation or
partnership organized in or under the laws of the United States or any political
subdivision thereof or therein, an estate the income of which is subject to U.S.
Federal income taxation regardless of its source or a trust (i) the
administration over which a U.S. court can exercise primary supervision and (ii)
all of the substantial decisions of which one or more U.S. persons have the
authority to control. This summary does not address any U.S. Federal income tax
consequences of the acquisition, ownership and disposition of Units by any
holder of Units that is not a U.S. Holder, and any such prospective holder
should consult its tax advisor with respect to such tax consequences. This
summary applies only to Notes and Warrants held as capital assets and does not
address aspects of U.S. Federal income taxation that may be applicable to
holders that are subject to special tax rules, such as insurance companies,
tax-exempt organizations, banks or dealers in securities or currencies or to
holders that will hold a Unit as a position in a "straddle" or as part of a
"hedging" or "conversion" transaction for U.S. Federal income tax purposes or
that have a "functional currency" other than the U.S. dollar. In addition, this
summary assumes that a U.S. holder will not elect to treat a Unit and a hedge or
combination of hedges with respect thereto as an integrated transaction for U.S.
Federal income tax purposes. Each prospective purchaser should consult its tax
advisor with respect to the U.S. Federal, state, local and foreign tax
consequences of acquiring, holding and disposing of Units.
Allocation of Purchase Price Among Notes and Warrants. For U.S. federal
income tax purposes, each Unit will be treated as an investment unit, consisting
of a Note and a Warrant. The issue price of the Unit will be the first price at
which a substantial portion of the Units are sold in the Offering (excluding
sales to bond houses, brokers or similar persons acting in the capacity of
underwriter, placement agent or wholesaler). The issue price of each Unit is
required to be allocated between the Notes and Warrants based upon their
relative fair market values. That allocation will be used to determine the U.S.
holders' initial tax basis in the Notes, and (as described below) the issue
price of the Notes. Based on the estimate of the relative fair market values of
the Notes and Warrants on the date the Offering was priced, the Company has
determined that $906.50 of the issue price of each Unit is allocable to the Note
and $93.50 of such price is allocable to the Warrant comprising each Unit. The
Company's allocation will not be binding on the IRS, which may challenge such
allocation. However, a U.S. Holder is bound by the Company's allocation, unless
a disclosure statement is attached to the timely filed U.S. federal income tax
return of the U.S. Holder for its taxable year in which it acquires the Units.
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EXCHANGE OFFER
The Company believes this offer to exchange Outstanding Notes for Exchange
Notes pursuant to the Exchange Offer should not constitute a material
modification of the terms of the Outstanding Notes. Thus, pursuant to the
Exchange Offer U.S. holders of the Notes should not recognize taxable gain or
loss upon the exchange of the Notes for the Registered Notes. For purposes of
determining gain or loss upon the subsequent sale or exchange of the Notes, a
Holder's basis in the Notes should be the same as such Holder's basis in the
Registered Notes exchanged therefor. In addition, Holders should be considered
to have held the Notes from the time of the original acquisition of the
Registered Notes.
Effect of Change of Control. Upon a Change of Control, the Company is
required to offer to redeem all outstanding Notes for a price equal to 101% of
the principal amount thereof plus accrued and unpaid interest. Under the
Regulations, such Change of Control redemption requirements will not affect the
yield or maturity date of the Notes unless, based on all the facts and
circumstances of the Issue Date, it was more likely than not that a Change of
Control giving rise to the redemption would occur. The Company will not treat
the Change of Control redemption provisions of the Notes as affecting the
calculation of the yield to maturity of any Note.
Optional Redemption. The Company, at its option, may redeem part or all of
the Notes at any time on or after December 1, 2000, at the redemption prices set
forth herein, plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of redemption. In addition, the Company may, at its option, redeem
up to 35% of the aggregate principal amount of the Notes at a redemption price
equal to 113% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, from the net cash proceeds of a Public Equity
Offering, provided that at least $65.0 million in principal amount of the Notes
remains outstanding. The Regulations provide that, for purposes of calculating
yield and maturity, an issuer will be treated as exercising any such option if
its exercise would lower the yield of the debt instrument. A redemption of Notes
at the optional redemption prices, however, would increase the effective yield
of the debt instrument as calculated from the Issue Date. The Company does not
currently intend to exercise such options with respect to the Notes and, in
accordance with the Regulations, as of the Issue Date, the optional redemption
provisions will not be taken in account in calculating the yield to maturity of
the Notes.
Original Issue Discount. The Notes will be issued with original issue
discount ("OID") for U.S. federal income tax purposes. The amount of OID on a
Note will equal the excess of the principal amount due at maturity on the Note
over its "issue price." The "issue price" of a Note will be that portion of the
issue price of the Unit that is allocable to the Note under the rules described
in "-- Allocation of Purchase Among Notes and Warrants," above.
Each U.S. Holder (whether reporting on the cash or accrual basis of
accounting for tax purposes) will be required to include in taxable income for
any particular taxable year the daily portion of the OID described in the
preceding paragraph that accrues on the Note for each day during the taxable
year on which such U.S. Holder holds the Note, and in advance of the receipt of
the cash to which such OID is attributable. The daily portion is determined by
allocating to each day of an accrual period (generally, in the case of the
Notes, the initial period beginning on the Issue Date and ending on June 1, 1998
and each subsequent six-month period thereafter ending on June 1 and December 1)
a pro rata portion of the OID allocable to such accrual period. The amount of
OID allocable to an accrual period equals the excess of (i) the product of the
"adjusted issue price" of the Note at the beginning of the accrual period and
the Note's "yield to maturity" over (ii) the amount of any stated interest
payments allocable to such accrual period. The "yield to maturity" of the Notes
is the discount rate that, when applied to all payments due under the Notes
(including stated interest payments), results in a present value equal to the
issue price of the Notes. The "adjusted issue price" of a Note at the beginning
of an accrual period will equal its issue price, increased by the aggregate
amount of OID that has accrued on the Note in all prior accrual periods, and
decreased by any principal payments made on the Note during all prior accrual
periods.
Interest. Stated interest paid on a Note will be includible in a U.S.
Holder's gross income as ordinary interest income in accordance with U.S.
Holder's usual method of tax accounting. If Liquidated Damages are paid,
although not free from doubt, such payment should be taxable to a U.S. Holder as
ordinary income at
116
<PAGE> 125
the time it accrues or is received in accordance with such holder's regular
method of accounting. It is possible, however, that the Internal Revenue Service
may take a different position, in which case the timing and amount of income
inclusion may be different. For purposes of the following discussion, the term
"interest" includes Liquidated Damages.
Although not free from doubt, interest (including any OID and market
discount for the same accrued period) paid by CR Mexico with respect to the
Notes will likely be treated as foreign source income for U.S. Federal income
tax purposes. If interest (including any OID and market discount for the same
accrued period) on the Notes is paid by CR US, although not free from doubt, it
will likely be treated as U.S. source income, unless CR US meets the Active
Foreign Business Test. The "Active Foreign Business Test" is met if at least 80%
of the gross income of CR US and its direct or indirect subsidiaries during a
certain testing period is non-U.S. source income attributable to the active
conduct of a trade or business outside the United States. Because of the factual
nature of the Active Foreign Business Test, it cannot be predicted with
certainty whether or not such test would be met in the future. Each holder of a
Note is urged to consult its own tax advisor regarding the sourcing of the
interest paid by CR US or CR Mexico, as the case may be.
Market Discount. If a U.S. Holder purchases a Note for less than the stated
redemption price at maturity (the sum of all payments on the Note other than
qualified stated interest), the difference is considered "market discount,"
unless such difference is de minimis. A discount will be considered de minimis
if it is less than one-fourth ( 1/4) of one percent of the Note Issue Price
multiplied by the number of complete years to maturity (after the Holder
acquires the Note). Under the market discount rules, any gain realized by the
U.S. Holder on a taxable disposition of a Note having "market discount," as well
as on any partial principal payment made with respect to such Note, will be
treated as ordinary income to the extent of the then "accrued market discount"
of the Note. An overview of the rules concerning the calculation of "accrued
market discount" is set forth in the paragraph immediately below. In addition,
the U.S. Holder of such Note may be required to defer the deduction of all or a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry a Note.
Any market discount will accrue ratably from the date of acquisition to the
maturity date of the Note, unless the U.S. Holder elects, irrevocably, to accrue
market discount on a constant interest rate method. The constant interest rate
method generally accrues interest at times and in amounts equivalent to the
result which would have occurred had the market discount been original issue
discount computed from the U.S. Holder's acquisition of the Note through the
maturity date. The election to accrue market discount on a constant interest
rate method is irrevocable but may be made separately as to each Note held by
the U.S. Holder. Accrual of market discount will not cause the accrued amounts
to be included currently in a U.S. Holder's taxable income, in the absence of a
disposition of, or principal payment on, the Note. However, a U.S. Holder of a
Note may elect to include market discount in income currently as it accrues on
either a ratable or constant interest rate method. In such event, interest
expense relating to the acquisition of a Note which would otherwise be deferred
would be currently deductible to the extent otherwise permitted by the Code. The
election to include market discount in income currently, once made, applies to
all market discount obligations acquired by such holder on or after the first
day of the first taxable year to which the election applies, and may not be
revoked without the consent of the Internal Revenue Service. Accrued market
discount which is included in a U.S. Holder's gross income will increase the
adjusted tax basis of the Note in the hands of the U.S. Holder.
Amortization of Bond Premium. If a subsequent U.S. Holder acquires a Note
for an amount which is greater than the amount payment at maturity, such holder
will be considered to have purchased such Note with "amortizable bond premium"
equal to the amount of such excess. The U.S. Holder may elect to amortize the
premium, using a constant yield method employing six-month compounding, over the
period from the acquisition date to the maturity date of the Note. The "amount
payable at maturity" will be determined as of an earlier call date, using the
call price payable on such earlier date, if the combination of such earlier date
and call price will produce a smaller amortizable bond premium than would result
from using the scheduled maturity date and its amount payable. If an earlier
call date is used and the Note is not called, the Note will be treated as having
matured on such earlier call date and then as having been reissued on such
117
<PAGE> 126
date for the amount so payable. Amortized amounts may be offset only against
interest payments due under the Note and will reduce the U.S. Holder's adjusted
tax basis in the Note to the extent so used.
Once made, an election to amortize and offset interest on bonds, such as
the Notes, will apply to all bonds in respect of which the election was made
that were owned by the taxpayer on the first day of the taxable year to which
the election relates and to all bonds of such class or classes subsequently
acquired by such taxpayer. Such election may only be revoked with the consent of
the Service. If a U.S. Holder of a Note does not elect to amortize the premium,
the premium will decrease the gain or increase the loss which would otherwise be
recognized upon disposition of the Note.
Sale, Exchange or Retirement. Upon the sale, exchange or retirement of a
Note, a U.S. Holder will recognize taxable gain or loss equal to the difference,
if any, between the amount realized on the sale, exchange or retirement (other
than amounts attributable to accrued but unpaid interest or OID) and the U.S.
Holder's adjusted tax basis in such Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal the issue price of such Note, increased by any OID
on the Notes previously included in such Holder's income, and reduced by any
payments (other than payments of qualified stated interest) previously made on
such Note. Such gain or loss generally will be capital gain or loss, and will be
long-term capital gain or loss if the Note has been held for more than one year
at the time of such sale, exchange or retirement. Long-term capital gain
realized by an individual U.S. Holder is generally subject to a maximum tax rate
of 28% in respect of property held for more than one year and to the maximum
rate of 20% in respect of property held in excess of 18 months. Any gain on a
sale, exchange or retirement of a Note generally will be treated as U.S. source
income. It is currently unclear whether any loss realized by a U.S. Holder would
be treated as U.S. source or foreign source.
Effect of Mexican Withholding Taxes. As described above under "-- Mexican
Tax Considerations," the payment of interest by CR Mexico with respect to the
Notes currently will be subject to a Mexican withholding tax. U.S. Holders of
Notes will be required for U.S. Federal income tax purposes to include in their
U.S. taxable income (in accordance with their usual method of tax accounting)
the amount of all Mexican taxes being withheld by the Issuers, along with
payments of interest with respect to the Notes. In addition, the Additional
Amounts that the Issuers are required to pay in respect of such Mexican
withholding taxes must also be included in the U.S. Holder's taxable income (in
accordance with its usual method of tax accounting). Mexican withholding taxes
paid by the Issuers on behalf of a U.S. Holder will be eligible for credit
against such U.S. Holder's U.S. Federal income tax liability, subject to
generally applicable limitations and, at the election of the U.S. Holder, for
deduction in computing such U.S. Holder's taxable income. For purposes of
computing the foreign tax credit, interest paid on a Note generally will
constitute "passive income" or, in the case of certain holders, "financial
services income," unless Mexican withholding taxes are imposed at a rate of 5%
or more, in which case interest paid on a Note generally will be considered
"high withholding tax interest." U.S. Holders are urged to consult their tax
advisors regarding the effect of Mexican withholding taxes and of the payment of
Additional Amounts on the amounts includible in the U.S. taxable income, as
described above, and the availability and the amount of any tax credit
attributable to such Mexican taxes.
Tax Treatment of Warrants. A. U.S. Holder will recognize gain or loss upon
the sale, redemption, lapse or other taxable disposition of a Warrant in an
amount equal to the difference between the amount of cash and the fair market
value of other property received (if any) by the U.S. Holder and the U.S.
Holder's tax basis in the Warrant. A U.S. Holder's tax basis in a Warrant will
equal that portion of the issue price of the unit that is allocated to the
Warrant under the rules described in "-- Allocation of Purchase Price Among
Notes and Warrants," above.
The cash exercise of a Warrant will not be taxable to the exercising U.S.
Holder, except with respect to cash, if any, received in lieu of a fractional
share. Although the law is not entirely clear, the surrender of one or more
Warrants in payment of the exercise price of another Warrant will likely result
in taxable gain or loss to the U.S. Holder in an amount equal to the difference
between (i) the amount of the exercise price so paid and (ii) the U.S. Holder's
tax basis in the Warrants used to pay the exercise price. A U.S. Holder will
have a tax basis in the shares of Common Stock received upon exercise of a
Warrant which equals such U.S. Holder's tax
118
<PAGE> 127
basis in the warrant exercised, plus the amount of cash and the U.S. Holder's
tax basis in any Warrants used to pay the exercise price, plus the amount of
gain (or minus the amount of loss) recognized by the U.S. Holder on any Warrants
used to pay the exercise price, as adjusted for cash (if any) received in lieu
of a fractional share. A U.S. holder will have a holding period in shares of
Common Stock acquired upon exercise of a Warrant which commences on the day
after the date of exercise of the Warrant.
An adjustment to the exercise price or conversion ratio of the Warrants, or
the failure to make such adjustments, may in certain circumstances result in
constructive distributions to the holders of the Warrants which could be taxable
as dividends under Section 305 of the Code. In such event, a holder's tax basis
in the Warrant would be increased by the amount of any such dividend.
If the exercise price of the Warrants is a nominal amount, it may be
possible that the Warrants will be considered to be constructively exercised for
federal income tax purposes on the day on which the Warrants first become
exercisable or possibly on the day of issuance. In that event, (i) no gain or
loss will be recognized to a holder on such deemed exercise or upon actual
exercise of the Warrants; (ii) the adjusted basis of the common stock deemed
received for federal income tax purposes on the constructive exercise of the
Warrants will be equal to the adjusted basis in the Warrants until the Warrants
are actually exercised (and the exercise price paid) at which time such basis
would be increased by the exercise price of the Warrants; and (iii) the holding
period of the Common Stock deemed received for federal income tax purposes on
the constructive exercise of the Warrants will begin on the day following the
day of such constructive exercise.
U.S. Backup Withholding Tax and Information Reporting. A 31% backup
withholding tax and information reporting requirement applies to certain
payments of principal of, and interest on, an obligation and to proceeds of the
sale or redemption of an obligation, to certain non-corporate U.S. Holders. The
payor will be required to withhold 31% of any such payment on a Note within the
United States to a U.S. Holder (other than an "exempt recipient," such as a
corporation) if such U.S. Holder fails to furnish its correct taxpayer
identification number or otherwise fails to comply with, or establish an
exemption from, such backup withholding requirements.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE NOTEHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS
TO THE PARTICULAR TAX CONSEQUENCES TO THE PROSPECTIVE NOTEHOLDER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR NON-U.S. INCOME TAX LAWS AND
ANY RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.
LEGAL MATTERS
Certain legal matters regarding the Notes will be passed upon for the
Issuers by Akin, Gump, Strauss, Hauer & Feld, L.L.P., Houston, Texas. Julien R.
Smythe, an associate of Akin, Gump, Strauss, Hauer & Feld, L.L.P. owns 10,000
shares of CR US Common Stock. Certain other matters in connection with Mexican
law will be passed upon by Santamarina y Steta, S.C. for the Issuers.
EXPERTS
The consolidated balance sheets of Club Regina Resorts, Inc. as of December
31, 1997 and August 18, 1997 and the consolidated statements of operations,
shareholders' investment and cash flows for the year ended December 31, 1997,
for the period from January 1, 1997 through August 18, 1997 and for the period
August 19, through December 31, 1997; the consolidated balance sheets of Club
Regina Resorts Capital, S. de R.L. de C.V. at December 31, 1997 and August 18,
1997 and the consolidated statements of income and retained earnings and cash
flows for the period August 19, 1997 through December 31, 1997; the statements
of operations and cash flows of Desarrollos Turisticos Bancomer, S.A. de C.V.
and Subsidiaries for the years ended December 31, 1996 and 1995; and the
statements of operations and cash flows of Desarrollos Turisticos Bancomer, S.A.
de C.V. and Subsidiaries for the period from January 1, 1997 to August 18, 1997,
appearing in this Registration Statement have been audited by Ernst & Young LLP,
independent certified public
119
<PAGE> 128
accountants, as set forth in their reports thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
DEFINED TERMS
ARDA -- the American Resort Development Association.
Member -- an owner of a Vacation Interval.
RCI -- Resort Condominiums International, Inc.
Remainder Rights -- the interests in the Company's vacation ownership
condominium units held under the Trust Agreements which allow the owners of such
interest to use such condominium units after the 50 year right to use period
held by the Operating Subsidiaries. See "The Business -- Description of Purchase
Transactions -- Description of Trusts."
Remainder Disposition -- CR US's contribution of the Remainder Rights to an
unaffiliated charitable institution such that the audited consolidated financial
statements of the Company for the period ended December 31, 1997 and for future
periods use the full accrual method of accounting in accordance with Statement
of Financial Accounting Standards No. 66 "Accounting for Sales of Real Estate"
rather than the installment method of accounting. See "Description of Notes --
Disposition of Remainder Interest."
Vacation Interval -- the right to use a fully-furnished vacation residence
for one week each year or in alternating years, which right may only be
exercised by Class B shareholders of Club Regina, S.A. de C.V., a Mexican
corporation and an indirect subsidiary of CR US ("CR"), upon payment of an
annual service fee to CR.
UDI -- an obligation denominated in pesos, the value of which is adjusted
by the same percentage as the percentage change of the Indice Nacional de
Precios al Consumidor, or the Mexican Consumer Price Index. Upon the
establishment of the UDI, one UDI was worth one Peso.
Vacation Interval Receivable -- the obligation to pay the remaining portion
of the purchase price of a Vacation Interval. Almost all Vacation Interval
Receivables are evidenced by a promissory note. Upon repayment of such note, the
Member is entitled to receive a Class B Share of CR.
120
<PAGE> 129
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CLUB REGINA RESORTS, INC.
Report of Independent Certified Public Accountants........ F-2
Consolidated Balance Sheets as of December 31, 1997 and
August 18, 1997........................................ F-3
Consolidated Statement of Operations for the year ended
December 31, 1997, for the period January 1, 1997
through August 18, 1997 and for the period August 19,
1997 through December 31, 1997......................... F-4
Consolidated Statement of Shareholders' Investment for the
year ended December 31, 1997, for the period January 1,
1997 through August 18, 1997 and for the period August
19, 1997 through December 31, 1997..................... F-5
Consolidated Statement of Cash Flows for the year ended
December 31, 1997 for the period January 1, 1997
through August 18, 1997 and for the period August 19,
1997 through December 31, 1997......................... F-6
Notes to Consolidated Financial Statements................ F-7
CR RESORTS CAPITAL, S. DE R.L. DE C.V. (A FINANCE
SUBSIDIARY)
Report of Independent Certified Public Accountants........ F-18
Consolidated Balance Sheets as of December 31, 1997 and
August 18, 1997........................................ F-19
Consolidated Statement of Income and Retained Earnings for
the period August 19, 1997 through December 31, 1997... F-20
Consolidated Statement of Cash Flows for the period August
19, 1997 through December 31, 1997..................... F-21
Notes to Consolidated Financial Statements................ F-22
FINANCIAL STATEMENTS OF PREDECESSOR BUSINESS -- DESARROLLOS
TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
Report of Independent Certified Public Accountants........ F-26
Consolidated Statements of Operations for the years ended
December 31, 1996 and 1995............................. F-27
Consolidated Statement of Cash Flows for the years ended
December 31, 1996 and 1995............................. F-28
Notes to Consolidated Financial Statements................ F-29
Report of Independent Certified Public Accountants........ F-35
Consolidated Statement of Operations for the Period
January 1, 1997 through August 18, 1997................ F-36
Consolidated Statement of Cash Flows for the Period
January 1, 1997 through August 18, 1997................ F-37
Notes to Consolidated Financial Statements................ F-38
</TABLE>
F-1
<PAGE> 130
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders
Club Regina Resorts, Inc.
We have audited the accompanying consolidated balance sheets of Club Regina
Resorts, Inc. and subsidiaries (the Company) as of December 31 and August 18,
1997 and the related consolidated statements of operations, shareholders' equity
and cash flows for the year ended December 31, 1997, for the period January 1,
1997 through August 18, 1997 and for the period August 19, 1997 through December
31, 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Club Regina
Resorts, Inc. and subsidiaries at December 31, 1997 and August 18, 1997, and the
consolidated results of their operations and their cash flows for the year ended
December 31, 1997, for the period January 1, 1997 through August 18, 1997 and
for the period August 19, 1997 through December 31, 1997 in conformity with
generally accepted accounting principles.
Miami, Florida
March 20, 1998 except for
the second and third paragraphs
of Note 10 as to which the
date is March 27, 1998
F-2
<PAGE> 131
CLUB REGINA RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 18,
1997 1997
------------ -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 8,994,591 $ 2,055,799
Vacation interval receivables and other trade receivables,
net....................................................... 39,951,550 37,180,278
Reimbursements receivable from Starwood Lodging Corporation
for shared acquisition costs.............................. 1,876,956 1,300,000
Inventories................................................. 964,301 806,519
Refundable Mexican taxes.................................... 3,716,381 742,227
Office furniture and equipment.............................. 1,518,194 776,240
Land held for vacation ownership development................ 12,279,821 12,237,328
Investment in a 50% held company............................ 2,474,947 2,486,956
Cost of unsold vacation ownership intervals and related club
memberships............................................... 31,611,780 33,804,862
Hotel asset management agreement............................ 4,000,000 4,000,000
Deferred loan costs, net of $440,348 of accumulated
amortization.............................................. 7,900,315 --
Prepaid and other assets.................................... 1,575,085 359,201
------------ -----------
Total assets $116,863,921 $95,749,410
============ ===========
LIABILITIES AND SHAREHOLDERS' INVESTMENT (DEFICIT)
LIABILITIES
Accounts payable and accrued liabilities.................... $ 7,654,211 $ 3,412,477
Payable to a bank........................................... 1,000,000 82,953,633
Senior Notes Payable, due 2004, net of unamortized original
issue discount of $9,220,025.............................. 90,779,975 --
Notes payable to shareholder................................ -- 1,150,000
Mexican taxes payable....................................... 1,319,079 2,945,873
Unearned services fees...................................... 3,058,883 1,852,852
Subordinated notes payable to shareholders.................. -- 3,750,000
------------ -----------
Total liabilities........................................... 103,812,148 96,064,835
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT (DEFICIT)
Common stock, par value $.001, 45,000,000 shares authorized,
shares issued and outstanding 10,701,000 and 10,100,000,
respectively.............................................. 10,701 10,100
Preferred stock, par value $.001, 5,000,000 shares
authorized, shares issued and outstanding 37,500.......... 38 --
Paid-in capital............................................. 7,045,885 4,275
Common Stock Warrants to purchase 1,869,962 Common shares... 9,331,110 --
Accumulated deficit......................................... (3,335,961) (329,800)
------------ -----------
Total shareholders' investment (deficit).................... 13,051,773 (315,425)
------------ -----------
Total liabilities and shareholders' investment (deficit).... $116,863,921 $95,749,410
============ ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 132
CLUB REGINA RESORTS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR AUGUST 19, 1997 JANUARY 1, 1997
ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, AUGUST 18,
1997 1997 1997
------------ ----------------- ---------------
<S> <C> <C> <C>
REVENUES:
Vacation interval sales......................... $18,513,499 $18,513,499
Rental and service fee income................... 5,129,427 5,129,427
Interest income on vacation interval
receivables................................... 994,897 994,897
Other interest income........................... 731,873 731,873
Other income.................................... 184,596 184,596
----------- -----------
Total revenues........................ 25,554,292 25,554,292
COST AND OPERATING EXPENSES:
Cost of vacation interval sales................. 4,941,161 4,941,161
Provision for doubtful accounts................. 2,348,960 2,348,960
Advertising, sales and marketing................ 6,367,571 6,367,571
Operating, general and administrative........... 8,240,652 7,987,142 $ 253,510
Financing Expenses:
Interest...................................... 3,726,276 3,649,986 76,290
Amortization of deferred loan costs........... 551,433 551,433
Depreciation.................................... 60,540 60,540
----------- ----------- ---------
Total costs and operating expenses.... 26,236,593 25,906,793 329,800
----------- ----------- ---------
Loss from operations............................ (682,301) (352,501) (329,800)
Exchange gains (losses), net.................... (991,879) (991,879)
----------- ----------- ---------
Loss before taxes............................... (1,674,180) (1,344,380) (329,800)
U.S. Income taxes............................... -- -- --
Foreign taxes................................... 1,661,781 1,661,781
----------- ----------- ---------
Net loss before preferred dividends............. (3,335,961) (3,006,161) (329,800)
Preferred stock dividends....................... 232,031 232,031
----------- ----------- ---------
Loss attributable to common shareholders........ $(3,567,992) $(3,238,192) $(329,800)
=========== =========== =========
Basic and diluted loss per share................ $ (.40)
===========
Weighted average number of common shares
outstanding................................... 8,840,751
===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 133
CLUB REGINA RESORTS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS INVESTMENT
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
WARRANTS TOTAL
ADDITIONAL TO PURCHASE SHAREHOLDERS'
COMMON PREFERRED PAID-IN COMMON ACCUMULATED INVESTMENT
STOCK STOCK CAPITAL STOCK DEFICIT (DEFICIT)
------- --------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Issue of 10,100,000 common
shares................... $10,100 $ 4,275 $ 14,375
Net loss for the period
January 1, 1997
through August 18,
1997.................. $ (329,800) (329,800)
------- ------ ---------- ---------- ----------- -----------
Balance, August 18, 1997... 10,100 4,275 (329,800) (315,425)
Issue of 37,500 preferred
shares in exchange for
shareholder loans of
$3,750,000............ $ 38 3,749,962 3,750,000
Issue of 200,000 common
shares................ 200 999,800 1,000,000
Issue of 258,450 common
shares in connection
with Senior note
offering, net of issue
costs................. 258 1,291,991 1,292,249
Issue of 142,850 common
shares as
consideration for
purchase transaction
fees.................. 143 999,857 1,000,000
Issue of warrants to
purchase 1,819,962
common shares, net of
issue costs........... $9,331,110 9,331,110
Net loss for the period
August 18, 1997
through December 31,
1997.................. (3,006,161) (3,006,161)
------- ------ ---------- ---------- ----------- -----------
Balance, end of year....... $10,701 $ 38 $7,045,885 $9,331,110 $(3,335,961) $13,051,773
======= ====== ========== ========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 134
CLUB REGINA RESORTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
AUGUST 19, JANUARY 1,
YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, AUGUST 18,
1997 1997 1997
------------ ------------ -----------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Capital contributions..................................... $ 1,014,375 $ 1,000,000 $ 14,375
Proceeds from shareholder loans........................... 4,900,000 4,900,000
Proceeds from issuance of notes payable to a bank in
connection with the Purchase Transactions............... 82,953,633 82,953,633
Additional bank loan...................................... 1,000,000 1,000,000
Repayment of bank loan.................................... (82,953,633) (82,953,633)
Issuance of Senior Notes, less related expenses........... 93,951,586 93,951,586
Repayment of shareholder loans............................ (1,150,000) (1,150,000)
------------ ------------ -----------
Net cash provided by financing activities................. 99,715,961 11,847,953 87,868,008
INVESTING ACTIVITIES
Purchase of Vacation Ownership business, net of cash
acquired................................................ (85,482,409) (85,482,409)
Land held for vacation ownership development.............. (42,493) (42,493)
Additions to office furniture, equipment and new leasehold
improvements............................................ (802,494) (802,494)
------------ ------------ -----------
Net cash used in investing activities..................... (86,327,396) (844,987) (85,482,409)
OPERATING ACTIVITIES
Net loss.................................................. (3,335,961) (3,006,161) (329,800)
Adjustment to reconcile net loss to net cash used in
operating activities:
Depreciation & amortization............................. 611,973 611,973
Provision for doubtful accounts......................... 2,348,960 2,348,960
Equity loss in investment............................... 12,009 12,009
Changes in other operating assets and liabilities:
Vacation interval receivables and other trade
receivables........................................... (5,120,232) (5,120,232)
Reimbursement receivable from Starwood Lodging Corp..... (576,956) (576,956)
Inventories............................................. (157,782) (157,782)
Refundable Mexican taxes................................ (2,974,154) (2,974,154)
Cost of unsold vacation ownership intervals and related
club memberships...................................... 2,193,082 2,193,082
Prepaid and other assets................................ (1,215,884) (1,215,884)
Accounts payable and accrued liabilities................ 4,241,734 4,241,734
Mexican taxes payable................................... (1,626,794) (1,626,794)
Unearned services fees.................................. 1,206,031 1,206,031
------------ ------------ -----------
Net cash used in operating activities....................... (4,393,974) (4,064,174) (329,800)
Increase in cash and cash equivalents..................... 8,994,591 6,938,792 2,055,799
Cash and cash equivalents, at beginning of the period..... -- 2,055,799 --
------------ ------------ -----------
Cash and cash equivalents at end of the period.............. $ 8,994,591 $ 8,994,591 $ 2,055,799
============ ============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest.................. $ 2,782,000
============
Cash paid during the period for taxes..................... $ 316,000
============
NON-CASH INVESTING ACTIVITIES
Issuance of warrants in conjunction with debt offering.... $ 9,331,110
============
Issuance of common stock in conjunction with debt
offering................................................ $ 1,292,249
============
Issuance of common stock in settlement of financial
advisory fees........................................... $ 1,000,000
============
Conversion of shareholder loans to preferred stock........ $ 3,750,000
============
</TABLE>
See accompanying notes.
F-6
<PAGE> 135
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
On August 18, 1997, Club Regina Resorts, Inc. (the "Company" and "Ultimate
Parent"), which was incorporated in August 1996, purchased all of the stock of
Desarrollos Turisticos Regina S. de R.L. de C.V. and its subsidiaries (the
"Predecessor Business"). In summary, the Company acquired net vacation ownership
assets of approximately $90 million from a Mexican Bank (Bancomer) using
shareholder loans of approximately $5.0 million and seller financing of
approximately $83 million. The initial allocation of the purchase price was to
the following net assets (in millions):
<TABLE>
<S> <C>
Receivables................................................. $37.2
Land held for development................................... 12.2
Cost of unsold inventory and employee housing, etc.......... 36.6
Hotel asset management contract............................. 4.0
-----
$90.0
=====
</TABLE>
Contemporaneous with the purchase, the real property of the Predecessor
Business was segregated into condominium regimes so that the Regina Resorts and
Westin Hotels would be able to be owned by separate companies. The Westin Hotels
were then sold to SLT Realty Limited Partnership, an affiliate of Starwood
Lodging Trust and Starwood Lodging Corporation (collectively "Starwood") on
August 18, 1997. These transactions are referred to herein as the Purchase
Transactions.
As a result of the Purchase Transactions, the Company now owns and operates
three luxury Mexican vacation ownership resorts in Cancun, Puerto Vallarta and
Cabo San Lucas, Mexico. The Company's principal operations consist of (1)
acquiring vacation ownership resorts, (2) marketing and selling vacation
ownership intervals, (3) providing consumer financing for the purchase of
vacation ownership intervals at its resorts and (4) managing the operations of
its resorts. Prior to August 18, 1997 the Company did not have significant
operations or revenues. Accordingly, the financial statements present results of
operations for the year ended December 31, 1997, the period from January 1, 1997
through August 18, 1997 and the period from August 19, 1997 through December 31,
1997. Prior to April 1997 the Company was inactive.
The following unaudited pro forma consolidated results of operations for
the year ended December 31, 1997 assume the acquisition occurred as of January
1, 1997 (in thousands):
<TABLE>
<S> <C>
Net revenues................................................ $50,718
Net loss.................................................... $(2,643)
Net loss attributable to common shareholders................ $(3,262)
Basic and diluted loss per common share..................... $ (.37)
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiaries. The Company reports its 50% interest
in a company which owns and rents housing to both employees of the Company and
employees of Starwood, using the equity method of accounting. All significant
intercompany balances have been eliminated in consolidation.
TRANSLATION OF FOREIGN CURRENCY
The Company maintains its Mexican accounting records and prepares its
financial statements for its Mexican subsidiaries in Mexican Pesos. The balance
sheet accounts of the Mexican subsidiaries have been remeasured into U.S.
dollars in accordance with Statement of Financial Accounting Standards (SFAS)
F-7
<PAGE> 136
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
No. 52, Foreign Currency Translation. Accordingly, the Mexican Pesos are
translated to US Dollars for financial reporting purposes in using the US Dollar
as the functional currency and exchange gains and losses as well as translation
gains and losses are reported in income and expense. The resulting net exchange
and translation loss for the period August 19, 1997 through December 31, 1997
was $991,879. This net loss was primarily related to the change in the exchange
rate of the Peso to the U.S. dollar during the period August 18, 1997 through
December 31, 1997 as follows:
<TABLE>
<CAPTION>
EXCHANGE RATES PESOS U.S. DOLLAR
-------------- ----- -----------
<S> <C> <C> <C>
August 18, 1997............................................. 7.766 = $1.00
December 31, 1997........................................... 8.083 = $1.00
</TABLE>
On March 20, 1998 the exchange rate had declined to 8.550 Pesos per $1.00
and this additional decline in the Peso has resulted in additional net exchange
losses which will be reported in the quarter ended March 31, 1998. The future
valuation of the Peso related to the U.S. dollar cannot be determined, estimated
or projected.
CASH AND CASH EQUIVALENTS
The Company considers demand accounts and short-term investments with
maturities of three months or less when purchased to be cash equivalents.
VACATION INTERVAL CONTRACTS RECEIVABLE AND CONCENTRATION OF GEOGRAPHIC AND
CREDIT RISK
As of December 31, 1997, substantially all of the Company's vacation
ownership contracts receivable relate to sales of a special Class B shares of
Club Regina, S.A. de C.V. (a Mexican subsidiary owned and controlled by the
Company) which entitles the owner of such Class B shares, upon payment of a
service fee, a defined right to use vacation ownership facilities at the
Company's Regina Resorts. While the Company does not obtain collateral for such
vacation ownership contracts, the Company does not believe it has significant
credit risk with regard to its vacation ownership contracts receivable, because
in the instance of uncollectibility of a contract, the Company retains the right
to recover and resell the underlying defaulted Vacation Interval. Historically,
the Predecessor Business was able to resell such intervals at prices in excess
of the defaulted receivable balances. Management believes the allowance for
uncollectible accounts is adequate to cover probable losses inherent in the
contracts receivable portfolio at December 31, 1997.
The Company estimates that at December 31, 1997 approximately 64% of all of
the Vacation Interval receivables were U.S. dollar denominated, 32% of all
Vacation Interval receivables were denominated in UDIs, an obligation
denominated in pesos which is adjusted for Mexican inflation, and 4% of all
Vacation Interval receivables were denominated in Mexican pesos.
A significant portion of the Company's customers reside in Mexico and all
of the Company's sales offices are currently located in Mexico. Any economic
downturn in Mexico, which has a history of economic instability, could have a
material adverse effect on the Company's business, results of operations and
financial condition.
FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of vacation interval receivables and other trade
receivables, reimbursements receivable from Starwood for shared acquisition
costs, notes payable to a bank, and notes payable to shareholders approximate
their estimated fair market value because of the short-term maturity of those
instruments and/or because they bear market interest rates as of December 31,
1997. The carrying value of the Senior Notes, due to their recent issue, also
approximate their fair value.
F-8
<PAGE> 137
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
INVENTORIES
Inventories, which include supplies, other consumables, and items held for
sale in the Company's retail shops are stated at the lower of cost (FIFO method)
or estimated market.
OFFICE FURNITURE AND EQUIPMENT
Office furniture and equipment is stated at cost and is related to assets
used by the Company in its administration and marketing functions and is
depreciated using the straight line method over the estimated useful lives of
five to seven years.
COSTS OF UNSOLD VACATION OWNERSHIP INTERVALS AND RELATED CLUB MEMBERSHIPS
The Company is the beneficiary of trusts which hold fee simple title to the
vacation ownership facilities at the three Regina Resorts. The Company reports
its allocated acquisition costs related to these trust rights to use these
facilities, to the extent that such Vacation Intervals were unsold, within the
balance sheet as "cost of unsold Vacation Intervals and related club
memberships."
On August 18, 1997, the Company acquired the trust rights to use the
vacation ownership facilities at the three Regina Resorts including the separate
trust rights that cover the rights to use such facilities in the year 2027 and
thereafter which are referred to as the "Remainder Interests." These trust
rights have been amended to provide that the three Regina Resorts hold the
rights to use the related facilities through August 18, 2047. The amended
separate trust rights that take effect after this date were contributed by the
Company to a Mexican corporation and all of the outstanding stock of that
corporation was contributed to a charitable foundation pursuant to an agreement
with the foundation executed on December 31, 1997.
DEFERRED LOAN COSTS
The costs incurred in connection with the issue of the Senior Notes, due
2004, have been deferred in the balance sheet and are being amortized over the
seven year term of the Senior Notes using the interest method.
REVENUE RECOGNITION
The Company recognizes sales of vacation intervals on an accrual basis
after a binding sales contract has been executed, a 15% minimum down payment has
been received. For transactions that do not qualify for accrual method of
accounting, all revenue is deferred using the deposit method.
ADVERTISING EXPENSE
The Company expenses advertising costs as incurred.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share also includes the assumed
conversion of all securities, such as options, warrants, convertible debt and
convertible preferred stock, if dilutive.
LAND HELD FOR VACATION OWNERSHIP DEVELOPMENT
The Company owns parcel of undeveloped beachfront property located in
Cozumel, Mexico. In addition the Company has a letter of intent to purchase a
parcel of land adjacent to its Regina Resort located in Cabo
F-9
<PAGE> 138
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
San Lucas, Mexico. The Company plans to construct additional vacation ownership
facilities on these parcels of land. Although preliminary architectural and
engineering planning has commenced, no commitments have been made as of March
20, 1998 regarding these planned expansion projects. Interest of $400,000 during
1997 has been capitalized related to these developmental properties.
USE 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.
CURRENCY FLUCTUATIONS
The Company's operations are currently located in Mexico. The Peso, the
currency of Mexico, has fluctuated in value relative to the U.S. dollar in
recent years. On December 31, 1997, and March 20, 1998 the exchange rate of
Pesos to U.S. dollars was 8.0833 Pesos equal to one U.S. dollar and 8.550 Pesos
equal to one U.S. dollar respectively. The future valuation of the Peso related
to the U.S. dollar cannot be determined, estimated or projected.
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants.
3. VACATION INTERVAL RECEIVABLES AND OTHER TRADE RECEIVABLES
Vacation Interval receivables and other trade receivables were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 AUGUST 18, 1997
----------------- ---------------
<S> <C> <C>
Vacation Interval receivables........................ $43,968,564 $38,652,202
Service fee receivables.............................. 1,382,458 999,906
Other trade receivables.............................. 1,646,111 3,028,270
Less -- allowances for uncollectable accounts........ (7,045,583) (5,550,000)
----------- -----------
Total...................................... $39,951,550 $37,180,278
=========== ===========
</TABLE>
The weighted average interest rate earned on Vacation Interval receivables
is in excess of 14%. These receivables are collected in monthly installments
over periods ranging from 12 months to 7 years. Approximately 66% of Vacation
Interval receivables at December 31, 1997 were U.S. dollar denominated.
F-10
<PAGE> 139
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. VACATION INTERVAL RECEIVABLES AND OTHER TRADE RECEIVABLES -- (CONTINUED)
The following table reflects the principal maturities of Vacation Interval
receivables as of December 31, 1997:
<TABLE>
<S> <C>
PERIOD ENDED DECEMBER 31:
- ------------------------------------------------------------
1998........................................................ $ 8,197,000
1999........................................................ 9,871,000
2000........................................................ 9,807,000
2001........................................................ 8,425,000
Thereafter.................................................. 7,668,564
-----------
$43,968,564
===========
</TABLE>
The activity in the vacation interval receivables and other trade
receivables for the year ended December 31, 1997 is as follows:
<TABLE>
<S> <C>
Amount recorded in connection with Purchase Transaction..... $ 5,500,000
Adjustment to purchase price allocation..................... 850,000
Provision charged to expense................................ 2,348,680
Receivables charged off..................................... (190,000)
Cancellation of contracts................................... (1,463,097)
-----------
Balance, end of the year.................................... $ 7,045,583
===========
</TABLE>
4. SENIOR NOTES PAYABLE, DUE 2004
On December 5, 1997, the Company and its indirect wholly-owned Mexican
financial subsidiary jointly issued $100,000,000 of Senior Notes due December 1,
2004. In connection with this offering the Company incurred deferred loan costs
of $8,340,663. The Company also issued warrants to the Noteholders to purchase
1,869,962 common shares. The estimated fair market value of the warrants on the
date that the warrants were issued was $4.99 per warrant or $9,331,110 in total.
This amount was recorded as an increase in shareholders' investment and original
issue discount in the Company's balance sheet. The original issue discount is
being amortized to expense over the warrant exercise period of 84 months. A
portion of net proceeds ($82,953,633) was used to repay the outstanding loans
and related accrued interest payable to the Company's lender bank (Bancomer).
The Senior Notes are payable in US Dollars and bear interest at 13% with
interest payable semi-annually on June 1st and December 1st. The Notes are
general unsecured obligations of the Issuers.
The indenture pursuant to which the Notes were issued (the "Indenture")
contains certain covenants that, among other things, limit the ability of the
Issuers to incur certain additional Indebtedness and issue preferred stock, pay
dividends or make other distributions, repurchase Equity Interests (as defined)
or subordinated Indebtedness, create certain liens, enter into certain
transactions with affiliates, sell assets of the Issuers, issue or sell Equity
interests of CR US's subsidiaries, or enter into certain mergers and
consolidations. In addition, under certain circumstances, the Issuers will be
required to offer to purchase Notes at a price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of purchase, with the proceeds of certain Asset Sales (as defined).
Any payments (interest or principal) in respect of the Notes will be made
free and clear of and without any withholding or deduction for or on account of
any present or future taxes, duties, levies, imposts, assessments or other
governmental charges of whatever nature imposed or levied by or on behalf of
Mexico or any subdivision thereof or by any authority or agency therein or
thereof having power to tax ("Taxes"), unless
F-11
<PAGE> 140
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. SENIOR NOTES PAYABLE, DUE 2004 -- (CONTINUED)
such taxes are required by law, rule or regulation or by the interpretation or
administration thereof to be withheld or deducted, in which case, subject to
certain exceptions, the Issuers will pay such additional amounts ("Additional
Amounts") as may be necessary so that the net amount received by holders (the
"Holders") of the Notes (including Additional Amounts) after such withholding or
deduction will not be less than the amount that would have been received in the
absence of such withholding or deduction.
5. NOTES PAYABLE TO A BANK
See Note 11 regarding lines of credit arrangements entered into subsequent
to December 31, 1997. The note payable to a bank at December 31, 1997
represented a $1,000,000 loan with interest payable at 11% per annum which was
initially due on January 19, 1998 and has been extended to April 19, 1998.
Notes payable to a bank at August 18, 1997 consisted of the following.
These notes were fully repaid on December 5, 1997 from the net proceeds of the
Senior Note Offering which is discussed in Note 4.
<TABLE>
<S> <C>
TRANCHE A:
Promissory note payable, denominated in U.S. dollars,
interest payable quarterly at 11% with quarterly principal
payments beginning in March, 1998 based on the rates at
which down payments are made on Vacation Intervals and
Vacation Interval receivables payments are collected, with
the remaining balance, if any, payable on August 18,
2003...................................................... $45,000,000
TRANCHE B:
Promissory note payable, denominated in U.S. dollars,
interest payable quarterly at 10% through August 18, 1999
and thereafter at 11% with quarterly principal payments
beginning in March, 1998 based on the rates at which down
payments are made on Vacation Intervals and Vacation
Interval receivables payments are collected, with the
remaining balance, if any, payable on August 18, 2003..... 17,453,633
TRANCHE C:
Promissory note payable, denominated in U.S. dollars,
interest payable quarterly at 10%, due in August 1999,
secured by the Company's property in Cozumel with a
carrying value of $12,000,000 and the stock of one of the
Company's subsidiaries which holds this property.......... 8,000,000
TRANCHE D:
Promissory note payable, denominated in U.S. dollars,
interest payable quarterly at 10%, due December 18,
1998...................................................... 12,500,000
-----------
Total....................................................... $82,953,633
===========
</TABLE>
Tranches A, B and D were collateralized by the rights in the trusts which
own the land on which effectively all the Company's operations are located, as
discussed above. The debt agreements also included restrictive covenants
relating to, among other things, maximum leverage, minimum net worth, and
payments of dividends.
Substantially all office furniture and equipment and inventories as well as
the shares of the Company's subsidiaries collateralized these bank loans.
F-12
<PAGE> 141
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. RELATED PARTY TRANSACTIONS AND AGREEMENTS
OTHER NOTES PAYABLE
At August 18, 1997, the Company had a $1,150,000 note payable to C.R.
Management Company (a shareholder) which accrued interest at 8%. The note plus
accrued interest was paid in full in December 1997.
AGREEMENTS
In connection with the Purchase Transactions, the Company and Starwood
entered into various operating agreements related to the joint operation and
ownership of certain common facilities at the Combined Resorts. Starwood has
rented specified rooms at two of the Company's Regina Resorts for a one-year
period ending August 18, 1998 for $1,250,000 which is being recognized into
income along with related fees of $1,950,000 over the term of the agreements.
The operating agreements provide for certain operating standards at the Combined
Resorts and prohibit the Company from renting vacant vacation ownership units on
a transient basis. The Company will be liable for significant penalties should
it violate certain provisions of these operating agreements.
On August 18, 1997, Starwood and the Company also entered into an Asset
Management Agreement which is operative until August 18, 2047, whereby Starwood
retained the Company as its asset manager for the three hotels that are included
in the Combined Resorts. In return for the Company's services, Starwood agreed
to pay the Company various defined advisory fees based upon the financial
performance of the hotel assets which Starwood acquired. This agreement
provides, among other things, for the Company to receive 20% of the cash flow,
as defined, including cash flow from any future refinancing and/or sale of the
hotel facilities. The Company has allocated a value of $4,000,000 to this asset
management agreement in the balance sheet as of August 18, 1997 which will be
amortized against the income expected to be recognized under this agreement.
7. SHAREHOLDERS' (DEFICIT) INVESTMENT AND A SUBSEQUENT EXCHANGE OF SHAREHOLDER
LOANS FOR PREFERRED STOCK
PREFERRED STOCK
The Company had obtained shareholder loans of $3,750,000 which were
subordinated to other indebtedness and provided for interest to accrue at the
annual rate of 16.5%. On October 29, 1997, the shareholders waived all interest
and exchanged these loans for 37,500 shares of Class A Preferred Stock which
provide for preferential annual dividends of $618,750 (16.5% of $3,750,000),
accruing from and after August 18, 1997. The dividend rate shall be 20% after
August 18, 2002. Cumulated dividends accrue dividends at the rate of 12% per
year. No cash dividends are required to be paid prior to an initial public
offering of the Company's common stock or the sale of the Company. Under the
Class A Preferred, upon an initial public offering or stock merger by the
Company, the Company may force the redemption of all cumulated dividends in
exchange for either cash or stock of the Company valued at 85% of the IPO price
or 100% of the merger consideration value, as the case may be. Furthermore, in
such event, the holders of the Class A Preferred have the right to convert the
liquidation preference of each share of Class A Preferred into stock of the
Company valued at 85% of the IPO price or 100% of the merger consideration
value, as the case may be.
So long as any shares of the Class A Preferred are outstanding, no dividend
is permitted to be declared or paid or set apart for payment on any other series
of stock ranking on a parity with the Class A Preferred as to dividends, unless
all unpaid dividends on the Class A Preferred are paid. Furthermore, if all
accrued dividends on the Class A Preferred Stock have not been paid, the Company
is not permitted to declare or pay or set apart for payment any dividends or
make any other distributions on its Common Stock or any other class of stock or
series thereof of the Company ranking, as to distributions in the event of a
liquidation, dissolution or winding up of the Company, voluntary or involuntary
(a "Liquidation"), junior to the Class A Preferred until
F-13
<PAGE> 142
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. SHAREHOLDERS' (DEFICIT) INVESTMENT AND A SUBSEQUENT EXCHANGE OF SHAREHOLDER
LOANS FOR PREFERRED STOCK -- (CONTINUED)
such dividends on the Class A Preferred and any redemption obligations due and
owing under the Certificate of Designations governing the Class A Preferred (the
"Certificate of Designation") have been paid. Upon any Liquidation of the
Company, the holders of the Class A Preferred are entitled to receive, out of
assets of the Company which remain after satisfaction in full of all valid
claims of creditors of the Company and which are available for payment to
stockholders, and subject to the rights of the holders of any stock of the
Company ranking senior to or on a parity with the Class A Preferred in respect
of distributions upon Liquidation, before any amount shall be paid to or
distributed among the holders of Common Stock or any other shares ranking junior
to the Class A Preferred in respect of distributions upon Liquidation,
liquidating distributions per share of the Class A Preferred in the amount of
$100 per share, plus an amount equal to the accrued and unpaid dividends
thereon. Preferred shares also provide that dividends will accrue monthly
whether paid currently or not. Dividends may be paid by the Company, at its
option in shares of common stock. The preferred stock is redeemable at the
Company's option and is convertible at the holders option into shares of common
stock. The accrued and unpaid dividends were $232,031, or, $6.19 per preferred
share, as of December 31, 1997.
1997 LONG TERM INCENTIVE PLAN
On August 18, 1997, the Board of Directors and the Company's stockholders
approved the Company's 1997 Long Term Incentive Plan (the Plan). The purpose of
the Plan is to provide directors, officers, key employees, consultants and other
service providers with additional incentives by increasing their ownership
interest in the Company. Individual awards under the Plan may take the form of
one or more of (i) either incentive stock options or non-qualified stock
options; (ii) stock appreciation rights; (iii) restricted or deferred stock;
(iv) dividend equivalents and (v) other awards not otherwise provided for, the
value of which is based in whole or in part upon the value of the common stock.
The maximum number of shares of common stock that may be subject to
outstanding awards, determined immediately after the grant of any award, may not
exceed the greater of 808,000 shares or 8% of the aggregate number of shares of
common stock outstanding.
As of December 31, 1997, stock options covering 163,000 common shares had
been granted under this plan with an exercise price of $5.00 to $7.00 per common
share representing the fair value at the date of grant. These options are
generally exercisable over a period of ten years from the date of grant.
1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN
The Company's 1997 Non-Employee Directors' Stock Plan, which was adopted by
the Board of Directors provided for an automatic annual grant to each
non-employee director of an option to purchase 5,000 shares at each annual
meeting of shareholders thereafter at which such director is re-elected or
remains a director, unless such annual meeting is held within three months of
such person's initial election as a director. All options will have an exercise
price per share equal to the fair market value of the Common Stock on the date
of grant and are immediately vested and expire on the earlier of ten years from
the date of grant or one year after termination of service as a director.
As of December 31, 1997, no options had been granted under this plan.
OTHER
On August 15, 1997, the Company issued stock options covering 100,000
shares of Common Stock to the Company's president at an exercise price of $2 per
share, the estimated fair market value of the common stock on the date of grant.
A total of 20,000 of these options vested immediately; the remainder vest at the
rate of 20,000 per year for four years.
F-14
<PAGE> 143
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. SHAREHOLDERS' (DEFICIT) INVESTMENT AND A SUBSEQUENT EXCHANGE OF SHAREHOLDER
LOANS FOR PREFERRED STOCK -- (CONTINUED)
As allowed by Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" (FAS 123), the Company has elected to
continue to follow Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25) in accounting for its stock option plans.
Under APB 25, the Company does not recognize compensation expense on the
issuance of its stock options because the option terms are fixed and the
exercise price equals the market price of the underlying stock on the grant
date. As required by FAS 123, the Company has determined the pro forma
information as if the Company had accounted for stock options granted since
January 1, 1995, under the fair value method of FAS 123. The Black-Scholes
option pricing model was used with the following weighted-average assumptions;
risk-free interest rate of 7%; dividend yield of 0%; expected Common Stock
market price volatility factor of .001; and a weighted-average expected life of
the options of five years. The weighted-average fair value of options granted in
1997 was not material. Therefore, the pro forma effect of these options on
operations basic and diluted earnings per share was not material.
8. INCOME TAXES
The Company, a Nevada corporation, will file an annual U.S. Federal income
tax return. The Company incurred net losses for the period ended December 31,
1997 in Mexico as well as the United States. Accordingly no provision for income
taxes was made during 1997.
For the period ended December 31, 1997, the Mexican subsidiaries of the
Company will file separate Mexican income tax returns. An application has been
made to file certain of the income tax returns of the Company's Mexican
operations on a consolidated basis beginning in 1998.
In connection with the Purchase Transactions of August 18, 1997, the
Company and Starwood will be allocated a portion of the net operating losses of
the Predecessor Businesses. The Company anticipates that it has received
approximately $60 million of Mexican net operating losses, which will begin to
expire in the year 2000. For financial statement purposes, a valuation allowance
of $20 million has been recognized to offset the estimated $20 million of
deferred tax assets related to those carryforwards.
The U.S. Federal income tax regulations may, under certain circumstances
cause income transactions in Mexico to give rise to U.S. income taxes. Subject
to an adjustment for foreign tax credits. The Company's Mexican operations
subsequent to August 18, 1997 have resulted in losses and no provision for U.S.
income taxes is necessary for the period ended December 31, 1997.
9. CONTINGENCIES AND COMMITMENTS
As of November 17, 1994, Club Regina, S.A. de C.V., currently a wholly
owned subsidiary of the Company, applied to the Mexican tax authorities to
reconfirm that the sale of Class B shares, which give a Member, after paying an
annual service fee, the right to use certain Vacation Intervals, is a tax free
event with respect to Mexican value added taxes. On February 9, 1995, the tax
authorities concluded that the Predecessor Businesses should pay Mexican value
added tax regarding its sales of Class B shares. On February 19, 1997, the
attorneys for the Company received an informal letter from the Quinta Sala
Regional Metropolitana de la Federacion (the Fifth Federal Metropolitan Regional
Tax Court) stating that the Company was not required to pay Mexican value added
taxes on sales of Class B shares. Consistent with this letter, the Company did
not collect and remit value added taxes on the sale of Class B shares. In
December, 1997, amendments to Mexico's value added tax laws were enacted which
subject sales of vacation intervals such as those sold by the Company to a value
added tax of approximately 10% in Cancun and Los Cabos and 15% in other Mexican
locations. To counteract the imposition of a value added tax on sales of
Vacation Intervals, the Company decreased its prices effective January 1, 1998,
but by less than the amount of such tax.
F-15
<PAGE> 144
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. CONTINGENCIES AND COMMITMENTS -- (CONTINUED)
The Company is subject to various claims arising in the ordinary course of
business, and is a party to various legal proceedings which constitute ordinary
routine litigation incidental to the Company's business. In the opinion of
management, all such matters are either adequately covered by insurance or are
not expected to have a material adverse effect on the Company.
The Company has agreed to pay an investment banking firm a fee for general
financial advice of $125,000 monthly for the period August 1997 through June 15,
1998. This fee has been charged to expense in the periods that the services were
rendered and at December 31, 1997 the remaining prepaid financial advisory fee
of $687,500 was included in prepaid assets.
The agreement with the investment banking firm provides that if the Company
completes an initial public offering of its common stock, the Company will be
required to issue to that firm warrants to purchase 400,000 shares of the common
stock of the Company. The warrants will have a term of 5 years and an exercise
price of 120% of the initial public offering price.
The Company leases administrative and sales office space and certain
equipment under noncancellable lease agreements. Total rent expense for the year
ended December 31, 1997 was approximately $317,000. These operating leases
expire in various years in the future. Some of these leases may be renewed.
Future minimum payments under all of the Company's noncancellable operating
leases with initial terms of one year or more were as follows at December 31,
1997:
<TABLE>
<S> <C>
1998........................................................ $1,649,834
1999........................................................ 1,242,473
2000........................................................ 1,003,072
2001........................................................ 566,890
2002........................................................ 521,146
----------
Total....................................................... $4,983,415
==========
</TABLE>
10. SUBSEQUENT EVENTS
ACQUISITIONS -- The Company has executed a letter of intent to acquire the land
and facilities of the Villa Vera Hotel & Racquet Club (the "Villa Vera") for
$4.5 million. The Villa Vera is in Acapulco, Mexico and has 74 hotel units, 62
of which the Company plans to convert into vacation ownership units that should
increase the Company's inventory by approximately 4,000 Vacation Intervals.
These Vacation Intervals are expected to be priced on average slightly lower
than the Company's intervals at the current Regina Resorts. The Company
estimates this conversion will cost $2.5 million. Closing of this acquisition is
expected in April 1998. The Villa Vera has been operating on a limited basis
during the year ended December 31, 1997 and its unaudited revenues and net loss
for 1997 were approximately $400,000 and $400,000 respectively.
LINES OF CREDIT -- On March 27, 1998, the Company entered into an agreement with
Bancomer, expiring in March 2002, which provides the Company with a line of
credit of $20 million. All borrowings and interest under the line will be
payable in U.S. dollars and any loans will bear interest at 13%. Loans under the
line will be secured by all of the present and future accounts receivable of an
indirect wholly-owned subsidiary (CR Resorts Puerto Vallarta). The Company has
also agreed to pay the bank a one time fee of 2% of the line of credit.
The Company has also received approval from Bancomer for the extension of
an additional line of credit of $6.0 million. These funds are required to be
used to complete the purchase of the Villa Vera Hotel & Racquet Club ('Villa
Vera") and for the conversion cost of 62 units into vacation ownership units.
This line of
F-16
<PAGE> 145
CLUB REGINA RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
credit will be secured by a Mortgage Trust on the Villa Vera property and by the
Accounts Receivable of CR Resorts Puerto Vallarta both present and future. This
line of credit also requires a 2% fee be paid to the bank before the funds may
be borrowed.
AMENDMENT TO MEXICAN VALUE ADDED TAX LAW -- In December 1997, the Mexican Value
Added Tax Law was amended to make all vacation ownership operations, regardless
of the structure subject to the Value Added Tax, effective January 1, 1998. This
would have caused a new Club Regina member to pay 10 to 15% more for each
vacation interval depending on the sales location. In response to these events,
the Company decreased its Vacation Interval prices on an average of five percent
to compensate in part for the tax charged to the customer. The Company will
benefit, however, from the fact that the Company is now able to recover all of
the Value Added Tax paid as part of the marketing efforts to sell the Vacation
Intervals. The Company believes that because of these changes in the tax law it
will be able to reduce foreign tax expenses equivalent to six percent of the
revenue from the sale of Vacation Intervals.
NEW PRODUCT STRUCTURE -- Effective March 13, 1998, the Company put into effect a
new product structure to sell its Vacation Intervals under a right-of-use
membership sold by either the Los Cabos or the Cancun based companies, thus
subject to a rate of 10% for the Value Added Tax. This new membership has a term
of 50 years instead of the 30 years which applied under the prior marketing
structure. On the same date, an increase in the prices of the Vacation Intervals
of five percent on average was announced. In the opinion of management, these
changes in product structure and the actions taken to adjust prices will enable
the Company to offset the loss of revenue resulting from the Value Added Tax law
changes.
F-17
<PAGE> 146
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholder
CR Resorts Capital, S. de R.L. de C.V.
We have audited the accompanying consolidated balance sheets of CR Resorts
Capital, S. de R.L. de C.V. (Capital) as of December 31 and August 18, 1997 and
the related consolidated statements of income and retained earnings and cash
flows for the period August 19, 1997 (inception) through December 31, 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 audits.
We conducted our audits 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 statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CR Resorts
Capital, S. de R.L. de C.V. at December 31, 1997 and August 18, 1997 and the
consolidated results of their operations and their cash flows for the period
August 19, 1997 (inception) through December 31, 1997 in conformity with
generally accepted accounting principles.
Miami, Florida
March 20, 1998,
except for Note 6
as to which the date is
March 27, 1998
F-18
<PAGE> 147
CR RESORTS CAPITAL, S. DE R.L. DE C.V. (CAPITAL)
(A WHOLLY OWNED FINANCE SUBSIDIARY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 18,
1997 1997
------------ -----------
<S> <C> <C>
ASSETS
Cash...................................................... $ 8,010 $ 385
Loans and related accrued interest receivable from
affiliates............................................. 91,960,716 86,703,633
Assets held for sale representing Remainder Interests..... -- 1,600,000
Deferred loan costs, net of $58,446 of accumulated
amortization........................................... 7,113,570 --
Other assets.............................................. 99,111 --
------------ -----------
Total assets................................................ $ 99,181,407 $88,304,018
============ ===========
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Accrued expenses.......................................... $ 32,107 $ --
Due to Club Regina Resorts, Inc. (Ultimate Parent)........ 15,564,508 --
Notes payable to a bank................................... 1,000,000 82,953,633
Senior Notes due 2004, bearing interest at 13%, net of
unamortized original issue discount of $8,298,023...... 81,701,977 --
Accrued interest payable.................................. 881,110 --
Notes payable to Shareholders of Club Regina Resorts,
Inc.................................................... -- 3,750,000
Note payable to Capital's parent.......................... -- 1,600,000
------------ -----------
Total liabilities........................................... 99,179,902 88,303,633
SHAREHOLDER'S INVESTMENT
Capital stock............................................. 385 385
Retained earnings......................................... 1,320 --
------------ -----------
Total shareholder's investment.................... 1,705 385
------------ -----------
Total liabilities and shareholder's investment.............. $ 99,181,407 $88,304,018
============ ===========
</TABLE>
See accompanying notes.
F-19
<PAGE> 148
CR RESORTS CAPITAL, S. DE R.L. DE C.V. (CAPITAL)
(A WHOLLY OWNED FINANCE SUBSIDIARY)
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE PERIOD AUGUST 19, 1997 THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
Revenues, representing interest and related fees charged to
affiliates................................................ $4,033,454
EXPENSES:
Interest expense on bank loans and Senior Notes........... 3,794,187
Interest expense on notes payable to the Ultimate
Parent................................................. 109,359
Amortization of deferred loan costs....................... 58,446
General and administrative, including $50,000 of
management fees charged by an affiliate for accounting
and administrative services............................ 60,256
Exchange and translation loss, net........................ 9,886
----------
4,032,134
----------
Net income for the period and retained earnings since
inception.............................................. $1,320
==========
</TABLE>
See accompanying notes.
F-20
<PAGE> 149
C.R. RESORTS CAPITAL, S. DE R.L. DE C.V. (CAPITAL)
(A WHOLLY OWNED FINANCE SUBSIDIARY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM AUGUST 19, 1997 THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
FINANCING ACTIVITIES
Capital contributions..................................... $ 385
Proceeds from shareholder loans and loans from
affiliates............................................. 3,750,000
Proceeds from issuance of notes payable to a bank in
connection with the Purchase Transactions.............. 82,953,633
Repayment of Bank loans................................... (82,953,633)
Proceeds from issue of $90,000,000 of Senior Notes........ 86,400,000
Payments for debt issuance costs.......................... (3,572,036)
Proceeds from a bank loan................................. 1,000,000
------------
Net cash provided by financing activities................. 87,578,349
INVESTING ACTIVITIES
Loans to affiliates....................................... (86,703,633)
------------
Cash used in investing activities........................... (86,703,633)
OPERATING ACTIVITIES
Net income for the period................................. 1,320
Adjustments to reconcile net income to net cash used in
operating activities:
Amortization........................................... 158,442
Changes in operating assets and liabilities
Other assets.............................................. (99,111)
Due to affiliates......................................... 3,416,509
Due from affiliates....................................... (5,257,083)
Accrued expenses and accrued interest..................... 913,217
------------
Net cash used in operating activities..................... (866,706)
------------
Cash at end of period....................................... $ 8,010
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.................. $ 2,913,077
============
Non-cash financing activities
Increase in due to affiliate resulting from debt
discount............................................... $ 8,397,999
============
</TABLE>
See accompanying notes.
F-21
<PAGE> 150
CR RESORTS CAPITAL, S. DE R.L. DE C.V.
(A WHOLLY OWNED FINANCE SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
CR Resorts Capital, S. de R.L. de C.V. (Capital), which is 100% owned by
Canarias Future SRL, a wholly-owned subsidiary of the Club Regina Resorts, Inc.
(the Ultimate Parent), was formed in August, 1997 for purposes of obtaining
financing of the Ultimate Parent's Mexican operations.
On August 18, 1997, the Ultimate Parent purchased all of the stock of
Desarrollos Turisticos Regina S. de R.L. de C.V. and its subsidiaries (the
Predecessor Businesses). Contemporaneous with the purchase, the real property
was segregated into condominium regimes so that the Regina Resorts and Westin
Hotels would be able to be owned by separate companies. The Westin Hotels were
then sold to SLT Realty Limited Partnership, an affiliate of Starwood Capital
Group, L.L.C. (Starwood). These transactions are referred to herein as the
Purchase Transactions.
On August 18, 1997, Capital obtained bank loans aggregating $82,953,633 as
well as other related party loans which were used to make loans to the operating
subsidiaries of the Ultimate Parent. See Note 4.
On December 5, 1997, Capital and its Ultimate Parent jointly issued
$100,000,000 of Senior Notes due December 1, 2004 and Capital recorded
$90,000,000 of such debt along with the related deferred loan costs of
$7,506,597. The Ultimate Parent also issued warrants to the Noteholders to
purchase 1,869,962 common shares. These warrants were estimated to have a value
of $4.99 per warrant or $9,331,110 in total. This amount was recorded as an
increase in shareholders' investment by the Ultimate Parent and as original
issue discount in the amount of $8,397,999 on Capital's balance sheet. The
original issue discount is being amortized to expense over the warrant exercise
period of 84 months. Substantially, all of the net proceeds of the Senior Note
offering were used to repay the outstanding loans and related accrued interest
payable by Capital to its lender bank (Bancomer).
The Senior Notes are payable in US Dollars and bear interest at 13% with
interest payable semi-annually on June 1st and December 1st. The Notes are
general unsecured obligations of the Issuers.
The indenture pursuant to which the Notes were issued (the "Indenture")
contains certain covenants that, among other things, limit the ability of the
Issuers to incur additional Indebtedness and issue preferred stock, pay
dividends or make other distributions, repurchase Equity Interests (as defined)
or Subordinated Indebtedness, create certain liens, enter into certain
transactions with affiliates, sell assets of the Issuers, issue or sell Equity
Interests of the Ultimate Parent's subsidiaries, or enter into certain mergers
and consolidations. In addition, under certain circumstances, the Issuers will
be required to offer to purchase the Notes at a price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase, with the proceeds of certain Asset
Sales (as defined).
Any payments (interest or principal) in respect of the Notes will be made
free and clear of and without any withholding or deduction for or on account of
any present or future taxes, duties, levies, imposts, assessments or other
governmental charges of whatever nature imposed or levied by or on behalf of
Mexico or any subdivision thereof or by any authority or agency therein or
thereof having power to tax ("Taxes"), unless such Taxes are required by law,
rule or regulation or by the interpretation or administration thereof to be
withheld or deducted, in which case, subject to certain exceptions, the Issuers
will pay such additional amounts ("Additional Amounts") as may be necessary so
that the net amount received by holders (the "Holders") of the Notes (including
Additional Amounts) after such withholding or deduction will not be less than
the amount that would have been received in the absence of such withholding or
deduction.
F-22
<PAGE> 151
CR RESORTS CAPITAL, S. DE R.L. DE C.V.
(A WHOLLY OWNED FINANCE SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEFERRED LOAN COSTS
The costs incurred in connection with the issue of the Senior Notes, due
2004, have been deferred in the balance sheet and are being amortized over the
seven year term of these Senior Notes using the interest method.
USE 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.
PRINCIPLES OF CONSOLIDATION AND TRANSLATION POLICY
The consolidated balance sheet at August 18, 1997 includes the accounts of
Capital and its wholly owned subsidiary. As of December 31, 1997, Capital's
subsidiary, which held the amended trust rights to use the Regina Resort
facilities after August 18, 2047, was contributed to a charitable foundation and
its remaining net book value ($10,000) was charged to general and administrative
expense. All significant intercompany balances have been eliminated in
consolidation. The accounts of Capital are maintained in Mexican Pesos which are
translated to US Dollars for financial reporting purposes in accordance with
Statement of Financial Accounting Standards No. 52 Foreign Currency Translation
using the US Dollar as the functional currency. Exchange gains and losses as
well as translation gains and losses are reported in income and expense. The
resulting net gain for the period August 19, 1997 through December 31, 1997 was
approximately $9,900.
3. LOANS RECEIVABLE FROM AFFILIATES
Loans receivable from Affiliates are payable in US Dollars upon demand and
bear interest at 16%.
Loans receivable from affiliates and associated interest income are
eliminated in the consolidation of Capital into the consolidated financial
statements of the Ultimate Parent.
F-23
<PAGE> 152
CR RESORTS CAPITAL, S. DE R.L. DE C.V.
(A WHOLLY OWNED FINANCE SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. NOTES PAYABLE TO A BANK
The note payable to a bank at December 31, 1997 represented a $1,000,000
loan with interest at 11% per annum which was initially due on January 19, 1998
and has been extended to April 19, 1998. This note and the related interest is
payable in U.S. dollars.
Notes payable to a bank at August 18, 1997 consisted of the following.
These loans were paid in full on December 5, 1997 from the proceeds of the
Senior Note Offering.
<TABLE>
<S> <C>
TRANCHE A:
Promissory note payable, denominated in U.S. dollars,
interest payable quarterly at 11% with quarterly principal
payments based on the rates at which down payments are
made on the Ultimate Parent's Vacation Intervals and
Vacation Interval receivables collections are received by
the Company, maturing on August 18, 2003.................. $45,000,000
TRANCHE B:
Promissory note payable, denominated in U.S. dollars,
interest payable quarterly at 10% through August 18, 1999,
and thereafter at 11% with quarterly principal payments of
principal payments based on the rates at which down
payments are made on the Ultimate Parent's Vacation
Intervals and Vacation Interval receivables collections
are received by the Company, maturing on August 18,
2003...................................................... 17,453,633
TRANCHE C:
Promissory note payable, denominated in U.S. dollars,
interest payable quarterly at 10%, due in August 1999,
secured by the Company's property in Cozumel with a
carrying value of $12,000,000 and the stock of one of the
Company's subsidiaries, which holds this property......... 8,000,000
TRANCHE D:
Promissory note payable, denominated in U.S. dollars,
interest payable quarterly at 10%, due December 18,
1998(B)................................................... 12,500,000
-----------
$82,953,633
===========
</TABLE>
5. NOTES PAYABLE TO RELATED PARTIES
At both August 18, 1997 and December 31, 1997, Capital had $3.75 million of
notes payable to the Ultimate Parent which bear interest at 8% and are payable
upon demand. At August 18, 1997 Capital had $1,600,000 of notes payable to its
immediate parent which financed Capital's initial investment in the Remainder
Interests. On December 31, 1997, this loan had been liquidated and the restated
Remainder Interests, which value was reduced to $10,000 due to the changes in
the trusts which delayed the Remainder Interests effective date by 20 years
until August 18, 2047, were contributed to an unaffiliated charitable
foundation.
Notes payable to related parties and the associated interest expense are
all payable in U.S. dollars and have been eliminated in the consolidation of
Capital into the consolidated financial statements of the Ultimate Parent.
6. SUBSEQUENT EVENTS
On March 27, 1998, Capital entered into an agreement with Bancomer,
expiring in March 2002, which provides Capital with a line of credit of $20
million. All borrowings and interest under the line will be payable
F-24
<PAGE> 153
CR RESORTS CAPITAL, S. DE R.L. DE C.V.
(A WHOLLY OWNED FINANCE SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SUBSEQUENT EVENTS -- (CONTINUED)
in U.S. dollars and any loans will bear interest at 13%. Loans under the line
will be secured by all the present and future accounts receivable of an indirect
wholly-owned subsidiary, CR Resorts Puerto Vallarta ("CRPV"). Capital has also
agreed to pay the bank a one time fee of 2% of the line of credit.
Capital has also received approval from Bancomer for the extension of an
additional line of credit of $6.0 million. These funds are required to be loaned
to CRPV in order that CRPV may complete the purchase of the Villa Vera Hotel &
Racquet Club (Villa Vera) for $4.5 million and finance a portion of the
conversion cost of some of the hotel units into 37 vacation ownership units.
This line of credit will be secured by a Mortgage Trust on the Villa Vera
property and by the accounts receivable of CRPV both present and future. This
line of credit also requires a 2% fee to be paid to the bank before the funds
may be borrowed.
F-25
<PAGE> 154
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Desarrollos Turisticos Bancomer, S.A. de C.V.
Mexico City
We have audited the accompanying consolidated statements of operations and
cash flows of Desarrollos Turisticos Bancomer, S.A. de C.V. and Subsidiaries
(the "Company"), for the years ended December 31, 1996 and 1995. 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated statements of operations and cash flows
referred to above present fairly, in all material respects, the consolidated
results of operations and cash flows of Desarrollos Turisticos Bancomer, S.A. de
C.V. and Subsidiaries for the years ended December 31, 1996 and 1995 in
conformity with generally accepted accounting principles.
Houston, Texas
June 5, 1997 except for Note 11
as to which the date is August 18, 1997
F-26
<PAGE> 155
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenue from hotel operations:
Rooms..................................................... $ 27,328 $ 20,937
Food and beverage......................................... 13,606 10,884
Other departmental........................................ 3,950 2,519
Miscellaneous............................................. 178 536
-------- --------
Total revenue from hotel operations............... 45,062 34,876
Hotel operating expenses:
Rooms..................................................... 4,903 3,995
Food and beverage......................................... 7,547 6,499
Other departmental........................................ 1,894 1,014
-------- --------
Total hotel operating expenses.................... 14,344 11,508
-------- --------
Hotel gross profit................................ 30,718 23,368
Revenue from vacation ownership operations:
Sales of vacation ownership interests..................... 37,263 25,034
Less: amounts deferred to future periods.................. (36,435) (24,461)
Add: amounts recognized from prior sales.................. 2,039 1,131
-------- --------
2,867 1,704
Interest income on vacation ownership contracts
receivable................................................ 3,294 1,839
Rental of unsold units...................................... 2,898 2,043
Maintenance fee income...................................... 2,599 2,062
Other....................................................... 760 690
-------- --------
Total revenue from vacation ownership
operations...................................... 12,418 8,338
Vacation ownership operating expenses:
Commissions paid to salespeople........................... 7,108 4,919
Less amounts deferred to future periods................... (5,807) (4,824)
Add amounts recognized from prior sales................... 303 178
Maintenance of unsold units............................... 188 189
-------- --------
Total vacation ownership operating expenses,
net............................................. 1,792 462
-------- --------
Vacation ownership gross profit............................. 10,626 7,876
-------- --------
Hotel and vacation ownership gross profit................... 41,344 31,244
Advertising, sales, and marketing........................... 7,928 8,526
General and administrative.................................. 13,085 12,023
Maintenance................................................. 9,021 8,286
Interest expense............................................ 8,287 10,357
Other expense............................................... 485 1,473
-------- --------
Income (loss) before taxes........................ 2,537 (9,421)
Income taxes................................................ -- 79
Asset taxes................................................. 2,110 2,970
Other taxes................................................. 2,523 2,245
-------- --------
Net loss.......................................... $ (2,096) $(14,715)
======== ========
</TABLE>
See accompanying notes.
F-27
<PAGE> 156
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income........................................... $(2,096) $(14,715)
Changes in operating assets and liabilities:
Accounts receivable....................................... (3,004) 5,225
Vacation ownership contracts receivable................... (7,024) (9,328)
Inventory................................................. (364) 337
Taxes to be recovered..................................... (2,067) 1,158
Deferred vacation ownership costs......................... (5,504) (2,010)
Other assets.............................................. (1,017) 2,442
Accounts payable.......................................... 399 (2,889)
Reservations deposits..................................... 145 1,023
Other liabilities......................................... (838) 6,235
Unearned deposits......................................... 1,030 --
Deferred vacation ownership revenue....................... 31,100 12,435
------- --------
Net cash provided by (used in) operating activities......... 10,760 (87)
INVESTING ACTIVITIES
(Acquisition) sale of property, plant, and equipment........ (5,728) 4,489
FINANCING ACTIVITIES
Proceeds from (payments on) notes payable to related
parties................................................... 50,112 (3,216)
Distribution to stockholders................................ (54,620) --
------- --------
Net cash used in financing activities....................... (4,508) (3,216)
Increase in cash and cash equivalents....................... 524 1,186
Cash and cash equivalents at beginning of period............ 4,094 2,908
------- --------
Cash and cash equivalents at end of period.................. $ 4,618 $ 4,094
======= ========
SUPPLEMENTAL DISCLOSURES
Interest paid............................................... $ 7,725 $ 10,640
======= ========
Income and asset taxes paid................................. $ 2,138 $ 3,048
======= ========
</TABLE>
See accompanying notes.
F-28
<PAGE> 157
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Prior to August 18, 1997, Desarrollos Turisticos Bancomer, S.A. de C.V.
(the "Company"), was a wholly owned subsidiary of Bancomer, S.A. de C.V.
("Bancomer"), a Mexican banking and financial services institution. The Company
owns and operates certain hospitality assets of Bancomer, which comprise
primarily deluxe resort hotels and vacation ownership properties in Cancun,
Puerto Vallarta, and Cabo San Lucas, Mexico. The Company's principal operations
consist of (1) developing and acquiring hotel and vacation ownership resorts,
(2) marketing and selling vacation intervals at its resorts, (3) providing
consumer financing for the purchase of vacation intervals at its resorts, and
(4) managing the operations of its resorts.
The consolidated financial statements include the accounts of Desarrollos
Turisticos Bancomer, S.A. de C.V., and all of its majority owned subsidiaries,
which are listed below:
Club Regina, S.A. de C.V.
Servicios Turisticos Integrales Cobamex, S.A. de C.V.
Corporacion Habitacional Mexicana, S.A. de C.V.
Corporacion Mexitur, S.A. de C.V.
Promotora y Desarrolladora Pacifico, S.A. de C.V.
Promotora Turistica Nizuc, S.A. de C.V.
Desarrollos Turisticos Integrales Cabo San Lucas, S.A. de C.V.
Desarrollos Turisticos Integrales de Cozumel, S.A. de C.V.
All significant intercompany balances and transactions have been
eliminated.
TRANSLATION OF FOREIGN CURRENCY
The Company maintains its accounting records and prepares its financial
statements for domestic purposes in Mexican pesos. The accompanying financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America ("U.S. GAAP") in thousands of U.S.
dollars ("$") and, accordingly, differ from those used for domestic purposes in
Mexico.
Peso-denominated transactions are translated into U.S. dollars using
average exchange rates for revenue and expense transactions and year-end
exchange rates for assets and liabilities expected to be realized/satisfied
within one year. The effect of changes in the peso/dollar exchange rates on such
assets and liabilities is immaterial. Real estate and certain other long-term
assets and dollar-denominated transactions and balances (which include certain
vacation interval sales, vacation ownership contracts receivable, and borrowings
from related parties) are reported in the financial statements at their
historical dollar equivalent amounts.
USE 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 of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-29
<PAGE> 158
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
VACATION OWNERSHIP CONTRACTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
Substantially all contracts receivable relate to sales of vacation
ownership interests. While the Company does not obtain collateral for such
contracts, the Company does not believe it has significant concentrations of
credit risk in its contracts receivable because in the instance of
uncollectibility of a contract, the Company retains the right to recover and
resell the defaulted interval. Historically, the Company has been able to resell
such intervals at prices in excess of the defaulted receivable balances.
A significant portion of the Company's customers reside in Mexico and the
Company intends to continue to conduct business in Mexico. All of the Company's
sales offices are currently located in Mexico and any economic downturn in
Mexico, which has a history of economic instability, could have a material
adverse effect on the Company's business, results of operations and financial
condition.
REVENUE RECOGNITION
Vacation Ownership Revenue
The Company sells shares of Class B stock in a majority-owned subsidiary to
vacation ownership buyers. The rights associated with the Class B shares allow
the buyers to use a specified type of accommodation (one-bedroom, two-bedroom,
etc.) during a specified season at any of the Company's resorts on a first-come,
first-serve basis annually for approximately thirty years. The sales price of
such Class B shares is recognized ratably over the thirty-year right to use
period and the costs of selling the Class B shares, which include brokerage
commissions, commissions to sales personnel, and marketing costs directly
associated with successful sales, are deferred and recognized ratably over the
right-to-use period.
Interest income from contracts receivable is recognized when received.
Maintenance fees are billed to Class B shareholders annually and recognized
as earned over 12 months. Maintenance expenses are recognized when incurred.
A provision for uncollectible contracts receivable is accrued for contracts
which become more than 180 days past due. Deferred revenue related to contracts
cancelled in any year subsequent to the year of sale is recognized to the extent
of cumulative cash collections in excess of costs. Deferred costs are recognized
in their entirety. Contracts which are canceled in the year of sale are treated
as a reduction of revenue.
Hotel Revenue
The Company has entered into a hotel management agreement with Westin
Hotels whereby Westin operates the hotels at each of the Company's resort
locations. Revenue is recognized when earned.
ADVERTISING EXPENSE
Advertising costs, which include solicitations of prospective timeshare
buyers, are expensed as incurred to the extent they cannot be directly
associated with a successful sale of Class B shares to a timeshare buyer.
Additionally, advertising costs include the costs of print and broadcast media
associated with the hotel operations. Advertising expenses in 1996 and 1995
totaled $4,098, and $4,398, respectively, and are included in advertising, sales
and marketing expenses.
2. VACATION OWNERSHIP CONTRACTS RECEIVABLE AND CREDIT LOSSES
Vacation ownership contracts receivables are originated when vacation
ownership buyers elect to finance their purchases through the Company. The
Company requires a minimum 15% down payment; a majority of purchasers are
citizens of the United States and Canada. Vacation ownership contracts
receivable bear interest from 14% to 15% and are collected in monthly
installments over periods ranging from 12 months to
F-30
<PAGE> 159
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7 years. Approximately 71% of timeshare contracts receivable were U.S.
dollar-denominated at December 31, 1996.
Changes in the allowance for uncollectible accounts for the years ended
December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Balance at beginning of year................................ $ 3,014 $ 6,710
Provisions for uncollectible accounts....................... 2,895 1,242
Cancellations and write-offs of uncollectible accounts...... (4,134) (4,938)
------- -------
Balance at end of year...................................... $ 1,775 $ 3,014
======= =======
</TABLE>
Because the Company collects non-refundable cash from vacation ownership
buyers in excess of deferred profit, and because the Company has historically
been able to resell vacation ownership intervals at prices in excess of canceled
receivable balances, the Company does not provide for credit losses related to
doubtful contracts.
4. IMPAIRMENT LOSS
Management concluded that at December 31, 1994, the hotel and vacation
ownership assets were impaired and an impairment adjustment of $130,000 was
recorded as of that date. Management's estimate of the impairment loss was based
on its negotiations to sell the assets of the Company.
The Company was the beneficiary of certain trusts established to retain
title to beachfront property in accordance with Mexican law. The property held
in trust consists of the real estate upon which the Company has constructed
hotels and vacation ownership buildings in Cancun, Puerto Vallarta, and Cabo San
Lucas. The trusts are for an original term of 33 years and expire from 2017
through 2023. The Trusts can be renewed for an additional thirty years.
7. INCOME TAXES
The subsidiaries of the Company generally file separate Mexican income tax
returns. Because operations of the Company and each of its subsidiaries have
resulted in losses, only nominal amounts of income taxes have become payable.
The Company pays the greater of its income tax liability or a tax on net
assets. The amount of asset tax paid in excess of income taxes is available to
reduce future income tax payments.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are deferred timeshare revenue
and costs, inventories, and tax loss carryforwards.
F-31
<PAGE> 160
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net deferred tax assets at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Deferred vacation ownership costs........................... $ (5,200) $ (3,500)
Inventories................................................. (1,800) (1,500)
Deferred vacation ownership revenue......................... 26,000 16,000
Net operating losses........................................ 99,000 100,000
--------- ---------
Net deferred taxes before valuation allowance............... 118,000 111,000
Valuation allowance......................................... (118,000) (111,000)
--------- ---------
Net deferred tax assets..................................... $ -- $ --
========= =========
</TABLE>
8. RELATED PARTY TRANSACTIONS
The Company's shareholder is the principal owner or has substantial
ownership interests in other entities with which the Company transacts business.
The following table summarizes transactions with related parties:
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Liabilities:
Notes payable............................................. $119,016 $67,736
Accounts payable.......................................... $ -- $ 340
Interest payable.......................................... $ 2,264 $ 1,168
Expenses:
Interest expense.......................................... $ 8,287 $10,357
Lease expense............................................. $ 161 $ 148
Fees...................................................... $ -- $ --
</TABLE>
9. COMMITMENTS
Certain subsidiaries of the Company entered into an operation and
administrative agreement with Westin Mexico, S.A. de C.V. ("Westin"), through
December 2003. The Company believes it has the right to terminate the agreement
pursuant to provisions related to change of control of Westin, but has not
asserted that right. Under the agreement, the subsidiaries are obligated to pay
certain cost and expense reimbursements related to promotion, marketing,
reservations, and sales.
Additionally, the subsidiaries are obligated to pay 0.9% of total operating
revenues for technical services provided by Westin. Technical services expense
was $867 and $367 for the years ended December 31, 1996 and 1995, respectively.
Additionally, Westin is entitled to management fees based on a percentage
of the total operating revenues of the hotels (ranging from 1% to 2% over the
life of the contract), as well as additional fees for maintaining certain
percentages related to gross margin operations (calculated as a percentage of
total operating revenues and ranging from 2.5% to 6%). Management fees were $764
and $422 and gross margin fees were $437 and $281 for the years ended December
31, 1996 and 1995, respectively.
10. CONTINGENCIES
The Company is subject to various claims arising in the ordinary course of
business, and is a party to various legal proceedings which constitute
litigation incidental to the Company's business. In the opinion of management,
all such matters are either adequately covered by insurance or are not expected
to have a material adverse effect on the Company.
F-32
<PAGE> 161
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. SUBSEQUENT EVENTS
On August 18, 1997, Bancomer sold its interest in the Company to Club
Regina Resorts, Inc. In connection with such sale, the Bancomer affiliate
provided financing to Club Regina Resorts, Inc.
12. SEGMENT INFORMATION
Based on management's belief and knowledge, allocations of certain income,
expense, assets, and liabilities items are based on the following percentages
for each subsidiary included in the DTB's consolidated financial statements:
<TABLE>
<CAPTION>
VACATION
SUBSIDIARY OWNERSHIP HOTEL
---------- --------- -----
<S> <C> <C>
Corporacion Mexitur, S.A. de C.V............................ 100%
Club Regina, S.A. de C.V.................................... 100%
D.T.I. de Cozumel, S.A. de C.V.............................. 100%
S.T.I. Cobamex, S.A. de C.V................................. 39% 61%
Corporacion Habitacianal Mexicana, S.A. de C.V.............. 50% 50%
DTB Holding................................................. 39% 61%
Promotora y Desarrolladora Pacifico, S.A. de C.V............ 52% 48%
D.T.I. Cabo San Lucas, S.A. de C.V.......................... 45% 55%
Promotora Turistica Nizuc, S.A. de C.V...................... 21% 79%
</TABLE>
For the year ended December 31, 1996
Following is management's estimate of 1996 revenues and expenses allocable
to each of the Company's business segments.
<TABLE>
<CAPTION>
VACATION
HOTEL OWNERSHIP CONSOLIDATED
-------- --------- ------------
<S> <C> <C> <C>
Revenue from operations........................... $ 45,062 $ 12,418 $ 57,480
Allocable operating expenses...................... 14,344 1,792 16,136
-------- -------- --------
Gross profit...................................... 30,718 10,626 41,344
Allocable other expenses.......................... 17,681 12,839 30,520
-------- -------- --------
Income (loss)before interest and allocable
taxes........................................... 13,037 (2,213) 10,824
Interest expense.................................. 5,179 3,108 8,287
Allocable taxes................................... 1,321 3,312 4,633
-------- -------- --------
Net income (loss)................................. $ 6,537 $ (8,633) $ (2,096)
======== ======== ========
</TABLE>
For the year ended December 31, 1995
Following is management's estimate of 1995 revenues and expenses allocable
to each of the Company's business segments.
F-33
<PAGE> 162
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
VACATION
HOTEL OWNERSHIP CONSOLIDATED
----- --------- ------------
<S> <C> <C> <C>
Revenue from operations..................................... $34,876 $ 8,338 $ 43,214
Allocable operating expenses................................ 11,508 462 11,970
------- -------- --------
Gross profit................................................ 23,368 7,876 31,244
Allocable other expenses.................................... 16,549 13,759 30,308
------- -------- --------
Income (loss) before interest and allocable taxes........... 6,819 (5,883) 936
Interest expense............................................ 6,473 3,884 10,357
Allocable taxes............................................. 1,938 3,356 5,294
------- -------- --------
Net loss.......................................... $(1,592) $(13,123) $(14,715)
======= ======== ========
</TABLE>
F-34
<PAGE> 163
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Desarrollos Turisticos Bancomer, S.A. de C.V.
Mexico City
We have audited the accompanying consolidated statements of operations and
cash flows of Desarrollos Turisticos Bancomer, S.A. de C.V. and Subsidiaries
(the "Company"), for the period January 1, 1997 through August 18, 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 consolidated statements of operations and cash flows
referred to above present fairly, in all material respects, the consolidated
results of operations and cash flows of Desarrollos Turisticos Bancomer, S.A. de
C.V. and Subsidiaries for the period from January 1, 1997 through August 18,
1997 in conformity with generally accepted accounting principles.
Miami, Florida
March 20, 1998
F-35
<PAGE> 164
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, 1997
THROUGH
AUGUST 18, 1997
----------------
<S> <C>
Revenue from hotel operations:
Rooms..................................................... $ 20,832
Food and beverage......................................... 11,342
Other departmental........................................ 2,297
Miscellaneous............................................. 242
----------------
Total revenue from hotel operations............... 34,713
Hotel operating expenses:
Rooms..................................................... 2,952
Food and beverage......................................... 6,038
Other departmental........................................ 746
----------------
Total hotel operating expenses.................... 9,736
----------------
Hotel gross profit................................ 24,977
Revenue from vacation ownership operations:
Sales of vacation ownership interests..................... 31,479
Less: amounts deferred to future periods.................. (30,653)
Add: amounts recognized from prior sales.................. 1,650
----------------
2,476
----------------
Interest income on vacation ownership contracts
receivable................................................ 3,277
Rental of unsold units...................................... 4,560
Maintenance fee income...................................... 2,461
Other....................................................... 1,329
----------------
Total revenue from vacation ownership
operations....................................... 14,103
Vacation ownership operating expenses:
Commissions paid to salespeople........................... 5,512
Less amounts deferred to future periods................... (5,413)
Add amounts recognized from prior sales................... 313
Maintenance of unsold units............................... 110
----------------
Total vacation ownership operating expenses,
net.............................................. 522
----------------
Vacation ownership gross profit............................. 13,581
----------------
Hotel and vacation ownership gross profit................... 38,558
Advertising, sales, and marketing........................... 7,863
General and administrative.................................. 10,274
Maintenance................................................. 9,407
Interest expense............................................ 7,539
Other expense............................................... 1,360
Exchange loss............................................... 157
----------------
Income before taxes............................... 1,958
Asset taxes................................................. 2,010
Other taxes................................................. 2,684
----------------
Net loss.......................................... $ (2,736)
================
</TABLE>
See accompanying notes.
F-36
<PAGE> 165
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, 1997
THROUGH
AUGUST 18, 1997
----------------
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (2,736)
Adjustments to reconcile net loss to net cash provided by
operating activities -- changes in operating assets and
liabilities:
Accounts receivable....................................... (2,377)
Vacation ownership contracts receivable................... (9,547)
Inventory................................................. (372)
Taxes to be recovered..................................... 1,205
Deferred vacation ownership costs......................... (5,100)
Other assets.............................................. (1,436)
Accounts payable.......................................... 4,108
Reservations deposits..................................... 1,764
Other liabilities......................................... (2,122)
Unearned deposits......................................... (1,030)
Deferred vacation ownership revenue....................... 26,269
--------
Net cash provided by operating activities................... 8,626
INVESTING ACTIVITIES
Acquisition of property, plant, and equipment............... (849)
FINANCING ACTIVITIES
Proceeds from notes payable to related parties.............. 1,727
Distribution to stockholders................................ (11,000)
--------
Net cash used in financing activities....................... (9,273)
--------
Decrease in cash and cash equivalents....................... (1,496)
Cash and cash equivalents at beginning of period............ 4,618
--------
Cash and cash equivalents at end of period.................. $ 3,122
========
SUPPLEMENTAL DISCLOSURES
Interest paid............................................... $ 7,197
========
Income and asset taxes paid................................. $ 1,752
========
Non-cash financing activity:
Conversion of debt to equity.............................. $120,743
========
</TABLE>
See accompanying notes.
F-37
<PAGE> 166
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 18, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Prior to August 18, 1997, Desarrollos Turisticos Bancomer, S.A. de C.V.
(the "Company"), was a wholly owned subsidiary of Bancomer, S.A. de C.V.
("Bancomer"), a Mexican banking and financial services institution. The Company
owns and operates certain hospitality assets of Bancomer, which comprise
primarily deluxe resort hotels and vacation ownership properties in Cancun,
Puerto Vallarta, and Cabo San Lucas, Mexico. The Company's principal operations
consist of (1) developing and acquiring hotel and vacation ownership resorts,
(2) marketing and selling vacation intervals at its resorts, (3) providing
consumer financing for the purchase of vacation intervals at its resorts, and
(4) managing the operations of its resorts.
The consolidated financial statements include the accounts of Desarrollos
Turisticos Bancomer, S.A. de C.V., and all of its majority owned subsidiaries,
which are listed below:
Club Regina, S.A. de C.V.
Servicios Turisticos Integrales Cobamex, S.A. de C.V.
Corporacion Habitacional Mexicana, S.A. de C.V.
Corporacion Mexitur, S.A. de C.V.
Promotora y Desarrolladora Pacifico, S.A. de C.V.
Promotora Turistica Nizuc, S.A. de C.V.
Desarrollos Turisticos Integrales Cabo San Lucas, S.A. de C.V.
Desarrollos Turisticos Integrales de Cozumel, S.A. de C.V.
All significant intercompany balances and transactions have been
eliminated.
TRANSLATION OF FOREIGN CURRENCY
The Company maintains its accounting records and prepares its financial
statements for domestic purposes in Mexican pesos. The accompanying financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America ("U.S. GAAP") in thousands of U.S.
dollars ("$") and, accordingly, differ from those used for domestic purposes in
Mexico.
Peso-denominated transactions are translated into U.S. dollars using
average exchange rates for revenue and expense transactions and year-end
exchange rates for assets and liabilities expected to be realized/satisfied
within one year. The effect of changes in the peso/dollar exchange rates on such
assets and liabilities is immaterial. Real estate and certain other long-term
assets and dollar-denominated transactions and balances (which include certain
vacation interval sales, vacation ownership contracts receivable, and borrowings
from related parties) are reported in the financial statements at their
historical dollar equivalent amounts.
USE 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 of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-38
<PAGE> 167
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
VACATION OWNERSHIP CONTRACTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
Substantially all contracts receivable relate to sales of vacation
ownership interests. While the Company does not obtain collateral for such
contracts, the Company does not believe it has significant concentrations of
credit risk in its contracts receivable because in the instance of
uncollectibility of a contract, the Company retains the right to recover and
resell the defaulted interval. Historically, the Company has been able to resell
such intervals at prices in excess of the defaulted receivable balances.
A significant portion of the Company's customers reside in Mexico and the
Company intends to continue to conduct business in Mexico. All of the Company's
sales offices are currently located in Mexico and any economic downturn in
Mexico, which has a history of economic instability, could have a material
adverse effect on the Company's business, results of operations and financial
condition.
REVENUE RECOGNITION
Vacation Ownership Revenue
The Company sells shares of Class B stock in a majority-owned subsidiary to
vacation ownership buyers. The rights associated with the Class B shares allow
the buyers to use a specified type of accommodation (one-bedroom, two-bedroom,
etc.) during a specified season at any of the Company's resorts on a first-come,
first-serve basis annually for approximately thirty years. The sales price of
such Class B shares is recognized ratably over the thirty-year right to use
period and the costs of selling the Class B shares, which include brokerage
commissions, commissions to sales personnel, and marketing costs directly
associated with successful sales, are deferred and recognized ratably over the
right-to-use period.
Interest income from contracts receivable is recognized when received.
Maintenance fees are billed to Class B shareholders annually and recognized
as earned over 12 months. Maintenance expenses are recognized when incurred.
A provision for uncollectible contracts receivable is accrued for contracts
which become more than 180 days past due. Deferred revenue related to contracts
cancelled in any year subsequent to the year of sale is recognized to the extent
of cumulative cash collections in excess of costs. Deferred costs are recognized
in their entirety. Contracts which are canceled in the year of sale are treated
as a reduction of revenue.
Hotel Revenue
The Company has entered into a hotel management agreement with Westin
Hotels whereby Westin operates the hotels at each of the Company's resort
locations. Revenue is recognized when earned.
ADVERTISING EXPENSE
Advertising costs, which include solicitations of prospective timeshare
buyers, are expensed as incurred to the extent they cannot be directly
associated with a successful sale of Class B shares to a timeshare buyer.
Additionally, advertising costs include the costs of print and broadcast media
associated with the hotel operations. Advertising expenses in the period January
1, 1997 through August 18, 1997 totaled $2,965, and are included in advertising,
sales and marketing expenses.
2. VACATION OWNERSHIP CONTRACTS RECEIVABLE AND CREDIT LOSSES
Vacation ownership contracts receivables are originated when vacation
ownership buyers elect to finance their purchases through the Company. The
Company requires a minimum 15% down payment; a majority of purchasers are
citizens of the United States and Canada. Vacation ownership contracts
receivable bear interest from 14% to 15% and are collected in monthly
installments over periods ranging from 12 months to
F-39
<PAGE> 168
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7 years. Approximately 66% of timeshare contracts receivable were U.S.
dollar-denominated at August 18, 1997.
Because the Company collects non-refundable cash from vacation ownership
buyers in excess of deferred profit, and because the Company has historically
been able to resell vacation ownership intervals at prices in excess of canceled
receivable balances, the Company does not provide for credit losses related to
doubtful contracts.
4. IMPAIRMENT LOSS
Management concluded that at December 31, 1994, the hotel and vacation
ownership assets were impaired and an impairment adjustment of $130,000 was
recorded as of that date. Management's estimate of the impairment loss was based
on its negotiations to sell the assets of the Company.
Accordingly, the assets are carried at the lower of cost or fair market
value less costs of disposal. No depreciation expense has been recorded on the
hotel and vacation ownership assets.
7. INCOME TAXES
The subsidiaries of the Company generally file separate Mexican income tax
returns. Because operations of the Company and each of its subsidiaries have
resulted in losses, only nominal amounts of income taxes have become payable.
The Company pays the greater of its income tax liability or a tax on net
assets. The amount of asset tax paid in excess of income taxes is available to
reduce future income tax payments.
8. RELATED PARTY TRANSACTIONS
The Company's shareholder is the principal owner or has substantial
ownership interests in other entities with which the Company transacts business.
The following table summarizes transactions with related parties for the period
January 1, 1997 through August 18, 1997:
<TABLE>
<S> <C> <C>
Expenses for the period:
Interest expense.......................................... $ 7,539
Lease expense............................................. $ 244
</TABLE>
9. COMMITMENTS
Certain subsidiaries of the Company entered into an operation and
administrative agreement with Westin Mexico, S.A. de C.V. ("Westin"), through
December 2003. The Company believes it has the right to terminate the agreement
pursuant to provisions related to change of control of Westin, but has not
asserted that right. Under the agreement, the subsidiaries are obligated to pay
certain cost and expense reimbursements related to promotion, marketing,
reservations, and sales.
Additionally, the subsidiaries are obligated to pay 0.9% of total operating
revenues for technical services provided by Westin. Technical services expense
was $1,564 for the period.
Additionally, Westin is entitled to management fees based on a percentage
of the total operating revenues of the hotels (ranging from 1% to 2% over the
life of the contract), as well as additional fees for maintaining certain
percentages related to gross margin operations (calculated as a percentage of
total operating revenues and ranging from 2.5% to 6%). Management fees were $756
and gross margin fees were $1,564 for the period, respectively.
F-40
<PAGE> 169
DESARROLLOS TURISTICOS BANCOMER, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. CONTINGENCIES
The Company is subject to various claims arising in the ordinary course of
business, and is a party to various legal proceedings which constitute
litigation incidental to the Company's business. In the opinion of management,
all such matters are either adequately covered by insurance or are not expected
to have a material adverse effect on the Company.
11. SUBSEQUENT EVENTS
On August 18, 1997, Bancomer sold its interest in the Company to Club
Regina Resorts, Inc. In connection with such sale, the Bancomer affiliate
provided financing to Club Regina Resorts, Inc.
12. SEGMENT INFORMATION
For the period January 1, 1997 through August 18, 1997
Based on management's belief and knowledge, allocations of certain income,
expense, assets, and liabilities items are based on the following percentages
for each subsidiary included in the DTB's consolidated financial statements:
<TABLE>
<CAPTION>
VACATION
SUBSIDIARY OWNERSHIP HOTEL
---------- --------- -----
<S> <C> <C>
Corporacion Mexitur, S.A. de C.V............................ 100%
Club Regina, S.A. de C.V.................................... 100%
D.T.I. de Cozumel, S.A. de C.V.............................. 100%
S.T.I. Cobamex, S.A. de C.V................................. 39% 61%
Corporacion Habitacianal Mexicana, S.A. de C.V.............. 50% 50%
DTB Holding................................................. 39% 61%
Promotora y Desarrolladora Pacifico, S.A. de C.V............ 52% 48%
D.T.I. Cabo San Lucas, S.A. de C.V.......................... 45% 55%
Promotora Turistica Nizuc, S.A. de C.V...................... 21% 79%
</TABLE>
Following is management's estimate of revenues, expenses, allocable to each
of the Company's business segments.
<TABLE>
<CAPTION>
VACATION
HOTEL OWNERSHIP CONSOLIDATED
------- --------- ------------
<S> <C> <C> <C>
Revenue from operations............................ $34,713 $14,103 $48,816
Allocable operating expenses....................... 9,736 522 10,258
------- ------- -------
Gross profit....................................... 24,977 13,581 38,558
Allocable other expenses........................... 15,025 14,036 29,061
------- ------- -------
Income (loss)before interest & allocable taxes..... 9,952 (455) 9,497
Interest expense................................... 4,712 2,827 7,539
Allocable taxes.................................... 2,938 1,756 4,694
------- ------- -------
Net income (loss).................................. $ 2,302 $(5,038) $(2,736)
======= ======= =======
</TABLE>
F-41
<PAGE> 170
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS OR THE INITIAL PURCHASER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................
Enforceability of Civil or Criminal
Liabilities............................
Summary..................................
Risk Factors.............................
Exchange Rates...........................
Private Placement........................
Use of Proceeds..........................
Capitalization...........................
Unaudited Pro Forma Financial Data.......
Selected Combined Historical Financial
Data...................................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................
Business.................................
Management...............................
Certain Transactions.....................
Principal Stockholders...................
The Exchange Offer.......................
Description of Notes.....................
Book-Entry; Delivery and Form............
Transfer Restrictions on Outstanding
Notes..................................
Description of Other Debt................
Description of Capital Stock and
Warrants...............................
Taxation.................................
Legal Matters............................
Experts..................................
Defined Terms............................
Index to Financial Statements............ F-1
</TABLE>
$100,000,000
13% SERIES B SENIOR NOTES
DUE 2004
CLUB REGINA RESORTS, INC.
CR RESORTS CAPITAL,
S. DE R. L. DE C. V.
--------------------
PROSPECTUS
--------------------
, 1998
<PAGE> 171
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is empowered by Section 78.751 of the Nevada General
Corporation Law (the "NGCL"), subject to the procedures and limitations stated
therein, to indemnify any person who was or is a party or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director or officer, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the proceeding if he acted in good faith and
in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In
accordance with Section 78.751, the Company must indemnify a director or officer
to the extent that the officer or director has been successful on the merits or
otherwise in defense of any action, suit or proceeding or in defense of any
claim, issue or matter against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense. The statute provides
that indemnification pursuant to its provisions is not exclusive of other rights
of indemnification to which a person may be entitled under the articles of
incorporation, or any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. The bylaws of the Company provide for indemnification
by the Company of its directors and officers to the fullest extent permitted by
the NGCL. In addition, the Company has provided in its Articles of Incorporation
that, to the fullest extent permitted by applicable law, no director or officer
shall be personally liable to the Company or stockholder for damages for breach
of fiduciary duty as a director or officer, except for act or omissions that
involve intentional misconduct, fraud, or a knowing violation of law or the
payment of dividends in violation of Section 78.300 of the NGCL.
The Company intends to obtain an insurance policy providing for
indemnification of officers and directors of the Company and certain other
persons against liabilities and expenses incurred by any of them in certain
stated proceedings and under certain stated conditions. The Company has entered
into separate indemnification agreements with each of its directors which may
require the Company, among other things, to indemnify such directors against
certain liabilities that may arise by reason of their status or service as
directors to the maximum extent permitted under Nevada law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
The following instruments and documents are included as Exhibits to this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* -- Purchase Agreement, dated November 26, 1997, among the
Issuers and the Initial Purchaser.
3.1* -- Amended and Restated Articles of Incorporation of Club
Regina Resorts, Inc. ("CR US"), dated August 12, 1997.
3.2* -- Articles of Incorporation of C.R. Resorts Capital, S. de
R.L. de C.V., dated August 11, 1997 (English Translation
which includes by-laws).
3.3* -- By-Laws of Club Regina Resorts, Inc., effective April 15,
1997.
3.4* -- Certificate of Designations of Class A Redeemable
Convertible Preferred Stock of CR US.
4.1* -- Indenture (including Forms of Registered Note and
Outstanding Note), dated December 5, 1997, among the
Issuers and IBJ Schroder Bank & Trust Company.
</TABLE>
II-1
<PAGE> 172
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.2* -- Series B Warrant Agreement (including form of warrant),
dated December 5, 1997, between CR US and Jefferies &
Company, Inc. (Initial Purchaser).
4.3* -- Warrant Agreement (including form of warrant), dated
December 5, 1997, between CR US and the Warrant Agent.
5.1+ -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
5.2+ -- Opinion of Santamarina y Steta.
10.1* -- Second Amended and Restated Stock Purchase Agreement,
dated August 18, 1997, by and among Bancomer, CR US,
Desarrollos Turisticos Bancomer, S.A. de C.V. and CR
Hotel Acquisition Company, L.L.C.
10.2* -- Cross Indemnity Agreement, dated August 18, 1997 by and
among Bancomer, CR US and others named therein.
10.3* -- Post-Closing Agreement, dated August 19 ,1997, by and
among Bancomer, CR US and others named therein.
10.4+ -- Asset Management Agreement, dated August 18, 1997, by and
among Starwood Lodging Corporation and CR US.
10.5* -- Form of Operating Agreement by and among Starwood and
subsidiaries of CR US (English translation).
10.6* -- Warrant Shares Registration Rights Agreement, dated
December 5, 1997, between CR US and the Initial
Purchaser.
10.7* -- A/B Exchange Registration Rights Agreement, dated
December 5, 1997, among the Issuers and the Initial
Purchaser.
10.8* -- Series B Warrant Registration Rights Agreement, dated
December 5, 1997, between CR US and the Initial
Purchaser.
10.9* -- 1997 Non-Employee Directors' Stock Option Plan.
10.10* -- Form of Indemnity Agreement.
10.11* -- Form of Registration Rights Agreement, by and among CR US
and stockholders of CR US.
10.12* -- Form of Shareholders Agreement, by and among CR US and
stockholders of CR US.
10.13* -- 1997 Long-Term Incentive Plan.
10.14* -- Tax Allocation Agreement dated August 18, 1997, by and
among Starwood Lodging Corporation and CR US.
10.15* -- Agreement dated May 20, 1996 by and among Starwood
Capital Group, L.L.C., CR US and Raintree Capital
Company, LLC.
10.16* -- Agreement dated May 20, 1996 by and among SLT Realty
Limited Partnership, CR US and Raintree Capital Company,
LLC.
12.1* -- Statements re Computation of Ratios.
21.1* -- List of Subsidiaries of CR US.
23.1+ -- Consent of Akin, Gump (included in Exhibit 5.1).
23.2+ -- Consent of Santa Marina y Steta (included in Exhibit
5.2).
23.3* -- Consent of Ernst & Young LLP.
25.1* -- Statement of Eligibility and Qualification on Form T-1
under the Trust Indenture Act of 1939, made by the
Trustee under the Indenture.
</TABLE>
II-2
<PAGE> 173
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
25.2* -- Report of Financial Condition of Trustee (included as
Exhibit T-1.6 to Statement of Eligibility filed as
Exhibit -- 25.1).
27.1* -- Financial Data Schedule.
99.1* -- Form of Letter of Transmittal for Exchange Offer.
</TABLE>
- ---------------
* filed herewith
+ to be filed
(b) Financial Statement Schedules:
None. All Schedules are omitted because the required information is not
present in amounts sufficient to require submission of the Schedule or because
the information required is included in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS
A. 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, the company has been
advised that, in the opinion of the Securities and Exchange Commission, 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 registrant 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.
B. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
C. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 174
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement or Amendment to be signed on their
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
the State of Texas, on April 20, 1998.
CLUB REGINA RESORTS, INC.
By: /s/ DOUGLAS Y. BECH
----------------------------------
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DOUGLAS Y. BECH Chairman (principal executive April 20, 1998
- ----------------------------------------------------- officer)
Douglas Y. Bech
/s/ JOHN MCCARTHY President and Chief Operating April 20, 1998
- ----------------------------------------------------- Officer
John McCarthy
/s/ GEORGE STROESENREUTHER Senior Vice President -- Finance April 20, 1998
- ----------------------------------------------------- and Accounting (principal
George Stroesenreuther accounting officer)
* Director April 20, 1998
- -----------------------------------------------------
Christopher Allick
* Director April 20, 1998
- -----------------------------------------------------
Christel DeHaan
* Director April 20, 1998
- -----------------------------------------------------
Walker Harman
* Director April 20, 1998
- -----------------------------------------------------
Merrick Kleeman
/s/ THOMAS POWERS Director April 20, 1998
- -----------------------------------------------------
Thomas Powers
</TABLE>
II-4
<PAGE> 175
CR RESORTS CAPITAL, S. DE R.L. DE
C.V.
By: /s/ JOHN MCCARTHY
----------------------------------
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN MCCARTHY Chairman of the Board of April 20, 1998
- ----------------------------------------------------- Managers (Principal Executive
John McCarthy Officer)
/s/ DOUGLAS Y. BECH Secretary and Manager April 20, 1998
- -----------------------------------------------------
Douglas Y. Bech
/s/ GEORGE STROESENREUTHER Senior Vice President -- Finance April 20, 1998
- ----------------------------------------------------- and Accounting (Principal
George Stroesenreuther Accounting Officer)
</TABLE>
II-5
<PAGE> 176
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* -- Purchase Agreement, dated November 26, 1997, among the
Issuers and the Initial Purchaser.
3.1* -- Amended and Restated Articles of Incorporation of Club
Regina Resorts, Inc. ("CR US"), dated August 12, 1997.
3.2* -- Articles of Incorporation of C.R. Resorts Capital, S. de
R.L. de C.V., dated August 11, 1997 (English Translation
which includes by-laws).
3.3* -- By-Laws of Club Regina Resorts, Inc., effective April 15,
1997.
3.4* -- Certificate of Designations of Class A Redeemable
Convertible Preferred Stock of CR US.
4.1* -- Indenture (including Forms of Registered Note and
Outstanding Note), dated December 5, 1997, among the
Issuers and IBJ Schroder Bank & Trust Company.
4.2* -- Series B Warrant Agreement (including form of warrant),
dated December 5, 1997, between CR US and Jefferies &
Company, Inc. (Initial Purchaser).
4.3* -- Warrant Agreement (including form of warrant), dated
December 5, 1997, between CR US and the Warrant Agent.
5.1+ -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
5.2+ -- Opinion of Santamarina y Steta.
10.1* -- Second Amended and Restated Stock Purchase Agreement,
dated August 18, 1997, by and among Bancomer, CR US,
Desarrollos Turisticos Bancomer, S.A. de C.V. and CR
Hotel Acquisition Company, L.L.C.
10.2* -- Cross Indemnity Agreement, dated August 18, 1997 by and
among Bancomer, CR US and others named therein.
10.3* -- Post-Closing Agreement, dated August 19 ,1997, by and
among Bancomer, CR US and others named therein.
10.4+ -- Asset Management Agreement, dated August 18, 1997, by and
among Starwood Lodging Corporation and CR US.
10.5* -- Form of Operating Agreement by and among Starwood and
subsidiaries of CR US (English translation).
10.6* -- Warrant Shares Registration Rights Agreement, dated
December 5, 1997, between CR US and the Initial
Purchaser.
10.7* -- A/B Exchange Registration Rights Agreement, dated
December 5, 1997, among the Issuers and the Initial
Purchaser.
10.8* -- Series B Warrant Registration Rights Agreement, dated
December 5, 1997, between CR US and the Initial
Purchaser.
10.9* -- 1997 Non-Employee Directors' Stock Option Plan.
10.10* -- Form of Indemnity Agreement.
10.11* -- Form of Registration Rights Agreement, by and among CR US
and stockholders of CR US.
10.12* -- Form of Shareholders Agreement, by and among CR US and
stockholders of CR US.
10.13* -- 1997 Long-Term Incentive Plan.
</TABLE>
<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.14* -- Tax Allocation Agreement dated August 18, 1997, by and
among Starwood Lodging Corporation and CR US.
10.15* -- Agreement dated May 20, 1996 by and among Starwood
Capital Group, L.L.C., CR US and Raintree Capital
Company, LLC.
10.16* -- Agreement dated May 20, 1996 by and among SLT Realty
Limited Partnership, CR US and Raintree Capital Company,
LLC.
12.1* -- Statements re Computation of Ratios.
21.1* -- List of Subsidiaries of CR US.
23.1+ -- Consent of Akin, Gump (included in Exhibit 5.1).
23.2+ -- Consent of Santa Marina y Steta (included in Exhibit
5.2).
23.3* -- Consent of Ernst & Young LLP.
25.1* -- Statement of Eligibility and Qualification on Form T-1
under the Trust Indenture Act of 1939, made by the
Trustee under the Indenture.
25.2* -- Report of Financial Condition of Trustee (included as
Exhibit T-1.6 to Statement of Eligibility filed as
Exhibit -- 25.1).
27.1* -- Financial Data Schedule.
99.1* -- Form of Letter of Transmittal for Exchange Offer.
</TABLE>
- ---------------
* filed herewith
+ to be filed
<PAGE> 1
EXHIBIT 1.1
EXECUTION COPY
PURCHASE AGREEMENT
CLUB REGINA RESORTS, INC.
CR RESORTS CAPITAL, S. DE R. L. DE C. V.
100,000 Units consisting in the aggregate of
13% Senior Notes due 2004
and Warrants to Purchase 1,869,962 Shares of Common Stock
of Club Regina Resorts, Inc.
November 26, 1997
JEFFERIES & COMPANY, INC.
<PAGE> 2
PURCHASE AGREEMENT
100,000 Units of 13% Senior Notes due 2004
of Club Regina Resorts, Inc. and CR Resorts Capital, S. de R. L. de C. V.
and Warrants to purchase 1,869,962 shares of Common Stock
of Club Regina Resorts, Inc.
November 26, 1997
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard
Los Angeles, California 90025
Dear Sirs:
Club Regina Resorts, Inc., a Nevada corporation ("CR US"), and CR
Resorts Capital, a Mexican Sociedad de Responsibilidad Limitada de Capital
Variable ("CR Mexico"; together with CR US, the "Issuers"), propose to issue and
sell to Jefferies & Company, Inc. (the "Initial Purchaser") 100,000 units (the
"Units") consisting in the aggregate of $100,000,000 in aggregate principal
amount of their 13% Series A Senior Notes due 2004 (the "Series A Notes") and
warrants (the "Warrants") to purchase 1,869,962 shares (the "Warrant Shares") of
common stock, par value $.001 per shares (the "Common Stock") of CR US, subject
to the terms and conditions set forth herein. The Series A Notes are to be
issued pursuant to the provisions of an indenture (the "Indenture"), to be dated
as of the Closing Date (as defined below), among the Issuers and IBJ Schroder
Bank & Trust Company, as trustee (the "Trustee"). The Series A Notes and the
Series B Notes (as defined below) issuable in exchange therefor are collectively
referred to herein as the "Notes." The Warrants will be issued pursuant to a
warrant agreement (the "Warrant Agreement"), to be dated the Closing Date,
between CR US and IBJ Schroder Bank & Trust Company, as warrant agent (the
"Warrant Agent"). The Notes and the Warrants will not be separately tradeable
until the earlier to occur of (i) June 1, 1998, (ii) the occurrence of a Change
of Control and (iii) such earlier date as may be determined by the Initial
Purchaser. The Units, the Notes and the Warrants are collectively referred to
herein as the "Securities." Capitalized terms used but not defined herein shall
have the meanings given to such terms in the Indenture.
1. OFFERING CIRCULAR.
The Securities will be offered and sold to the Initial Purchaser
pursuant to one or more exemptions from the registration requirements under the
Securities Act of 1933, as amended (the "Act"). The Issuers have prepared a
preliminary offering circular, dated
<PAGE> 3
November 13, 1997 (the "Preliminary Offering Circular") and a final offering
circular, dated November 26, 1997 (the "Offering Circular"), relating to the
Securities.
Upon original issuance thereof, and until such time as the same is no
longer required under applicable requirements of the Act, the Units, the Series
A Notes, the Warrants and the Warrant Shares (and all securities issued in
exchange therefor, in substitution thereof or upon conversion thereof) shall
bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS
TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE
144(k) AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES
WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL CLOSING DATE HEREOF
AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) EXCEPT (A)
TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
(D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501 (A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
2
<PAGE> 4
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE ISSUERS' AND THE [TRUSTEE'S] [WARRANT AGENT'S] RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE
FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE [TRUSTEE]
[WARRANT AGENT].
2. AGREEMENTS TO SELL AND PURCHASE; ADDITIONAL AGREEMENTS.
(a) On the basis of the representations, warranties and covenants
contained in this Agreement, and subject to the terms and conditions contained
herein, the Issuers agree to issue and sell to the Initial Purchaser, and the
Initial Purchaser agrees to purchase from the Issuers, the Units at a purchase
price equal to $96,000,000 (the "Purchase Price").
(b) In addition, on the Closing Date, (i) the Issuers agree to pay
to the Initial Purchaser an advisory fee of $2,000,000 (in addition to any other
fees that may be owed to the Initial Purchaser pursuant to the letter agreement
dated August 18, 1997 between CR US and the Initial Purchaser), (ii) CR US
agrees to issue to the Initial Purchaser 258,450 shares of Common Stock and
(iii) CR US agrees to grant to the Initial Purchaser (or one or more of its
designees) warrants to acquire shares of Common Stock at a purchase price equal
to the lesser of $7.00 per share or the lowest purchase price for shares of
Common Stock issued by CR US in a private placement (other than with respect to
transfers by shareholders to William J. Criswell and parties whose rights to
purchase shares are related to William J. Criswell, and transfers of shares
related to AEW Mexico Company, L.L.C.) after the date hereof and to pay the
reasonable out-of-pocket expenses (including reasonable legal fees) incurred in
connection with the exercise of such warrants; provided that such warrant shall
expire on the earlier of one year from the date hereof and the date CR US closes
an initial public offering of its Common Stock; and provided further that such
warrants shall have the customary terms and conditions (including such terms and
conditions as are applicable to the Warrants to be issued in this transaction,
to the extent appropriate). The total number of shares to be issued pursuant to
the warrants described in clause (iii) shall be equal to 4,000,000 divided by
the exercise price of such warrant (as such exercise price is determined in
accordance with clause (iii) and such other terms of such warrants).
3. TERMS OF OFFERING.
The Initial Purchaser has advised the Issuers that the Initial
Purchaser will make offers (the "Exempt Resales") of the Units purchased
hereunder on the terms set forth in the Offering Circular, as amended or
supplemented, solely to (i) persons whom the Initial Purchaser reasonably
believes to be "qualified institutional buyers" as defined in Rule 144A under
the Act ("QIBs"), and (ii) other institutional "accredited investors," as
defined in Rule 501(a) (1), (2), (3) or (7) under the Act, that make certain
representations and agreements to the Issuers (each, an
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<PAGE> 5
"Accredited Institution") (such persons specified in clauses (i) and (ii) being
referred to herein as the "Eligible Purchasers"). The Initial Purchaser will
offer the Series A Notes to Eligible Purchasers initially at the price set forth
herein. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the A/B Exchange Registration Rights
Agreement (the "Notes Registration Rights Agreement"), to be dated the Closing
Date, in substantially the form of Exhibit A-1 hereto and holders (including
subsequent transferees) of the Warrants will have registration rights set forth
in the Warrant Shares Registration Rights Agreement (the "Warrant Shares
Registration Rights Agreement"), to be dated the Closing Date, in substantially
the form of Exhibit A-2 hereto, for so long as such Notes, Warrants or any
Warrant Shares constitute "Transfer Restricted Securities" (as defined in each
such agreement, respectively). Pursuant to the Notes Registration Rights
Agreement, the Issuers will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i) a
registration statement under the Act (the "Exchange Offer Registration
Statement") relating to the Issuers' 13% Series B Notes due 2004 (the "Series B
Notes"), to be offered in exchange for the Series A Notes (such offer to
exchange being referred to as the "Exchange Offer") and (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Notes Registration Statements") relating to the resale by
certain holders of the Series A Notes and to use their best efforts to cause
such Notes Registration Statements to be declared and remain effective and
usable for the periods specified in the Notes Registration Rights Agreement and
to consummate the Exchange Offer. Pursuant to the Warrant Shares Registration
Rights Agreement, CR US will agree to file with the Commission, under the
circumstances set forth therein, a shelf registration statement pursuant to Rule
415 under the Securities Act (the "Warrant Shares Shelf Registration Statement")
relating to the exercise of the Warrants and the resale by certain holders of
Warrants and Warrant Shares, and to use its best efforts to cause such Warrant
Shares Shelf Registration Statement to be declared effective. This Agreement,
the Indenture, the Units, the Notes, the Warrant Agreement, the Warrants, the
Warrant Shares, the Notes Registrations Right Agreement and the Warrant Shares
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the "Operative Documents."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the Series A
Notes shall be made at the offices of Latham & Watkins, 885 Third Avenue, Suite
1000, New York, NY 10022, or such other location as may be mutually acceptable.
Such delivery and payment shall be made at 9:00 a.m. New York City time, on
December 5, 1997 or at such other time as shall be agreed upon by the Initial
Purchaser and the Issuers. The time and date of such delivery and the payment
are herein called the "Closing Date."
(b) One or more Units in definitive global form, registered in the
name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), having
an aggregate amount corresponding to the aggregate amount of the Units sold
pursuant to Exempt Resales to
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<PAGE> 6
Eligible Purchasers (collectively, the "Global Unit"), each such Global Unit
consisting of $1,000 aggregate principal amount of Notes in definitive form,
registered in the name of Cede & Co., as nominee of DTC (the "Global Note"), and
one global Warrant in definitive form to purchase 1,869,962 shares of Common
Stock, registered in the name of Cede & Co., as nominee of DTC (the "Global
Warrant"), shall be delivered by the Issuers to the Initial Purchaser (or as the
Initial Purchaser directs) in each case with any transfer taxes thereon duly
paid by the Issuers, against payment by the Initial Purchaser of the purchase
price therefor, by wire transfer of immediately available funds to the account
of either Issuer or as directed in writing by the Issuers, provided that the
Issuers shall give at least two business days' prior written notice to the
Initial Purchaser of the information required to effect such wire transfer. In
addition, at the request of the Initial Purchaser, the Issuers shall deliver one
or more Units in certificated form registered in the name of one or more persons
or entities specified by the Initial Purchaser. The Global Unit (as well as any
certificated Units) shall be made available to the Initial Purchaser for
inspection not later than 9:30 a.m. on the business day immediately preceding
the Closing Date.
5. AGREEMENTS OF THE ISSUERS.
The Issuers hereby agree with the Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if requested by
the Initial Purchaser, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the qualification
or exemption from qualification of any Securities for offering or sale in any
jurisdiction designated by the Initial Purchaser pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii) of
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Preliminary Offering
Circular or the Offering Circular untrue or that requires any additions to or
changes in the Preliminary Offering Circular or the Offering Circular in order
to make the statements therein not misleading. The Issuers shall use their best
efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption of any Securities under any state securities or Blue
Sky laws and, if at any time any state securities commission or other federal or
state regulatory authority shall issue an order suspending the qualification or
exemption of any Securities under any state securities or Blue Sky laws, the
Issuers shall use their best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
(b) To furnish the Initial Purchaser and those persons identified by
the Initial Purchaser to the Issuers as many copies of the Preliminary Offering
Circular and the Offering Circular, and any amendments or supplements thereto,
as the Initial Purchaser may reasonably request for the time period specified in
Section 5(c). Subject to the Initial Purchaser's compliance with its
representations and warranties and agreements set forth in Section 7 hereof, the
Issuers consent to the use of the Preliminary Offering Circular and the Offering
Circular, and any amendments and supplements thereto required pursuant hereto,
by the Initial Purchaser in connection with Exempt Resales.
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<PAGE> 7
(c) During such period as in the opinion of counsel for the Initial
Purchaser an Offering Circular is required by law to be delivered in connection
with Exempt Resales by the Initial Purchaser and in connection with
market-making activities of the Initial Purchaser until consummation of the
Exchange Offer (in the case of the Notes) and until the Warrant Shares have been
registered pursuant to the Warrant Shares Shelf Registration Statement (in the
case of the Warrants), (i) not to make any amendment or supplement to the
Offering Circular of which the Initial Purchaser shall not previously have been
advised or to which the Initial Purchaser shall reasonably object after being so
advised and (ii) to prepare promptly upon the Initial Purchaser's reasonable
request, any amendment or supplement to the Offering Circular which may be
necessary or advisable in connection with such Exempt Resales or such
market-making activities.
(d) If, during the period referred to in Section 5(c) above, any
event shall occur or condition shall exist as a result of which, in the opinion
of counsel to the Initial Purchaser, it becomes necessary to amend or supplement
the Offering Circular in order to make the statements therein, in the light of
the circumstances when such Offering Circular is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchaser, it is necessary to amend or supplement the Offering Circular to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Circular so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Circular will comply with
applicable law, and to furnish to the Initial Purchaser and such other persons
as the Initial Purchaser may designate such number of copies thereof as the
Initial Purchaser may reasonably request.
(e) Prior to the sale of all Securities pursuant to Exempt Resales
as contemplated hereby, to cooperate with the Initial Purchaser and counsel to
the Initial Purchaser in connection with the registration or qualification of
the Securities for offer and sale to the Initial Purchaser and pursuant to
Exempt Resales under the securities or Blue Sky laws of such jurisdictions as
the Initial Purchaser may request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided, however, that neither
Issuer shall be required in connection therewith to qualify as a foreign
corporation in any jurisdiction in which it is not now so qualified or to take
any action that would subject it to general consent to service of process or
taxation other than as to matters and transactions relating to the Preliminary
Offering Circular, the Offering Circular or Exempt Resales, in any jurisdiction
in which it is not now so subject.
(f) So long as the Notes are outstanding, to furnish to the Initial
Purchaser as soon as available copies of all reports or other communications
furnished by the Issuers to their security holders (including holders of the
Notes) or furnished to or filed with the Commission or any national securities
exchange on which any class of securities of either Issuer is listed and such
other publicly available information concerning the CR US and/or its
subsidiaries as the Initial Purchaser may reasonably request.
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<PAGE> 8
(g) So long as any of the Series A Notes remain outstanding and
during any period in which the Issuers are not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
available to any holder of Series A Notes in connection with any sale thereof
and any prospective purchaser of such Series A Notes from such holder, the
information ("Rule 144A Information") required by Rule 144A(d)(4) under the Act.
(h) To pay or cause to be paid, whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
all expenses incident to the performance of the obligations of the Issuers under
this Agreement, including: (i) the fees, disbursements and expenses of counsel
to the Issuers and accountants of the Issuers in connection with the sale and
delivery of the Securities to the Initial Purchaser and pursuant to Exempt
Resales, and all other fees and expenses in connection with the preparation,
printing, filing and distribution of the Preliminary Offering Circular, the
Offering Circular and all amendments and supplements to any of the foregoing
(including financial statements), including the mailing and delivering of copies
thereof to the Initial Purchaser and persons designated by it in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Securities to the Initial Purchaser and pursuant to Exempt
Resales, including any transfer or other taxes payable thereon, (iii) all costs
of printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Securities, (iv) all expenses in connection with the
registration or qualification of the Securities for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Initial Purchaser in connection with such registration or qualification and
memoranda relating thereto), (v) the cost of printing certificates representing
the Securities, (vi) all expenses and listing fees in connection with the
application for quotation of the Notes in the National Association of Securities
Dealers, Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii) the
fees and expenses of the Trustee and the Trustee's counsel in connection with
the Indenture and the Notes, (viii) the fees and expenses of the Warrant Agent
and the Warrant Agent's counsel in connection with the Warrant Agreement and the
Warrants, (ix) the costs and charges of any transfer agent, registrar and/or
depositary (including DTC), (x) any fees charged by rating agencies for the
rating of the Securities, (xi) all costs and expenses of the Exchange Offer and
any Registration Statement, as set forth in the Notes Registration Rights
Agreement, (xii) all costs and expenses of any Warrant Shares Shelf Registration
Statement as set forth in the Warrant Shares Shelf Registration Rights
Agreement, and (xiii) and all other costs and expenses incident to the
performance of the obligations of the Issuers hereunder for which provision is
not otherwise made in this Section.
(i) To use their best efforts to effect the inclusion of the
Securities in PORTAL and to maintain the listing of the Securities on PORTAL for
so long as the Securities are outstanding.
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<PAGE> 9
(j) To obtain the approval of DTC for "book-entry" transfer of the
Securities, and to comply with all of its agreements set forth in the
representation letters of the Issuers to DTC relating to the approval of the
Securities by DTC for "book-entry" transfer.
(k) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of either of the Issuers or
any warrants, rights or options to purchase or otherwise acquire debt securities
of either of the Issuers substantially similar to the Notes (other than (i) the
Notes and (ii) commercial paper issued in the ordinary course of business),
without the prior written consent of the Initial Purchaser.
(l) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Units to the Initial Purchaser or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of any of the Securities under the Act.
(m) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury or similar laws against the holders of any
Notes.
(n) To cause the Exchange Offer to be made in the appropriate form
to permit the Series B Notes registered pursuant to the Act to be offered in
exchange for the Series A Notes and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(o) To comply with all of its agreements set forth in the Notes
Registration Rights Agreement and the Warrant Shares Registration Rights
Agreement.
(p) To reserve and continue to reserve, so long as any Warrants are
outstanding, a sufficient number of shares of Common Stock for issuance upon
exercise of the Warrants.
(q) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Units.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ISSUERS. As of the
date hereof, each of the Issuers represents and warrants to, and agrees with,
the Initial Purchaser that:
(a) No Misstatements or Omissions. The Preliminary Offering Circular
and the Offering Circular do not, and any supplement or amendment to them will
not, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained in this
paragraph (a) shall not apply to statements in or omissions from the Preliminary
Offering Circular or the Offering Circular (or any supplement or amendment
thereto) contained in (a) the
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<PAGE> 10
last paragraph of the cover page of the Offering Circular, (b) the first
paragraph on page (i) of the Offering Circular and (c) the fifth, sixth and
eighth paragraphs under the heading "Plan of Distribution" in the Offering
Circular (collectively, the "Initial Purchaser Information"). No stop order
preventing the use of the Preliminary Offering Circular or the Offering
Circular, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) Organization. Each of CR US and its subsidiaries has been duly
incorporated (in the case of subsidiaries that are corporations) or organized
(in the case of the subsidiaries that are partnerships), is validly existing as
a corporation or partnership (or limited liability company), as applicable, in
good standing under the laws of its jurisdiction of incorporation or formation,
as applicable, and has the corporate or partnership, as applicable, power and
authority (or equivalent power and authority under the laws of Mexico) to carry
on its business as described in the Preliminary Offering Circular and the
Offering Circular and to own, lease and operate its properties, and each is duly
qualified and is in good standing as a foreign corporation or partnership (or
limited liability company), as applicable, authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the business, prospects,
financial condition or results of operations of CR US and its subsidiaries,
taken as a whole (a "Material Adverse Effect").
(c) Capital Stock. All outstanding shares of capital stock of CR US
have been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights. There are 45,000,000 shares
of Common Stock authorized, of which 10,300,000 are issued and outstanding.
There are 5,000,000 shares of preferred stock of CR US authorized, of which
37,500 shares of the Class A Redeemable Convertible Preferred Stock are issued
and outstanding.
(d) Subsidiaries. The entities listed on Schedule A hereto are the
only subsidiaries, direct or indirect, of CR US. Schedule A identifies the
ownership structure of each of CR US's subsidiaries. All of the outstanding
shares of capital stock or other equity interests of each of CR US's
subsidiaries have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights, except for
preemptive rights of direct or indirect subsidiaries of CR US, and, except as
noted on Schedule A, are owned by CR US, directly or indirectly through one or
more subsidiaries, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature (each, a "Lien"). Schedule A
identifies the subsidiaries of CR US that are partnerships, the subsidiaries of
CR US that are corporations and the subsidiaries of CR US that are limited
liability companies.
(e) The Purchase Agreement. This Agreement has been duly authorized,
executed and delivered by each Issuer.
(f) The Indenture. The Indenture has been duly authorized by each
Issuer and, on the Closing Date, will have been validly executed and delivered
by each Issuer.
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When the Indenture has been duly executed and delivered by each Issuer, the
Indenture will be a valid and binding agreement of each Issuer, enforceable
against each Issuer in accordance with its terms except as the enforceability
thereof may be limited by (i) bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) equitable principles of general
applicability. On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended (the
"TIA" or "Trust Indenture Act"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(g) The Units. The Units have been duly authorized by each Issuer.
(h) The Series A Notes. The Series A Notes have been duly authorized
and, on the Closing Date, will have been validly executed and delivered by each
Issuer. When the Series A Notes have been issued, executed and authenticated in
accordance with the provisions of the Indenture and delivered to and paid for by
the Initial Purchaser in accordance with the terms of this Agreement, the Series
A Notes will be entitled to the benefits of the Indenture and will be valid and
binding obligations of each Issuer, enforceable in accordance with their terms
except as the enforceability thereof may be limited by (i) bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
equitable principles of general applicability. On the Closing Date, the Series A
Notes will conform as to legal matters to the description thereof contained in
the Offering Circular.
(i) The Series B Notes. On the Closing Date, the Series B Notes will
have been duly authorized by each Issuer. When the Series B Notes are issued,
executed and authenticated in accordance with the terms of the Exchange Offer
and the Indenture, the Series B Notes will be entitled to the benefits of the
Indenture and will be the valid and binding obligations of each Issuer,
enforceable against each Issuer in accordance with their terms, except as the
enforceability thereof may be limited by (i) bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) equitable principles of
general applicability.
(j) The Notes Registration Rights Agreement. The Notes Registration
Rights Agreement has been duly authorized by each Issuer and, on the Closing
Date, will have been duly executed and delivered by each Issuer. When the Notes
Registration Rights Agreement has been duly executed and delivered, the Notes
Registration Rights Agreement will be a valid and binding agreement of each
Issuer, enforceable against each Issuer in accordance with its terms except as
the enforceability thereof may be limited by (i) bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) equitable principles
of general applicability. On the Closing Date, the Notes Registration Rights
Agreement will conform as to legal matters to the description thereof in the
Offering Circular and (iii) the enforceability of the indemnification and
contribution provisions thereof may be limited by federal and state laws
governing the enforcement of such provisions.
(k) The Warrant Agreement. The Warrant Agreement has been duly
authorized by each Issuer and, on the Closing Date, will have been validly
executed and delivered by each Issuer. When the Warrant Agreement has been duly
executed and delivered by
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each Issuer, the Warrant Agreement will be a valid and binding agreement of each
Issuer, enforceable against each Issuer in accordance with its terms except as
the enforceability thereof may be limited by (i) bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) equitable principles
of general applicability.
(l) The Warrants. The Warrants have been duly authorized and, on the
Closing Date, will have been validly executed and delivered by each Issuer. When
the Warrants have been issued, executed and authenticated in accordance with the
provisions of the Warrant Agreement and delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, the Warrants will be
entitled to the benefits of the Warrant Agreement and will be valid and binding
obligations of each Issuer, enforceable in accordance with their terms except as
the enforceability thereof may be limited by (i) bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) equitable principles
of general applicability. On the Closing Date, the Warrants will conform as to
legal matters to the description thereof contained in the Offering Circular.
(m) The Warrant Shares Registration Rights Agreement. The Warrant
Shares Registration Rights Agreement has been duly authorized by each Issuer
and, on the Closing Date, will have been duly executed and delivered by each
Issuer. When the Warrant Shares Registration Rights Agreement has been duly
executed and delivered, the Warrant Shares Registration Rights Agreement will be
a valid and binding agreement of each Issuer, enforceable against each Issuer in
accordance with its terms except as (a) the enforceability thereof may be
limited by (i) bankruptcy, insolvency or similar laws affecting creditors'
rights generally or (ii) equitable principles of general applicability, and (b)
the enforceability of the indemnification and contribution provisions thereof
may be limited by federal and state laws governing the enforcement of such
provisions. On the Closing Date, the Warrant Shares Registration Rights
Agreement will conform as to legal matters to the description thereof in the
Offering Circular.
(n) No Violations or Defaults. Neither CR US nor any of its
subsidiaries is in violation of its respective charter or by-laws or other
organizational document or in default in the performance of any obligation,
agreement, covenant or condition contained in any indenture, loan agreement,
mortgage, lease or other agreement or instrument to which CR US or any of its
subsidiaries is a party or by which CR US or any of its subsidiaries or their
respective property is bound, except to the extent that any violations, taken
singly or in the aggregate, would not result in a Material Adverse Effect.
(o) No Conflicts. The execution, delivery and performance of this
Agreement and the other Operative Documents by each Issuer, compliance by each
Issuer with all provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states), (ii) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, (a) the charter
or by-laws of CR US or any of its subsidiaries or (b) any indenture, loan
agreement, mortgage, lease or other agreement to which CR US or any of its
subsidiaries is a party or by which CR US or any of its
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subsidiaries or their respective property is bound (except to the extent any
conflict, breach or default under this clause (ii)(b) would not, singly or in
the aggregate, result in a Material Adverse Effect), (iii) violate or conflict
with any applicable law or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over CR US, any
of its subsidiaries or their respective property, (iv) result in the imposition
or creation of (or the obligation to create or impose) a Lien (other than any
Liens which, singly or in the aggregate, would not result in a Material Adverse
Effect) under, any agreement or instrument to which CR US or any of its
subsidiaries is a party or by which CR US or any of its subsidiaries or their
respective property is bound, or (v) result in the termination, suspension or
revocation of any Authorization (as defined below) of CR US or any of its
subsidiaries or result in any other impairment of the rights of the holder of
any such Authorization.
(p) No Legal or Governmental Proceedings. There are no legal or
governmental proceedings pending or threatened to which CR US or any of its
subsidiaries is or could be a party or to which any of their respective property
is or could be subject, which might result, singly or in the aggregate, in a
Material Adverse Effect.
(q) Compliance with Laws. Neither CR US nor any of its subsidiaries
has violated or is in violation of any, federal, state, local or Mexican or
other foreign law, ordinance, or administrative or governmental rule including
(i) any federal, state, local or Mexican or other foreign law or regulation
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) any provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (or any provision of any similar
Mexican law), or the rules and regulations promulgated thereunder or (iii) any
provision of the Mexican Securities Market Law (Ley del Mercado de Valores) or
any rule or regulation promulgated thereunder, except, in each case, for such
violations which, singly or in the aggregate, would not have a Material Adverse
Effect.
(r) No Environmental Liabilities. There are no costs or liabilities
associated with Environmental Laws (including, without limitation, any capital
or operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any Authorization, any related constraints
on operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, have a Material Adverse Effect.
(s) Authorizations. Each of CR US and its subsidiaries has such
permits, licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "Authorization") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without limitation,
under any applicable Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its business, except where
the failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of CR US and its
subsidiaries is in compliance with all the terms and conditions thereof and
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with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to CR US or any of its subsidiaries; except, in
each case, where such failure to be valid and in full force and effect or to be
in compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material Adverse
Effect.
(t) Purchase Transactions. All requisite consents, approvals,
authorizations, registrations or qualifications of any Mexican governmental
agency or authority to the consummation of the Purchase Transactions ( as
defined in the Offering Circular) were obtained prior to such consummation
(other than any consents, approvals, authorizations, registrations or
qualifications which, if not obtained, would not have a Material Adverse
Effect.).
(u) Certification by Independent Accountants. The accountants, Ernst
& Young LLP, that have certified the financial statements and supporting
schedules included in the Preliminary Offering Circular and the Offering
Circular are independent public accountants with respect to each Issuer, as
would be required by the Act and the Exchange Act. Except as disclosed in the
comfort letter contemplated by Section 9(j), the historical financial
statements, together with related schedules and notes, set forth in the
Preliminary Offering Circular and the Offering Circular comply as to form in all
material respects with the requirements applicable to registration statements on
Form S-1 under the Act.
(v) Historical Financial Statements. The historical financial
statements, together with related schedules and notes forming part of the
Preliminary Offering Circular and the Offering Circular (and any amendment or
supplement thereto), present fairly the consolidated financial position, results
of operations and changes in financial position of the Issuers on the basis
stated in the Preliminary Offering Circular and the Offering Circular at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and, except as disclosed therein,
the other financial and statistical information and data set forth in the
Preliminary Offering Circular and the Offering Circular (and any amendment or
supplement thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Issuers.
(w) Pro Forma Financial Statements. The pro forma financial
statements included in the Preliminary Offering Circular and the Offering
Circular have been prepared on a basis consistent with the historical financial
statements of CR US and its subsidiaries and give effect to assumptions used in
the preparation thereof on a reasonable basis and in good faith and present
fairly the historical and proposed transactions contemplated by the Preliminary
Offering Circular and the Offering Circular; and such pro forma financial
statements comply as to form in all material respects with the requirements
applicable to pro forma financial
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statements included in registration statements on Form S-1 under the Act. The
other pro forma financial and statistical information and data included in the
Preliminary Offering Circular and the Offering Circular are, in all material
respects, accurately presented and prepared on a basis consistent with the pro
forma financial statements.
(x) Good and Marketable Title. CR US and its subsidiaries have good
and marketable title in fee simple to all real property (except for real
property currently held by Bancomer, S.A. as trustee for the benefit of the
Operating Subsidiaries pursuant to the Trust Agreements) and good and marketable
title to all personal property owned by them which is material to the business
of CR US and its subsidiaries, in each case free and clear of all Liens and
defects, except such as are described in the Offering Circular or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by CR US and its subsidiaries; and
any real property and buildings held under lease by CR US and its subsidiaries
are held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by CR US and its
subsidiaries, in each case except as described in the Offering Circular.
(y) Payment of Indebtedness. All indebtedness of CR US and/or its
subsidiaries that will be repaid with the proceeds of the issuance and sale of
the Units was incurred, and the indebtedness represented by the Notes is being
incurred, for proper purposes and in good faith. Each of CR US and each of its
subsidiaries was, at the time of the incurrence of such indebtedness that will
be repaid with the proceeds of the issuance and sale of the Units, and will be
on the Closing Date (after giving effect to the application of the proceeds from
the issuance of the Units) solvent, and had at the time of the incurrence of
such indebtedness that will be repaid with the proceeds of the issuance and sale
of the Units and will have on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the Units) sufficient capital
for carrying on their respective business and were, at the time of the
incurrence of such indebtedness that will be repaid with the proceeds of the
issuance and sale of the Units, and will be on the Closing Date (after giving
effect to the application of the proceeds from the issuance of the Units), able
to pay their respective debts as they mature.
(z) Issuance and Sale is Permitted. No action has been taken and no
law, statute, rule or regulation or order has been enacted, adopted or issued by
any governmental agency or body which prevents the execution, delivery and
performance of any of the Operative Documents or the issuance of the Securities,
or suspends the sale of the Securities in any jurisdiction referred to in
Section 5(e); and no injunction, restraining order or other order or relief of
any nature by a foreign, federal or state court or other tribunal of competent
jurisdiction has been issued with respect to CR US or any of its subsidiaries
which would prevent or suspend the issuance or sale of the Securities in any
jurisdiction referred to in Section 5(e).
(aa) Intellectual Property Rights. Each of CR US and each of its
subsidiaries has sufficient trademarks, trade names, patent rights, copyrights,
licenses or other similar rights and proprietary knowledge (collectively,
"Intangibles"), approvals and governmental authorizations to conduct its
businesses as now conducted or as described in the
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<PAGE> 16
Offering Circular; the expiration of any Intangibles, approvals or governmental
authorizations will not result in a Material Adverse Effect; and the Issuers
have no knowledge of any material infringement by them or any of CR US's
subsidiaries of any Intangibles, and there is no claim being made against CR US
or any of its subsidiaries regarding any Intangible or other infringement which
could result in a Material Adverse Effect.
(bb) Tax Law Compliance. CR US and each of its subsidiaries have
filed all necessary federal, state, local and Mexican and other foreign income
and franchise tax returns and have paid all taxes shown as due thereon; all
federal, state, local and Mexican and other foreign taxes payable in connection
with the consummation of the Purchase Transactions have been paid; and the
Issuers have no knowledge of any tax deficiency which has been or might be
asserted or threatened against CR US or its subsidiaries, in each case except as
would not, individually or in the aggregate, result in a Material Adverse
Effect.
(cc) Insurance. CR US and its subsidiaries have and will maintain
liability, property and casualty insurance (insured by insurers of recognized
financial responsibility) in favor of CR US and its subsidiaries, with respect
to each of the Regina Resorts (as defined in the Offering Circular) and the
other properties owned or leased by them in an amount and on such terms as is
reasonable and customary for businesses of the type proposed to be conducted by
CR US and its subsidiaries, including, among other things, insurance against
business interruption, theft, damage, destruction and acts of vandalism. Neither
CR US nor any of its subsidiaries has received from any insurance company notice
of any material defects or deficiencies affecting the insurability of any such
resort. Title insurance in favor of CR US and its subsidiaries is in force with
respect to each of the Regina Resorts (except for the Cancun Regina Resort) in
an amount as would be reasonably acceptable to a prudent company in a similar
line of business.
(dd) Certain Losses. Subsequent to the respective dates as of which
information is given in the Offering Circular, neither CR US nor any of its
subsidiaries has sustained any loss or interference with its respective
businesses or properties from fire, flood, windstorm, accident or other
calamity, whether or not covered by insurance, that would result in a Material
Adverse Effect.
(ee) CR US's Accounting System. CR US and each of its subsidiaries
maintain and will maintain a system of internal accounting controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to financial and corporate
books and records is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(ff) Compliance with Vacation Ownership Laws. Each of CR US and each
of its subsidiaries are in compliance with all federal, state, local and foreign
laws and
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regulations applicable to such entity regarding the marketing, offers to sell
and sales of vacation intervals in each jurisdiction (domestic or foreign) in
which CR US or any of its subsidiaries is doing business, including, but not
limited to, the Federal Trade Commission Act, Regulation Z (the truth-in-lending
act), Equity Opportunity Credit Act and Regulation B, Interstate Land Sales Full
Disclosure Act, Telephone Consumer Protection Act, Telemarketing and Consumer
Fraud and Abuse Prevention Act, Fair Housing Act and Civil Rights Acts of 1964
and 1968 and all corresponding foreign laws (including without limitation, the
Mexican Federal Consumer Protection Law (Ley Federal de Proteccion al
Consumidor)), in each case as applicable to CR US or any of its subsidiaries and
in each case except as would not result in a Material Adverse Effect. Each of CR
US and each of its subsidiaries has filed all required documents and supporting
information in compliance with federal, state, local and foreign laws and
regulations and each of CR US and each of its subsidiaries is in compliance with
all licensure, anti-fraud, telemarketing, price, gift and sweepstakes and labor
laws to which it is or may become subject, in each case except as would not
result in a Material Adverse Effect. CR US and each of its subsidiaries have all
permits and licenses which are required to sell vacation intervals in each state
and foreign jurisdiction where they conduct business, in each case except as
would not result in a Material Adverse Effect.
(gg) No Finder's Fees. Neither Issuer nor any of their Affiliates
and Subsidiaries has incurred any liability for a fee, commission or other
compensation on account of the employment of a broker or finder in connection
with the transactions contemplated by this Agreement other than as disclosed in
the Offering Circular.
(hh) No First Refusals to Purchase Resorts. Except as set forth in
the Offering Circular, no person has an option or right of first refusal to
purchase all or part of any of the Regina Resorts or the Cozumel Property or any
interest therein. Except as set forth in the Offering Circular, each of the
Regina Resorts complies with all applicable codes, laws and regulations
(including, without limitation, building and zoning codes and laws relating to
handicapped access), except for such non-compliance as will not result in a
Material Adverse Effect. Neither Issuer has knowledge of any pending or
threatened condemnation proceedings, zoning changes, or other proceedings or
actions that will in any manner affect the size of, number of vacation intervals
planned for, the use of any improvements on, or access to, the Regina Resorts or
the Cozumel Property.
(ii) Company's Relationship with Starwood. Except as disclosed in
the Offering Circular, to the knowledge of the Issuers, no material dispute
exists or is imminent between either Issuer or Starwood.
(jj) Condition and Sufficiency of Assets. Except for such assets as
are not material singly or in the aggregate to the business of CR US and its
subsidiaries, the buildings, structures, equipment and other tangible assets of
CR US and its subsidiaries are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they are being put,
and CR US and its subsidiaries have available to them sufficient utilities to
conduct their business as currently conducted.
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(kk) The Trust Agreements. Each of the three trust agreements dated
August 18, 1997, entered into among Bancomer, as trustee, CR Resorts Remainder
Company, S. de R. L. de C. V. (the "Remainder Company"), and each of (i) CR
Resorts Cancun, S. de R. L. de C. V. (the "Cancun Operating Subsidiary") in
connection with the Cancun Regina Resort, (ii) CR Resorts Los Cabos, S. de R. L.
de C. V. (the "Los Cabos Operating Subsidiary") in connection with the Los Cabos
Regina Resort, and (iii) CR Resorts Puerto Vallarta, S. de R. L. de C. V. in
connection with the Puerto Vallarta Regina Resort (collectively, the "Trust
Agreements"), has been duly executed and delivered and is in the process of
registration with the Public Registry of Property of Cancun, Quintana Roo,
Mexico (in the case of the Cancun Resort), Los Cabos, Baja California Sur (in
the case of the Los Cabos Regina) and Puerto Vallarta, Jalisco, Mexico (in the
case of the Puerto Vallarta Regina Resort), and each Trust Agreement is legal,
valid, binding and enforceable in accordance with its terms. Bancomer, acting in
its capacity as trustee under each of the Trust Agreements, owns good, valid,
exclusive and marketable title to the Regina Resorts for the benefit of the Los
Cabos Operating Subsidiary (in the case of the Los Cabos Regina Resort), the
Cancun Operating Subsidiary (in the case of the Cancun Regina Resort) and the
Puerto Vallarta Operating Subsidiary (in the case of the Puerto Vallarta Regina
Resort), in each case free and clear of any Liens. Each of the Los Cabos
Operating Subsidiary, the Cancun Operating Subsidiary and the Puerto Vallarta
Operating Subsidiary is a beneficiary (fideicomisario) under one of the Trust
Agreements, and has the right to use and exploit, without limitation or
restriction of any kind, the Los Cabos Regina Resort (in the case of the Los
Cabos Operating Subsidiary), the Cancun Regina Resort (in the case of the Cancun
Operating Subsidiary) and the Puerto Vallarta Regina Resort (in the case of the
Puerto Vallarta Operating Subsidiary), in each case until August 18, 2027. The
beneficial rights of each of the Los Cabos Operating Subsidiary, the Cancun
Operating Subsidiary and the Puerto Vallarta Operating Subsidiary are, in each
case, free and clear of any Liens.
(ll) Operating Agreements. The Letter Agreement among CR US and
Starwood dated August 18, 1997, pursuant to which CR US and Starwood approved
the form of, and upon translation into Spanish have agreed to enter into, an
Operating Agreement (each an "Operating Agreement") for each of the Combined
Resorts (as defined in the Offering Circular), is legal, valid, binding and
enforceable against each of CR US and Starwood in accordance with its terms.
Upon (i) execution and delivery of an Operating Agreement, in the presence of,
and certified by a Mexican notary public, between (A) the Los Cabos Operating
Subsidiary and Starwood Los Cabos, S. de R. L. de C. V., (B) the Cancun
Operating Subsidiary and Starwood Cancun, S. de R. L. de C. V., and (C) the
Puerto Vallarta Operating Subsidiary and Starwood Puerto Vallarta, S. de R. L.
de C. V.; and (ii) the due registration of each Operating Agreement in the
relevant Public Registry of Property, the Operating Agreements will be legal,
valid, binding and enforceable against applicable subsidiaries of each of CR US
and Starwood in accordance with their terms, and will be binding on any future
owners of any Westin Resort (as defined in the Offering Circular).
(mm) Bancomer Agreements. Assuming that the agreements listed on
Schedule B hereto (the "Bancomer Agreements") have been duly authorized by all
necessary corporate action on the part of Bancomer and that the Bancomer
Agreements have been duly executed and delivered by Bancomer, the obligations of
Bancomer contained in the Bancomer
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Agreements are the legal, valid and binding obligations of Bancomer, enforceable
by CR US against Bancomer in accordance with their terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or providing relief to or affecting creditors'
rights and to general equitable principles (whether considered in a proceeding
in equity or at law).
(nn) Descriptions in the Offering Circular. The Indenture, the
Series A Notes, the Series B Notes, the Notes Registration Rights Agreement, the
Warrant Agreement, the Warrants and the Warrant Shares Registration Rights
Agreement will conform in all material respects to the descriptions thereof in
the Offering Circular.
(oo) No Investment Company. Neither Issuer is and, after giving
effect to the offering and sale of the Series A Notes and the application of the
net proceeds thereof as described in the Offering Circular, will be, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
(pp) No Agreement for Filing a Registration Statement. Except as
disclosed in the Offering Circular, there are no contracts, agreements or
understandings between either Issuer and any person granting such person the
right to require either Issuer to file a registration statement under the Act
with respect to any securities of either Issuer or to require either Issuer to
include such securities with the Notes or Warrant Shares registered pursuant to
any Registration Statement or Warrant Shares Shelf Registration Statement.
(qq) Compliance with Federal Reserve System Regulations. Neither CR
US nor any of its subsidiaries nor any agent thereof acting on the behalf of
them has taken, and none of them will take, any action that might cause this
Agreement or the issuance or sale of the Series A Notes to violate Regulation G
(12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R.
Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System.
(rr) No Change in Rating. No "nationally recognized statistical
rating organization" as such term is defined for purposes of Rule 436(g)(2)
under the Act (i) has imposed (or has informed either Issuer that it is
considering imposing) any condition (financial or otherwise) on either Issuer's
retaining any rating assigned to either Issuer or any securities of either
Issuer or (ii) has indicated to either Issuer that it is considering (a) the
downgrading, suspension, or withdrawal of, or any review for a possible change
that does not indicate the direction of the possible change in, any rating so
assigned or (b) any change in the outlook for any rating of either Issuer or any
securities of either Issuer.
(ss) No Material Adverse Change. Since the respective dates as of
which information is given in the Offering Circular other than as set forth in
the Offering Circular (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there has not occurred any
material adverse change or any development involving a prospective
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material adverse change in the condition, financial or otherwise, or the
earnings, business, management or operations of CR US and its subsidiaries,
taken as a whole, (ii) there has not been any material adverse change or any
development involving a prospective material adverse change in the capital stock
or in the long-term debt of CR US or any of its subsidiaries and (iii) neither
CR US nor any of its subsidiaries has incurred any material liability or
obligation, direct or contingent.
(tt) Compliance with Rule 144A. Each of the Preliminary Offering
Circular and the Offering Circular, as of its date, contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under the Act.
(uu) No Listing on Exchanges. When the Securities are issued and
delivered pursuant to this Agreement, the Securities will not be of the same
class (within the meaning of Rule 144A under the Act) as any security of either
Issuer that is listed on a national securities exchange registered under Section
6 of the Exchange Act or that is quoted in a United States automated
inter-dealer quotation system.
(vv) No Solicitation or Advertising. No form of general
solicitation or general advertising (as defined in Regulation D under the Act)
was used by either Issuer or any of their representatives (other than the
Initial Purchaser, as to whom the Issuers make no representation) in connection
with the offer and sale of the Securities contemplated hereby, including, but
not limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as any of
the Securities have been issued and sold by either Issuer within the six-month
period immediately prior to the date hereof.
(ww) No Requirement for Qualification under TIA. Prior to the
effectiveness of any Registration Statement, the Indenture is not required to be
qualified under the TIA.
(xx) Regulation S. Neither CR US, CR Mexico nor any of their
respective affiliates or any person acting on its or their behalf (other than
the Initial Purchaser, as to whom the Issuers make no representation) has
engaged or will engage in any directed selling efforts within the meaning of
Regulation S under the Act ("Regulation S") with respect to the Series A Notes.
(yy) No Registration Requirement. No registration under the Act of
any of the Securities is required for the sale of the Units to the Initial
Purchaser as contemplated hereby or for the Exempt Resales assuming the accuracy
of the Initial Purchaser's representations and warranties and agreements set
forth in Section 7 hereof.
(zz) Officers' Certificates. Each certificate signed by any officer
of either Issuer and delivered to the Initial Purchaser or counsel for the
Initial Purchaser shall be deemed to be a representation and warranty by the
Issuers to the Initial Purchaser as to the matters covered thereby.
(aaa) Usury. Neither Issuer may successfully avail itself, by way of
defense or otherwise, of any provisions of Mexican constitutional, federal,
state or local law (or
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any rule or regulation thereunder) or of any Nevada, New York or Texas
constitutional or state law (or any rule or regulation promulgated thereunder)
relating to usury (or similar laws, rules or regulations) to avoid or defeat its
payment obligations pursuant to and in accordance with the terms of the Notes
and the Indenture.
The Issuers acknowledge that the Initial Purchaser and, for purposes of
the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Issuers and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial
Purchaser represents and warrants to, and agrees with, the Issuers:
(a) Qualifications of the Initial Purchaser. The Initial Purchaser
is either a QIB or an Accredited Institution, in either case, with such
knowledge and experience in financial and business matters as is necessary in
order to evaluate the merits and risks of an investment in the Units.
(b) Compliance with the Act. The Initial Purchaser (A) is not
acquiring the Units with a view to any distribution thereof or with any present
intention of offering or selling any of the Units in a transaction that would
violate the Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling the Units
only to (y) QIBs in reliance on the exemption from the registration requirements
of the Act provided by Rule 144A, and (z) Accredited Institutions that execute
and deliver a letter containing certain representations and agreements in the
form attached as Annex A to the Offering Circular.
(c) No Solicitation or Advertising. The Initial Purchaser agrees
that no form of general solicitation or general advertising (within the meaning
of Regulation D under the Act) has been or will be used by the Initial Purchaser
or any of its representatives in connection with the offer and sale of the Units
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) Eligible Purchasers. The Initial Purchaser agrees that, in
connection with Exempt Resales, the Initial Purchaser will solicit offers to buy
the Units only from, and will offer to sell the Units only to, Eligible
Purchasers. The Initial Purchaser further agrees that it will offer to sell the
Units only to, and will solicit offers to buy the Units only from (A) Eligible
Purchasers that the Initial Purchaser reasonably believes are QIBs and (B)
Accredited Institutions who make the representations contained in, and execute
and return to the Initial Purchaser, a certificate in the form of Annex A
attached to the Offering Circular, in each case, that agree that (x) the Units
purchased by them may be resold, pledged or otherwise transferred within the
time period referred to under Rule 144(k) (taking into account the provisions of
Rule 144(d) under the Act, if applicable) under the Act, as in effect on the
date of the transfer of such Units, only (I) to CR US or any of its
subsidiaries, (II) to a person whom the
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seller reasonably believes is a QIB purchasing for its own account or for the
account of a QIB in a transaction meeting the requirements of Rule 144A under
the Act, (III) in a transaction meeting the requirements of Rule 144 under the
Act, (IV) to an Accredited Institution that, prior to such transfer, furnishes
the Trustee a signed letter containing certain representations and agreements
relating to the registration of transfer of such Securities (the form of which
is substantially the same as Annex A to the Offering Circular) and, if such
transfer is in respect of an aggregate principal amount of Securities less than
$250,000, an opinion of counsel acceptable to the Issuers that such transfer is
in compliance with the Act, (V) in accordance with another exemption from the
registration requirements of the Act (and based upon an opinion of counsel
acceptable to the Issuers) or (VI) pursuant to an effective registration
statement and, in each case, in accordance with the applicable securities laws
of any state of the United States or any other applicable jurisdiction and (y)
they will deliver to each person to whom such Securities or an interest therein
are transferred a notice substantially to the effect of the foregoing.
(e) Compliance with the Laws of the United Kingdom. The Initial
Purchaser further represents and agrees that (1) it has not offered or sold and
will not offer or sell any Securities to persons in the United Kingdom prior to
the expiration of the period of six months from the issue date of the Units,
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their business or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995, (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Securities in, from or
otherwise involving the United Kingdom and (iii) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issuance of the Securities to a person who is of a kind
described in Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom the document may
otherwise lawfully be issued or passed on.
(f) Sales Outside the United States. The Initial Purchaser agrees
that it will not offer, sell or deliver any of the Units in any jurisdiction
outside the United States except under circumstances that will result in
compliance with the applicable laws thereof, and that it will take at its own
expense whatever action is required to permit its purchase and resale of the
Units in such jurisdictions. The Initial Purchaser understands that no action
has been taken to permit a public offering in any jurisdiction outside the
United States where action would be required for such purpose.
The Initial Purchaser acknowledges that the Issuers and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Issuers and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and the Initial
Purchaser hereby consents to such reliance.
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8. INDEMNIFICATION.
(a) The Issuers, jointly and severally, agree to indemnify and hold
harmless the Initial Purchaser, its directors, its officers and each person, if
any, who controls such Initial Purchaser within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and judgments (including, without limitation, any
reasonable legal or other actual expenses incurred in connection with
investigating or defending any matter, including any action, that could give
rise to any such losses, claims, damages, liabilities or judgments)
(collectively, "Losses") caused by any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Circular, the
Offering Circular (or any amendment or supplement thereto), or any Rule 144A
Information provided by either Issuer to any holder or prospective purchaser of
the Notes pursuant to Section 5(h) or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such Losses are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon the Initial Purchaser Information. Notwithstanding the
foregoing, the Issuers shall not be liable in any such case to the extent that
any such Loss arises out of, or is based upon, an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Offering Circular if (i) the Initial Purchaser failed to send or deliver a copy
of the Offering Circular with or prior to the delivery of written confirmation
of the sale of Securities to the person asserting such Loss or who purchased
such Securities which are the subject thereof and (ii) the Offering Circular
would have corrected such untrue statement or omission or alleged untrue
statement or alleged omission; and the Issuers shall not be liable in any such
case to the extent that any such Loss arises out of, or is based upon, an untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in the Offering Circular, if such untrue
statement or alleged untrue statement or omission or alleged omission is
corrected in any amendment or supplement to the Offering Circular and if, having
been furnished by or on behalf of the Issuers with copies of the Offering
Circular as so amended or supplemented prior to the sale of Securities, the
Initial Purchaser thereafter fails to deliver such Offering Circular as so
amended or supplemented prior to or concurrently with the sale of the
Securities.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Issuers, and their directors and officers and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
either of the Issuers, to the same extent as the foregoing indemnity from the
Issuers to the Initial Purchaser but only with reference to the Initial
Purchaser Information.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing,
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all reasonable fees and actual expenses of such counsel, as
incurred (except that in the case of any action in respect of which indemnity
may be sought
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<PAGE> 24
pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall not be
required to assume the defense of such action pursuant to this Section 8(c), but
may employ separate counsel and participate in the defense thereof, but the fees
and expenses of such counsel, except as provided below, shall be at the expense
of the Initial Purchaser). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and actual expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by Jefferies & Company, Inc., in the case of
the parties indemnified pursuant to Section 8(a), and by the Issuers, in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
shall indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the settlement is entered into more than twenty
business days after the indemnifying party shall have received a request from
the indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this Section 8
is unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers, on the one hand, and the Initial Purchaser, on the other hand, from the
offering of the Series A Notes or (ii) if the allocation provided by clause
8(d)(i) above is not permitted by applicable law, in such proportion as is
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<PAGE> 25
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Issuers, on the one hand, and
the Initial Purchaser, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
benefits received by the Issuers, on the one hand and the Initial Purchaser, on
the other hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Series A Notes (before deducting expenses)
received by the Issuers, and the total discounts and commissions received by the
Initial Purchaser bear to the total price to investors of the Series A Notes, in
each case as set forth in the table on the cover page of the Offering Circular.
The relative fault of the Issuers, on the one hand, and the Initial Purchaser,
on the other hand, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers, on the one hand, or the Initial Purchaser, on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Issuers and the Initial Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other actual expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
such Initial Purchasers exceeds the amount of any damages which the Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations of
the Initial Purchaser to purchase the Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) Representations and Warranties. All the representations and
warranties of the Issuers contained in this Agreement shall be true and correct
on the Closing Date with the same force and effect as if made on and as of the
Closing Date. The Issuers shall
24
<PAGE> 26
have performed or complied with all of the agreements herein contained and
required to be performed and complied with by it at or prior to the Closing
Date.
(b) No Stop Order. No stop order suspending the qualification or
exemption from qualification of any of the Securities for sale in any
jurisdiction shall have been issued and no proceeding for that purpose shall
have been commenced or be pending, or, to the knowledge of the Issuers, be
contemplated.
(c) Governmental Action. No action shall have been taken and no
statute, rule, regulation or order shall have been enacted, adopted or issued by
any governmental agency which would, as of the Closing Date, prevent the
issuance of any of the Securities; no action, suit or proceeding shall be
pending or, to the knowledge of the Issuers, threatened against, CR US or any of
its subsidiaries before any court or arbitrator or any governmental body, agency
or official that, if adversely determined, would have a Material Adverse Effect;
and no stop order preventing the use of the Offering Circular, or any amendment
or supplement thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration requirements of
the Securities Act shall have been issued.
(d) No Material Adverse Change. Since the respective dates as of
which information is given in the Offering Circular other than as set forth in
the Offering Circular (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there shall not have occurred any
change or any development involving a prospective change in the condition,
financial or otherwise, or the earnings, business, management or operations of
CR US and its subsidiaries, taken as a whole, (ii) there shall not have been any
change or any development involving a prospective change in the capital stock or
in the long-term debt of CR US or any of its subsidiaries and (iii) neither CR
US nor any of its subsidiaries shall have incurred any liability or obligation,
direct or contingent, the effect of which, in any such case described in clause
9(d)(i), 9(d)(ii) or 9(d)(iii), in your judgment, is material and adverse and,
in your judgment, makes it impracticable to market the Units on the terms and in
the manner contemplated in the Offering Circular.
(e) No Ratings Agency Change. On or after the date hereof, (i) there
shall not have occurred any downgrading, suspension or withdrawal of, nor shall
any notice have been given of any potential or intended downgrading, suspension
or withdrawal of, or of any review (or of any potential or intended review) for
a possible change that does not indicate the direction of the possible change
in, any rating of either Issuer or any securities of either Issuer (including,
without limitation, the placing of any of the foregoing ratings on credit watch
with negative or developing implications or under review with an uncertain
direction) by any "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act, (ii) there
shall not have occurred any change, nor shall any notice have been given of any
potential or intended change, in the outlook for any rating of either Issuer or
any securities of either Issuer by any such rating organization and (iii) no
such rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to any of the Securities than that on
which the Securities were marketed.
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<PAGE> 27
(f) No Adverse Market Events. Subsequent to the execution and
delivery of this Agreement there shall not have occurred any of the following:
(i) trading in securities generally on the New York Stock Exchange or The Nasdaq
Stock Market's National Market or in the over-the-counter market shall have been
suspended or materially limited, or minimum prices shall have been established
on such exchange by the Commission, or by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a banking
moratorium shall have been declared by federal or state authorities, (iii) the
United States shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or (iv) there
shall have occurred such a material adverse change in general economic,
political or financial conditions (or the effect of international conditions on
the financial markets in the United States shall be such) as to make it, in the
reasonable judgment of the Initial Purchaser, impracticable or inadvisable to
proceed with the offering or delivery of the Series A Notes being delivered on
the Closing Date on the terms and in the manner contemplated herein and in the
Offering Circular.
(g) Officers' Certificate. You shall have received on the Closing
Date a certificate dated the Closing Date, signed by the President and the Chief
Financial Officer of each Issuer, confirming the matters set forth in Sections
6(rr), 9(a), 9(b), 9(c) and 9(d) and stating that (i) each Issuer has complied
with all the agreements and satisfied all of the conditions herein contained and
required to be complied with or satisfied on or prior to the Closing Date and
(ii) the Issuers have the right to use, at any and all times, the real
properties of the Regina Resorts held by the Trusts.
(h) Opinions of Counsel for the Issuers. You shall have received on
the Closing Date opinions (satisfactory to you and counsel for the Initial
Purchaser), dated the Closing Date, of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., of Santamarina y Steta and of Ernst & Young LLP, each acting as counsel
for the Issuers, in the forms attached hereto as Exhibits B, C and D,
respectively. The opinions of Akin, Gump, Strauss, Hauer & Feld, L.L.P., of
Santamarina y Steta and of Ernst & Young LLP shall be rendered to you at the
request of the Issuers and shall so state therein.
(i) Opinions of Counsel for the Initial Purchaser. The Initial
Purchaser shall have received on the Closing Date opinions, dated the Closing
Date, of Latham & Watkins and of Creel, Garcia-Cuellar y Muggenburg, each
acting as counsel for the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser.
(j) Comfort Letter of the Independent Accountants. The Initial
Purchaser shall have received, at the time this Agreement is executed, letters
dated the date hereof in form and substance satisfactory to the Initial
Purchaser from Ernst & Young LLP, independent public accountants, containing the
information and statements of the type ordinarily included in accountants'
"comfort letters" to the Initial Purchaser with respect to the financial
statements and certain financial information contained in the Offering Circular.
26
<PAGE> 28
(k) Bring-Down Comfort Letter. On the Closing Date, the Initial
Purchaser shall have received from Ernst & Young LLP, independent public
accountants for the Issuers, a letter dated such date, in form and substance
satisfactory to the Initial Purchaser, to the effect that (i) they confirm that
they are independent public accountants under the guidelines of the American
Institute of Certified Public Accountants and (ii) they reaffirm, as of the
Closing Date, the statements made in the respective letters furnished by them
pursuant to subsection (g) of this Section 9.
(l) PORTAL Designation. The Securities shall have been approved by
the NASD for trading and duly listed in PORTAL.
(m) The Operative Documents. The Issuers, the Trustee and the
Warrant Agent, as applicable, shall have entered into each of the Operative
Documents, the Initial Purchaser shall have received counterparts, conformed as
executed, of each Operative Document, and each Operative Document shall be in
full force and effect.
(n) Compliance with Agreements. Neither Issuer shall have failed at
or prior to the Closing Date to perform or comply with any of the agreements
herein contained and required to be performed or complied with by either Issuer,
as the case may be, at or prior to the Closing Date.
(o) Trust Documents. On or before the Closing Date, (i) the Trust
Agreements shall have been duly registered with the Public Registry of Property
of Cancun, Quintana Roo, Mexico (in the case of the Cancun Regina Resort), Los
Cabos, Baja California Sur, Mexico (in the case of the Los Cabos Regina Resort),
and Puerto Vallarta, Jalisco, Mexico (in the case of the Puerto Vallarta Regina
Resort); and (ii) each of the Operating Subsidiaries shall have entered into an
agreement with Bancomer and the Remainder Company (the "Formalization
Agreement"), in the presence of, and certified by a Mexican Notary Public, and
in form and substance satisfactory to the Initial Purchaser, pursuant to which
(A) each Operating Subsidiary shall agree to the terms and conditions of the
Trust Agreements, (B) Bancomer and the Remainder Company shall have consented to
the participation of the Operating Subsidiaries as beneficiaries
(fideicomisarios) under the Trust Agreements, and (C) the Formalization
Agreement shall have been duly registered in the Public Registry of Property of
Cancun, Quintana Roo, Mexico (in the case of the Cancun Regina Resort), Los
Cabos, Baja California Sur, Mexico (in the case of the Los Cabos Regina Resort),
and Puerto Vallarta, Jalisco, Mexico (in the case of the Puerto Vallarta Regina
Resort).
(p) CNBV Approval. On or before the Closing Date, the Mexican
Banking and Securities Commission (Comision Nacional Bancaria y de Valores)
shall have authorized the registration of the Securities, and the Securities
shall have been duly registered, in the Special Section (Seccion Especial) of
the Mexican National Registry of Securities and Intermediaries (Registro
Nacional de Valores e Intermediarios), and the Issuers shall have obtained any
other permits, authorizations or registrations that may be required for the
issuance and sale of the Securities as contemplated herein.
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<PAGE> 29
(q) Repayment of Bancomer Loan. CR Mexico shall have entered into an
agreement with Bancomer, the Mexican subsidiaries of CR US, and Fianzas
Monterrey Aetna, S.A., in the presence of, and certified by a Mexican Notary
Public, and in form and substance satisfactory to the Initial Purchaser,
pursuant to which, upon repayment in full of all outstanding indebtedness under
the Bancomer Loan (as defined in the Offering Circular) (i) the Bancomer Loan
shall terminate and obligations of CR Mexico shall be released, and (ii) all
Liens securing the Bancomer Loan shall be released, and the Initial Purchaser
shall have received assurances satisfactory to it that the Issuers will,
contemporaneously with the Closing, repay in full the Bancomer Loan and receive
all mortgage releases and other release documents (in each case originally
executed and properly notarized and in form for registration) necessary to
evidence the repayment in full of the Bancomer Loan and the release of all Liens
thereunder.
(r) Mirror Notes. One or more Operating Subsidiaries of CR US shall
have issued a promissory note (or promissory notes) in the amount of $86.7
million in favor of CR Mexico in form and substance satisfactory to the Initial
Purchaser.
(s) Power of Attorney. CR Mexico shall have executed and delivered
an irrevocable power of attorney in the presence of, and certified by a Mexican
notary public, in the form of Exhibit E hereto, relating to the appointment of
CR US as agent for service of process.
(t) The Issuers shall have complied with their obligations in
Section 2(b) hereof.
(u) Additional Documents. On or before the Closing Date, the Initial
Purchaser and counsel for the Initial Purchaser shall have received such
information, documents and opinions as they may reasonably require for the
purposes of enabling them to pass upon the issuance and sale of the Securities
as contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions or
agreements, herein contained.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchaser by written notice to the Issuers if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the Initial
Purchaser's judgment, is material and adverse and, in the Initial Purchaser's
judgment, makes it impracticable to market the Units on the terms and in the
manner contemplated in the Offering Circular, (ii) the suspension or material
limitation of trading in securities or other instruments on the New York Stock
Exchange, the American Stock Exchange, the Chicago Board of Options Exchange,
the Chicago Mercantile Exchange, the Chicago Board of Trade or the Nasdaq
National Market or limitation on prices for securities or other instruments on
any such exchange or the Nasdaq National Market, (iii) the suspension of trading
of any securities of the Issuers on any exchange or in the over-the-counter
market, (iv) the enactment, publication,
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<PAGE> 30
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your opinion
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of CR US and
its subsidiaries, taken as a whole, (v) the declaration of a banking moratorium
by either federal or New York State authorities or (vi) the taking of any action
by any federal, state or local government or agency in respect of its monetary
or fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
11. MISCELLANEOUS. (a) Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Issuers, to Club Regina
Resorts, Inc., 10000 Memorial Drive, Houston, Texas 77024, Attn: Secretary, and
(ii) if to the Initial Purchaser, Jefferies & Company, Inc., 11100 Santa Monica
Boulevard, Los Angeles, California 90025, Attention: General Counsel, or in any
case to such other address as the person to be notified may have requested in
writing. For such purpose, CR Mexico hereby (and pursuant to the irrevocable
power of attorney referred to in Section 9(s) hereof) designates and appoints CR
US as its authorized agent upon which process may be served in any legal suit,
action or proceeding relating to the validity, or seeking enforcement, of CR
Mexico's obligations under the Operative Documents, and agrees that service of
process upon CR Mexico in any such suit, action or proceeding and further
designates the domicile of CR US specified above and any domicile CR US may have
in the future as its domicile to receive service of process hereunder.
(b) The respective indemnities, contribution agreements,
representations, warranties and other statements of the Issuers and the Initial
Purchaser set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect, and will survive delivery of and payment for the
Units, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, either Issuer, the officers or directors of either Issuer, or any
person controlling either Issuer, (ii) acceptance of the Units and payment for
them hereunder and (iii) termination of this Agreement.
(c) If for any reason the Units are not delivered by or on behalf of
the Issuers as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Issuers agree to reimburse the
Initial Purchaser for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Issuers shall be liable for all expenses which they have
agreed to pay pursuant to Section 5(i) hereof. The Issuers also agree to
reimburse the Initial Purchaser and its officers, directors and each person, if
any, who controls such Initial Purchaser within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act for any and all fees and expenses
(including without limitation the fees and expenses of counsel) incurred by them
in connection with enforcing their rights under this Agreement (including
without limitation its rights under this Section 8).
(d) Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon each Issuer, the
Initial Purchaser, the Initial Purchaser's directors and officers, any
controlling persons referred to herein, the directors
29
<PAGE> 31
of each Issuer and their respective successors and assigns, all as and to the
extent provided in this Agreement, and no other person shall acquire or have any
right under or by virtue of this Agreement. The term "successors and assigns"
shall not include a purchaser of any of the Notes from the Initial Purchaser
merely because of such purchase.
(e) THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PROVISIONS THEREOF.
(f) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
(g) Each Issuer and, with respect to clause (i) below, the Initial
Purchaser hereby irrevocably and unconditionally:
(i) submits itself and its property to any legal action or
proceeding relating to this Agreement and the other Operative Documents to which
it is a party, or for recognition and enforcement of any judgment in respect of
this Agreement or any other Operative Documents, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate courts
for such state and federal courts;
(ii) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to CR US at its address set below its
signature to this Agreement or at such other address as CR US shall have
notified the Initial Purchaser; provided that for any notice or service of
process to be effective under Mexican law, such notice or service shall be
deemed to have been given or made when delivered either (i) personally, return
receipt requested or (ii) by certified mail, return receipt requested; and
(iv) agrees that nothing in this Agreement shall affect the
right to effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
(Signature page follows)
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<PAGE> 32
Please confirm that the foregoing correctly sets forth the agreement
among the Issuers and the Initial Purchaser.
Very truly yours,
CLUB REGINA RESORTS, INC.
By:
-------------------------------------
Name:
Title:
CR RESORTS CAPITAL, S. de R. L. de C. V.
By:
-------------------------------------
Name:
Title:
31
<PAGE> 33
Agreed and accepted by as of November 26, 1997:
JEFFERIES & COMPANY, INC.
By:
--------------------------------
Name:
Title:
32
<PAGE> 1
EXHIBIT 3.1
CLUB REGINA RESORTS, INC.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
DOUGLAS Y. BECH certifies:
1. That he is the President and Secretary, respectively, of Club Regina
Resorts, Inc., a Nevada corporation (the Company).
2. That the Board of Club Regina Resorts, Inc., by unanimous written
consent as of August 11, 1997, resolved to amend and restate the
Company's Articles of Incorporation, pursuant to Section 78.403 of the
Nevada General Corporation Law (the NGCL).
3. That the Company's sole stockholder, by written consent as of August
11, 1997 in lieu of a meeting, resolved to amend and restate the
Company's Articles of Incorporation, pursuant to Section 78.403 of the
NGCL.
4. That as a result of the adoption of such resolutions, the Company's
Articles of Incorporation, as amended to date, have been amended and
restated to read in their entirety as follows:
ARTICLE I
NAME
The name of the Company is:
Club Regina Resorts, Inc.
ARTICLE II
DEFINITIONS
Articles means these amended and restated articles of incorporation.
Business Combination means: (a) any merger, reorganization or
consolidation of the Company or any of its subsidiaries with or into a Related
Person, (b) any sale, lease, exchange, transfer or other disposition of all or
substantially all of the property and assets of the Company or any of its
subsidiaries (including the issuance of any voting securities) to a Related
Person, (c) any merger or consolidation of a Related Person with or into the
Company or any of its subsidiaries, (d) any sale, lease, exchange, transfer or
other disposition of all or any substantial part of the assets of the Related
Person (including the issuance of any securities of the Related Person) to the
Company or any of its subsidiaries, or (e) any liquidation or dissolution of
the Company of any of its subsidiaries.
<PAGE> 2
Continuing Director means a director (i) who was a member of the Board
of the Company immediately prior to the time that a Related Person involved in
a Business Combination (as those terms are defined in these Articles) became
the owner of more than 20% of the outstanding shares of capital stock of the
Company entitled to vote on the election of directors or (ii) who was elected,
appointed or nominated as a director by a majority of the Continuing Directors.
Liquidation means any voluntary or involuntary liquidation,
dissolution or winding-up of the Company.
Person means any natural person, partnership (general or limited),
corporation, group or other entity (other than the Company, any subsidiary of
the Company or a trustee holding stock for the benefit of employees of the
Company or its subsidiaries, or any one of them, pursuant to one or more
employee benefit plans or arrangement). When two or more Persons act as a
partnership (general or limited), syndicate, association or other group for the
purpose of acquiring, holding or disposing of shares of stock, such partnership
(general or limited), syndicate, association or group shall be deemed a Person.
Related Person means any Person which is the beneficial owner (as such
term is defined in Rule 13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934) as of the Determination Date or immediately
prior to the consummation of a Business Combination, of 20% or more of the
capital stock of the Company entitled to vote on the election of directors, and
any "affiliate" or "associate" (as such terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934) of any
such Person.
Voting Stock means (i) Common Stock and (ii) Preferred Stock granted
voting rights pursuant to Article V, paragraph (b)(2).
ARTICLE III
RESIDENT OFFICE
The resident office of the Company is located at 400 West King St.,
Suite 404, Carson City, Nevada 89703 and the name of the initial registered
agent at such address is Capitol Document Services, Inc. The Company may
maintain an office or offices in such towns, cities and places within or
outside of the State of Nevada as the Board (the Board) may from time to time
determine or as may be designated by the By-Laws of the Company (the Bylaws).
ARTICLE IV
PURPOSE
The nature of the business, or object, or purposes, proposed to be
transacted, promoted or carried on by the Company are as follows:
To engage in any lawful activity.
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The enumeration of the foregoing powers shall not in anyway be deemed
to be a limitation upon the powers of the Company, but shall be in furtherance
of and in addition to the powers which it is authorized to exercise under "An
Act to Provide a General Corporation Law," approved March 21, 1925, and acts
amendatory and supplemental thereto.
ARTICLE V
CAPITALIZATION
The total number of shares of all classes of stock that the Company
shall have authority to issue is 50,000,000 shares, consisting of 45,000,000
shares of Common Stock, par value $.001 per share (the Common Stock), and
5,000,000 shares of Preferred Stock, par value $.001 per share (the Preferred
Stock).
(a) TERMS OF COMMON STOCK.
(1) General. Except as otherwise required by law or as
otherwise provided in these Articles, each share of Common Stock shall
have identical powers, preferences, qualifications, limitations and
other rights.
(2) Voting Rights. Except as otherwise required by law or
as otherwise provided in these Articles each share of Common Stock
shall be entitled to one vote per share.
(3) Dividends. Subject to the rights of any outstanding
class or series of capital stock ranking senior to Common Stock as to
dividends, dividends may be paid upon Common Stock in cash, property
or securities as and when declared by the Board out of funds legally
available therefor. As and when dividends are so declared and paid,
the holders of Common Stock shall be entitled to participate in such
dividends ratably on a per share basis.
(4) Liquidation. Upon any Liquidation, the holders of
Common Stock are entitled to share ratably in the net assets, if any,
remaining after payment in full of all debts and liabilities of the
Company and after the holders of any outstanding class or series of
capital stock ranking senior to Common Stock shall have been paid in
full the amounts to which such holders shall be entitled, or an amount
sufficient to pay the aggregate amount to which such holders are
entitled shall have been set aside for the benefit of the holders of
such senior stock.
(5) No Preemptive Rights. The Board may from time to time
issue any class or series of authorized stock of the Company, or any
notes, debentures, bonds, or other securities convertible into or
carrying options or warrants to purchase authorized stock of any class
or series without offering any such stock, either in whole or in part,
to the existing stockholders. No stockholder of the Company shall
because of his holding shares have any preemptive or preferential
rights to purchase or subscribe to stock of any class or series of the
Company now or hereafter to be authorized, or any notes, debentures,
bonds, or other securities convertible into or
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carrying options or warrants to purchase stock of any class or series
now or hereafter to be authorized, whether or not the issuance of any
such stock, or such notes, debentures, bonds or other securities,
would adversely affect the dividend or voting rights of such
stockholder; provided, however, all such newly authorized shares of
stock of any class or series, or notes, debentures, bonds or other
securities convertible into, or carrying options or warrants to
purchase, stock of any class or series, may be issued and disposed of
or sold by the Board on such terms and for such consideration, so far
as may be permitted by law, and to such person or persons as the Board
may determine in its discretion from time to time.
(b) PREFERRED STOCK. The Preferred Stock may be issued from time
to time in one or more series, each of such series to have such voting powers,
designation, preferences, and relative participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, as are
stated and expressed herein or in a resolution or resolutions providing for the
issuance of such series, adopted by the Board as hereinafter provided. The
Board is hereby expressly empowered, subject to this Article V, to provide for
the issuance of the Preferred Stock from time to time in series and to fix by
resolution or resolutions providing for the issuance of such series:
(1) Number. The number of shares to constitute such
series and the designation thereof;
(2) Voting Rights. The voting rights, full or limited, if
any, to which holders of shares of any series of Preferred Stock may
be entitled;
(3) Dividends. The dividend rate of the shares of such
series, and whether such dividends shall be cumulative;
(4) Redemption Provisions. Whether the shares of such
series shall be redeemable and, if redeemable, the redemption price
and the terms and conditions thereof;
(5) Liquidation Preference. The amount, if any, which the
shares of any such series shall be entitled to receive, before any
distribution or payment shall be made to holders of the Common Stock,
upon a Liquidation, or of any proceedings resulting in any
distribution of all, or substantially all, of its assets to its
stockholders; provided, however, that the sale of all, or
substantially all, of the property and assets of the Company to, or
the merger or consolidation of the Company into or with, any other
corporation shall not be deemed to be a Liquidation within the meaning
of this subdivision (e);
(6) Sinking Funds. Whether the shares of such series
shall be subject to the operation of retirement or sinking funds to be
applied to the purchase or redemption of such shares and, if such
funds are established, the annual amount thereof, and the terms and
provisions relative to the operation thereof;
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(7) Conversion Rights. Whether the shares of such series
shall be convertible into, or exchangeable for, shares of any other
class or classes of any other series of the same or any other class of
stock of the Company and, if convertible, the conversion price or
prices or rate or rates of conversion or exchange and the terms of
adjustments, if any, upon such conditions as shall be stated in said
resolution or resolutions; and
(8) Other Rights. Such other designations, preferences
and relative participating, optional or other special rights and
qualifications, limitations or restrictions thereof as it may deem
advisable and shall be stated in said resolution or resolutions.
ARTICLE VI
ELECTION OF DIRECTORS
(a) The business and affairs of the Company shall be conducted and
managed by, or under the direction of, the Board. Except as otherwise provided
for or fixed pursuant to Article V relating to the rights of the holders of any
series of Preferred Stock to elect additional directors, the total number of
directors constituting the entire Board shall be fixed form time to time by or
pursuant to a resolution passed by the Board.
(b) The number of directors which shall constitute the whole Board
shall be as specified pursuant to the Bylaws and may be altered from time to
time as may be provided therein. The Board shall be divided into three classes,
Class A, Class B and Class C. Such classes shall be as nearly equal in number
of directors as possible. Each director shall serve for a term expiring at the
third annual meeting following the annual meeting at which such director was
elected; provided, however, that the directors first elected to Class A shall
serve for an initial term expiring at the annual meeting following the end of
the Company's 1997 fiscal year, the directors first elected to Class B shall
serve for an initial term expiring at the second annual meeting next following
the end of the Company's 1998 fiscal year, and the directors first elected to
Class C shall serve for an initial term expiring at the third annual meeting
next following the end of the Company's 1999 fiscal year. The foregoing
notwithstanding, except as otherwise provided in these Articles or any
resolution or resolutions of the Board designating a series of Preferred Stock,
directors who are elected at an annual meeting of stockholders, and directors
elected in the interim to fill vacancies and newly created directorships, shall
hold office for the term for which elected and until their successors are
elected and qualified or until their earlier death, resignation or removal.
Whenever the holders of any class or classes of stock or any series thereof
shall be entitled to elect one or more directors pursuant to these Articles or
any resolution or resolutions of the board designating a series of Preferred
Stock, and except as otherwise provided herein or therein, vacancies and newly
created directorships of such class or classes or series thereof may be filled
by a majority of the directors elected by such class or classes or series
thereof then in office, by a sole remaining director so elected or by the
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unanimous written consent or the affirmative vote of a majority of the
outstanding shares of such class or classes or series entitled to elect such
director or directors.
(c) Except as otherwise provided for or fixed pursuant to Article
V relating to the rights of the holders of any series of Preferred Stock to
elect additional directors, and subject to the provisions hereof, newly created
directorships resulting from any increase in the authorized number of
directors, and any vacancies on the Board resulting from death, resignation,
disqualification, removal or other cause, may be filled only by the affirmative
vote of a majority of the remaining directors then in Office, even though less
than a quorum of the Board. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
newly created directorship or for the directorship in which the vacancy
occurred, and until such director's successor shall have been duly elected and
qualified, subject to his earlier death, disqualification, resignation or
removal. Subject to the provisions of these Articles, no decrease in the number
of directors constituting the Board shall shorten the term of any incumbent
director.
(d) During any period when the holders of any series of Preferred
Stock have the right to elect additional directors as provided for or fixed
pursuant to Article V, then upon commencement and for the duration of the
period during which such right continues (i) the then otherwise total
authorized number of directors of the Company shall automatically be increased
by such specified number of directors, and the holders of such Preferred Stock
shall be entitled to elect the additional directors so provided for or fixed
pursuant to said provisions, and (ii) each such additional director shall serve
until such director's successor shall have been duly elected and qualified, or
until such director's right to hold such office terminates pursuant to said
provisions, whichever occurs earlier, subject to his earlier death,
disqualification, resignation or removal. Except as otherwise provided by the
Board in the resolution or resolutions establishing such series, whenever the
holders of any series of Preferred Stock having such right to elect additional
directors are divested of such right pursuant to the provisions of such stock,
the terms of office of all such additional directors elected by the holders of
such stock, or elected to fill any vacancies resulting from death, resignation,
disqualification or removal of such additional directors, shall forthwith
terminate and the total and authorized number of directors of the Company shall
be reduced accordingly. Notwithstanding the foregoing, whenever, pursuant to
Article V, the holders of any one or more series of Preferred Stock shall have
the right, voting separately as a series or together with holders of other such
series, to elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of these Articles and the
Certificate of Designations applicable thereto, and such directors so elected
shall not be divided into classes pursuant to this Section 6(d) unless
expressly provided by such terms.
(e) Except for such additional directors, if any, as are elected
by the holders of any series of Preferred Stock as provided for or fixed
pursuant to Article V, any director may be removed from office only by the
affirmative vote of the holders of
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66 2/3% or more of the combined voting power of the then-outstanding shares of
Voting Stock at a meeting of stockholders called for that purpose, voting
together as a single class.
ARTICLE VII
RESTRICTIONS ON BUSINESS COMBINATIONS
(a) Except as set forth in Section 7(b) any Business Combination
shall require the affirmative vote of the holders of shares representing at
least 66 2/3% of the outstanding shares of capital stock of the Company entitled
to vote on the election of directors.
(b) The provisions of Section 7(a) shall not apply to any Business
Combination if:
(1) the Business Combination is approved by majority of
the Continuing Directors; or
(2) the Business Combination is with another corporation,
a majority of the outstanding shares of stock of which is owned of
record or beneficially, directly or indirectly, by the Company or its
subsidiaries and none of which is owned by a Related Person; or
(3) the form of consideration and minimum price
requirements described below are satisfied:
(i) in a Business Combination, the cash or
consideration to be paid to the Company's stockholders is
either cash or the same type of consideration used by the
Related Person in acquiring the largest portion of its shares
of the Company's voting capital stock prior to the first
public announcement of the proposed Business Combination; and
(ii) the fair market value per share of such
payments to the Company's stockholders in a Business
Combination is at least equal in value to the higher of (x)
the highest per share price (including brokerage commissions,
soliciting dealers' fees, dealer-manager compensation and
other expenses, and as appropriately adjusted to take account
of stock splits, reverse stock splits, stock dividends and
similar transactions) paid or agreed to be paid by the Related
Person to acquire any shares of the Company's voting capital
stock during the two years prior to the first public
announcement of the proposed Business Combination (the
Announcement Date) or in the transaction in which the Related
Person first became a Related Person (the date of such
transaction herein referred to as the Determination Date),
whichever is higher, or (y) the fair market value per share of
the Common Stock on the Announcement Date or on the
Determination Date, whichever is higher.
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ARTICLE VIII
NO WRITTEN CONSENTS OF STOCKHOLDERS
Except as otherwise provided for or fixed pursuant to Article IV
relating to the rights of the holders of any series of Preferred Stock, no
action that is required or permitted to be taken by the stockholders at any
annual or special meeting of stockholders may be effected by written consent of
stockholders in lieu of a meeting of stockholders, unless the action to be
effected by written consent of stockholders and the taking of such action by
such written consent have expressly been approved in advance by the Board.
ARTICLE IX
STOCKHOLDER MEETINGS
(a) Meetings of stockholders of the Company (Stockholder Meetings)
may be held within or without the State of Nevada, as the Bylaws may provide.
Except as otherwise provided for or fixed pursuant to Article V relating to the
rights of the holders of any series of Preferred Stock, special Stockholder
Meetings may be called only by (i) the Chairman of the Board or (ii) the Board
pursuant to a resolution adopted by a majority of the seated Continuing
Directors of the Company. Special Stockholder Meetings may not be called by any
other Person or Person or in any other manner. Elections of directors need not
be by written ballot unless the Bylaws shall so provide.
(b) In addition to the powers conferred on the Board by these
Articles and by the NGCL, and without limiting the generality thereof, the
Board is specifically authorized from time to time, by resolution of the Board
without additional authorization by the stockholders of the Company, to adopt,
amend or repeal the Bylaws, in such form and with such terms as the Board may
determine, including, without limiting the generality of the foregoing, Bylaws
relating to (i) regulation of the procedure for submission by stockholders of
nominations of persons to be elected to the Board, (ii) regulation of the
attendance at annual or special Stockholder Meetings by Persons other than
holders of record or their proxies, and (iii) regulation of the business that
may properly be brought by a stockholder of the Company before an annual or
special meeting of stockholders of the Company.
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ARTICLE X
AMENDMENT OF CORPORATE DOCUMENTS
(a) Articles. Whenever any vote of the holders of Voting Stock is
required by law to amend, alter, repeal or rescind any provision of these
Articles, then in addition to any affirmative vote required by applicable law
and in addition to any vote of the holders of any series of Preferred Stock
provided for or fixed pursuant to Article V, such alteration, amendment, repeal
or rescission (a Change) of any provision of these Articles must be approved by
at least a majority of the then-combined voting power of the then-outstanding
shares of Voting Stock, voting together as a single class; provided, however,
that if any such Change relates to Articles II, VI, VII, VIII, IX, or to this
Article X, such Change must also be approved by the affirmative vote of the
holders of at least 66 2/3% of the combined voting power of the
then-outstanding shares of Voting Stock, voting together as a single class;
provided further, however, that the vote(s) required by the immediately
preceding clause shall not be required if such Change has been first approved by
at least two-thirds of the then-authorized number of directors.
Subject to the provisions hereof, the Company reserves the right at
any time, and from time to time, to amend, alter, repeal or rescind any
provision contained in these Articles in the manner now or hereafter prescribed
by law, and other provisions authorized by the laws of the State of Nevada at
the time in force may be added or inserted, in the manner now or hereafter
prescribed by law; and all rights, preferences and privileges of whatsoever
nature conferred upon stockholders, directors or any other Persons whomsoever
by and pursuant to these Articles in its present form or as hereafter amended
are granted subject to the rights reserved in this article.
(b) Bylaws. In addition to any affirmative vote required by law,
any Change of the Bylaws may be adopted either (i) by the Board by the
affirmative vote of at least a majority of the then-authorized number of
directors, or (ii) by the stockholders by the affirmative vote of the holders
of at least 66 2/3% of the combined voting power of the then-outstanding shares
of Voting Stock, voting together as a single class.
ARTICLE XI
The corporation elects to be governed by Sections 78.411 to 78.444,
inclusive, of the General Corporation Law of the State of Nevada.
ARTICLE XII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
No director or officer shall be personally liable to the Company or
stockholder for damages for breach of fiduciary duty as a director or officer,
except that this Article XII shall not eliminate or limit the liability of a
director or officer for (i) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or (ii) the payment of
dividends in violation of Section 78.300 of the NCGL. If the NGCL is hereafter
amended or interpreted to eliminate or limit further the personal liability of
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directors or officers, then the liability of all directors and officers shall
be eliminated or limited to the full extent then so permitted. Neither the
amendment nor repeal of this Article XII, nor the adoption of any provision of
these Articles inconsistent with this Article XII, shall eliminate or reduce
the effect of Article XII in respect of any act or omission that occurred prior
to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE XIII
CONFLICT OF INTEREST
No contract or other transaction between the Company and any other
Person and no other acts of the Company with relation to any other Person
shall, in the absence of fraud, in any way be invalidated or otherwise affected
by the fact that any one or more of the directors or officers of the Company
are pecuniarily or otherwise interested in, or are directors or officers of,
such other Person. Any director or officer of the Company individually, or any
firm or association of which any director or officer may be a member, may be a
party to, or may be pecuniarily or otherwise interested in, any contract or
transaction of the Company, provided that the fact that he individually or as a
member of such firm or association is such a party or is so interested shall be
disclosed or shall have been known to the board of directors or a majority of
such members thereof as shall be present at any meeting of the board of
directors at which action upon any such contract or transaction shall be taken;
and any director of the Company who is also a director or officer of such other
Person or who is such a party or so interested may be counted in determining
the existence of a quorum at any meeting of the board of directors which shall
authorize any such contract or transaction and may vote thereat to authorize
any such contract or transaction, with like force and effect as if he wore not
such a director or officer of such other Person or not so interested. Any
director of the Company may vote upon any contract or any other transaction
between the Company and any subsidiary or affiliated Person without regard to
the fact that he is also a director or officer of such subsidiary or affiliated
Person.
Any contract, transaction, act of the Company or of the directors,
which shall be ratified at any annual meeting of the stockholders of the
Company, or at any special meeting of the stockholders of the Company, or at
any special meeting called for such purpose, shall, insofar as permitted by
law, be as valid and as binding as though ratified by every stockholder of the
Company; provided, however, that any failure of the stockholders to approve or
ratify any such contract, transaction or act, when and if submitted shall not
be deemed in any way to invalidate the terms or deprive the Company, its
directors, officers or employees, of its or their right to proceed with such
contract, transaction or act.
Subject to any express agreement which may from time to time be in
effect, any stockholder, director or officer of the Company may carry on and
conduct in his own right and for his own personal account, or as a partner in
any partnership, or as a joint venturer in any joint venture, or as an officer,
director or stockholder of any Person, or
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as a participant in any syndicate, pool, trust or association, any business
which competes with the business of the Company and shall be free in all such
capacities to make investments in any kind of property in which the Company may
make investments.
ARTICLE XIV
TERM
This corporation is to have a perpetual existence.
ARTICLE XV
NO ASSESSMENTS
The capital stock of the Company after the amount of the subscription
price, or par value, has been paid in, shall not be subject to assessment to
pay debts of the Company, and no paid up stock, and no stock issued as fully
paid, shall ever be assessable or assessed.
ARTICLE XVI
SOLE DIRECTOR
The name and address of the incorporator and sole director signing
these Articles is as follows:
<TABLE>
<CAPTION>
Name Post Office Address
---- -------------------
<S> <C>
Douglas Y. Bech 2310 Pennzoil Place - South Tower
711 Louisiana
Houston, Texas 77002
</TABLE>
DATED: August 11, 1997
-----------------------------------
Douglas Y. Bech, President
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On this 11th day of August, 1997, personally appeared before me, a
Notary Public in and for said County and State, DOUGLAS Y. BECH, known to me to
be the President and Secretary, respectively, of Club Regina Resorts, Inc., a
Nevada
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corporation, and acknowledged to me that they executed the within instrument in
such capacities pursuant to authority granted by the Board of Club Regina
Resorts, Inc.
In witness whereof, I have hereunto set my hand and affixed my
official seal on the day and year first above written.
---------------------------------------
NOTARY PUBLIC in and for said
County and State
12
<PAGE> 1
EXHIBIT 3.2
[Seal:
LUIS ANGOITIA BECERRA, ESQ.
NOTARY PUBLIC 230
MEXICO CITY, FEDERAL DISTRICT
UNITED MEXICAN STATES]
BOOK NINE HUNDRED FIFTY-SIX
(50,857) FIFTY THOUSAND EIGHT HUNDRED FIFTY-SEVEN.
In Mexico City, Federal District, on the eleventh day of the month of
August of nineteen ninety-seven, I, LUIS DE ANGOITIA BECERRA, Esq., Notary
Public number two hundred thirty of the Federal Distinct, acting as associate
in the notary office and records of LUIS DE ANGOITIA Y GAXIOLA, ESQ., NOTARY
PUBLIC NUMBER ONE HUNDRED NINE OF THE FEDERAL DISTRICT, hereby record the
following: ARTICLES OF ORGANIZATION AND BYLAWS OF A VARIABLE-CAPITAL LIMITED
LIABILITY COMPANY, which shall be called "CR RESORTS CAPITAL", formed by
CANARIAS FUTURE, S.L. and CR RESORTS PARENT NOMINEE HOLDING, LLC., both
represented by Mr. AARON LEVET VELASCO, under the following recitals and
clauses:
RECITALS
FORMATION OF THE COMPANY
I. In order to execute this document, the Secretariat of Foreign
Relations, on June fourth of nineteen ninety-seven, issued PERMIT 03020548 -
FILE 9709020076 - PAGE 20643, which I attach as appendix "A" to the certified
copies I issue.
II. Having met the above-described requirement, the company which
is now formed shall be governed by the bylaws set out below:
COMPANY BYLAWS OF
CR RESORTS CAPITAL, VARIABLE-CAPITAL LIMITED LIABILITY COMPANY.
NAME, PURPOSE, DOMICILE, NATIONALITY, DURATION.
ARTICLE ONE. The name of the Company is "CR Resorts Capital", which
name shall always be followed by the words "Variable-Capital Limited Liability
Company" or the abbreviation "S. de R.L. de C.V.".
ARTICLE TWO. The purpose of the company is to:
1. Promote, incorporate, exploit, organize and manage any sort of
Mexican or foreign companies, civil or commercial, including, but not in any
way limited to, industrial, commercial, service, or any other sort of
associations or companies.
<PAGE> 2
2
2. Provide any sort of technical consulting, management or
supervisory services in accounting, commercial, administrative or financial
fields to Mexican or foreign industrial, commercial or private companies,
public associations or companies of any sort, and receive such services from
individuals, entities or companies.
3. Borrow money, with or without specific security, and loan
money to other companies or entities of any sort with which the Company has a
business relationship.
4. Represent, or be the agent for, any person or legal entity
involved in any industrial or commercial activity allowed by the laws of the
United Mexican States.
5. Register, acquire, dispose of and trade in trademarks, trade
names, patents, copyrights, inventions and processes, either in the United
Mexican States or abroad.
6. Establish, acquire, own, lease, operate and, in general,
acquire the use of, or title to, any warehouses, offices, facilities, stores,
real or personal property and equipment of any sort which is required for the
company to accomplish its purpose, or the purpose of any companies or entities
in which the Company has an interest or share, or with which it has a business
relationship, as well as to acquire, or have an interest in, any sort of
industrial or commercial association and to acquire its assets or shares.
7. Provide any sort of security or guarantee for obligations or
credit instruments for which any companies or entities in which the Company has
an interest or share is liable, as well as obligations or credit instruments
for which any companies or persons with which the Company has a business
relationship is liable.
8. Issue and negotiate, in general, any sort of credit
instruments, as well as accept or endorse them.
9. In general, carry out any related action, contract or
activities which are deemed necessary or appropriate for the accomplishment of
the above-described company purposes.
ARTICLE THREE. The domicile of the Company shall be Mexico City,
Federal District; however, it may establish agencies, branches or offices in
any part of the Mexican Republic or abroad, and shall be subject to
contractually-
<PAGE> 3
3
[Seal:
LUIS ANGOITIA BECERRA, ESQ.
NOTARY PUBLIC 230
MEXICO CITY, FEDERAL DISTRICT
UNITED MEXICAN STATES]
established domiciles, provided, however, that this shall not signify a change
of the corporate domicile.
ARTICLE FOUR. The Corporation is of Mexican nationality. Any alien
who acquires any interest or share of the Company in the process of formation
or any time later, shall, by this fact alone, be deemed to be a Mexican with
regard to the Company and it is understood that he shall not invoke the
protection of his government, subject to forfeiting such interest or share in
the company to the Mexican government if he fails to comply with such
agreement.
ARTICLE FIVE. The duration of the Company shall be 99 (ninety-nine)
years from the date of its formation.
EQUITY CAPITAL
ARTICLE SIX. The amount of equity capital shall be variable. The
minimum fixed capital is $3,000.00 (THREE THOUSAND MEXICAN PESOS), fully
subscribed and paid in. The variable part of the capital shall be unlimited.
The equity capital shall be represented by membership interests.
VOTING RIGHTS
ARTICLE SEVEN. Any Member shall have the right to participate in the
Meetings, having the right to one vote per $1.00 (One and 00/100 Mexican Peso)
of his contribution to capital.
MEMBERSHIP INTERESTS
ARTICLE EIGHT. No Member shall have more than one membership interest.
In the event that any Member makes a new contribution, or acquires all
or any part of the membership interest of another member, under the terms
provided in these bylaws, his membership interest shall increase accordingly.
The Company shall maintain a special Members book, which shall contain
the name and domicile of all of Members, indicating the amount paid for his
membership interests and the transfers of such membership interests. One must
be registered in the Members' book in order to be considered such.
<PAGE> 4
4
CERTIFICATES OF MEMBERSHIP INTERESTS
ARTICLE NINE. The membership interests shall be represented by
documents which shall, in any case, be valid only if their holder is a member.
Such certificates shall be signed by the Chairman and the Secretary of the
Board of Managers. The membership interests are not negotiable and may be
assigned only in accordance with the provisions of Articles Ten, Eleven and
Twelve of these Articles of Organization.
ASSIGNMENT OF MEMBERSHIP INTERESTS
ARTICLE TEN. a) Any assignment of membership interests shall be made
in strict compliance with the provisions of Articles Ten, Eleven and Twelve of
these Articles of Organization.
b) No Member (the "Assigning Member") may assign his membership
interest, in whole or in part, without first offering such membership interest
to the other members of the company.
c) The Assigning Member shall notify the Members in writing of
any proposed assignment, providing the name and address of the potential
acquirer, the sales price and all terms and conditions relevant to the
assignment (the "Original Notice"). The Secretary of the Board of Managers
shall, within the following 15 (fifteen) days, notify the other Members with
respect to the Original Notice and such Members shall have preemptive rights to
acquire the offered membership interests, in proportion to their percentage
interest. Such preemptive right shall be exercised by written notice to the
Board of Managers and to the Assigning Member.
d) If the non-assigning Members decide not to exercise their
preemptive right, as provided in Paragraph c) above, the Assigning Partner
shall have the right to assign his membership interest to the person or legal
entity designated in the Original Notice, subject to unanimous consent by the
other Members, who shall have the right to authorize, or not authorize, such
transaction.
ARTICLE ELEVEN. The unanimous consent of the Members of the Company,
declared at a General Meeting of Members, shall be required for the admission
of new members.
<PAGE> 5
5
[Seal:
LUIS ANGOITIA BECERRA, ESQ.
NOTARY PUBLIC 230
MEXICO CITY, FEDERAL DISTRICT
UNITED MEXICAN STATES]
ENCUMBRANCES AND SECURITY INTERESTS
ARTICLE TWELVE. The consent of all of the other Members shall be
required for any Member to encumber his rights in his membership interest or
grant a security interest in such rights.
INCREASES IN CAPITAL
ARTICLE THIRTEEN. Capital may be increased by contributions by the
Members or by the admission of new members, with the understanding, however, in
both cases, that the unanimous consent of the Members shall be required.
The Members shall have the right to subscribe for any increase in
capital adopted by resolution of the Members, in proportion to their membership
interests. In the event that one or more of the Members does not exercise such
right within the period allowed by the Members, the other Members shall have
the right to subscribe and pay for such membership interest.
MEETINGS OF MEMBERS
ARTICLE FOURTEEN. The Members, acting at a Meeting of Members, is the
supreme governing body of the Company. Meetings of Members shall be held, upon
prior notice, at the corporate domicile at least one annually, within four
months after the closing of each fiscal year. Publication of the notice will
not be required if, at the time of the voting, all of the Members are present
or represented.
NOTICE OF MEETINGS OF MEMBERS
ARTICLE FIFTEEN. The Board of Managers shall, at the request of any
Member, call a Meeting of Members. In the event that the Board of Managers
does not issue the appropriate notice, the Supervisory Board shall do so, and,
in the absence of this Board, notices shall be issued by Members representing
more than one third of the equity capital.
Notices of Meetings of Members shall be sent to all Members by fax or
certified mail, specifying the time, place and Agenda for the Meeting, no less
than 10 (ten) days in advance of the date set for the Meeting.
<PAGE> 6
6
ARTICLE SIXTEEN. Meetings of Members shall be presided over by the
Chairman of the Board of Managers or, in his absence, by one of the
Administrative Managers, or, in their absence, by the person designated by the
Members at the Meeting. The Secretary of the Company shall serve as Secretary
of the Meeting, or, in his absence, the person designated by the Members at the
Meeting. The Chairman shall designate one or more Members, or their
representatives, to serve as monitors. The minutes of all Meetings of Members
shall be transcribed in the minute book kept by the Company for such purpose.
The minutes shall be signed at least by the persons serving as Chairman and
Secretary of the Meeting.
QUORUM
ARTICLE SEVENTEEN. The Meeting of Members may be held pursuant to the
first or subsequent notice if at least 75% (seventy-five percent) of the equity
capital is present, and any resolutions adopted at such Meetings shall be valid
if adopted by the favorable vote of Members representing at least 75%
(seventy-five percent) of the equity capital, unless a higher percentage is
required under these bylaws.
All Members appearing as such in the special book maintained for such
purpose shall be entitled to vote at the Meetings of Members, in accordance
with the provisions of Article 73 (Seventy-three) of the General Commercial
Corporations Law. The Members may be represented by an attorney in fact
holding a general or special power of attorney or a simple letter power of
attorney signed by the Member in front of witnesses.
ARTICLE EIGHTEEN: Members may validly adopt resolutions without
holding a Meeting of Members. In such case, the resolution in question shall
be sent to each of the Members by certified mail (return receipt requested) for
signature by all of the Members. Such resolutions shall, for legal purposes,
has the same validity as if they had been adopted at a Meeting of Members. The
documents containing the resolutions adopted under the provisions of this
Article shall be filed in the appropriate Minute Book.
<PAGE> 7
7
[Seal:
LUIS ANGOITIA BECERRA, ESQ.
NOTARY PUBLIC 230
MEXICO CITY, FEDERAL DISTRICT
UNITED MEXICAN STATES]
MANAGEMENT
ARTICLE NINETEEN. The Management of the Company shall be the
responsibility of one or more Managers, as determined by the Members at a
Meeting of Members. Managers may be members or third parties, and they shall
serve as such until their successors have been designated and assume their
duties. The Members shall have the right to revoke the designation of any
Manager at any time.
In the event that there are two or more Managers, they shall act
jointly and their resolutions shall be adopted, in all cases, by a majority
vote, in accordance with the provisions of Article 75 (Seventy-Five) of the
General Commercial Corporations Law. The Members shall have the right to elect
Managers in proportion to their interest in the equity capital.
ARTICLE TWENTY. The Board of Managers shall be the Company's legal
representative and, therefore, shall have the following powers:
1. General power of attorney for lawsuits and collections, for
the purpose of representing the Company before any judicial or administrative
authorities, whether municipal, local or federal, as well as before labor
authorities and arbitrators, without any limitation whatsoever, in accordance
with the provisions of Paragraph One of Article 2554 (Two Thousand Five Hundred
Fifty Four) of the Federal District Civil Code and its counterpart in the civil
codes of the other states in the Republic, and, therefore, it shall be deemed
that this power of attorney is granted with the special powers which require a
special clause under Article 2567 (Two Thousand Sixty-Seven) of the
aforementioned Code, and, therefore, they are authorized to:
(i) Institute or abandon any sort of legal action or remedy,
including a suit for protection of constitutional rights;
(ii) File criminal accusations and complaints; satisfy the
requirements thereof and abandon same;
(iii) Act as intervenor with prosecutorial authorities;
(iv) Grant a pardon in criminal cases;
<PAGE> 8
8
(v) Submit and answer interrogatories in any sort of proceeding,
including labor-related suits;
(vi) Appear before any sort of criminal, civil, administrative, tax
or labor authorities, with regard to labor matters.
2. Represent the Company in legal and labor-related matters, with
the power and authority provided under, and for the purposes of, Articles 11
(eleven), 46 (forty-six), 47 (forty-seven), 134 (one hundred thirty-four)
Section III, 523 (five hundred twenty-three), 692 (six hundred ninety-two)
Sections 1, II and III, 786 (seven hundred eighty- six), 787 (seven hundred
eighty-seven), 873 (eight hundred seventy-three), 874 (eight hundred
seventy-four), 880 (eight hundred eighty), 883 (eight hundred eighty-three),
884 (eight hundred eighty-four) and other articles of the Federal Labor Law,
and shall be authorized to act vis-a-vis any unions now existing, or which come
to exist in the future, in connection with any collective bargaining agreements
which have been executed or which are executed in the future, and vis-a-vis the
Company's workers, individually, and for all purposes related to any individual
or collective conflicts and, in general, in connection with all
employer-employee matters before any labor or social security authorities
referred to in Article 523 (Five Hundred Twenty-Three) of the Federal Labor
Law; in addition, they may appear before Arbitration and Reconciliation Boards,
either local or federal; they may appear to submit or answer interrogatories;
appear, with all powers of legal representation, to attend the hearing referred
to in Article 873 (eight hundred seventy-three), under the terms of Article 875
(eight hundred seventy-five), 876 (eight hundred seventy-six), Sections I and
IV, 877 (eight hundred seventy-seven), 878 (eight hundred seventy-eight), 879
(eight hundred seventy-nine) and 888 (eight hundred eight-eight); in addition,
they have been conferred powers to propose conciliatory arrangements, to
negotiate, sign and execute settlement agreements, and also to act as
representatives, in the capacity as administrators, with regard to any sort of
lawsuits or labor-related proceedings being handled before any authority; at
the same time, they may execute and rescind employment agreements.
Consequently, for all of the above-described purposes, the attorneys in fact
shall have a power of attorney for lawsuits, collections and administrative
actions, under the terms of the first two paragraphs of Article 2554
<PAGE> 9
9
[Seal:
LUIS ANGOITIA BECERRA, ESQ.
NOTARY PUBLIC 230
MEXICO CITY, FEDERAL DISTRICT
UNITED MEXICAN STATES]
(two thousand five hundred fifty-four) of the Federal District Civil Code and
its counterpart in the civil codes for all of the states of the Mexican
Republic; therefore, they can sign complaints and, by way of example but not
limited to, they may file and abandon any sort of proceedings, lawsuits or
remedies, including a suit for protection of constitutional rights; to settle
and make commitments through arbitrators; submit and answer interrogatories;
object to, or receive, payments, present accusations and complaints in criminal
cases and abandon them where allowed by law and where they deem such to be
appropriate, as well as exercise this authority before any person or legal
entity, public or private body, and before civil, criminal, administrative,
tax, military or labor authorities in labor-related matters, and may object to
judges and authorities; intervene with prosecutorial authorities; grant pardons
and designate expert witnesses, all in the defense of their principal.
3. Administer property in accordance with the provisions of the
Paragraph Two of Article 2554 (two thousand five hundred fifty-four) of the
Federal District Civil Code and its counterpart in the civil codes of the other
states of the Republic.
4. Exercise acts of ownership under the terms of the third
paragraph of Article 2554 (two thousand five hundred fifty-four) of the Federal
District Civil Code and its counterpart in the civil codes of the other states
of the Republic.
5. Sign, grant, accept, endorse and, in general, negotiate credit
certificates and instruments, under the terms of Article 9 (nine) of the
General Credit Instrument and Transaction Law.
6. Open banking and investment accounts in the name of the
Company, in order to draft on them and to designate the persons who can draft
on them.
7. Employ and remove officials and employees of the Company and
determine their tasks, working conditions and compensation;
8. Prepare internal work rules;
9. Carry out all of the legal actions indicated in these Articles
of Organization or resulting therefrom;
<PAGE> 10
10
10. Grant special and general powers of attorney under the terms
of this article, with or without authority to delegate, and to revoke the
powers of attorney which are granted, and, subject to applicable laws and
regulations, delegate their powers, maintaining, at all times, the right to
exercise such.
CHAIRMAN OF THE BOARD
ARTICLE TWENTY-TWO. The Board of Managers shall designate the
Secretary and Assistant Secretary of the Company, who may or may not be Members
or members of the Board of Managers. The Secretary and Assistant Secretary may
be removed from their positions at any time by the Board of Managers. The
Secretary, and, in his absence, the Assistant Secretary, shall prepare the
minutes of the Meetings of the Members and the meetings of the Board of
Managers; they shall keep all of the minutes and records of the Members of the
Company; they shall authorize certified copies or excerpts of the minutes and
other Company documents and they shall maintain the file and correspondence
related to the aforementioned matters.
MEETINGS OF THE BOARD OF MANAGERS
ARTICLE TWENTY-THREE. In the event that two or more Managers are
designated, all resolutions must be adopted by majority vote, the Board acting
as a collective body, and they shall be transcribed in the special minute book
and signed by all of the attendees at the meeting. The Board of Managers may
hold their meetings after being called by notice from the Chairman, the
Secretary, the Assistant Secretary or any member of the Supervisory Board. The
Meetings shall be held at the domicile of the Company or at any other location,
either in the Mexican Republic or abroad, as established in the pertinent
notice.
The notices shall be sent to the members of the Board of Managers at
least ten (10) days prior to the date set for the Meeting. The minutes of the
Meetings of the Board of Managers shall be transcribed in the minute book and
signed by all of the members present.
<PAGE> 11
11
[Seal:
LUIS ANGOITIA BECERRA, ESQ.
NOTARY PUBLIC 230
MEXICO CITY, FEDERAL DISTRICT
UNITED MEXICAN STATES]
TERM OF OFFICE
ARTICLE TWENTY-FOUR. Members of the Board of Managers shall serve in
such capacity until their successors have been designated and assume their
duties. Members of the Board of Managers may be reelected.
SUPERVISORY BOARD
ARTICLE TWENTY-FIVE. The Company shall be supervised by a Supervisory
Board composed of two or more Statutory Auditors, who may or may not be
Members, and who shall be designated by the Members at a Meeting of Members.
The members of the Supervisory Board shall serve as such until their successors
have been designated and assume their duties.
RIGHTS AND DUTIES OF THE SUPERVISORY BOARD
ARTICLE TWENTY-SIX. The Supervisory Board shall have the following
rights and duties:
(i) Conduct an examination of the operations, documents, records
and other supporting evidence, to the degree and extent necessary to supervise
the operations as required by law and in order to be able to render the report
mentioned in Paragraph (ii), based on such evidence;
(ii) To submit a report annually at a Meeting of Members regarding
the accuracy, sufficiency and reasonableness of the information presented at
the Meeting of Members by the Board of Managers. This report shall include, at
a minimum:
a) The opinion of the Supervisory Board whether the accounting
and informational policies and criteria followed by the Company are appropriate
and sufficient, taking into consideration the particular circumstances of the
Company.
b) The opinion of the Supervisory Board whether these policies
and criteria have been applied consistently in the information presented by the
Board of Managers.
<PAGE> 12
12
c) The opinion of the Supervisory Board whether, as a result of
the foregoing, the information presented by the Board of Managers accurately
and adequately reflects the Company's financial position.
(iii) Ensure that the items they believe appropriate are included in
the agendas for the meetings of the Board of Managers and Meetings of Members.
(iv) Call a Meeting of Members, in the event that the Board of
Managers fails to do so, or in any other case they deem appropriate.
(v) Attend, as non-voting participants, all meetings of the Board
of Managers and Meetings of Members, of which they shall be notified.
(vi) In general, all those rights and duties established by law or
by these bylaws.
EARNINGS AND RESERVES
ARTICLE TWENTY-SEVEN. Within the first four months after the closing
of each company fiscal year, the Board of Managers shall prepare a report
containing the financial information referred to in Article Twenty-Six above.
The financial information, along with the related supporting documentation,
shall be delivered to the Supervisory Committee at least 15 days in advance of
the date set for the Annual Meeting of Members.
ARTICLE TWENTY-EIGHT. Net earnings for each company fiscal year shall
be distributed as follows:
1. Five percent (5%) shall be allocated to constitute, and, in
necessary, reconstitute, a legal reserve fund, until such fund equals at least
twenty percent (20%) of the equity capital;
2. If the Members so resolve, at a Meeting of Members, they may
create or increase capital reserves as they deem appropriate; and
3. The remaining earnings, if there are any, shall be distributed
as resolved at a Meeting of Members.
DISSOLUTION AND TERMINATION
ARTICLE TWENTY-NINE. The Company shall be dissolved in any of the
following cases:
a) In the event it becomes impossible to accomplish the company's
purposes;
<PAGE> 13
13
[Seal:
LUIS ANGOITIA BECERRA, ESQ.
NOTARY PUBLIC 230
MEXICO CITY, FEDERAL DISTRICT
UNITED MEXICAN STATES]
b) If so resolved at a Meeting of Members;
c) In the event that the number of Members exceeds fifty or if
all of the membership interests are owned by one person; and
d) In those cases provided by law.
ARTICLE THIRTY. Any Member who is declared bankrupt or becomes a
party to a bankruptcy, insolvency, suspension of payments or other similar
proceeding, shall be automatically separated from the Company. In such case,
his participation as a Member shall terminate and the amount of his
contribution to the company's capital may not be utilized in any transaction or
operation whatsoever in which the Company is involved after the aforementioned
Member has been declared in bankruptcy, insolvency, suspension of payments or
similar status.
A Meeting of Members shall be held to formalize the separation of the
aforesaid Member, as well as to adopt resolutions regarding the reduction of
the company's capital for the purpose of reimbursing such Member for his
contribution to the company's capital.
LIQUIDATORS
ARTICLE THIRTY-ONE. After the dissolution of the Company has been
decreed, it shall be liquidated. The Members shall determine the number of
liquidators which will carry out such process, and their compensation.
RESPONSIBILITIES OF THE LIQUIDATORS
ARTICLE THIRTY-TWO. In the absence of contrary instructions from the
Members to the liquidators, the liquidation shall be carried out as follows:
1. Conclude the company's operations in the manner which is least
prejudicial to the creditors and Members remaining at the time of dissolution;
2. Collect and pay the debts of the Company;
3. Sell the Company's property;
4. Prepare a final balance sheet of the liquidation;
5. Distribute any remaining assets among the Members, in
proportion to their membership interests.
<PAGE> 14
14
6. After the liquidation has been concluded, have the
registration of the articles of organization in the Public Commercial Registry
canceled.
POWERS OF THE LIQUIDATORS
ARTICLE THIRTY-THREE. During the liquidation period, Meetings of
Members may be called by the liquidators, by the Supervisory Board, or by
Members holding at least 25% (twenty-five percent) of the company's capital.
The liquidators shall represent the Company, with the authority to take action
relating to administration, ownership, lawsuits and collections, without any
limitation whatsoever, including any power requiring a special power of
attorney or clause.
TEMPORARY
ONE. The founding Members, as such, do not reserve any ownership
whatsoever.
TWO. The equity capital is variable. The minimum fixed capital is
$3,000.00 (Three Thousand Mexican Pesos), represented by the Membership
Interests, fully subscribed and paid in, with the following values and
distributed as follows:
<TABLE>
<CAPTION>
VALUE OF THE
MEMBER MEMBERSHIP INTEREST VOTES
------ ------------------- -----
<S> <C> <C>
Canarias Future, S.L. $2,999.00 2,999
CR Resorts Parent Nominee
Holding, L.L.C. $ 1.00 1
--------- -----
TOTAL: $3,000.00
</TABLE>
THREE. The Members of the Company hereby agree that:
a) The Board of Managers shall be responsible for the management
of the Company and, for the purposes thereof, they hereby designate Messrs.
John McCarthy S. as Chairman and Douglas Y. Bech as Secretary. Such
multi-member entity shall have the powers established under Article Twenty of
these Articles of Organization.
b) Messrs. CARLOS DE LA ROSA HAM, CPA and HUMBERTO ORTIZ, CPA,
are hereby designated members of the Supervisory Board of the Company.
<PAGE> 15
15
[Seal:
LUIS ANGOITIA BECERRA, ESQ.
NOTARY PUBLIC 230
MEXICO CITY, FEDERAL DISTRICT
UNITED MEXICAN STATES]
c) Messrs. John McCarthy Sandland and Douglas Y. Bech are hereby
designated attorneys in fact for the Company, conferring on them the powers set
out in Paragraphs 1 (one), 2 (two), 3 (three), 5 (five), 6 (six), 7 (seven), 8
(eight), 9 (nine) and 10 (ten) of Article Twenty of these bylaws, to be
exercised by any of them in representation of the company. In addition, Mr.
Douglas Y. Bech alone is granted a special power of attorney, with the powers
set out in Paragraph 4 (four) of Article Twenty of these company bylaws.
d) A special power of attorney for lawsuits and collections and
for administrative actions, as broad as required by law, is hereby granted to
Messrs. John McCarthy Sandland, Douglas Y. Bech, Aaron Levet Velasco, Juan
Carlos Machorro Guerrero, Ana Maria Poblanno Chanona, Jorge Leon Orantes and
Alfredo Chavez Goyenche, or any of them, so that any of them may, on behalf of
the Company and as its representative, appear before the notary public of their
choice to form one or more Mexican commercial companies in which the Company
resolves to participate as a member, partner or shareholder, in any percentage
interest, as determined by the attorneys of fact themselves, and, therefore,
they are authorized to agree on the name, purpose, bylaws, equity capital,
attorneys in fact and any other documents, data or information necessary for
such purpose, and so that any of them may represent the Company at any meeting
of the members, partners or shareholders, being held for such purposes, and to
vote the membership interests or shares owned by the Company in the manner they
deem appropriate or advisable for the Company.
e) Messrs. Aaron Levet Velasco, Juan Carlos Machorro Guerrero,
Ana Maria Poblanno Chanona, Jorge Leon Orantes and Alfredo Chavez Goyenche are
designated attorneys in fact for the company, with the powers established under
Paragraphs 1 (one), 2 (two) and 10 (ten) of Article Twenty of these company
bylaws, to be exercised by any of them as representatives of the Company.
f) A special power of attorney is hereby granted to Messrs. John
McCarthy Sandland, Norma Gonzalez S., Aaron Levet Velasco, Juan Carlos Machorro
Guerrero, Ana Maria Poblanno Chanona, Jorge Leon Orantes and Alfredo Chavez
<PAGE> 16
16
Goyenche, or any of them, so that any of them may request and obtain from all
federal, local or municipal authorities and entities all authorizations and
registrations required for the operation of the Company, including, but not
limited to, the registration of the Company in or with the Federal Taxpayer
Registry, the Mexican Social Security Institute, the National Registry of
Foreign Investments and other governmental entities and agencies.
g) With the exception of the first fiscal year, which shall be
irregular, beginning on the date of this document and ending on December 31
(thirty-first) of this year, the company's fiscal years shall begin in January
1 (first) and end on December 31 (thirty-first) of each year.
LEGAL STATUS
Mr. Aaron Levet Velasco has documented his legal status to me as
attorney in fact for CR RESORTS PARENT NOMINEE HOLDING, LLC. and CANARIAS
FUTURE, S.L., with public documents number fifty thousand eight hundred
fifty-four and fifty- thousand eight hundred fifty-five, both of the same date
as this document and executed before me, in which the Powers of Attorney issued
by such companies outside of Mexico, which I attach to the Appendix as "A" and
"B", along with the certified copies I have issued, are legalized and recorded.
I, THE NOTARY PUBLIC, CERTIFY: I. That the documents which have been
inserted and listed are in accord with the originals, to which I refer. II.
That, in accordance with the provisions of Article One Hundred Twenty-Seven of
the Regulations under the General Population Law, aliens designated as
Advisors, Officers or attorneys in fact of a company, which requires them to
serve as such, may begin serving as such while they are obtaining the
appropriate authorization from the Secretariat of Government. III. That I know
the party appearing before me, who, in my judgment, has legal capacity. IV.
That the legal status in which Mr. Aaron Levet Velasco appears has not been
modified or revoked in any manner and that his principal has legal capacity.
V. That, having read this document, explaining to him the significance and
effect thereof under the law, he was in agreement therewith, and he signed said
document, in order to demonstrate his agreement, declaring himself, by the
personal information provided, to be: a Mexican by birth, a native of this
city, where he was born on May thirteenth of
<PAGE> 17
17
[Seal:
LUIS ANGOITIA BECERRA, ESQ.
NOTARY PUBLIC 230
MEXICO CITY, FEDERAL DISTRICT
UNITED MEXICAN STATES]
nineteen sixty-one, married, an attorney at law and domiciled at number three
hundred forty-five Campos Eliseos, in this city.
Illegible signature of Mr. AARON LEVET VELASCO, ESQ.
Signed before me on the date hereof.
LUIS DE ANGOITIA BECERRA, ESQ. Signature. Seal of authorization.
ARTICLE 2554. For a general power of attorney for lawsuits and
collections to be deemed to have been conferred without any limitation
whatsoever, it will be sufficient to say that it is granted with the general
and special powers requiring a special clause under the law.
For general powers of attorney for the administration of property, it
will be sufficient to state that they are granted with such character, so that
the attorney in fact has all sorts of administrative powers.
For general powers of attorney for exercising acts of ownership, it
will be sufficient to say that they are granted with such character, so that
the attorney in fact has all ownership powers, both with regard to the property
and to take any sort of actions for the purpose of defending it.
If, in the three cases mentioned above, there is a desire to limit the
powers of the attorneys in fact, the limitations shall be set out or the powers
of attorney shall be special.
The Notaries shall insert this article in the certified copies of the
powers of attorney they legalize.
CERTIFIED COPY ISSUED FOR LEGAL PURPOSES AND IS AN ACCURATE
REPRODUCTION OF THE ORIGINAL, WHICH CONSISTS OF TWENTY-FIVE PAGES OF TEXT, FOR
CR RESORTS CAPITAL, VARIABLE-CAPITAL LIMITED LIABILITY COMPANY. IT HAS BEEN
COMPARED AND CORRECTED. MEXICO CITY, FEDERAL DISTRICT, ON AUGUST TWELFTH,
NINETEEN NINETY-SEVEN.
[signature of LUIS DE ANGOITIA BECERRA]
<PAGE> 1
EXHIBIT 3.3
- --------------------------------------------------------------------------------
BYLAWS
OF
CLUB REGINA RESORTS, INC.
EFFECTIVE APRIL 15, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Additional Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. STOCKHOLDERS MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5. Organization and Conduct of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6. Notification of Stockholder Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7. Voting of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8. Inspectors of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III. DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2. Number and Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3. Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4. Notification of Nominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5. Vacancies and Newly Created Directorships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6. Newly Created Directorships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.7. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV. BOARD MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3. Conduct of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4. Quorum, Required Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5. Consent In Lieu of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE V. COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1. Establishment, Standing Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2. Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.3. Finance Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4. Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.5. Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.6. Available Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.7. Unavailable Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.8. Alternate Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.9. Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1. Elected Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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6.2. Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3. Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.5. Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.6. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.7. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.8. Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.9. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.10. Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.11. Divisional Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.12. Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.13. Appointed Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.14. Multiple Officeholders, Stockholder and Director Officers . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.15. Compensation, Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.16. Additional Powers and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.17. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.18. Voting Upon Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII SHARE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1. Entitlement to Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2. Multiple Classes of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3. Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.4. Issuance and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5. Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.6. Transfer of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.7. Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VIII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.2. Actions by or in the Right of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.3. Board Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.4. Advancement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.5. Nonexclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.7. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.8. Change in Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IX. INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.1. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.2. Disclosure, Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.3. Nonexclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE X. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.2. Fixing Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.3. Means of Giving Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10.4. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.5. Attendance via Communications Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.6. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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10.7. Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.8. Reports to Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.9. Checks, Notes and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.10. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.11. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.12. Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.13. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.14. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.15. Surety Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.16. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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BY-LAWS
OF
CLUB REGINA RESORTS, INC.
ARTICLE I.
OFFICES
1.1. Registered Office. The registered office of the Company
within the State of Nevada shall be located at the principal place of business
in said state of such Company or individual acting as the Company's registered
agent in Nevada.
1.2. Additional Offices. The Company may, in addition to its
registered office in the State of Nevada, have such other offices and places of
business, both within and without the State of Nevada, as the Board of
Directors of the Company (the Board) may from time to time determine or as the
business and affairs of the Company may require.
ARTICLE II.
STOCKHOLDERS MEETINGS
2.1. Annual Meetings. Annual meetings of stockholders shall be
held at a place and time on any weekday which is not a holiday as shall be
designated by the Board and stated in the notice of the meeting, at which
meeting the stockholders shall elect the directors of the Company and transact
such other business as may properly be brought before the meeting.
2.2. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, shall be called in the manner prescribed by the
Articles of Incorporation (the Articles).
2.3. Notices. Written notices of each stockholders meeting stating
the place, date and hour of the meeting shall be given to each stockholder
entitled to vote thereat at the address of such stockholder as reflected in the
records of the Company. Such notice shall be given by or at the direction of
the party calling such meeting not less than 10 nor more than 60 days before
the date of the meeting. If said notice is for a stockholders meeting other
than an annual meeting, it shall in addition state the purpose or purposes for
which said meeting is being called, and the business transacted at such meeting
shall be limited to the matters so stated in said notice and any matters
reasonably related thereto.
2.4. Quorum. At any stockholders meeting, the holders present in
person or by proxy of a majority of the voting power of the shares of capital
stock of the Company entitled to vote thereat shall constitute a quorum of the
stockholders for all purposes (unless the representation of a larger number of
shares shall be required by law or by the Articles, in which case the
representation of the number of shares so required shall constitute a quorum).
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The holders of a majority of the voting power of the shares of
capital stock of the Company entitled to vote which are present in person or by
proxy at any meeting (whether or not constituting a quorum of the outstanding
shares) may adjourn the meeting from time to time without notice other than by
announcement thereat; and at any adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting as originally called, but only those stockholders entitled to vote at
the meeting originally noticed shall be entitled to vote at any adjournment or
adjournments thereof. However, if the adjournment is for more than 30 days, or
if after the adjournment a new record date is fixed, notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.5. Organization and Conduct of Meetings. The Chairman of the
Board shall call stockholders meetings to order and shall act as Chairman of
such meetings. In the absence of the Chairman of the Board at any meeting, the
Chief Executive Officer or, in his absence, the President or any Vice President
designated by the Board to perform the duties of the Chairman of the Board
shall act as Chairman. In the absence of the Chairman of the Board, the Chief
Executive Officer, the President or any such Vice President at any meeting, the
holders of a majority of the shares of capital stock entitled to vote present
in person or by proxy at such meeting shall elect a Chairman.
The Secretary shall act as secretary of all stockholders
meetings; but, in the absence of the Secretary, the Chairman may appoint any
person to act as secretary of the meeting.
The date and time of the opening and the closing of the polls
for each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting by the Chairman of the meeting. The Board may, to the
extent not prohibited by law, adopt by resolution such rules and regulations
for the conduct of the meeting of stockholders as it shall deem appropriate.
Except to the extent inconsistent with such rules and regulations as adopted by
the Board, the Chairman of any meeting of stockholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such Chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board or prescribed by the Chairman of the meeting, may to the extent
not prohibited by law include, without limitation, the following: (i) the
establishment of an agenda or order of business for the meeting; (ii) rules and
procedures for maintaining order at the meeting and for the safety of those
present; (iii) limitations on attendance at or participation in the meeting to
stockholders of record of the Company, their duly authorized and constituted
proxies or such other persons as the Chairman of the meeting shall determine;
(iv) restrictions on entry to the meeting after the time fixed for the
commencement thereof, and (v) limitation on the time allotted to questions or
comments by participants. Unless and to the extent determined by the Board or
the Chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with the rules of parliamentary procedure.
Proceedings at every stockholders meeting shall, at the
election of the Chairman, comply with Robert's Rules of Order (latest published
edition).
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2.6. Notification of Stockholder Business. All business properly
brought before an annual meeting shall be transacted at such meeting. Subject
to the right of stockholders to elect a Chairman of the meeting, as set forth
in Section 2.5, business shall be deemed properly brought only if it is (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (ii) otherwise properly brought before the meeting
by or at the direction of the Board or (iii) brought before the meeting by a
stockholder of record entitled to vote at such meeting if written notice of
such stockholder's intent to bring such business before such meeting is
delivered to, or mailed, postage prepaid, and received by, the Secretary at the
principal executive offices of the Company not later than the close of business
on the tenth day following the date on which the Company first makes public
disclosure of the date of the annual meeting; provided, however, that if the
annual meeting is adjourned, and the Company is required by Nevada law to give
notice to stockholders of the adjourned meeting date, written notice of such
stockholder's intent to bring such business before the meeting must be
delivered to or received by the Secretary no later than the close of business
on the fifth day following the earlier of (1) the date the Company makes public
disclosure of the date of the adjourned meeting or (2) the date on which notice
of such adjourned meeting is first given to stockholders. Each notice given by
such stockholder shall set forth: (A) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting; (B) the name and address of the stockholder who
intends to propose such business; (C) a representation that the stockholder is
a holder of record of stock of the Company entitled to vote at such meeting (or
if the record date for such meeting is subsequent to the date required for such
stockholder notice, a representation that the stockholder is a holder of record
at the time of such notice and intends to be a holder of record on the record
date for such meeting) and intends to appear in person or by proxy at such
meeting to propose such business; and (D) any material interest of the
stockholder, if any, in such business. The Chairman of the meeting may refuse
to transact any business at any meeting made without compliance with the
foregoing procedure. For this Section 2.6, public disclosure shall be deemed
to first be given to stockholders when disclosure of such date of the meeting
of stockholders is first made in a press release reported by the Dow Jones News
Services, Associated Press or comparable national news service, or in a
document publicly filed by the Company with the Securities and Exchange
Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act
of 1934, as amended.
2.7. Voting of Shares.
2.7.1. Voting Lists. The officer or agent who has charge of
the stock ledger of the Company shall prepare, at least 10 days before
every meeting of stockholders, a complete list of the stockholders
entitled to vote thereat arranged in alphabetical order and showing
the address and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected
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by any stockholder who is present. The original stock transfer books
shall be prima facie evidence as to who are the stockholders entitled
to examine such list or transfer books or to vote at any meeting of
stockholders. Failure to comply with the requirements of this Section
shall not affect the validity of any action taken at said meeting.
2.7.2. Votes Per Share. Each outstanding share of capital
stock shall be entitled to vote in accordance with the provisions for
voting included in the Articles. In determining the number of shares
of stock required by law, by the Articles or by the By-laws to be
represented for any purpose, or to determine the outcome of any matter
submitted to stockholders for approval or consent, the number of
shares represented or voted shall be weighted in accordance with the
provisions of the Articles regarding voting powers of each class of
stock. Any reference in these By-laws to a majority or a particular
percentage of the voting stock or a majority or a particular
percentage of the capital stock shall be deemed to refer to a majority
or a particular percentage, respectively, of the voting power of such
stock. Issues shall be determined by a class vote only when a class
vote is required by law or the Articles.
2.7.3. Proxies. Every stockholder entitled to vote at a
meeting or to express consent or dissent without a meeting or a
stockholder's duly authorized attorney-in-fact may authorize another
person or persons to act for him by proxy. Each proxy shall be in
writing, executed by the stockholder giving the proxy or by his duly
authorized attorney. No proxy shall be voted on or after three years
from its date, unless the proxy provides for a longer period. Unless
and until voted, every proxy shall be revocable at the pleasure of the
person who executed it, or his legal representatives or assigns,
except in those cases where an irrevocable proxy permitted by statute
has been given.
2.7.4. Required Vote. When a quorum is present at any
meeting, the vote of the holders, present in person or represented by
proxy, of capital stock of the Company representing a majority of the
votes of all capital stock of the Company entitled to vote thereat
shall decide any question brought before such meeting, unless the
question is one upon which, by express provision of law or the
Articles or these By-laws, a different vote is required, in which case
such express provision shall govern and control the decision of such
question.
2.7.5. Consents in Lieu of Meeting. Pursuant to Article
VIII of the Company's Articles, no action that is required or
permitted to be taken by the stockholders of the Company at any annual
or special meeting of stockholders may be effected by written consent
of stockholders in lieu of a meeting of stockholders, unless, subject
to certain exceptions contained in the Articles, the action to be
effected by written consent of stockholders and the taking of such
action by such written consent have expressly been approved in advance
by the Board.
2.8. Inspectors of Election. The Company shall, in advance of any
meeting of stockholders, appoint one or more inspectors of election, who may be
employees of the
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Company, to act at the meeting or any adjournment thereof and to make a written
report thereof. The Company may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector so
appointed or designated is able to act at a meeting of stockholders, the
Chairman or the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath to execute
faithfully the duties of inspector with strict impartiality and according to
the best of his or her ability.
The inspector or inspectors so appointed or designated shall:
(a) ascertain the number of shares of capital stock of the Company outstanding
and the voting power of each such share; (b) determine the shares of capital
stock of the Company represented at the meeting and the validity of proxies and
ballots; (c) count all votes and ballots; (d) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors; and (e) certify their determination of the
number of shares of capital stock of the Company represented at the meeting and
such inspectors' count of all votes and ballots. Such certification and report
shall specify such other information as may be required by law. In determining
the validity and counting of proxies and ballots cast at any meeting of
stockholders of the Company, the inspectors may consider such information as is
permitted by applicable law. No person who is a candidate for an office at an
election may serve as an inspector at such election.
ARTICLE III.
DIRECTORS
3.1. Purpose. The business and affairs of the Company shall be
managed by or under the direction of the Board, acting by not less than a
majority of the directors then in office. The Board shall exercise all such
powers of the Company and do all such lawful acts and things as are not by law,
the Articles or these By-laws directed or required to be exercised or done by
the stockholders. Directors need not be stockholders or residents of the State
of Nevada.
3.2. Number and Class. The number of directors constituting the
Board shall never be less than one (1), and shall be determined by resolution
of the Board. At each election held after the initial elections, directors
elected to succeed such directors whose terms expire shall be elected for a
term of office which shall expire at the third succeeding annual meeting of
stockholders after their election. The foregoing notwithstanding, except as
otherwise provided in the Articles or any resolution or resolutions of the
Board designating a series of preferred stock of the Company, directors who are
elected at an annual meeting of stockholders, and directors elected in the
interim to fill vacancies and newly created directorships, shall hold office
for the term for which elected and until their successors are elected and
qualified or until their earlier death, resignation or removal. Whenever the
holders of any class or classes of stock or any series thereof shall be
entitled to elect one or more directors pursuant to the provisions of the
Articles or any resolution or resolutions of the Board designating a series of
preferred stock of the Company, and except as otherwise provided herein or
therein, vacancies and newly created directorships of such class or classes or
series thereof may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, by a
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sole remaining director so elected or by the unanimous written consent or the
affirmative vote of a majority of the outstanding shares of such class or
classes or series entitled to elect such director or directors. Except as
otherwise provided in the Articles, directors need not be stockholders.
3.3. Election. Directors shall be elected by the stockholders by
plurality vote at a stockholders meeting as provided in the Articles and these
By-laws, and each director shall hold office until his successor has been duly
elected and qualified or until the earlier of his death, resignation or removal
from office.
3.4. Notification of Nominations. Subject to the fights of the
holders of any one or more series of Preferred Stock then outstanding,
nominations for the election of directors may be made by the Board or by any
stockholder entitled to vote for the election of directors. Any stockholder
entitled to vote for the election of directors at an annual meeting or a
special meeting called for the purpose of electing directors may nominate
persons for election as directors at such meeting only if written notice of
such stockholder's intent to make such nomination is delivered to, or mailed,
postage prepaid, and received by, the Secretary at the principal executive
offices of the Company not later than the close of business on the tenth day
following the date on which the Company first makes public disclosure of the
date of the meeting; provided, however, that if the meeting is adjourned, and
the Company is required by Nevada law to give notice to stockholders of the
adjourned meeting date, written notice of such stockholder's intent to make
such nomination at such adjourned meeting must be delivered to or received by
the Secretary no later than the close of business on the fifth day following
the earlier of (1) the date the Company makes public disclosure of the date of
the adjourned meeting or (2) the date on which notice of such adjourned meeting
is first given to stockholders. Each notice given by such stockholder shall
set forth: (A) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (B) a representation
that the stockholder is a holder of record of stock of the Company entitled to
vote at such meeting (or if the record date for such meeting is subsequent to
the date required for such stockholder notice, a representation that the
stockholder is a holder of record at the time of such notice and intends to be
a holder of record on the record date for such meeting) and intends to appear
in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (C) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (D) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board; and (E) the written consent of each nominee to
serve as a director of the Company if so elected. The Chairman of the meeting
may refuse to acknowledge the nomination of any person made without compliance
with the foregoing procedure. For this Section 3.4, public disclosure shall be
deemed to be first given to stockholders when disclosure of such date of the
meeting of stockholders is first made in a press release reported by the Dow
Jones News Services, Associated Press or comparable national news service, or
in a document publicly filed by the Company with the Securities and
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Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities
Exchange Act of 1934, as amended.
3.5. Vacancies and Newly Created Directorships.
3.5.1. Vacancies. Any vacancy occurring in the Board shall
be filled in accordance with Article VI of the Articles. A director
elected to fill a vacancy shall hold office until his successor has
been duly elected and qualified or until his earlier death,
resignation or removal from office.
3.6. Newly Created Directorships. A directorship to be filled
because an increase in the number of directors shall be filled in accordance
with Article VI of the Articles. A director elected to fill a newly-created
directorship shall hold office until his successor has been duly elected and
qualified or until his earlier death, resignation or removal from office.
3.7. Removal. Any director or the entire Board may be removed in
accordance with the procedures set forth in Article VI of the Articles.
3.8. Compensation. Unless otherwise restricted by law, the
Articles or these By-laws, the Board shall have the authority to fix
compensation of directors. The director may be reimbursed for their expenses,
if any, of attendance at each meeting of the Board and may be paid either a
fixed sum for attendance at each meeting of the Board and/or a stated salary as
director. No such payment shall preclude any director from serving the Company
in any other capacity and receiving compensation therefor. Members of
committees of the Board may be allowed like compensation.
ARTICLE IV.
BOARD MEETINGS
4.1. Regular Meetings. Regular meetings of the Board shall be held
at such times and places as the Board shall determine. No notice shall be
required for any regular meeting of the Board; but a notice of the fixing or
changing of the time or place of regular meetings shall be mailed to every
director at least five days before the first meeting held pursuant to the
notice.
4.2. Special Meetings. Special meetings of the Board (i) may be
called by the Chairman of the Board and (ii) shall be called by the Chairman of
the Board or Secretary on the written request of two or more directors. Notice
of each special meeting of the Board shall be given to each director at least
24 hours before the meeting if such notice is delivered personally or by means
of telephone, telegram, telex or facsimile transmission and delivery; two days
before the meeting if such notice is delivered by a recognized express delivery
service; and three days before the meeting if such notice is delivered through
the United States mail. Any and all business may be transacted at a special
meeting which may be transacted at a regular meeting of the Board. Except as
may be otherwise expressly provided by law, the Articles or these By-laws,
neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in the notice or waiver of notice of such meeting.
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4.3. Conduct of Meetings. The Chairman of the Board shall preside
at all meetings of the Board and shall determine the order of business that
shall be considered at such meetings. In the absence of the Chairman of the
Board, the Chief Executive Officer shall preside at all meetings of the Board.
In the absence of the Chief Executive Officer, a Chairman of the meeting shall
be elected from the directors present. The Secretary shall act as secretary of
all meetings of the directors, but in the absence of the Secretary, the
Chairman of the meeting may appoint any person to act as secretary of the
meeting.
4.4. Quorum, Required Vote. A majority of the directors shall
constitute a quorum for the transaction of business at any meeting of the
Board, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board, except as may be
otherwise specifically provided by law, the Articles or these By-laws. If a
quorum shall not be present at any meeting, a majority of the directors present
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present.
4.5. Consent In Lieu of Meeting. Unless otherwise restricted by
the Articles or these By-laws, any action required or permitted to be taken at
any meeting of the Board or any committee thereof may be taken by written
consent in lieu of a meeting in accordance with applicable provisions of law.
ARTICLE V.
COMMITTEES OF DIRECTORS
5.1. Establishment, Standing Committees. The Board may by
resolution establish, name or dissolve one or more committees, each committee
to consist of one or more of the directors. Each committee shall keep regular
minutes of its meetings and report the same to the Board when required. Such
committees may include the following standing committees, which committees, if
established, shall have and may exercise the following powers and authority:
5.2. Executive Committee. The Executive Committee shall have and
may exercise all the powers of the Board delegable by law in the management of
the business and affairs of the Company, unless the resolution creating such
committee or further defining its powers provides otherwise, in which case the
Executive Committee shall have and exercise the powers so provided in such
resolution or resolutions. The Executive Committee shall be comprised of the
Chairman of the Board and such other director or directors as the Board by
resolution shall appoint thereto. In addition to the foregoing, the Executive
Committee shall have such other powers and duties as shall be specified by the
Board in a resolution or resolutions.
5.3. Finance Committee. The Finance Committee shall, from time to
time, meet to review the Company's consolidated operating and financial
affairs, both with respect to the Company and its subsidiaries, if any, and to
report its findings and recommendations to the Board for final action. The
Finance Committee shall not be empowered to approve any corporate action, of
whatever kind or nature, and the recommendations of the Finance Committee shall
not be binding on the Board, except when, pursuant to Section 5.2, such power
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and authority have been specifically delegated to such committee by the Board
by resolution. In addition to the foregoing, the specific duties of the
Finance Committee shall be determined by the Board by resolution.
5.4. Audit Committee. The Audit Committee shall, from time to
time, but no less than two times per year, meet to review and monitor the
financial and cost accounting practices and procedures of the Company and its
subsidiaries, if any, and to report its findings and recommendations to the
Board for final action. In addition, the Audit Committee shall recommend an
independent public accountant to audit the Company's financial statements and
perform other accounting services for the Company to the Board for submission
to the stockholders for approval. Furthermore, the Audit Committee will, at
the request of the Board by resolution, review specific matters as to which the
Board believe there may be a conflict of interest between the Company and an
affiliate, officer and/or director of the Company to determine if the
resolution of such conflict proposed by the Board or management of the Company,
as the case may be, is fair and reasonable. The composition of the Audit
Committee shall meet the requirements of any national securities exchange or
national market system on which the Company lists any of its capital stock.
The Audit Committee shall not be empowered to approve any corporate action, of
whatever kind or nature, and the recommendations of the Audit Committee shall
not be binding on the Board, except when, pursuant to Section 5.2, such power
and authority have been specifically delegated to such committee by the Board
by resolution. In addition to the foregoing, the specific duties of the Audit
Committee shall be determined by the Board by resolution. In addition to the
foregoing, the specific duties of the Audit Committee shall be determined by
the Board by resolution. For this Section, "affiliate" shall include (i) any
entity that is an "affiliate" within the meaning set forth in Section 12b-2 of
Regulation 12B promulgated under the Securities Exchange Act of 1934, as
amended, and (ii) any officer or director of an "affiliate" as defined therein.
5.5. Compensation Committee. The Compensation Committee shall,
from time to time, meet to review the various compensation plans, policies and
practices of the Company and its subsidiaries, if any, and to report its
findings and recommendations to the Board for final action. The Compensation
Committee shall not be empowered to approve any corporate action, of whatever
kind or nature, and the recommendations of the Compensation Committee shall not
be binding on the Board, except when, pursuant to Section 5.2, such power and
authority have been specifically delegated to such committee by the Board by
resolution. In addition to the foregoing, the specific duties of the
Compensation Committee shall be determined by the Board by resolution.
5.6. Available Powers. Any committee established pursuant to
Section 5.1, including the Executive Committee, the Finance Committee, the
Audit Committee and the Compensation Committee, but only to the extent provided
in the resolution of the Board establishing such committee or otherwise
delegating specific power and authority to such committee, and as limited by
law, the Articles, and these By-laws, shall have and may exercise all the
powers and authority of the Board in the management of the business and affairs
of the Company, and may authorize the seal of the Company to be affixed to all
papers which may require it. Without limiting the foregoing, such committee
may, but only to the extent
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authorized in the resolution or resolutions providing for the issuance of
shares of stock adopted by the Board as provided in Section 195 of the General
Corporation Law of Nevada (the NGCL), fix any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution of
assets of the Company or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or
any other class or classes of stock of the company.
5.7. Unavailable Powers. No committee of the Board shall have the
power or authority to amend the Articles (except in connection with the
issuance of capital stock as provided in the previous Section); adopt an
agreement of merger or consolidation; recommend to the stockholders the sale,
lease or exchange of all or substantially all of the Company's property and
assets, a dissolution of the Company or a revocation of such a dissolution;
amend the By-laws of the Company; or, unless the resolution establishing such
committee or the Articles expressly so provides, declare a dividend, authorize
the issuance of stock or adopt a certificate of ownership and merger.
5.8. Alternate Members. In the absence or disqualification of a
member of a committee, (i) the Board may designate one or more directors as
alternate members of any such committee or (ii) the member or members of the
committee present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member; provided, however, that any person or persons appointed pursuant to
subparagraph (i) or (ii) are qualified to serve on such committee in accordance
with these By-laws and/or the resolutions establishing the same.
5.9. Procedures. Time, place and notice, if any, of meetings of a
committee shall be determined by such committee. At meetings of a committee, a
majority of the number of members designated by the Board to serve on such
committee shall constitute a quorum for the transaction of business. The act
of a majority of the members present at any meeting at which a quorum is
present shall be the act of the committee, except as otherwise specifically
provided by law, the Articles, these By-laws or the resolution or resolutions
establishing such committee. If a quorum is not present at a meeting of a
committee, the members present may adjourn the meeting from time to time,
without notice other than an announcement at the meeting, until a quorum is
present. Any member of any committee established pursuant to Section 5.1 shall
serve, until his successor is duly elected by the Board and qualified or until
the earlier of his death or his resignation or removal from such committee or
the Board. The Board by resolution shall have at any time and from time to
time the power to change the membership of, fill any vacancies in, or dissolve
any, committee established pursuant to Section 5.1; provided, however, that in
no event shall the Audit Committee be dissolved once it is established nor
shall the membership of any committee, including, without limitation, the Audit
Committee and the Executive Committee, be altered in any way if such alteration
would cause such committee to fail to meet its membership standards as set
forth in the resolutions or resolutions of the Board creating such committee.
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ARTICLE VI.
OFFICERS
6.1. Elected Officers. The Board shall elect a Chairman of the
Board (or Chairman), President and a Secretary (collectively, the Required
Officers) and may elect such other officers having the titles and duties set
forth below which are not reserved for the Required Officers or such other
titles as the Board may by resolution from time to time establish. The
respective duties of the Required Officers or any other officer, shall be
defined by and subject to the description of such office set forth below and by
the resolution creating the same.
6.2. Chairman of the Board. The Chairman of the Board (or
Chairman), or in his absence, the President, shall preside, when present, over
all meetings of the stockholders and the Board. The Chairman of the Board
shall advise and counsel the President and other officers and shall exercise
such powers and perform such duties as shall be assigned to or required of him
from time to time by the Board or these By-laws. The Chairman of the Board may
execute bonds, mortgages and other contracts requiring a seal under the seal of
the Company, except where required or permitted by law to be otherwise signed
and executed to another agent of the Company or where the signing and execution
thereof shall be expressly delegated by the Board to some other officer or
agent of the Company. The Chairman of the board may delegate all or any of his
powers or duties to the President, if and to the extent deemed by the Chairman
of the Board to be desirable or appropriate.
6.3. Chief Executive Officer. The Chief Executive Officer shall
generally and actively manage the business of the Company and shall see that
all orders of the Chairman and orders and resolutions of the Board are carried
into effect. The Chief Executive Officer shall only report to the Chairman of
the Board and the Board. In the absence of the Chairman of the Board or upon
his inability or refusal to act, the Chief Executive Officer shall perform the
duties and exercise the powers of the Chairman of the Board.
6.4. President. The President shall have general executive powers
to manage the operations of the Company, and such other powers and duties as
the Chairman of the Board, these By-laws or the Board may from time to time
prescribe. In the absence of the Chief Executive Officer or upon his inability
or refusal to act, the President shall perform the duties and exercise the
powers of the Chief Executive Officer.
6.5. Chief Financial Officer. The Chief Financial Officer shall be
the principal financial officer of the Company and shall have such powers and
perform such duties as these By-laws or the Board may from time to time
prescribe.
6.6. Vice Presidents. In the absence of the President, or upon his
inability or refusal to act, the Vice President (or if there be more than one
Vice President, the Vice Presidents in the order designated by the Board, or in
the absence of any such designation, then in the order of their election or
appointment) shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President.
6.7. Secretary. The Secretary shall keep in books provided for
that purpose the minutes of all meetings of the Board and of all committees of
the Board and the minutes of all
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meetings of the stockholders; he shall attend to the giving or serving of all
notices of the Company; he may sign with the Chairman of the Board or the Chief
Executive Officer, the President or a Vice President, in the name of the
Company, all contracts when authorized so to do either generally or in specific
instances by the Board or by any committee of the Board having the requisite
authority and, when so ordered by the Board or such committee, he shall affix
he seal of the Company thereto; he may sign with the Chairman of the Board, the
President or a Vice President Certificates for shares of the capital stock; he
shall have charge of the stock Articles books, transfer books and stock ledgers
and such other books and papers as the Board shall direct, all of which shall
at all reasonable times be open to the examination of the independent public
accountants of the Company or any director, at the office of the Company during
business hours; and he shall in general perform all the duties incident to the
office of Secretary, subject to the control of the Board.
6.8. Assistant Secretaries. The Assistant Secretary, or if there
be more than one, the Assistant Secretaries (in the order determined by the
Board or if there be no such determination, then in the order of their election
or appointment) shall, in the absence of the Secretary or upon his inability or
refusal to act, perform the duties and exercise the powers of the Secretary.
6.9. Treasurer. The Treasurer shall have custody of all the funds
and securities of the Company which may come into his hands, and shall deposit
the same with such bank or banks or other depository or depositories as the
Board from time to time shall determine; he may endorse on behalf of the
Company for collection checks, notes and other obligations and shall deposit
the same to the credit of the Company in such bank or banks or depositary or
depositaries as the Board may designate; he may sign all receipts and vouchers
for payments made to the Company; he may sign with the Chairman of the Board or
the President or a Vice President Certificates for shares of the capital stock;
he shall enter or cause to be entered regularly in the books of the Company
full and accurate accounts of all moneys received and paid on account for the
Company and wherever required by the Board shall render statements of such
accounts; he shall, at all reasonable times, exhibit his books and accounts to
the independent public accountant of the Company or to any director of the
Company during business hours; and he shall perform all acts incident of the
office of Treasurer, subject to the control of the Board.
6.10. Assistant Treasurers. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers (in the order determined by
the Board or if there be no such determination, then in the order of their
election or appointment) shall, in the absence of the Treasurer or upon his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer.
6.11. Divisional Officers. Each division of the Company, if any,
may have a President, Secretary or Treasurer and one or more Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other assistant officers. Any
number of such offices may be held by the same person. Such divisional
officers will be appointed by, report to and serve at the pleasure of the Board
and such other officers that the Board may place in authority over them. The
officers of each division shall have such authority with respect to the
business and affairs
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of that division as may be granted from time to time by the Board, and in the
regular course of business of such division may sign contracts and other
documents in the name of the division where so authorized; provided that in no
case and under no circumstances shall an officer of one division have authority
to bind any other division of the Company except as necessary in the pursuit of
the normal and usual business of the division of which he is an officer.
6.12. Election. All officers shall serve until their successors are
duly elected and qualified or until their earlier death, disqualification,
retirement, resignation or removal from office.
6.13. Appointed Officers. The Board may also appoint or delegate the
power to appoint such other officers, assistant officers and agents, and may
also remove such officers and agents or delegate the power to remove same, as
it shall from time to time deem necessary, and the titles and duties of such
appointed officers may be as described in Section 6.1 for elected officers;
provided that the officers and any officer possessing authority over or
responsibility for any function of the Board shall be elected officers.
6.14. Multiple Officeholders, Stockholder and Director Officers.
Any number of offices may be held by the same person, unless the Articles or
these By-laws otherwise provide. Officers need not be stockholders or
residents of the State of Nevada. Officers, such as the Chairman of the Board,
possessing authority over or responsibility for any function of the Board must
be directors.
6.15. Compensation, Vacancies. The Board shall have the power to
establish the compensation of officers of the Company or authorize the Company
to enter into an agreement with an affiliate whereby the services of such
officers, along with certain other services specified therein, are provided to
the Company for a fee. To the extent not governed by such an agreement, the
Board shall fill any vacancy in an office. Any of the powers granted in this
Section may be delegated to a committee established pursuant to Section 5.1.
For this Section, "affiliate" shall include (i) any entity that is an
"affiliate" within the meaning set forth in Section 12b-2 of Regulation 12B
promulgated under the Securities Exchange Act of 1934, as amended, and (ii) any
officer or director of an "affiliate" as defined therein.
6.16. Additional Powers and Duties. In addition to the foregoing
especially enumerated powers and duties, the several officers of the Company
shall perform such other duties and exercise such further powers as may be
provided by law, the Articles or these By-laws or as the Board may from time to
time determine or as may be assigned to them by any competent committee or
superior officer.
6.17. Removal. Any officer may be removed, either with or without
cause, by a majority of the directors at the time in office, at any regular or
special meeting of the Board.
6.18. Voting Upon Stocks. Unless otherwise ordered by the Board,
the Chairman of the Board, the Chief Executive Officer or the President, or any
other officer of the Company designated by the Chairman of the Board or the
Chief Executive Officer shall have full power and authority on behalf of the
Company to attend and to act and to vote in person or by proxy at
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any meeting of the holders of securities of any corporation or entity in which
the Company may own or hold stock or other securities, and at any such meeting
shall possess and may exercise in person or by proxy any and all rights, powers
and privileges incident to the ownership of such stock or other securities
which the Company, as the owner or holder thereof, might have possessed and
exercised if present. The Chairman of the Board, the Chief Executive Officer,
the President or any other officer of the Company designated by the Chairman of
the Board, the Chief Executive Officer, or the President, may also execute and
deliver on behalf of the Company powers of attorney, proxies, waivers of notice
and other instruments relating to the stocks or securities owned or held by the
Company. The Board may, from time to time, by resolution confer like powers
upon any other person or persons.
ARTICLE VII.
SHARE CERTIFICATES
7.1. Entitlement to Certificates. Every holder of the capital
stock of the Company, unless and to the extent the Board by resolution provides
that any or all classes or series of stock shall be unissued, shall be entitled
to have a certificate, in such form as is approved by the Board and conforms
with applicable law, certifying the number of shares owned by him.
7.2. Multiple Classes of Stock. If the Company shall be authorized
to issue more than one class of capital stock or more than one series of any
class, a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall, unless the Board shall by resolution provide
that such class or series of stock shall be unissued, be set forth in full or
summarized on the face or back of the certificates which the Company shall
issue to represent such class or series of stock; provided that, to the extent
allowed by law, in lieu of such statement, the face or back of such
certificates may state that the Company will furnish a copy of such statement
without charge to each requesting stockholder.
7.3. Signatures. Each certificate representing capital stock of
the Company shall be signed by or in the name of the Company by (1) the
Chairman of the Board, the President or a Vice President; and (2) the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary.
The signatures of the officers of the Company may be facsimiles. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to hold such office before such certificate is
issued, it may be issued by the Company with the same effect as if he held such
office on the date of issue.
7.4. Issuance and Payment. Subject to any provision of applicable
law, the Articles or these By-laws, shares of capital stock of the Company may
be issued for such consideration and to such persons as the Board may determine
from time to time. Shares may not be issued until the full amount of the
consideration has been paid, unless upon the face or back of each certificate
issued to represent any partly paid shares of capital stock there shall have
been set forth the total amount of the consideration to be paid.
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7.5. Lost, Stolen or Destroyed Certificates. The Board may direct
a new certificate or certificates to be issued in place of any certificate or
certificate theretofore issued by the Company alleged to have been lost, stolen
or destroyed upon the making of an affidavit of that fact by the person
claiming the certificates of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Company a bond in such sum as it may direct as indemnity
against any claim that may be made against the Company with respect to the
certificates alleged to have been lost, stolen or destroyed.
7.6. Transfer of Stock. Upon surrender to the Company or its
transfer agent, if any, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer and of the payment of all taxes applicable to the transfer of said
shares, the Company shall be obligated to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books; provided, however, that the Company shall not be so obligated unless
such transfer was made in compliance with applicable state and federal
securities laws.
7.7. Registered Stockholders. The Company shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, vote and be held liable for calls and
assessments and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any person other than such
registered owner, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
ARTICLE VIII.
INDEMNIFICATION
8.1. General. The Company shall indemnify any person who was or is
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Company),
because he is or was a director or officer of the Company, or is or was serving
at the written request of the Company as a director, officer, trustee, employee
or agent of or in any other capacity with another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, have reasonable cause to believe that his conduct was
unlawful.
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8.2. Actions by or in the Right of the Company. The Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Company to procure a judgment in its favor because he is or was a director
or officer of the Company, or is or was serving at the written request of the
Company as a director, officer, trustee, employee or agent of or in any other
capacity with another corporation, partnership, joint venture or trust or other
enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company and except that no
indemnification shall be made in respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Company unless
and only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
8.3. Board Determinations. Any indemnification under Sections 8.1
and 8.2 (unless ordered by a court) shall be made by the Company only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Sections 8.1 and
8.2. Such determination shall be made (1) by the Board by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel
(which may be counsel ordinarily used by the Company) in a written opinion, or
(3) by the holders of a majority of the outstanding shares of capital stock of
the Company entitled to vote thereon.
8.4. Advancement of Expenses. Expenses incurred by a director or
officer of the Company in defending a civil or criminal action, suit or
proceeding shall (in the case of any action, suit or proceeding against a
director of the Company) or may (in the case of any pending threatened action,
suit or proceeding against an officer) be paid by the Company in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Company as authorized by law or in this Article VIII.
8.5. Nonexclusive. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VIII shall not be deemed
exclusive of any other rights to which any director, officer, employee or agent
of the Company seeking indemnification or advancement of expenses may be
entitled under any other provision of these By- laws or by the Articles, an
agreement, a vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office, and shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of such a person.
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8.6. Insurance. The Company may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against any liability asserted against him and
incurred by him in any such capacity or arising out of his status as such,
whether or not the Company would have the power to indemnify him against such
liability under provisions of applicable law, the Articles or this Article
VIII.
8.7. Certain Definitions. For this Article VIII, (a) references to
the "Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger, which, if its separate existence had continued,
would have the power and authority to indemnify its directors, officers,
employees or agents, so that any person who is or was a director, officer,
employee, or agent of such constituent corporation, or is serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this Article VIII with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued; (b)
references to "other enterprises" shall include employee benefit plans, (c)
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and (d) references to "serving at the
request of the Company" shall include any service as a director, officer,
employee or agent of the Company which imposes duties on, or involves services
by, such director, officer, employee, or agent with respect to any employee
benefit plan, its participants, or beneficiaries; and a person who acted in
good faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Company" as
referred to in this Article VIII.
8.8. Change in Governing Law. Upon any amendment or addition to
Section 751 of the NGCL or the addition of any other section to such law which
shall limit indemnification rights thereunder, the Company shall, to the extent
permitted by the NGCL, indemnify to the fullest extent authorized or permitted
hereunder, any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including an action by or in
the right of the Company) because he is or was a director, officer, employee or
agent of the Company or is or was serving at the request of the Company as a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding.
ARTICLE IX.
INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS
9.1. Validity. Any contract or other transaction between the
Company and any of its directors, officers or stockholders (or any corporation
or firm in which any of them are directly or indirectly interested) shall be
valid for all purposes notwithstanding the presence of such
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director, officer, or stockholder at the meeting authorizing such contract or
transaction, or his participation or vote in such meeting or authorization.
9.2. Disclosure, Approval. The foregoing shall, however, apply
only if the material facts of the relationship or the interest of each such
director, officer or stockholder is known or disclosed:
9.2.1. to the Board and it nevertheless in good faith
authorizes or ratifies the contract or transaction by a majority of
the directors present, each such interested director to be counted in
determining whether a quorum is present but not in calculating the
majority to carry the vote; or
9.2.2. to the stockholders and they nevertheless in good
faith authorize or ratify the contract or transaction by a majority of
the shares present, each such interested stockholder to be counted for
quorum and voting purposes.
9.3. Nonexclusive. This provision shall not be construed to
invalidate any contract or transaction which would be valid in the absence of
this provision.
ARTICLE X.
MISCELLANEOUS
10.1. Place of Meetings. All stockholders, directors and committee
meetings shall be held at such place or places, within or without the State of
Nevada, as shall be designated from time to time by the Board or such committee
and stated in the notices thereof. If no such place is so designated, said
meetings shall be held at the principal business office of the Company.
10.2. Fixing Record Dates. So that the Company may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, to receive payment of any dividend or other
distribution or allotment of any rights, to exercise any rights in respect of
any change, conversion or exchange of stock or to effect any other lawful
action, or to make a determination of stockholders for any other proper
purpose, the Board may fix, in advance, a record date for any such
determination of stockholders, which shall not be more than 60 nor less than 10
days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. In the absence of any action by
the Board, the date on which a notice of meeting is given, or the date the
Board adopts the resolution declaring a dividend or other distribution or
allotment or approving any change, conversion or exchange, as the case may be,
shall be the record date. A record date validly fixed for any meeting of
stockholders and the determination of stockholders entitled to vote at such
meeting shall be valid for any adjournment of said meeting except where such
determination has been made through the closing of stock transfer books and the
stated period of closing has expired.
10.3. Means of Giving Notice. Except as expressly provided
elsewhere herein, whenever under law, the Articles or these By-laws, notice is
required to be given to any director or stockholder, such notice may be given
in writing and delivered personally, through the
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United States mail, by a recognized express delivery service (such as Federal
Express) or by means of telegraph, telex, or facsimile transmission, addressed
to such director or stockholder at his address, telex or facsimile transmission
number, as the case may be, appearing on the records of the Company, with
postage and fees thereon prepaid. Such notice shall be deemed to be given at
the time when the same shall be deposited in the United States mail or with an
express delivery service or when transmitted, as the case may be.
10.4. Waiver of Notice. Whenever notice is required to be given
under any provision of law or of the Articles or of these By-laws, a written
waiver thereof, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting of stockholders or of directors or of a
committee shall constitute waiver of notice of such meeting, except where
otherwise provided by law.
10.5. Attendance via Communications Equipment. Unless otherwise
restricted by law, the Articles or these By- laws, members of the Board or any
committee thereof or the stockholders may hold a meeting by means of conference
telephone or other communications equipment by means of which all persons
participating in the meeting can effectively communicate with each other. Such
participation in a meeting shall constitute presence in person at the meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
10.6. Dividends. Dividends on the capital stock of the Company,
paid in cash, property, or securities of the Company and as may be limited by
applicable law and applicable provisions of the Articles (if any), may be
declared by the Board at any regular or special meeting.
10.7. Reserves. Before payment of any dividends, there may be set
aside out of any funds of the Company available for dividends such sum or sums
as the Board from time to time, in its absolute discretion, think proper as a
reserve or reserves to meet contingencies, for equalizing dividends, for
repairing or maintaining any property of the Company to be distributed to
stockholders, or for such other purpose as the Board shall determine to be in
the best interest of the Company; and the Board may modify or abolish any such
reserve in the manner in which it was created.
10.8. Reports to Stockholders. The Board shall present at each
annual meeting of stockholders, and at any special meeting of stockholders when
called for by vote of the stockholders, a statement of the business and
condition of the Company.
10.9. Checks, Notes and Contracts. Checks and other orders for the
payment of money shall be signed by such person or persons as the Board shall
from time to time by resolution determine. Contracts and other instruments or
documents may be signed in the name of the Company by the Chairman of the
Board, the Chief Executive Officer or the President or by any other officer
authorized to sign such contract, instrument or document by the Board, and such
authority may be general or confined to specific instances.
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Checks and other orders for the payment of money made payable
to the Company may be endorsed for deposit to the credit of the Company, with a
depository authorized by resolution of the Board, by the Chief Financial
Officer or Treasurer or such other persons as the Board may from time to time
by resolution determine.
10.10. Loans. No loans and no renewals of any loans shall be
contracted on behalf of the Company except as authorized by the Board. When
authorized so to do by the Board, any officer or agent of the Company may
effect loans and advances for the Company from any bank, trust company or other
institution or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the Company. When authorized so to do by the
Board, any officer or agent of the Company may pledge, hypothecate or transfer,
as security for the payment of any and all loans, advances, indebtedness and
liabilities of the Company, any and all stocks, securities and other personal
property at any time held by the Company, and to that end may endorse, assign
and deliver the same. Such authority may be general or confined to specific
instances.
10.11. Fiscal Year. The fiscal year of the Company shall begin on
the first day of July in each year and terminate on the final day of June in
the succeeding calendar year.
10.12. Seal. The seal of the Company shall be in such form as shall
from time to time be adopted by the Board. The seal may be used by causing it
or a facsimile thereof to be impressed, affixed or otherwise reproduced.
10.13. Books and Records. The Company shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its stockholders, Board and committees and shall keep at its registered
office or principal place of business, or at the office of its transfer agent
or registrar, a record of its stockholders, giving the names and addresses of
all stockholders and the number and class of the shares held by each.
10.14. Resignation. Any director, committee member, officer or agent
may resign by giving written notice to the Chairman of the Board, the President
or the Secretary. The resignation shall take effect at the time specified
therein, or immediately if no time is specified. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
10.15. Surety Bonds. Such officers and agents of the Company (if
any) as the Chief Executive Officer, the President or the Board may direct,
from time to time, shall be bonded for the faithful performance of their duties
and for the restoration to the Company, in case of their death, resignation,
retirement, disqualification or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in their possession or
under their control belonging to the Company, in such amounts and by such
surety companies as the president or the Board may determine. The premiums on
such bonds shall be paid by the Company and the bonds so furnished shall be in
the custody of the Secretary.
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10.16. Amendments. These By-laws may from time to time be altered,
amended or repealed and new By-laws may be adopted, as provided in the
Articles.
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EXHIBIT 3.4
CLUB REGINA RESORTS, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATION, OPTIONAL
AND OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
PREFERRED STOCK, SERIES A
----------
Pursuant to Section 78.1955 of the Nevada General Corporation Law
----------
Club Regina Resorts, Inc. (the Company), a corporation organized and
existing under the Nevada General Corporation Law (the NGCL), does hereby
certify that pursuant to the provisions of Section 78.1955 of the NGCL, its
Board of Directors (the Board), by unanimous written consent dated October 28,
1997, duly adopted the following resolution, which resolution remains in full
force and effect as of the date hereof:
WHEREAS, the Board is authorized, within the limitations and
restrictions stated in the Articles of Incorporation, to fix by resolution or
resolutions the designation of each class and series of the preferred stock
(the Preferred Stock) and the powers, preferences and relative participating,
optional or other special rights and qualifications, limitations or
restrictions thereof, including, without limiting the generality of the
foregoing, such provisions as may be desired concerning voting, redemption,
dividends, dissolution or the distribution of assets, conversion or exchange,
and such other subjects or matters as may be fixed by resolution or resolutions
of the Board under the NGCL;
WHEREAS, as of the date of this resolution, no shares of Stock
(defined below) have been issued by the Company; and
WHEREAS, it is the desire of the Board, pursuant to its authority as
aforesaid, to authorize and fix the term of a class of Preferred Stock and the
number of shares constituting such class:
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such
series of Preferred Stock on the terms and with the provisions herein set
forth:
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1. Designation; Number of Shares. The designation of the series
of stock, par value $.001 per share, authorized by this resolution shall be
"Preferred Stock, Series A" (the Stock). The maximum number of shares of the
Stock authorized hereby shall be 37,500 and the liquidation preference with
respect thereto shall be $100.00 per share (the Liquidation Preference).
2. Voting Rights. The holders of the Stock (the Stockholders)
shall have no voting rights except as provided by the NGC; provided that this
Certificate of Designations shall not be amended, modified, supplemented or
otherwise altered without the affirmative vote of Stockholders holding not less
than 85% of the outstanding shares of Stock.
3. Dividends. The Stockholders shall be entitled to receive when,
as and if declared by the Board and out of the assets of the Company which are
by law available for the payment of dividends, dividends payable on the Payment
Date which shall cumulate at the annual rate of 16.5% of the Liquidation
Preference per share (the Dividend Amount); provided that such annual rate
shall increase to 20% with respect to any shares of Stock outstanding from and
after August 18, 2002. In addition, to the extent dividends of the Dividend
Amount or Unpaid Dividend Amount (as defined below) are not paid (the Unpaid
Dividend Amount), such amount shall be cumulated and the Stockholders shall be
entitled to receive when, as and if declared by the Board and out of the assets
of the Company which are by law available for the payment of dividends,
dividends at the rate of 12% of the Unpaid Dividend Amount. The record date for
the determination of the Stockholders entitled to receive dividends shall be
the record date specified by the Board; provided, however, that such date shall
not be more than 60 days nor less than 10 days prior to any Payment Date. So
long as any shares of the Stock shall be outstanding, no dividend shall be
declared or paid or set apart for payment on any other series of stock ranking
on a parity with the Stock as to dividends, unless all declared and unpaid
dividends on the Stock shall have been or contemporaneously are paid or
sufficient sums are set aside for all prior Payment Dates ratably in proportion
to the respective amounts of dividends declared and unpaid prior to the Payment
Date on the Stock and accumulated and unpaid on such parity stock through the
period next preceding such Payment Date and any redemption obligations due and
owing pursuant to Section 4 shall have been paid. If all accrued dividends on
the Stock have not been paid, the Company shall not declare or pay or set apart
for payment any dividends or make any other distributions on the Common Stock
or any other class of stock or series thereof of the Company (the Junior
Securities) ranking, as to distributions in the event of a liquidation,
dissolution or winding up of the Company, junior to the Stock until such
dividends on the Stock and any redemption obligations due and owing pursuant to
Section 4 shall have been paid. If dividends cannot be paid in full on the
Payment Date upon shares of the Stock and other shares of stock ranking on a
parity with the Stock as to dividends, all dividends declared upon shares of
the Stock and such parity stock shall be paid ratably, in the manner described
above.
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4. Redemption Provisions.
a. The Company shall have the right, at its option and
by resolution of the Board, to redeem at any time the Stock, in whole
or in part, upon payment in cash of the Liquidation Preference and all
cumulated and unpaid dividends in respect of each share redeemed. If
fewer than all of the outstanding shares of the Stock are to be
redeemed as permitted by this Section 4a, the number of shares to be
redeemed shall be determined by the Board and the shares to be
redeemed shall be redeemed ratably from the holders thereof in
proportion of their respective holdings of the Stock. If fewer than
all of the shares represented by any certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without
cost to the holder thereof.
b. Special Redemption Provision
(1) The Company shall send notice to the
Stockholders of its intention either to conduct an IPO or a
Stock Merger (the Conversion Notice) in the following manner:
(a) In the case of an IPO, within five days
after filing a registration statement for an IPO,
Company shall send to the Stockholders a Conversion
Notice which shall (i) state that the Company is
conducting an IPO, (ii) state whether the Company
will redeem the Dividend Amounts (including, if
applicable, the prorata share of the Dividend Amount
with respect to the Computation Period in which the
Conversion Date occurs) and the Unpaid Dividend
Amounts (including any cumulated dividends thereon
pursuant to Section 3 and, if applicable, the prorata
share of the Unpaid Dividend Amount of the
Computation Period in which the Conversion Date
occurs) (the Combined Dividend Amount) pursuant to
Section 4b(2) and (iii) attach a copy of the
prospectus forming a part of the Registration
Statement as an exhibit thereto.
(b) In the case of a Stock Merger,
within five days after entering into a definitive
agreement providing for a Stock Merger, the Company
shall send to the Stockholders a Conversion Notice
which shall (i) state that the Company is conducting
a Stock Merger, (ii) state whether the Company will
redeem the Combined Dividend Amount pursuant to
Section 4b(2), and (iii) attach a copy of the
Definitive Agreement as an exhibit thereto.
(2) On the Conversion Date simultaneous with the
consummation of the IPO or Stock Merger, as the case may be,
the Company shall, at its option, redeem the Combined Dividend
Amount, by
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paying the Combined Dividend Amount (i) in cash or (ii) in IPO
Stock as calculated in Section 4b(3).
(3) Pursuant to Section 4b(2), the Company shall
issue the Stockholders a value in shares of Company's Common
Stock (the IPO Stock), or, in the case of a Stock Merger,
stock of the class of publicly traded securities received by
the Company's shareholders in the Stock Merger (the Merger
Stock) priced (i) in the event of an IPO, at 85% of the IPO
Stock Price or (ii) in the event of a Stock Merger, at 100% of
the Merger Stock Price, equal to the Combined Dividend Amount.
c. Dividends shall cease to accrue on any Stock once
redeemed and any redeemed shares shall no longer be deemed to be
outstanding and shall have the status of authorized but unissued
shares of Preferred Stock, unclassified as to series, and shall not be
reissued as shares of the Stock at the time outstanding, and all
rights of the holders thereof as stockholders of the Company (except
the right to receive from the Company the redemption price including
any declared and unpaid dividends) shall cease. Upon surrender in
accordance with said notice of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board
shall so require and the notice shall so state), such shares shall be
redeemed by the Company at the redemption price as aforesaid. Upon a
partial redemption, the Company shall issue to the Stockholder,
without cost to the Stockholder, a replacement certificate
representing the unredeemed Stock.
5. Conversion Rights. The Stockholders may convert shares of the
Stock into IPO Stock or Merger Stock on the following terms and conditions:
a. the Company shall send the Conversion Notice to the
Stockholders in the following manner:
(1) In the case of an IPO, within five days after
filing a registration statement for an IPO, the Company shall
send to the Stockholders a Conversion Notice which shall (i)
state that the Company is conducting an IPO, (ii) reaffirm the
Stockholder's option pursuant to Section 5b and (iii) attach a
copy of the prospectus forming a part of the Registration
Statement as an exhibit thereto.
(2) In the case of a Stock Merger, within five
days after entering into a definitive agreement providing for
a Stock Merger, the Company shall send to the Stockholder a
Conversion Notice which shall (i) state that the Company is
conducting a Stock Merger, (ii) reaffirm the Stockholder's
option pursuant to Section 5b and (iii) attach a copy of the
Definitive Agreement as an exhibit thereto.
b. Within 15 days after the date of the Conversion
Notice, the Stockholder shall give notice (the Stockholder Conversion
Notice) to the
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<PAGE> 5
Company as to whether it intends to exercise its right under this
Section 5b to require the Company to convert all or part of the Stock
owned by such Stockholder (the Converted Amount) by issuing to the
Stockholder an amount of Merger Stock or IPO Stock calculated pursuant
to Section 5c.
c. Pursuant to Section 5b, Company shall issue to the
Stockholder the IPO Stock, or, in the case of a Stock Merger, the
Merger Stock priced (i) in the event of an IPO, at 85% of the IPO
Stock Price or (ii) in the event of a Stock Merger, at 100% of the
Merger Stock Price, equal to the Converted Amount. The Company
represents and warrants that upon issuance or transfer to the
Stockholder, the IPO Stock or the Merger Stock, as applicable, will be
validly issued, fully paid and nonassessable.
d. If the Stockholder elects to convert only part of the
Stock owned by such Stockholder, the Company shall issue, without
charge or cost to such Stockholder, to such Stockholder a certificate
representing any unconverted shares of the Stock represented by the
Stockholder Conversion Notice.
e. The Company shall reserve and at all times keep
available, free from preemptive rights, out of its authorized but
unissued stock, for the purpose of effecting the conversion of the
Stock, such number of its duly authorized Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding
Stock.
f. Dividends shall cease to accrue on any Stock once
converted and any converted shares shall no longer be deemed to be
outstanding and shall have the status of authorized but unissued
shares of Preferred Stock, unclassified as to series, and shall not be
reissued as shares of the Stock at the time outstanding, and all
rights of the holders thereof as stockholders of the Company shall
cease.
g. The Company shall not charge any Stockholder any
commission or fee if such Stockholder exercises its right under
Section 5b for the conversion of the stock owned by such Stockholder.
The Company represents and warrants that upon issuance or transfer to
the Stockholder, the IPO Stock or Merger Stock, as applicable, will be validly
issued, fully paid and nonassessable.
6. Liquidation Preference.
a. Upon any liquidation, dissolution or winding up of
the Company, voluntary or involuntary (a Liquidation), the holders of
the Stock shall be entitled to receive, out of assets of the Company
which remain after satisfaction in full of all valid claims of
creditors of the Company and which are available for payment to
stockholders, and subject to the rights of the holders of any stock of
the Company ranking senior to or on a parity with the Stock in respect
of
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<PAGE> 6
distributions upon Liquidation, before any amount shall be paid to or
distributed among the holders of Common Stock or any other shares
ranking junior to the Stock in respect of distributions upon
Liquidation, liquidating distributions per share of the Stock in the
amount of the Liquidation Preference, plus an amount equal to the
Combined Dividend Amount thereon. If upon any Liquidation the amounts
payable with respect to the Stock and any other stock ranking as to
any such distribution on a parity with the Stock are not paid in full,
the holders of the Stock and such other stock shall share ratably in
any distribution of assets in proportion to the full respective
preferential amounts to which they are entitled.
b. Written notice of any voluntary or involuntary
Liquidation, stating the payment date or dates when, and the place or
places where, the amounts distributable to the holders of the Stock in
such circumstances shall be payable, shall be given not less than 20
days prior to any payment date stated therein, to the Stockholders.
c. For the purposes of this Section 6, (x) the voluntary
sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
property or assets of the Company or (y) the consolidation or merger
of the Company with one or more other companies or entities shall not
be deemed to be a Liquidation.
7. Senior Preferred Stock. The Company may, in its sole
discretion, authorize additional classes and series of Preferred Stock with
rights senior to those of the Stock.
8. Consolidation, Merger, etc. If the Company shall consummate
any consolidation or merger or similar business combination, pursuant to which
the outstanding shares of Common Stock are by operation of law exchanged solely
for or changed, reclassified or converted solely into stock of any successor or
resulting corporation (including the Company) or cash or other property, all
outstanding shares of the Stock, if not otherwise redeemed under Section 4,
shall, in connection with such consolidation, merger or similar business
combination, be assumed by and shall become preferred stock of such successor
or resulting corporation, having in respect of such corporation, insofar as
possible, the same powers, preferences and relative, participating, optional or
other special rights (including the redemption rights provided by Section 4),
and the qualifications, limitations or restrictions, thereon, that the Stock
had immediately prior to such transaction, except that after such transaction
each share of the Stock shall be redeemable, otherwise on the terms and
conditions provided for redemption pursuant to Section 4, for the kind of
securities so receivable by a holder of the number of shares of Common Stock
for which such shares of the Stock would have been converted immediately prior
to such transaction assuming the Stock were to be converted immediately prior
to such transaction.
9. Definitions.
Board shall mean the Board of Directors of Club Regina Resorts, Inc.
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<PAGE> 7
Combined Dividend Amount shall have the meaning indicated in Section
4b(1)(a).
Common Stock shall mean the common stock of the Company.
Company shall mean Club Regina Resorts, Inc., a Nevada corporation.
Computation Period shall mean (1) initially, the period commencing on
August 18, 1997 and ending on December 31, 1997 and subsequently, (2) each
calendar quarter beginning January 1, April 1, July 1, and October 1.
Conversion Date shall mean each of (i) the date that the Company
consummates an IPO and (ii) the date on which the Company shall consummate a
merger or consolidation with or into another entity, or the sale of all or
substantially all of its assets, the result of which in any case is that as
part or all of the consideration thereunder, the Company's shareholders receive
securities of a class of publicly traded securities.
Conversion Notice shall have the meaning indicated in Section 4b(1).
Converted Amount shall have the meaning indicated in Section 5b.
Definitive Agreement shall mean the agreement governing the Stock
Merger.
Dividend Amount shall have the meaning indicated in Section 3.
IPO shall mean a firm underwritten, public offering of the Company's
common stock pursuant to a registration statement filed with the Securities and
Exchange Commission.
IPO Stock shall have the meaning indicated in Section 4b(3).
IPO Stock Price shall mean the price (without deduction for
underwriting discounts and commissions) per share at which the Company's common
stock is offered to the public pursuant to an IPO.
Liquidation shall have the meaning indicated in Section 6.
Liquidation Preference shall have the meaning indicated in Section 1.
Merger Stock shall have the meaning indicated in Section 4b(3).
Merger Stock Price shall mean the value of the stock received pursuant
to a Stock Merger on a per share basis. The value of the stock so received
shall be based on the average of the closing price of the stock received in
such merger for the 10 trading days prior to the closing of the Stock Merger.
NGCL shall mean the Nevada General Corporation Law, as amended.
7
<PAGE> 8
Payment Date shall mean (i) the Conversion Date and, thereafter, (ii)
the first business day following January 1 of each year with respect to the
four preceding Computation Periods.
Person shall mean any corporation, individual, partnership (limited or
general), limited liability company, governmental body or other entity.
Preferred Stock shall have the meaning indicated in the Preamble.
Stock shall have the meaning indicated in Section 1.
Stockholder Conversion Notice shall have the meaning indicated in
Section 5b.
Stockholders shall have the meaning indicated in Section 2.
Stock Merger shall mean the occurrence of the Company merging or
consolidating into another entity, or selling all or substantially all of its
assets, the result of which is that as part or all of the consideration
thereunder, the Company's shareholders receive securities of a class of
publicly traded securities.
Unpaid Dividend Amount shall have the meaning indicated in Section 3.
8
<PAGE> 9
IN WITNESS WHEREOF, CLUB REGINA RESORTS, INC. has caused this
certificate to be made under the seal of the Company signed by its President
and Secretary, respectively, and acknowledged by its President, this 28th day
of October, 1997.
CLUB REGINA RESORTS, INC.
By:
-----------------------------------
Name: John McCarthy Sandland
Title: President
By:
-----------------------------------
Name: Douglas Y. Bech
Title: Secretary
ACKNOWLEDGMENT:
CLUB REGINA RESORTS, INC.
By:
-----------------------------------
Name: John McCarthy Sandland
Title: President
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the ___ day of October,
1997, by JOHN MCCARTHY SANDLAND, President of CLUB REGINA RESORTS, INC., a
Nevada corporation, on behalf of said corporation.
--------------------------------------------
Notary Public in and for The State of Texas
9
<PAGE> 1
EXHIBIT 4.1
================================================================================
EXECUTION COPY
----------------------------------------
CLUB REGINA RESORTS, INC.
CR RESORTS CAPITAL, S. de R. L. de C. V.
SERIES A AND SERIES B
13% SENIOR NOTES DUE 2004
INDENTURE
-------------------------
Dated as of December 5, 1997
-------------------------
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
--------------
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1).....................................................................................7.10
(a)(2) ........................................................................................7.10
(a)(3).........................................................................................N.A.
(a)(4).........................................................................................N.A.
(a)(5).........................................................................................7.10
(i)(b).........................................................................................7.10
(ii)(c)........................................................................................N.A.
311(a).........................................................................................7.11
(b)............................................................................................7.11
(iii(c)........................................................................................N.A.
312 (a)........................................................................................2.05
(b)............................................................................................10.03
(iv)(c)........................................................................................10.03
313(a).........................................................................................7.06
(b)(2).........................................................................................7.07
(v)(c).........................................................................................7.06;
10.02
(vi)(d)........................................................................................7.06
314(a).........................................................................................4.03;
10.02
(c)(1).........................................................................................10.04
(c)(2).........................................................................................10.04
(c)(3) N.A.
(vii)(e).......................................................................................10.05
(f)............................................................................................N.A.
315 (a)........................................................................................7.01
(b) ...........................................................................................7.05,
10.02
(A)(c).........................................................................................7.01
(d)............................................................................................7.01
(e)............................................................................................6.11
316 (a)(last sentence).........................................................................2.09
(a)(1)(A)......................................................................................6.05
(a)(1)(B)......................................................................................6.04
(a)(2).........................................................................................N.A.
(b)............................................................................................6.07
(B)(c).........................................................................................2.12
317 (a)(1).....................................................................................6.08
(a)(2).........................................................................................6.09
(b)............................................................................................2.04
318 (a).......................................................................................10.01
(b)...........................................................................................N.A.
(c)..........................................................................................10.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
----
<S> <C> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.....................................1
Section 1.01. Definitions....................................................................1
Section 1.02. Other Definitions.............................................................16
Section 1.03. Incorporation by Reference....................................................17
Section 1.04. Rules of Construction.........................................................17
ARTICLE 2. THE NOTES.....................................................................17
Section 2.01. Form and Dating...............................................................17
Section 2.02. Execution and Authentication..................................................18
Section 2.03. Registrar and Paying Agent....................................................21
Section 2.04. Paying Agent to Hold Money in Trust...........................................21
Section 2.05. Holder Lists..................................................................21
Section 2.06. Transfer and Exchange.........................................................21
Section 2.07. Replacement Notes.............................................................32
Section 2.08. Outstanding Notes.............................................................33
Section 2.09. Treasury Notes................................................................33
Section 2.10. Temporary Notes...............................................................33
Section 2.11. Cancellation..................................................................34
Section 2.12. Defaulted Interest............................................................34
Section 2.13. Liquidated Damages............................................................34
ARTICLE 3. REDEMPTION AND PREPAYMENT.....................................................34
Section 3.01. Notices to Trustee............................................................34
Section 3.02. Selection of Notes to Be Redeemed.............................................34
Section 3.03. Notice of Redemption..........................................................35
Section 3.04. Effect of Notice of Redemption................................................36
Section 3.05. Deposit of Redemption Price...................................................36
Section 3.06. Notes Redeemed in Part........................................................36
Section 3.07. Optional Redemption...........................................................36
Section 3.08. Redemption for Tax Reasons....................................................37
Section 3.09. Offer to Purchase by Application of Excess Proceeds...........................38
Section 3.10. Mandatory Redemption..........................................................39
ARTICLE 4. COVENANTS.....................................................................39
Section 4.01. Payment of Notes..............................................................39
Section 4.02. Maintenance of Office or Agency...............................................40
Section 4.03. Reports.......................................................................40
Section 4.04. Compliance Certificate........................................................40
Section 4.05. Taxes.........................................................................41
Section 4.06. Stay, Extension and Usury Laws................................................41
Section 4.07. Restricted Payments...........................................................41
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries................43
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock....................44
Section 4.10. Asset Sales...................................................................46
Section 4.11. Transactions with Affiliates..................................................47
Section 4.12. Liens.........................................................................48
Section 4.13. Line of Business..............................................................48
Section 4.14. Corporate Existence...........................................................48
Section 4.15. Offer to Repurchase Upon Change of Control....................................49
Section 4.16. Restriction on Preferred Stock of Restricted Subsidiaries.....................50
Section 4.17. Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Subsidiaries..................................................................50
Section 4.18. Payments for Consent..........................................................50
Section 4.19. Limitations on CR Mexico......................................................50
Section 4.20. Disposition of Remainder Interest.............................................50
Section 4.21. Additional Amounts............................................................51
ARTICLE 5. SUCCESSORS....................................................................53
Section 5.01. Merger, Consolidation, or Sale of Assets......................................53
Section 5.02. Successor Corporation Substituted.............................................53
ARTICLE 6. DEFAULTS AND REMEDIES.........................................................54
Section 6.01. Events of Default.............................................................54
Section 6.02. Acceleration..................................................................55
Section 6.03. Other Remedies................................................................56
Section 6.04. Waiver of Past Defaults.......................................................56
Section 6.05. Control by Majority...........................................................56
Section 6.06. Limitation on Suits...........................................................57
Section 6.07. Rights of Holders of Notes to Receive Payment.................................57
Section 6.08. Collection Suit by Trustee....................................................57
Section 6.09. Trustee May File Proofs of Claim..............................................57
Section 6.10. Priorities....................................................................58
Section 6.11. Undertaking for Costs.........................................................58
ARTICLE 7. TRUSTEE.......................................................................59
Section 7.01. Duties of Trustee.............................................................59
Section 7.02. Rights of Trustee.............................................................60
Section 7.03. Individual Rights of Trustee..................................................60
Section 7.04. Trustee's Disclaimer..........................................................60
Section 7.05. Notice of Defaults............................................................61
Section 7.06. Reports by Trustee to Holders of the Notes....................................61
Section 7.07. Compensation and Indemnity....................................................61
Section 7.08. Replacement of Trustee........................................................62
Section 7.09. Successor Trustee by Merger, etc..............................................63
Section 7.10. Eligibility; Disqualification.................................................63
Section 7.11. Preferential Collection of Claims Against Issuers.............................63
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE......................................63
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance......................63
Section 8.02. Legal Defeasance and Discharge................................................63
Section 8.03. Covenant Defeasance...........................................................64
Section 8.04. Conditions to Legal or Covenant Defeasance....................................64
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions................................................65
Section 8.06. Repayment to Issuers..........................................................66
Section 8.07. Reinstatement.................................................................66
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER..............................................67
Section 9.01. Without Consent of Holders of Notes...........................................67
Section 9.02. With Consent of Holders of Notes..............................................67
Section 9.03. Compliance with Trust Indenture Act...........................................68
Section 9.04. Revocation and Effect of Consents.............................................69
Section 9.05. Notation on or Exchange of Notes..............................................69
Section 9.06. Trustee to Sign Amendments, etc...............................................69
ARTICLE 10. MISCELLANEOUS.................................................................69
Section 10.01. Trust Indenture Act Controls..................................................69
Section 10.02. Notices.......................................................................69
Section 10.03. Communication by Holders of Notes with Other Holders of Notes.................70
Section 10.04. Certificate and Opinion as to Conditions Precedent............................71
Section 10.05. Statements Required in Certificate or Opinion.................................71
Section 10.06. Rules by Trustee and Agents..................................................71
Section 10.07. No Personal Liability of Directors, Officers, Employees and
Stockholders..................................................................71
Section 10.08. Governing Law; Submission to Jurisdiction.....................................72
Section 10.09. No Adverse Interpretation of Other Agreements.................................72
Section 10.10. Successors....................................................................72
Section 10.11. Severability..................................................................72
Section 10.12. Counterpart Originals.........................................................73
Section 10.13. Table of Contents, Headings, etc..............................................73
Section 10.14. Approval of Board of Directors................................................73
</TABLE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
Exhibit E FORM OF PROMISSORY NOTE
iii
<PAGE> 6
This INDENTURE is made and entered into as of December 5, 1997, by and
among CLUB REGINA RESORTS, INC., a Nevada corporation (the "CR US"), CR RESORTS
CAPITAL S. de R. L. de C. V., a Mexican Sociedad de Responsabilidad Limitada de
Capital Variable ("CR Mexico" and, together with CR US, the "Issuers"), and IBJ
SCHRODER BANK & TRUST COMPANY, as trustee (the "Trustee").
The Issuers and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 13% Series A
Senior Notes due 2004 (the "Series A Notes") and the 13% Series B Senior Notes
due 2004 (the "Series B Notes" and, together with the Series A Notes, the
"Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of, and registered in the name of, the Depositary or its
nominee that will be issued in a denomination equal to the outstanding principal
amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness, Disqualified Stock or preferred stock incurred
in connection with, or in contemplation of, such other Person merging with or
into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness,
Disqualified Stock or preferred stock secured by a Lien encumbering any asset
acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control; further provided that GLLC shall not be deemed to be an
Affiliate of CR US and is Subsidiaries so long as GLLC does not own more than
20% of the Capital Stock of CR US and does not own any Capital Stock of a
Subsidiary of CR US.
"Agent" means the Registrar or any Paying Agent or transfer agent.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Management Agreement" means the Asset Management Agreement dated
as of August 18, 1997, by and between CR US and Starwood Lodging Corporation.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets or rights (including, without limitation, by way of a sale and
leaseback) (a "Disposition") other than sales
<PAGE> 7
of inventory in the ordinary course of business consistent with industry
practice for reasonably similar companies (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of CR
US and its Subsidiaries taken as a whole will be governed by the provisions of
Section 4.15 and/or the provisions of Section 5.01 and not by the provisions of
Section 4.10), and (ii) the issue or sale by CR US or any of its Subsidiaries of
Equity Interests of any of CR US's Subsidiaries, in the case of either clause
(i) or (ii), whether in a single transaction or a series of related transactions
(a) that have a fair market value in excess of $1.0 million or (b) for net
proceeds in excess of $1.0 million. Notwithstanding the foregoing, the following
items shall not be deemed to be Asset Sales: (i) a Disposition of assets by CR
US to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted
Subsidiary to CR US or to another Wholly Owned Restricted Subsidiary, (ii) an
issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to CR US or
to another Wholly Owned Restricted Subsidiary, (iii) a Restricted Payment that
is permitted by Section 4.07, (iv) the Disposition of the Remainder Interest,
(v) any Disposition of Cash Equivalents, (vi) any Disposition of defaulted
Vacation Interval Receivables for collection purposes, (vii) the grant of any
Lien securing Indebtedness to the extent such Lien is granted in compliance with
Section 4.12, (viii) the sale of Class B shares of CR S.A. to customers of CR US
and its Subsidiaries consistent with past practices (or similar sales of
non-controlling equity interests in any Restricted Subsidiary that is formed to
serve the same purpose as is served by CR S.A. on the Issue Date so long as such
sales are effected for the same reasons that sales of Class B shares of CR S.A.
are made as of the Issue Date), or (ix) the sales of Vacation Intervals in the
ordinary course of business.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means, with respect to a Person, the Board of
Directors of such Person, or any authorized committee of the Board of Directors
of such Person.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association, sociedad de responsabilidad limitada,
or business entity, any and all shares, parties sociales, interests,
participations, rights or other equivalents (however designated) of corporate
stock, (iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than twelve months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of twelve
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial
2
<PAGE> 8
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition, (vi) money market funds at least 95%
of the assets of which constitute Cash Equivalents of the kinds described in
clauses (i) - (v) of this definition, (vii) Certificados de la Tesoreria de la
Federacion (Cetes) or Bonos de Desarrollo del Gobierno Federal (Bondes) issued
by the Mexican government and maturing not more than 365 days after the
acquisition thereof, (viii) direct obligations of the Mexican government or
obligations fully and unconditionally guaranteed by the Mexican government, (ix)
certificates of deposit, bank promissory notes and bankers' acceptances
denominates in pesos maturing not more than 365 days after the acquisition
thereof and issued or guaranteed by (a) any one of the five largest banks (based
on assets as of the immediately preceding December 31st) organized under the
laws of Mexico and (b) one or more other banks organized under the laws of
Mexico, provided that the aggregate amount of certificates of deposit, bank
promissory notes and banker's acceptances issued or guaranteed by any one such
bank referred to in clause (b) shall not exceed $3.0 million at any one time)
and, in each case, which is not under intervention by the Comision Nacional
Bancaria y de Valores or controlled by the Fondo Bancario de Proteccion al
Ahorro or by any other governmental body or agency and (x) Mexican pesos;
provided that the aggregate amount of Cash Equivalents held by CR US and its
Restricted Subsidiaries at any one time under clauses (vii), (viii), (ix) and
(x) of this definition shall be limited to $4.0 million.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of CR US and its Restricted Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than a Principal or a Related Party of a Principal (as
defined below), (ii) the adoption of a plan relating to the liquidation or
dissolution of CR US, (iii) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of CR US (measured by voting power rather than number of
shares) or (iv) the first day on which a majority of the members of the Board of
Directors of CR US are not Continuing Directors.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus the sum,
without duplication of (i) an amount equal to any extraordinary loss plus any
net loss, together with any related provisions for taxes arising on such loss,
realized in connection with an Asset Sale (to the extent such losses (and
provisions for taxes) were deducted in computing such Consolidated Net Income),
plus (ii) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (iii) consolidated
interest expense of such Person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in
3
<PAGE> 9
computing such Consolidated Net Income, plus (iv) Consolidated Lease Expense,
but only to the extent such expense exceeds $0.5 million for any four quarter
period, of such Person and its Subsidiaries for such period, plus (v)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period), and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, minus (vi) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Subsidiary of CR US shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that the Net Income of such Subsidiary was included
in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to CR US or paid to CR Mexico by such Subsidiary without prior
approval (that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Lease Expense" means, with respect to any Person for any
period, the aggregate rental obligations (other than Capital Lease Obligations)
of such Person and its consolidated Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP payable in respect of such period
under leases of real and/or personal property (net of income from subleases
thereof, but including taxes, insurance, maintenance and similar expenses that
the lessee is obligated to pay under the terms of such leases), whether or not
such obligations are reflected as liabilities or commitments on a consolidated
balance sheet of such Person and its Restricted Subsidiaries or in the notes
thereto.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income (but not loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to CR US or one of its
Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash
4
<PAGE> 10
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of the Indenture
in the book value of any asset owned by such Person or a consolidated Subsidiary
of such Person, (y) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in each case,
Permitted Investments), and (z) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing determined in
accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of CR US who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 hereof or such other address as to which the
Trustee may give notice to the Issuers.
"CR Mexico" means CR Resorts Capital, a Mexican Sociedad de
Responsabilidad Limitada de Capital Variable and any and all successors thereto.
"CR S.A." means Club Regina S.A. de C.V.
"CR US" means Club Regina Resorts, Inc., a Nevada corporation and any
and all successors thereto.
"Credit Agreements" means any credit agreement or similar facility
governing Indebtedness entered into by CR US or any Subsidiary, as any such
agreement or facility may be amended, modified, refinanced or replaced from time
to time (except to the extent that any such amendment, modification, refinancing
or replacement would be prohibited by the terms of the Indenture).
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement to which
such Person is a party or a beneficiary.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A hereto except that such Note shall not bear the Global Note
Legend.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
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<PAGE> 11
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require CR US to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that CR US may not repurchase or redeem
any such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with Section 4.07.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"fair market value" means the price that would be paid in an arm's
length transaction between an informed and willing seller under no compulsion to
sell and an informed and willing buyer under no compulsion to buy.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests that are paid in
Equity Interests of CR US (other than Disqualified Stock) or to CR US or a
Restricted Subsidiary of CR US, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP and (v) the
Consolidated Lease Expense of such Person and its Restricted Subsidiaries for
such period, but only to the extent such expense exceeds $0.5 million for any
four quarter period.
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"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. If the referent Person or any of
its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by CR US or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"GLLC" means Greenmex L.L.C., a Delaware limited liability company.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under any Interest Rate Agreement or Currency
Agreement.
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"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note in the form of Exhibit A hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its nominee
that will be issued in a denomination equal to the outstanding principal amount
of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
to protect CR US or any Subsidiary against fluctuation in interest rates.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to directors, officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If CR US or any Restricted Subsidiary of CR US sells or otherwise disposes
of any Equity Interests of any direct or indirect Subsidiary of CR US such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of CR US, CR US shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of Section 4.07.
"Issue Date" means the date of original issuance of the Notes.
"Issuers" means CR US and CR Mexico.
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<PAGE> 14
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Issuers and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Mirror Notes" means, (i) the notes outstanding on the Issue Date in
the form of Exhibit E hereto that are issued by Top Acquisition Sub in favor of
CR Mexico, representing senior obligations of such Operating Subsidiary, in
aggregate principal amount equal to approximately $86.7 million, (ii) the notes
to be issued in replacement of the Mirror Note specified in clause (i) pursuant
to Section 4.19 hereof and (iii) such other promissory notes in the form of
Exhibit E hereto issued by Operating Subsidiaries to CR Mexico in exchange for
future advances from CR Mexico to such Operating Subsidiaries.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities (other than sales of Equity Interests of a
Restricted Subsidiary described in clause (viii) of the definition of Asset
Sale) by such Person or any of its Restricted Subsidiaries or the extinguishment
of any Indebtedness of such Person or any of its Restricted Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by CR US or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither CR US
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness, other than Indebtedness ("Non-Recourse Indebtedness"),
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<PAGE> 15
the incurrence of which also constitutes an Investment permitted to be made
under Section 4.07 or pursuant to clause (k) of the definition of "Permitted
Investments"), (b) is directly or indirectly liable (as a guarantor or
otherwise, other than a Guarantee (a "Non-Recourse Guarantee"), the incurrence
of which also constitutes an Investment permitted to be made under Section 4.07
or pursuant to clause (k) of the definition of "Permitted Investments"), or (c)
constitutes the lender, other than pursuant to loans ("Non-Recourse Loans") that
also constitute an Investment permitted to be made under Section 4.07 or
pursuant to clause (k) of the definition of "Permitted Investments"; and (ii) no
default with respect to which (including any rights that the holders thereof may
have to take enforcement action against an Unrestricted Subsidiary) would permit
(upon notice, lapse of time or both) any holder of any other Indebtedness of CR
US or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing (and, in the case of any Non-Recourse Indebtedness, Non-Recourse
Guarantee or Non-Recourse Loan, have agreed in writing) that they will not have
any recourse to the stock or assets of CR US or any of its Restricted
Subsidiaries (other than the Capital Stock of one or more Unrestricted
Subsidiaries).
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Issuers.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means, with respect to any Person (other than
the Trustee), a certificate signed on behalf of such Person by two Officers of
such Person, one of whom must be the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of such
Person, that meets the requirements of Section 10.05 hereof.
"Operating Subsidiaries" means each Subsidiary of CR US other than CR
Mexico.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
10.05 hereof. The counsel may be an employee of or counsel to CR US, any
Subsidiary of CR US or the Trustee.
"Opinion of Mexican Counsel" means a written opinion of independent
Mexican legal counsel admitted to practice in Mexico and of recognized standing
in Mexico who is reasonably acceptable to the Trustee and that meets the
requirements of Section 10.05 hereof. The counsel may be counsel to CR US or any
Subsidiary of CR US.
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"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means, at any time, any business that is primarily
in the vacation ownership business.
"Permitted Investments" means (a) any Investment in CR US or in a
Wholly Owned Restricted Subsidiary of CR US that is engaged in a Permitted
Business; (b) any Investment in Cash Equivalents; (c) any Investment by CR US or
any Subsidiary of CR US in a Person, if as a result of such Investment (i) such
Person becomes a Wholly Owned Restricted Subsidiary of CR US that is engaged in
a business that is related, ancillary or complementary to, and supportive of,
the vacation ownership business or (ii) such Person is engaged in a business
that is related, ancillary or complementary to, and supportive of, the vacation
ownership business and is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
CR US or a Wholly Owned Restricted Subsidiary of CR US that is engaged in a
business that is related, ancillary or complementary to, and supportive of, the
vacation ownership business; (d) any Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10; (e) any acquisition of assets solely in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of CR US;
(f) any Investment in a Receivables Subsidiary of Vacation Interval Receivables
and Related Assets in connection with a Receivables Financing; (g) accounts
receivable created or acquired, and prepaid expenses arising, in the ordinary
course of business; (h) the endorsements of negotiable instruments for
collection or deposit in the ordinary course of business; (i) the incurrence,
assumption or creation of Hedging Obligations that CR US or a Restricted
Subsidiary of CR US enters into in the ordinary course of business; (j) a
promissory note or other payment obligation in the original principal amount of
up to $1.8 million to be received in connection with the disposition of the
Remainder Interest; and (k) other Investments in Equity Interests of any Person
engaged in a business that is related to, ancillary or complementary to, and
supportive of, the vacation ownership business having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (k) that are at the time outstanding,
not to exceed $7.5 million.
"Permitted Liens" means (i) Liens securing the Credit Agreements;
provided that the principal amount of Indebtedness secured by such Liens is not
greater than the principal amount of Indebtedness permitted to be incurred by
clause (i) of the second paragraph of Section 4.09; (ii) Liens in favor of CR US
or its Wholly Owned Restricted Subsidiaries; (iii) Liens on property of a Person
existing at the time such Person is merged into or consolidated with CR US or
any Subsidiary of CR US; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with CR US; (iv)
Liens on property existing at the time of acquisition thereof by CR US or any
Subsidiary of CR US, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (iii), (v) (but only to the extent that Indebtedness refinanced pursuant
to such clause (v) was secured by Liens), (vii) and (ix) of the second paragraph
Section 4.09 covering only the assets acquired with such Indebtedness; (vii)
Liens existing on
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the Issue Date; (viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) Liens incurred in the
ordinary course of business of CR US or any Subsidiary of CR US with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by CR US or such Subsidiary; (x) Liens on assets of or Capital Stock of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries; (xi) Liens in favor of the Trustee under the Indenture; (xii)
judgment Liens with respect to judgments that do not cause an Event of Default
under clause (f) of Section 6.01; and (xiii) Liens securing guarantees that are
permitted to be incurred under Section 4.09(b)(viii), but only if the guarantee
proposed to be secured by a Lien relates to Indebtedness which (a) would be
permitted to be secured by a Lien under the terms herein and (b) is permitted to
be incurred under clauses (i), (iii), (iv), (v), (vii) and (ix) of Section
4.09(b).
"Permitted Refinancing Indebtedness" means any Indebtedness of CR US or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of CR US or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that: (i) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
CR US or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means Douglas Y. Bech, Thomas R. Powers and Walker G.
Harman.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means an underwritten public offering of
common Capital Stock of CR US registered under the Securities Act (other than a
public offering registered on Form S-8) under the Securities Act.
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<PAGE> 18
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Receivables Financing" means a financing by CR US or a Restricted
Subsidiary of CR US of Vacation Interval Receivables.
"Receivables Subsidiary" means a Subsidiary which is established for
the limited purpose of acquiring and financing Vacation Interval Receivables and
Related Assets.
"Regina Operating Subsidiaries" means CR Resorts Cabo, S. de R. L. de
C. V., CR Resorts Puerto Vallarta, S. de R. L. de C. V., CR Resorts Cancun, S.
de R. L. de C. V., and Desarollos Turisticos Integrales Cozumel, S. de R. L. de
C. V.
"Regina Resorts" means the vacation ownership resorts operated as of
the Issue Date by CR US and its Subsidiaries in Cancun, Mexico, Puerto Vallarta,
Mexico and Los Cabos, Mexico.
"Registration Rights Agreement" means the A/B Exchange Registration
Rights Agreement, dated as of the Issue Date, by and among the Issuers and
Jefferies & Company, Inc., as such agreement may be amended, modified or
supplemented from time to time.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Remainder Interest" means the rights under the Trust Agreements to own
the Regina Resorts after August 18, 2027.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend and the Global Note Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"RNVI" means the Registro Nacional de Valores y Intermediarios de
Mexico.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
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"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Top Acquisition Sub" mean Top Acquisition Sub, S de R.L. de C.V.
"Trust Agreements" means the three trust agreements dated August 18,
1997, entered into among Bancomer, as trustee, CR Resorts Remainder Company, S.
de R. L. de C. V., and each of (i) CR Resorts Cancun, S. de R. L. de C. V., in
connection with the Cancun Regina Resort, (ii) CR Resorts Los Cabos, S. de R. L.
de C. V., in connection with the Los Cabos Regina Resort, and (iii) CR Resorts
Puerto Vallarta, S. de R. L. de C. V., in connection with the Puerto Vallarta
Regina Resort.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Units" means the Issuers' units, each consisting of $1,000 principal
amount of Series A Notes and a Warrant to purchase 18.69962 shares of Common
Stock of CR US.
"Unrestricted Global Note" means a permanent global Note in the form of
Exhibit A attached hereto that bears the Global Note Legend, and that is
deposited with or on behalf of and registered in the name of the Depositary,
representing a series of Notes that do not bear the Private Placement Legend.
14
<PAGE> 20
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of CR US (other than CR
Mexico or any other Subsidiary of CR US that exists on the Issue Date) or any
successor to any of them that is designated by the Board of Directors of CR US
as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the
extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse
Debt; (b) is not party to any agreement, contract, arrangement or understanding
with CR US or any Restricted Subsidiary of CR US unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to CR US
or such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of CR US; (c) is a Person with respect to which
neither CR US nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
CR US or any of its Restricted Subsidiaries. Any such designation by the Board
of Directors of CR US shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution of CR US giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 4.07. If, at
any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of CR
US as of such date (and, if such Indebtedness is not permitted to be incurred as
of such date under Section 4.09, CR US shall be in default of such covenant).
The Board of Directors of CR US may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of CR
US of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
Section 4.09 calculated on a pro forma basis as if such designation had occurred
at the beginning of the four-quarter reference period, and (ii) no Default or
Event of Default would be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Vacation Interval Receivables" means the gross receivables of CR US
and its Restricted Subsidiaries arising from sales by CR US and its Restricted
Subsidiaries of Vacation Intervals (but excluding any receivables for service or
other fees in respect of such Vacation Intervals) determined on a consolidated
basis in accordance with GAAP.
"Vacation Interval Receivables and Related Assets" means Vacation
Interval Receivables and instruments, chattel paper, obligations, general
intangibles and other similar assets, in each case relating to Vacation Interval
Receivables.
"Vacation Intervals" means the right to use (whether arising by virtue
of a club membership or a deeded interest in real property or otherwise) a
fully-furnished vacation residence for a specified period each year or
otherwise.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
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<PAGE> 21
"Warrants" means CR US's warrants, issued on the date hereof as part of
the Units.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares or other
shares or ownership interests required by applicable law to be held by third
parties (but only to the extent of such legal requirement) shall at the time be
owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of
such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares or other shares or other
ownership interests required by applicable law to be held by third parties (but
only to the extent of such legal requirement)) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term ........ Section
<S> <C>
"Additional Amounts"...................................................4.21
"Affiliate Transaction"................................................4.11
"Asset Sale"...........................................................4.10
"Asset Sale Offer".....................................................3.09
"Authentication Order".................................................2.02
"Bankruptcy Law".......................................................4.01
"Change of Control Offer"..............................................4.15
"Change of Control Payment"............................................4.15
"Change of Control Payment Date" ......................................4.15
"Covenant Defeasance"..................................................8.03
"Event of Default".....................................................6.01
"Excess Proceeds"......................................................4.10
"Excluded Taxes".......................................................4.21
"incur"................................................................4.09
"Legal Defeasance" ....................................................8.02
"Offer Amount".........................................................3.09
"Offer Period".........................................................3.09
"Paying Agent".........................................................2.03
"Purchase Date"........................................................3.09
"Registrar"............................................................2.03
"Restricted Payments"..................................................4.07
"Taxes"................................................................4.21
</TABLE>
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<PAGE> 22
SECTION 1.03. INCORPORATION BY REFERENCE
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the Notes means the Issuers and any successor
obligor(s) upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them....
SECTION 1.04. 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 GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. The Issuers shall furnish any such notations, legends and
17
<PAGE> 23
endorsements to the Trustee in writing. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture and the Issuers and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the Global Note Legend thereon). Notes
issued in definitive form shall be substantially in the form of Exhibit A
attached hereto (but without the Global Note Legend thereon). Each Global Note
shall represent such of the outstanding Notes as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time reflected in the records of the Trustee and
that the aggregate principal amount of outstanding Notes represented thereby may
from time to time be reduced or increased, as appropriate, to reflect exchanges
and redemptions. Any record of an increase or decrease of a Global Note to
reflect the amount of any increase or decrease in the aggregate principal amount
of outstanding Notes represented thereby shall be made by the Trustee or the
Note Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers of each Issuer shall sign the Notes for the Issuers
by manual or facsimile signature. CR US's seal shall be reproduced on the Notes
and may be in facsimile form, to the extent required by the organizational
documents of either Issuer or as required by applicable law.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed by
two Officers of each Issuer (an "Authentication Order"), authenticate Notes for
original issue up to the aggregate principal amount stated in paragraph 4 of the
Notes. The aggregate principal amount of Notes outstanding at any time may not
exceed such amount except as provided in Section 2.07 hereof.
The Trustee (at the expense of the Issuers) may appoint an
authenticating agent acceptable to the Issuers to authenticate Notes. An
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with Holders or an Affiliate of either Issuer.
All Notes issued prior to the separation described below shall
have printed or overprinted thereon the following (the "Warrant Endorsement"):
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<PAGE> 24
"THE NOTES EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE
SEPARATELY FROM THE WARRANTS ATTACHED HERETO ORIGINALLY SOLD AS A
UNIT WITH THE NOTES UNTIL THE EARLIEST TO OCCUR OF (I) JUNE 1,
1998; (II) THE OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN
THE INDENTURE); AND (III) THE DATE SPECIFIED BY THE INITIAL
PURCHASER (SUCH EARLIEST DATE, THE "SEPARATION DATE"). PRIOR TO
SUCH DATE, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN INTEGRAL MULTIPLES OF $1,000 PRINCIPAL AMOUNT
OF NOTES AND ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE
OF ONE WARRANT FOR EACH $1,000 PRINCIPAL AMOUNT SO TRANSFERRED.
Under the terms of the warrant agreement relating to the Warrants
(the "Warrant Agreement"), the holder of this security may at any
time on or after the Separation Date, at its option, by notice to
the Trustee elect to separate or separately transfer the Notes and
the Warrants represented hereby, in whole or in part, and shall
thereafter surrender this security to the Trustee for the exchange
of this security, in part, for such Warrant or Warrants and for a
Note or Notes of a like aggregate principal amount and of
authorized denominations not bearing this Warrant Endorsement;
provided that no delay or failure on the part of the Trustee or
the Warrant Agent to exchange this security for such Warrant or
Warrant and Note or Notes shall affect the separation of such
Notes and Warrants represented hereby or their separate
transferability. Until such separation, the holder of this
security is, for each $1,000 principal amount of Notes, also the
record owner of one Warrant expiring December 1, 2004, each
Warrant to purchase one share of Common Stock of CR US, par value
$.001 per share (subject to adjustment as provided in the Warrant
Agreement). CR US has deposited with the Trustee, as custodian for
the Holder of the Notes bearing this Warrant Endorsement, a
certificate or certificates for such Warrants to purchase an
aggregate of 1,869,962 shares of Common Stock (subject to
adjustment as provided in the Warrant Agreement). Prior to the
separation of the Notes and the Warrants as described above,
record ownership of such Warrants is transferable only by the
transfer of this Note on the Note register maintained by the
Issuers pursuant to the Indenture. After such separation,
ownership of a Warrant is transferable only by the transfer of the
certificate representing such Warrant in accordance with the
provisions of the Warrant Agreement.
By accepting a security bearing this Warrant Endorsement, each
holder of this security shall be bound by all of the terms and
provisions of the Warrant Agreement (a copy of which is available
on request to CR US or the Warrant Agent).
Election to Exercise. On or after the Exercise Commencement Date
(as such term is defined in the Warrant Agreement), the Warrants
may be exercised by obtaining from the Trustee, as custodian for
Holders of securities bearing this Warrant Endorsement, the
required forms of election to exercise, declaration form and
instructions for payment of the Exercise Price (as such term is
defined in the Warrant Agreement). Upon receiving the required
forms and payment of such Exercise Price, the Trustee as custodian
for the Holder of the security bearing this Warrant Endorsement,
shall exercise such Warrants in accordance with the provisions of
the Warrant Agreement.
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<PAGE> 25
Election of Exchange. The undersigned registered holder of the security
represented hereby irrevocably elects to separate its Notes and Warrants
and to exchange this security (representing ownership of
__________________ Warrants evidenced by Warrant Certificates deposited
with the Trustee) for a new Note in the principal amount hereof and a
Warrant Certificate in the amount of said _______________________
Warrants.
The undersigned hereby irrevocably instructs the Trustee (A) to issue in
the name of the undersigned registered holder a new Note not containing
the above Warrant Endorsement in the principal amount equal to the
principal amount hereof and (B) to deliver this security to the Warrant
Agent pursuant to the provisions of the Warrant Agreement with
instructions to issue in the name of the undersigned registered holder a
Warrant certificate representing the number of Warrants equal to the
number of Warrants represented by this security and to issue a new
Warrant Certificate to replace the Warrant Certificate held on deposit
by the Trustee as custodian representing the number of Warrants equal to
the difference between (x) the number of Warrants represented by the
Warrant Certificate so held on deposit and (y) the number of Warrants
represented by this Security.
Dated: ______________________
Name of Holder of this security: ______________________
Address: ______________________
______________________
Signature: ______________________
Note: The above signature must correspond with the name as
written upon the face of this security in every particular,
without alteration or enlargement whatever and if the
certificate representing any principal amount at maturity of
this security or the associated Warrants is to be registered in
a name other than that in which this security is registered."
Signature Guaranteed: ______________________
Note: Signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar, which
requirements include membership or participation in the
Securities Transfer Agents Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
Until any Note and the Warrant with which it is initially issued
are separated or separately transferred pursuant to the terms of the Warrant
Endorsement, the Trustee shall hold such Warrant as custodian on behalf of the
Holder of such Note bearing such legends.
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<PAGE> 26
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuers may appoint one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Issuers may change any Paying
Agent or Registrar without notice to any Holder. The Issuers shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Issuers fail to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. CR US or any
Subsidiary of CR US may act as Paying Agent or Registrar.
The Issuers initially appoint The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Notes.
The Issuers initially appoint the Trustee to act as the Registrar
and Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuers shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Issuers in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Issuers at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than CR US or a Subsidiary)
shall have no further liability for the money. If CR US or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy
or reorganization proceedings relating to either Issuer, the Trustee shall serve
as Paying Agent for the Notes.
SECTION 2.05. HOLDER 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
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Issuers shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders and the
Issuers shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Issuers for Definitive
Notes if (i) the Issuers deliver to the Trustee notice from the Depositary that
it is unwilling or unable to continue to act
21
<PAGE> 27
as Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Issuers within 120 days after the date of such notice from the Depositary or
(ii) the Issuers in their sole discretion determine that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and deliver a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest
in the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend. Beneficial
interests in any Unrestricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the Registrar
either (A) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such
increase or (B) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Definitive
Note in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above. Upon consummation of an Exchange Offer by the
Issuers in accordance with Section 2.06(f) hereof, the requirements of
this Section 2.06(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable under
22
<PAGE> 28
the Securities Act, the Trustee shall adjust the principal amount of the
relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of
a beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of
a beneficial interest in the IAI Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications and certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of either
Issuer;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
23
<PAGE> 29
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Issuers to the
effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been issued,
the Issuers shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests in Global Notes for
Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for
a Restricted Definitive Note or to transfer such beneficial interest to
a Person who takes delivery thereof in the form of a Restricted
Definitive Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (2)(a) thereof;
(D) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (2) thereof, if
applicable;
(E) if such beneficial interest is being transferred to CR
US or any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (2)(b)
thereof; or
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(F) if such beneficial interest is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h)
hereof, and the Issuers shall execute and the Trustee shall authenticate
and deliver to the Person designated in the instructions a Definitive
Note in the appropriate principal amount. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant
to this Section 2.06(c) shall be registered in such name or names and in
such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant
to this Section 2.06(c)(i) shall bear the Private Placement Legend and
shall be subject to all restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to
a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of either Issuer;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a Definitive
Note that does not bear the Private Placement Legend, a certificate from
such holder in the form of Exhibit B hereto, including the
certifications in item (3) thereof;
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and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Issuers to the
effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive Note,
then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant
to Section 2.06(h) hereof, and the Issuers shall execute and the Trustee
shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to
this Section 2.06(c)(iii) shall be registered in such name or names and
in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests in Global Notes.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in item (2)(b)
thereof;
(B) if such Restricted Definitive Note is being transferred
to a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (2)(a) thereof;
(D) if such Restricted Definitive Note is being transferred
to an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by
item (3) thereof, if applicable;
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(E) if such Restricted Definitive Note is being transferred
to CR US or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(2)(b) thereof; or
(F) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement under
the Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (2)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note and increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case of
clause (B) above, the 144A Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of either
Issuer;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(c) thereof;
or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (3) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Issuers to the
effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
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Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note at any time. Upon receipt of a request for such an exchange
or transfer, the Trustee shall cancel the applicable Unrestricted
Definitive Note and increase or cause to be increased the aggregate
principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest in a Global Note is effected pursuant to subparagraphs (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Issuers shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
opinions, documents and information, as applicable, required pursuant to the
following provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes.
Any Restricted Definitive Note may be transferred to and registered in
the name of Persons who take delivery thereof in the form of a
Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (2) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and
the Holder, in the case of an
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exchange, or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a broker-dealer, (2)
a Person participating in the distribution of the Exchange Notes or (3)
a Person who is an affiliate (as defined in Rule 144) of either Issuer;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery thereof
in the form of an Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit B hereto, including the certifications in item
(3) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests, an Opinion of Counsel in form reasonably acceptable to the
Issuers to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to
a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer, the
Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Issuers shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 and an Officers'
Certificate certifying that the Registration is effective and directing the
Trustee to authenticate Notes not bearing the Private Placement Legend, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Issuers,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Issuers
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shall execute and the Trustee shall authenticate and deliver to the Persons
designated by the Holders of Definitive Notes so accepted Definitive Notes in
the appropriate principal amount.
(g) Legends.
The following legends shall appear on the face of all Global Notes
and Definitive Notes issued under this Indenture unless specifically stated
otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
THAT IS TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE
PROVIDED UNDER RULE 144(k) AS PERMITTING RESALES BY NON-AFFILIATES OF
RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE
ORIGINAL CLOSING DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR
ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE ISSUERS, (B) PURSUANT
TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING
THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE
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ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and
all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY TRUST COMPANY (THE
"DEPOSITARY") OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS ON ITS
RECORDS AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II)
THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO
SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED
TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE
AND (IV) THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY
OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY WITHOUT THE PRIOR WRITTEN CONSENT OF THE ISSUERS."
(h) Cancellation and/or Adjustment of Global Notes.
At such time as all beneficial interests in a particular Global Note
have been exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or cancelled in whole and not in part, each such Global
Note shall be returned to or retained and cancelled by the Trustee in accordance
with Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note or for Definitive Notes, the principal amount of Notes represented
by such Global Note shall be reduced accordingly and an adjustment shall be made
on the records of the Trustee by the Trustee or by the Depositary at the
direction of the Trustee to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Note,
such other Global Note shall be increased accordingly and an adjustment shall be
made on the records of the Trustee by the Trustee or by the Depositary at the
direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
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(i) To permit registrations of transfers and exchanges, the
Issuers shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Issuers' order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Issuers may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05
hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Issuers, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Definitive Notes surrendered upon such registration of transfer
or exchange.
(v) The Issuers shall not be required (A) to issue, to register
the transfer of or to exchange any Notes during a period beginning at
the opening of business 15 days before the day of any selection of Notes
for redemption under Section 3.02 hereof and ending at the close of
business on the day of selection, (B) to register the transfer of or to
exchange any Note so selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part or (c) to
register the transfer of or to exchange a Note between a record date and
the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer
of any Note, the Trustee, any Agent and the Issuers may deem and treat
the Person in whose name any Note is registered as the absolute owner of
such Note for the purpose of receiving payment of principal of and
interest on such Notes and for all other purposes, and none of the
Trustee, any Agent or the Issuers shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06
to effect a registration of transfer or exchange may be submitted by
facsimile.
(ix) The Trustee shall have no duty to monitor compliance with
federal or state securities laws, other than to collect documentation
specifically required to be collected on behalf of the Issuers by this
Section 2.06.
SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the
Issuers and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Issuers shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the
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Trustee's requirements are met. If required by the Trustee or the Issuers, an
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Trustee and the Issuers to protect the Issuers, the Trustee, any Agent
and any authenticating agent from any loss that any of them may suffer if a Note
is replaced. The Issuers and the Trustee may charge for their expenses in
replacing a Note.
Every replacement Note is an additional obligation of the
Issuers and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because either Issuer or an
Affiliate of either Issuer holds the Note; however, Notes held by CR US or a
Subsidiary of CR US shall not be deemed to be outstanding for purposes of
Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Trustee receives written notice that the replaced
Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than CR US, a Subsidiary of CR US or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by either Issuer, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with either Issuer,
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes as to which a Responsible Officer of
the Trustee has received written notice are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery,
the Issuers may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Issuers consider appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Issuers shall prepare
and the Trustee shall authenticate Definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
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SECTION 2.11. CANCELLATION.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Issuers. The Issuers may not issue new Notes to replace Notes that they
have paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuers default in a payment of interest on the Notes,
they shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Issuers shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Issuers shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Issuers (or, upon the written request of the Issuers, the Trustee in the name
and at the expense of the Issuers) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
SECTION 2.13. LIQUIDATED DAMAGES.
In the event that the Issuers shall be required to pay
Liquidated Damages pursuant to the Registration Rights Agreement, the Issuers
shall, five Business Days prior to the relevant interest payment date, deliver
to the Trustee an Officers' Certificate specifying the amount of Liquidated
Damages payable per $1,000 principal amount of Notes to be paid on such interest
payment date.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Issuers elect to redeem Notes pursuant to the optional
redemption provisions of Sections 3.07 or 3.08 hereof, they shall furnish to the
Trustee, at least 45 days (unless a shorter period shall be satisfactory to the
Trustee) but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed or purchased in
an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any (provided
that the Issuers shall have provided the Trustee prior written notice of any
exchange on which the Notes are issued), on which the Notes are listed or, if
the Notes are not so listed, on a pro rata basis, by lot or in accordance with
any other method the Trustee considers fair and appropriate. In the event of
partial
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redemption by lot, the particular Notes to be redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to the
redemption date by the Trustee from the outstanding Notes not previously called
for redemption.
The Trustee shall promptly notify the Issuers in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof (if
applicable), at least 30 days but not more than 60 days before a redemption
date, the Issuers shall mail or cause to be mailed, by first class mail, a
notice of redemption to each Holder whose Notes are to be redeemed at its
registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Issuers default in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) the CUSIP number of the Notes to be redeemed and that no
representation is made as to the correctness or accuracy of the CUSIP number, if
any, listed in such notice or printed on the Notes.
At the Issuers' written request, the Trustee shall give the
notice of redemption in the Issuers' name and at their expense; provided,
however, that each Issuer shall have delivered to the Trustee, at least 45 days
prior to the redemption date, an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
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SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Issuers shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Issuers upon
their written request any money deposited with the Trustee or the Paying Agent
by the Issuers in excess of the amounts necessary to pay the redemption price
of, and accrued interest on, all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Issuers to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Issuers
shall issue and, upon the Issuers' written request, the Trustee shall
authenticate for the Holder at the expense of the Issuers a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the
Issuers shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to December 1, 2000. Thereafter, the Issuers shall have the option to
redeem the Notes, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on December 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000.............................................................107.429%
2001.............................................................105.571%
2002.............................................................103.714%
2003.............................................................101.857%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, until December 1, 2000, either or both of the Issuers may redeem up to 35%
of the aggregate principal amount of Notes
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<PAGE> 42
originally issued hereunder with the net proceeds of a Public Equity Offering at
a redemption price equal to 113% of the principal amount thereof plus accrued
and unpaid Liquidated Damages thereon, if any; provided that at least $65.0
million in aggregate principal amount of the Notes remain outstanding
immediately after the occurrence of such redemption; provided further that the
call for such redemption occurs within 45 days of the date of the closing of
such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 REDEMPTION FOR TAX REASONS
(a) The Notes may be redeemed, at the option of either or both
of the Issuers, in whole but not in part, at any time, upon giving not less than
30 nor more than 60 days' notice to the Holders of the Notes, at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest and Liquidated Damages, if any, to the date fixed for redemption and
Additional Amounts, if any, if the Issuers determine and certify to the Trustee
immediately prior to the giving of such notice (which certification shall
include an Opinion of Mexican Counsel) that (i) as a result of any change in, or
amendment to, the laws (or any rules or regulations promulgated thereunder) of
Mexico, or any political subdivision thereof or any taxing authority thereof or
therein affecting taxation, or any amendment to, change in or expiration of an
official interpretation or application regarding such laws, treaties, rules or
regulations which are of general applicability, which change, amendment,
application, expiration or interpretation becomes effective on or after the
Closing Date, either Issuer would be obligated, for reasons outside its control,
to pay Additional Amounts in respect of interest payments on the Notes pursuant
to the terms and conditions thereof in excess of those attributable to Mexican
withholding tax on the basis of a rate of 15% imposed on interest payments, (ii)
such obligation cannot be avoided by the Issuers after taking reasonable
measures available to them to avoid it, and (iii) such obligation (or a separate
tax obligation of equal or greater magnitude that arises from the structuring
contemplated by this clause (iii)) cannot be avoided by structuring the interest
payments in such manner that they are paid solely by CR US (rather than CR
Mexico); provided that (a) no such notice of redemption shall be given earlier
than 90 days prior to the earliest date on which either Issuer would be
obligated to pay such Additional Amounts and (b) at the time such notice is
given, the Issuers' obligation to pay such Additional Amounts remains in effect.
(b) Before any notice of redemption pursuant to this
provision is given to the Trustee or the Holders, the Issuers shall deliver to
the Trustee (i) an Officers' Certificate to the effect that the Issuers'
obligation to pay such Additional Amounts in respect of the Notes cannot be
avoided by either or both of the Issuers taking reasonable measures available to
them and (ii) an Opinion of Mexican Counsel to the effect that the either or
both of Issuers would be obligated to pay Additional Amounts in respect of
interest payments on the Notes pursuant to the terms and conditions thereof in
excess of those attributable to Mexican withholding tax on the basis of a rate
of 15% imposed on interest payments to Holders because of a change, amendment,
application, expiration or interpretation regarding laws, rules or regulations
of the kind referred to above. The Trustee shall accept such certificate and
opinion as sufficient evidence of the satisfaction of the conditions precedent
set forth in clauses (i) and (ii) described in the preceding paragraph (subject
to the proviso thereto), in which event it will be conclusive and binding on the
Trustee and the Holders. Such notice of redemption, once given by the Issuers to
the Trustee or Holders, will be irrevocable. Except as provided in this Section
3.08, any redemption pursuant to Section 3.08 shall be made pursuant to the
provisions of Section 3.01 through 3.06 hereof.
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SECTION 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Issuers
shall be required to commence an offer to all Holders to purchase Notes (an
"Asset Sale Offer"), they shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Issuers shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Issuers shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Issuers default in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Issuers, a depositary, if appointed by
the Issuers, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Issuers, the depositary or the Paying Agent, as the case may be, receive(s), not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
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(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Issuers shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuers so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuers shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall each deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Issuers in accordance
with the terms of this Section 3.09. The Issuers, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Issuers for purchase, and the Issuers shall promptly issue a new Note, and
the Trustee, upon written request from the Issuers shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Issuers to the Holder thereof. The Issuers
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
SECTION 3.10 MANDATORY REDEMPTION.
The Issuers shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
ARTICLE 4.
COVENANTS
SECTION 4.01 PAYMENT OF NOTES.
The Issuers shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than CR US or a
Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money
deposited by the Issuers in immediately available funds and designated for and
sufficient to pay all principal, premium, if any, and interest then due. The
Issuers shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Issuers shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal at the rate
equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; they shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
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SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Issuers shall maintain in the Borough of Manhattan, the City
of New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee or Registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Issuers in respect of the Notes and this Indenture may be served. The
Issuers 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 Issuers
shall fail to maintain any such required 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 Issuers 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;
provided, however, that no such designation or rescission shall in any manner
relieve the Issuers of their obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Issuers 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 Issuers hereby designate the Corporate Trust Office of the
Trustee as one such office or agency of the Issuers in accordance with Section
2.03.
SECTION 4.03 REPORTS.
Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Issuers will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K with
respect to quarterly periods ending after the Issue Date if the Issuers were
required to file such Forms (including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of CR US and its consolidated Subsidiaries
(showing in reasonable detail, either on the face of the financial statements or
in the footnotes thereto and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, the financial condition and
results of operations of CR US and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of CR US) and, with respect to the annual information only, a report thereon by
the Issuers' certified independent accountants and (ii) all current reports that
would be required to be filed with the SEC on Form 8-K if the Issuers were
required to file such reports, in each case within the time periods specified in
the SEC's rules and regulations. In addition, following the consummation of the
exchange offer contemplated by the Registration Rights Agreement, whether or not
required by the rules and regulations of the SEC, the Issuers shall file a copy
of all such information and reports with the SEC for public availability within
the time periods specified in the SEC's rules and regulations (unless the SEC
will not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. The Issuers shall at all times
comply with TIA ss. 314(a).
SECTION 4.04 COMPLIANCE CERTIFICATE.
(a) Each Issuer shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of CR US and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Issuers have kept, observed, performed and fulfilled
their obligations under this
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<PAGE> 46
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Issuers have kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and are not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Issuers are taking or
propose to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Issuers are taking or propose to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Issuers' independent public accountants (who shall be a
firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that either Issuer has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) Each Issuer shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Issuers are taking or proposes to take with
respect thereto.
SECTION 4.05 TAXES.
Each Issuer shall pay, and shall cause each of its Subsidiaries
to pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS.
Each Issuer 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
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and each Issuer (to the extent
that 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 4.07 RESTRICTED PAYMENTS.
CR US shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of CR US's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving CR US or any of its
Restricted Subsidiaries) or to the direct or indirect holders of CR US's or any
of its Restricted Subsidiaries' Equity Interests in their
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<PAGE> 47
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of CR US or to CR US or a Restricted
Subsidiary of CR US); (ii) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any merger or
consolidation involving CR US) any Equity Interests of CR US or any direct or
indirect parent of CR US or other Affiliate of CR US that is not a Restricted
Subsidiary of CR US (other than any such Equity Interests owned by CR US or any
Wholly Owned Restricted Subsidiary of CR US); (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Notes, except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) CR US would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by CR US and its Restricted Subsidiaries
after the Issue Date (excluding Restricted Payments permitted by clauses (ii),
(iii) and (iv) of the next succeeding paragraph), is less than the sum, without
duplication, of (i) 50% of the Consolidated Net Income of CR US for the period
(taken as one accounting period) from the beginning of the first fiscal quarter
commencing after the Issue Date to the end of CR US's most recently ended fiscal
quarter for which internal financial statements are available at the time of
such Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by CR US since the Issue Date as a contribution to its common
equity capital or from the issue or sale of Equity Interests of CR US (other
than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of CR US that have been converted into such Equity Interests (other
than Equity Interests (or Disqualified Stock or convertible debt securities)
sold to a Subsidiary of CR US), plus (iii) to the extent that any Restricted
Investment that was made after the Issue Date is sold for cash or Cash
Equivalents or otherwise liquidated or repaid for cash or Cash Equivalents, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial amount of
such Restricted Investment, plus (iv) to the extent that any Unrestricted
Subsidiary is redesignated as a Restricted Subsidiary after the Issue Date, the
lesser of (A) the fair market value of CR US's or its Restricted Subsidiary's
Investment in such Subsidiary as of the date of such redesignation or (B) such
fair market value as of the date on which such Subsidiary was originally
designated as an Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions of this Section
4.07 shall not prohibit (i) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture; (ii) the redemption,
repurchase, retirement, defeasance or other acquisition of any subordinated
Indebtedness or Equity Interests of CR US in exchange for, or out of the net
cash proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of CR US) of, other Equity Interests of CR US (other than any
Disqualified Stock) or a substantially concurrent capital contribution; provided
that the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or
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other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Subsidiary of CR US to the holders of its common Equity Interests on a pro rata
basis; (v) so long as no Default or Event of Default is continuing, loans made
to current officers, directors and employees of CR US or any Restricted
Subsidiary thereof at any one time outstanding not to exceed $2.0 million; and
(vi) repurchases of Capital Stock deemed to occur upon exercise of stock options
to the extent such Capital Stock represents a portion of the price of such
options;
The amount of all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by CR US or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors of CR US whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $5.0 million. Not later than the date
of making any Restricted Payment, the Issuers shall deliver to the Trustee an
Officers' Certificate of each Issuer stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this Section 4.07 were computed, together with a copy of any fairness opinion or
appraisal required herein as of the Issue Date.
The Board of Directors of CR US may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default; provided that in no event shall the business operated by CR US or its
Subsidiaries (including the planned development of a new resort at Cozumel,
Mexico and additional vacation ownership units in Los Cabos, Mexico) as of the
Issue Date be transferred to or held by an Unrestricted Subsidiary. For purposes
of making such determination, all outstanding Investments by CR US and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this Section 4.07. All such outstanding Investments will
be deemed to constitute Investments in an amount equal to the fair market value
of such Investments at the time of such designation. Such designation shall only
be permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
CR US shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to (i)(a) pay dividends or make any other distributions to CR US or
any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect
to any other interest or participation in, or measured by, its profits, or (b)
pay any indebtedness owed to CR US or any of its Restricted Subsidiaries, (ii)
make loans or advances to CR US or any of its Restricted Subsidiaries or (iii)
transfer any of its properties or assets to CR US or any of its Restricted
Subsidiaries. However, the foregoing restrictions will not apply to encumbrances
or restrictions existing under or by reason of (a) the Indenture and the Notes,
(b) applicable laws, or governmental regulations or orders, (c) any instrument
governing Indebtedness or Capital Stock of a Person acquired by CR US or any of
its Restricted Subsidiaries as in effect at the time of such acquisition (except
to the extent such Indebtedness or Capital Stock was incurred in connection with
or in contemplation of such acquisition), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person,
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other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred, (d) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (e) Capital Lease Obligations or purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, (f) any agreement for the sale of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale, (g)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (h) secured Indebtedness otherwise permitted
to be incurred pursuant to the provisions of Section 4.12 that limits the right
of the debtor to dispose of the assets securing such Indebtedness, (i)
provisions with respect to the disposition or distribution of assets or property
in joint venture agreements (or organizational documents established in
connection with a joint venture) and other similar agreements entered into in
the ordinary course of business, (j) restrictions on cash or other deposits or
net worth imposed by customers under contracts entered into in the ordinary
course of business, or (k) any encumbrance or restriction pursuant to
Indebtedness of Receivables Subsidiaries that is permitted to be incurred
subsequent to the Issue Date pursuant to Section 4.09.
SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) CR US shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that CR
US will not issue any Disqualified Stock and will not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that CR
US may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and CR US's Subsidiaries may incur Indebtedness or issue
preferred stock if the Fixed Charge Coverage Ratio for CR US's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock or preferred stock is issued would have
been at least 1.75 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock or preferred stock had been issued,
as the case may be, at the beginning of such four-quarter period. The Indenture
shall also provide that CR US will not incur any Indebtedness that is
contractually subordinated in right of payment to any other Indebtedness of CR
US unless such Indebtedness is also contractually subordinated in right of
payment to the Notes on substantially identical terms; provided, however, that
no Indebtedness of CR US shall be deemed to be contractually subordinated in
right of payment to any other Indebtedness of CR US solely by virtue of being
unsecured.
(b) The provisions of clause (a) of this Section 4.09 will not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by CR US or any of its Restricted
Subsidiaries of Indebtedness under Credit Agreements; provided that the
aggregate principal amount of all Indebtedness (with letters of credit,
guarantees, bid, surety and performance bonds or other obligations under
any Credit Agreement being deemed to have a principal amount equal to
the maximum potential liability of CR US and its Restricted Subsidiaries
thereunder) outstanding under all Credit Agreements after giving effect
to such incurrence does not exceed an amount equal to the greater of (i)
$40.0 million and (ii) 90% of the Vacation Interval Receivables of CR US
and its Restricted Subsidiaries;
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(ii) the incurrence by CR US and CR Mexico of Indebtedness
represented by the Notes;
(iii) the incurrence by CR US or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property, plant or equipment used
in the Permitted Business, in an aggregate principal amount, together
with any Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause
(iii), not to exceed $7.5 million at any time outstanding;
(iv) the incurrence by CR US or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of
assets or a new Restricted Subsidiary; provided that such Indebtedness
was incurred by the prior owner of such assets or such Restricted
Subsidiary prior to such acquisition by CR US or one of its Restricted
Subsidiaries and was not incurred in connection with, or in
contemplation of, such acquisition by CR US or one of it Restricted
Subsidiaries; and provided further that after giving effect to such
acquisition, CR US would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of this
covenant;
(v) the incurrence by CR US or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted
by the Indenture to be incurred (a) under Section 4.09(a) or under
clauses (iii), (iv) and (x) of this Section 4.09(b), or (b) under clause
(ii) of this Section 4.09(b), but only to the extent that the net
proceeds of such Permitted Refinancing Indebtedness incurred pursuant to
this clause (b) are used to refund, refinance or replace Notes that are
repurchased by the Issuers under the provisions of Section 4.15;
(vi) the incurrence by CR US or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among CR US and any
of its Wholly Owned Restricted Subsidiaries; provided, however, that (i)
if either Issuer is the obligor on such Indebtedness, such Indebtedness
is expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes, and (ii)(A) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than CR US or a Restricted
Subsidiary thereof and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either CR US or a Wholly Owned
Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by CR US or such
Restricted Subsidiary, as the case may be, that was not permitted by
this clause (vi);
(vii) the incurrence by CR US or any of its Restricted
Subsidiaries of Hedging Obligations incurred in the ordinary course of
business for the purpose of fixing or hedging interest rate risk or
currency risk and not for the purpose of speculation;
(viii) the guarantee by CR US or any of the Subsidiaries of
Indebtedness of CR US or a Restricted Subsidiary of CR US that was
permitted to be incurred by another provision of this covenant (other
than by clauses (x) or (xi) of this Section 4.09(b));
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(ix) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds, in each case,
issued in favor of governmental bodies or quasi-governmental bodies and
entered into in the ordinary course of business consistent with past
practice of CR US and its Subsidiaries (or of the vacation ownership
segment of the Predecessor Business), and not in connection with the
borrowing of money or the obtaining of advances or credit;
(x) the incurrence by CR US or CR Mexico of additional
Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (x), not to exceed $7.5 million;
(xi) the incurrence by CR US's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event
shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of CR US that was not permitted by this clause
(xi).
(c) For purposes of determining compliance with this Section 4.09,
if an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (i) through (x) above or is entitled to
be incurred pursuant to the first paragraph of this covenant, CR US shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this Section 4.09. Accrual of interest, accretion or amortization
of original issue discount, the payment of interest on any Indebtedness in the
form of additional Indebtedness with the same terms, and the payment of
dividends on Disqualified Stock in the form of additional shares of the same
class of Disqualified Stock shall not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this Section
4.09; provided, in each such case, that the amount thereof is included in Fixed
Charges of CR US as accrued.
Notwithstanding any of the provisions of this Section 4.09, CR
US shall not permit any of its Operating Subsidiaries to, directly or
indirectly, incur any Indebtedness in excess of $3.0 million or issue any shares
of preferred stock (whether or not otherwise permitted by this Section 4.09)
until such time as the Regina Operating Subsidiaries have assumed in full the
existing $86.7 million of intercompany indebtedness owed by Top Acquisition Sub
to CR Mexico and issued Mirror Notes in favor of CR Mexico in respect thereof.
SECTION 4.10 ASSET SALES
CR US shall not, and shall not permit any of its Restricted
Subsidiaries to consummate an Asset Sale unless (x) CR US (or the Restricted
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors of CR US set forth in an Officers' Certificate delivered by
the Issuers to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (y) at least 80% of the consideration received
therefor by CR US or such Restricted Subsidiary is in the form of cash or Cash
Equivalents; provided, however, that the amount of (A) any liabilities (as shown
on CR US's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto), of CR US or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
any guarantee thereof) that are assumed in connection with such Asset Sale by
the transferee of any such assets pursuant to a novation agreement that releases
CR US or such Restricted Subsidiary from further liability and (B) any
securities, notes or other obligations received by CR US or any such
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Restricted Subsidiary from such transferee that are contemporaneously (subject
to ordinary settlement periods) converted by CR US or such Restricted Subsidiary
into cash or Cash Equivalents (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Issuers may apply such Net Proceeds to (i) the acquisition of a
majority of the assets of, or a majority of the Voting Stock of, another
business that is a Permitted Business, (ii) the making of a capital expenditure
or the acquisition of other long-term assets that are used or useful in a
Permitted Business, or (iii) the payment, redemption, defeasance or other
acquisition or retirement for value of senior Indebtedness of either Issuer or
any Restricted Subsidiary in a manner that results in the permanent retirement
of such Indebtedness and, if applicable, the permanent reduction of the related
loan commitment. Pending the final application of any such Net Proceeds, the
Issuers may temporarily reduce revolving credit borrowings or otherwise invest
such Net Proceeds in any manner that is not prohibited by this Indenture. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Issuers will be required to make an offer to all Holders of Notes, and, if
the Company is required to do so under the terms of any other Indebtedness that
ranks pari passu to the Notes, to the holders of such other senior Indebtedness
(an "Asset Sale Offer"), to purchase the maximum principal amount of Notes and
principal of such other senior Indebtedness on a pro rata basis that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in Section 3.09 hereof. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Issuers
may use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes tendered into such Asset
Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds,
the Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
Notwithstanding anything to the contrary contained herein, CR US
or any of its Restricted Subsidiaries may engage in transactions in which (i)
vacation ownership, hotel or other resort properties, parcel(s) of raw land, or
the Asset Management Agreement will be transferred in exchange for one or more
other vacation ownership, hotel or other resort properties, or (ii) one or more
parcels of raw land owned by CR US or any Subsidiary are transferred in exchange
for one or more other parcels of raw land; provided that if the fair market
value of the assets to be transferred by CR US or such Restricted Subsidiary,
plus the fair market value of any other consideration paid or credited by CR US
or such Restricted Subsidiary (the "Transaction Value") exceeds $1.0 million,
such transaction shall require approval of the Board of Directors of CR US. In
addition, each such transaction shall be valued at an amount equal to all
consideration received by CR US or such Restricted Subsidiary in such
transaction, other than the assets received pursuant to such exchange (the
"Other Consideration") for purposes of determining whether an Asset Sale has
occurred. The Other Consideration shall be in the form of cash or Cash
Equivalents to the extent required by this Section 4.10. If the Other
Consideration is of an amount and character such that such transaction
constituted as Asset Sale, then the first paragraph of this Section 4.10 shall
be applicable to any Net Proceeds of such Other Consideration.
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
CR US shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement,
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understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to CR US or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by CR US or such Restricted Subsidiary with an unrelated
Person and (ii) CR US delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to the Holders (or to CR US and its Subsidiaries,
taken as a whole) of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by CR US
or any of its Restricted Subsidiaries in the ordinary course of business and
having terms consistent with the industry practice for reasonably similar
companies, (ii) transactions between or among CR US and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of CR US, (iv) Restricted Payments that are permitted by
the provisions of Section 4.07, and (v) sale of Capital Stock (other than
Disqualified Stock or preferred stock) of CR US.
SECTION 4.12 LIENS.
CR US shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly create, incur, assume or suffer to exist any Lien on
any asset now owned or hereafter acquired, or any income or profits therefrom or
assign or convey any right to receive income therefrom, except Permitted Liens,
unless all payments due under the Notes or the Indenture are equally and ratably
secured with the obligations so secured, in each case, until such time as such
obligations are no longer secured by a Lien.
SECTION 4.13 LINE OF BUSINESS.
CR US shall, and shall cause its Subsidiaries to, conduct its
and their respective businesses such that CR US and its Subsidiaries, taken as a
whole, will at all times remain a Permitted Business.
SECTION 4.14 CORPORATE EXISTENCE.
Subject to Article 5 hereof, CR US 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 each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of CR US or any such Subsidiary
and (ii) the rights (charter and statutory), licenses and franchises of CR US
and its Subsidiaries; provided, however, that CR US 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 CR US and its Subsidiaries, taken as a whole, and that the loss
thereof is not adverse in any material respect to the Holders of the Notes.
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SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Issuers shall
make an offer (a "Change of Control Offer") to each Holder to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Issuers shall mail a notice to each Holder
describing the transaction or transactions that constitute a Change of Control
and stating: (1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered will be accepted for payment; (2) the
purchase price and the purchase date, which shall be no later than 30 business
days from the date such notice is mailed (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest; (4) that,
unless the Issuers default in the payment of the Change of Control Payment, all
Notes accepted for payment pursuant to the Change of Control Offer shall cease
to accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to surrender the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at
the address specified in the notice or transfer by book-entry transfer to a
Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and (7) that Holders whose
Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof. The Issuers shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes in connection with a Change of Control.
(b) On the Change of Control Payment Date, the Issuers shall, to
the extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate of each
Issuer stating the aggregate principal amount of Notes or portions thereof being
purchased by the Issuers. The Paying Agent shall promptly mail to each Holder of
Notes so tendered payment in an amount equal to the purchase price for the
Notes, and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered by such Holder, if any;
provided, that each such new Note shall be in a principal amount of $1,000 or an
integral multiple thereof. The Issuers shall publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(c) The Issuers shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control Offer
made by the Issuers and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
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SECTION 4.16 RESTRICTION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES.
CR US shall not permit any of its Restricted Subsidiaries to
issue any preferred stock, or permit any Person to own or hold an interest in
any preferred stock of any such Restricted Subsidiary, except for preferred
stock issued to CR US or a Wholly Owned Restricted Subsidiary of CR US.
SECTION 4.17 LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED SUBSIDIARIES.
Except as contemplated in clause (viii) of the definition of
Asset Sales, CR US (i) shall not, and shall not permit any Wholly Owned
Subsidiary of CR US to, transfer, convey, sell, lease or otherwise dispose of
any Equity Interests of any Wholly Owned Subsidiary of CR US to any Person
(other than CR US or a Wholly Owned Subsidiary of CR US ), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Equity
Interests of such Wholly Owned Subsidiary and (b) the cash Net Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof, (ii) shall not permit any Wholly Owned
Subsidiary of CR US to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to CR US or a Wholly Owned Subsidiary of CR US;
and (iii) shall not transfer, convey, sell, lease or otherwise dispose of any
Equity Interest in CR Mexico.
SECTION 4.18 PAYMENTS FOR CONSENT.
Neither CR US nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.19 LIMITATIONS ON CR MEXICO
Notwithstanding any provision of the Indenture to the contrary,
(i) CR Mexico must at all times continue to be a Wholly Owned Restricted
Subsidiary of CR US, (ii) CR Mexico may not consolidate or merge with or into
any Person other than a Wholly Owned Restricted Subsidiary, and (iii) CR US
shall cause the Regina Operating Subsidiaries to (a) assume, no later than April
30, 1998, the $86.7 million of intercompany indebtedness owed by CR Mexico Top
Acquisition Sub and (b) issue Mirror Notes in favor of CR Mexico in respect
thereof, and (iv) CR Mexico shall at all times maintain the Mirror Notes in
aggregate principal amount equal to the amounts of outstanding loans from CR
Mexico to the Operating Subsidiaries (to the extent such loans have not been
repaid) and shall not incur or suffer to exist any Lien on the Mirror Notes;
provided, however, that this clause (iv) shall cease to apply if CR Mexico
merges with (and the successor entity of such merger is) a Wholly Owned
Restricted Subsidiary that owns, either directly or indirectly, substantially
all of the assets located in Mexico of CR US and its Restricted Subsidiaries,
taken as a whole.
SECTION 4.20 DISPOSITION OF REMAINDER INTEREST
CR US shall effect the disposition of the Remainder Interest
such that, after giving effect to such disposition, CR US will not be required
to use the installment method of accounting with respect to the presentation of
its consolidated financial statements under GAAP for the period ended
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December 31, 1997 and any future periods; provided that this covenant shall not
apply if (i) CR US is able to use (and uses) the full accrual method of
accounting with respect to the presentation of its consolidated financial
statements (including those required to be delivered to the Holders under the
provision of Section 4.03) under GAAP for the period ending December 31, 1997
and any future periods and (ii) such financial statements are audited by and
accompanied with an audit report of a Big Six accounting firm.
SECTION 4.21 ADDITIONAL AMOUNTS
(a) Any payments made by the Issuers under or with respect to the
Notes shall be made free and clear of and without withholding or deduction for
or on account of any present or future tax, duty, levy, impost, assessment or
other governmental charge of whatever nature imposed or levied by or on behalf
of Mexico or of any subdivision thereof or by any authority or agency therein or
thereof having power to tax (hereinafter "Taxes"), unless either Issuer is
required to withhold or deduct Taxes by law, rule or regulation or by the
interpretation or administration thereof. If either Issuer is so required to
withhold or deduct any amount for or on account of Taxes from any payment made
under or with respect to the Notes, then the Issuers shall pay such additional
amounts ("Additional Amounts") as may be necessary, so that the net amount
received on the respective due dates of such amounts by each Holder (including
Additional Amounts) after such withholding or deduction will not be less than
the amount such Holder would have received if such Taxes had not been withheld
or deducted.
(b) Notwithstanding clause (a) of this Section 4.21, no such
Additional Amounts shall be payable with respect to:
(i) any Taxes which are imposed on, or deducted or withheld
from, payments made to the Holder or beneficial owner of a Note because
of the existence of any present or former connection between the Holder
or beneficial owner of the Notes (or between a fiduciary, settlor,
beneficiary, member of, or possessor of a power over, such Holder or
beneficial owner, if such Holder or beneficial owner is an estate, a
trust or a partnership) and Mexico, except for a connection relating to
or otherwise arising from the mere ownership of, or receipt of payment
under, such Note or the exercise of rights under such Note or the
Indenture (personally or through the Trustee);
(ii) any Taxes that are imposed on, or withheld or deducted
from, payments made to the Holder or beneficial owner of a Note to the
extent such Taxes would not have been so imposed, deducted or withheld
but for the failure by such Holder or beneficial owner of such Note to
comply with any certification, identification, information,
documentation or other reporting requirement concerning the nationality,
residence or identity of the Holder or beneficial owner of such Note if
(1) such compliance is required or imposed by a statute, treaty,
regulation, ruling or administrative practice in order to make any claim
for exemption from, or reduction in the rate of, the imposition,
withholding or deduction of any Taxes; and (2) at least 60 days prior to
the first payment date with respect to which the Issuers shall apply
this clause (ii), the Issuers shall have notified such Holders or
beneficial owners of the Notes in writing that such Holders and
beneficial owners of the Notes will be required to provide such
information or documentation; provided, however, that the Issuers'
obligation to pay Additional Amounts shall apply and the limitations set
forth in this clause (ii) shall not apply if such Holder or beneficial
owner of the Notes as the case may be, satisfies the certification or
reporting requirement described in this clause (ii) within 30 days of
the payment date unless CR US has already
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irrevocably paid to the relevant taxing authority or agency the withheld
or deducted amount of Tax in respect of which such Additional Amounts
would have been payable;
(iii) any Taxes that would not have been imposed but for the
presentation by such Holder for payment of such Holder's Note (where
presentation for payment is requirement) on a date more than 30 days
after the date on which such payment became due and payable or the date
on which payment thereof is duly provided for and notice thereof given
to Holders to the extent required herein, whichever occurs later, but
only to the extent that the Holder of such Note would have been entitled
to Additional Amounts in respect of such Taxes on presenting such Note
for payment on any date during such 30-day period;
(iv) any Taxes that would not have been imposed if the
beneficial owner of, or person ultimately entitled to obtain an interest
in, such Notes had been the Holder of such Notes;
(v) Taxes imposed because of any estate, inheritance, gift,
sale, transfer, personal property or similar taxes, duties, assessments
or charges that are payable otherwise than by withholding from a payment
of (or in respect of) principal of, or interest or Liquidated Damages
on, the Notes; or
(vi) any combination of clauses (i), (ii), (iii), (iv) or (v)
above (the Taxes described in clauses (i) through (v) for which no
Additional Amounts are payable are hereinafter referred to as "Excluded
Taxes").
(c) Notwithstanding clause (b) of this Section 4.21, the limitations
on the Issuers' obligation to pay Additional Amounts set forth in clause (b)(ii)
of this Section 4.21 shall not apply if (i) the provision of information,
certification or other evidence described in such clause (b)(iii) would be
materially more onerous, in form, in procedure or in the substance of
information disclosed, to a Holder or beneficial owner of a Note (taking into
account any relevant differences between U.S. and Mexican law, regulation or
administrative practice) than comparable information or other reporting
requirements imposed under U.S. tax law, regulation or administrative practice
(such as IRS Forms 1001, W-8 and W-9) or (ii) Rule 3.32.11 issued by the
Secretaria de Hacienda y Credito Publico (Ministry of Finance and Public Credit)
on March 21, 1997 or a substantially similar successor of such Rule is in
effect, unless the provision of the information, documentation or other evidence
described in clause (b)(ii) of this Section 4.21 is expressly required by
statute, rule or regulation, to apply Rule 3.32.11 (or a substantially similar
successor of such Rule), the Issuers cannot obtain such information,
documentation or other evidence on their own through reasonable diligence and
the Issuers otherwise would meet the requirements for application of Rule
3.32.11 (or such successor of such Rule). In addition, such clause (b)(ii) shall
not be construed to require that a non-Mexican pension or retirement fund or a
non-Mexican financial institution or any other Holder register with the Ministry
of Finance and Public Credit to establish eligibility for an exemption from or
reduction of Mexican withholding tax or to require that a Holder or beneficial
owner certify or provide information concerning whether it is or is not a
tax-exempt pension or retirement fund.
(d) At least 30 days prior to each date on which any payment under
or with respect to the Notes is due and payable, if the Issuers shall pay
Additional Amounts with respect to such payment, the Issuers will deliver to the
relevant Trustee and the Paying Agent an Officers' Certificate stating the fact
that such Additional Amounts will be payable and the amounts so payable and will
set forth such other information as is necessary to enable the Trustee or the
Paying Agent, as the case may be, to pay such Additional Amounts to Holders on
the payment date.
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(e) Whenever in the Indenture there is mentioned, in any context,
the payment of principal, interest, Liquidated Damages or any other amount
payable under or with respect to any Note, such mention shall be deemed to
include mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
(f) The Issuers shall provide the Trustee, within 20 Business Days
after the receipt thereof, with an official receipt of such payment or if such
receipt is unavailable, with documentation evidencing the payment of Mexican
taxes in respect of which the Issuers have paid any Additional Amounts. Copies
of such documentation will be made available to the Holders or the Paying Agent,
as applicable, upon request therefor.
(g) In addition, the Issuers shall pay any stamp, issue,
registration, documentary or other similar taxes and other duties (including
interest and penalties and fees payable to the RNVI) (i) payable in Mexico or
the United States (or any political subdivision of either jurisdiction) in
respect of the creation, issue and offering of the Notes and (ii) payable in
Mexico (or any political subdivision thereof) in respect of the subsequent
redemption or retirement of the Notes other than, in the case of any subsequent
redemption or retirement, Excluded Taxes.
ARTICLE 5.
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS.
CR US shall not consolidate or merge with or into (whether or
not CR US is the surviving corporation) or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions to, another corporation, Person or entity
unless (i) CR US is the surviving corporation or the entity or the Person formed
by or surviving any such consolidation or merger (if other than CR US) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia, (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than CR US) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of CR US (i) under the Registration Rights Agreement and
(ii) pursuant to a supplemental indenture under the Notes and this Indenture in
a form reasonably satisfactory to the Trustee, together with the documentation
required by Section 9.06 hereof, (iii) immediately after such transaction, no
Default or Event of Default exists and (iv) except in the case of a merger of CR
US with or into a Wholly Owned Restricted Subsidiary of CR US, CR US or the
entity or Person formed by or surviving any such consolidation or merger (if
other than CR US), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) shall have Consolidated
Net Worth (immediately after the transaction) equal to or greater than the
Consolidated Net Worth of CR US immediately preceding the transaction and (B)
shall, at the time of such transaction and after giving pro forma effect thereto
as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test applicable to CR
US set forth in clause (a) of the first paragraph of Section 4.09 hereof.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of CR US in accordance with Section 5.01
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hereof, the successor corporation formed by such consolidation or into or with
which CR US is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted for
(so that from and after the date of such consolidation, merger, sale, lease,
conveyance or other disposition, the provisions of this Indenture referring to
the "CR US" shall refer instead to the successor corporation and not to CR US),
and may exercise every right and power of CR US under this Indenture with the
same effect as if such successor Person had been named as CR US herein;
provided, however, that the predecessor CR US shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of CR US's assets that meets the requirements of Section 5.01
hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Issuers default in the payment when due of interest on, or
Liquidated Damages or Additional Amounts with respect to, the Notes and such
default continues for a period of 30 days;
(b) the Issuers default in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or
otherwise;
(c) CR US fails to comply with any of the provisions of Section
4.07, 4.09, 4.10, 4.15 or 5.01 hereof;
(d) CR US or any of its Subsidiaries fails to observe or perform any
other covenant, representation, warranty or other agreement in this Indenture or
the Notes for 60 days after notice to the Issuers by the Trustee or the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding
voting as a single class;
(e) a 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 CR US or any of its Subsidiaries, whether
such Indebtedness or guarantee now exists, or is created after the date of this
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express 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 more than the lessor of (a) the amount of
stockholders' equity on CR US's most recent quarterly balance sheet and (b)
$10.0 million;
(f) final, non-appealable judgments (to the extent not covered by
insurance for which there is no dispute as to coverage) for the payment of money
are entered by a court or courts of competent jurisdiction against CR US or any
of its Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary and such judgment or judgments
remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds the lesser of (a) the amounts of stockholders'
equity on CR US's most recent quarterly balance sheet and (b) $10.0 million; or
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(g) CR US, CR Mexico or any of their respective Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary pursuant to or within the meaning of
Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against CR US, CR Mexico or any of their
respective Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a Custodian of CR US, CR Mexico or any of their
respective Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary or for all
or substantially all of the property of CR US, CR Mexico or any of their
respective Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of CR US, CR Mexico or any of their
respective Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
SECTION 6.02 ACCELERATION.
If any Event of Default (other than an Event of Default
specified in clause (g) or (h) of Section 6.01 hereof with respect to CR US, CR
Mexico, any of their respective Significant Subsidiaries or any group of
Significant Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately. Upon any such declaration, the Notes shall
become due and payable immediately. Notwithstanding the foregoing, if an Event
of Default specified in clause (g) or (h) of Section 6.01 hereof occurs with
respect to CR US, CR Mexico, any of their respective Significant Subsidiaries or
any group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived.
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If an Event of Default occurs on or after December 1, 2000 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of either Issuer with the intention of avoiding payment of the premium that the
Issuers would have had to pay if the Issuers then had elected to redeem the
Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to December 1,
2000 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of either Issuer with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on December 1 of the years
set forth below, as set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1997................................................................113%
1998................................................................113%
1999................................................................113%
2000................................................................113%
</TABLE>
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
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direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right
of any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Issuers for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized 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 (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to either
Issuer (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any
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custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
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 accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money, property or other
consideration pursuant to this Article, it shall pay out the money, property or
other consideration in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
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 a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
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ARTICLE 7.
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in 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 duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether they conform to the requirements of this
Indenture, but need not verify the contents thereof.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; 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 6.05 hereof.
(d) Whether or not therein expressly so provided, 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.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
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SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) 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 the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from either Issuer shall be sufficient if
signed by an Officer or, in the case of an Officers' Certificate or an
Authentication Order, two Officers of such Issuer.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Issuers or any
Affiliate of either Issuer with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Issuers' use of the proceeds from the Notes or
any money paid to the Issuers or upon the Issuers' direction under any provision
of this Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
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SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice
of the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Note, the Trustee may withhold the notice if and so long
as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA ss. 313(a) (but if no
event described in TIA ss. 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all
reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders
of Notes shall be mailed to the Issuers and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Issuers shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Issuers jointly and severally shall pay to the Trustee from
time to time such reasonable compensation as shall be agreed in writing from
time to time for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers jointly and severally shall reimburse
the Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Issuers jointly and severally shall indemnify the Trustee
against any and all losses, liabilities or expenses incurred by it arising out
of or in connection with the acceptance or administration of its duties under
this Indenture, including the costs and expenses of enforcing this Indenture
against the Issuers (including this Section 7.07) and defending itself against
any claim (whether asserted by either Issuer or any Holder or any other person)
or liability in connection with the exercise or performance of any of its powers
or duties hereunder, except to the extent any such loss, liability or expense
may be attributable to its negligence or bad faith. The Trustee shall notify the
Issuers promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Issuers shall not relieve the Issuers of their
obligations hereunder. The Issuers shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Issuers
shall pay the reasonable fees and expenses of such counsel. The Issuers need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Issuers under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture and any other
termination of the Indenture, including, without limitation, any termination
under any Bankruptcy Law.
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To secure the Issuers' payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture and any other termination of the Indenture,
including, without limitation, any termination under any Bankruptcy Law.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2)
to the extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged
from the trust hereby created by so notifying the Issuers. The Holders of Notes
of a majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Issuers in writing. The Issuers may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Issuers shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Issuers.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Issuers,
or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who
has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers . Thereupon, the
resignation or removal of the retiring Trustee shall become
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effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. The successor Trustee shall mail a
notice of its succession to Holders of the Notes. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
provided all sums owing to the Trustee hereunder have been paid and subject to
the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Issuers' obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Issuers may, at the option of the Board of Directors of each
Issuer evidenced by a resolution set forth in an Officers' Certificate of each
Issuer, at any time, elect to have either Section 8.02 or 8.03 hereof be applied
to all outstanding Notes upon compliance with the conditions set forth below in
this Article Eight.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Issuers' exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Issuers shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from their obligations with respect to all outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"Legal Defeasance"). For this purpose, Legal Defeasance means that the Issuers
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this
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Indenture (and the Trustee, on demand of and at the expense of the Issuers,
shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Issuers'
obligations with respect to such Notes under Article 2 and Section 4.02 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Issuers' obligations in connection therewith and (d) this Article Eight.
Subject to compliance with this Article Eight, the Issuers may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
SECTION 8.03 COVENANT DEFEASANCE.
Upon the Issuers' exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Issuers shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from their obligations under the covenants contained in Sections 4.07, 4.08,
4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20 and 4.21 hereof
with respect to the outstanding Notes on and after the date the conditions set
forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and
the Notes shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Issuers may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Issuers' exercise under
Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(d) through 6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Issuers must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages and
Additional Amounts, if any, and interest on the outstanding Notes on the stated
date for payment thereof or on the applicable redemption date, as the case may
be;
(b) in the case of an election under Section 8.02 hereof, the
Issuers shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Issuers have
received from, or there has been published by, the Internal Revenue Service a
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ruling or (B) since the Issue Date, there has been a change in the applicable
U.S. federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Legal Defeasance and will be subject to
U.S. federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Issuers shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to U.S. federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence and the granting of Liens to secure such
Indebtedness) or insofar as Sections 6.01(g) or 6.01(h) hereof is concerned, at
any time in the period ending on the 91st day after the date of deposit;
(e) except as contemplated by clause (d), such Legal Defeasance or
Covenant Defeasance shall not result in a breach or violation of, or constitute
a default under, any material agreement or instrument (other than this
Indenture) to which CR US or any of its Subsidiaries is a party or by which CR
US or any of its Subsidiaries is bound;
(f) the Issuers shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that,
assuming no intervening bankruptcy of either Issuer between the date of deposit
and the 91st day following the deposit and assuming no Holder of Notes is an
insider of either Issuer, after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) each Issuer shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the intent
of preferring the Holders over any other creditors of the Issuers or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Issuers; and
(h) the Issuers shall have delivered to the Trustee an Officers'
Certificate of each Issuer and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of
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such Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Issuers acting as Paying Agent) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
The Issuers jointly and severally shall pay and indemnify the
Trustee against any tax, penalty, loss, fee or other charge imposed on or
assessed against the cash or non-callable Government Securities deposited
pursuant to Section 8.04 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 the outstanding Notes. This provision shall
survive as set forth in Section 7.07.
Anything in this Article Eight to the contrary notwithstanding,
the Trustee shall deliver or pay to the Issuers from time to time upon the
written request of the Issuers any money or non-callable Government Securities
held by them as provided in Section 8.04 hereof which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06 REPAYMENT TO ISSUERS.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Issuers, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Issuers on their written request or (if then held by the Issuers)
shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a secured creditor, look only to the Issuers for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Issuers as trustees thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Issuers cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Issuers .
SECTION 8.07 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Issuers' obligations under this Indenture
and the Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying
Agent is permitted to apply all such money in accordance with Section 8.02 or
8.03 hereof, as the case may be; provided, however, that, if the Issuers make
any payment of principal of, premium, if any, or interest on any Note following
the reinstatement of its obligations, the Issuers shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money held
by the Trustee or Paying Agent.
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ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Issuers and
the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes or to alter the provisions of Article 2 hereof (including
the related definitions) in a manner that does not materially adversely affect
any Holder;
(c) to provide for the assumption of the CR US's obligations to the
Holders of the Notes by a successor to CR US pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
Upon the written request of the Issuers accompanied by a
resolution of the Board of Directors of each Issuer authorizing the execution of
any such amended or supplemental Indenture, and upon receipt by the Trustee of
the documents described in Section 7.02 and 9.06 hereof, the Trustee shall join
with the Issuers in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Indenture
or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Issuers and
the Trustee may amend or supplement this Indenture (including Sections 3.08,
3.09, 4.10 and 4.15 hereof) and the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
Notes then outstanding voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes).
Upon the written request of the Issuers accompanied by a
resolution of the Board of Directors of each Issuer authorizing the execution of
any such amended or supplemental Indenture, and upon the filing with the Trustee
of evidence satisfactory to the Trustee of the consent of the Holders of Notes
as aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Issuers in the execution of
such amended or supplemental Indenture unless
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such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Issuers shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Issuers to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by the Issuers with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of the
Notes except as provided above with respect to Sections 3.08, 3.09, 4.10 and
4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or interest on the Notes;
(g) waive a redemption payment with respect to any Note (except as
described above with respect to Sections 3.08, 3.09, 4.10 or 4.15); or
(h) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provision.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
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SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Issuers in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Issuers may not sign an amendment or supplemental Indenture until the Board
of Directors of each Issuer approves it. In executing any amended or
supplemental indenture, the Trustee shall be entitled to receive and (subject to
Section 7.01 hereof) shall be fully protected in relying upon, in addition to
the documents required by Section 10.04 hereof, an Officer's Certificate of each
Issuer and an Opinion of Counsel stating that the execution of such amended or
supplemental indenture is authorized or permitted by this Indenture.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall
control.
SECTION 10.02 NOTICES.
Any notice or communication by either Issuer or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address
If to the Issuers:
Club Regina Resorts, Inc.
10000 Memorial Drive
Houston, TX 77024
Telecopier No.: (713) 223-5825
Attention: Chairman
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With a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Pennzoil Place - South Tower
711 Louisiana Street
Houston, TX 77002
Telecopier No.:.(713) 236-0822
Attn: Julien R. Smythe, Esq.
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Telecopier No.: (212) 858-2952
Attention: Corporate Trust Administration
Either Issuer or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA ss. 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Issuers mail a notice or communication to Holders, they
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Issuers, the Trustee, the Registrar and anyone else shall have the protection of
TIA ss. 312(c).
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SECTION 10.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuers to the Trustee to
take any action under this Indenture, each Issuer shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 10.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 10.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 10.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 10.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporation or stockholder of either Issuer, as such, shall have any liability
for any obligations of the Issuers under the Notes, or this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
71
<PAGE> 77
SECTION 10.08 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
(b) Each Issuer and, with respect to clause (i) below, the
Trustee hereby irrevocably and unconditionally:
(i) submits itself and its property to any legal action or
proceeding relating to this Indenture, or for recognition and
enforcement of any judgment in respect of this Indenture, to the
non-exclusive general jurisdiction of the courts of the State of New
York, County of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts for such state
and federal courts;
(ii) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to CR US at its
address set below its signature to this Agreement or at such other
address as CR US shall have notified the Trustee; provided that for any
notice or service of process to be effective under Mexican law, such
notice or service shall be deemed to have been given or made when
delivered either (i) personally, return receipt requested or (ii) by
certified mail, return receipt requested; and
(iv) agrees that nothing in this Indenture shall affect the
right to effect service of process in any other manner permitted by law
or shall limit the right to sue in any other jurisdiction.
SECTION 10.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of CR US or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 10.10 SUCCESSORS.
All agreements of the Issuers in this Indenture and the Notes
shall bind the successors of either of them. All agreements of the Trustee in
this Indenture shall bind its successors.
SECTION 10.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
72
<PAGE> 78
SECTION 10.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 10.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table 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 of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
SECTION 10.14 APPROVAL OF BOARD OF DIRECTORS.
To the extent any provision of this Indenture requires the
approval of the Board of Directors of CR US, such requirement may be satisfied
if the matter in question is approved by the Board of Directors of a Wholly
Owned Restricted Subsidiary of CR US, but only if the members of the Board of
Directors of such Restricted Subsidiary are identical to the members
constituting the entire Board of Directors of CR US on the date that the
applicable resolution is adopted.
(Signature Page Follows)
73
<PAGE> 79
SIGNATURES
Dated as of December 5, 1997
CLUB REGINA RESORTS, INC.
BY:
-------------------------------------
Name:
Title:
Attest:
- -------------------------
Name:
Title:
Dated as of December 5, 1997
CR RESORTS CAPITAL, S. DE R. L. DE C. V.
BY:
-------------------------------------
Name:
Title:
Attest:
- -------------------------
Name:
Title:
(Signature Page Continues)
S-1
<PAGE> 80
Dated as of December 5, 1997
IBJ SCHRODER BANK & TRUST COMPANY
BY:
-------------------------------
Name:
Title:
Attest:
- --------------------------------
Authorized Signatory
2
<PAGE> 81
EXHIBIT A (FACE OF NOTE)
13% SENIOR NOTES DUE 2004, SERIES A
CUSIP Number __________________
No. _____ $________
FOR PURPOSES OF SECTION 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE
DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE PRICE IS
$1,000, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $93.50, THE ISSUE DATE IS
DECEMBER 5, 1997, AND THE YIELD TO MATURITY IS 15.218% PER ANNUM.
CLUB REGINA RESORTS, INC., a Nevada corporation, and CR RESORTS
CAPITAL, S. de R. L. de C. V., a Mexican Sociedad de Responsabilidad Limitada de
Capital Variable promise to pay to ________________ or registered assigns, the
principal sum of _____________________ DOLLARS ($____________) on December 1,
2004.
Interest Payment Dates: June 1 and December 1, commencing June 1,
1998. Record Dates: May 15, and November 15.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
Dated: __________________
[SEAL] CLUB REGINA RESORTS, INC.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
CR RESORTS CAPITAL, S. de R. L. de C. V.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
This is one of the [Global] Notes referred to
in the within-mentioned Indenture:
IBJ Schroder Bank & Trust Company, as Trustee
By:
---------------------------------
Authorized Signatory
A-1
<PAGE> 82
(BACK OF NOTE)
CLUB REGINA RESORTS, INC. AND
CR RESORTS CAPITAL, S. DE R. L. DE C. V.
13% SENIOR NOTES DUE 2004, SERIES A
[INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE
INDENTURE:
THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY TRUST COMPANY (THE
"DEPOSITARY") OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS
HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT
THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS ON ITS RECORDS AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY WITHOUT THE PRIOR WRITTEN CONSENT OF THE
ISSUERS.]
[INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS
OF THE INDENTURE:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS
TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE
144(k) AS PERMITTING RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT
RESTRICTION) AFTER THE LATER OF THE ORIGINAL CLOSING DATE HEREOF AND THE LAST
DATE ON WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE ISSUERS, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
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(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE
FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.]
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Club Regina Resorts, Inc., a Nevada corporation
("CR US"), and CR Resorts Capital, S. de R. L. de C. V., a Mexican Sociedad de
Responsabilidad Limitada de Capital Variable ("CR Mexico" and, together with CR
US, the "Issuers"), promise to pay interest on the principal amount of this Note
at 13% per annum from June 1, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Issuers will pay interest and Liquidated Damages
semi-annually on June 1 and December 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be June 1, 1998. The Issuers shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; they
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Issuers will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 15 or November
15 (whether or not a Business Day) next preceding the Interest Payment Date,
even if such Notes are cancelled after such record date and on or before such
Interest Payment Date, except as provided in Section 2.12 of the Indenture with
respect to defaulted interest. The Notes will be payable as to principal,
premium and Liquidated Damages, if any, and interest at the office of the
Trustee maintained for such purpose within the City and State of New York;
provided that payment by wire transfer of immediately available funds will be
required to be made by the Trustee with respect to principal of and interest,
premium and Liquidated Damages on, all Global Notes and all other Notes the
Holders of which shall have provided written wire transfer instructions to the
Trustee. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
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<PAGE> 84
3. PAYING AGENT AND REGISTRAR. Initially, IBJ Schroder Bank
& Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar without notice
to any Holder. CR US or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Issuers issued the Notes under an Indenture
dated as of December 5, 1997 ("Indenture") between the Issuers and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Issuers limited to $100,000,000
million in aggregate principal amount, plus amounts, if any, issued to pay
Liquidated Damages and Additional Amounts on outstanding Notes as set forth in
Paragraphs 2 and 14 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this
Paragraph 5, the Issuers shall not have the option to redeem the Notes prior to
December 1, 2000. Thereafter, the Issuers shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest and Liquidated Damages thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on December 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000..........................................107.429%
2001..........................................105.571%
2002..........................................103.714%
2003..........................................101.857%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of
this Paragraph 5, until December 1, 2000, either or both of the Issuers may
redeem up to 35% of the aggregate principal amount of Notes issued hereunder
with the net proceeds of a Public Equity Offering at a redemption price equal to
113% of the principal amount thereof plus accrued and unpaid Liquidated Damages
thereon, if any; provided that at least $65.0 million in aggregate principal
amount of the Notes remain outstanding immediately after the occurrence of such
redemption; provided further that the call for such redemption occurs within 45
days of the date of the closing of such Public Equity Offering.
6. REDEMPTION FOR TAX REASONS.
(a) The Notes may be redeemed, at the option of either or
both of the Issuers, in whole but not in part, at a redemption price equal to
100% of the principal amount thereof, together with accrued interest and
Liquidated Damages, if any, to the date fixed for redemption and Additional
Amounts, if any, if the Issuers determine and certify to the Trustee immediately
prior to the giving of such notice (which certification shall include an Opinion
of Mexican Counsel) that (i) as a result of any change in, or amendment to, the
laws (or any rules or regulations promulgated thereunder) of Mexico, or
political subdivision thereof or any taxing authority thereof or therein
affecting taxation, or any amendment to, change in or expiration of an official
interpretation or application regarding such
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<PAGE> 85
laws, treaties, rules or regulations which are of general applicability, which
change, amendment, application, expiration or interpretation becomes effective
on or after the Issue Date, either Issuer would be obligated, for reasons
outside its control, to pay Additional Amounts in respect of interest payments
on the Notes pursuant to the terms and conditions thereof in excess of those
attributable to Mexican withholding tax on the basis of a rate of 15% imposed on
interest payments, (ii) such obligation cannot be avoided by the Issuers after
taking reasonable measures available to them to avoid it, and (iii) such
obligation (or a separate tax obligation of equal or greater magnitude that
arises from the structuring contemplated by this clause (iii)) cannot be avoided
by structuring the interest payments in such manner that they are paid solely by
CR US (rather than CR Mexico); provided that (a) no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which either
Issuer would be obligated to pay such Additional Amounts and (b) at the time
such notice is given, the Issuers' obligation to pay such Additional Amounts
remains in effect.
(b) Before any notice of redemption pursuant to clause (a)
above is given to the Trustee or the Holders, the Issuers shall have complied
with the provisions of Section 3.08(b) of the Indenture.
7. MANDATORY REDEMPTION.
Except as set forth in paragraph 8 below, the Issuers shall not be
required to make mandatory redemption payments with respect to the Notes.
8. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Issuers shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase the "Change of Control Payment"). Within 30 days following any
Change of Control, the Issuers shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If CR US or a Subsidiary of CR US consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5 million, the Issuers shall commence an offer to all Holders
of Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date fixed for the closing of such offer in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, CR US (or such Subsidiary) may use such deficiency for any purpose not
prohibited by the Indenture. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Issuers prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
9. NOTICE OF REDEMPTION. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at
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<PAGE> 86
its registered address. Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000, unless all of the Notes
held by a Holder are to be redeemed. On and after the redemption date interest
ceases to accrue on Notes or portions thereof called for redemption.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Issuers may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Issuers need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Issuers need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note
may be treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes voting as a single class, and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes voting as a single class. Without the consent of any Holder of
a Note, the Indenture or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes or, to provide for the assumption
of the Issuers' obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
13. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest or Liquidated Damages on
the Notes; (ii) default in payment when due of principal of or premium, if any,
on the Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise, (iii) failure
by either Issuer to comply with Section 4.07, 4.09, 4.10, 4.15 or 5.01 of the
Indenture; (iv) failure by either Issuer for 60 days after notice to the Issuers
by the Trustee or the Holders of at least 25% in principal amount of the Notes
then outstanding voting as a single class to comply with certain other
agreements in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of CR US or its Subsidiaries which default
(a) is caused by a failure to pay principal of or premium, if any, or interest
on such Indebtedness prior to the expiration of the grace period provided in
such Indebtedness on the date of such default or (b) results in the acceleration
of such Indebtedness prior to its express maturity; (vi) certain final,
non-appealable judgments (to the extent not covered by insurance for which there
is no dispute as to coverage) aggregating in excess of the lesser of (a) the
amount of stockholders' equity on CR US's most recent quarterly balance sheet
and (b) $10.0 million, which judgments are not paid, discharge or stayed for a
period of 60 days; (vii) certain events of bankruptcy or insolvency with respect
to the CR US, CR Mexico or any of their respective Significant Subsidiaries. If
any Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable. Notwithstanding the foregoing, in
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the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Issuers are required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Issuers are required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
14. ADDITIONAL AMOUNTS. Whenever in this Note or the
Indenture there is mentioned, in any context, the payment of principal,
interest, Liquidated Damages or any other amount payable under this Note, such
mention shall be deemed to include mention of Additional Amounts to the extent
that, in such context, Additional Amounts are, were or would be payable in
respect thereof under the terms of the Indenture.
15. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Issuers or their Affiliates, and may otherwise deal
with the Issuers or their Affiliates, as if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, officer,
employee, incorporator or stockholder, of either of the Issuers , as such, shall
not have any liability for any obligations of the Issuers under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
17. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the A/B Exchange
Registration Rights Agreement dated as of December 5, 1997 between the Issuers
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Issuers have
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes
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<PAGE> 88
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
The Issuers will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Club Regina Resorts, Inc.
10000 Memorial Drive
Houston, TX 77024
Attention: Chairman
21. WARRANT ENDORSEMENT
THE NOTES EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE
SEPARATELY FROM THE WARRANTS ATTACHED HERETO ORIGINALLY SOLD AS A UNIT
WITH THE NOTES UNTIL THE EARLIEST TO OCCUR OF (I) JUNE 1, 1998; (II) THE
OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE); AND
(III) THE DATE SPECIFIED BY THE INITIAL PURCHASER (SUCH EARLIEST DATE,
THE "SEPARATION DATE"). PRIOR TO SUCH DATE, THE NOTES EVIDENCED BY THIS
CERTIFICATE MAY BE TRANSFERRED ONLY IN INTEGRAL MULTIPLES OF $1,000
PRINCIPAL AMOUNT OF NOTES AND ONLY WITH THE SIMULTANEOUS TRANSFER TO THE
TRANSFEREE OF ONE WARRANT FOR EACH $1,000 PRINCIPAL AMOUNT SO
TRANSFERRED.
Under the terms of the warrant agreement relating to the Warrants
(the "Warrant Agreement"), the holder of this security may at any time on
or after the Separation Date, at its option, by notice to the Trustee
elect to separate or separately transfer the Notes and the Warrants
represented hereby, in whole or in part, and shall thereafter surrender
this security to the Trustee for the exchange of this security, in part,
for such Warrant or Warrants and for a Note or Notes of a like aggregate
principal amount and of authorized denominations not bearing this Warrant
Endorsement; provided that no delay or failure on the part of the Trustee
or the Warrant Agent to exchange this security for such Warrant or
Warrant and Note or Notes shall affect the separation of such Notes and
Warrants represented hereby or their separate transferability. Until such
separation, the holder of this security is, for each $1,000 principal
amount of Notes, also the record owner of one Warrant expiring December
1, 2004, each Warrant to purchase one share of Common Stock of CR US, par
value $.001 per share (subject to adjustment as provided in the Warrant
Agreement). CR US has deposited with the Trustee, as custodian for the
Holder of the Notes bearing this Warrant Endorsement, a certificate or
certificates for such Warrants to purchase an aggregate of 1,869,962
shares of Common Stock (subject to adjustment as provided in the Warrant
Agreement). Prior to the separation of the Notes and the Warrants as
described above, record ownership of such Warrants is transferable only
by the transfer of this Note on the Note register maintained by the
Issuers pursuant to the Indenture. After such separation, ownership of a
Warrant is transferable only by the transfer of the certificate
representing such Warrant in accordance with the provisions of the
Warrant Agreement.
A-8
<PAGE> 89
By accepting a security bearing this Warrant Endorsement, each
holder of this security shall be bound by all of the terms and
provisions of the Warrant Agreement (a copy of which is available on
request to CR US or the Warrant Agent).
Election to Exercise. On or after the Exercise Commencement Date
(as such term is defined in the Warrant Agreement), the Warrants may be
exercised by obtaining from the Trustee, as custodian for Holders of
securities bearing this Warrant Endorsement, the required forms of
election to exercise, declaration form and instructions for payment of
the Exercise Price (as such term is defined in the Warrant Agreement).
Upon receiving the required forms and payment of such Exercise Price,
the Trustee as custodian for the Holder of the security bearing this
Warrant Endorsement, shall exercise such Warrants in accordance with the
provisions of the Warrant Agreement.
Election of Exchange. The undersigned registered holder of the
security represented hereby irrevocably elects to separate its Notes and
Warrants and to exchange this security (representing ownership of
________ Warrants evidenced by Warrant Certificates deposited with the
Trustee) for a new Note in the principal amount hereof and a Warrant
Certificate in the amount of said ________ Warrants.
The undersigned hereby irrevocably instructs the Trustee (A) to
issue in the name of the undersigned registered holder a new Note not
containing the above Warrant Endorsement in the principal amount equal
to the principal amount hereof and (B) to deliver this security to the
Warrant Agent pursuant to the provisions of the Warrant Agreement with
instructions to issue in the name of the undersigned registered holder a
Warrant certificate representing the number of Warrants equal to the
number of Warrants represented by this security and to issue a new
Warrant Certificate to replace the Warrant Certificate held on deposit
by the Trustee as custodian representing the number of Warrants equal to
the difference between (x) the number of Warrants represented by the
Warrant Certificate so held on deposit and (y) the number of Warrants
represented by this Security.
Dated: ______________________
Name of Holder of this security: ______________________
Address: ______________________
______________________
Signature: ______________________
Note: The above signature must correspond with the name as written upon the face
of this security in every particular, without alteration or enlargement whatever
and if the certificate representing any principal amount at maturity of this
security or the associated Warrants is to be registered in a name other than
that in which this security is registered.
Signature Guaranteed: ______________________
Note: Signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-9
<PAGE> 90
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
as agent to transfer this Note on the books of the Issuers. The agent may
substitute another to act for him.
Date: ___________________________
--------------------------------------
(Sign exactly as your name appears on
the face of this Note)
--------------------------------------
(Signature Guaranteed)
Note: Signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-10
<PAGE> 91
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by
the Issuers pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$________________.
Date:_______________________
-------------------------------------
(Sign exactly as your name appears on
the face of this Note) Tax
Identification No:___________________
-------------------------------------
(Signature Guaranteed)
Note: Signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-11
<PAGE> 92
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Club Regina Resorts, Inc.
CR Resorts Capital, S. de R. L. de C. V.
10000 Memorial Drive
Houston, TX 77024
Attn: Secretary
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Re: 13% Senior Notes due 2004
Reference is hereby made to the Indenture, dated as of December
5, 1997 (the "Indenture"), between Club Regina Resorts, Inc. and CR Resorts
Capital, S. de R. L. de C. V., as Issuers (the "Issuers"), and IBJ Schroder Bank
& Trust Company, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer
the Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Notes and Restricted Definitive Notes and pursuant to and in
accordance
B-1
<PAGE> 93
with the Securities Act and any applicable blue sky securities laws of any state
of the United States, and accordingly the Transferor hereby further certifies
that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to CR US or a subsidiary
thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) [if such Transfer is in respect of a principal amount of Notes
at the time of transfer of less than $250,000,] an Opinion of Counsel provided
by the Transferor or the Transferee (a copy of which the Transferor has attached
to this certification), to the effect that such Transfer is in compliance with
the Securities Act. Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the IAI Global Note and/or the
Definitive Notes and in the Indenture and the Securities Act.
3. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any State of the
United States
B-2
<PAGE> 94
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will not be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes or Restricted
Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuers.
-------------------------------
[Insert Name of Transferor]
By:
----------------------------
Name:
Title:
Dated: _________ , ____
B-3
<PAGE> 95
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
(ii) [ ] IAI Global Note (CUSIP ); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
(ii) [ ] IAI Global Note (CUSIP ); or
(iii) [ ] Unrestricted Global Note (CUSIP ); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE> 96
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Club Regina Resorts, Inc.
CR Resorts Capital, S. de R. L. de C. V.
10000 Memorial Drive
Houston, TX 77024
Attn: Secretary
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Re: 13% Senior Note due 2004
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of December 5,
1997 (the "Indenture"), between Club Regina Resorts, Inc. and CR Resorts
Capital, S. de R. L. de C. V. as Issuers (the "Issuers"), and IBJ Schroder Bank
& Trust Company, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with
C-1
<PAGE> 97
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] [ ] 144A Global Note, [ ] IAI Global Note with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
C-2
<PAGE> 98
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
-----------------------------------
[Insert Name of Owner]
By:
--------------------------------
Name:
Title:
Dated: ________________, ____
C-3
<PAGE> 99
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Club Regina Resorts, Inc.
CR Resorts Capital, S. de R. L. de C. V.
10000 Memorial Drive
Houston, TX 77024
Attn: Secretary
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Re: 13% Senior Notes due 2004
Reference is hereby made to the Indenture, dated as of
December 5, 1997 (the "Indenture"), between Club Regina Resorts, Inc. and CR
Resorts Capital, S. de R. L. de C. V. as Issuers (the "Issuers"), and IBJ
Schroder Bank & Trust Company, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes
or any interest therein is subject to certain restrictions and conditions set
forth in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have
not been registered under the Securities Act, and that the Notes and any
interest therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Issuers or any subsidiary of
either of the Issuers, (B) in accordance with Rule 144A under the Securities Act
to a "qualified institutional buyer" (as defined therein), (c) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Issuers a signed letter substantially in the form of this letter
and [, if such transfer is in respect of a principal amount of Notes, at the
time of transfer of less than $250,000,] an Opinion of Counsel in form
reasonably acceptable to the Issuers to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in
D-1
<PAGE> 100
accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant
to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the Definitive Note or beneficial interest
in a Global Note from us in a transaction meeting the requirements of clauses
(A) through (E) of this paragraph a notice advising such purchaser that resales
thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes
or beneficial interest therein, we will be required to furnish to you and the
Issuers such certifications, legal opinions and other information as you and the
Issuers may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the Notes,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Notes or beneficial interest
therein purchased by us for our own account or for one or more accounts (each of
which is an institutional "accredited investor") as to each of which we exercise
sole investment discretion.
You and the Issuers are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
------------------------------------
[Insert Name of Accredited Investor]
By:
---------------------------------
Name:
Title:
Dated: __________________, ____
D-2
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
SERIES B WARRANT AGREEMENT
between
CLUB REGINA RESORTS, INC.
and
JEFFERIES & COMPANY, INC.
------------------------------
Dated as of December 5, 1997
------------------------------
<PAGE> 2
WARRANT AGREEMENT dated as of December 5, 1997 between CLUB
REGINA RESORTS, INC., a Nevada corporation (the "Company"), and JEFFERIES &
COMPANY, INC. (the "Initial Purchaser").
WHEREAS, the Company proposes to issue to the Initial
Purchaser, or its designee, 571,420 Series B Warrants, as hereinafter described
(the "Warrants"), to purchase 571,420 shares of Common Stock, par value $.001
per share (the "Common Stock"), of the Company (the Common Stock issuable on
exercise of the Warrants being referred to herein as the "Warrant Shares"),
pursuant to a Purchase Agreement dated as of November 26, 1997 between the
Company, CR Resorts S. de R.L. de C.V. and the Initial Purchaser.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Warrant Certificates. The certificates evidencing
the Warrants (the "Warrant Certificates") to be delivered pursuant to this
Agreement shall be in registered form only and shall be substantially in the
form set forth in Exhibit A attached hereto.
SECTION 2. Execution of Warrant Certificates. Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board or its President or a Vice President and by its Secretary or an Assistant
Secretary under its corporate seal. Each such signature upon the Warrant
Certificates may be in the form of a facsimile signature of the present or any
future Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, President,
Vice President, Secretary or Assistant Secretary, notwithstanding the fact that
at the time the Warrant Certificates shall be delivered or disposed of he shall
have ceased to hold such office. The seal of the Company may be in the form of a
facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the execution
of this Warrant Agreement any such person was not such officer.
SECTION 3. Registration. The Company shall number and register
the Warrant Certificates in a register as they are issued. The Company may deem
and treat the registered holder(s) of the Warrant Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone), for all purposes, and shall not be affected by any
notice to the contrary.
1
<PAGE> 3
SECTION 4. Registration of Transfers and Exchanges. The
Company shall from time to time register the transfer of any outstanding Warrant
Certificates in a Warrant register to be maintained by the Company upon
surrender thereof accompanied by a written instrument or instruments of transfer
in form satisfactory to the Company, duly executed by the registered holder or
holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be cancelled and disposed of by the Company; provided,
however, that the Holders shall not transfer Warrants to a number of Holders
that would be unreasonably burdensome on the Company.
The Warrant holders agree that prior to any proposed transfer
of the Warrant or of the Warrant Shares, if such transfer is not made pursuant
to an effective Registration Statement under the Securities Act of 1933, as
amended (the "Act"), or an opinion of counsel, reasonably satisfactory in form
and substance to the Company, that the Warrant or Warrant Shares may be sold
publicly without registration under the Act, the Warrant holder will, if
requested by the Company, deliver to the Company:
(1) an investment representation reasonably satisfactory to
the Company signed by the proposed transferee;
(2) an agreement by such transferee to the impression of the
restrictive investment legend set forth below on the Warrant or the
Warrant Shares;
(3) an agreement by such transferee that the Company may place
a notation in the stock books of the Company or a "stop transfer order"
with any transfer agent or registrar with respect to the Warrant
Shares; and
(4) an agreement by such transferee to be bound by the
provisions of this Section 4 relating to the transfer of such Warrant
or Warrant Shares.
The Warrant holders agree that each certificate representing
Warrant Shares will bear the following legend:
"The securities evidenced or constituted hereby have been
acquired for investment and have not been registered under the
Securities Act of 1933, as amended. Such securities may not be
sold, transferred, pledged or hypothecated unless the
registration provisions of said Act have been complied with or
unless the Company has received an opinion of counsel
reasonably satisfactory to the Company that such registration
is not required."
Warrant Certificates may be exchanged at the option of the
holder(s) thereof, when surrendered to the Company at its office for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be cancelled and disposed of by the Company.
2
<PAGE> 4
SECTION 5. Warrants; Exercise of Warrants. Subject to the
terms of this Agreement, each Warrant holder shall have the right, which may be
exercised commencing at the opening of business on December 5, 1997 and until
5:00 p.m., New York City time on the earlier to occur of (i) the date that the
Company closes an Initial Public Offering (as defined) and (ii) December 7, 1998
(such earlier date, the "Exercise Termination Date"), to receive from the
Company the number of fully paid and nonassessable Warrant Shares which the
holder may at the time be entitled to receive on exercise of such Warrants and
payment of the Exercise Price then in effect for such Warrant Shares. Each
Warrant not exercised prior to 5:00 p.m., New York City time, on the Exercise
Termination Date shall become void and all rights thereunder and all rights in
respect thereof under this agreement shall cease as of such time. No adjustments
as to dividends will be made upon exercise of the Warrants. In the event the
Exercise Termination Date is prior to December 7, 1998, the Company shall
provide each holder of Warrants with at least 15 days and not more than 30 days
prior written notice of the Exercise Termination Date. Notwithstanding the
provisions of this Section 5, in no event shall the Exercise Termination Date be
earlier than 15 days from the date that the notice referred to in the previous
sentence is given. If, prior to the Exercise Termination Date, the Company is
notified by a holder of Warrants that the Company is required to file a Shelf
Registration Statement pursuant to Section 3(a) of the Series B Warrant
Registration Rights Agreement dated as of the date hereof between the Initial
Purchaser and the Company, the Exercise Termination Date shall be no earlier
than the 30th day after such Shelf Registration Statement has been declared and
maintained effective.
A Warrant may be exercised upon surrender to the Company at
its office designated for such purpose (the address of which is set forth in
Section 14 hereof) of the certificate or certificates evidencing the Warrants to
be exercised with the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall be guaranteed by a bank or trust
company having an office or correspondent in the United States or a broker or
dealer which is a member of a registered securities exchange or the National
Association of Securities Dealers, Inc., and upon payment to the Company of the
exercise price (the "Exercise Price") which is set forth in the form of Warrant
Certificate attached hereto as Exhibit A as adjusted as herein provided, for the
number of Warrant Shares in respect of which such Warrants are then exercised.
Payment of the aggregate Exercise Price shall be made in cash or by certified or
official bank check payable to the order of the Company.
Subject to the provisions of Section 6 hereof, upon such
surrender of Warrants and payment of the Exercise Price the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the holder and in such name or names as the Warrant holder may
designate, a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrants together with cash as provided in
Section 11; provided, however, that if any consolidation, merger or lease or
sale of assets is proposed to be effected by the Company as described in
subsection (m) of Section 10 hereof, or a tender offer or an exchange offer for
shares of Common Stock of the Company shall be made, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the Company shall, as
soon as possible, but in any event not later than two business days thereafter,
issue and cause to be delivered the full number of Warrant Shares issuable upon
the exercise of such Warrants in the manner described in this sentence together
with cash as provided in Section 11. Such
3
<PAGE> 5
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrants
and payment of the Exercise Price.
The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part and, in the event
that a certificate evidencing Warrants is exercised in respect of fewer than all
of the Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrants, a new certificate evidencing the remaining Warrant
or Warrants will be issued and delivered pursuant to the provisions of this
Section and of Section 2 hereof.
All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled and disposed of by the Company. The Company shall keep copies
of this Agreement and any notices given or received hereunder available for
inspection by the holders during normal business hours at its office.
SECTION 6. Payment of Taxes. The Company will pay all
documentary stamp taxes attributable to the initial issuance of Warrant Shares
upon the exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue of any Warrant Certificates or any certificates for
Warrant Shares in a name other than that of the registered holder of a Warrant
Certificate surrendered upon the exercise of a Warrant, and the Company shall
not be required to issue or deliver such Warrant Certificates unless or until
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 7. Mutilated or Missing Warrant Certificates. In case
any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed,
the Company shall issue, in exchange and substitution for and upon cancellation
of the mutilated Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like
tenor and representing an equivalent number of Warrants, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant Certificate and indemnity, if requested, also
reasonably satisfactory to it. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 8. Reservation of Warrant Shares. The Company will at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably
4
<PAGE> 6
authorized and directed at all times to reserve such number of authorized shares
as shall be required for such purpose. The Company will keep a copy of this
Agreement on file with the Transfer Agent and with every subsequent transfer
agent for any shares of the Company's capital stock issuable upon the exercise
of the rights of purchase represented by the Warrants. The Company will furnish
such Transfer Agent a copy of all notices of adjustments and certificates
related thereto, transmitted to each holder pursuant to Section 13 hereof.
Before taking any action which would cause an adjustment
pursuant to Section 10 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate action
which may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
SECTION 9. Obtaining Stock Exchange Listings. The Company will
from time to time take all action which may be necessary so that the Warrant
Shares, immediately upon their issuance upon the exercise of Warrants, will be
listed on the principal securities exchanges and markets within the United
States of America, if any, on which other shares of Common Stock are then
listed.
SECTION 10. Adjustment of Exercise Price and Number of Warrant
Shares Issuable. The Exercise Price and the number of Warrant Shares issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 10. For purposes of
this Section 10, "Common Stock" means shares now or hereafter authorized of any
class of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
(a) Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
5
<PAGE> 7
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock or preferred stock; or
(5) issues by reclassification of its Common Stock any shares
of its capital stock;
then the Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Warrant upon exercise of
it may receive shares of two or more classes of capital stock of the Company,
the Company shall determine the allocation of the adjusted Exercise Price
between the classes of capital stock. After such allocation, the exercise
privilege and the Exercise Price of each class of capital stock shall thereafter
be subject to adjustment on terms comparable to those applicable to Common Stock
in this Section.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to
all holders of its Common Stock entitling them for a period expiring within 60
days after the record date mentioned below to purchase shares of Common Stock at
a price per share less than the current market price per share on that record
date, the Exercise Price shall be adjusted in accordance with the formula:
O + N x P
---------
E' = E x M
-----------------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
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<PAGE> 8
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock
any of its assets (including but not limited to cash), debt securities,
preferred stock, or any rights or warrants to purchase debt securities,
preferred stock, assets or other securities of the Company, the Exercise Price
shall be adjusted in accordance with the formula:
E' = E x M - F
-----------
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of Common
Stock. The Board of Directors shall determine the fair market
value.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This subsection does not apply to rights, options or warrants
referred to in subsection (b) of this Section 10.
(d) Adjustment for Common Stock Issue.
(i) If the Company issues shares of Common Stock for a
consideration per share less than $7.00 per share on the date the Company fixes
the offering price per share of such additional shares (such per share offering
price, the "Subsequent Offering Price"), the Exercise Price shall be adjusted to
equal the Subsequent Offering Price; provided, however, that the
7
<PAGE> 9
adjustment contemplated by this Section 10(d) shall not apply if the Exercise
Price in effect immediately prior to the applicable issuance is lower than the
Subsequent Offering Price relating to such issuance. The adjustment shall be
made successively whenever any such issuance is made, and shall become effective
immediately after such issuance.
(ii) If the Company issues shares of Common Stock for a
consideration per share greater than or equal to $7.00 but less than the current
market price per share on the date the Company fixes the offering price of such
additional shares, the Exercise Price shall be adjusted in accordance with the
formula:
P
-
E' = E x O + M
----------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior
to the issuance of such additional shares.
P = the aggregate consideration received for the issuance of
such additional shares.
M = the current market price per share on the date of issuance
of such additional shares.
A = the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance.
(iii) This subsection (d) does not apply to:
(1) any of the transactions described in subsections
(b) and (c) of this Section 10,
(2) the exercise of Warrants, or the conversion or
exchange of other securities convertible or exchangeable for Common
Stock,
(3) Common Stock issued to the Company's employees
under bona fide employee benefit plans adopted by the Board of
Directors and approved by the holders of Common Stock when required by
law, if such Common Stock would
8
<PAGE> 10
otherwise be covered by this subsection (d) (but only to the extent
that the aggregate number of shares excluded hereby and issued after
the date of this Warrant Agreement shall not exceed 10% of the Common
Stock outstanding at any time, exclusive of antidilution adjustments
thereunder),
(4) Common Stock upon the exercise of rights or
warrants issued to the holders of Common Stock, or
(5) Common Stock issued to shareholders of any person
which merges into the Company in proportion to their stock holdings of
such person immediately prior to such merger, upon such merger; or
(6) Common Stock issued to employees of the Company
in return for services, not to exceed in the aggregate 1% of the Common
Stock outstanding as of the date hereof.
(e) Adjustment for Convertible Securities Issue.
(i) If the Company issues any securities convertible into or
exchangeable for shares of Common Stock (other than securities issued in
transactions described in subsections (b) and (c) of this Section 10) for a
consideration per share of Common Stock initially deliverable upon conversion or
exchange of such securities less than $7.00 per share on the date of issuance of
such securities (such consideration, the "Subsequent Convertible Security
Consideration"), the Exercise Price shall be adjusted to equal the Subsequent
Convertible Security Consideration; provided, however, that the adjustment
contemplated by this Section 10(d) shall not apply if the Exercise Price in
effect immediately prior to the applicable issuance is lower than the Subsequent
Convertible Security Consideration relating to such issuance. The adjustment
shall be made successively whenever any such issuance is made, and shall become
effective immediately after such issuance.
(ii) If the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (b) and (c) of this Section 10) for a consideration per
share of Common Stock initially deliverable upon conversion or exchange of such
securities greater than or equal to $7.00 per share but less than the current
market price per share on the date of issuance of such securities, the Exercise
Price shall be adjusted in accordance with this formula:
P
-
E' = E x O + M
-----------
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
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<PAGE> 11
O = the number of shares outstanding immediately prior to the issuance
of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the current market price per share on the date of issuance of such
securities.
D = the maximum number of shares deliverable upon conversion or
in exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance.
(iii) If all of the Common Stock deliverable upon conversion
or exchange of securities under this subsection (e) have not been issued when
such securities are no longer outstanding, then the Exercise Price shall
promptly be readjusted to the Exercise Price which would then be in effect had
the adjustment upon the issuance of such securities been made on the basis of
the actual number of shares of Common Stock issued upon conversion or exchange
of such securities.
(iv) This subsection (e) does not apply to:
(1) convertible securities issued to shareholders of
any person which merges into the Company, or with a subsidiary of the
Company, in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger,
(2) convertible securities issued in a bona fide
public offering pursuant to a firm commitment underwriting or
(3) convertible securities issued in a bona fide
private placement through a placement agent which is a member firm of
the National Association of Securities Dealers, Inc. (except to the
extent that any discount from the current market price attributable to
restrictions on transferability of Common Stock issuable upon
conversion, as determined in good faith by the Board of Directors and
described in a Board resolution which shall be filed with the Trustee,
shall exceed 20% of the then current market price).
(f) Current Market Price. In Sections 10(b), (c) and (e)
hereof, the "current market price" per security at any date of determination
shall be (1) in connection with a sale by the Company to a party that is not an
Affiliate of the Company in an arm's-length transaction (a "Non-Affiliate
Sale"), the price per security at which such security is sold and (2) in
connection with any sale by the Company to an Affiliate of the Company, (a) the
last price per security at which such security was sold in a Non-Affiliate Sale
within the three-month period preceding such date of determination or (b) if
clause (a) is not applicable, the fair market value of such security determined
in good faith by a nationally recognized investment banking, appraisal or
valuation firm, which is not an Affiliate of the Company, in each case, taking
into account,
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<PAGE> 12
among all other factors deemed relevant by such investment banking, appraisal or
valuation firm, the trading price and volume of such security on any national
securities exchange or automated quotation system on which such security is
traded. Notwithstanding the foregoing, any sale to the Initial Purchaser (or any
successor thereto) pursuant to an underwritten public offering registered under
the Securities Act shall be deemed to be and treated as a Non-Affiliate Sale.
For purposes of this Section 10(f), "Affiliate" of any
specified person means (A) any other person directly or indirectly controlling
or controlled by or under direct or indirect common control with such specified
person and (B) any director, officer or employee of such specified person. For
purposes of this definition "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control with") as used
with respect to any person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such person, whether through the ownership of voting securities, by agreement or
otherwise.
(g) Consideration Received.
For purposes of any computation respecting consideration
received pursuant to subsections (d) and (e) of this Section 10, the following
shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that
in no case shall any deduction be made for any commissions, discounts
or other expenses incurred by the Company for any underwriting of the
issue or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors (irrespective of the
accounting treatment thereof), whose determination shall be conclusive,
and described in a Board resolution;
(3) in the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received
therefor shall be deemed to be the consideration received by the
Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the
conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (1) and (2) of
this subsection).
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment.
All calculations under this Section shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
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<PAGE> 13
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to in
subsections (a), (b), (c) or (e) of this Section 10 if Warrant holders are to
participate in the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction.
No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no
par value of the Common Stock.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(i) No Dilution of Impairment.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Warrants
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company (1) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock on the exercise of the Warrants from
time to time outstanding and (2) will not take any action which results in any
adjustment of the Exercise Price if the total number of Warrant Shares issuable
after the action upon the exercise of all of the Warrants would exceed the total
number of shares of Common Stock then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise. A
consolidation, merger, reorganization or transfer of assets involving the
Company covered by Section 10(o) shall not be prohibited by or require any
adjustment under this Section 10(i).
(j) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall
provide the notices required by Section 13 hereof.
(k) Voluntary Reduction.
The Company from time to time may reduce the Exercise Price by
any amount for any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period; provided, however, that in no event
may the Exercise Price be less than the par value of a share of Common Stock.
12
<PAGE> 14
Whenever the Exercise Price is reduced, the Company shall mail
to Warrant holders a notice of the reduction. The Company shall mail the notice
at least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period it will be in
effect.
A reduction of the Exercise Price does not change or adjust
the Exercise Price otherwise in effect for purposes of subsections (a), (b),
(c), (d) and (e) of this Section 10.
(l) Notice of Certain Transactions.
If:
(1) the Company takes any action that would require an
adjustment in the Exercise Price pursuant to subsections (a), (b), (c),
(d) or (e) of this Section 10 and if the Company does not arrange for
Warrant holders to participate pursuant to subsection (i) of this
Section 10;
(2) the Company takes any action that would require a
supplemental Warrant Agreement pursuant to subsection (m) of this
Section 10; or
(3) there is a liquidation or dissolution of the Company,
the Company shall mail to Warrant holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(m) Reorganization of Company.
If the Company consolidates or merges with or into, or
transfers or leases all or substantially all its assets to, any person, upon
consummation of such transaction the Warrants shall automatically become
exercisable for the kind and amount of securities, cash or other assets which
the holder of a Warrant would have owned immediately after the consolidation,
merger, transfer or lease if the holder had exercised the Warrant immediately
before the effective date of the transaction. Concurrently with the consummation
of such transaction, the corporation formed by or surviving any such
consolidation or merger if other than the Company, or the person to which such
sale or conveyance shall have been made, shall enter into a supplemental Warrant
Agreement so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for in this
Section. The successor Company shall mail to Warrant holders a notice describing
the supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement.
13
<PAGE> 15
If this subsection (m) applies, subsections (a), (b), (c), (d)
and (e) of this Section 10 do not apply.
(n) When Issuance or Payment May Be Deferred.
In any case in which this Section 10 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
and (ii) paying to such holder any amount in cash in lieu of a fractional share
pursuant to Section 11; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional Warrant Shares, other capital stock and cash
upon the occurrence of the event requiring such adjustment.
(o) Additional Adjustments.
In addition, in the event that any other transaction or event
occurs (including, without limiting the generality of the foregoing, the
issuance by the Company of shares of Common Stock, or securities convertible
into or exchangeable for Common Stock, for a consideration per share less than
the Exercise Price per share on the date the Company fixes the offering price
for such additional shares) as to which the foregoing adjustment provisions are
not strictly applicable but the failure to make any adjustment would adversely
affect the rights represented by the Warrants in accordance with the essential
intent and principles of such provisions, then, in each such case, the Company
shall appoint an investment banking firm of recognized national standing, or any
other financial expert that does not (or whose directors, officers, employees,
affiliates or stockholders do not) have a direct or material indirect financial
interest in the Company or any of its subsidiaries, who has not been, and, at
the time it is called upon to give independent financial advice to the Company,
is not (and none of its directors, officers, employees, affiliates or
stockholders are) a promoter, director or officer of the Company or any of its
subsidiaries, which will give their opinion upon the adjustment, if any, on a
basis consistent with the essential intent and principles established in the
foregoing adjustment provisions, necessary to preserve, without dilution, the
rights represented by the Warrants. Upon receipt of such opinion or
determination, the Company shall promptly mail a copy thereof to the holders of
the Warrants and will make the adjustments described therein.
(p) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this
Section 10, each Warrant outstanding prior to the making of the adjustment in
the Exercise Price shall thereafter evidence the right to receive upon payment
of the adjusted Exercise Price that number of shares of Common Stock (calculated
to the nearest hundredth) obtained from the following formula:
N' = N x E
--
E'
14
<PAGE> 16
where:
N' = the adjusted number of Warrant Shares issuable upon exercise
of a Warrant by payment of the adjusted Exercise Price.
N = the number or Warrant Shares previously issuable upon
exercise of a Warrant by payment of the Exercise Price prior
to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(q) Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 11. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 11,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the Exercise Price on the day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.
SECTION 12. Notices to Warrant holders. Upon any adjustment of
the Exercise Price pursuant to Section 10, the Company shall promptly thereafter
(i) cause to be filed with the Company a certificate of a firm of independent
public accountants of recognized standing selected by the Board of Directors of
the Company (who may be the regular auditors of the Company) setting forth the
Exercise Price after such adjustment and setting forth in reasonable detail the
method of calculation and the facts upon which such calculations are based and
setting forth the number of Warrant Shares (or portion thereof) issuable after
such adjustment in the Exercise Price, upon exercise of a Warrant and payment of
the adjusted Exercise Price, which certificate shall be conclusive evidence of
the correctness of the matters set forth therein, and (ii) cause to be given to
each of the registered holders of the Warrant Certificates at his address
appearing on the Warrant register written notice of such adjustments by
first-class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
other provisions of this Section 13.
15
<PAGE> 17
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants; or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in subsection (a) of
Section 10 hereof); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of the properties and assets
of the Company substantially as an entirety, or of any reclassification
or change of Common Stock issuable upon exercise of the Warrants (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(e) the Company proposes to take any action (other than
actions of the character described in Section 10(a)) which would
require an adjustment of the Exercise Price pursuant to Section 10;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificates at his address appearing on the Warrant register, at
least 20 days (or 10 days in any case specified in clauses (a) or (b) above)
prior to the applicable record date hereinafter specified, or promptly in the
case of events for which there is no record date, by first-class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of record
of shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common Stock,
or (iii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up. The failure to give the notice required by this Section 13 or any defect
therein shall not affect the legality or validity of any distribution, right,
option, warrant, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive
16
<PAGE> 18
notice as shareholders in respect of the meetings of shareholders or the
election of Directors of the Company or any other matter, or any rights
whatsoever as shareholders of the Company.
SECTION 13. Notices to Company and Warrant Holder. Any notice
or demand authorized by this Agreement to be given or made by the registered
holder of any Warrant Certificate to or on the Company shall be sufficiently
given or made when and if deposited in the mail, first class or registered,
postage prepaid, addressed to the office of the Company expressly designated by
the Company at its office for purposes of this Agreement (until the Warrant
holders are otherwise notified in accordance with this Section by the Company),
as follows:
Club Regina Resorts, Inc.
10000 Memorial Drive
Houston, TX 77024
Attention: Secretary
Any notice pursuant to this Agreement to be given by the
Company to the registered holder(s) of any Warrant Certificate shall be
sufficiently given when and if deposited in the mail, first-class or registered,
postage prepaid, addressed (until the Company is otherwise notified in
accordance with this Section by such holder) to such holder at the address
appearing on the Warrant register of the Company, with a copy to:
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
Los Angeles, CA 90025
Attention: Jerry Gluck
SECTION 14. Supplements and Amendments. The Company may from
time to time supplement or amend this Agreement without the approval of any
holders of Warrant Certificates in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company may deem necessary or
desirable and which shall not in any way adversely affect the interests of the
holders of Warrant Certificates.
SECTION 15. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder.
SECTION 16. Termination. This Agreement shall terminate at
5:00 p.m., New York City time on the Exercise Termination Date. Notwithstanding
the foregoing, this Agreement will terminate on any earlier date if all Warrants
have been exercised.
SECTION 17. Governing Law. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the internal laws of said State. The Company hereby irrevocably
and unconditionally: (i) submits itself and its property in any legal
17
<PAGE> 19
action or proceeding relating to this Agreement or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
jurisdiction of the courts of the State of New York and the courts of the United
States of America for the Southern District of New York, and appellate courts
thereof, and consents and agrees to such action or proceeding being brought in
such courts; and (ii) waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such action
or proceeding was brought in any inconvenient court and agrees not to plead or
claim the same, without regard to the conflict of law rules thereof.
SECTION 18. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than the
Company and the registered holders of the Warrant Certificates any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company and the registered holders
of the Warrant Certificates.
SECTION 19. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
18
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
CLUB REGINA RESORTS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
JEFFERIES & COMPANY, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
S-1
<PAGE> 21
EXHIBIT A
[Form of Warrant Certificate]
[Face]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. SAID SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
EXERCISABLE ON OR BEFORE THE EXERCISE TERMINATION DATE.
No. _____ Series B Warrants
Warrant Certificate
CLUB REGINA RESORTS, INC.
This Warrant Certificate certifies that ______________, or
registered assigns, is the registered holder of Series B Warrants expiring on
the Exercise Termination Date (as defined in the Warrant Agreement referred to
on the reverse hereof) (the "Warrants") to purchase Common Stock, par value
$.001 per share (the "Common Stock"), of Club Regina Resorts, Inc., a Nevada
corporation (the "Company"). Each Warrant entitles the holder upon exercise to
receive from the Company on or before 5:00 p.m. New York City Time on the
Exercise Termination Date, one fully paid and nonassessable share of Common
Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price")
of $7.00 payable in lawful money of the United States of America upon surrender
of this Warrant Certificate and payment of the Exercise Price at the office of
the Company designated for such purpose, but only subject to the conditions set
forth herein and in the Warrant Agreement referred to on the reverse hereof. The
Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City
Time on the Exercise Termination Date, and to the extent not exercised by such
time such Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless countersigned
by the Company, as such term is used in the Warrant Agreement.
A-1
<PAGE> 22
IN WITNESS WHEREOF, Club Regina Resorts, Inc. has caused this
Warrant Certificate to be signed by its authorized officers[, each by a
facsimile of his signature,] and has caused [a facsimile of] its corporate seal
to be affixed hereunto or imprinted hereon.
Dated:
CLUB REGINA RESORTS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
A-2
<PAGE> 23
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring on the Exercise Termination Date
entitling the holder on exercise to receive shares of Common Stock, par value
$.001 per share, of the Company (the "Common Stock"), and are issued or to be
issued pursuant to a Series B Warrant Agreement dated as of December 5, 1997
(the "Warrant Agreement"), duly executed and delivered by the Company, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or before the Exercise
Termination Date. The holder of Warrants evidenced by this Warrant Certificate
may exercise them by surrendering this Warrant Certificate, with the form of
election to purchase set forth hereon properly completed and executed, together
with payment of the Exercise Price in cash at the office of the Company
designated for such purpose. In the event that upon any exercise of Warrants
evidenced hereby the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or his assignee a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Common Stock
issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The holders of the Warrants are entitled to certain registration
rights with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in full in a Series B Warrant Registration
Rights Agreement relating to the Warrants dated as of December 5, 1997, between
the Company and Jefferies & Company, Inc. A copy of the Registration Rights
Agreement may be obtained by the holder hereof upon written request to the
Company.
Warrant Certificates, when surrendered at the office of the
Company by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
A-3
<PAGE> 24
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Company a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the registered holder(s)
thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, of any distribution to the holder(s) hereof, and
for all other purposes, and the Company shall not be affected by any notice to
the contrary. Neither the Warrants nor this Warrant Certificate entitles any
holder hereof to any rights of a stockholder of the Company.
A-4
<PAGE> 25
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive __________ shares of
Common Stock and herewith tenders payment for such shares to the order of Club
Regina Resorts, Inc. in the amount of $______ in accordance with the terms
hereof. The undersigned requests that a certificate for such shares be
registered in the name of ________________, whose address is
_______________________________ and that such shares be delivered to
________________ whose address is ___________ ______________________. If said
number of shares is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant Certificate representing
the remaining balance of such shares be registered in the name of
______________, whose address is _________________________, and that such
Warrant Certificate be delivered to _________________, whose address is
__________________.
Signature:
Date:
Signature Guaranteed:
A-5
<PAGE> 26
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1 Warrant Certificates.......................................................1
SECTION 2 Execution of Warrant Certificates..........................................1
SECTION 3 Registration...............................................................1
SECTION 4 Registration of Transfers and Exchanges....................................2
SECTION 5 Warrants; Exercise of Warrants.............................................3
SECTION 6 Payment of Taxes...........................................................4
SECTION 7 Mutilated or Missing Warrant Certificates..................................4
SECTION 8 Reservation of Warrant Shares..............................................4
SECTION 9 Obtaining Stock Exchange Listings..........................................5
SECTION 10 Adjustment of Exercise Price and Number of Warrant Shares Issuable.........5
SECTION 11 Fractional Interests......................................................15
SECTION 12 Notices to Warrant holders................................................15
SECTION 13 Notices to Company and Warrant Holder.....................................17
SECTION 14 Supplements and Amendments................................................17
SECTION 15 Successors................................................................17
SECTION 16 Termination...............................................................17
SECTION 17 Governing Law.............................................................17
SECTION 18 Benefits of This Agreement................................................18
SECTION 19 Counterparts..............................................................18
</TABLE>
- --------
* This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or
provisions.
i
<PAGE> 1
EXHIBIT 4.3
================================================================================
CLUB REGINA RESORTS, INC.
WARRANT AGREEMENT
Dated as of December 5, 1997
IBJ SCHRODER BANK & TRUST COMPANY,
Warrant Agent
================================================================================
<PAGE> 2
WARRANT AGREEMENT ("Agreement"), dated as of December 5, 1997, by and
between CLUB REGINA RESORTS, INC., a Nevada corporation (together with any
successor thereto, the "Company"), and IBJ Schroder Bank & Trust Company, as
warrant agent (with any successor Warrant Agent, the "Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement (the
"Purchase Agreement") dated November 26, 1997 with Jefferies & Company, Inc.
(the "Initial Purchaser") in which the Company has agreed to sell to the
Initial Purchaser 100,000 units (the "Units") consisting in the aggregate of
(i) $100,000,000 in aggregate principal amount of 13% Senior Notes due 2004
(the "Notes") of the Company and CR Resorts S. de R. L. de C. V. to be issued
under an indenture, dated as of the date hereof (the "Indenture"), by and
between the Company and IBJ Schroder Bank & Trust Company, as trustee (in such
capacity, the "Trustee"), and (ii) 100,000 Warrants (the "Warrants"), each
representing the right to purchase initially 18.69962 shares of Common Stock,
par value $.001 per share, of the Company (the "Common Stock");
WHEREAS, the Company desires the Warrant Agent to assist the Company
in connection with the issuance, exchange, cancellation, replacement and
exercise of the Warrants, and in this Agreement wishes to set forth, among
other things, the terms and conditions on which the Warrants may be issued,
exchanged, canceled, replaced and exercised;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. Warrant Certificates. The certificates evidencing the
Warrants (the "Warrant Certificates") shall be in registered form only and
shall be substantially in the form set forth in Exhibit A attached hereto and
shall, prior to the Separation Date (as defined herein), bear the legend set
forth in Exhibit B attached hereto.
Certain of the Warrants initially will be issued in global form (the
"Global Warrants"), substantially in the form of Exhibit A attached hereto
(including the text referred to in footnotes 1 and 2 thereto).
The Global Warrant shall represent such of the outstanding Warrants as
shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Warrants from time to time endorsed thereon and
that the aggregate amount of outstanding Warrants represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges and
exercises. Any endorsement of the Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent or the depositary with respect to the Global
Warrants (the "Depositary") in accordance with instructions given by the holder
thereof. The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Warrants in global form.
Each Global Warrant shall bear the following legend on the face
thereof:
<PAGE> 3
"Unless and until it is exchanged in whole or in part for
Warrants in definitive form, this Warrant may not be
transferred except as a whole by the Depositary to a nominee
of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. The Depository Trust
Company shall act as the Depositary until a successor shall be
appointed by the Company. Unless this certificate is presented
by an authorized representative of The Depository Trust
Company (55 Water Street, New York, New York) ("DTC"), to the
Company or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name
of Cede & Co. or such other name as may be requested by an
authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as may be requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein."
Beneficial owners of interests in a Global Warrant may receive
Warrants in definitive form (the "Definitive Warrants"), substantially in the
form of Exhibit A attached hereto (but without the text referred to in
footnotes 1 and 2 thereto) in the name of such beneficial owners in accordance
with the procedures of the Warrant Agent and the Depositary. In connection with
the execution and delivery of such Definitive Warrants, the Warrant Agent shall
reflect on its books and records a decrease in the principal amount of the
relevant Global Warrant equal to the amount of such Definitive Warrants and the
Company shall execute and the Warrant Agent shall countersign and deliver one
or more Definitive Warrants in an equal aggregate amount.
SECTION 3. Execution of Warrant Certificates. (a) Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board, Chief Executive Officer, its President or a Vice President and by its
Secretary or an Assistant Secretary. Each such signature upon the Warrant
Certificates may be in the form of a facsimile signature of the present or any
future Chairman of the Board, Chief Executive Officer, President, Vice
President, Secretary or Assistant Secretary and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose the Company may
adopt and use the facsimile signature of any person who shall have been
Chairman of the Board, Chief Executive Officer, President, Vice President,
Secretary or Assistant Secretary, notwithstanding the fact that at the time the
Warrant Certificates shall be countersigned and delivered or disposed of he
shall have ceased to hold such office. The seal of the Company may be in the
form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates.
(b) In case any officer of the Company who shall have
signed any of the Warrant Certificates shall cease to be such officer before
the Warrant Certificates so signed shall have been countersigned by the Warrant
Agent, or disposed of by the Company, such Warrant Certificates nevertheless
may be countersigned and delivered or disposed of as though such person had not
ceased to be such officer of the Company; and any Warrant Certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of the Company
to sign such Warrant Certificate, although at the date of the execution of this
Warrant Agreement any such person was not such officer.
(c) Warrant Certificates shall be dated the date of
countersignature by the Warrant Agent.
2
<PAGE> 4
SECTION 4. Registration and Countersignature. (a) The Warrant Agent,
on behalf of the Company, shall number and register the Warrant Certificates in
a register as they are issued by the Company.
(b) Warrant Certificates shall be manually countersigned
by the Warrant Agent and shall not be valid for any purpose unless so
countersigned. The Warrant Agent shall, upon written instructions of the
Chairman of the Board, the Chief Executive Officer, the President, a Vice
President, the Treasurer or the Controller of the Company, initially
countersign, issue and deliver Warrant Certificates entitling the holders
thereof to purchase not more than the number of Warrant Shares referred to
above in the first recital hereof and shall countersign and deliver Warrant
Certificates as otherwise provided in this Agreement.
(c) The Company and the Warrant Agent may deem and treat
the registered holder(s) of the Warrant Certificates as the absolute owner(s)
thereof (notwithstanding any notation of ownership or other writing thereon
made by anyone) for all purposes, and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary.
SECTION 5. Registration of Transfers and Exchanges. (a) Transfer
and Exchange of Global Warrants. A Global Warrant may not be transferred as a
whole except by the Depositary to a nominee of the Depositary, by a nominee of
the Depositary to the Depositary or to another nominee of the Depositary, by
the Depositary or any such nominee to a successor Depositary or a nominee of
such successor Depositary. All Global Warrants will be exchanged by the Company
for Definitive Warrants if (i) the Company delivers to the Warrant Agent notice
from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Securities Exchange Act of 1934, as amended, and, in either case, a successor
Depositary is not appointed by the Company within 120 days after the date of
such notice from the Depositary or (ii) the Company in its sole discretion
determines that the Global Warrants (in whole but not in part) should be
exchanged for Definitive Warrants and delivers a written notice to such effect
to the Warrant Agent. Upon the occurrence of either of the preceding events in
(i) or (ii) above, Definitive Warrants shall be issued in such names as the
Depositary shall instruct the Warrant Agent. Global Warrants also may be
exchanged or replaced, in whole or in part. Every Warrant authenticated and
delivered in exchange for, or in lieu of, a Global Warrant or any portion
thereof, pursuant to this Section 5, shall be authenticated and delivered in
the form of, and shall be, a Global Warrant. A Global Warrant may not be
exchanged for another Warrant other than as provided in this Section 5(a);
however, beneficial interests in a Global Warrant may be transferred and
exchanged as provided in Section 5(b) or (c) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Warrants. The transfer and exchange of beneficial interests in the
Global Warrants shall be effected through the Depositary, in accordance with
the provisions of this Warrant Agreement and the rules and procedures of the
Depositary that apply to such transfer or exchange (the "Applicable
Procedures"). Beneficial interests in a Global Warrant bearing the Private
Placement Legend (as defined herein) (a "Restricted Global Warrant") shall be
subject to restrictions on transfer comparable to those set forth herein to the
extent required by the Securities Act. Transfers of beneficial interests in the
Global Warrants also shall require compliance with either subparagraph (i) or
(ii) below, as applicable, as well as one or more of the other following
subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global
Warrant. Beneficial interests in any Restricted
Global Warrant may be transferred to persons who take
delivery thereof in the form of a beneficial interest
in the same Restricted
3
<PAGE> 5
Global Warrant in accordance with the transfer
restrictions set forth in the legend set forth in
Section 5(f) hereof (the "Private Placement Legend").
Beneficial interests in any Unrestricted Global
Warrant (defined for purposes hereof as any Global
Warrant in the form of Exhibit A hereto that bears
the legend set forth in Section 2 hereof and that has
the "Schedule of Exchanges of Global Warrants"
attached thereto, and that is deposited with or on
behalf of the Depositary, representing Warrants that
do not bear the Private Placement Legend) may be
transferred to persons who take delivery thereof in
the form of a beneficial interest in an Unrestricted
Global Warrant. No written orders or instructions
shall be required to be delivered to the Warrant
Agent to effect the transfers described in this
Section 5(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial
Interests in Global Warrant. In connection with all
transfers and exchanges of beneficial interests that
are not subject to Section 5(b)(i) above, the
transferor of such beneficial interest must deliver
to the Warrant Agent either (A)(1) a written order
from a person who has an account with the Depositary
(a "Participant") or with a person who has an account
with a Participant (an "Indirect Participant") given
to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or
cause to be credited a beneficial interest in another
Global Warrant in an amount equal to the beneficial
interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable
Procedures containing information regarding the
Participant account to be credited with such increase
or (B)(1) a written order from a Participant or an
Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing
the Depositary to cause to be issued a Definitive
Warrant in an amount equal to the beneficial interest
to be transferred or exchanged and (2) instructions
given by the Depositary to the Warrant Agent
containing information regarding the person in whose
name such Definitive Warrant shall be registered to
effect the transfer or exchange referred to in (1)
above. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in
Global Warrants contained in this Warrant Agreement
or otherwise applicable under the Securities Act, the
Warrant Agent shall adjust the amount of the relevant
Global Warrant(s) pursuant to Section 5(g) hereof.
(iii) Transfer of Beneficial Interests to Another
Restricted Global Warrant. A beneficial interest in
any Restricted Global Warrant may be transferred to a
person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global
Warrant if the transfer complies with the
requirements of Section 5(b)(ii) above and the
Warrant Agent receives the following:
(A) if the transferee will take delivery in the
form of a beneficial interest in the 144A
Global Warrant (defined for purposes hereof
as any Global Warrant in the form of Exhibit
A hereto that bears the Private Placement
Legend and the legend set forth in Section 2
hereof and that is deposited with or on
behalf of, and registered in the name of, the
Depositary or its nominee that will be issued
in an amount equal to the amount of Warrants
sold in reliance on Rule 144A under the
Securities Act), then
4
<PAGE> 6
the transferor must deliver a certificate in
the form of Exhibit C hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in the
form of a beneficial interest in the IAI
Global Warrant (defined for purposes hereof
as any Global Warrant in the form of Exhibit
A hereto that bears the Private Placement
Legend and the legend set forth in Section 2
hereof and that is deposited with or on
behalf of, and registered in the name of, the
Depositary or its nominee that will be issued
in an amount equal to the amount of Warrants
sold to institutional "accredited investors"
(as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act)
("Institutional Accredited Investors")), then
the transferor must deliver a certificate in
the form of Exhibit C hereto, including the
certifications and certificates and Opinion
of Counsel required by item (2) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Warrant for Beneficial Interests in
the Unrestricted Global Warrant. A beneficial
interest in any Restricted Global Warrant may be
exchanged by any holder thereof for a beneficial
interest in an Unrestricted Global Warrant or
transferred to a person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted
Global Warrant if the exchange or transfer complies
with the requirements of Section 5(b)(ii) above and:
(A) such transfer is effected pursuant to a
Registration Statement in accordance with the
Warrant Shares Registration Rights Agreement;
or
(B) the Warrant Agent receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global
Warrant proposes to exchange such
beneficial interest for a beneficial
interest in an Unrestricted Global
Warrant, a certificate from such
holder in the form of Exhibit D
hereto, including the certifications
in item (l)(a) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global
Warrant proposes to transfer such
beneficial interest to a person who
shall take delivery thereof in the
form of a beneficial interest in an
Unrestricted Global Warrant, a
certificate from such holder in the
form of Exhibit C hereto, including
the certifications in item (3)
thereof;
and, in each such case set forth in this subparagraph (B),
if the Warrant Agent so requests or if the Applicable
Procedures so require, an opinion of counsel from legal
counsel reasonably acceptable to the Warrant Agent and the
Company (an "Opinion of Counsel") to the effect that such
exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required
in order to maintain compliance with the Securities Act.
5
<PAGE> 7
If any such transfer is effected pursuant to subparagraph
(B) above at a time when an Unrestricted Global Warrant
has not yet been issued, the Company shall issue and the
Warrant Agent shall countersign one or more Unrestricted
Global Warrants in an aggregate amount equal to the
aggregate amount of beneficial interests transferred
pursuant to subparagraph (B) above.
Beneficial interests in an Unrestricted Global Warrant
cannot be exchanged for, or transferred to persons who
take delivery thereof in the form of, a beneficial
interest in a Restricted Global Warrant.
(c) Transfer or Exchange of Beneficial Interests for
Definitive Warrants.
(i) Beneficial Interests in Restricted Global Warrants to
Restricted Definitive Warrants. If any holder of a
beneficial interest in a Restricted Global Warrant
proposes to exchange such beneficial interest for a
Restricted Definitive Warrant or to transfer such
beneficial interest to a person who takes delivery
thereof in the form of a Restricted Definitive
Warrant, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in
a Restricted Global Warrant proposes to
exchange such beneficial interest for a
Restricted Definitive Warrant, a certificate
from such holder in the form of Exhibit D
hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being
transferred to a "qualified institutional
buyer" as defined in Rule 144A under the
Securities Act (a "QIB") in accordance with
Rule 144A under the Securities Act, a
certificate to the effect set forth in
Exhibit C hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being
transferred pursuant to an exemption from the
registration requirements of the Securities
Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect
set forth in Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(D) if such beneficial interest is being
transferred to an Institutional Accredited
Investor in reliance on an exemption from the
registration requirements of the Securities
Act other than those listed in subparagraphs
(B) and (C) above, a certificate to the
effect set forth in Exhibit C hereto,
including the certifications, certificates
and Opinion of Counsel required by item (2)
thereof, if applicable;
(E) if such beneficial interest is being
transferred to the Company or any of its
subsidiaries, a certificate to the effect set
forth in Exhibit C hereto, including the
certifications in item (2)(b) thereof; or
(F) if such beneficial interest is being
transferred pursuant to an effective
registration statement under the Securities
Act, a certificate to the effect
6
<PAGE> 8
set forth in Exhibit C hereto, including the
certifications in item (2)(c) thereof,
the Warrant Agent shall cause the aggregate amount of
the applicable Global Warrant to be reduced
accordingly pursuant to Section 5(g) hereof, and the
Company shall execute and the Warrant Agent shall
authenticate and deliver to the person designated in
the instructions a Definitive Warrant in the
appropriate amount. Any Definitive Warrant issued in
exchange for a beneficial interest in a Restricted
Global Warrant pursuant to this Section 5(c) shall be
registered in such name or names and in such
authorized denomination or denominations as the
holder of such beneficial interest shall instruct the
Warrant Agent through instructions from the
Depositary and the Participant or Indirect
Participant. The Warrant Agent shall deliver such
Definitive Warrants to the persons in whose names
such Warrants are so registered. Any Definitive
Warrant issued in exchange for a beneficial interest
in a Restricted Global Warrant pursuant to this
Section 5(c)(i) shall bear the Private Placement
Legend and shall be subject to all restrictions on
transfer contained therein.
(ii) Beneficial Interests in Restricted Global Warrants to
Unrestricted Definitive Warrants. A holder of a
beneficial interest in a Restricted Global Warrant
may exchange such beneficial interest for an
Unrestricted Definitive Warrant or may transfer such
beneficial interest to a person who takes delivery
thereof in the form of an Unrestricted Definitive
Warrant only if:
(A) such transfer is effected pursuant to a
Registration Statement in accordance with the
Warrant Shares Registration Rights Agreement;
or
(B) the Warrant Agent receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global
Warrant proposes to exchange such
beneficial interest for a Definitive
Warrant that does not bear the
Private Placement Legend, a
certificate from such holder in the
form of Exhibit D hereto, including
the certifications in item (l)(b)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global
Warrant proposes to transfer such
beneficial interest to a person who
shall take delivery thereof in the
form of a Definitive Warrant that
does not bear the Private Placement
Legend, a certificate from such
holder in the form of Exhibit C
hereto, including the certifications
in item (3) thereof;
and, in each such case set forth in this subparagraph
(B), if the Warrant Agent so requests or if the
Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Warrant
Agent to the effect that such exchange or transfer is
in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
7
<PAGE> 9
(iii) Beneficial Interests in Unrestricted Global Warrants
to Unrestricted Definitive Warrants. If any holder
of a beneficial interest in an Unrestricted Global
Warrant proposes to exchange such beneficial interest
for a Definitive Warrant or to transfer such
beneficial interest to a person who takes delivery
thereof in the form of a Definitive Warrant, then,
upon satisfaction of the conditions set forth in
Section 5(b)(ii) hereof, the Warrant Agent shall
cause the aggregate principal amount of the
applicable Global Warrant to be reduced accordingly
pursuant to Section 5(g) hereof, and the Company
shall execute and the Warrant Agent shall countersign
and deliver to the person designated in the
instructions a Definitive Warrant in the appropriate
amount. Any Definitive Warrant issued in exchange
for a beneficial interest pursuant to this Section
5(c)(iii) shall be registered in such name or names
and in such authorized denomination or denominations
as the holder of such beneficial interest shall
instruct the Warrant Agent through instructions from
the Depositary and the Participant or Indirect
Participant. The Warrant Agent shall deliver such
Definitive Warrants to the persons in whose names
such Warrants are so registered. Any Definitive
Warrant issued in exchange for a beneficial interest
pursuant to this Section 5(c)(iii) shall not bear the
Private Placement Legend.
(d) Transfer and Exchange of Definitive Warrants for Beneficial
Interests.
(i) Restricted Definitive Warrants to Beneficial
Interests in Restricted Global Warrants. If any
holder of a Restricted Definitive Warrant proposes to
exchange such Warrant for a beneficial interest in a
Restricted Global Warrant or to transfer such
Restricted Definitive Warrants to a person who takes
delivery thereof in the form of a beneficial interest
in a Restricted Global Warrant, then, upon receipt by
the Warrant Agent of the following documentation:
(A) if the holder of such Restricted Definitive
Warrant proposes to exchange such Warrant for
a beneficial interest in a Restricted Global
Warrant, a certificate from such holder in
the form of Exhibit D hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Warrant is
being transferred to a QIB in accordance with
Rule 144A under the Securities Act, a
certificate to the effect set forth in
Exhibit C hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Warrant is
being transferred pursuant to an exemption
from the registration requirements of the
Securities Act in accordance with Rule 144
under the Securities Act, a certificate to
the effect set forth in Exhibit C hereto,
including the certifications in item (2)(a)
thereof;
(D) if such Restricted Definitive Warrant is
being transferred to an Institutional
Accredited Investor in reliance on an
exemption from the registration requirements
of the Securities Act other than those listed
in subparagraphs (B) and (C) above, a
certificate to the effect set forth in
8
<PAGE> 10
Exhibit C hereto, including the
certifications, certificates and Opinion of
Counsel required by item (2) thereof, if
applicable;
(E) if such Restricted Definitive Warrant is
being transferred to the Company or any of
its subsidiaries, a certificate to the effect
set forth in Exhibit C hereto, including the
certifications in item (2)(b) thereof; or
(F) if such Restricted Definitive Warrant is
being transferred pursuant to an effective
registration statement under the Securities
Act, a certificate to the effect set forth in
Exhibit C hereto, including the
certifications in item (2)(c) thereof,
the Warrant Agent shall cancel the Restricted
Definitive Warrant, increase or cause to be increased
the aggregate amount of, in the case of clause (A)
above, the appropriate Restricted Global Warrant, in
the case of clause (B) above, the 144A Global Warrant
and in all other cases, the IAI Global Warrant.
(ii) Restricted Definitive Warrants to Beneficial
Interests in Unrestricted Global Warrants. A holder
of a Restricted Definitive Warrant may exchange such
Warrant for a beneficial interest in an Unrestricted
Global Warrant or transfer such Restricted Definitive
Warrant to a person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted
Global Warrant only if:
(A) such transfer is effected pursuant to a
Registration Statement in accordance with the
Warrant Shares Registration Rights Agreement;
or
(B) the Warrant Agent receives the following:
(1) if the holder of such Definitive
Warrants proposes to exchange such
Warrants for a beneficial interest
in the Unrestricted Global Warrant,
a certificate from such holder in
the form of Exhibit D hereto,
including the certifications in item
(l)(c) thereof; or
(2) if the holder of such Definitive
Warrants proposes to transfer such
Warrants to a person who shall take
delivery thereof in the form of a
beneficial interest in the
Unrestricted Global Warrant, a
certificate from such holder in the
form of Exhibit C hereto, including
the certifications in item (3)
thereof;
and, in each such case set forth in this subparagraph
(B), if the Warrant Agent so requests or if the
Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Warrant
Agent to the effect that such exchange or transfer is
in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 5(d)(ii), the Warrant
Agent shall cancel the Definitive Warrants and
increase or cause to be increased the aggregate
amount of the Unrestricted Global Warrant.
9
<PAGE> 11
(iii) Unrestricted Definitive Warrants to Beneficial
Interests in Unrestricted Global Warrants. A holder
of an Unrestricted Definitive Warrant may exchange
such Warrant for a beneficial interest in an
Unrestricted Global Warrant or transfer such
Definitive Warrants to a person who takes delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Warrant at any time. Upon receipt
of a request for such an exchange or transfer, the
Warrant Agent shall cancel the applicable
Unrestricted Definitive Warrant and increase or cause
to be increased the aggregate amount of one of the
Unrestricted Global Warrants.
If any such exchange or transfer from a Definitive
Warrant to a beneficial interest is effected pursuant
to subparagraphs (ii) or (iii) above at a time when
an Unrestricted Global Warrant has not yet been
issued, the Company shall issue and the Warrant Agent
shall authenticate one or more Unrestricted Global
Warrants in an aggregate amount equal to the amount
of Definitive Warrants so transferred.
(e) Transfer and Exchange of Definitive Warrants for
Definitive Warrants. Upon request by a holder of Definitive Warrants and such
holder's compliance with the provisions of this Section 5(e), the Warrant Agent
shall register the transfer or exchange of Definitive Warrants. Prior to such
registration of transfer or exchange, the requesting holder shall present or
surrender to the Warrant Agent the Definitive Warrants duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Warrant Agent duly executed by such holder or by his attorney, duly authorized
in writing. In addition, the requesting holder shall provide any additional
certifications, documents and information, as applicable, required pursuant to
the following provisions of this Section 5(e).
(i) Restricted Definitive Warrants to Restricted
Definitive Warrants. Any Restricted Definitive
Warrant may be transferred to and registered in the
name of persons who take delivery thereof in the form
of a Restricted Definitive Warrant if the Warrant
Agent receives the following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the
transferor must deliver a certificate in the
form of Exhibit C hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to any
other exemption from the registration
requirements of the Securities Act, then the
transferor must deliver a certificate in the
form of Exhibit C hereto, including the
certifications, certificates and Opinion of
Counsel required by item (2) thereof, if
applicable.
(ii) Restricted Definitive Warrants to Unrestricted
Definitive Warrants. Any Restricted Definitive
Warrant may be exchanged by the holder thereof for an
Unrestricted Definitive Warrant or transferred to a
person or persons who take delivery thereof in the
form of an Unrestricted Definitive Warrant if:
(A) any such transfer is effected pursuant to a
Registration Statement in accordance with the
Warrant Shares Registration Rights Agreement;
or
(B) the Warrant Agent receives the following:
10
<PAGE> 12
(1) if the holder of such Restricted
Definitive Warrants proposes to exchange such
Warrants for an Unrestricted Definitive
Warrant, a certificate from such holder in
the form of Exhibit D hereto, including the
certifications in item (l)(d) thereof; or
(2) if the holder of such Restricted
Definitive Warrants proposes to transfer such
Warrants to a person who shall take delivery
thereof in the form of an Unrestricted
Definitive Warrant, a certificate from such
holder in the form of Exhibit C hereto,
including the certifications in item (3)
thereof;
and, in each such case set forth in this subparagraph
(B), if the Warrant Agent so requests, an Opinion of
Counsel in form reasonably acceptable to the Company
to the effect that such exchange or transfer is in
compliance with the Securities Act and that the
restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Warrants to Unrestricted
Definitive Warrants. A holder of Unrestricted
Definitive Warrants may transfer such Warrants to a
person who takes delivery thereof in the form of an
Unrestricted Definitive Warrant.
Upon receipt of a request to register such a
transfer, the Warrant Agent shall register the
Unrestricted Definitive Warrants pursuant to the
instructions from the holder thereof.
(f) Legends. The following legend shall appear on the
face of all Global Warrants and Definitive Warrants issued under this Warrant
Agreement unless specifically stated otherwise in the applicable provisions of
this Warrant Agreement.
(i) Except as permitted by subparagraph (ii) below, each
Global Warrant and each Definitive Warrant (and all
Warrants issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF AGREES NOT TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT IS TWO
YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE
PROVIDED UNDER RULE 144(k) AS PERMITTING RESALES BY
11
<PAGE> 13
NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT
RESTRICTION) AFTER THE LATER OF THE ORIGINAL CLOSING
DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR
ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) EXCEPT
(A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501
(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT
IS PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE ISSUERS' AND THE WARRANT AGENT'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH
OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT."
(ii) Notwithstanding the foregoing, any Global Warrant or
Definitive Warrant issued pursuant to subparagraphs
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii),
(e)(ii) or (e)(iii) to this Section 5 and all
Warrants issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(g) Cancellation and/or Adjustment of Global Warrants.
At such time as all beneficial interests in a particular Global Warrant have
been exchanged for Definitive Warrants or a particular Global Warrant has been
redeemed, repurchased or canceled in whole and not in part, each such Global
Warrant shall be returned to or retained and canceled by the Warrant Agent in
accordance with Section 5(k). At any time prior to such cancellation, if any
beneficial interest in a Global Warrant is exchanged for or transferred to a
person who will take delivery thereof in the form of a beneficial interest in
another Global Warrant or for Definitive Warrants, the principal amount of
Warrants represented by
12
<PAGE> 14
such Global Warrant shall be reduced accordingly and an endorsement shall be
made on such Global Warrant by the Warrant Agent or by the Depositary at the
direction of the Warrant Agent to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a person who will take
delivery thereof in the form of a beneficial interest in another Global
Warrant, such other Global Warrant shall be increased accordingly and an
endorsement shall be made on such Global Warrant by the Warrant Agent or by the
Depositary at the direction of the Warrant Agent to reflect such increase.
(h) Indemnification. Each holder of a Warrant
Certificate agrees to indemnify the Company and the Warrant Agent against any
liability that may result from the transfer, exchange or assignment of such
holder's Warrant Certificate in violation of any provision of this Agreement
and/or applicable U.S. Federal or state securities law.
(i) Depositary. Members of, or participants in, the
Depositary ("Agent Members") shall have no rights under this Agreement with
respect to the Global Warrants, as the case may be, held on their behalf by the
Depositary or the Warrant Agent as its custodian, and the Depositary may be
treated by the Company, the Warrant Agent and any agent of the Company or the
Warrant Agent as the absolute owner of such Global Warrant for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Warrant Agent or any agent of the Company or the Warrant Agent,
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a holder of any Warrants.
(j) Notices. The Warrant Agent shall retain copies of
all letters, notices and other written communications received pursuant to this
Section 5. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Warrant Agent.
(k) Cancellation of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates surrendered or so
delivered to the Warrant Agent shall be promptly canceled by the Warrant Agent
and shall not be reissued by the Company and, except as provided in this
Section 5 in case of an exchange, Section 6 hereof in case of the exercise of
less than all the Warrants represented thereby or Section 8 hereof in case of a
mutilated Warrant Certificate, no Warrant Certificate shall be issued hereunder
in lieu thereof. The Warrant Agent shall deliver to the Company from time to
time or otherwise dispose of such canceled Warrant Certificates as the Company
may direct in writing.
(l) Countersignature of New Certificates. The Warrant
Agent is hereby authorized to countersign, in accordance with the provisions of
this Section 5 and of Section 4 hereof, the new Warrant Certificates required
pursuant to the provisions of this Section 5.
(m) Charges. No service charge shall be made for
registration of transfer or exchange upon surrender of any Warrant Certificate
at the office of the Warrant Agent maintained for that purpose. The Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration, transfer or
exchange of Warrant Certificates.
(n) Warrant Endorsement. Notwithstanding the foregoing
provisions of this Section 5, until Separated (as defined herein) each Warrant
will be held by the Trustee, as custodian for the registered holders of each
Note or Note in global form, and will be registered in the name of the
registered
13
<PAGE> 15
holder of such Note initially in the amount specified in writing to the Warrant
Agent by the Company. Such holder may, at any time, on or after the Separation
Date (as defined herein), at its option, by notice to the Trustee elect to
separate and/or separately transfer the Notes and the Warrants represented by
such Note or Note in global form containing a Warrant Endorsement (as defined
in the Indenture), in whole or in part, for a definitive Warrant Certificate or
Warrant Certificates or a beneficial interest in a Global Warrant evidencing
the underlying Warrants and for a Note or Notes or a beneficial interest in a
global Note of a like aggregate principal amount at maturity of authorized
denominations and not containing a Warrant Endorsement in accordance with the
Indenture (such surrender and exchange being referred to herein as a
"Separation" and the related Warrants being referred to as "Separated");
provided that no delay or failure on the part of the Trustee or the Warrant
Agent to exchange such Warrant Certificate and Note or Notes shall affect the
Separation of the Notes and the Warrants or their separate transferability.
Prior to Separation, record ownership of the Warrants will be evidenced by the
certificates for Notes or a global Note registered in the names of the holders
of the Notes or global Notes, which certificates or global Note will bear
thereon a Warrant Endorsement substantially in the form set forth in the
Indenture, and the right to receive or exercise Warrants will be transferable
only in connection with the transfer of such Notes or a beneficial interest in
a global Note.
All Notes and global Notes containing a Warrant
Endorsement presented for Separation shall be duly endorsed by the registered
holder or holders thereof or by the duly appointed legal representative thereof
or by a duly authorized attorney, and in the case of transfer, which signature
shall be medallion guaranteed by an institution which is a member of a
Securities Transfer Association recognized signature guarantee program. Upon
notice from the Trustee of a Separation, the Warrant Agent shall, with respect
to Definitive Warrants, deliver (or cause to be delivered) the Warrant
Certificate or Warrant Certificates executed by the Company and countersigned
by the Warrant Agent in the name of such registered holder or holders or such
transferee or transferees or shall, with respect to (i) 144A Global Warrants,
deliver (or cause to be delivered) a 144A Global Warrant, and (ii) IAI Global
Warrants, deliver (or cause to be delivered) an IAI Global Warrant, in each
case, executed by the Company and countersigned by the Warrant Agent in the
name of the Depositary or its nominee for such aggregate amount of Warrants
(or, with respect to a Global Warrant, increasing the amount of Warrants
represented thereby in such amount) as shall equal one Warrant for each $1,000
principal amount at maturity of Notes so exchanged for Separation, bearing
numbers or other distinguishing symbols not contemporaneously outstanding, to
the person or persons entitled thereto. Upon registration of transfer or
exchange of a Warrant Certificate, the Warrant Agent shall countersign and
deliver by certified mail a new Warrant Certificate to the persons entitled
thereto.
SECTION 6. Separation, Terms and Exercise of Warrants. (a) The Notes
and Warrants will not be separately transferable until the close of business on
the earliest to occur of (i) June 1, 1998, (ii) such earlier date as the
Initial Purchaser may determine, (iii) the occurrence of a Change of Control
(as defined in the Indenture) and (iv) the date of effectiveness of the
Exchange Offer Registration Statement (as defined in the Indenture) (the
earliest of such dates, the "Separation Date"), at which time such Warrants
shall become separately transferable. Subject to the terms of this Agreement,
each Warrant holder shall have the right, which may be exercised during the
period commencing at the opening of business on the earlier to occur of (i)
June 30, 2000; (ii) the occurrence of a Change of Control, and (iii) the date
that is 180 days after consummation of an Initial Public Offering (the
"Exercise Commencement Date") (provided, however, that if the Company
consummates an Initial Public Offering prior to June 30, 2000, the Exercise
Commencement Date shall be the earlier to occur of (i) the occurrence of a
Change of Control and (ii) the date that is 180 days after the consummation of
such Initial Public Offering) and until 5:00 p.m., New York City time on
December 1, 2004 (the "Exercise Period"), to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the holder may at
the time
14
<PAGE> 16
be entitled to receive on exercise of such Warrants and payment of the exercise
price (the "Exercise Price") then in effect for such Warrant Shares; provided
that holders shall be able to exercise their Warrants only if a registration
statement relating to the Warrant Shares is then in effect, or the exercise of
such Warrants is exempt from the registration requirements of the Securities
Act, and such securities are qualified for sale or exempt from qualification
under the applicable securities laws of the states in which the various holders
of the Warrants or other persons to whom it is proposed that the Warrant Shares
be issued on exercise of the Warrants reside. Each holder may exercise its
right, during the Exercise Period to receive Warrant Shares as follows: (1)
the holder makes a payment to the Company in cash (or in the form of certified
or official bank check payable to the order of the Company) in an amount equal
to the Exercise Price of the Warrants being exercised by such holder, (2) the
holder tenders Notes having an aggregate principal amount at maturity, plus
accrued and unpaid interest, if any thereon, to the date of exercise equal to
the Exercise Price of the Warrants being exercised by such holder, (3) the
holder tenders Warrants having a fair market value (as determined in good faith
by the Company's Board of Directors) equal to the Exercise Price or (4) by a
combination of clauses (1) (2) and (3) above, all at the option of the holder
electing to exercise. Each Warrant not exercised prior to 5:00 p.m., New York
City time, on December 1, 2004 (the "Expiration Date") shall become void and
all rights thereunder and all rights in respect thereof under this agreement
shall cease as of such time. No adjustments as to dividends will be made upon
exercise of the Warrants. The Company will give notice of expiration not less
than 90 and not more than 120 days prior to the Expiration Date to the
registered holders of the then outstanding Warrants. If the Company fails to
give such notice, the Warrants will not expire until 90 days after the Company
gives notice. In no event will holders of Warrants be entitled to any damages
or other remedy for the Company's failure to give such notice other than any
such extension.
(b) In order to exercise all or any of the Warrants
represented by a Warrant Certificate, (i) in the case of Definitive Warrants,
the holder thereof must surrender for exercise the Warrant Certificate to
Company at the office of the Warrant Agent at its corporate trust office set
forth in Section 19 (which office shall be maintained in New York) hereof, (ii)
in the case of a book-entry interest in a Global Warrant, the exercising Agent
Member whose name appears on a securities position listing of the Depositary as
the holder of such book-entry interest must comply with the Depositary's
procedures relating to the exercise of such book-entry interest in such Global
Warrant and (iii) in the case of both Global Warrants and Definitive Warrants,
the holder thereof or the Agent Member, as applicable, must deliver to the
Company at the office of the Warrant Agent in New York the form of election to
purchase on the reverse thereof duly filled in and signed, which signature
shall be medallion guaranteed by an institution which is a member of a
Securities Transfer Association recognized signature guarantee program, and
upon payment to the Warrant Agent in New York for the account of the Company of
the Exercise Price, which is set forth in the form of Warrant Certificate
attached hereto as Exhibit A, as adjusted as herein provided, for the number of
Warrant Shares in respect of which such Warrants are then exercised.
(c) Subject to the provisions of Section 7 hereof, upon
compliance with clause (b) above, the Company shall deliver or cause to be
delivered with all reasonable dispatch, to or upon the written order of the
holder and in such name or names as the Warrant holder or Agent Member may
designate, a certificate or certificates for the number of whole Warrant Shares
issuable upon the exercise of such Warrants or other securities or property to
which such holder is entitled hereunder, together with cash as provided in
Section 12 hereof; provided that if any consolidation, merger or lease or sale
of assets is proposed to be effected by the Company as described in Section
11(m) hereof, or a tender offer or an exchange offer for shares of Common Stock
shall be made, upon such surrender of Warrants and payment of the Exercise
Price as aforesaid, the Company shall, as soon as possible, but in any event
not later than two business days thereafter, deliver or cause to be delivered
the full number of Warrant
15
<PAGE> 17
Shares issuable upon the exercise of such Warrants in the manner described in
this sentence or other securities or property to which such holder is entitled
hereunder, together with cash as provided in Section 12 hereof. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrants
and payment of the Exercise Price.
(d) The Warrants shall be exercisable, at the election of
the holders thereof, either in full or from time to time in part. If less than
all the Warrants represented by a Definitive Warrant are exercised, such
Definitive Warrant shall be surrendered and a new Definitive Warrant of the
same tenor and for the number of Warrants which were not exercised shall be
executed by the Company and delivered to the Warrant Agent and the Warrant
Agent shall countersign the new Definitive Warrant, registered in such name or
names as may be directed in writing by the holder, and shall deliver the new
Definitive Warrant to the person or persons entitled to receive the same. The
Warrant Agent shall make such notations on Schedule A to each Global Warrant as
are required to reflect any change in the number of Warrants represented by
such Global Warrant resulting from any exercise in accordance with the terms
hereof.
(e) All Warrant Certificates surrendered upon exercise of
Warrants shall be canceled by the Warrant Agent. Such canceled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
satisfactory to the Company. The Warrant Agent shall account promptly to the
Company with respect to Warrants exercised and concurrently pay to the Company
all monies received by the Warrant Agent for the purchase of the Warrant Shares
through the exercise of such Warrants.
(f) The Warrant Agent shall keep copies of this Agreement
and any notices given or received hereunder available for inspection upon
reasonable notice by the registered holders during normal business hours at its
office. The Company shall supply the Warrant Agent from time to time with such
numbers of copies of this Agreement as the Warrant Agent may request.
SECTION 7. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in
the issue of any Warrant Certificates or any certificates for Warrant Shares in
a name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 8. Mutilated or Missing Warrant Certificates. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company shall issue and the Warrant Agent may countersign, in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory
to the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and indemnity, if requested, also satisfactory to them.
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.
16
<PAGE> 18
SECTION 9. Reservation of Warrant Shares. (a) The Company will at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
(b) The Company or, if appointed, the transfer agent for
the Common Stock (the "Transfer Agent") and every subsequent transfer agent for
any shares of the Company's capital stock issuable upon the exercise of any of
the rights of purchase aforesaid will be irrevocably authorized and directed at
all times to reserve such number of authorized shares as shall be required for
such purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company will furnish such Transfer Agent a
copy of all notices of adjustments, and certificates related thereto,
transmitted to each holder pursuant to Section 14 hereof. The Warrant Agent is
hereby irrevocably authorized to requisition from time to time from such
Transfer Agent the stock certificates required to honor outstanding Warrants
upon exercise thereof in accordance with the terms of this Agreement. The
Company will supply such Transfer Agent with duly executed certificates for
such purposes and will provide or otherwise make available any cash which may
be payable as provided in Section 12.
(c) Before taking any action which would cause an
adjustment pursuant to Section 11 hereof to reduce the Exercise Price below the
then par value (if any) of the Warrant Shares, the Company will take any
corporate action which may, in the opinion of its counsel (which may be counsel
employed by the Company), be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
(d) The Company covenants that all Warrant Shares which
may be issued upon exercise of Warrants will, upon issue, be fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens,
charges and security interests with respect to the issuance thereof.
SECTION 10. Obtaining Stock Exchange Listings. The Company will from
time to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed
on the principal securities exchanges and markets within the United States of
America, if any, on which other shares of Common Stock are then listed, if any.
Upon the listing of such Warrant Shares, the Company shall notify the Warrant
Agent in writing. The Company will obtain and keep all required permits and
records in connection with such listing.
SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The Exercise Price and the number of Warrant Shares issuable upon
the exercise of each Warrant are subject to adjustment from time to time upon
the occurrence of the events enumerated in this Section 11. For purposes of
this Section 11, "Common Stock" means shares now or hereafter authorized of any
class of common stock of the Company and any other stock of the Company,
however designated, that has the right (subject to any prior rights of any
class or series of preferred stock) to participate in any distribution of the
assets or earnings of the Company without limit as to per share amount.
(a) Adjustment for Change in Capital Stock. If the
Company (i) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock, (ii) subdivides its outstanding shares of Common
Stock into a greater number of shares, (iii) combines its outstanding shares of
Common Stock into a smaller number of shares, (iv) makes a distribution on its
Common Stock in shares
17
<PAGE> 19
of its capital stock other than Common Stock or (v) issues by reclassification
of its Common Stock any shares of its capital stock; then the Exercise Price in
effect immediately prior to such action shall be proportionately adjusted so
that the holder of any Warrant thereafter exercised may receive the aggregate
number and kind of shares of capital stock of the Company which he would have
owned immediately following such action if such Warrant had been exercised
immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise of it may receive
shares of two or more classes of capital stock of the Company, the Company
shall determine the allocation of the adjusted Exercise Price between the
classes of capital stock. After such allocation, the exercise privilege and the
Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 11. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Rights Issue. If the Company
distributes any rights, options or warrants to all holders of its Common Stock
entitling them for a period expiring within 45 days after the record date
mentioned below to purchase shares of Common Stock at a price per share less
than the less than the Fair Value (as defined herein) per share on that record
date, the Exercise Price shall be adjusted in accordance with the formula:
O + N x P
---------
E' = E x M
----------------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the Fair Value per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or
warrants shall have been exercised, the Exercise Price shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
(c) Adjustment for Other Distributions. If the Company
distributes to all holders of its Common Stock any of its assets (including,
without limitation, cash) or debt securities or any rights or
18
<PAGE> 20
warrants to purchase debt securities, assets or other securities of the
Company, the Exercise Price shall be adjusted in accordance with the formula:
E' = E x M - F
-----------
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants to be distributed in respect of
one share of Common Stock as determined in good faith by the
Board of Directors of the Company (the "Board of Directors").
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the
distribution.
This Section 11(c) does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown on
the books of the Company prepared in accordance with generally accepted
accounting principles. Also, this Section 11(c) does not apply to rights,
options or warrants referred to in Section 11(b) hereof.
(d) Adjustment for Common Stock Issue. If the Company
issues shares of Common Stock for a consideration per share less than the Fair
Value per share on the date the Company fixes the offering price of such
additional shares, the Exercise Price shall be adjusted in accordance with the
formula:
P
-
E' = E x O + M
----------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
0 = the number of shares outstanding immediately prior to the issuance
of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the Fair Value per share on the date of issuance of such additional
shares.
A = the number of shares outstanding immediately after the issuance of
such additional shares.
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<PAGE> 21
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (b) and (c)
of this Section 11,
(2) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock,
(3) Common Stock issued in a bona fide public offering pursuant to
a firm commitment underwriting managed by a nationally recognized firm, or
(4) Common Stock issued to the Company's employees under bona fide
employee benefit plans adopted by the Board of Directors and approved by the
holders of Common Stock when required by law, if such Common Stock would
otherwise be covered by this subsection (d) (but only to the extent that the
aggregate number of shares excluded hereby and issued after the date of this
Warrant Agreement shall not exceed 10% of the Common Stock outstanding at any
time, exclusive of antidilution adjustments thereunder),
(5) Common Stock issued upon the exercise of rights or warrants
issued to the holders of Common Stock, or
(6) Common Stock issued to shareholders of any person which merges
into the Company in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger; or
(7) Common Stock issued to employees of the Company in return for
services, not to exceed in the aggregate 1% of the Common Stock outstanding as
of the date hereof.
(e) Adjustment for Convertible Securities Issue. If the
Company issues any securities convertible into or exchangeable for Common Stock
(other than securities issued in transactions described in subsections (b) and
(c) of this Section 11) for a consideration per share of Common Stock initially
deliverable upon conversion or exchange of such securities less than the Fair
Value per share on the date of issuance of such securities, the Exercise Price
shall be adjusted in accordance with this formula:
P
-
E' = E x O + M
----------
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior to the issuance
of such securities.
20
<PAGE> 22
P = the aggregate consideration received for the issuance of such
securities.
M = the Fair Value per share on the date of issuance of such
securities.
D = the maximum number of shares deliverable upon conversion or in
exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities have not been issued when such securities are no longer
outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to:
(1) convertible securities issued to shareholders of any person
which merges into the Company, or with a subsidiary of the Company, in
proportion to their stock holdings of such person immediately prior to such
merger, upon such merger,
(2) convertible securities issued in a bona fide public offering
pursuant to a firm commitment underwriting managed by a nationally recognized
firm, or
(3) convertible securities issued in a bona fide private placement
through a placement agent which is a member firm of the National Association of
Securities Dealers, Inc. (except to the extent that any discount from the
current market price attributable to restrictions on transferability of Common
Stock issuable upon conversion, as determined in good faith by the Board of
Directors and described in a Board resolution which shall be filed with the
Warrant Agent, shall exceed 20% of the then current market price).
(f) Consideration Received. For purposes of any
computation respecting consideration received pursuant to subsections (d) and
(e) of this Section 11, the following shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or otherwise
in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors (irrespective of the accounting treatment
thereof), whose determination shall be conclusive, and described in a Board
resolution which shall be filed with the Warrant Agent;
(3) in the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor shall be
deemed to be the consideration received by the Company for the issuance of such
securities plus the additional consideration, if any, to be received by
21
<PAGE> 23
the Company upon the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in clauses (1) and (2) of
this subsection); and
(4) in the case of the issuance of shares of Common Stock pursuant
to rights, options or warrants which rights, options or warrants were
originally issued together with one or more other securities as part of a unit,
the consideration shall be deemed to be (i) the fair value of such rights,
options or warrants at the time of issuance thereof as determined in good faith
by the Board of Directors whose determination shall be conclusive and described
in a Board resolution which shall be filed with the Warrant Agent plus (ii) the
additional consideration, if any, to be received by the Company upon the
exercise, conversion or exchange thereof (as determined in the same manner as
provided in clause (1) and (2) of this subsection).
(g) Fair Value. In Sections 11(b), (c), (d) and (e)
hereof, the "Fair Value" per security at any date of determination shall be (1)
in connection with a sale by the Company to a party that is not an Affiliate of
the Company in an arm's-length transaction (a "Non-Affiliate Sale"), the price
per security at which such security is sold and (2) in connection with any sale
by the Company to an Affiliate of the Company, (a) the last price per security
at which such security was sold in a Non-Affiliate Sale within the three-month
period preceding such date of determination or (b) if clause (a) is not
applicable, the fair market value of such security determined in good faith by
a nationally recognized investment banking, appraisal or valuation firm, which
is not an Affiliate of the Company, in each case, taking into account, among
all other factors deemed relevant by such investment banking, appraisal or
valuation firm, the trading price and volume of such security on any national
securities exchange or automated quotation system on which such security is
traded. Notwithstanding the foregoing, any sale to the Initial Purchaser (or
any successor thereto) pursuant to an underwritten public offering registered
under the Securities Act shall be deemed to be and treated as a Non-Affiliate
Sale.
For purposes of this Section 11(g), "Affiliate" of any specified
person means (A) any other person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified
person and (B) any director, officer or employee of such specified person. For
purposes of this definition "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with") as
used with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such person, whether through the ownership of voting securities, by
agreement or otherwise.
(h) When De Minimis Adjustment May Be Deferred. No
adjustment in the Exercise Price need be made unless the adjustment would
require an increase or decrease of at least 1% in the Exercise Price. Any
adjustments that are not made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 11 shall be
made to the nearest 1/1000th of a cent or to the nearest 1/l000th of a share,
as the case may be.
(i) No Dilution of Impairment. The Company will not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of the Warrants, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the holders of the Warrants against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (1) will take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
on the exercise of the Warrants from time to time outstanding and (2) will not
take
22
<PAGE> 24
any action which results in any adjustment of the Exercise Price if the total
number of Warrant Shares issuable after the action upon the exercise of all of
the Warrants would exceed the total number of shares of Common Stock then
authorized by the Company's certificate of incorporation and available for the
purpose of issue upon such exercise. A consolidation, merger, reorganization
or transfer of assets involving the Company covered by Section 11(m) shall not
be prohibited by or require any adjustment under this Section 11(i).
(j) Notice of Adjustment. Whenever the Exercise Price is
adjusted, the Company shall provide the notices required by Section 13 hereof.
(k) Voluntary Reduction. The Company from time to time
may reduce the Exercise Price by any amount for any period of time, if the
period is at least 20 days and if the reduction is irrevocable during the
period; provided that in no event may the Exercise Price be less than the par
value of a share of Common Stock. Whenever the Exercise Price is reduced, the
Company shall mail to Warrant holders a notice of the reduction. The Company
shall mail the notice at least 15 days before the date the reduced Exercise
Price takes effect. The notice shall state the reduced Exercise Price and the
period in which it will be in effect. A reduction of the Exercise Price does
not change or adjust the Exercise Price otherwise in effect for purposes of
Sections 11(a), (b), (c), (d), (e) and (g) hereof.
(1) Notice of Certain Transactions. If (i) the Company
takes any action that would require an adjustment in the Exercise Price
pursuant to Section 11(a), (b), (c), (d), (e) or (r) hereof, (ii) the Company
takes any action that would require a supplemental Warrant Agreement pursuant
to Section 11(m) hereof or (iii) there is a liquidation or dissolution of the
Company, then the Company shall mail to Warrant holders a notice stating the
proposed record date for a dividend or distribution or the proposed effective
date of a subdivision, combination, reclassification, consolidation, merger,
transfer, lease, liquidation or dissolution. The Company shall mail the notice
at least 15 days before such date. Failure to mail the notice or any defect in
it shall not affect the validity of the transaction.
(m) Reorganization of Company. If the Company
consolidates or merges with or into, or transfers or leases all or
substantially all its assets to, any person, upon consummation of such
transaction the Warrants shall automatically become exercisable for the kind
and amount of securities, cash or other assets which the holder of a Warrant
would have owned immediately after the consolidation, merger, transfer or lease
if the holder had exercised the Warrant immediately before the effective date
of the transaction. Concurrently with the consummation of such transaction,
the corporation formed by or surviving any such consolidation or merger if
other than the Company, or the person to which such sale or conveyance shall
have been made, shall enter into a supplemental Warrant Agreement so providing
and further providing for adjustments which shall be as nearly equivalent as
may be practical to the adjustments provided for in this Section 11(m). The
successor Company shall mail to Warrant holders a notice describing the
supplemental Warrant Agreement. If the issuer of securities deliverable upon
exercise of Warrants under the supplemental Warrant Agreement is an affiliate
of the formed, surviving, transferee or lessee corporation, that issuer shall
join in the supplemental Warrant Agreement.
(n) When No Adjustment Required. No adjustment need be
made for a transaction referred to in Section 11(a), (b), (c), (d), (e) or (r)
hereof, if Warrant holders are to participate in the transaction on a basis and
with notice that the Board of Directors determines to be fair and appropriate
in light of the basis and notice on which holders of Common Stock participate
in the transaction. No adjustment need be made for (i) rights to purchase
Common Stock pursuant to a Company plan for reinvestment of dividends or
interest or (ii) a change in the par value or no par value of the Common
23
<PAGE> 25
Stock. To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
(o) Warrant Agent's Disclaimer. The Warrant Agent has no
duty to determine when an adjustment under this Section 11 should be made, how
it should be made or what it should be. The Warrant Agent has no duty to
determine whether any provisions of a supplemental Warrant Agreement under
Section 11(m) hereof are correct. The Warrant Agent makes no representation as
to the validity or value of any securities or assets issued upon exercise of
Warrants. The Warrant Agent shall not be responsible for the Company's failure
to comply with this Section 11.
(p) When Issuance or Payment May Be Deferred. In any case
in which this Section 11 shall require that an adjustment in the Exercise Price
be made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event (i) issuing to the holder of
any Warrant exercised after such record date the Warrant Shares and other
capital stock of the Company, if any, issuable upon such exercise over and
above the Warrant Shares and other capital stock of the Company, if any,
issuable upon such exercise on the basis of the Exercise Price and (ii) paying
to such holder any amount in cash in lieu of a fractional share pursuant to
Section 12 hereof; provided that the Company shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's right to receive
such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(q) Adjustment in Number of Shares. Upon each adjustment
of the Exercise Price pursuant to this Section 11, each Warrant outstanding
prior to the making of the adjustment in the Exercise Price shall thereafter
evidence the right to receive upon payment of the adjusted Exercise Price that
number of shares of Common Stock (calculated to the nearest hundredth) obtained
from the following formula:
N' = N x E
--------
E'
where:
N' = the adjusted number of Warrant Shares issuable upon
exercise of a Warrant by payment of the adjusted Exercise
Price.
N = the number or Warrant Shares previously issuable upon
exercise of a Warrant by payment of the Exercise Price
prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(r) Additional Adjustments. In addition, in the event
that any other transaction or event occurs (including, without limiting the
generality of the foregoing, the issuance by the Company of shares of Common
Stock, or securities convertible into or exchangeable for Common Stock, for a
consideration per share less than the Exercise Price per share on the date the
Company fixes the offering price for such additional shares) as to which the
foregoing adjustment provisions are not strictly applicable but the failure to
make any adjustment would adversely affect the rights represented by the
Warrants in accordance with the essential intent and principles of such
provisions, then, in each such case, subject to Section 11(h), the Company
shall appoint an investment banking firm of recognized
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<PAGE> 26
national standing, or any other financial expert that does not (or whose
directors, officers, employees, affiliates or stockholders do not) have a
direct or material indirect financial interest in the Company or any of its
subsidiaries, who has not been, and, at the time it is called upon to give
independent financial advice to the Company, is not (and none of its directors,
officers, employees, affiliates or stockholders are) a promoter, director or
officer of the Company or any of its subsidiaries, which will give their
opinion upon the adjustment, if any, on a basis consistent with the essential
intent and principles established in the foregoing adjustment provisions,
necessary to preserve, without dilution, the rights represented by the
Warrants. Upon receipt of such opinion or determination, the Company shall
promptly mail a copy thereof to the holders of the Warrants and will make the
adjustments described therein.
(s) Form of Warrants. Irrespective of any adjustments in
the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Warrants initially issuable pursuant to this Agreement.
SECTION 12. Fractional Interests. The Company shall not be required
to issue fractional Warrant Shares on the exercise of Warrants. If more than
one Warrant shall be presented for exercise in full at the same time by the
same holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section
12, be issuable on the exercise of any Warrants (or specified portion thereof),
the Company shall pay an amount in cash equal to the Fair Value per Warrant
Share, as determined on the day immediately preceding the date the Warrant is
presented for exercise, multiplied by such fraction, computed to the nearest
whole U.S. cent.
SECTION 13. Notices to Warrant Holders. (a) Upon any adjustment of
the Exercise Price pursuant to Section 11 hereof, the Company shall promptly
thereafter (i) cause to be filed with the Warrant Agent a certificate of a firm
of independent public accountants of recognized standing selected by the Board
of Directors of the Company (who may be the regular auditors of the Company)
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) cause to be given to each of the registered holders of
Warrants at the address appearing on the Warrant register for each such
registered holder written notice of such adjustments by first-class mail,
postage prepaid. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 13.
(b) In case:
(i) the Company shall authorize the issuance to
all holders of shares of Common Stock of rights, options or warrants to
subscribe for or purchase shares of Common Stock or of any other subscription
rights or warrants;
(ii) the Company shall authorize the distribution
to all holders of shares of Common Stock of evidences of its indebtedness or
assets (other than cash dividends or cash distributions
25
<PAGE> 27
payable out of consolidated earnings or earned surplus or dividends payable in
shares of Common Stock or distributions referred to in Section 11(a) hereof);
(iii) of any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and assets of the
Company substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock;
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
(v) a Change of Control occurs; or
(vi) the Company proposes to take any action which
would require an adjustment of the Exercise Price pursuant to Section 11
hereof;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of Warrants at his address
appearing on the Warrant register, at least 20 days (or 10 days in any case
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (x)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to
be determined, (y) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (z) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the
notice required by this Section 13 or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up, or the vote upon any action.
(c) Nothing contained in this Agreement or in any of the
Warrant Certificates shall be construed as conferring upon the holders of
Warrants the right to vote or to consent or to receive notice as stockholders
in respect of the meetings of stockholders or the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
SECTION 14. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the business of the Warrant Agent, shall be the successor to the Warrant Agent
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 corporation would be
eligible for appointment as a successor warrant agent under the provisions of
Section 16 hereof. In case at the time such successor to the Warrant Agent
shall succeed to the agency created by this Agreement, and in case at that time
any of the Warrant Certificates
26
<PAGE> 28
shall have been countersigned but not delivered, any such successor to the
Warrant Agent may adopt the countersignature of the original Warrant Agent; and
in case at that time any of the Warrant Certificates shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of the predecessor Warrant Agent or in the name
of the successor to the Warrant Agent; and in all such cases such Warrant
Certificates shall have the full force and effect provided in the Warrant
Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its
changed name, and in all such cases such Warrant Certificates shall have the
full force and effect provided in the Warrant Certificates and in this
Agreement.
SECTION 15. Warrant Agent. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company and the Warrant Agent
assumes no responsibility for the correctness of any of the same except as such
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise expressly provided.
(b) The Warrant Agent shall not be responsible for any
failure of the Company to comply with any of the covenants contained in this
Agreement or in the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with
counsel satisfactory to it (who may be counsel for the Company) and the Warrant
Agent shall incur no liability or responsibility to the Company or to any
holder of any Warrant Certificate in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with the opinion or the
advice of such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant Certificate for
any action taken in reliance on any Warrant Certificate, certificate of shares,
notice, resolution, waiver, consent, order, opinion, certificate, or other
paper, document or instrument believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent
reasonable compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all expenses
(including the fees and expenses of its counsel), taxes and governmental
charges and other charges of any kind and nature incurred by the Warrant Agent
in the execution of this Agreement and to indemnify the Warrant Agent. The
Company shall indemnify the Warrant Agent against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Warrant Agreement,
including the costs and expenses of enforcing this Warrant Agreement against
the Company (including this Section 15) and defending itself against any claim
(whether asserted by the Company or any holder or any other person) or
liability in connection with the exercise or performance of any of its powers
or duties hereunder, except to the extent any such loss, liability or expense
may be attributable to its negligence or bad faith.
27
<PAGE> 29
The Warrant Agent shall notify the Company promptly of any claim for which it
may seek indemnity. Failure by the Warrant Agent to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Warrant Agent shall cooperate in the defense. The
Warrant Agent may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as it may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding instituted by the
Warrant Agent shall be brought in its name as Warrant Agent and any recovery of
judgment shall be for the ratable benefit of the registered holders of the
Warrants, as their respective rights or interests may appear.
(g) The Warrant Agent, and any stockholder, director,
officer or employee of it, may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.
(h) The Warrant Agent shall act hereunder solely as agent
for the Company, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for anything which it may do or
refrain from doing in connection with this Agreement except for its own gross
negligence or bad faith.
(i) The Warrant Agent shall not at any time be under any
duty or responsibility to any holder of any Warrant Certificate to make or
cause to be made any adjustment of the Exercise Price or number of the Warrant
Shares or other securities or property deliverable as provided in this
Agreement, or to determine whether any facts exist which may require any of
such adjustments, or with respect to the nature or extent of any such
adjustments, when made, or with respect to the method employed in making the
same. The Warrant Agent shall not be accountable with respect to the validity
or value or the kind or amount of any Warrant Shares or of any securities or
property which may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other securities
will when issued be validly issued and fully paid and nonassessable, and makes
no representation with respect thereto.
(j) The Warrant Agent shall exercise such of the rights
and powers vested in it by this Warrant Agreement, 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. The duties of the Warrant
Agent shall be determined solely by the express provisions of this Warrant
Agreement and the Warrant Agent need perform only those duties that are
specifically set forth in this Warrant Agreement and no others, and no implied
covenants or obligations shall be read into this Warrant Agreement against the
Warrant Agent. In the absence of bad faith on its part, the Warrant Agent may
conclusively rely, as
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<PAGE> 30
to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Warrant Agent and
conforming to the requirements of this Warrant Agreement. However, the Warrant
Agent shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Warrant Agreement.
(l) Unless otherwise specifically provided in this
Warrant Agreement, any demand, request, direction or notice from the Company
shall be sufficient if signed by an officer of the Company.
SECTION 16. Resignation and Removal of Warrant Agent. No resignation
or removal of the Warrant Agent and no appointment of a successor warrant agent
shall become effective until the acceptance of appointment by the successor
warrant agent as provided herein. The Warrant Agent may resign its duties and
be discharged from all further duties and liability hereunder (except liability
arising as a result of the Warrant Agent's own negligence or willful
misconduct) after giving written notice to the Company. The Company or the
holders of a majority of the unexercised Warrants may remove the Warrant Agent
upon written notice, and the Warrant Agent shall thereupon in like manner be
discharged from all further duties and liabilities hereunder, except as
aforesaid. The Warrant Agent shall, at the Company's expense, cause to be
mailed (by first class mail, postage prepaid) to each holder of a Warrant at
his last address as shown on the register of the Company maintained by the
Warrant Agent a copy of said notice of resignation or notice of removal, as the
case may be. Upon such resignation or removal, the Company shall appoint in
writing a new warrant agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in writing of
such resignation by the resigning Warrant Agent or after such removal, then the
resigning Warrant Agent or the holder of any Warrant may apply to any court of
competent jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such a court, shall be a
corporation doing business under the laws of the United States or any state
thereof, in good standing and having a combined capital and surplus of not less
than $50,000,000. The combined capital and surplus of any such new warrant
agent shall be deemed to be the combined capital and surplus as set forth in
the most recent annual report of its condition published by such warrant agent
prior to its appointment, provided that such reports are published at least
annually pursuant to law or to the requirements of a federal or state
supervising or examining authority. After acceptance in writing of such
appointment by the new warrant agent, it shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named herein
as the Warrant Agent, without any further assurance, conveyance, act or deed;
but if for any reason it shall be necessary or expedient to execute and deliver
any further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the resigning or removed Warrant Agent. Not later than the effective date
of any such appointment, the Company shall give notice thereof to the resigning
or removed Warrant Agent. Failure to give any notice provided for in this
Section 16, however, or any defect therein, shall not affect the legality or
validity of the resignation of the Warrant Agent or the appointment of a new
warrant agent, as the case may be.
SECTION 17. Registration. The Initial Purchaser and each subsequent
holder of Warrants shall be able to exercise their Warrants only if a
registration statement relating to the Warrant Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act, and such securities are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of the Warrants or other persons to whom it is proposed that
the Warrant Shares be issued on exercise of the Warrants reside. The Initial
Purchaser and each subsequent holder of Warrants shall have the registration
rights set forth in the Warrant Shares Registration Rights Agreement, dated as
of the date hereof, by and between the Company and the Initial Purchaser (the
"Warrant Registration Rights Agreement").
29
<PAGE> 31
SECTION 18. Reports. (a) Whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Warrants are outstanding, the Company shall furnish to the Warrant
Agent and the holders of Warrants (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Form 10-Q if the Company were required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company shall
file a copy of all such information and reports with the Commission for public
availability (unless the Commission shall not accept such a filing) and make
such information available to securities analysts and prospective investors upon
request. In addition, for so long as any Warrants remain outstanding, the
Company shall furnish to the holders of Warrants and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(b) Concurrently with the delivery of the reports
required to be delivered pursuant to clause (a) above, the Company shall file
with the Warrant Agent and cause to be delivered to each holder annual and
quarterly financial statements with appropriate footnotes of the Company and
its Restricted Subsidiaries, all prepared and presented in a manner
substantially consistent with those of the Company and its subsidiaries on a
consolidated basis as required by the preceding paragraph.
(c) The Company shall provide the Warrant Agent with a
sufficient number of copies of all such reports that the Warrant Agent may be
required to deliver to the holders of the Warrants under this Section 18.
SECTION 19. Notices to Company and Warrant Agent. Any notice or
demand authorized by this Agreement to be given or made by the Warrant Agent or
by the registered holder of any Warrant to or on the Company shall be
sufficiently given or made when and if deposited in the mail, first class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent) as follows:
Club Regina Resorts, Inc.
10000 Memorial Drive
Houston, TX 77024
Attn: Secretary
With a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Pennzoil Place - South Tower
711 Louisiana Street
Houston, TX 77002
Attn: Julien Smythe, Esq.
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
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<PAGE> 32
Any notice pursuant to this Agreement to be given by the Company or by
the registered holder(s) of any Warrant to the Warrant Agent shall be
sufficiently given when and if deposited in the mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attn: Corporate Trust Administration
SECTION 20. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Warrants in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
adversely affect the interests of the holders of Warrants. Any amendment or
supplement to this Agreement that has a material adverse effect on the
interests of the holders of Warrants shall require the written consent of the
holders of a majority of the then outstanding Warrants (excluding Warrants held
by the Company or any of its affiliates). The consent of each holder of
Warrants affected shall be required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares purchasable
upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided in this Agreement).
SECTION 21. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder,
whether so expressed or not.
SECTION 22. Termination. This Agreement shall terminate at 5:00 p.m.,
New York City time on December 1, 2004.
SECTION 23. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT
OF LAW RULES THEREOF. The Company hereby irrevocably and unconditionally: (i)
submits itself and its property in any legal action or proceeding relating to
this Agreement or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive jurisdiction of the courts of the State of New
York and the courts of the United States of America for the Southern District
of New York, and appellate courts thereof, and consents and agrees to such
action or proceeding being brought in such courts; and (ii) waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in
any inconvenient court and agrees not to plead or claim the same.
SECTION 24. Benefits of This Agreement. (a) Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company, the Warrant Agent and the registered holders of Warrants any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the registered holders of Warrants.
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<PAGE> 33
(b) All rights of action in respect of this Agreement are
vested in the holders of the Warrants Certificates, and any holder of any
Warrant Certificates, without the consent of the Warrant Agent or the holder of
any other Warrant Certificates, may, on such holder's own behalf and for such
holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company suitable to enforce, or otherwise in respect
of, such holder's rights hereunder, including the right to exercise, exchange
or surrender for purchase such holder's Warrants in the manner provided in this
Agreement.
SECTION 25. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
32
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
CLUB REGINA RESORTS, INC.
By:
----------------------------------------
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY,
as Warrant Agent
By:
----------------------------------------
Name:
Title:
S-1
<PAGE> 35
EXHIBIT A
[FORM OF WARRANT]
[FACE OF WARRANT CERTIFICATE]
WARRANT CERTIFICATE
CLUB REGINA RESORTS, INC.
No. [ ] [ ] Warrants
CUSIP Number [ ]
This Warrant Certificate certifies that [ ], or
registered assigns, is the registered holder of ________________ (_______)
warrants (the "Warrants") to purchase shares of common stock, par value $.001
per share (the "Common Stock"), of CLUB REGINA RESORTS, INC., a Nevada
corporation (the "Company"). Each Warrant entitles the holder upon exercise to
receive from the Company commencing on the Exercise Commencement Date (as
defined in the Warrant Agreement) until 5:00 p.m. New York City Time on
December 1, 2004, the number of fully paid and nonassessable Warrant Shares as
set forth in the Warrant Agreement, subject to adjustment as set forth in
Section 11 of the Warrant Agreement, at the initial exercise price (the
"Exercise Price") of $.01 per share payable pursuant to the provisions of
Section 6 of the Warrant Agreement upon surrender of this Warrant Certificate
and payment of the Exercise Price at the office or agency of the Warrant Agent,
but only subject to the conditions set forth herein and in the Warrant
Agreement referred to on the reverse hereof. The Exercise Price and number of
Warrant Shares issuable upon exercise of the Warrants are subject to adjustment
upon the occurrence of certain events set forth in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, no Warrant may be exercised
after 5:00 p.m., New York City Time on December 1, 2004, and to the extent not
exercised by such time such Warrants shall become void. Reference is hereby
made to the further provisions of this Warrant Certificate set forth on the
reverse hereof and such further provisions shall for all purposes have the same
effect as though fully set forth at this place. This Warrant Certificate shall
not be valid unless countersigned by the Warrant Agent, as such term is used in
the Warrant Agreement. This Warrant Certificate shall be governed and
construed in accordance with the internal laws of the State of New York.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
Terms used and not otherwise defined in this Warrant Certificate shall
have the meanings given them in the Warrant Agreement.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
A-1
<PAGE> 36
IN WITNESS WHEREOF, Club Regina Resorts, Inc. has caused this Warrant
Certificate to be signed by its authorized officers and may cause its corporate
seal to be affixed hereunto or imprinted hereon.
Dated:
---------------------
[SEAL]
CLUB REGINA RESORTS, INC.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
Countersigned:
IBJ SCHRODER BANK & TRUST COMPANY,
as Warrant Agent
By: _______________________________________________________
Authorized Signatory
A-2
<PAGE> 37
[FORM OF WARRANT]
[REVERSE OF WARRANT CERTIFICATE]
[Unless and until it is exchanged in whole or in part for
Warrants in certificated form, this Warrant may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.(1)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
NOT TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE THAT IS TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE
PROVIDED UNDER RULE 144(k) AS PERMITTING RESALES BY NON-AFFILIATES OF
RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE
ORIGINAL CLOSING DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR
ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE ISSUERS, (B) PURSUANT
TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501 (A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
PURCHASING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH,
__________________________________
(1) This paragraph is to be included only if the Warrant is in global
form.
A-3
<PAGE> 38
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE WARRANT AGENT'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE WARRANT AGENT.
[THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT
TRANSFERABLE SEPARATELY FROM THE NOTES ORIGINALLY SOLD AS A UNIT WITH
THE WARRANTS UNTIL THE EARLIEST TO OCCUR OF (I) JUNE 1, 1998, (II)
SUCH EARLIER DATE AS JEFFERIES & COMPANY, INC. MAY DETERMINE, (III)
THE OCCURRENCE OF A CHANGE IN CONTROL (AS DEFINED IN THE INDENTURE
RELATING TO THE NOTES) AND (IV) THE EFFECTIVENESS OF THE EXCHANGE
OFFER REGISTRATION STATEMENT (AS DEFINED IN THE INDENTURE RELATING TO
THE NOTES). PRIOR TO SUCH DATE, THE WARRANTS EVIDENCED BY THIS
CERTIFICATE MAY BE TRANSFERRED ONLY WITH THE SIMULTANEOUS TRANSFER TO
THE TRANSFEREE OF $1,000 PRINCIPAL AMOUNT OF NOTES FOR EACH WARRANT SO
TRANSFERRED.]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring December 1, 2004 entitling the holder on
exercise to receive shares of Common Stock, and are issued or to be issued
pursuant to a Warrant Agreement dated as of December 5, 1997 (the "Warrant
Agreement"), duly executed and delivered by the Company to IBJ Schroder Bank &
Trust Company, as warrant agent (the " Warrant Agent"), which Warrant Agreement
is hereby incorporated by reference in and made a part of this instrument and
is hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant Agent, the Company
and the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or after the Exercise
Commencement Date and on or before December 1, 2004; provided that holders
shall be able to exercise their Warrants only if a registration statement
relating to the Warrant Shares is then in effect, or the exercise of such
Warrants is exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), and such securities are qualified for
sale or exempt from qualification under the applicable securities laws of the
states in which the various holders of the Warrants or other persons to whom it
is proposed that the Warrant Shares be issued on exercise of the Warrants
reside. In order to exercise all or any of the Warrants represented by this
Warrant Certificate, (i) in the case of Definitive Warrants, the holder must
surrender for exercise this Warrant Certificate to the Warrant Agent at its
corporate trust office set forth in Section 19 of the Warrant Agreement, (ii)
in the case of a book-entry interest in a Global Warrant, the exercising Agent
Member whose name appears on a securities position listing of the Depositary as
the holder of such book-entry interest must comply with the Depositary's
procedures relating to the exercise of such book-entry interest in such Global
Warrant and (iii) in the case of both Global Warrants and Definitive Warrants,
the holder thereof or the Agent Member, as applicable, must deliver to the
Warrant Agent the form of election to purchase on the reverse hereof duly
filled in and
A-4
<PAGE> 39
signed, which signature shall be medallion guaranteed by an institution which
is a member of a Securities Transfer Association recognized signature guarantee
program, and upon payment to the Warrant Agent for the account of the Company
of the Exercise Price, as adjusted as provided in the Warrant Agreement, for
the number of Warrant Shares in respect of which such Warrants are then
exercised. No adjustment shall be made for any dividends on any Common Stock
issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The holders of the Warrants shall have the registration rights set
forth in the Warrant Shares Registration Rights Agreement, dated as of the date
hereof, by and between the Company and the Initial Purchaser.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-5
<PAGE> 40
[FORM OF]
ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive [ ] shares
of Common Stock and herewith tenders payment for such shares to the order of
the Company in the amount of $[ ] in accordance with Section 6 of
the Warrant Agreement. The undersigned requests that a certificate for such
shares be registered in the name of [
], whose address is [ ] and that such shares be delivered
to [ ] whose address is [ ]. If said
number of shares is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant Certificate representing
the remaining balance of such shares be registered in the name of [
], whose address is [ ],
and that such Warrant Certificate be delivered to [ ], whose
address is [ ].
Date:____________________________
________________________________________
(Signature)
Note: The above signature must
correspond with the name as
written upon the face of this
Warrant Certificate in every
particular, without
alteration or enlargement or
any change whatever.
________________________________________
(Signature Guaranteed)
Note: Signature must be guaranteed
by an "eligible guarantor
institution" meeting the
requirements of the
Registrar, which requirements
include membership or
participation in the
Securities Transfer Agents
Medallion Program ("STAMP")
or such other "signature
guarantee program" as may be
determined by the Registrar
in addition to, or in
substitution for, STAMP, all
in accordance with the
Securities Exchange Act of
1934, as amended.
Tax Identification or
Social Security Number:_____________________
Address:__________________________________
A-6
<PAGE> 41
[FORM OF]
ASSIGNMENT
For value received [ ] hereby sells, assigns and
transfers unto [ ] the within Warrant Certificate,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint [ ] attorney,
to transfer said Warrant Certificate on the books of the within-named Company,
with full power of substitution in the premises.
Date
--------------------------
--------------------------------------
(Signature)
Note: The above signature must
correspond with the name as
written upon the face of this
Warrant Certificate in every
particular, without
alteration or enlargement or
any change whatever.
--------------------------------------
(Signature Guaranteed)
Note: Signature must be guaranteed
by an "eligible guarantor
institution" meeting the
requirements of the
Registrar, which requirements
include membership or
participation in the
Securities Transfer Agents
Medallion Program ("STAMP")
or such other "signature
guarantee program" as may be
determined by the Registrar
in addition to, or in
substitution for, STAMP, all
in accordance with the
Securities Exchange Act of
1934, as amended.
A-7
<PAGE> 42
EXHIBIT B
Each Certificate evidencing Warrants originally issued as part of a
Unit of Notes and Warrants issued by the Company (and each Certificate
evidencing Warrants issued on registration of transfer thereof or in exchange
or substitution therefor prior to the close of business on the Separation Date
(as defined)) shall bear a legend, which may be affixed by stamp or sticker, in
substantially the following form:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE
SEPARATELY FROM THE NOTES ORIGINALLY SOLD AS A UNIT WITH THE WARRANTS
UNTIL THE EARLIEST TO OCCUR OF (I) JUNE 1, 1998, (II) SUCH EARLIER
DATE AS JEFFERIES & COMPANY, INC. MAY DETERMINE, (III) THE OCCURRENCE
OF A CHANGE IN CONTROL (AS DEFINED IN THE INDENTURE RELATING TO THE
NOTES) AND (IV) THE EFFECTIVENESS OF THE EXCHANGE OFFER REGISTRATION
STATEMENT (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES). PRIOR
TO SUCH DATE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY WITH THE SIMULTANEOUS TRANSFER TO THE TRANSFEREE OF
$1,000 PRINCIPAL AMOUNT OF NOTES FOR EACH WARRANT SO TRANSFERRED.
B-1
<PAGE> 43
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
Club Regina Resorts, Inc.
10000 Memorial Drive
Houston, TX 77024
Attn: Secretary
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Re: Warrants to Purchase Common Stock of Club Regina Resorts, Inc.
Reference is hereby made to the Warrant Agreement, dated as of
December 5, 1997 (the "Warrant Agreement"), between Club Regina Resorts, Inc.
(the "Company"), and IBJ Schroder Bank & Trust Company, as warrant agent.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Warrant Agreement.
[ ], (the "Transferor") owns and proposes to
transfer the Warrant[s] or interest in such Warrant[s] specified in Annex A
hereto, in the amount of [ ] Warrants in such Note[s] or
interests (the "Transfer"), to [ ] (the "Transferee"), as
further specified in Annex A hereto. In connection with the Transfer, the
Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN THE 144A GLOBAL WARRANT OR A DEFINITIVE WARRANT PURSUANT TO RULE 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Warrant is being transferred to a person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Warrant for its own account, or for one or more accounts
with respect to which such person exercises sole investment discretion, and
such person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A
and such Transfer is in compliance with any applicable blue sky securities laws
of any state of the United States. Upon consummation of the proposed Transfer
in accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the 144A
Global Warrant and/or the Definitive Warrant and in the Warrant Agreement and
the Securities Act.
2. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN THE IAI GLOBAL WARRANT OR A DEFINITIVE WARRANT PURSUANT
TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Warrants and Restricted Definitive
Warrants and pursuant to and
C-1
<PAGE> 44
in accordance with the Securities Act and any applicable blue sky securities
laws of any state of the United States, and accordingly the Transferor hereby
further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to
and in accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the
Company or a subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to
an effective registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an
Institutional Accredited Investor and pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A, Rule 144
or Rule 904, and the Transferor hereby further certifies that it has not
engaged in any general solicitation within the meaning of Regulation D under
the Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Warrant or Restricted
Definitive Warrants and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the Transferee in
the form of Exhibit E to the Warrant Agreement and (2) an Opinion of Counsel
provided by the Transferor or the Transferee (a copy of which the Transferor
has attached to this certification), to the effect that such Transfer is in
compliance with the Securities Act. Upon consummation of the proposed transfer
in accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the IAI
Global Warrant and/or the Definitive Warrants and in the Warrant Agreement and
the Securities Act.
3. [ ] Check if Transferee will take delivery of a beneficial interest
in an Unrestricted Global Warrant or of an Unrestricted Definitive Warrant.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144.
(i) The Transfer is being effected pursuant to and in accordance with Rule 144
under the Securities Act and in compliance with the transfer restrictions
contained in the Warrant Agreement and any applicable blue sky securities laws
of any state of the United States and (ii) the restrictions on transfer
contained in the Warrant Agreement and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Warrant Agreement, the transferred beneficial interest or Definitive Warrant
will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Warrants, on
Restricted Definitive Warrants and in the Warrant Agreement.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER
EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance
with an exemption from the registration requirements of the Securities Act
other than Rule 144, Rule 903 or Rule 904 under the Securities Act and in
compliance with the transfer restrictions contained in the Warrant Agreement
and any applicable blue sky securities
C-2
<PAGE> 45
laws of any State of the United States and (ii) the restrictions on transfer
contained in the Warrant Agreement and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Warrant Agreement, the transferred beneficial interest or Definitive Warrant
will not be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Warrants or Restricted
Definitive Warrants and in the Warrant Agreement.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
------------------------------------
[Insert Name of Transferor]
By:
---------------------------------
Name:
Title:
Dated:
C-3
<PAGE> 46
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Warrant (CUSIP), or
(ii) [ ] IAI Global Warrant (CUSIP); or
(b) [ ] a Restricted Definitive Warrant.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Warrant (CUSIP), or
(ii) [ ] IAI Global Warrant (CUSIP); or
(iii) [ ] Unrestricted Global Warrant (CUSIP); or
(b) [ ] a Restricted Definitive Warrant; or
(c) [ ] an Unrestricted Definitive Warrant,
in accordance with the terms of the Warrant Agreement.
C-4
<PAGE> 47
EXHIBIT D
FORM OF CERTIFICATE OF EXCHANGE
Club Regina Resorts, Inc.
10000 Memorial Drive
Houston, TX 77024
Attn: Secretary
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Re: Warrants to Purchase Common Stock of Club Regina Resorts, Inc.
Reference is hereby made to the Warrant Agreement, dated as of
December 5, 1997 (the "Warrant Agreement"), between Club Regina Resorts, Inc.,
as issuer (the "Company"), and IBJ Schroder Bank & Trust Company, as warrant
agent. Capitalized terms used but not defined herein shall have the meanings
given to them in the Warrant Agreement.
[ ], (the "Owner") owns and proposes
to exchange the Warrant[s] or interest in such Warrant[s] specified herein, in
the amount of [ ] Warrant[s] or interests (the "Exchange"). In
connection with the Exchange, the Owner hereby certifies that:
1. [ ] EXCHANGE OF RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL
INTERESTS IN A RESTRICTED GLOBAL WARRANT FOR UNRESTRICTED DEFINITIVE WARRANTS
OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL WARRANT
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST
IN A RESTRICTED GLOBAL WARRANT TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL
WARRANT. In connection with the Exchange of the Owner's beneficial interest in
a Restricted Global Warrant for a beneficial interest in an Unrestricted Global
Warrant in an equal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Warrants and pursuant to and in accordance with the
United States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the Warrant Agreement and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global
Warrant is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST
IN A RESTRICTED GLOBAL WARRANT TO UNRESTRICTED DEFINITIVE WARRANT. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Warrant for an Unrestricted Definitive Warrant, the Owner hereby
certifies (i) the Definitive Warrant is being acquired for the Owner's own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Global Warrants and
pursuant to and in accordance with the Securities Act, (iii) the restrictions
on transfer contained in the Warrant Agreement and the Private Placement Legend
are not required in order to maintain compliance with the Securities Act and
(iv) the Definitive Warrant is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
D-1
<PAGE> 48
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED
DEFINITIVE WARRANT TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL WARRANT.
In connection with the Owner's Exchange of a Restricted Definitive Warrant for
a beneficial interest in an Unrestricted Global Warrant, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Warrants and
pursuant to and in accordance with the Securities Act, (iii) the restrictions
on transfer contained in the Warrant Agreement and the Private Placement Legend
are not required in order to maintain compliance with the Securities Act and
(iv) the beneficial interest is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED
DEFINITIVE WARRANT TO UNRESTRICTED DEFINITIVE WARRANT. In connection with the
Owner's Exchange of a Restricted Definitive Warrant for an Unrestricted
Definitive Warrant, the Owner hereby certifies (i) the Unrestricted Definitive
Warrant is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Warrants and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Warrant Agreement and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Unrestricted
Definitive Warrant is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
2. [ ] EXCHANGE OF RESTRICTED DEFINITIVE WARRANTS OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL WARRANTS FOR RESTRICTED DEFINITIVE WARRANTS OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL WARRANTS
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST
IN A RESTRICTED GLOBAL WARRANT TO RESTRICTED DEFINITIVE WARRANT. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global
Warrant for a Restricted Definitive Warrant with an equal amount, the Owner
hereby certifies that the Restricted Definitive Warrant is being acquired for
the Owner's own account without transfer. Upon consummation of the proposed
Exchange in accordance with the terms of the Warrant Agreement, the Restricted
Definitive Warrant issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Warrant and in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED
DEFINITIVE WARRANT TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL WARRANT. In
connection with the Exchange of the Owner's Restricted Definitive Warrant for a
beneficial interest in the [CHECK ONE] O 144A Global Warrant, O IAI Global
Warrant with an equal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Warrants and pursuant to and
in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation
of the proposed Exchange in accordance with the terms of the Warrant Agreement,
the beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private
Placement Legend printed on the relevant Restricted Global
Warrant and in the Warrant Agreement and the Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
----------------------------------------
[Insert Name of Owner]
By:
------------------------------------
Name:
Title:
Dated:
D-2
<PAGE> 49
EXHIBIT E
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Club Regina Resorts, Inc.
10000 Memorial Drive
Houston, TX 77024
Attn: Secretary
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Re: Warrants to Purchase Common Stock of Club Regina Resorts, Inc.
Reference is hereby made to the Warrant Agreement, dated as of
December 5, 1997 (the "Warrant Agreement"), between Club Regina Resorts, Inc.,
as issuer (the "Company"), and IBJ Schroder Bank & Trust Company, as warrant
agent. Capitalized terms used but not defined herein shall have the meanings
given to them in the Warrant Agreement.
In connection with our proposed purchase of [ ]
number of:
(a) [ ] a beneficial interest in a Global Warrant, or
(b) [ ] a Definitive Warrant,
we confirm that:
1. We understand that any subsequent transfer of the
Warrants or any interest therein is subject to certain restrictions and
conditions set forth in the Warrant Agreement and the undersigned agrees to be
bound by, and not to resell, pledge or otherwise transfer the Warrants or any
interest therein except in compliance with, such restrictions and conditions
and the United States Securities Act of 1933, as amended (the "Securities
Act").
2. We understand that the offer and sale of the Warrants
have not been registered under the Securities Act, and that the Warrants and
any interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, that if we should sell the
Warrants or any interest therein, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act
to a "qualified institutional buyer" (as defined therein), (c) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter
and an Opinion of Counsel in form reasonably acceptable to the Company to the
effect that such transfer is in compliance with the Securities Act, (D) outside
the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the provisions of Rule 144(k) under the
Securities Act or (F) pursuant to an effective registration statement under the
Securities Act, and we
E-1
<PAGE> 50
further agree to provide to any person purchasing the Definitive Warrant or
beneficial interest in a Global Warrant from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising
such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the
Warrants or beneficial interest therein, we will be required to furnish to you
and the Company such certifications, legal opinions and other information as
you and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the
Warrants purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment in the
Warrants, and we and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
5. We are acquiring the Warrants or beneficial interest
therein purchased by us for our own account or for one or more accounts (each
of which is an institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
-----------------------------------
[Insert Name of Accredited Investor]
By:
--------------------------------
Name:
Title:
Dated:
E-2
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
by and between
BANCOMER S.A., INSTITUCION DE BANCA MULTIPLE, GRUPO FINANCIERO
and
DESARROLLOS TURISTICOS REGINA, S. DE R.L. DE C.V.
and
CLUB REGINA RESORTS, INC.,
and
CR HOTEL ACQUISITION COMPANY, LLC
----------------------------------
Dated as of August 18, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I......................................................................2
1.1 Definitions..........................................................2
1.2 Captions.............................................................8
1.3 Number and Gender....................................................8
1.4 Knowledge............................................................8
1.5 Amendment and Restatement of Original Agreements.....................8
ARTICLE II.....................................................................9
2.1 Purchase and Sale of Shares..........................................9
2.2 Purchase Price Adjustment............................................9
2.3 Closing.............................................................11
2.4 Ancillary Agreements to be Delivered At or Prior to the Closing.....11
2.5 Escrow..............................................................11
ARTICLE III...................................................................11
3.1 Information Review..................................................12
3.2 Physical Inspection.................................................12
3.3 No Effect on Other Provisions.......................................12
ARTICLE IV....................................................................12
4.1 Organization and Good Standing......................................13
4.2 Authorization and Validity..........................................13
4.3 No Governmental Approvals...........................................13
4.4 No Conflicts........................................................13
4.5 Certain Proceedings.................................................13
4.6 No Brokers or Finders...............................................13
4.7 Acknowledgment Regarding A Shares...................................13
4.8 Acknowledgment Regarding Recapitalization of Real Estate Companies..14
ARTICLE V.....................................................................14
5.1 Organization and Good Standing......................................14
5.2 Capitalization......................................................14
5.3 Other Subsidiaries..................................................14
5.4 Authorization and Validity..........................................14
5.5 No Governmental Approvals...........................................15
5.6 No Conflicts........................................................15
5.7 Historical Financial Statements.....................................15
5.8 Projections.........................................................16
5.9 Absence of Undisclosed Liabilities..................................16
5.10 Title to Properties; Liens..........................................16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
5.11 Condition and Sufficiency of Assets.................................17
5.12 Accounts Receivable.................................................17
5.13 Inventory...........................................................17
5.14 Insurance...........................................................17
5.15 Certain Proceedings.................................................18
5.16 Compliance with Laws................................................18
5.17 Environmental Matters...............................................18
5.18 Taxes...............................................................19
5.19 Intellectual Property...............................................20
5.20 Contracts...........................................................20
5.21 Absence of Changes or Events........................................20
5.22 Licenses, Permits and Tariffs.......................................21
5.23 Absence of Certain Business Practices; Internal Accounting Controls.22
5.24 Customers and Suppliers.............................................22
5.25 Bank Accounts.......................................................22
5.26 No Broker...........................................................22
5.27 Employees...........................................................22
5.28 Labor Relations; Compliance.........................................23
5.29 Employee Benefit Plans..............................................23
ARTICLE VI....................................................................24
6.1 Access to Information...............................................24
6.2 Taking of Necessary Action..........................................25
6.3 Expenses............................................................25
6.4 Notice of Certain Changes...........................................25
6.5 Confidentiality; Press Releases.....................................26
6.6 [Intentionally Omitted].............................................26
6.7 Title Insurance, Surveys, etc.......................................26
6.8 Consummation of Debt Commitments....................................27
ARTICLE VII...................................................................27
7.1 Ordinary Course.....................................................27
7.2 Dividends and Issuance and Purchase of Securities; Loans............27
7.3 Government Documents; Inconsistent Agreements.......................28
7.4 No Other Bids.......................................................28
7.5 Acquisitions........................................................28
7.6 Indebtedness........................................................28
7.7 Employee Contracts and Benefit Plans................................28
7.8 Prohibited Dispositions.............................................29
7.9 Lines of Business and Capital Expenditures..........................29
7.10 Accounting Methods..................................................29
7.11 Settlements.........................................................29
7.12 Completion of Los Cabos Club Regina Units...........................29
ARTICLE VIII..................................................................29
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
8.1 Conditions to All Parties' Obligations..............................29
8.2 Buyer's Conditions..................................................30
8.3 Seller's Conditions.................................................31
ARTICLE IX....................................................................32
9.1 Risk of Loss........................................................32
9.2 Casualty............................................................32
9.3 Condemnation........................................................33
ARTICLE X.....................................................................33
10.1 Termination.........................................................33
10.2 Effect of Termination...............................................34
ARTICLE XI....................................................................35
11.1 Indemnification by Seller...........................................35
11.2 Indemnification by Buyer............................................35
11.3 Notice, Participation and Duration..................................35
11.4 Reimbursement.......................................................35
ARTICLE XII...................................................................36
12.1 Arbitration.........................................................36
ARTICLE XIII..................................................................37
13.1 Survival of Representations, Warranties and Agreements..............37
13.2 Effect of Due Diligence.............................................37
13.3 Notices.............................................................37
13.4 Attorneys' Fees.....................................................38
13.5 Counterparts........................................................38
13.6 Miscellaneous.......................................................38
13.7 Governing Law.......................................................38
13.8 Incorporation of Exhibits and Schedules.............................38
13.9 Waiver..............................................................38
13.10 Specific Performance................................................39
13.11 Release of CR Hotel.................................................39
ARTICLE XIV...................................................................39
</TABLE>
iii
<PAGE> 5
SECOND AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
This SECOND AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (this
"Agreement"), dated as of August 18, 1997, is by and among Bancomer S.A.,
Institucion de Banca Multiple, Grupo Financiero, a Mexican corporation
("Seller"), and Desarrollos Turisticos Regina, S. de R.L. de C.V., a Mexican
corporation (f/k/a Desarrollos Turisticos Bancomer, S.A. de C.V.) (the
"Company"), on the one hand, and Club Regina Resorts, Inc., a Nevada
corporation, formerly known as CR Timeshare Acquisition Company, Inc. ("Buyer"),
and CR Hotel Acquisition Company, LLC, a Delaware limited liability company ("CR
Hotel"), on the other.
R E C I T A L S
WHEREAS, on December 20, 1996 (the "Original Agreement Date"), Buyer
and Seller entered into that certain Stock Purchase Agreement by and between
Buyer and Seller (the "Timeshare Agreement");
WHEREAS, on the Original Agreement Date, CR Hotel and the Company
entered into that certain Stock Purchase Agreement by and between the Company
and CR Hotel (the "Hotel Agreement" and, together with the Timeshare Agreement,
the "Original Agreements");
WHEREAS, on June 25, 1997, the Company, CR Hotel, Buyer and Seller
amended and restated the Hotel Agreement and the Timeshare Agreement,
respectively, into the First Amended and Restated Stock Purchase Agreement (the
"First Amended Agreement"), by and among Seller and the Company, on the one
hand, and Buyer and CR Hotel, on the other.
WHEREAS, the Company and CR Hotel, and Buyer and Seller, wish to amend
and restate the First Amended Agreement;
WHEREAS, Seller owns or controls all of the issued and outstanding
shares of capital stock of the Company;
WHEREAS, the Company, through its subsidiaries, has been engaged in
both the hotel and the vacation ownership interval business in Mexico, primarily
in Cabo San Lucas, Puerto Vallarta and Cancun, under the name "Westin Regina and
Club Regina";
WHEREAS, Buyer has deposited US $3.0 million into escrow as
contemplated by Section 2.5;
WHEREAS, Seller desires to sell and Buyer desires to purchase all of
the outstanding shares of capital stock of the Company and all of the shares of
capital stock of the Real Estate Companies (as defined herein) held by Seller on
the terms and conditions hereinafter stated; and
WHEREAS, the parties hereto have previously executed that certain
Purchase Proposal which set forth the parties intent as to the transactions
contemplated hereby, a copy of which is attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the above and the mutual covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and
1
<PAGE> 6
sufficiency of which is hereby acknowledged by the parties hereto, Seller, the
Company, Buyer and CR Hotel hereby agree as follows:
ARTICLE I.
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. The following terms when used in this Agreement (including
all of the Exhibits and Schedules) will have the meanings set forth below:
"Accounts Receivable" shall mean all accounts receivable of the Company,
other than the Timeshare Receivables, that are reflected on the Interim
Historical Balance Sheet or on the accounting records of the Company as of the
Closing Date.
"Actual Employees" shall mean all individuals, including without
limitation, agents or representatives, rendering subordinated services to the
Company as of the Original Agreement Date.
"Affiliate" shall mean with respect to a Person, any other Person that,
directly or indirectly, controls, or is controlled by or under common control
with such Person. For purposes of this definition, control (including the terms
controlled by and under common control with), as used with respect to any
Person, means the power to direct or cause the direction of the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities or by Contract or otherwise.
"Ancillary Agreements" shall have that meaning set forth in Section 2.4.
"Applicable Environmental and Safety Laws" shall mean any and all
environmental or health and safety related laws, regulations, rules, permits,
orders, ordinances, decrees or determinations of Governmental Bodies in effect
on the Closing Date, in any and all jurisdictions in which the Property is
located or the Company conducts operations and applicable to such Property or
operations, as the case may be, including without limitation, the Mexican
General Law on Ecological Equilibrium and Environmental Protection, the Mexican
National Waters Law and other applicable environmental and health and safety
related laws, rules, ordinances, directives and regulations.
"Average Sales Expense" shall mean the average Selling Expense per Module
of the Sold Timeshare Intervals, as derived from and reflected in the Company's
audited consolidated financial statements for the year ended December 31, 1996,
stated as a percentage and calculated on a historical US dollar basis.
"Average Sales Price" shall mean the average sales price per Module of the
Sold Timeshare Intervals, as derived from and reflected in the Company's audited
consolidated financial statements for the year ended December 31, 1996 and
calculated on a historical US dollar basis.
"Balance Sheet Date" shall have the meaning set forth in Section 5.7.
"Business" shall mean the business conducted by the Company.
2
<PAGE> 7
"Business Day" shall mean any day other than a Saturday, Sunday or a legal
holiday under the federal laws of either the United States of America or the
United Mexican States.
"CSL Timeshare Sub" shall mean the Mexican corporation to be formed as a
subsidiary of the Company for purposes of holding the Timeshare Property in Cabo
San Lucas.
"Cancun Timeshare Sub" shall mean the Mexican corporation to be formed as a
subsidiary of the Company for purposes of holding the Timeshare Property in
Cancun.
"Capital Expenditures" shall mean any expenditure for replacement, repair,
improvement or addition to the Property which is, in accordance with GAAP, an
expenditure which should be capitalized on the books and records of the Company.
"Closing" shall have the meaning set forth in Section 2.3.
"Closing Date" shall have the meaning set forth in Section 2.3.
"Closing Date Timeshare Intervals" shall mean the Timeshare Intervals as of
the Closing Date.
"Closing Date Timeshare Receivables" shall mean the amount of Timeshare
Receivables as of the Closing Date.
"Club Regina" shall mean Club Regina, S.A. de C.V., a Mexican corporation.
"Commissioners" shall mean all agents and third parties that are hired from
time to time by the Company to provide a specific service, including the
promotion and sale of timeshares.
"Commitments" shall mean subscriptions, options, warrants, calls, rights,
commitments or any other Contracts of any character obligating a Person to issue
any shares of its capital stock or any other securities convertible into,
exchangeable or exercisable for, or evidencing the right to subscribe for, any
such shares.
"Company" shall mean Desarrollos Turisticos Regina, S de R.L. de C.V., a
Mexican corporation, and, unless otherwise provided, its Subsidiaries.
"Contract" shall mean any contract, lease, license, deed of trust,
mortgage, commitment, license, franchise, indenture, note, other agreement,
instrument or obligation.
"Controversy" shall have the meaning set forth in Section 12.1.
"Corporate Banking" shall mean Bancomer, S.A., Banca Corporativa, Division
de Comunicacion y Servicios.
"Current Assets" shall mean those assets known as "current assets" under
GAAP; provided, however, that for purposes of calculating Working Capital, the
term "Current Assets" shall not include Timeshare Receivables.
"Current Liabilities" shall mean those liabilities known as "current
liabilities" under GAAP.
2
<PAGE> 8
"Damages" shall mean all damages, losses (including any diminution in
value), liabilities (joint or several), payments, obligations, penalties,
claims, demands, defenses, judgments, suits, proceedings, costs, disbursements
or expenses (including, without limitation, reasonable and duly documented fees,
disbursements and expenses of attorneys, accountants and other professional
advisors and of expert witnesses and costs of investigation and preparation) of
any kind or nature whatsoever.
"Debt Commitment" shall mean the Hotel Debt Commitment and the Timeshare
Debt Commitment.
"Default" by either party ("Defaulting Party") shall include the failure to
consummate the Closing on or before the Termination Date if the failure to
consummate the Closing on or before such date resulted from the willful and
knowing failure by the Defaulting Party to fulfill any undertaking or commitment
provided for herein that is required to be fulfilled by such Defaulting Party at
or prior to Closing; provided that the other party ("Non-Defaulting Party")
shall have given written notice of the undertaking or commitment failed to be
properly fulfilled by the Defaulting Party and permitting the Defaulting Party a
10 Business Day period in which to fulfill such undertaking or commitment and
close the transactions contemplated hereby.
"Defects" shall have that meaning set forth in Section 3.2.
"Defect Notice" shall have that meaning set forth in Section 3.2.
"Definitive Purchase Price Adjustment" shall have that meaning set forth in
Section 2.2(c).
"Desarrollos" shall mean Desarrollos Turisticos Integrales Cabo San Lucas,
S. A. de C. V., a Mexican corporation and a partially-owned subsidiary of the
Company.
"DTI Cozumel" shall mean Desarrollos Turisticos Integrales Cozumel, S.A. de
C.V., a Mexican corporation and wholly owned subsidiary of the Company.
"Employees" shall mean the Actual Employees and the Commissioners.
"Escrow Agreement" shall mean that certain Escrow Agreement dated as of
December 20, 1996 by and among CR Hotel, the Company and Texas Commerce Bank
National Association, a national banking association ("TCB").
"Escrow Deposit" shall have that meaning specified in Section 2.5.
"Exchange Rate" shall mean the exchange rate of Pesos for US Dollars as
published by Banco de Mexico in the Diario Oficial de la Federacion (Official
Gazette) for the settlement of obligations denominated in US Dollars as of the
close of business on the Business Day immediately preceding the date of
measurement.
"First Amended Agreement" shall have the meaning set forth in the Recitals.
"GAAP" shall mean Mexican generally accepted accounting principles
consistently applied.
3
<PAGE> 9
"Governmental Body" shall mean any competent court or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
other instrumentality, domestic or foreign, in the US, the United Mexican
States, or elsewhere.
"Hazardous Material" shall mean any pollutant, contaminant, toxic
substance, hazardous waste, hazardous substance, oil, or petroleum product as
defined in or pursuant to the Mexican General Law on Ecological Equilibrium and
Environmental Protection, the Mexican Regulations on Hazardous Wastes, the
Mexican Regulation for the Land Transportation of Hazardous Wastes and Materials
and the Mexican Law on National Waters and its Regulations, or any other
environmental or health and safety-related law, regulation, ordinance or rule at
the federal, state or local level, whether existing as of the Original Agreement
Date, previously in force, or subsequently enacted.
"Hotel Agreement" shall have the meaning set forth in the recitals.
"Hotel Business" shall mean the assets, business and operations of
Desarrollos, Nizuc and Prodepa, relating to the hotels and related assets of
such companies in Cabo San Lucas, Cancun and Puerto Vallarta, Mexico.
"Hotel Debt Commitment" shall mean the commitment of Corporate Banking to
loan funds pursuant to the commitment letter dated the date hereof.
"Hotel Property" shall mean the real estate, furniture, fixtures, equipment
and other assets comprising the Hotel Business.
"House Sub" shall mean Corporacion Habitacional Mexicana, S. A. de C.V., a
Mexican corporation and wholly-owned subsidiary of the Company, which currently
owns all of the houses and other residential properties owned by the Company,
including, without limitation, those listed on Schedule 5.10.
"Information" shall have the meaning set forth in Section 3.1.
"Initial Timeshare Intervals" shall mean the Timeshare Intervals as of June
30, 1996.
"Intangibles" shall mean all of the Company's rights, if any, to any
telephone numbers currently in use by the Company; all as built plans and
specifications in the Company's possession; warranties and guaranties relating
to the Property; original, or where appropriate, copies of all financial,
personnel and other books, records and files relating to the ownership or
operation of the Property wherever located and held by the Company or its
agents, in computer readable form where available without additional cost or
expense, and all Intellectual Property used in the operation of the Property.
"Intellectual Property" shall mean trademarks, service marks, trade dress,
logos and trade names, together with all goodwill associated therewith and all
registrations, applications, renewals, translations, adaptations, derivations
and combinations thereof, copyrights and copyrightable works and all
registrations, applications and renewals therefor; trade secrets and
confidential information (including, without limitation, ideas, drawings,
specifications, designs, plans, proposals, financial and accounting data,
business and marketing plans, and customer and supplier lists); computer
software; other intellectual property rights; and all copies and tangible
embodiments of the foregoing (in whatever form or medium).
4
<PAGE> 10
"Laws" shall mean all laws (common or statutory), statutes, ordinances,
rules, regulations and decrees applicable to the referenced matter.
"Leases" shall mean those leases listed on Schedule 5.20 under the heading
"Leases".
"Legal Requirements" shall mean all Laws affecting or in any way relating
to the Company or its operations, including, without limitation, the Applicable
Environmental and Safety Laws.
"Liabilities" shall mean, as to any Person, any liability, obligation, cost
or expense of any nature whatsoever, whether now known or unknown, asserted or
unasserted, accrued or unaccrued, liquidated, unliquidated or due or to become
due, including, without limitation, any liability in respect of Taxes of any
kind whatsoever that affect such Person or its Subsidiaries or the operation
thereof.
"Lien" shall mean any lien, mechanic's lien, materialman's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, right of third Person
to prohibit assignment or transfer of title without such Person's consent,
claim, title imperfection, restrictive covenant, encroachment or other survey
defect, pledge, restriction, security interest or other adverse claim, whether
arising by Contract or under Law or otherwise.
"Management Agreements" shall mean those agreements with Westin relating to
the management and operation of the Property in Cabo San Lucas, Cancun and
Puerto Vallarta, as more particularly described on Schedule 5.20.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on or with respect to the business, assets, financial
condition or results of operations of such Person and its Subsidiaries, taken as
a whole.
"Mexico Hotel Holding" shall mean the Mexican corporation to be formed for
purposes of holding the stock of the Real Estate Companies and 50% of the stock
of the House Sub.
"Module" shall mean a single room.
"Nizuc" shall mean Promotora Turistica Nizuc, S.A. de C.V., a Mexican
corporation and a partially-owned subsidiary of the Company.
"Order" shall mean any order, injunction, decree of a court or charge of a
Governmental Body.
"Ordinary Course of Business" shall mean the ordinary course of business
generally consistent with past custom and practice (including with respect to
quantity and frequency).
"Original Agreements" shall have the meaning set forth in the recitals.
"Original Agreement Date" shall have the meaning set forth in the recitals.
"Other Business" shall mean all of the assets, business and operations of
the Company other than the Hotel Business and the Timeshare Business.
5
<PAGE> 11
"Other Property" shall mean the real estate, furniture, fixtures, equipment
and other assets comprising the Other Business.
"PV Timeshare Sub" shall mean the Mexican corporation to be formed as a
subsidiary of the Company for purposes of holding the Timeshare Property in
Puerto Vallarta.
"Permitted Hotel Property Lien" shall have the meaning set forth in Section
6.7(a)(iii).
"Permitted Timeshare Property Liens" shall have the meaning set forth in
Section 6.7(a)(iv).
"Person" shall mean an individual, corporation, joint venture, partnership
(limited or general), limited liability company, trust or unincorporated
organization or other entity or Governmental Body.
"Preliminary Adjustment Schedule" shall have that meaning specified in
Section 2.2(c).
"Proceeding" shall mean any claim, action, suit, proceeding, formal
complaint, show cause Order or cease and desist Order, arbitration,
adjudication, settlement proceeding, or formal Governmental Body investigation,
in each case, if applicable, whether at equity or at law.
"Prodepa" shall mean Promotora y Desarrolladora del Pacifico, S.A. de C.V.,
a Mexican corporation and a partially-owned subsidiary of the Company.
"Projections" shall mean Seller's internal management projections dated
June 1996 relating to the business and operations of the Company.
"Property" shall mean the assets of the Company.
"Purchase Price" shall have the meaning set forth in Section 2.1.
"Real Estate Companies" shall mean Desarrollos, Nizuc and Prodepa.
"Release" shall mean any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, or on, into, under or from the soil, surface water, ground water or
property.
"Requisite Regulatory Approvals" shall mean all permits, approvals,
filings, consents and waivers required to be obtained or made, and all waiting
periods required to expire, before the consummation of the transactions
contemplated by this Agreement, as applicable, under all applicable Laws of any
jurisdiction, domestic or foreign, having jurisdiction over the transactions
contemplated by this Agreement, including, without limitation, notifications,
approvals, orders, authorizations or filings required by the Mexican Federal Law
of Economic Competition and the Mexican Foreign Investment Law.
"Schedules" shall have the meaning set forth in Section 14.1.
"Seller's Estimated Purchase Price Adjustment" shall have that meaning set
forth in Section 2.2(b).
"Seller's Response" shall have that meaning set forth in Section 3.3.
6
<PAGE> 12
"Selling Expense" shall mean all costs and expenses related to the
promotion, sale, financing, administration and closing of the sale of Timeshare
Intervals, including those incurred by the sales office and identifiable in the
financial statements and accounting books and records of the Company as "Cost of
Sales" (at "GOP"), which historically have averaged approximately 50%.
"Sold Timeshare Intervals" shall have that meaning set forth in Section 2.2
(a) (iii).
"Stock" shall mean the outstanding shares of stock of the (i) Company
listed on Schedule 5.2, and, (ii) Real Estate Companies held by Seller listed on
Schedule 5.3.
"Subsidiary" shall mean, as to any Person, any corporation, joint venture,
partnership or other business entity of which securities or other ownership
interests are, at the time as of which any determination is being made, owned
directly or indirectly by the parent or one or more subsidiaries of the parent;
provided, that with respect to the Company, "Subsidiary" shall include, without
limitation, those entities listed on Schedule 5.3 hereto.
"Tax Return" shall include any statement, form, return, or other documents
required to be supplied to a taxing authority in connection with Taxes.
"Taxes" shall mean all taxes, charges, fees, levies, or other assessments,
including without limitation, income, gross receipts, excise, property, sales,
occupation, use, service, license, payroll, franchise, ad valorem, value added,
withholding, social security, national insurance (or other similar contributions
or payments), estimated, severance, transfer, stamp and recording taxes, fees
and charges imposed by any Governmental Body (including any interest, fines,
penalties or additions attributable to, or imposed on or with respect to, any
such taxes or other assessments) whether computed on a separate, consolidated,
unitary, combined or any other basis.
"Termination Date" shall mean August 15, 1997; provided, however, that (i)
if the conditions to Closing set forth in Sections 8.1 and 8.2 (other than
Sections 8.2(f), (h) and (j)) have not been satisfied at least ten Business Days
prior to July 31, 1997, then the Termination Date shall be automatically
extended to the tenth Business Day following the date on which all conditions to
Closing set forth in Sections 8.1 and 8.2 (other than Sections 8.2(f), (h) and
(j)) have been satisfied, and (ii) Buyer shall have the option to extend the
Termination Date for fifteen days from the date the Termination Date would
otherwise occur hereunder by depositing into escrow with the Escrow Agent, on or
before 5:00 p.m. (Houston, Texas time) on the date the Termination Date would
otherwise occur, an additional amount such that the total amount held in escrow
in connection with the transactions contemplated hereby is US $61.5 million.
"Third Party Offer" shall mean a proposal or offer from any Person other
than Buyer relating to the direct or indirect acquisition or purchase of assets
of the Company (or any of its Subsidiaries) or of any of the stock of the
Company (or of any of its Subsidiaries), by way of sale, merger, exchange or any
similar transaction or business combination, for a specified consideration or
consideration within a specified range.
"Timeshare Agreement" shall have the meaning set forth in the recitals.
"Timeshare Business" shall mean all of the assets, business and operations
of the Company relating to its vacation interval business.
7
<PAGE> 13
"Timeshare Debt Commitment" shall mean the commitment of Corporate Banking
to loan funds to CR Resorts Capital S. de R.L. de C.V., pursuant to the
commitment letter dated the date hereof.
"Timeshare Intervals" shall mean the number of Modules available for sale
as of the date in question multiplied by 52, as sold through Series "B" Shares
of Club Regina.
"Timeshare Mezzanine Note" shall mean the promissory note evidencing the
"Tranche B" financing under the Timeshare Debt Commitment.
"Timeshare Property" shall mean the real estate, furniture, fixtures,
equipment and other assets comprising the Timeshare Business.
"Timeshare Receivables" shall mean the outstanding balance derived from the
sale of Series "B" Shares of Club Regina and the sale of Vacation Ownership Club
(VOC) memberships.
"Trusts" shall mean those Trusts identified on Schedule 1.1 hereto.
"US" shall mean the United States of America.
"US Hotel Holding" shall mean the limited liability company to be formed
pursuant to the laws of the State of Delaware or such other State in the United
States of America as Buyer may determine, for purposes of holding the stock of
Mexico Hotel Holding.
"Westin" shall mean those Westin entities which are parties to the
Management Agreements, including Westin Hotel Company and Westin Mexico, S.A. de
C.V.
"Working Capital" shall mean the amount equal to the Current Assets minus
the Current Liabilities of the Company.
1.2 Captions. Titles and captions of articles and Sections set forth in
this Agreement are inserted only as a matter of convenience and for reference,
and in no way define, limit, extend or describe the scope of this Agreement or
the meaning of any provision set forth herein.
1.3 Number and Gender. Whenever required by the context, the singular
number shall include the plural and the gender of any pronoun shall include the
other genders.
1.4 Knowledge. When used in this Agreement, "knowledge" shall mean the
actual, not implied or assumed, knowledge of the directors and officers of the
Person in question and such Person's Subsidiaries and Affiliates.
1.5 Amendment and Restatement of Original Agreements. This Agreement
amends restates, replaces and supersedes the Original Agreements and the First
Amended Agreement in their entirety.
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ARTICLE II.
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, Buyer agrees to purchase from Seller at the Closing, and Seller
agrees to sell to Buyer (or a direct or indirect wholly owned Subsidiary
thereof) at the Closing, the Stock, for the aggregate purchase price of US
$231.5 million (the "Purchase Price"), subject to adjustment as set forth in
Section 2.2, payable on the Closing Date by delivery either by certified check
or wire transfer.
2.2 Purchase Price Adjustment.
a) Purchase Price Adjustments. The Purchase Price shall be subject
to the following adjustments (collectively, the "Purchase Price
Adjustments"):
(i) Timeshare Receivables. The Purchase Price shall be
increased by any amount by which the Closing Date
Timeshare Receivables exceed US $28.5 million, or
decreased by any amount by which the Closing Date
Timeshare Receivables are less than US $28.5 million.
(ii) Nonperforming Timeshare Receivables. The Purchase Price
shall be decreased by the amount equal to the total amount
of Closing Date Timeshare Receivables which have been
outstanding for 90 days or more as of such date,
multiplied by 25%.
(iii) Sales of Timeshare Intervals. The Purchase Price shall be
reduced by an amount equal to (A) the Initial Timeshare
Intervals minus the Closing Date Timeshare Intervals (the
"Sold Timeshare Intervals"), (B) multiplied by the Average
Sales Price (C) multiplied by the amount equal to 100%
minus the Average Sales Expense.
(iv) Working Capital. The Purchase Price shall be increased by
the amount by which the Working Capital as of the Closing
Date exceeds US $333,000, and decreased by the amount by
which the Working Capital as of the Closing Date is less
than US $333,000.
(v) Replacement Reserve. The Purchase Price shall be reduced
by the amount of US $1.4 million.
Provided,that any of the amounts specified in subparagraphs (i) through
(iv) above which are denominated in Pesos shall be converted into their US
Dollar equivalent at the Exchange Rate.
b) Estimated Purchase Price Adjustment. Five (5) calendar days prior
to the Closing Date, (A) Seller shall deliver to Buyer (after consultation
with and review by Buyer) its good faith estimate of each of the
adjustments to the Purchase Price to be made pursuant to Section 2.2(a)
(the sum of such adjustments being hereinafter referred to as the
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"Seller's Estimated Purchase Price Adjustment"). If the Seller's Estimated
Purchase Price Adjustment indicates that the Purchase Price shall be
increased, then at Closing the principal balance of the Timeshare Mezzanine
Note shall be increased by an amount equal to the Seller's Estimated Purchase
Price Adjustment. If the Seller's Estimated Purchase Price Adjustment
indicates that the Purchase Price shall be decreased, then at Closing the
principal amount of the Timeshare Mezzanine Note shall be reduced by an
amount equal to the Seller's Estimated Purchase Price Adjustment.
c) Definitive Purchase Price Adjustment.
(i) As promptly as practicable but in no event later than 90
calendar days after the Closing Date, Buyer shall deliver
to Seller, a schedule (the "Preliminary Adjustment
Schedule") setting forth in reasonable detail the
calculation of the actual Purchase Price Adjustments
contemplated by paragraphs (i) through (v) of Section
2.2(a), but shall use the actual values and quantities on
the Closing Date for the calculations to be made at
Closing pursuant to the applicable provisions of
paragraphs (i) through (v) of Section 2.2(a).
(ii) The Preliminary Adjustment Schedule shall be subject to
review by Seller. In reviewing the Preliminary Adjustment
Schedule, Seller shall have the right to communicate with,
and to review the work papers, schedules, memoranda and
other documents prepared or reviewed by Buyer during the
preparation of the Preliminary Adjustment Schedule and
thereafter shall have access to all relevant books and
records, all to the extent reasonably required by Seller
in order to complete its review of the Preliminary
Adjustment Schedule. Within 30 calendar days after its
receipt of the Preliminary Adjustment Schedule, Seller
shall advise Buyer whether, based on such review, it has
any exceptions to the Preliminary Adjustment Schedule.
Unless Seller shall deliver to Buyer within such 30
calendar day period a letter specifying in reasonable
detail any such exceptions, the Preliminary Adjustment
Schedule shall be conclusive and binding on Buyer and the
Seller. If Seller shall submit a letter detailing any
exceptions to the Preliminary Exception Schedule, then
Seller and Buyer shall mutually agree on which exceptions
shall result in adjustments to the Preliminary
Consideration Adjustment. If Buyer and Seller are unable
to agree on the Definitive Purchase Price Adjustment, then
the matter shall be referred to Arthur Andersen & Co., who
shall determine the Definitive Purchase Price Adjustment,
which determination shall be final and binding on Buyer
and Seller for all purposes. The "Definitive Purchase
Price Adjustment" shall mean the Preliminary
Consideration Adjustment, with any adjustment required by
this subparagraph (ii).
(iii) (A) If the Definitive Purchase Price Adjustment is greater
than the Estimated Purchase Price Adjustment, then the
principal balance of
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the Timeshare Mezzanine Note shall be decreased by an
amount equal to such difference, together with interest
thereon at a rate of 10% per annum during the period
commencing on the Closing Date and continuing through and
including the date the Definitive Purchase Price
Adjustment is determined.
(iv) (B) If the Definitive Purchase Price Adjustment is less
than the Estimated Purchase Price Adjustment, then the
principal balance of the Timeshare Mezzanine Note shall be
increased by an amount equal to such difference, together
with interest thereon at a rate of 10% per annum during
the period commencing on the Closing Date and continuing
through and including the date the Definitive Purchase
Price Adjustment is determined.
2.3 Closing. Subject to the provisions set forth in the definition of
"Termination Date", the parties hereto agree to use all commercially reasonable
efforts to consummate the transactions contemplated by this Agreement (the
"Closing") on or before August 15, 1997, at the offices of Seller, Av.
Universidad 1200, Col. Xoco, 03339 Mexico, D.F. The date on which such Closing
occurs is herein referred to as the "Closing Date". The parties shall conduct a
pre-closing at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1900
Pennzoil Place - South Tower, 711 Louisiana, Houston, Texas 77002 on the date
that is five (5) Business Days prior to the Closing Date, or at such other time
and place as the parties may mutually agree.
2.4 Ancillary Agreements to be Delivered At or Prior to the Closing. In
connection with the transactions contemplated hereby, at or prior to the
Closing, the following documents and/or agreements, in form and substance
satisfactory to the parties hereto, shall have been entered into among the
parties thereto, the effectiveness of which shall be conditioned upon the
occurrence of the Closing (collectively, the "Ancillary Agreements").
a) Option Agreement. Buyer and Seller shall have entered into an
Option Agreement setting forth the terms of Seller's grant to Buyer of the
one-year option to acquire and right of first refusal with respect to the
35,000 square meters of beachfront property in Cancun.
b) [Intentionally Omitted.]
c) Tax Allocation Agreement. Seller, Buyer and/or the Company
shall have executed and delivered such documents, agreements and
instruments as may be necessary or desirable to evidence the allocation
between Buyer and Seller of the Company's Taxes for the period prior to the
Closing Date.
d) Other Agreements. Seller, Buyer and the Companies hereby agree
that all arrangements currently in place between Seller and the Company as
leases, credit cards and other matters shall continue on substantially the
same terms and conditions as are currently being observed except as the
parties hereto shall otherwise agree.
2.5 Escrow. Buyer has deposited in escrow with Escrow Agent the sum of US
$3.0 million (the "Escrow Deposit") pursuant to the terms of the Escrow
Agreement.
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ARTICLE III
INSPECTION PERIOD AND PROCESS
3.1 Information Review.
a) Pursuant to its letter dated December 27, 1996, a copy of which
is attached hereto as Exhibit 3.1, Buyer's counsel, Santamarina y Steta,
requested that certain information described therein (the "Information") be
made available for review. As of the date hereof, Seller has provided
substantially all of such Information to Buyer. Seller hereby undertakes to
provide full, complete and accurate copies of the remaining Information to
Buyer as promptly as practicable.
b) Buyer has submitted to Seller a written report of all issues
discovered by Buyer during the course of its review of such Information.
c) Seller has delivered to Buyer a report of the actions it was
taking to resolve the matters identified on Bancomer's written report.
d) Buyer's knowledge of the items on Schedule 3.1(b) shall not be
deemed to be a waiver of the items listed thereon for the purposes of this
Agreement.
3.2 Physical Inspection.
a) Buyer has delivered to Seller full, complete and accurate copies
of the written reports of the physical and environmental inspection of the
Property and the Company's assets which identify all defects discovered by
Buyer during the course of its inspection ("Defects") and an estimate of
the cost to correct such Defects (such notice being hereinafter referred to
as the "Defect Notice").
b) Seller has advised Buyer of all Defects to which Seller takes
objection ("Seller's Response").
c) With respect to the Defects, Buyer and Seller have agreed that
the amount of Defects for which Seller will be responsible is $333,000, and
that Seller's responsibility therefor has been resolved by adjusting the
target Working Capital as of the Closing Date set forth in Section
2.2(a)(iv) by $333,000.
3.3 No Effect on Other Provisions. Notwithstanding any provision of this
Agreement to the contrary, no failure on the part of Buyer to perform any
specified level of due diligence shall be asserted by Seller, whether or not in
connection with any Proceeding, (i) as a default by Buyer under this Agreement,
(ii) as the failure of a covenant under this Agreement, (iii) as an action
giving rise to a claim by Seller for Damages or a right to specifically enforce
such covenant, or (iv) as an action, in whole or in part, that mitigates or
excuses Seller's obligations and covenants under this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
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4.1 Organization and Good Standing. As of the Closing Date, Buyer will be
a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada. On or before the Closing, Buyer will have delivered
or made available to Seller complete and correct copies of its Articles of
Incorporation and Bylaws, or similar organizational documents, as amended and in
effect on the Original Agreement Date, of Buyer, and of all minutes and consents
relating to shareholder and director approval of the transactions contemplated
by this Agreement.
4.2 Authorization and Validity. As of the Closing Date, Buyer will have
the corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is party and, subject to the obtaining of all Requisite
Regulatory Approvals referenced in Section 4.3, to carry out its obligations
hereunder and thereunder. Each of the execution, delivery and performance by
Buyer of this Agreement and the Ancillary Agreements to which it is a party has
been duly authorized by all requisite action. This Agreement and the Ancillary
Agreements to which it is a party constitute the legal, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their terms,
subject to bankruptcy, reorganization, insolvency, and similar Laws of general
application relating to or affecting the rights of creditors, and subject to
general principles of equity.
4.3 No Governmental Approvals. No Requisite Regulatory Approval is
required on the part of Buyer in connection with the execution and delivery by
Buyer of this Agreement or the Ancillary Agreements to which it is a party or
the consummation by Buyer of the transactions contemplated by this Agreement,
except for (a) those set forth on Schedule 4.3, and (b) any Requisite Regulatory
Approval that, if not obtained, would not reasonably be expected to have a
Material Adverse Effect on Buyer after giving effect to the transactions
contemplated hereby.
4.4 No Conflicts. Except as set forth in Schedule 4.4 to this Agreement,
and assuming the receipt of all Requisite Regulatory Approvals referenced in
Section 4.3, the execution, delivery and performance by Buyer of this Agreement
and the Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated by this Agreement will not conflict with, or result in
any violation of or default or loss of any benefit under, any provision of the
certificate of incorporation or bylaws of Buyer, or any agreement or other
arrangement to which Buyer is a party or of any permit, concession, grant,
franchise, license, judgment, Order or Law applicable to Buyer as of the
Original Agreement Date or the properties of Buyer, other than any conflict,
violation, default or loss that would not reasonably be expected to have
Material Adverse Effect on Buyer after giving effect to the transactions
contemplated hereby.
4.5 Certain Proceedings. There are no Proceedings pending or, to Buyer's
knowledge, threatened against Buyer that challenge, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, the
transactions contemplated by this Agreement.
4.6 No Brokers or Finders. Buyer has not incurred any obligation or
Liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement or the
transactions contemplated hereby.
4.7 Acknowledgment Regarding A Shares. Buyer acknowledges that the
Company has issued A Shares which may only be owned by Mexican Persons.
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<PAGE> 19
4.8 Acknowledgment Regarding Recapitalization of Real Estate Companies.
Buyer hereby acknowledges that Seller exchanged (i) $22,531,000 in debt of Nizuc
in return for the shares owned by Seller listed on Schedule 5.3, (ii)
$53,497,664 in debt of Prodepa in return for the shares of capital stock of
Prodepa listed on Schedule 5.3, and (iii) $43,971,336 in debt of Desarrollos in
return for the shares of Desarrollos capital stock listed on Schedule 5.3.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
5.1 Organization and Good Standing. The Company (and each of its
Subsidiaries) is duly organized and validly existing under the laws of the
jurisdiction of its organization and has all requisite power and authority to
own, lease and operate all properties and assets now owned, leased or operated
by it and to carry on its business as currently conducted. Seller has delivered
or made available to Buyer complete and correct copies of the Articles of
Incorporation and Bylaws, or similar organizational documents, as amended and in
effect on the Original Agreement Date, of the Company and each of its
Subsidiaries and all minutes and consents relating to shareholder and director
action taken from the inception of the Company and each of its Subsidiaries to
the Original Agreement Date. Seller, the Company and each of its Subsidiaries is
duly qualified to conduct business in the jurisdictions set forth on Schedule
5.1, which jurisdictions comprise all such jurisdictions in which the nature of
the business transacted by it requires qualification and where the failure to so
qualify would reasonably be expected to have a Material Adverse Effect on the
Company.
5.2 Capitalization. As of the Original Agreement Date, the authorized
capital stock of the Company is as set forth on Schedule 5.2 hereto. All of such
outstanding shares of stock are validly issued, fully paid and nonassessable. As
of the Original Agreement Date, there are no Commitments, preemptive rights or
agreements of any character to which Seller, the Company or any of its
Subsidiaries is a party or by which any party is bound obligating the Company or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of the Company or any of
its Subsidiaries or any securities or obligations convertible into or
exchangeable for such shares, or to grant, extend or enter into any Commitment,
preemptive right or similar agreement.
5.3 Other Subsidiaries. Schedule 5.3 sets forth a list of all of the
Subsidiaries of the Company. Schedule 5.3 indicates for each Subsidiary of the
Company as of the date of this Agreement; (a) the number and class of
authorized, issued and outstanding shares of capital stock of each Subsidiary,
(b) the percentage and type of equity securities of the Subsidiary owned by the
Company (and with respect to the Real Estate Subsidiaries, Seller) and its
Subsidiaries, (c) the identity of any other beneficial or record owner of any
interest in any Subsidiary and the percentage and type of the ownership and (d)
the jurisdiction of incorporation or organization. Except as set forth in
Schedule 5.3, all equity securities listed thereon as being owned by the
Company, Seller or a Subsidiary of the Company are owned by such Person free and
clear of all Liens of any nature whatsoever.
5.4 Authorization and Validity. Seller has all requisite power and
authority to enter into this Agreement and the Ancillary Agreements to which it
is party and, subject to obtaining
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all Requisite Regulatory Approvals referenced in Section 5.5, to carry out
its obligations hereunder and thereunder. Each of the execution, delivery and
performance by Seller of this Agreement and the Ancillary Agreements to which it
is a party has been duly authorized by all requisite action. This Agreement and
the Ancillary Agreements constitute the legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with their terms, subject to
bankruptcy, reorganization, insolvency and similar Laws of general application
relating to or affecting the rights of creditors, and subject to general
principles of equity.
5.5 No Governmental Approvals. No Requisite Regulatory Approval is
required on the part of Seller, the Company or any of its Subsidiaries in
connection with the execution and delivery by Seller of this Agreement or any
Ancillary Agreement to which it is a party or the consummation by Seller of the
transactions contemplated by this Agreement, except for (a) the compliance with
the Requisite Regulatory Approvals set forth on Schedule 5.5 hereto and (b) any
Requisite Regulatory Approval that, if not obtained, would not reasonably be
expected to have a Material Adverse Effect on the Company.
5.6 No Conflicts. Except as set forth in Schedule 5.6 to this Agreement,
and assuming the receipt of all Requisite Regulatory Approvals referenced in
Section 5.5, the execution, delivery and performance by Seller of this Agreement
and the Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated by this Agreement will not conflict with, or result in
any violation of or default or loss of any benefit under, any provision of the
certificate of incorporation or bylaws of Seller, the Company, of the
certificate of incorporation, bylaws or other organization or governing
instrument of any of the Company's Subsidiaries, or any Contract listed on
Schedule 5.20 to which any of them is a party or of any permit, concession,
grant, franchise, license, judgment, Order or Law applicable to Seller, the
Company or any of its Subsidiaries as of the Original Agreement Date or the
Properties, other than any conflict, violation, default or loss that would not
reasonably be expected to have a Material Adverse Effect on the Company.
5.7 Historical Financial Statements. Seller has delivered or has caused
the Company to deliver to Buyer (i) audited consolidated balance sheets of the
Company and its Subsidiaries as at December 31 for each of the years from the
Company's inception through 1996 and the related audited consolidated statements
of income, changes in stockholders' equity and cash flow for each of the fiscal
years then ended, together with the report thereon of Mancera S.C., the Mexican
branch of Ernst & Young, independent certified public accountants, including the
notes thereto (the "Historical Audited Statements") and (ii) an unaudited
consolidated balance sheet (the "Interim Historical Balance Sheet") (which does
not reflect the effects of inflation) of the Company and its Subsidiaries as at
June 30, 1997 (the "Balance Sheet Date") and the related unaudited consolidated
statements of income, changes in stockholders' equity and cash flow for the
three months then ended (the "Interim Historical Financial Statements" and,
together with the Historical Audited Statements, the "Historical Financial
Statements"). The Historical Financial Statements and notes have been prepared
in accordance with GAAP and present fairly and accurately the financial position
and results of operations of the Company as of the dates of such statements and
for the periods covered thereby, subject to normal recurring year-end
adjustments the effect of which will not, individually, or in the aggregate,
have a Material Adverse Effect on the Company. Except as set forth on Schedule
5.7:
(i) there have been no write-ups of inventories or other
assets; and
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(ii) the Company's and each of its Subsidiary's books and
records of accounts have been kept accurately in the Ordinary Course
of Business, the transactions entered therein represent bona fide
transactions, and the revenues, expenses, assets and Liabilities of
the Company and its Subsidiaries have been properly recorded in such
books.
5.8 Projections. Seller has previously delivered to Buyer the Projections.
Except as set forth on Schedule 5.8, Seller is not aware of any facts or
circumstances which (i) would render inaccurate the Projections, or (ii) are
inconsistent with the assumptions used in preparing the Projections. Buyer
acknowledges that actual results may vary materially from the Projections.
5.9 Absence of Undisclosed Liabilities. Except as contemplated by this
Agreement or as set forth on Schedule 5.9, neither the Company nor any of its
Subsidiaries is subject to any Liabilities other than those set forth or
adequately reserved against in the Interim Historical Financial Statements or
those incurred since the Balance Sheet Date in the Ordinary Course of Business.
5.10 Title to Properties; Liens. Schedule 5.10 contains a complete and
accurate list of all real property, leaseholds, or other interests therein owned
by the Company or any of its Subsidiaries. Seller has delivered or made
available to Buyer copies of the deeds and other instruments (as recorded) by
which the Company or its Subsidiaries, as applicable, acquired such real
property and interests, and copies of all title insurance policies, if any,
opinions, abstracts, and surveys in the possession of Seller, the Company or its
Subsidiaries and relating to such property or interests. The Company and its
Subsidiaries own (with good and marketable title in the case of all real estate
associated with the Hotel Business, the Timeshare Business and the Other
Business, respectively, subject only to the matters permitted by the following
sentence) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) that they purport to own, or reflected as owned
in the books and records of the Company and its Subsidiaries, including all of
the properties and assets reflected in the Interim Historical Balance Sheet
(except for assets held under capitalized leases disclosed on Schedule 5.10 and
personal property sold since the Balance Sheet Date, as the case may be, in the
Ordinary Course of Business), and all of the properties and assets purchased or
otherwise acquired by the Company and its Subsidiaries since the Balance Sheet
Date (except for personal property consistent with past practice), which
subsequently purchased or acquired properties and assets (other than inventory
and short-term investments) are listed on Schedule 5.10. Except as set forth on
Schedule 5.10, all properties and assets reflected in the Interim Historical
Balance Sheet are free and clear of all Liens and are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with respect to
all such properties and assets, (a) mortgages or security interests shown on the
Interim Historical Balance Sheet as securing specified liabilities or
obligations, with respect to which no default (/or event that, with notice or
lapse of time or both, would constitute a default) exists, (b) mortgages or
security interests incurred in connection with the purchase of property or
assets after March 31, 1997 (such mortgages and security interests being limited
to the property or assets so acquired), with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a default)
exists, (c) Liens for current taxes not yet due, and (d) with respect to real
property, (i) minor imperfections in title, if any, none of which is substantial
in amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of the Company or any of its
Subsidiaries, and (ii) zoning laws and other land use restrictions that do not
impair the present or anticipated use of the property subject
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thereto. All buildings, facilities, and structures owned by the Company and its
Subsidiaries lie wholly within the boundaries of the real property owned by the
Company and its Subsidiaries and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person.
5.11 Conditions and Sufficiency of Assets. The buildings, plants,
structures and equipment of the Company and its Subsidiaries are structurally
sound, are in good operating condition and repair, and are adequate for the uses
to which they are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost, and have
available to them sufficient utilities to conduct the Business as currently
conducted. The building, plants, structures and equipment of the Company and its
Subsidiaries are sufficient for the continued conduct of the Hotel Business,
Timeshare Business and Other Business after the Closing in substantially the
same manner as conducted prior to the Closing.
5.12 Accounts Receivable. All Accounts Receivable and the Timeshare
Receivables represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectable net of the respective reserves shown
on the Interim Historical Balance Sheet or on the accounting records of the
Company and its Subsidiaries as of the Closing Date (which reserves are adequate
and calculated consistent with past practice and, in the case of the reserve as
of the Closing Date, will not represent a greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the Interim
Historical Balance Sheet represented of the Accounts Receivable reflected
therein and will not represent a material adverse change in the composition of
such Accounts Receivable in terms of aging). Subject to such reserves, each of
the Accounts Receivable, other than the Timeshare Receivables, either has been
or will be collected in full, without any set-off, within ninety days after the
day on which it first became due and payable. There is no contest, claim, or
right of set-off, other than returns in the Ordinary Course of Business, under
any Contract with any obligor of an Accounts Receivable or Timeshare Receivable
relating to the amount or validity of such Accounts Receivable or Timeshare
Receivable. Schedule 5.12 contains a complete and accurate list of all Accounts
Receivable and Timeshare Receivables as of the date of the Interim Historical
Balance Sheet, which list sets forth the aging of such Accounts Receivable and
Timeshare Receivables. The number of Timeshare Intervals as of July 1, 1996 was
that number set forth on Schedule 5.12 under the heading "Timeshare Intervals."
5.13 Inventory. Except as set forth on Schedule 5.13, all inventory of the
Company and its Subsidiaries, whether or not reflected in the Interim Historical
Balance Sheet, consists of a quantity usable and salable in the Ordinary Course
of Business, except for obsolete items and items of below-standard quality, all
of which have been written off or written down to net realizable value in the
Interim Historical Balance Sheet or on the accounting records of the Company and
its Subsidiaries as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or market value. The
quantities of each item of inventory (whether raw materials, work-in-process, or
finished goods) are not excessive, but are reasonable in the present
circumstances of the Company and its Subsidiaries.
5.14 Insurance. Schedule 5.14 sets forth a list of all policies of
insurance to which the Company or any of its
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<PAGE> 23
Subsidiaries is a party or under which the Company or any of its Subsidiaries,
or any director or officer of the Company or any of its Subsidiaries, is or has
been covered at any time from inception of operations. Such insurance is in an
amount and with a scope of coverage that is consistent with industry standards.
Complete copies of all such policies have been delivered to Buyer. All such
policies are in full force and effect. None of Seller, the Company or any of its
Subsidiaries has received notice from any insurance carrier of the intention of
such carrier to discontinue any insurance coverage afforded to the Company.
5.15 Certain Proceedings. Except as set forth in Schedule 5.15, there is
no pending Proceeding (i) that has been commenced by or against Seller, the
Company or any of its Subsidiaries or that otherwise relates to or may affect
the business of, or any of the assets owned or used by, the Company or any of
its Subsidiaries, or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with the
transactions contemplated by this Agreement. To the knowledge of Seller, (1) no
such Proceeding has been threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding. Seller has delivered to Buyer copies of all
pleadings, correspondence, and other documents relating to each Proceeding
listed on Schedule 5.15. The Proceedings listed on Schedule 5.15 would not,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company.
5.16 Compliance with Laws. Except as set forth in Schedule 5.16, and
with respect to the matters addressed by Section 5.17 of this Agreement, the
businesses of the Company and its Subsidiaries have been conducted in compliance
with all Laws (including, without limitation, those relating to licenses and
permits for the ownership, occupancy and operation of their properties), except
for violations that individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect on the Company. Except as disclosed
in Schedule 5.16, and except for any investigation or review that would not
reasonably be expected to have a Material Adverse Effect on the Company, as of
the Original Agreement Date no investigation or review by any Governmental Body
(including without limitation any audit or similar review by any federal, state
or local taxing authority) with respect to the Company or any of its
Subsidiaries or any of their respective properties is pending or, to the
knowledge of Seller, threatened.
5.17 Environmental Matters. Specifically, without limiting the
representations contained in Section 5.16, and except as set forth in Schedule
5.17 to this Agreement, as of the Original Agreement Date:
a) The Company and its Subsidiaries have complied, and are in
compliance, with all Applicable Environmental and Safety Laws, except where
the failure to comply would not reasonably be expected to have a Material
Adverse Effect on the Company. There is no Proceeding now pending or, to
Seller's knowledge, threatened, against or affecting the Company or any of
its Subsidiaries, the resolution of which would reasonably be expected to
have a Material Adverse Effect on the Company (i) for noncompliance by the
Company or any of its Subsidiaries with any Applicable Environmental and
Safety Law or (ii) relating to the Release by the Company or any of its
Subsidiaries (or, to Seller's knowledge, any predecessor to any of the
businesses or assets of the Company or any of its Subsidiaries with respect
to those businesses or assets) of any Hazardous Material whether or not
occurring at or on or being released from a site owned, leased or operated
by the Company or any of its Subsidiaries.
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b) Neither the Company nor any of its Subsidiaries has any
Liability, contingent or otherwise, arising out of or resulting from the
Release, whether on or off its own premises or through other Persons, of
any Hazardous Material, which would reasonably be expected to have a
Material Adverse Effect on the Company.
c) There are no unpaid citations, fines or penalties previously
assessed against the Company or any of its Subsidiaries under any
Applicable Environmental and Safety Law, except for any unpaid citation,
fine or penalty that would not reasonably be expected to have a Material
Adverse Effect on the Company, nor has the Company or any of its
Subsidiaries received any notices or any other communications from any
Governmental Body with respect to any violations or alleged violations of,
or potential Liability under, any Applicable Environmental and Safety Law
that would reasonably be expected to have a Material Adverse Effect on the
Company.
d) The Company and its Subsidiaries have obtained all permits
required by any Applicable Environmental and Safety Law and all such
permits are in good standing and in full force and effect and the Company
and its Subsidiaries are in compliance with all terms and conditions of
such permits, except where the failure to obtain any such permit or to
comply therewith would not reasonably be expected to have a Material
Adverse Effect on the Company.
5.18 Taxes. Except as set forth on Schedule 5.18,
a) To the knowledge of Seller, all Tax Returns required to be filed
on or before the Closing Date by the Company and its Subsidiaries have been
or will be filed within the time prescribed by Law (including extensions of
time approved by the appropriate taxing authority).
b) To the knowledge of Seller, the Tax Returns so filed are
complete and accurate representations of the Tax Liabilities of the Company
and its Subsidiaries in all material respects and such Tax Returns
accurately set forth or will accurately set forth in all material respects
all items to the extent required to be reflected or included in such
returns.
c) The Company has paid or has made adequate provision in the
Interim Historical Balance Sheet for the payment of all Taxes shown due on
such Tax Returns that have been filed or will be filed for periods ending
on or before December 31, 1996.
d) There is no investigation, audit, or claim pending with respect
to the Company and its Subsidiaries regarding any Tax.
e) To the knowledge of Seller, the Company and its Subsidiaries
have withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor,
independent contractor, or other Person.
f) None of the Company or any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
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g) The Seller has made available to Buyer correct and complete
copies of all Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company and its
Subsidiaries for all taxable periods beginning on or after January 1, 1990
and ending before January 1, 1997.
5.19 Intellectual Property. Schedule 5.19 contains a list of all
Intellectual Property owned by, issued to, licensed by or used by the Company
and its Subsidiaries. The Intellectual Property listed on Schedule 5.19
comprises all Intellectual Property necessary to conduct the business currently
conducted by the Company and its Subsidiaries. The Company and its Subsidiaries
own or have valid, binding and enforceable rights to use of all of such
Intellectual Property, without any known conflict with the rights of others.
Neither the Company nor any of its Subsidiaries has granted any outstanding
licenses or other rights, and has no obligations to grant licenses or other
rights, under any of such Intellectual Property. The Company has not received
any notice of infringement of or conflict with (and knows of no such
infringement of or conflict with) asserted rights of others with respect to any
such Intellectual Property which, individually or in the aggregate, is
reasonably likely to result in any Material Adverse Effect upon the Company;
and, to the knowledge of Seller, neither the Company nor any of its
Subsidiaries, in the conduct of its business as currently conducted, infringes
or conflicts with any right of any third party, where such infringement or
conflict is reasonably likely to result in any Material Adverse Effect upon the
Company.
5.20 Contracts. Schedule 5.20 sets forth all Contracts to which the
Company or any of its Subsidiaries is a party or to which any of their business,
or Properties is subject and which provide for monthly payments exceeding $2,000
and which are not terminable by the Company or its Subsidiaries by written
notice of 30 days or less without penalty or additional cost. All of such
Contracts are valid, binding and in full force and effect, have not been amended
or supplemented in any manner except as disclosed on Schedule 5.20 and are
enforceable by the Company in accordance with their respective terms. Except as
disclosed on Schedule 5.20, there are no defaults by the Company or any of its
Subsidiaries under any Contracts to which the Company or any of its Subsidiaries
is a party or to which any of their business or Properties is subject and, to
Seller's knowledge, there are no defaults thereunder by any other party thereto,
and no event has occurred that with the lapse of time or action or inaction by
any party thereto would result in a violation thereof or a default thereunder.
None of the rights thereunder will be impaired by the consummation of the
transactions contemplated by this Agreement, and all such rights will inure to
and be enforceable by Buyer and the Company after Closing without the consent,
permit of, or filing with, any other Person. When notice of termination is given
at Closing as contemplated by Section 8.2(g), the Management Agreements will be
terminated effective as of the 60th day after Closing without penalty or
additional cost.
5.21 Absence of Changes or Events. Except as set forth on Schedule 5.21,
since the Balance Sheet Date, the Company and its Subsidiaries have operated
their businesses in the Ordinary Course of Business and have not:
a) incurred any Liability, except for Liabilities incurred in the
Ordinary Course of Business which do not exceed US $150,000 individually or
US $300,000 in the aggregate;
b) created or permitted to be created any Lien on any of their
assets;
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c) sold, transferred, leased to or otherwise disposed of any of
their assets, except for inventory sold in the Ordinary Course of Business
which do not exceed US $150,000 individually or US $300,000 in the
aggregate, or canceled or compromised any material debt or claim, or waived
or released any right of material value except in the Ordinary Course of
Business which do not exceed US $150,000 individually or US $300,000 in the
aggregate;
d) suffered any material damage, destruction or casualty loss
(whether or not covered by insurance);
e) encountered any labor union organizing activity, had any actual
or threatened Employee strikes, work stoppages, slowdowns or lockouts, or
had any material adverse change in their relations with any of the
Employees, agents, customers or suppliers;
f) instituted, settled or agreed to settle any Proceeding before
any Governmental Body;
g) except as contemplated by Section 4.8, entered into any
transaction or Contract other than in the Ordinary Course of Business and
except for this Agreement and the Ancillary Agreements;
h) amended, modified or terminated any Contract except in the
Ordinary Course of Business;
i) with respect to any Subsidiary, purchased or redeemed any
shares of its capital stock or any Commitment with respect to its capital
stock;
j) except as contemplated by Section 4.8, with respect to any
Subsidiary, issued, sold or delivered or agreed to issue, sell or deliver
any additional shares of its capital stock, any Commitment with respect to
any such capital stock, any securities convertible into or exchangeable for
such capital stock or any bonds or other securities;
k) made any material increase in the compensation payable or to
become payable, or any material increase in benefits or benefit plan costs,
or any material increase in bonus, insurance, pension, compensation or
other benefit plans, in each case, with respect to its Employees;
l) entered into any agreement or made any commitment to take any
of the types of action described in subparagraphs (a) through (k) above; or
m) suffered any event or experience which has had, or with the
passage of time could reasonably be expected to have, a Material Adverse
Effect on the Company.
5.22 Licenses, Permits and Tariffs. The Company and its Subsidiaries
possess all the licenses and permits listed in Schedule 5.22, copies of all of
which have been made available to Buyer. Such licenses and permits constitute
all the licenses and permits necessary under Law for the Company and its
Subsidiaries to conduct their business as now conducted and the validity or
effectiveness of such permits will not be effected by the transactions
contemplated by this Agreement. Each of such licenses and permits and the rights
of the Company and its Subsidiaries
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with respect thereto are valid and subsisting and in full force and effect. The
Company and its Subsidiaries are in substantial compliance with the terms of
such licenses and permits. No such license or permit has been, or, to Seller's
knowledge, is threatened to be, revoked, canceled, suspended or modified.
5.23 Absence of Certain Business Practices; Internal Accounting Controls.
a) To Seller's knowledge, the Company and its Subsidiaries, as
well as their directors, officers, employees and agents and all other
Persons acting on their behalf, have complied with lawful and ethical
business practices, and have not undertaken any action which (i) would have
a Material Adverse Effect on the Company, or (ii) would have a Material
Adverse Effect on the covenants and obligations contained herein.
b) The Company maintains a system of internal accounting controls
sufficient to provide that: (i) transactions are executed in accordance
with management's general or specific authorization; and (ii) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets.
5.24 Customers and Suppliers. Schedule 5.24 sets forth a summary of the
Company's and each Subsidiary's relationship with its five largest suppliers
(based on the volume of purchases) for each of the years ended December 31, 1994
and 1995 and for the ten months ended October 31, 1996. Since October 31, 1996,
there has not been any change in the business relationship of the Company or any
of its Subsidiaries with any customer or supplier identified in Schedule 5.24
that would have a Material Adverse Effect on the Company. Except as set forth in
Schedule 5.24, the Company has not received notice of any intention of the
Company's customers or suppliers involving payments and obligations in the
aggregate of $20,000 per month to cease doing business with the Company or any
of its Subsidiaries.
5.25 Bank Accounts. Schedule 5.25 contains a true and correct list of
the names of each bank, savings and loan or other financial institution in which
the Company or any of its Subsidiaries has an account, including cash
contribution accounts, money market accounts, safe deposit boxes, certificates
of deposits and lock box arrangements, and the names of all Persons authorized
to draw thereon or to have access thereto.
5.26 No Broker. Seller has not incurred any obligation or Liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement or the transactions
contemplated hereby.
5.27 Employees.
a) Schedule 5.27 contains, for each of the specified categories,
a current, complete and accurate itemized list of information for each
category of Employee or director of the Company and its Subsidiaries,
including Employees on leave of absence or layoff status; compensation paid
or payable, vacation days per year, eligibility to participate under any
benefit plans, pension, retirement, profit-sharing, thrift-savings,
deferred compensation, stock bonus, stock option, cash bonus, employee
stock ownerships (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other
employee pension benefit plan or
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employee welfare benefit plan, or any other employee benefit plan or any
director plan maintained by the Company or its Subsidiaries.
b) No Employee or director of the Company or any of its
Subsidiaries is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or proprietary
rights agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that in any way adversely affects or will
affect (i) the performance of his duties as an employee or director, or
(ii) the ability of the Company or any of its Subsidiaries to conduct its
business. To Seller's knowledge, no director, officer or other key
employee of the Company or any of its Subsidiaries intends to terminate
his employment with the Company or any of its Subsidiaries.
c) Schedule 5.27 also contains a complete and accurate list of the
following information for each retired Employee or director of the Company
and its Subsidiaries or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
5.28 Labor Relations; Compliance. To Seller's knowledge, all applicable
labor relations and/or obligations within the scope of this Agreement, and in
particular, labor relations dealing with the Company and its Subsidiaries, shall
be construed and subject to applicable Mexican Labor Law. Except as set forth on
Schedule 5.28, since December 31, 1994 to the best of Seller's knowledge,
neither the Company nor any of its Subsidiaries has been or currently is a party
to any collective bargaining or other labor contract. To the best of Seller's
knowledge, since December 31, 1994, there has not been, there is not presently
pending or existing, and to Seller's knowledge there is not threatened, (a) any
strike, slowdown, picketing, work stoppage, or Employee grievance process; (b)
any Proceeding against or affecting the Company or its Subsidiaries relating to
the alleged violation of any Law pertaining to labor relations or employment
matters, organizational activity, or other labor or employment dispute against
or affecting any of the Company or its Subsidiaries or their premises; or (c)
any application for certification of a collective bargaining agent, which may
have a material adverse effect on this Agreement. No event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any Employees by the Company or its
Subsidiaries, and no such action is contemplated by the Company or its
Subsidiaries. To Seller's best knowledge, each of the Company and its
Subsidiaries have complied in all material respects with all applicable Mexican
Laws relating to employment.
5.29 Employee Benefit Plans.
a) Schedule 5.29 includes a correct and complete list of all
pension and welfare plans and all other employee benefit agreements or
arrangements for each category of Employee and director, including but not
limited to deferred compensation plans, incentive plans, bonus plans or
arrangements, savings plans, stock option plans, stock purchase plans,
golden parachute agreements, severance pay plans, dependent care plans,
cafeteria plans, employee assistance programs, scholarship programs,
employment contracts and other similar plans, agreements and arrangements
that are currently in effect or were maintained within three years of the
Original Agreement Date, or were approved before the Original Agreement
Date, but were not yet effective, for the benefit of
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directors, officers, Employees or former Employees (or their beneficiaries)
of the Company or any of its Subsidiaries. Seller has delivered to Buyer,
as to each plan, agreement or arrangement, as applicable, a true and
correct copy of (i) the plan, agreement or arrangement, (ii) the trust,
group annuity contract or other document that provides the funding for the
plan, agreement or arrangement, if any, (iii) the most recent actuarial
report or valuation statement, if any, or (iv) the most current summary
plan description, booklet, or other descriptive written materials, if any,
and each summary of material modifications prepared after the last summary
plan description.
b) Every Employee welfare benefit plan and every Employee pension
benefit plan on Schedule 5.29 (i) is in substantial compliance with all
requirements of applicable labor Laws; (ii) has no issue pending (other
than the payment of benefits in the normal course) nor any issue resolved
adversely to the Company or any of its Subsidiaries that may subject the
Company or any of its Subsidiaries in the future to the payment of a
penalty, interest or Tax which would reasonably be expected to have a
Material Adverse Effect on the Company and (iii) can be unilaterally
terminated or amended on no more than 90 days notice, except as set forth
in Schedule 5.29. All voluntary Employee benefit associations maintained or
contributed to by the Company or any of its Subsidiaries have been
submitted to and approved by the Mexican Ministry of Finance and Public
Credit ("SHCP") as exempt from federal income tax. Except as set forth in
Schedule 5.29, neither the Company nor any of its Subsidiaries provides
Employee post-retirement medical or health coverage or contributes to or
maintains any Employee welfare benefit plan that provides for health
benefit coverage following termination of employment. All premiums (and any
interest, charges and penalties for late payment of premiums) due with
respect to each employee pension benefit plan listed on Schedule 5.29 for
which premiums are required have been paid when due. No Employee pension
benefit plan, whether or not listed on Schedule 5.29, has been, or is
reasonably expected to be, terminated under circumstances that could result
in liability by the Company or any of its Subsidiaries. Either the
applicable plan document or Schedule 5.29 contains a complete and accurate
statement of all actuarial assumptions applied to determine the present
value of accrued benefits under all Employee benefit plans subject to
actuarial assumptions. All amounts owed under the deferred compensation
arrangements described in Schedule 5.29 are included as liabilities in the
Interim Historical Financial Statements.
ARTICLE VI.
PRE-CLOSING COVENANTS
6.1 Access to Information. From the Original Agreement Date through the
earlier of the Closing Date or the Termination Date, (i) Seller shall, and shall
cause the Company and each of its Subsidiaries to, afford to Buyer and its
accountants, counsel and other representatives, reasonable access to their
properties, books, contracts, commitments, Tax returns, records and operating
data, (ii) Seller shall provide from time to time such office space within its
executive offices as Buyer may reasonably request for use by their
representatives or agents in reviewing the materials referred to in clause (i)
of this Section 6.1, (iii) Seller shall, and shall cause the Company and each of
its Subsidiaries to, furnish to Buyer as promptly as practicable (w) copies of
any notice terminating, canceling or threatening to terminate or cancel any of
its insurance policies, (x) all financial and operating data and other
information concerning its business, properties and personnel generated or
developed in the Ordinary Course of Business as Buyer
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may reasonably request, (y) copies of any notice of default, or occurrence of
any event, which with the passage of time, giving of notice, or both, could
result in a default under a material agreement described on Schedule 5.20 and
(z) copies of proposed settlements of any Proceedings disclosed on Schedule 5.15
hereto, (iv) Seller shall, and shall cause the Company and each of its
Subsidiaries to, afford to Buyer and its accountants, counsel and other
representatives reasonable access during normal business hours to their officers
and other appropriate employees to discuss the condition, operation, business
and prospects of the Company and its Subsidiaries as a whole, and (v) Seller
shall, and shall cause the Company and each of its Subsidiaries to, cooperate
with and assist Buyer in preparing the Timeshare Business pro forma financial
statements and their reconciliation to US generally accepted accounting
principles (it is the understanding of the parties that Buyer is solely
responsible for preparing such pro forma financial statements).
6.2 Taking of Necessary Action. Subject to the terms and conditions of
this Agreement and to applicable Law, each of Buyer and Seller shall use all
reasonable efforts promptly to take or cause to be taken all action and promptly
to do or cause to be done all things necessary, proper or advisable under
applicable Laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the foregoing,
each of Buyer and Seller shall, and Seller shall cause the Company and each of
its Subsidiaries to, use all reasonable efforts to obtain and make all consents,
approvals, assurances or filings of or with third parties and Governmental
Bodies necessary for the consummation of the transactions contemplated hereby.
Each party shall cooperate with the others in good faith to help the other
satisfy its obligations under this Section 6.2. Seller shall use all reasonable
efforts to provide all documents, instruments, certificates and other
information necessary or desirable for Buyer to obtain at Closing the Title
Policy (as defined herein). If at any time after the Closing Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
including without limitation, to vest Buyer and its Subsidiaries with full title
to all properties, assets, rights, approvals, immunities and franchises of the
Company and its Subsidiaries, the proper officers or directors of each party to
this Agreement shall take that necessary action.
6.3 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, (i) Seller shall pay all costs and expenses that it
incurs in connection with this Agreement and the transactions contemplated
hereby, including without limitation the fees and expenses of its counsel,
accountants, and other advisors and (ii) Buyer shall pay all costs and expenses
that it incurs in connection with this Agreement and the transactions
contemplated hereby, including without limitation the fees and expenses of its
counsel, accountants, and other advisors. Notwithstanding the foregoing, Buyer
and Seller agree that any and all transfer taxes, appraisal fees, recording
fees, notarial fees and other costs and expenses arising from or relating to the
effectuation of the Condominium Regime (as hereinafter defined) shall be the
sole responsibility of Buyer. For purposes of this Section 6.3, the term
"effectuation of the Condominium Regime" shall mean (i) the constitution of a
condominium regime over the real estate properties of the Real Estate Companies
pursuant to the applicable provisions of the laws of Mexico, in order to legally
separate the Hotel Property, the Timeshare Property and the Other Property and
to create common areas and (ii) the transfer of the Timeshare Property to the PV
Timeshare Sub, the Cancun Timeshare Sub and the CSL Timeshare Sub, together with
the pro-rata share in common areas corresponding to the Timeshare Property as a
directly owned condominium unit.
6.4 Notice of Certain Changes. Each party hereto shall give prompt written
notice to the other party hereto of the occurrence, or non-occurrence, of any
event which would be likely
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to cause any representation or warranty herein to be untrue or inaccurate, or
any covenant, condition or agreement herein not to be complied with or
satisfied.
6.5 Confidentiality; Press Releases. Except as may be required by law or
as otherwise permitted or expressly contemplated herein, no party hereto or
their respective Affiliates, employees, agents and representatives shall
disclose to any third party this Agreement, the subject matter or terms hereof
or any confidential information or other proprietary knowledge concerning the
business or affairs of the other party which it may have acquired from such
party in the course of pursuing the transactions contemplated by this Agreement
without the prior consent of the other party hereto; provided, that any
information that is otherwise publicly available, without breach of this
provision, or has been obtained from a third party, shall not be deemed
confidential information. Seller and Buyer shall consult with each other as to
the timing, form and substance of any press release or public disclosure of
matters related to this Agreement or any of the transactions contemplated by
this Agreement; provided, however, that nothing in this Section 6.5 shall be
deemed to prohibit any party to this Agreement from making any disclosure that
is required to fulfill that party's disclosure obligations imposed by Law or
stock exchange requirements.
6.6 [Intentionally Omitted].
6.7 Title Insurance, Surveys, etc.
a) Seller shall assist Buyer in obtaining, as promptly as
practicable after the date hereof, commitments (the "Commitments") issued
by a title insurance company or companies acceptable to Buyer (the "Title
Company"), accompanied by one legible copy of all recorded or registered
documents relating to or affecting the Property, for the issuance of an
owners and mortgagee's policy of title insurance in such form and substance
as is acceptable to Buyer (the "Title Policy"); including that the Title
Policy shall (i) be in the amount determined by Buyer; (ii) insure that on
the Closing Date the respective condominium interests (A) to the Hotel
Property in Puerto Vallarta to be in the name of Prodepa, (B) to the Hotel
Property in Cancun to be in the name of Nizuc, (C) to the Hotel Property in
Cabo San Lucas to be in the name of Desarrollos, (D) to the Timeshare
Property in Puerto Vallarta to be in the name of PV Timeshare Sub, (E) to
the Timeshare Property in Cancun to be in the name of Cancun Timeshare Sub
and (F) to the Timeshare Property in Cabo San Lucas to be in the name of
CSL Timeshare Sub; (iii) state that at Closing the Hotel Property is free
and clear of all Liens except for a security interest granted to secure the
debt contemplated by the Hotel Debt Commitment (to the extent the
indebtedness contemplated to be evidenced by such note is required by
Buyer), and such other Liens as may be agreed by Buyer and Corporate
Banking (the "Permitted Hotel Property Lien") and (iv) state that at
Closing the Timeshare Property is free and clear of all Liens except for
(A) a security interest granted to secure the debt contemplated by the
Timeshare Debt Commitment, (B) a right to use the Timeshare Property by the
holders of the A Beneficiary rights previously issued under the Trusts and
(C) a second mortgage granted to secure the debt contemplated by the
Timeshare Debt Commitment, and such other Liens as may be agreed by Buyer
and Corporate Banking (the "Permitted Timeshare Property Liens"). In
connection with the above, Buyer will provide to the Title Company copies
of any and all relevant documents in its possession which the Title Company
requests. In addition, the Title Company will be required to use reasonable
and customary commercial standards in conducting its review and delivering
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the Title Policy contemplated hereby. Seller shall take, and shall cause
the Company to take, any and all such actions as are necessary for the
provisions of subparagraphs (ii) and (iii) above to be true as of the
Closing. The Commitments and the Title Policy shall contain such
endorsements as may be reasonably requested by Buyer. The Title Commitments
shall be later dated as of the Closing.
b) As promptly as practicable after the date hereof, Seller shall
deliver to Buyer and the Title Company an as-built survey of each of the
Properties (the "Surveys") prepared by a licensed and registered land
surveyor or engineer, dated on or after the date hereof, in such form and
substance and certified as required by the Title Company in order to enable
the Title Company to eliminate any exception to the Title Policy coverage
for matters that would be disclosed by an accurate survey. Any Survey may
be a recertification of a prior survey, provided that it meets the
foregoing criteria.
c) Seller shall pay one-third of the cost of the Title Commitments,
the Title Policy and the Surveys; provided, however, that in no event shall
Seller's responsibility therefor exceed US $200,000.
6.8 Consummation of Debt Commitments. Seller shall cause Corporate
Banking to make the loans contemplated by the Debt Commitments.
ARTICLE VII.
CONDUCT OF BUSINESS BY THE
COMPANY AND ITS SUBSIDIARIES
During the period from the Original Agreement Date through the earlier to
occur of the Closing Date or the Termination Date, Seller agrees (except to the
extent Buyer shall otherwise consent in writing, which consent shall not be
unreasonably withheld) that:
7.1 Ordinary Course. The Company shall, and shall cause each of its
Subsidiaries to, (a) carry on its businesses in the usual, regular and ordinary
course and consistent with past practices, (b) use its reasonable best efforts
to preserve its business organization, maintain its rights and franchises, and
preserve its relationships with customers, suppliers and others having business
dealings with it, and (c) use its reasonable best efforts, consistent with the
terms of this Agreement, to keep available the services of sufficient officers
and employees to carry on the business of the Company and its Subsidiaries as
set forth in Article VII.
7.2 Dividends and Issuance and Purchase of Securities; Loans. Except as
set forth below and in Section 4.8, neither the Company nor any of its
Subsidiaries shall (a) declare or pay any dividend on or make any other
distribution in respect of any of its capital stock, (b) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of, its
capital stock, (c) repurchase, redeem or otherwise acquire any shares of its
capital stock, (d) issue, deliver, sell or authorize the issuance, delivery or
sale of any stock appreciation rights or of any shares of its capital stock of
any class or any Commitments therefor, or (e) enter into any agreement or
understanding with respect to the matters referred to in this Section 7.2. The
foregoing shall not preclude (i) the recent reduction in capital of US $54.3
million which is fully reflected in the Interim Historical Financial Statements,
or (ii) the sale of shares of Club Regina representing sales of vacation
ownership intervals in the Ordinary Course of Business. Except as contemplated
by Section 4.8,
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neither the Company nor any of its Subsidiaries shall sell or otherwise
dispose of any securities of any Subsidiary, or enter into any agreement or
understanding with respect thereto, except to the extent otherwise permitted
hereunder. Neither the Company nor any of its Subsidiaries will make any loan to
or accept any loan from any of their respective directors, shareholders or
employees.
7.3 Government Documents; Inconsistent Agreements. None of Seller, the
Company nor any of its Subsidiaries shall (a) amend its certificate of
incorporation or bylaws or (b) enter into any agreement or incur any obligation,
the terms of which would be violated by the consummation of the transactions
contemplated by this Agreement.
7.4 No Other Bids. During the term of this Agreement, none of Seller, the
Company nor any of its Subsidiaries shall, nor shall it authorize or knowingly
permit any officer, director or employee of, or any investment banker, attorney,
accountant or other representative retained by it to, solicit, initiate or
encourage the submission or communication of any Third Party Offer, or
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person with respect to a Third Party
Offer. Seller shall promptly notify Buyer in writing upon receipt of a Third
Party Offer, such notice to include the identity of the Person having made such
Third Party Offer. Buyer shall promptly notify Seller in writing upon its
receipt of a Third Party Offer, such notice to include the identity of the
Person having made such Third Party Offer.
7.5 Acquisitions. Except for the purchase of inventory in the Ordinary
Course of Business, neither the Company nor any of its Subsidiaries shall
acquire or agree to acquire any assets in any individual transaction where the
purchase price exceeds US$250,000 or in transactions where the aggregate
purchase price exceeds US$1.0 million.
7.6 Indebtedness. Neither the Company nor any of its Subsidiaries shall,
(a) except pursuant to its existing credit facilities or otherwise in the
Ordinary Course of Business and specifically including for the purposes
permitted under this Agreement, incur any indebtedness for borrowed money or
guarantee any indebtedness, execute any indemnity, or issue or sell any debt
securities of the Company or any of its Subsidiaries or guarantee any debt
securities, or enter into or modify any Contract with respect to the foregoing,
or (b) except with respect to the debt described on Schedule 7.6 and as
contemplated by Section 4.8, make any optional payment of principal of any term
debt or otherwise permanently reduce its revolving credit facility.
7.7 Employee Contracts and Benefit Plans. During the term of this
Agreement, neither the Company nor any of its Subsidiaries shall (i) adopt or
amend (other than amendments that reduce the amounts payable by the Company or
any of its Subsidiaries or amendments required by Law to preserve the qualified
status of a plan or a contract) any collective bargaining agreement or employee
benefit plan, (ii) enter into any employment or severance arrangement with any
Person (including, without limitation, contracts with management of the Company
or any of its Subsidiaries that might require that payments be made upon the
consummation of the transactions contemplated hereby), except for severance
arrangements entered into in the ordinary Course of Business which do not
obligate the Company to pay more than US$150,000 individually or US$300,000 in
the aggregate, or (iii) amend any existing contracts to increase any amounts
payable thereunder or benefits provided thereunder. Neither the Company nor any
of its Subsidiaries shall grant any increase in compensation to its employees.
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7.8 Prohibited Dispositions. During the term of this Agreement, except for
sales of inventory in the Ordinary Course of Business, neither the Company nor
any of its Subsidiaries shall sell, lease or otherwise dispose of any of its
assets having a book or market value in excess of US$250,000 in any one
transaction or in excess of US$1.0 million in the aggregate.
7.9 Lines of Business and Capital Expenditures. During the term of this
Agreement, neither the Company nor any of its Subsidiaries will (a) enter into
any new material line of business or (b) incur or commit to any capital
expenditures other than (i) up to $1.0 million in the aggregate for acquisitions
as permitted under Section 7.5 and (ii) up to $1.0 million in the aggregate for
any other capital expenditures.
7.10 Accounting Methods. The Company will not change in any material
respect its methods of accounting (a) in effect at December 31, 1996, except as
required by Law, the Ministry of Finance & Pubic Credit, Undersecretary of
Revenue regulation or changes in generally accepted accounting principles as
concurred in by Ernst & Young, its independent auditors, or (b) for income and
deductions for federal income tax purposes from those employed in the
preparation of the consolidated federal income tax return of the Company and
each of the Subsidiaries for the taxable year ending December 31, 1996, except
as required by Law. The Company will not change its fiscal year.
7.11 Settlements. During the term of this Agreement, neither the Company
nor any of its Subsidiaries shall effect any settlements of any Proceedings.
7.12 Completion of Los Cabos Club Regina Units. Seller will complete and
furnish the remaining (80 as of the Original Agreement Date) Club Regina
timeshare Units currently under construction at the Los Cabos Club Regina
consistent with building plans and of a quality comparable to the Company's
other properties.
ARTICLE VIII.
CONDITIONS TO CLOSING
8.1 Conditions to All Parties' Obligations. The obligations of all the
parties to this Agreement to effect the transactions contemplated hereby shall
be subject to the fulfillment of the following conditions:
a) No Order and no other legal restraint or prohibition that would
prevent or have the effect of preventing the consummation of the
transactions contemplated by this Agreement shall be in effect; provided,
however, that no party hereto may invoke this condition unless such party
shall have complied fully with its obligations under Section 6.2 hereof
and, in addition shall have used all reasonable efforts to have any such
Order vacated.
b) The Requisite Regulatory Approvals referenced in Section 4.3 and
Section 5.5 shall have been obtained and shall be in full force and effect,
other than any Requisite Regulatory Approval that, if not obtained, would
not have a Material Adverse Effect on the business or operations of Buyer,
the Company and their Subsidiaries, taken as a whole, after giving effect
to the transactions contemplated hereby.
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c) There shall not have been any outbreak of war or civil unrest or a
suspension of financial markets or any other event generally adversely
affecting the normal conduct of business affecting either the United States
of America or the United Mexican States.
d) All issues identified pursuant to Article III or Article XIV shall
have been resolved in accordance with such provisions during the time
periods provided thereunder.
8.2 Buyer's Conditions. The obligation of Buyer to consummate the
transactions contemplated by this Agreement is subject to satisfaction on or
before Closing of the following conditions any of which may be waived in whole
or in part by Buyer, but only in writing at or prior to Closing. A failure to
discover, or a waiver of, any circumstances made a condition under this Section
8.2 shall not constitute a waiver of any warranties and representations provided
for elsewhere in this Agreement, unless any such waiver specifically so states.
a) Since the Original Agreement Date, nothing shall have occurred
which has had or could reasonably be expected to have a Material Adverse
Effect with respect to the Company.
b) The representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects at and as of
the Closing Date (except to the extent that they expressly relate only to
an earlier time, in which case they shall have been true and correct in all
material respects as of such earlier time), other than such breaches of
such representations and warranties which in the aggregate would not
reasonably be expected to have a Material Adverse Effect on the Company. No
Default or failure to perform which, with notice and/or lapse of time,
would constitute a Default by Seller, the Company or any of its
Subsidiaries under any of the agreements or covenants required by this
Agreement to be theretofore performed or complied with by any of them shall
have occurred and be continuing. Seller shall have delivered to Buyer a
certificate dated as of the Closing Date, signed either by its chairman,
chief executive officer, president, any vice president or the secretary of
the Board and its chief financial officer, in their capacities as officers
of Seller, to the effect set forth in this Section 8.2(b).
c) The Seller shall have delivered to Buyer the certificates
representing the Stock registered in the name of Seller free and clear of
all Liens, duly endorsed by Seller for transfer or accompanied by stock
transfer powers duly endorsed in blank.
d) Buyer shall have received an opinion dated the Closing Date of
each of the General Counsel to Seller and Santamarina y Steta, in form
and substance satisfactory to Buyer, as to the matters set forth in
Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.6, 5.10, 5.15, 5.16, 5.20, 5.22 and
5.29, and such other matters as Buyer may reasonably request.
e) Buyer shall have received all requisite consents of third Persons
necessary for the consummation of the transactions contemplated by this
Agreement.
f) (i) Corporate Banking shall have loaned to Buyer and the other
parties contemplated under the Debt Commitments the funds contemplated
thereby, and (ii) Buyer shall have received the funds required to make
payments hereunder in addition to those contemplated by the Debt
Commitments.
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g) On the Closing Date, Seller shall have notified Westin that the
Management Agreements will be terminated, unless Buyer waives this
requirement.
h) The Commitments shall have been delivered to Buyer and issuance of
the Title Policy shall be subject only to such conditions and/or exceptions
as Buyer may reasonably agree.
i) Each Ancillary Agreement required under this Agreement shall have
been executed and delivered by the parties thereto.
j) For each of the hotel and timeshare properties (each a "Site")
(A)(i) a legally enforceable declaration of condominium will have been
properly executed before a notary public dividing each Site into a hotel
condominium unit, a timeshare condominium unit and common areas; (ii) an
appropriate deed to the Site will have been properly executed before a
notary public to transfer title to the respective Site to the appropriate
Real Estate Company; (iii) an appropriate deed to the Timeshare Property
portion of each Site will have been properly executed before a notary
public to transfer title to the respective Timeshare Property to the Cancun
Timeshare Sub, PV Timeshare Sub and CSL Timeshare Sub; (iv) the respective
mortgage documentation will have been executed before a notary public to
effectuate the various mortgages contemplated by this Agreement, (B) the
items listed in clauses (i), (ii) and (iii), and, to the extent required
under financing arrangements, the items listed in clause (iv), will all
have been presented to the appropriate public registries; and (C) any other
appropriate steps will have been taken to induce the Title Company to
insure that the various titles have vested in the grantees; and (D) the
lender will have authorized the release of the mortgage financing proceeds
(hereinafter referred to collectively as the "Condominium Regime").
k) Seller shall have taken all necessary actions with respect to the
organizational documents of the Company and each of its Subsidiaries such
that the capital stock of such entities can be purchased and held by Buyer
as contemplated in this Agreement.
l) The Real Estate Companies shall have good and marketable direct
title to the Property, free and clear of all Liens.
8.3 Seller's Conditions. The obligation of Seller to consummate the
transactions contemplated by this Agreement is subject to satisfaction on or
before Closing of the following conditions any of which may be waived in whole
or in part by Seller, but only in writing at or prior to the Closing. A failure
to discover, or a waiver of, any circumstances made a condition under this
Section 8.3 shall not constitute a waiver of any warranties and representations
provided for elsewhere in this Agreement unless any such waiver specifically so
states.
a) Since the Original Agreement Date, nothing shall have occurred
which has had or could reasonably be expected to have a Material Adverse
Effect with respect to Buyer.
b) The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of
the Closing Date (except to the extent that they expressly relate only to
an earlier time, in which case they shall have
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been true and correct in all materials respects as of such earlier time),
other than such breaches of such representations and warranties which in
the aggregate would not reasonably be expected to have a Material Adverse
Effect on Buyer. No Default or failure to perform which, with notice and/or
lapse of time, would constitute a Default by Buyer under any of the
agreements or covenants required by this Agreement to be theretofore
performed or complied with by it shall have occurred and be continuing.
Buyer shall have delivered to Seller a certificate dated as of the Closing
Date, signed by its chairman, chief executive officer, president or any
vice president and its chief financial officer, in their capacities as
officers of Buyer, to the effect set forth in this Section 8.3(b).
c) The Seller shall have received from Buyer the Purchase Price due
under Section 2.1.
d) Seller shall have received an opinion dated the Closing Date of
Santamarina y Steta, in form and substance satisfactory to Seller.
e) Each Ancillary Agreement required under this Agreement shall have
been executed and delivered by the parties thereto.
f) Buyer shall have received all requisite consents of third Persons
necessary for it to fulfill its obligations under this Agreement.
ARTICLE IX.
RISK OF LOSS, DESTRUCTION AND CONDEMNATION
9.1 Risk of Loss. Risk of loss for damage to the Property, or any part
thereof, by fire or other casualty at any time prior to and including the
Closing Date will be on Seller. Upon Closing, full risk of loss with respect to
the Property will pass to Buyer.
9.2 Casualty.
a) Major Damage. If, prior to the Closing, the Property, or any
portion thereof, is damaged by fire, or any other cause of whatsoever
nature, Seller will promptly give Buyer written notice of such damage. If
the cost for repairing such damage, in the reasonable judgment of Buyer, in
consultation with Seller, after taking into account insurance coverage
exceeds US$1.0 million, Buyer will have the option, exercisable by written
notice delivered to Seller within ten Business Days of Seller's notice of
damage to Buyer either (i) to require Seller to convey the Property to
Buyer on the Closing Date, in its damaged condition and to assign to Buyer
all of Seller's right, title and interest in and to any claims Seller may
have under the property insurance policies covering the Property, in which
event Seller will pay to Buyer the amount of any deductible under
applicable insurance policies but Seller will have no further liability or
obligation to repair or replace the Property, or (ii) to terminate this
Agreement. If Buyer elects to terminate this Agreement, the Escrow Deposit
and interest thereon shall be returned to Buyer, and thereafter neither
party hereto will have any further duties or obligations hereunder.
b) Minor Damage. If the cost for repairing such damage will not, in
the reasonable judgment of Buyer, in consultation with Seller, after taking
into account insurance coverage exceed US $1.0 million, Buyer will have the
option, exercisable by written notice
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delivered to Seller within ten Business Days of Seller's notice of
damage to Buyer, either (i) to require Seller to repair and restore the
Property to substantially the same condition it was in prior to such
casualty, in which event the Closing Date shall be postponed for a
reasonable period of time to allow Seller to accomplish such repair and
restoration, or (ii) to require Seller to convey the Property to Buyer on
the Closing Date in its damaged condition and assign to Buyer all of
Seller's right, title and interest in and to any claims Seller may have
under the insurance policies covering the Property, in which event Seller
will pay to Buyer the amount of any deductible under applicable insurance
policies but Seller will have no further liability or obligation to repair
or replace the Property.
9.3 Condemnation. If during the pendency of this Agreement and prior to
Closing, condemnation/expropriation proceedings are commenced with respect to
the Property or any portion thereof, Buyer may, at Buyer's election, terminate
this Agreement by written notice to Seller within ten Business Days after Buyer
has been notified of the commencement of condemnation/expropriation proceedings.
In the event of such termination, the Escrow Deposit and interest thereon will
be promptly refunded to Buyer and, after the return of the Escrow Deposit to
Buyer, neither party will have any further duties or obligations hereunder. If
Buyer does not exercise such right to terminate within the period prescribed,
the Seller and Buyer, by their respective attorneys, will have the right to
appear and to defend their respective interests in the Property in such
condemnation/expropriation proceedings, and any award in
condemnation/expropriation will become the property of Seller and will reduce
the Purchase Price by the same amount.
ARTICLE X.
TERMINATION
10.1 Termination. This Agreement may be terminated, with the effect set
forth in Section 10.2, at any time before the Closing:
a) by written consent of Buyer and Seller, which termination shall be
approved by the board of directors of Buyer and Seller;
b) by either Buyer or Seller if the Closing shall not have occurred by
the close of business on the Termination Date, other than as a result of a
Default by the terminating party;
c) by Seller after the occurrence and during the continuation of a
Default by Buyer, provided that no Default, or event which, with notice
and/or the lapse of time, would constitute a Default, by Seller shall have
occurred and be continuing;
d) by Buyer after the occurrence and during the continuation of a
Default by Seller, provided that no Default, or event which, with notice
and/or lapse of time, would constitute a Default, by Buyer shall have
occurred and be continuing; or
e) by Seller if the Closing shall not have occurred by the close of
business on the Termination Date, and if all conditions to Closing set
forth in Article VIII shall have been satisfied except for the financing
condition set forth in Section 8.2(f)(i).
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Termination of this Agreement pursuant to this Section 10.1 shall be
effected by written notice by the party terminating this Agreement to the
other party of the termination and the basis for such termination.
10.2 Effect of Termination.
a) If this Agreement is terminated by either Buyer or Seller as
provided in Section 10.1 of this Agreement, then, except as provided in
this Section 10.2, this Agreement shall become void and there shall be no
Liability with respect to the terminated provisions of this Agreement on
the part of Buyer or Seller, or their respective officers or directors.
b) If this Agreement is terminated by Seller pursuant to Section
10.1(c), then Buyer shall pay to Seller, on the first Business Day
following such termination, the amount of US $3.0 million, with such amount
to be paid from the Escrow Account, to compensate Seller for, among other
things, its expenses and management time in pursuing the transactions
contemplated hereby and for lost opportunity costs. Seller agrees that such
payment shall be its sole and total damages and relief hereunder upon such
a termination. Notwithstanding the foregoing, if at the time of such
termination, Seller is in Default hereunder, or an event which, with notice
and/or lapse of time, would constitute a Default by Seller shall have
occurred and be continuing, then no such fee shall be due or payable
hereunder by Buyer.
c) If this Agreement is terminated by Buyer pursuant to Section
10.1(d), then the Escrow Deposit, plus accrued interest, shall be returned
to Buyer and Seller shall pay to Buyer, on the first Business Day following
such termination, the amount of US $3.0 million by wire transfer of
immediately available funds to an account designated by Buyer, to
compensate Buyer for, among other things, its expenses and management time
in pursuing the transactions contemplated hereby and for lost opportunity
costs. Buyer agrees that such payment shall be its sole and total damages
and relief hereunder upon such termination. Notwithstanding the foregoing,
if at the time of such termination, Buyer is in Default hereunder, or an
event which, with notice and/or lapse of time, would constitute a Default
by Buyer shall have occurred and be continuing, then no such fee shall be
due or payable hereunder by Seller.
d) If this Agreement is terminated by Seller pursuant to Section
10.1(e), then Seller shall be entitled to receive the Escrow Deposit,
together with all interest accrued thereon.
e) The termination of this Agreement shall not relieve any party of
its obligation to pay its costs and expenses as provided under Section 6.3
or its obligations under this Section 10.2 of this Agreement.
f) Notwithstanding anything herein to the contrary, in no event shall
the total amount paid to or recovered by Buyer or Seller under this
Agreement exceed the amount of US$3.0 million or the Escrow Deposit with
interest thereon, as applicable.
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ARTICLE XI.
INDEMNIFICATION
11.1 Indemnification by Seller. Seller agrees to indemnify and hold
harmless Buyer and its officers, directors, shareholders, Affiliates, employees
and agents (the "Buyer Indemnitees") from any and all Damages, directly or
indirectly resulting from, relating to, arising out of or attributable to: (a)
any breach of or inaccuracy in any representation or warranty of Seller
contained in this Agreement or in any Ancillary Agreement; (b) any breach or
non-performance, partial or total, by Seller of any covenant or agreement of
Seller contained in this Agreement or in any Ancillary Agreement; and (c) the
operation of the Company and its Subsidiaries prior to 11:59 p.m. on the Closing
Date.
11.2 Indemnification by Buyer. Buyer agrees to indemnify and hold harmless
Seller its officers, directors, shareholders, Affiliates, employees and agents
(the "Seller Indemnitees") from any and all Damages resulting from, arising out
of or attributable to: (a) any breach of or inaccuracy in any representation or
warranty of Buyer contained in this Agreement or in any Ancillary Agreement; (b)
any breach or non-performance, partial or total, by Buyer of any covenant or
agreement of Buyer contained in this Agreement or in any Ancillary Agreement,
and (c) the operation of the Company and its Subsidiaries after the Closing
Date.
11.3 Notice, Participation and Duration. If a claim by a third party is
made against a party indemnified pursuant to this Article XI ("Indemnitee"), and
if such Indemnitee intends to seek indemnity with respect thereto under this
Article XI, the Indemnitee shall promptly, and in any event within 60 days of
the assertion of any claim or the discovery of any fact upon which Indemnitee
intends to base a claim for indemnification under this Agreement (a "Claim"),
notify the party or parties from whom indemnification is sought (the
"Indemnitor") of such Claim. Upon any Claim, Indemnitor, at its option, may
assume (with legal counsel reasonably acceptable to the Indemnitee) the defense
of any Proceeding in connection with the Indemnitee's Claim, and may assert any
defense of Indemnitee or Indemnitor; provided that Indemnitee shall have the
right at its own expense to participate jointly with Indemnitor in the defense
of any Proceeding in connection with the Indemnitee's Claim. If Indemnitor
elects to undertake the defense of any Claim hereunder, Indemnitee shall
cooperate with Indemnitor to the extent reasonably requested in regard to all
matters relating to the Claim (including, without limitation, corrective actions
required by applicable Law, assertion of defenses and the determination,
mitigation, negotiation and settlement of all Damages) so as to permit
Indemnitor's management of the same with regard to the amount of Damages payable
by Indemnitor hereunder. Indemnitor shall not settle any indemnifiable Claim
without the prior written consent of Indemnitee unless such settlement involves
only the payment of money and the claimant provides to Indemnitee a release, in
form and substance reasonably satisfactory to Indemnitee, from all Liability in
respect of such Claim.
11.4 Reimbursement. If Indemnitor shall undertake, conduct or control the
defense or settlement of any Claim and it is later determined that such Claim
was not a Claim for which the Indemnitor is required to indemnify Indemnitee
under this Article XI, Indemnitee shall reimburse Indemnitor for all its costs
and expenses with respect to such settlement or defense, including reasonable
attorneys' fees and disbursements.
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ARTICLE XII.
MEDIATION AND ARBITRATION
12.1 Arbitration.
a) In the event that Buyer and Seller are unable to resolve any dispute,
controversy or claim arising out of or in connection with this Agreement (a
"Controversy"), either party may request in writing that the Controversy be
referred to the respective senior level management of each party for decision.
Such managers shall meet immediately and attempt in good faith to negotiate a
resolution of the Controversy. If the managers are unable to resolve the matter
within thirty (30) days of the written request referring the matter to them, any
party may, within thirty (30) days following the end of such thirty (30) day
period, elect to refer the matter to arbitration and the Controversy shall be
settled by binding arbitration in accordance with the Arbitration Rules of the
International Chamber of Commerce (the "ICC") then in effect (the "Rules").
b) There shall be a sole arbitrator selected in accordance with the Rules.
If the parties are unable to agree upon the arbitrator within thirty (30) days
of the referral to arbitration, the International Court of Arbitration of the
ICC shall make such appointment in accordance with the Rules. The arbitration
shall be conducted, and the award shall be rendered, in the English language.
The arbitration shall be held in New York, New York.
c) Each party shall cooperate with the other party in making full
disclosure of and providing access to all information and documents requested by
the other party in connection with such proceedings. The arbitrator shall have
the power to order such disclosure. Should a party fail to comply with such
order, the arbitrator shall take such refusal into account in determining the
award.
d) The decision of the arbitrator shall be final and binding on the
parties and shall be the sole and exclusive remedy regarding any claims,
counterclaims, issues or accounting presented to the arbitrator. Judgment upon
the award may be entered by any court having jurisdiction thereof. The parties
agree to waive any rights of recourse or appeal to any court in connection with
any questions of law arising in the course of the arbitration or with respect
to any award made except for actions to enforce an award.
e) Any monetary award shall be made and payable in United States Dollars.
The arbitrator shall be authorized to grant pre-award and post-award interest at
commercial rates without there being any presumption as to whether such interest
will be granted. Unless otherwise ordered by the arbitrator, each party shall
bear its own costs and fees, including attorneys' fees and expenses. The parties
expressly agree that the arbitrator shall have no power to consider or award
punitive or exemplary damages.
f) This agreement to arbitrate shall be binding upon the successors,
assigns, trustee, receiver or executor of each party.
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ARTICLE XIII.
GENERAL PROVISIONS
13.1 Survival of Representations, Warranties and Agreements. The
representations, warranties, covenants and agreements of Buyer and Seller
contained in this Agreement and any document, instrument or certificate
delivered in connection with the transactions contemplated hereby shall survive
the Closing.
13.2 Effect of Due Diligence. No investigation by any party to this
Agreement into the business, operations and condition of any other party shall
diminish in any way the effect of any representations or warranties made by such
other party in this Agreement or shall relieve such other party of any of its
obligations under this Agreement. The parties agree that any item disclosed on
any schedule to this Agreement shall be deemed to be disclosed for all purposes
of this Agreement, notwithstanding the fact that such item was not disclosed on
any other schedule to this Agreement.
13.3 Notices. Any notice, request, demand, instruction or other
communication to be given to either party hereunder (except those required to be
delivered at Closing) will be in writing, and will be deemed to be delivered
upon the earlier to occur of (i) actual receipt if delivered by hand or by
commercial courier such as "Federal Express" or "DHL", postage prepaid, to the
address indicated or (ii) upon confirmation of receipt if by facsimile
transmission addressed as follows:
If to Buyer:
Club Regina Resorts, Inc.
c/o Raintree Capital Acquisition Company
Pennzoil Place - South Tower
Suite 2310, 711 Louisiana
Houston, Texas 77002
Fax No.: (713) 223-5825
Attn: Douglas Y. Bech
with a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Pennzoil Place - South Tower
Suite 1900
Houston, Texas 77002
Attn: David S. Peterman
Fax No.: (713) 236-0822
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If to Seller:
Bancomer S.A., Institucion de Banca Multiple, Grupo Financiero
Av. Universidad No. 1200
Col. Xoco
C.P. 03339, Mexico, D.F.
Fax No.: 011-525-621-6633
Attn: Javier Fernandez Carbajal
Chief Financial Officer
Miguel Garcia y Garcia
General Counsel
Alejandro Rodriguez Mirelles
Director of Mergers and Acquisitions
John McCarthy Sandland
Managing Director of Bancomer Tourism Division
The addresses and facsimile numbers for the purpose of this Section may be
changed by either party by giving written notice of such change to the other
party in the manner provided herein.
13.4 Attorneys' Fees. If it becomes necessary for either Buyer or Seller to
enforce this Agreement or any provisions contained herein, the prevailing party
in such Action will be entitled to recover, in addition to all other remedies or
Damages, reasonable attorneys fees and costs of court incurred in connection
with such.
13.5 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same Agreement, and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
13.6 Miscellaneous. This Agreement and the documents and instruments
contemplated hereby (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement, including, without limitation,
the Original Agreements; and (b) are not intended to confer upon any Person,
other than the parties to this Agreement and such other documents and
instruments, any rights or remedies hereunder. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
13.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New York without giving effect to the principles of
conflicts of law.
13.8 Incorporation of Exhibits and Schedules. All exhibits and schedules
referred to in this Agreement and attached hereto are hereby made a part of this
Agreement by this reference.
13.9 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the party that is entitled to the benefits thereof. Any
waiver of any term or condition of this Agreement by any party shall not be
construed as a waiver of any subsequent breach or failure of the same term or
condition, or a waiver of any other term or condition of this Agreement.
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<PAGE> 44
13.10 Specific Performance. Each party hereto agrees with the other party
that the other party would be irreparably damaged if any of the provisions of
this Agreement are not performed in accordance with their specific terms and
that monetary damages would not provide an adequate remedy in such event.
Accordingly, it is agreed that, in addition to any other remedy to which the
nonbreaching party may be entitled, at law or in equity, the nonbreaching party
shall be entitled to injunctive relief to prevent breaches of the provisions of
this Agreement and specifically to enforce the terms and provisions hereof in
any court having subject matter jurisdiction thereof.
13.11 Release of CR Hotel. CR Hotel is hereby released as a party to this
Agreement, the First Amended Agreement and the Original Agreement and the
parties hereto acknowledge that Buyer has succeeded to the rights and
obligations of CR Hotel, if any, hereunder.
ARTICLE XIV.
ALTERNATIVE STRUCTURES
Notwithstanding anything herein to the contrary, Buyer, and Seller
currently anticipate that during the period between the date hereof and Closing,
they will continue to review and analyze the structure of the transactions
contemplated hereby, including without limitation, (i) whether the Hotel
Property, the Timeshare Property or the Other Property will be transferred out
of the trusts which currently hold title thereto (the "Trusts"), (ii) if the
Hotel Property, the Timeshare Property or the Other Property will be transferred
out of the Trusts, the mechanics and timing of such transfer and the identity of
the Persons to whom such property will be transferred, (iii) the source,
collateral, securitization, flow and characterization of the funds to be used to
effectuate the transactions contemplated hereby and (iv) such other matters as
they may identify, and, to the extent and degree that Buyer and Seller agree
that any such matters shall be dealt with in a manner that is different from the
manner set forth herein, then such matter shall be set forth in a written
amendment hereto signed by Buyer and Seller, whereupon this Agreement shall be
amended and superseded to such extent and degree.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE> 45
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to
above signed as of the date first above written by its duly authorized officer.
BANCOMER S.A., INSTITUCION DE BANCA
MULTIPLE, GRUPO FINANCIERO
By:
-----------------------------------
Printed Name:
------------------------
Title:
--------------------------------
By:
-----------------------------------
Printed Name:
------------------------
Title:
--------------------------------
DESARROLLOS TURISTICOS REGINA,
S. DE R.L. DE C.V.
By:
-----------------------------------
Printed Name:
------------------------
Title:
--------------------------------
CLUB REGINA RESORTS, INC.,
(formerly known as CR Timeshare
Acquisition Company)
By:
-----------------------------------
Douglas Y. Bech
President
CR HOTEL ACQUISITION COMPANY, L.L.C.
By:
-----------------------------------
Douglas Y. Bech
Managing Director
<PAGE> 1
EXHIBIT 10.2
CROSS INDEMNITY AGREEMENT
THIS CROSS INDEMNITY AGREEMENT (this "AGREEMENT"), is made and entered
into as of the 18th day of August, 1997 by BANCOMER, S.A., INSTITUCION DE BANCA
MULTIPLE, GRUPO FINANCIERO ("BANCOMER") in favor of the Benefited Parties (as
hereinafter defined), and by C.R. RESORTS CANCUN, S. DE R.L. DE C.V. ("RAINTREE
CANCUN") and C.R. RESORTS PUERTO VALLARTA, S. DE R.L. DE C.V. ("RAINTREE PUERTO
VALLARTA") in favor of Bancomer.
RECITALS
A. Any capitalized terms used in the following Recitals and not
defined therein are defined in the body of this Agreement.
B. Prior to the consummation of the Transaction (i) PRODEPA was
the primary beneficiary of the PRODEPA Trust which held title to certain real
property in Puerto Vallarta, Jalisco, Mexico and the improvements thereon,
which consist of an international luxury resort hotel currently known as the
Westin Regina Puerto Vallarta (the "PUERTO VALLARTA HOTEL") and a vacation
ownership interval facilities consisting of 205 timeshare units (the "PUERTO
VALLARTA TIMESHARE OPERATION"), and (ii) NIZUC was the primary beneficiary of
the NIZUC Trust which held title to certain real property in Cancun, Quintana
Roo, Mexico and the improvements thereon, which consist of an international
luxury resort hotel currently known as the Westin Regina Cancun (the "CANCUN
HOTEL") and a vacation ownership interval facilities consisting of 69 timeshare
units (the "CANCUN TIMESHARE OPERATION").
C. The Trust Agreements provided for the division of the
beneficial ownership interests in the above- described properties into "A"
beneficial rights, generally consisting of the right to use, occupy and enjoy
the timeshare suites for a period of time together with the right to use
certain amenities and common areas (the ""A" RIGHTS"), and "B" beneficial
rights, consisting of all other rights with respect to the real properties and
the improvements thereon as set forth in the Trust Agreements (the ""B"
RIGHTS"). PRODEPA held the "B" Rights in the PRODEPA Trust and NIZUC held the
"B" Rights in the NIZUC Trust.
D. The Trust Agreements originally contemplated that all
timeshare suites would ultimately be encumbered by the "A" Rights on a
sequential basis as follows: PRODEPA or NIZUC would assign the "A" Rights to
VDC, and subsequently VDC would assign those "A" Rights to VOC in exchange for
memberships in VOC, which VDC would sell to Mexican and foreign entities and
individuals. VDC did not transfer "A" Rights to any party other than VOC. All
memberships in VOC which were not sold by VDC, and all memberships in VOC which
were recovered by VDC from, or returned to VDC by, purchasers have been
transferred by VDC to PRODEPA. The Amended PRODEPA Trust accurately reflects
the number and identity of timeshare suites within the Puerto Vallarta
Timeshare Unit which are subject to "A" Rights, and the Amended NIZUC Trust
accurately
<PAGE> 2
reflects the number and identity of timeshare suites (or units) within the
Cancun Timeshare Unit which are subject to "A" Rights.
E. Prior to the amendment of the Trust Agreements, each of the
Trust Agreements contained certain restrictions and prohibitions which would
have prevented, among other things, the transfer of title to any portion of the
real property which was the subject thereof and the consummation of the
Transaction.
F. Bancomer, as Trustee of the PRODEPA Trust, acting on the
instructions of PRODEPA and with the consent of VOC, caused to be formalized
and registered the Puerto Vallarta Condominium Declaration dividing the real
property subject to the PRODEPA Trust into two condominium units and a common
access area; one unit consists of the Puerto Vallarta Hotel (the "PUERTO
VALLARTA HOTEL UNIT"), and one unit consists of the Puerto Vallarta Timeshare
Operation (the "PUERTO VALLARTA TIMESHARE UNIT").
G. Bancomer, as Trustee of the NIZUC Trust, acting on the
instructions of NIZUC and with the consent of VOC, caused to be formalized and
registered the Cancun Condominium Declaration dividing the real property
subject to the NIZUC Trust into two condominium units and a common access area;
one unit consists of the Cancun Hotel (the "CANCUN HOTEL UNIT") and one unit
consists of the Cancun Timeshare Operation (the "CANCUN TIMESHARE UNIT").
H. With the consent of VOC in each instance, Bancomer, as
Trustee, PRODEPA, and NIZUC amended and restated the Trust Agreements to
eliminate any restrictions and prohibitions which would have prevented the
closing of the Transaction. The amendments are as set forth in the Amended
PRODEPA Trust and the Amended NIZUC Trust.
I As contemplated by that Second Amended and Restated Stock
Purchase Agreement dated as of August 18, 1997, between Bancomer, Desarrollos
Turisticos Regina, S. de R.L. de C.V (formerly, Desarrollos Turisticos
Bancomer, S.A. de C.V.) Club Regina Resorts, Inc. and CR Hotel Acquisition
Company, LLC (the "STOCK PURCHASE AGREEMENT"), the parties thereto later
executed a series of corporate transactions (including stock sales, mergers,
spin-offs of assets and conveyances) as steps in one overall transaction (the
"TRANSACTION"). As a result of the Transaction, Starwood Puerto Vallarta
became the owner of the Puerto Vallarta Hotel Unit, Raintree Puerto Vallarta
became a beneficiary of a trust in which Bancomer, as Trustee, holds title to
the Puerto Vallarta Timeshare Unit (the "PUERTO VALLARTA TIMESHARE TRUST"),
Starwood Cancun became the owner of the Cancun Hotel Unit, and Raintree Cancun
became a beneficiary of a trust in which Bancomer, as Trustee, holds title to
the Cancun Timeshare Unit (the "CANCUN TIMESHARE TRUST").
J. At all times prior to the consummation of the Transaction
either, (i) PRODEPA and NIZUC were indirect subsidiaries of Bancomer, or (ii)
Bancomer was the majority shareholder of PRODEPA and NIZUC and, in either case,
PRODEPA and NIZUC were subject to Bancomer's control. Starwood Puerto
Vallarta, Starwood Cancun, Raintree Puerto Vallarta and Raintree Cancun are not
directly or indirectly owned by or affiliated with Bancomer.
2
<PAGE> 3
K. Prior to the consummation of the Transaction, Desarrollos
Turisticos Integrales Cabo San Lucas, S.A. de C.V. ("DTI CABO") and Bancomer
entered into trust agreement which was amended and restated as set forth in
public instrument number 16,531 dated January 29, 1993, granted before Cesar
Aramouro Rosas, Esq., Notary Public No. 3 of Baja California Sur, as registered
in the Public Registry of Property of San Jose del Cabo, Baja California Sur,
Mexico (the "DTI CABO TRUST"). The DTI Cabo Trust contemplated the division of
the beneficial interests in the real property that was the subject of the DTI
Cabo Trust into "A" Rights and "B" Rights similar to those contemplated in the
Trust Agreements. The DTI Cabo Trust contemplated that the "A" Rights would be
transferred to parties not identified therein. No such "A" Rights were
actually created and transferred under the DTI Cabo Trust. Consequently,
Bancomer and DTI Cabo were the only parties required to execute or consent to
the declaration of condominium formalized and registered in connection with the
Transaction for the real property held under the DTI Cabo Trust under public
deed No. 34,708, dated August 12, 1997, granted before Hector Castro Castro,
Esq., Notary Public No. 7 of Baja California Sur, Mexico, and the termination
of the DTI Cabo Trust pursuant to public instrument number 34,745, dated August
18, 1997, granted before Hector Castro Castro, Esq., Notary Public No. 7 of
Baja California Sur, Mexico.
AGREEMENT
NOW THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, Bancomer, Raintree
Cancun and Raintree Puerto Vallarta intending to be legally bound, hereby
severally represent, covenant and agree for themselves and their successors and
assigns as follows:
(1) Definitions. As used in this Agreement, the following terms
shall have the following meanings unless the context otherwise requires. All
other capitalized terms used herein which are not defined below shall have the
meanings as set forth in the Recitals or elsewhere in this Agreement.
(a) "Amended NIZUC Trust" means the NIZUC Trust as
amended and restated in public instrument number 11,008, dated August 18, 1997,
granted before Luis M. Camara Patron, acting as alternate of Notary Public No.
13 of Cancun, Quintana Roo, Mexico, registered in the Public Registry of
Property of Cancun, Quintana Roo, Mexico.
(b) "Amended PRODEPA Trust" means the PRODEPA Trust as
amended and restated in public instrument number 15,181, dated August 18, 1997,
granted before Francisco Ruiz Higuera, Esq., acting as alternate of Notary
Public No. 3 of Puerto Vallarta, Jalisco, Mexico, registered in the Public
Registry of Property of Puerto Vallarta, Jalisco, Mexico.
(c) "Benefited Parties" means (i) Starwood Cancun,
Starwood Puerto Vallarta, Raintree Cancun, Raintree Puerto Vallarta; (ii) all
entities described in Exhibit "A" attached hereto; (iii) all shareholders,
partners and members of all such entities described in clauses (i) and (ii) of
this subsection 1(c); (iv) all successors and assigns of all parties described
in clauses (i), (ii) and (iii) of this subsection 1(c); and (v) the respective
directors,
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<PAGE> 4
officers, agents and employees of all the parties described in classes (i),
(ii), (iii) and (iv) of this subsection 1(c).
(d) "Cancun Condominium Declaration" means the
Declaration of Condominium formalized under public instrument number 10,973,
dated August 11, 1997, registered in the Public Registry of Property of
Quintana Roo, Mexico.
(e) "Condominium Declarations" means the Puerto Vallarta
Condominium Declaration and the Cancun Condominium Declaration.
(f) "NIZUC" means Promotora Turistica Nizuc, S. de R.L.
de C.V., formerly Promotora Turistica Nizuc, S.A. de C.V.
(g) "NIZUC Trust" means that trust as amended and
restated pursuant to public instrument number 18,097, dated December 18, 1991
granted before Javier Rajes Carrillo, Esq., alternate Notary Public of Notary
Public Office No. 7 of Quintana Roo, Mexico, executed by Bancomer and NIZUC.
(h) "PRODEPA" means Promotora y Desarrolladora Pacifico,
S. de R.L. de C.V., formerly Promotora y Desarrolladora Pacifico, S.A. de C.V.
(i) "PRODEPA Trust" means that trust which is public
instrument number 8,588 dated November 13, 1991 granted before Francisco Ruiz
Higuera, alternate Notary Public of Notary Public Office No. 3 of Puerto
Vallarta, Jalisco, Mexico, executed by Bancomer and PRODEPA.
(j) "Puerto Vallarta Condominium Declaration" means the
Declaration of Condominium formalized under public deed No. 11,924, dated
August 8, 1997, granted before Carlos Castro Segundo, Esq., Notary Public No. 5
of Puerto Vallarta, Jalisco, Mexico, registered in the Public Registry of
Property of Jalisco, Mexico.
(k) "Starwood Cancun" means Starwood Cancun, S. de R.L.
de C.V.
(l) "Starwood Puerto Vallarta" means Starwood Puerto
Vallarta, S. de R.L. de C.V.
(m) "Transaction" shall have the meaning as set forth in
Section I of the Recitals hereto.
(n) "Trust Agreements" means the PRODEPA Trust and the
NIZUC Trust.
(o) "VDC" means Vacation Development Corporation of the
Americas Limited, a company formed and existing under the laws of the Cayman
Islands.
(p) "VOC" means Vacation Ownership Club, a California
non-profit association.
4
<PAGE> 5
(2) Representations and Warranties. Bancomer represents and
warrants to the Benefited Parties that:
(a) The facts set forth in Sections B, C, D, E, F, G, H,
J and K of the Recitals hereto are true and correct in all material respects.
(b) VOC validly consented to the Condominium Declarations
and the Condominium Declarations are enforceable against VOC.
(c) The amendments to the Trust Agreements as set forth
in the Amended PRODEPA Trust and the Amended NIZUC Trust are valid and
enforceable against the parties thereto under all applicable laws of the United
States of Mexico and the State of California.
(3) Covenants.
(a) Raintree Puerto Vallarta, as a beneficiary of the
Puerto Vallarta Timeshare Trust, covenants and agrees to comply with the
obligations to VOC and its members under the terms and conditions of the
Amended PRODEPA Trust.
(b) Raintree Cancun, as a beneficiary of the Cancun
Timeshare Trust, covenants and agrees to comply with the obligations to VOC and
its members under the terms and conditions of the Amended NIZUC Trust.
(4) Indemnification.
(a) Bancomer hereby covenants and agrees, with and for
the benefit of each of the Benefited Parties, to protect, indemnify, reimburse,
defend and hold harmless the Benefited Parties, at Bancomer's sole cost and
expense, from and against any and all liabilities, losses, suits, proceedings,
orders, penalties, fines, settlements, judgments, liens, assessments, claims,
demands, damages, injuries, obligations, costs, disbursements, expenses or fees
of any kind or nature (including without limitation, attorneys' fees), which
may at any time be imposed upon, incurred by or asserted or awarded against my
of the Benefited Parties, arising from or growing out of, directly or
indirectly: (i) the breach or inaccuracy of any representation or warranty by
Bancomer, under this Agreement; (ii) any claim by VOC (or any of its members or
prior members), or by any governmental authority of the State of California or
the United States of Mexico, that PRODEPA, NIZUC, VDC, Corporacion Mexitur,
S.A. de C.V. ("MEXITUR") and/or Bancomer, as Trustee (and/or any subsidiaries
of any such entities), failed in any respect to comply with the terms of any of
their respective obligations under, either of the Trust Agreements or of any
other agreement (whether with or by Bancomer, VDC, PRODEPA, Mexitur and/or
NIZUC and/or any subsidiaries of any such entities) with or for the benefit of
VOC or any of its members, at any time prior to the closing of the Transaction;
(iii) Bancomer's exercise of its fiduciary responsibilities (or the failure to
exercise such responsibilities) pursuant to the Trust Agreements prior to the
closing of the Transaction; or (iv) any claim that the board of directors of
VOC (or any of its individual members) either (A) lacked the power or authority
to authorize or consent to, (B) did not duly
5
<PAGE> 6
authorize or consent to (as a result of conflicts of interest or otherwise), or
(C) breached a fiduciary duty by authorizing or consenting to, the Condominium
Declarations, the Amended PRODEPA Trust and/or the Amended NIZUC Trusts, or the
transfer of title to all or part of the real property that was held in trust
pursuant to the Trust Agreements.
(b) Raintree Puerto Vallarta covenants and agrees, at its
sole cost and expense, to protect, indemnify, reimburse, defend and hold
harmless Bancomer from and against any and all liabilities, losses, suits,
proceedings, orders, penalties, fines, settlements, judgments, liens,
assessments, claims, demands, damages, injuries, obligations, costs,
disbursements, expenses or fees of any kind or nature (including, without
limitation, attorneys' fees), which may at any time be imposed upon, incurred
by or asserted or awarded against Bancomer, arising from or growing out of, any
claims by VOC or its members resulting from the breach of the covenant set
forth in Section 3(a), provided, however, that this Agreement shall not
obligate Raintree Puerto Vallarta to indemnify Bancomer for, or on account of,
any breach by Bancomer of its obligations or duties as Trustee of the Amended
PRODEPA Trust.
(c) Raintree Cancun covenants and agrees, at its sole
cost and expense, to protect, indemnify, reimburse, defend and hold harmless
Bancomer from and against any and all liabilities, losses, suits, proceedings,
orders, penalties, fines, settlements, judgments, liens, assessments, claims,
demands, damages, injuries, obligations, costs, disbursements, expenses or fees
of any kind or nature (including, without limitation, attorneys' fees), which
may at any time be imposed upon, incurred by or asserted or awarded against
Bancomer, arising from or growing out of, any claims by VOC or its members
resulting from the breach of the covenant set forth in Section 3(b), provided,
however, that this Agreement shall not obligate Raintree Cancun to indemnify
Bancomer for, or on account of, any breach by Bancomer of its obligations or
duties as Trustee of the Amended NIZUC Trust.
(d) For purposes of this Section 4, a party making a
claim for indemnity under this Section 4 is hereinafter referred to as an
"INDEMNIFIED PARTY" and the party against whom such claim is asserted is
hereinafter referred to as an "INDEMNIFYING PARTY". All claims by any
Indemnified Party under this Section 4 shall be asserted and resolved in
accordance with the provisions of subsections 4(e), (f), (g) and (h).
(e) The liabilities, losses, claims, damages, expenses
and other items referred to in subsections 4(a), (b) and (c) above, for which
the Benefited Parties and Bancomer, respectively, are indemnified and held
harmless under this Section 4 shall be reimbursed to the Indemnified Party by
the Indemnifying Party, without any requirement of waiting for the ultimate
outcome of any litigation, claim or other proceeding, if they have already been
incurred, within thirty (30) days after notice from the Indemnified Party,
itemizing the amounts incurred to the date of such notice; provided, however,
that in the event that there is a dispute between the Indemnified Party and the
Indemnifying Party with respect to the amount of any such items, such dispute
shall be resolved in accordance with the arbitration provisions in Section 5(d)
and the reimbursement of the disputed amounts
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<PAGE> 7
described above by the Indemnifying Party shall be contingent on the outcome of
the arbitration of such dispute.
(f) If any claim or demand for which an Indemnifying
Party may be liable to an Indemnified Party is asserted against or sought to be
collected from such Indemnified Party by a third party (in each case, a
"CLAIM"), said Indemnified Party shall promptly notify in writing the
Indemnifying Party of such Claim stating with reasonable specificity the
circumstances of the Indemnified Party's claim for indemnification; provided,
however, that any failure to give such notice will not affect the rights to
indemnity of the Indemnified Party except to the extent that the rights of the
Indemnifying Party are actually prejudiced by the absence or delay of the
notice. Immediately upon becoming aware of a Claim for which indemnity is or
could be sought, the Indemnifying Party shall vigorously and continuously
defend against the Claim and any proceedings resulting or derived therefrom
(with qualified legal counsel reasonably acceptable to the Indemnified Party
and licensed to practice in the jurisdiction in which the Claim is asserted),
and shall take all actions necessary or appropriate, including but not limited
to the posting of such bond or other security as may be required by any
judicial or governmental authority, so as to enable the Claim to be defended
without interfering with the conduct of the business of any Indemnified Party.
At all times, the Indemnifying Party shall keep the Indemnified Party fully
informed of the status of the Claim or any proceedings in connection therewith
and shall consult with the Indemnified Party with respect to the defense
against the Claim. The Indemnified Party shall have the right (at its own
expense) to participate jointly with the Indemnifying Party in the defense of
any Claim in connection with the Indemnified Party's claim for indemnity under
this Section 4, provided that the Indemnifying Party shall retain the right to
direct the defense against the Claim. Except as otherwise provided in
subsection 4(h), the Indemnified Party shall not unreasonably withhold its
consent to the settlement or resolution of a Claim, provided that the
Indemnified Party is not required thereby to incur any present or future cost,
expense or monetary loss.
(g) The Indemnifying Party may not assume the defense if
the named parties to any Claim (including any impleaded parties) include both
the Indemnified Party and the Indemnifying Party, and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. In any such case, the Indemnified Party
shall have the right to employ counsel (duly qualified as provided in
subsection 4(f)) of its choice, at the expense of the Indemnifying Party.
Except as otherwise provided in subsection 4(h), upon request of the
Indemnifying Party, the Indemnified Party shall, to the extent it may legally
do so and to the extent that it is compensated in advance by the Indemnifying
Party for any costs and expenses thereby incurred,
(i) take such action as the Indemnifying Party
may reasonably request in connection with such action,
(ii) allow the Indemnifying Party to dispute such
action in the name of the Indemnified party and to conduct a defense to such
action on behalf of the Indemnified Party, and
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<PAGE> 8
(iii) render to the Indemnifying Party all such
assistance as the Indemnifying Party may reasonably request in connection with
such dispute and defense.
(h) To the extent that any Claim is for, or could result
in, an order or judgment requiring any of (i) the rescission or nullification
of either of the Condominium Declarations, (ii) the amendments to the Trust
Agreements as set forth, respectively, in the Amended PRODEPA Trust or the
Amended NIZUC Trust; (iii) the reconveyance or transfer of any of the property
that was the subject of either of the Trust Agreements; or (iv) any other
modification of any of the Condominium Declarations, the Amended PRODEPA Trust
or the Amended NIZUC Trust, to any extent deemed adverse by any Benefited Party
(in its sole and absolute discretion), Bancomer shall make whatever payment,
restitution, concession, or other arrangement that may be required and
permitted under applicable law to avoid any of the consequences described in
this subsection 4(h).
(5) Miscellaneous Provisions.
(a) No delay on the part of any of the Benefited Parties
or Bancomer in exercising any of their rights, remedies, powers or privileges
under this Agreement, or as otherwise provided at law or in equity, shall
operate as a waiver of any such right, remedy, power or privilege, or excuse
Bancomer, Raintree Puerto Vallarta or Raintree Cancun, as the case may be, from
their obligations hereunder. Any waiver of such right, remedy, power or
privilege by the Benefited Parties or Bancomer must be in writing and signed by
an authorized agent of the Benefited Parties or Bancomer, as the case may be.
(b) All notices hereunder shall be in writing and shall
be deemed to have been sufficiently given or served for all purposes upon the
earlier of (i) actual receipt if delivered by hand or by commercial courier
such as "Federal Express" or "DHL", (ii) receipt by registered or certified
mail, postage prepaid, or (iii) upon confirmation of receipt, if by facsimile
transmission, to the address (or number) indicated, if to:
Bancomer: Bancomer, S.A.
Av. Universidad No. 1200
Col. Xoco
C.P. 03339, M,Mexico, D.F.
Fax No. 011-525-621-6633
Attn: Javier Carbajal, Chief Financial
Officer Miguel Garcia y Garcia,
General Counsel Alejandro
Rodriguez Mirelles, Dir. of
Mergers and Acquisitions
Starwood Cancun or
Starwood Puerto Vallarta: c/o Starwood Lodging Corporation
2231 East Camelback Road
Phoenix, Arizona 85016
Fax No. (602) 852-0984
Attn: Theodore Darnell
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<PAGE> 9
with a copy to: Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel
153 East 53rd Street
New York, New York 10022
Fax No. (212) 801-9281
Attn: Robert Ivanhoe
Raintree Cancun or
Raintree Puerto Vallarta: Pennzoil Place-South Tower
Suite 2310, 711 Louisiana
Houston, Texas 77002
Fax No. (713) 223-5825
Attn: Douglas Y. Bech
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Pennzoil Place-South Tower Suite
1900, 711 Louisiana
Houston, Texas 77002
Fax No. (713) 236-0822
Attn: David S. Peterman
Other Benefited Parties: See Exhibit "B" attached hereto.
Any party may designate a change of address by written notice (in accordance
with the provisions of this Section) to any other party, received by such other
party at least ten (10) days before such change of address is to become
effective.
(c) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original. Said counterparts
shall constitute but one and the same instrument and shall be binding upon each
of the undersigned individually as fully and completely as if all had signed
but one instrument so that the liability of each of the undersigned shall be
unaffected by the failure of any of the undersigned to execute any or all of
said counterparts.
(d) This Agreement and the rights and obligations of the
parties hereunder shall in all respects be construed, interpreted, enforced and
governed by and in accordance with the laws of the State of New York (excluding
the principles thereof governing conflicts of law). In the event that any of
the parties hereto are unable to resolve any dispute, controversy or claim
arising out of or in connection with this Agreement (a "CONTROVERSY"), either
party may request in writing that the Controversy be referred to the respective
senior level management of each party for decision. Such managers shall meet
immediately and attempt in good faith to negotiate a resolution of the
Controversy. If the managers are unable to resolve the matter within thirty
(30) days of the written request referring the matter to
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<PAGE> 10
them, any party may, within thirty (30) days following the end of such thirty
(30) day period, elect to refer the matter to arbitration and the Controversy
shall be resolved by binding arbitration in accordance with the Arbitration
Rules of the International Chamber of Commerce (the "ICC") then in effect (the
"RULES").
(i) There shall be a sole arbitrator selected in
accordance with the Rules. If the parties are unable to agree upon the
arbitrator within thirty (30) days of the referral to arbitration, the
International Court of Arbitration of the ICC shall make such appointment in
accordance with the Rules. The arbitration shall be conducted, and the award
shall be rendered, in the English language. The arbitration shall be held in
New York, New York.
(ii) Each party shall cooperate with the other
party in making full disclosure of and providing access to all information and
documents requested by the other party in connection with such proceedings.
The arbitrator shall have the power to order such disclosure. Should a party
fail to comply with such order, the arbitrator shall take such refusal into
account in determining any award.
(iii) The decision of the arbitrator shall be final
and binding on the parties and shall be the sole and exclusive remedy regarding
any claims, counterclaims, issues or accounting presented to the arbitrator.
Judgment upon the award may be entered by any court having jurisdiction
thereof. The parties agree to waive any rights of recourse or appeal to any
court in connection with any questions of law arising in the course of the
arbitration or with respect to any award made except for actions to enforce an
award.
(iv) Any monetary award shall be made and payable
in United States Dollars. The arbitrator shall be authorized to grant
pre-award and post-award interest at commercial rates without there being any
presumption as to whether such interest will be granted. Unless otherwise
ordered by the arbitrator, each party shall bear its own costs and fees,
including attorneys' fees and expenses. The parties expressly agree that the
arbitrator shall have no power to consider or award punitive or exemplary
damages.
(v) This agreement to arbitrate shall be binding
upon the successors, assigns, trustee, receiver or executor of each party.
(e) Except as expressly provided herein to the contrary,
this Agreement shall be binding upon and inure to the benefit of the Benefited
Parties and Bancomer and their respective heirs, personal representatives,
successors and assigns. Notwithstanding the foregoing, Bancomer shall not
delegate or assign any of its obligations hereunder without the prior written
consent of all of the other parties hereto. The respective obligations of
Raintree Puerto Vallarta and Raintree Cancun shall be deemed to run with the
respective ownership of the beneficial interests in the Puerto Vallarta
Timeshare Trust and the Cancun Timeshare Trust. Consequently, if either of
such beneficial interests should be transferred, the transferee shall
automatically be deemed to have assumed the obligations of its transferor and
the transferor shall have no further obligation under this Agreement.
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(f) Any reference in this Agreement to attorneys' fees
paid or incurred by any party shall include reasonable and documented
paralegals', consultants' or experts' fees and disbursements and costs of
litigation, appeals and any other legal or administrative proceeding
(including, without limitation, such fees or expenses incurred in any and all
judicial, bankruptcy, reorganization, administrative, or other proceedings,
including appellate proceedings, whether such fees or expenses arise before
proceedings are commenced or after entry of a final order or judgment).
(g) In the event that any Indemnified Party is required
to bring any action to enforce the payment or performance of the obligations of
any Indemnifying Party, the prevailing party shall be entitled to recover its
attorneys' fees.
(h) Use of any gender shall include all other genders and
words in the singular include the plural, and the plural include the singular.
(i) If any provision of this Agreement shall be contrary
to the laws of the jurisdiction in which the same shall be sought to be
enforced, the illegality or unenforceability of any such provision shall not
affect the other terms, covenants and conditions hereof, and the same shall be
binding upon the parties hereto with the same force and effect as though such
illegal or unenforceable provision were not contained herein.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
Signed, sealed and delivered
in the presence of: BANCOMER S.A. INSTITUCION DE,
BANCA MULTIPLE GRUPO
FINANCIERO
By:
- ---------------------------- ----------------------------
Name:
- ---------------------------- --------------------------
Title:
-------------------------
C.R. RESORTS CANCUN, S. DE R.L. DE C.V.
By:
- ---------------------------- ----------------------------
Name:
- ---------------------------- --------------------------
Title:
-------------------------
C.R. RESORTS PUERTO VALLARTA,
S. DE R.L. DE C.V.
By:
- ---------------------------- ----------------------------
Name:
- ---------------------------- --------------------------
Title:
-------------------------
11
<PAGE> 1
EXHIBIT 10.3
POST-CLOSING AND INDEMNITY AGREEMENT
THIS POST-CLOSING AND INDEMNITY AGREEMENT (this "AGREEMENT"), is made
and entered into as of the 19th day of August, 1997 by BANCOMER, S.A.,
INSTITUCION DE BANCA MULTIPLE, GRUPO FINANCIERO ("BANCOMER") in favor of the
Benefited Parties (as hereinafter defined). Unless otherwise specified, defined
terms herein shall have the respective meanings set forth in the Second Amended
and Restated Stock Purchase Agreement (the "PURCHASE AGREEMENT") dated as of
August 18, 1997, by and among Bancomer, Company, Buyer and CR Hotel.
RECITALS
A. Section 8.2 of the Purchase Agreement sets forth the conditions
("BUYER'S CONDITIONS") to Buyer's obligation to close the transactions
contemplated by the Purchase Agreement (the "TRANSACTIONS").
B. Bancomer and Buyer have agreed to consummate the Transactions,
although certain of Buyer's Conditions have not been satisfied as more
particularly described in the body of this Agreement (the "UNSATISFIED
CONDITIONS").
C. Buyer has agreed to consummate the Transactions, provided that
Bancomer agrees to use its best efforts to satisfy the Unsatisfied Conditions as
promptly as practicable following the date hereof.
D. Bancomer has agreed to indemnify and hold harmless each of the
Benefited Parties for any Damages suffered in the event that Bancomer fails to
satisfy the Unsatisfied Conditions.
AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Bancomer, intending to be legally
bound, hereby covenants and agrees with and for the benefit of the Benefited
Parties as follows:
(1) Definitions. As used in this Agreement, the following terms shall
have the following meanings unless the context otherwise requires. All other
capitalized terms used herein which are not in the Purchase Agreement or defined
below shall have the meanings as set forth in the Recitals or elsewhere in this
Agreement.
(a) "Amended NIZUC Trust" means the NIZUC Trust as amended and
restated in public instrument number 11,008, dated August 18, 1997, granted
before Luis M. Camara Patron, Esq., acting as alternate of Notary Public No. 13
of Cancun, Quintana Roo, Mexico, registered in the Public Registry of Property
of Cancun, Quintana Roo, Mexico.
(b) "Amended PRODEPA Trust" means the PRODEPA Trust as amended
and restated in public instrument number 15,181, dated August 18, 1997, granted
before
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Francisco J. Ruiz Higuera, Esq., acting as alternate of Notary Public No.
3 of Puerto Vallarta, Jalisco, Mexico, registered in the Public Registry of
Property of Puerto Vallarta, Jalisco, Mexico.
(c) "Benefited Parties" means each entity in favor of which
Bancomer covenants to perform a specific obligation under the terms of this
Agreement.
(d) "Cabo Access Area" means the roadway depicted on the Cabo
Survey connecting the Cabo Condominium to the public highway known as the
"Caretera Trans-Peninsular.
(e) "Cabo Accreted Area" means the area outside and
immediately adjoining the Southerly boundary of the Cabo Condominium which
contains 5,957.78 square meters and is labeled as the "AREA GANADA AL MAR" on
the Cabo Survey.
(f) "Cabo Condominium" means the real property depicted and
described in the Cabo Survey.
(g) "Cabo Hotel Unit" means the condominium unit in the Cabo
Condominium consisting of the hotel currently known as the Westin Regina Cabo
San Lucas.
(h) "Cabo Survey" means that Levantamiento Topografico
(Planimetria) prepared by Surveyor, certified on August ____, 1997 which is a
survey of the Cabo Condominium.
(i) "Cabo Timeshare Unit" means the condominium unit in the
Cabo Condominium consisting of the vacation ownership interval operation.
(j) "Cabo Unlicensed Improvements" means the portion of the
swimming pool and two staircases which were constructed within the Cabo Accreted
Area.
(k) "Cancun Concession" means that Concesion No. DZF-064/93
issued to NIZUC by the Subsecretaria De Vivienda Y Bienes Inmuebles of the
Direccion General Del Patrimonio Inmobillario Federal, dated as of May 14, 1993.
(l) "Cancun Concession Area" means the strip of land ("area de
pedimento") legally described in the Cancun Concession in which the Cancun
Infringing Improvements are located.
(m) "Cancun Condominium" means the real property depicted and
described in the Cancun Survey.
(n) "Cancun Condominium Declaration" means the Declaration of
Condominium formalized under public instrument number 10,973, dated August 11,
1997, registered in the Public Registry of Property of Quintana Roo, Mexico.
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(o) "Cancun Hotel Unit" means the condominium unit in the
Cancun Condominium consisting of the hotel currently known as the Westin Regina
Cancun.
(p) "Cancun Infringing Improvements" means the portions of the
improvements constructed upon the Cancun Hotel Unit and the Cancun Timeshare
Unit which are within the Cancun Concession Area as described in the Cancun
Concession and as more particularly depicted on the Cancun Survey which were
constructed without the requisite governmental license, outside the boundaries
of the Cancun Condominium.
(q) "Cancun Survey" means that Levantamiento Topografico
(Planimetria) prepared by Surveyor, certified on August _____, 1997, which is a
survey of the Cancun Condominium.
(r) "Cancun Timeshare Trust" means that trust agreement which
is public instrument number ______, dated as of August 18, 1997, granted before
Armando Galvez Perez, Notary Public No. 103 of the Federal District, Mexico,
among Bancomer, NIZUC and the Remainder Company.
(s) "Cancun Timeshare Unit" means the condominium unit in the
Cancun Condominium consisting of the vacation ownership internal operation.
(t) "Condominiums" means the Cabo Condominium, the Cancun
Condominium and the Puerto Vallarta Condominium.
(u) "Construction Costs" means all costs of construction,
including, without limitation, all architectural, engineering, demolition,
surveying, site preparation, landscaping and all such other direct and indirect
costs consistent with the general quality and esthetics of the improvements
located on the Cancun Condominium, Cabo Condominium and Puerto Vallarta
Condominium as deemed appropriate in the business judgment of any affected
Benefited Party.
(v) "Cozumel Land" means the land located in Cozumel, Mexico
owned by DTI Cozumel.
(w) "Creel" means the law firm of Creel, Garcia-Cuellar y
Muggenburg.
(x) "Damages" means all damages, losses (including any
diminution in value, lost profits and costs of business interruption with
respect to any affected real property), liabilities (joint and several),
payments, obligations, penalties, claims, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses (including, without limitation
attorneys' fees) of any kind or nature whatsoever; provided, however, that such
Damages shall be limited to $41,000,000. Notwithstanding the foregoing, in the
event of the loss or destruction of any hotel room or timeshare unit, the total
Damages for which Bancomer shall be liable to the applicable Benefited Party for
such hotel room or timeshare unit shall be deemed to be the liquidated amount of
U.S. $150,000.
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(y) "DTP" means Desarollo Turistico Peninsular, S.A. de C.V.
(z) "Fonatur" means Patrimonio de Bienes Inmuebles Federales,
Nacional Financiera, Sociedad Nacional de Credito, como Fiduciario del Gobierno
Federal en el Fideicomiso denominado Fondo Nacional de Fomento al Turismo.
(aa) "Fonatur Acknowledgment" means that Letter emitted by
Fonatur dated August 14, 1997, addressed to NIZUC with respect to the correct
legal description of the Cancun Condominium.
(bb) "Maritime Zone" means the "Zona Federal Maritimo
Terrestre" as shown on the Surveys.
(cc) "NIZUC" means Promotora Turistica Nizuc, S. de R.L. de
C.V., formerly Promotora Turistica Nizuc, S.A. de C.V.
(dd) "NIZUC Trust" means that trust as amended and restated
pursuant to public instrument number 18,097, dated December 18, 1991, granted
before Javier Rajes Carrillo, Esq. alternate notary of Notary Public No. 7 of
Quintana Roo, Mexico, executed by Bancomer and NIZUC.
(ee) "Pending Litigation" means the litigation described in
Sections X.1 through X.11 of the Santamarina Memo and: (i) the PRODEPA nullity
claim in the original amount of $2,437,204 New Pesos, (ii) the claim of Sylvia
Loyola Zerecero, (iii) the claim of Rosa Maria Pratz Fuentes, (iv) the claim of
Jorge Eugenio Balcazar Gonzalez, (v) the claim of Alma Roza Cerena O., (vi) the
claim of Aquilino Montrel Ramirez, and (vii) the claim of Leonardo Martinez
Munoz.
(ff) "PRODEPA" means Promotora y Desarrolladora Pacifico, S.
de R.L. de C.V., formerly Promotora y Desarrolladora Pacifico, S.A. de C.V.
(gg) "PRODEPA Trust" means that trust which is public
instrument number 8,588, dated November 13, 1991, granted before Francisco Ruiz
Higuera, alternate notary of Notary Public No. 3 of Puerto Vallarta, Jalisco,
Mexico, executed by Bancomer and PRODEPA.
(hh) "Promotora" means Promotora Cabo Real, S.A. de C.V.,
successor by merger to DTP.
(ii) "Puerto Vallarta Condominium" means the real property
depicted and described in the Puerto Vallarta Survey.
(jj) "Puerto Vallarta Condominium Declaration" means the
Declaration of Condominium formalized under public deed No. 11,924, dated August
8, 1997, granted before Carlos Castro Segundo, Esq., Notary Public No. 5 of
Puerto Vallarta, Jalisco, Mexico, registered in the Public Registry of Property
of Jalisco, Mexico.
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(kk) "Puerto Vallarta Hotel Unit" means the condominium unit
in the Puerto Vallarta Condominium consisting of the hotel currently known as
the Westin Regina Puerto Vallarta.
(ll) "Puerto Vallarta Infringing Improvements" means the walls
and any other improvements constructed outside the South Westerly boundary of
the Puerto Vallarta Condominium as more particularly depicted on the Puerto
Vallarta Survey.
(mm) "Puerto Vallarta Survey" means that Levantamiento
Topografico (Planimetria) prepared by the Surveyor, certified on August _____,
1997 which is a survey of the Puerto Vallarta Condominium.
(nn) "Puerto Vallarta Timeshare Unit" means the condominium
unit in the Puerto Vallarta Condominium consisting of the vacation ownership
interval operation.
(oo) "Raintree Cabo" means C.R. Resorts Los Cabos, S. de R.L.
de C.V.
(pp) "Remainder Company" means C.R. Resorts Remainder Company
S. de R.L. de C.V.
(qq) "Santamarina Memo" means that letter dated June 11, 1997
from Santamarina y Steta to Raintree Capital Company, LLC regarding due
diligence in connection with the Transactions.
(rr) "Starwood Cancun" means Starwood Cancun, S. de R.L. de
C.V.
(ss) "Starwood Puerto Vallarta" means Starwood Puerto
Vallarta, S. de R.L. de C.V.
(tt) "Surveyor" means Arias y Asociados, S.C.
(uu) "Surveys" means the Cabo Survey, the Cancun Survey and
the Puerto Vallarta Survey.
(vv) "Trust Agreements" means the PRODEPA Trust and the NIZUC
Trust.
(2) Covenants.
(a) Cancun Boundaries. Bancomer hereby represents, covenants
and agrees that, pursuant to the public instrument creating the NIZUC Trust,
Fonatur ostensibly conveyed to Bancomer, as Trustee of the NIZUC Trust, two lots
of real property defined as lots 70 and 71 located in "Boulevard Kukulcan,
Seccion "A", Segunda Fase de la Zona Turistica de Cancun, Quintana Roo" (the
"SUBDIVISION") bordered to the South by lot 69 of the Subdivision and to the
North by lot 72 of the Subdivision. Notwithstanding the intended conveyance,
Fonatur has agreed in the Fonatur Acknowledgment that the legal description used
in the conveyance incorrectly described said lots 70 and 71 and that the Fonatur
Acknowledgment sets forth the correct legal description of lots 70 and 71.
Consequently, the
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legal description of the Cancun Condominium (which is comprised of lots 70 and
71) as reflected on the Cancun Survey, does not coincide with the incorrect
legal description. The error is fundamental, and Starwood Cancun and the trustee
of the Cancun Timeshare Trust will not have good and marketable legal title to
the Cancun Hotel Unit and the Cancun Timeshare Unit, respectively, until the
error is corrected by appropriate public instrument and it is verified by
reference to the public instruments registered in the Public Registry of
Property of Quintana Roo, Mexico (and any other appropriate official records)
that the current owners of lots 69 and 72 (or their predecessors in title, as
the case may be) did not erroneously obtain title to any portion of lots 70 and
71 (the "POTENTIAL ENCROACHMENTS"). Bancomer, with and for the benefit of
Starwood Cancun and Raintree Cancun, shall, forthwith, obtain and cause to be
registered in the Public Registry of Property of Quintana Roo, Mexico (and any
other appropriate official records) any such appropriate corrective
instrument(s). Bancomer agrees that it shall, at all times, vigorously and
continuously pursue its obligations under this subsection (2)(a). In the event
that Bancomer is unable to satisfy its obligation under this subsection (2)(a)
within 360 days of the date of this Agreement, then Starwood Cancun and Raintree
Cancun shall have the right to assume control of the process (with the full and
complete cooperation of Bancomer). In the event that within 360 days from the
expiration of the first 360-day period, Starwood Cancun and Raintree Cancun
(with Bancomer's cooperation) cannot resolve the matter so that the obligations
of Bancomer in this subsection are fully satisfied, then the matter shall be
referred to binding arbitration pursuant to Section (4)(j) to determine the
amount of any Construction Costs and Damages as a result of such failure and
Bancomer shall pay such Construction Costs and Damages as may be awarded in such
arbitration proceedings in accordance with the final determination of the
arbitrator within thirty (30) days of the date of such award.
(b) Cancun Concession. Bancomer provided notice to the
Subsecretaria De Vivienda Y Bienes Inmuebles of the Direccion General Del
Patrimonio Inmobillario Federal (the "AGENCY") of the Transactions. However,
such notice was insufficient in order to allow the Agency to consider and grant
the approval for the Transactions. The Agency has acknowledged receipt of such
notice and its willingness to process Bancomer's request for the transfer of the
Cancun Concession. In addition, Starwood Cancun and Raintree Cancun are not
willing to accept the Cancun Concession unless it ultimately runs for at least
fifteen (15) years from the date of the Transactions. Consequently, Bancomer
hereby represents, covenants and agrees that, with and for the benefit of
Starwood Cancun and Raintree Cancun, that Bancomer shall simultaneously:
(i) apply for and obtain the consent of the Agency (and
all other appropriate governmental authorities) for the Transactions and the
transfer of the Cancun Concession. Any such consent shall not materially modify
the terms of the Cancun Concession or impose upon the transferees any additional
burdens, unless such burdens are purely monetary and Bancomer pays all such
additional amounts, together with any fines, penalties or previously unpaid
amounts required by the Agency; and
(ii) apply for and obtain an extension of the Cancun
Concession for an additional term of no less than fifteen (15) years from the
date of the Transactions (the
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"EXPIRATION DATE"). Any such extension shall not materially modify the terms of
the Cancun Concession or impose upon the transferees any additional burdens,
unless such burdens are purely monetary and Bancomer pays all such additional
amounts.
In the event that Bancomer cannot obtain the approval required by subsection (i)
above within two (2) years from the date of this Agreement, then Bancomer shall
pay to Starwood Cancun the amount of U.S $1,000,000. In the event that Bancomer
secures the transfer of the Cancun Concession but fails to obtain the requisite
extension thereof as provided in subsection (ii) above, then Bancomer shall pay
to Starwood Cancun the amount of U.S. $250,000. Except as described in
subsection (i) above, Bancomer shall not be liable for any amounts due under the
Cancun Concession, any extension of the Cancun Concession, or any new concession
or license granted in the future.
(c) Cabo Accreted Area. Bancomer hereby represents, covenants
and agrees that, with and for the benefit of Raintree Cabo, upon the request of
Raintree Cabo, Bancomer shall apply for and obtain a concession and/or license
(for the maximum legally permissible term) to maintain the Cabo Unlicensed
Improvements, which it acknowledges were constructed without the requisite
governmental license, outside the boundary of the Cabo Timeshare Unit. If either
(i) the competent governmental authority demands the removal of all or any part
of the Cabo Unlicensed Improvements, (ii) imposes any fines, penalties or fees
on Raintree Cabo or increases the costs of the concession and/or license
resulting from the existence of the Cabo Unlicensed Improvements, or (iii) if
Bancomer does not obtain for Raintree Cabo the requisite license, as requested
by Raintree Cabo, Bancomer shall pay any Damages suffered by Raintree Cabo,
including without limitation, any Construction Costs associated with the removal
of the Cabo Unlicensed Improvements and reconstructing any improvements outside
the Cabo Accreted Area occasioned by such removal.
(d) Cabo Ecological Preserve. When Bancomer acquired title to
the Los Cabos Property from Promotora, it covenanted in the Cabo Trust (which
has been subsequently confirmed by other agreements), among other things, that
it would not invade or construct any improvements upon the portion of the Los
Cabos Condominium which is referred to as the "Cerro Colorado", such portion
constituting a federal ecological preserve (the "FEDERAL PRESERVE"). The limit
of the Federal Preserve is referred to in the relevant documents as the "cota
50". The Cabo Survey reflects that the cota 50 line as it existed at the time of
the conveyance to Bancomer has been moved by construction and that a portion of
the hotel improvements adjoining the Cerro Colorado were constructed within what
were the boundaries of the Federal Preserve at the time Bancomer acquired title
to the real property. Bancomer shall indemnify Starwood Cabo for any Damages
suffered by Starwood Cabo, including without limitation, any Construction Costs
associated with the removal of any hotel improvements within the Federal
Preserve and reconstructing any improvements outside the Federal Preserve
occasioned by such removal.
(e) Puerto Vallarta Seawall. Bancomer hereby represents,
covenants and agrees that, with and for the benefit of Starwood Puerto Vallarta
and Raintree Puerto
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Vallarta, upon the request of Starwood Puerto Vallarta and Raintree Puerto
Vallarta, Bancomer shall apply for and obtain a concession and/or license (for
the maximum legally permissible term) to maintain the Puerto Vallarta Infringing
Improvements, which it acknowledges were constructed without the requisite
governmental license, outside the boundary of the Puerto Vallarta Condominium.
If either, (i) the competent governmental authority demands the removal of all
or any part of the Puerto Vallarta Infringing Improvements, (ii) imposes any
fines, penalties or fees on Starwood Puerto Vallarta or Raintree Puerto Vallarta
or increases the costs of the concession and/or license resulting from the
existence of the Puerto Vallarta Infringing Improvements, or (iii) if Bancomer
does not obtain for Starwood Puerto Vallarta and Raintree Puerto Vallarta the
requisite concession and/or license, as requested by Starwood Puerto Vallarta
and Raintree Puerto Vallarta, Bancomer shall pay any Damages incurred by
Starwood Puerto Vallarta or Raintree Puerto Vallarta, including, without
limitation, any Construction Costs associated with the removal of the Puerto
Vallarta Infringing Improvements.
(f) House Sub. Bancomer hereby represents, covenants and
agrees that, with and for the benefit of House Sub, Bancomer shall cause to be
legally consummated, the transfer (or acquisition) of title to House Sub of
those residential units identified n Sections III.1 (i), (iii), (iv), (v), (vi)
and (vii) of the Santamarina Memo as promptly as possible, so that good and
marketable title thereto shall be vested in House Sub, free and clear of any
liens, encumbrances or other charges, and shall pay (or cause to paid) all fees,
taxes, costs and expenses incidental to such processes. In the event that
Bancomer does not satisfy the obligation in this subsection within two (2) years
from the date of this Agreement, then the matter shall be referred to binding
arbitration pursuant to Section (4)(j) to determine the amount of any Damages as
a result of such failure and Bancomer shall pay such Damages as may be awarded
in such arbitration proceedings in accordance with the final determination of
the arbitrator within thirty (30) days of the date of such award.
(g) Cozumel Land. Bancomer hereby represents, covenants and
agrees that, with and for the benefit of DTI Cozumel, Bancomer shall cause to be
legally consummated, the transfer (or acquisition) of title to DTI Cozumel of
the Cozumel Land as promptly as possible, so that good and marketable title
thereto shall be vested in DTI Cozumel free and clear of any liens, encumbrances
or other charges, and shall pay (or cause to paid) all fees, taxes, costs and
expenses incidental to such process. In the event that Bancomer does not satisfy
the obligation in this subsection within two (2) years from the date of this
Agreement then, Bancomer shall pay to Desarollos Turisticos Regina, S. de R.L.
de C.V. the amount of U.S. $11,740,000.
(h) Pending Litigation. Bancomer hereby represents, covenants
and agrees that, with and for the benefit of the specific defendants (whether
named as a defendant or the successor to such defendant by merger, spin-off of
assets or otherwise) named in the Pending Litigation, Bancomer shall pay for the
cost of defending such Pending Litigation and pay any Damages arising or growing
out of the Pending Litigation.
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(i) Maritime Zone. Bancomer hereby represents, covenants and
agrees that, with and for the benefit of each of the owners of the condominium
units within the Condominiums, to the extent that any improvements which have
been constructed, installed or erected in connection with any of the
Condominiums are known to be, or subsequently discovered to have been, located
in the Maritime Zone adjoining such condominium as of the date of this
Agreement, that upon request of any of said owners whose property is affected by
such encroaching improvement, Bancomer shall apply for and obtain a concession
and/or license (for the maximum legally permissible term) to maintain such
encroaching improvements. If within two (2) years from the date of this
Agreement either, (i) the competent governmental authority demands the removal
of all or any part of such encroaching improvements, (ii) imposes any fines,
penalties or fees on any of the owners of the condominium units within the
Condominiums, or increases the cost of the concession and/or license, resulting
from the existence of such encroaching improvements, or (iii) if Bancomer does
not obtain for the affected owners of the condominium units within the
Condominiums the requisite concession and/or license, as requested by such
owner(s), Bancomer shall pay any resulting Damages, including, without
limitation, any Construction Costs associated with the removal of any such
encroaching improvements, replacement of the removed improvements (to the extent
practical) and the reconstruction of any other affected improvements.
(j) Gonzalez Claim. Bancomer hereby represents, covenants and
agrees that, with and for the benefit of Starwood Cabo and Raintree Cabo, that
Bancomer shall obtain and cause to registered in the Public Registry of Baja
California Sur, Mexico (and any other appropriate public registry) an
appropriate public instrument (acceptable to Creel or such other counsel
reasonably acceptable to Starwood Cabo and Raintree Cabo), specifically between
Jose Manuel Gonzalez Mendoza ("GONZALEZ") and Starwood Cabo, which finally and
fully determines and establishes that Gonzalez does not have any claim against
the Cabo Condominium, and in any event Bancomer shall indemnify and hold
harmless Starwood Cabo and Raintree Cabo from any Damages arising or growing out
of Gonzalez' claim to ownership of any portion of the Cabo Condominium.
(k) BTS/VDC. Bancomer hereby represents, covenants and agrees
that it shall, as promptly as practicable, but in any event within thirty (30)
days from the date of this Agreement, transfer for U.S.$1.00 to such Benefited
Parties as CRR shall advise in writing, all rights and interests, if any,
representing the right to use, vacation intervals or any similar rights with
respect to any timeshare suites in the Cancun Timeshare Unit and the Puerto
Vallarta Timeshare Unit.
(3) Indemnification.
(a) Bancomer hereby covenants and agrees, with and for the
benefit of each of the Benefited Parties, to protect, indemnify, reimburse,
defend and hold harmless the Benefited Parties, at Bancomer's sole cost and
expense, from and against any and all Damages of any kind or nature, which may
at any time be imposed upon, incurred by or asserted or awarded against any of
the Benefited Parties, arising from or growing out of,
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<PAGE> 10
directly or indirectly the failure by Bancomer to comply with its several
obligations to the Benefited Parties under this Agreement.
(b) For purposes of this Section 3, a party making a claim for
indemnity under this Section 3 is hereinafter referred to as an "INDEMNIFIED
PARTY". All claims by any Indemnified Party under this Section 3 hereof shall be
asserted and resolved in accordance with the provisions of subsections 3(c), (d)
and (e).
(c) The Damages and other items referred to in subsection 3
(a) above, for which the Benefited Parties are indemnified under this Section 3,
shall be reimbursed to such Benefited Party without any requirement of waiting
for the ultimate outcome of any litigation, claim or other proceeding, within
thirty (30) days after notice from such Benefited Party, itemizing the amounts
incurred to the date of such notice; provided, however, that in the event that
there is a dispute between such Benefited Party and Bancomer with respect to a
specific amount, such dispute shall be resolved in accordance with the
arbitration provisions in Section (4)(j) and the reimbursement by Bancomer of
the specifically disputed amount shall be contingent on the outcome of the
arbitration of such dispute.
(d) If any claim or demand for which Bancomer may be liable to
an Indemnified Party is asserted against or sought to be collected from such
Indemnified Party by a third party (in each case, a "CLAIM"), said Indemnified
Party shall promptly notify Bancomer in writing of such Claim stating with
reasonable specificity the circumstances of the Indemnified Party's claim for
indemnification; provided, however, that any failure to give such notice will
not affect the rights to indemnity of the Indemnified Party except to the extent
that the rights of Bancomer are actually prejudiced by the absence or delay of
the notice. Immediately upon becoming aware of a Claim for which indemnity is or
could be sought, Bancomer shall use its best efforts to vigorously and
continuously defend against the Claim and any proceedings resulting or derived
therefrom (with qualified legal counsel reasonably acceptable to the Indemnified
Party and licensed to practice in the jurisdiction in which the Claim is
asserted), and shall take all actions necessary or appropriate, including but
not limited to the posting of such bond or other security as may be required by
any judicial or governmental authority, so as to enable the Claim to be defended
without interfering with the conduct of the business of any Indemnified Party.
At all times, Bancomer shall keep the Indemnified Party fully informed of the
status of the Claim or any proceedings in connection therewith and shall consult
with the Indemnified Party with respect to the defense against the Claim. The
Indemnified Party shall have the right (at its own expense) to participate
jointly with Bancomer in the defense of any Claim in connection with the
Indemnified Party's claim for indemnity under this Section 3, provided that
Bancomer shall retain the right to direct the defense against the Claim. The
Indemnified Party shall not unreasonably withhold its consent to the settlement
or resolution of a Claim, provided that the Indemnified Party is not required
thereby to incur any present or future cost, expense or monetary loss.
(e) Bancomer may not assume the defense if the named parties
to any Claim (including any impleaded parties) include both the Indemnified
Party and Bancomer, and representation of both parties by the same counsel would
be inappropriate due to actual
10
<PAGE> 11
or potential differing interests between them. In any such case, the Indemnified
Party shall have the right to employ counsel (duly qualified as provided in
subsection 3(d)) of its choice, at the expense of Bancomer. Upon request of
Bancomer, the Indemnified Party shall, to the extent it may legally do so and to
the extent that it is compensated in advance by Bancomer for any costs and
expenses thereby incurred,
(i) take such action as Bancomer may reasonably request
in connection with such action,
(ii) allow Bancomer to dispute such action in the name of
the Indemnified party and to conduct a defense to such action on behalf of the
Indemnified Party, and
(iii) render to Bancomer all such assistance as Bancomer
may reasonably request in connection with such dispute and defense.
(4) Miscellaneous Provisions.
(a) No delay on the part of any of the Benefited Parties in
exercising any of their rights, remedies, powers or privileges under this
Agreement, or as otherwise provided at law or in equity, shall operate as a
waiver of any such right, remedy, power or privilege, or excuse Bancomer from
its obligations hereunder. Any waiver of such right, remedy, power or privilege
by any Benefited Party must be in writing and signed by an authorized agent of
such Benefited Party.
(b) All notices hereunder shall be in writing and shall be
deemed to have been sufficiently given or served for all purposes when sent by
registered or certified mail, if to:
Bancomer: Bancomer, S.A.
Av. Universidad No. 1200
Col. Xoco
C.P. 03339, M,Mexico, D.F.
Attn: Javier Fernandez Carbajal, Chief
Financial Officer
Miguel Garcia y Garcia, General
Counsel
Alejandro Rodriguez Mirelles, Dir. of
Mergers and Acquisitions
Starwood Cancun or
Starwood Puerto Vallarta: c/o Starwood Lodging Corporation
2231 East Camelback Road
Phoenix, Arizona 85016
Attn: Theodore Darnell
11
<PAGE> 12
with a copy to: Greenberg, Traurig, Hoffman, Lipoff, Rosen
& Quentel
153 East 53rd Street
New York, New York 10022
Attn: Robert Ivanhoe
Raintree Cancun or
Raintree Puerto Vallarta: Pennzoil Place-South Tower
Suite 2310, 711 Louisiana
Houston, Texas 77002
Attn: Douglas Y. Bech
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Pennzoil Place-South Tower
Suite 1900, 711 Louisiana
Houston, Texas 77002
Attn: David S. Peterman
Other Benefited Parties: See Exhibit "A" attached hereto.
Bancomer and any Benefited Party may designate a change of address by written
notice (in accordance with the provisions of this Section) to Bancomer or the
Benefited Party making such designation, as the case may be, received by
Bancomer or said Benefited Party at least ten (10) days before such change of
address is to become effective.
(c) In the event that any of the Benefited Parties assumes
control of the process of satisfying any of Bancomer's obligations or
undertakings described in Section (2), Bancomer shall reimburse such Benefited
Party for any Damages as they are incurred by such Benefited Party without any
requirement of waiting for the ultimate outcome of any litigation, claim or
other proceeding, within thirty (30) days after notice from such Benefited
Party, itemizing the amounts incurred to the date of such notice; provided,
however, that in the event that there is a dispute between such Benefited Party
and Bancomer with respect to a specific amount, such dispute shall be resolved
in accordance with the arbitration provisions in Section 4(j) and the
reimbursement by Bancomer of the specifically disputed amount shall be
contingent on the outcome of the arbitration of such dispute.
(d) To the extent that Creel has been involved in identifying
and resolving any problems or issues, it shall be retained by Bancomer to serve
as legal counsel to assist Bancomer in the resolution of any such matter or such
other counsel as may be reasonably acceptable to any affected Benefited Party.
Bancomer hereby acknowledges and agrees that (i) Creel currently serves as
counsel to certain of the Benefited Parties, (ii) it waives any present or
future conflicts created thereby, and (iii) Creel can continue to serve as
counsel for said Benefited Parties. Any other counsel retained by Bancomer to
assist it in complying with its obligations hereunder shall be reasonably
acceptable to the Benefited Party which is the beneficiary of such obligation.
All surveying, land measurement work and related engineering work shall be
performed or supervised by Surveyor.
12
<PAGE> 13
(e) All undertakings and obligations of Bancomer pursuant to
this Agreement shall be at the sole cost and expense (including, without
limitation, cost of Creel and Surveyor) of Bancomer.
(f) To the extent that Bancomer fails to complete any
obligation or undertaking, within the specific time period described in the
specific provision containing such obligation or undertaking, then unless the
respective Benefited Party (or Benefited Parties) elects, in its sole and
exclusive judgment, to extend such time period, the respective Benefited Party
(or Benefited Parties) shall have the right to assume control of the process of
curing the specific defect or problem, at Bancomer's sole cost and expense,
using such third party advisors, consultants or professionals as it (or they)
may choose (after consulting with Bancomer) and may do so in whatever manner it
deems (or they deem) necessary and appropriate to accomplish the cure at the
earliest possible time, including the payment of any sums that may be required
by third parties in order to grant any rights necessary to cure the defect or
waive any claims causing or contributing to the defect.
(g) Any covenants and indemnities that run in favor Raintree
Cabo, Raintree Cancun or Raintree Puerto Vallarta shall also run to the benefit
of the trustees for the respective trusts for which Raintree Cabo, Raintree
Cancun and Raintree Puerto Vallarta are beneficiaries and the entities which
hold the remainder of the rights under said trusts, as may be legally
appropriate.
(h) This Agreement shall not be deemed a waiver or limitation
of any indemnity obligations under the Purchase Agreement. Each of the
covenants, undertakings and indemnities contained herein are cumulative with any
other obligation of Bancomer in any other agreement or document. In the event of
any inconsistency between the terms and provisions of this Agreement and the
Purchase Agreement, the terms and provisions of this Agreement shall govern.
(i) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original. Said counterparts shall
constitute but one and the same instrument and shall be binding upon each of the
undersigned individually as fully and completely as if all had signed but one
instrument so that the liability of each of the undersigned shall be unaffected
by the failure of any of the undersigned to execute any or all of said
counterparts.
(j) This Agreement and the rights and obligations of the
parties hereunder shall in all respects be construed, interpreted, enforced and
governed by and in accordance with the laws of the State of New York (excluding
the principles thereof governing conflicts of law). In the event that Bancomer
or any Benefited Party are unable to resolve any dispute, controversy or claim
arising out of or in connection with this Agreement (a "Controversy"), either
party to such dispute may request in writing that the Controversy be referred to
the respective senior level management of each party for decision. Such managers
shall meet immediately and attempt in good faith to negotiate a resolution of
the Controversy. If the managers are unable to resolve the matter within thirty
(30) days of the written request
13
<PAGE> 14
referring the matter to them, any party may, within thirty (30) days following
the end of such thirty (30) day period, elect to refer the matter to arbitration
and the Controversy shall be resolved by binding arbitration in accordance with
the Arbitration Rules of the International Chamber of Commerce (the "ICC") then
in effect (the "RULES").
(i) There shall be a sole arbitrator selected in
accordance with the Rules. If the parties are unable to agree upon the
arbitrator within thirty (30) days of the referral to arbitration, the
International Court of Arbitration of the ICC shall make such appointment in
accordance with the Rules. The arbitration shall be conducted, and the award
shall be rendered, in the English language. The arbitration shall be held in New
York, New York.
(ii) Each party shall cooperate with the other party in
making full disclosure of and providing access to all information and documents
requested by the other party in connection with such proceedings. The arbitrator
shall have the power to order such disclosure. Should a party fail to comply
with such order, the arbitrator shall take such refusal into account in
determining any award.
(iii) The decision of the arbitrator shall be final and
binding on the parties and shall be the sole and exclusive remedy regarding any
claims, counterclaims, issues or accounting presented to the arbitrator.
Judgment upon the award may be entered by any court having jurisdiction thereof.
The parties agree to waive any rights of recourse or appeal to any court in
connection with any questions of law arising in the course of the arbitration or
with respect to any award made except for actions to enforce an award.
(iv) Any monetary award shall be made and payable in
United States Dollars. The arbitrator shall be authorized to grant pre-award and
post-award interest at commercial rates without there being any presumption as
to whether such interest will be granted. Unless otherwise ordered by the
arbitrator, each party shall bear its own costs and fees, including attorneys'
fees. The parties expressly agree that the arbitrator shall have no power to
consider or award punitive or exemplary Damages.
(v) This agreement to arbitrate shall be binding upon
the successors, assigns, trustee, receiver or executor of each party.
(k) Except as expressly provided herein to the contrary, this
Agreement shall be binding upon and inure to the benefit of the Benefited
Parties and Bancomer and their respective heirs, personal representatives,
successors and assigns. Notwithstanding the foregoing, Bancomer shall not
delegate or assign any of its obligations hereunder without the prior written
consent of any Benefited Parties who would be affected by such delegation.
(l) Any reference in this Agreement to attorneys' fees paid or
incurred by Bancomer or any Benefited Party shall include reasonable and
documented attorneys', paralegals', consultants' or experts' fees and
disbursements and costs of litigation, appeals and any other legal or
administrative proceeding (including, without limitation, such fees or expenses
incurred in any and all judicial, bankruptcy, reorganization, administrative, or
other
14
<PAGE> 15
proceedings, including appellate proceedings, whether such fees or expenses
arise before proceedings are commenced or after entry of a final order or
judgment).
(m) In the event that any Benefited Party is required to bring
any action to enforce the payment or performance of the obligations of Bancomer,
the prevailing party shall be entitled to recover its attorneys' fees.
(n) Use of any gender shall include all other genders and
words in the singular include the plural, and the plural include the singular.
(o) If any provision of this Agreement shall be contrary to
the laws of the jurisdiction in which the same shall be sought to be enforced,
the illegality or unenforceability of any such provision shall not affect the
other terms, covenants and conditions hereof, and the same shall be binding upon
Bancomer hereto with the same force and effect as though such illegal or
unenforceable provision were not contained herein. Upon such determination that
any provision herein is unenforceable, such provision shall automatically be
modified (without any action necessary by Bancomer or any Benefited Party) to
the extent necessary to resolve the illegality and to make such provision(s)
enforceable under applicable law.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
Signed, sealed and delivered BANCOMER, S.A., INSTITUCION DE
in the presence of: BANCA MULTIPLE, GRUPO FINANCIERO
By:
- ---------------------------------- -------------------------------------
Name:
- ---------------------------------- -----------------------------------
Title:
----------------------------------
15
<PAGE> 1
EXHIBIT 10.5
FORM OF
OPERATING AGREEMENT
AMONG
[STARWOOD PUERTO VALLARTA, S De R.L. De C.V., STARWOOD CANCUN, S. de
R.L. De C.V., OR STARWOOD LOS CABOS, S. De R.L. DE C.V.]
BANCOMER, S.A.
[C.R. RESORTS PUERTO VALLARTA, S. De R.L. De C.V., C.R. RESORTS CANCUN, S. De
R.L. De C.V. OR C.R. RESORTS CABOS, S. De
R.L. De C.V.]
AND
C.R. RESORTS REMAINDER COMPANY, S. De R.L. De C.V.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLES PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS............................................................................3
1.1. Definitions............................................................................3
ARTICLE II AGREEMENT TO RUN WITH THE PROPERTY....................................................10
2.1. Future Owners.........................................................................10
2.2. Mortgages.............................................................................10
2.3. Use...................................................................................10
ARTICLE III OPERATION OF THE PROPERTY.............................................................11
3.1. First Class Operating Standard........................................................11
3.2. Provision of Services.................................................................11
3.3. Additional Services...................................................................11
3.4 Operating Plan and Budget.............................................................12
3.5. Allocation of Other Labor Costs.......................................................15
3.6. Direct Expense Allocation For Supplies................................................15
3.7. Payment of Operating Expenses.........................................................16
3.8. Miscellaneous Services................................................................16
3.9. Books and Records.....................................................................17
ARTICLE IV SHARED FACILITIES.....................................................................17
4.1. Shared Facilities.....................................................................17
4.2. Allocation of Shared Facilities Costs................................................18
4.3. Shared Facilities Revenue.............................................................18
ARTICLE V COMMON FACILITIES AND POOLS...........................................................19
5.1. Common Facilities.....................................................................19
5.2. Operating Budget for Common Facilities and Pools......................................19
5.3. Allocation of Costs of Operation of the Common Facilities.............................19
ARTICLE VI CAPITAL IMPROVEMENTS..................................................................20
6.1. Capital Improvements..................................................................20
6.2. Capital Expense.......................................................................20
6.3. Common Facilities Capital Expense Plan................................................21
6.4. Capital Expense Reserve...............................................................22
6.5. Emergency Capital Expenses............................................................22
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VII EXPANSION OF HOTEL PROPERTY, TIMESHARE PROPERTY, SHARED FACILITIES AND COMMON AREAS..........23
7.1. Expansion of Hotel Rooms or Timeshare Units...........................................23
7.2. Expansion of Shared Facilities........................................................23
7.3. Development of Exclusive Facilities...................................................24
ARTICLE VIII PAYMENT OF AMOUNTS DUE................................................................25
8.1. Currency..............................................................................25
8.2. Interest; Application of Payments.....................................................25
ARTICLE IX TIMESHARE MARKETING...................................................................26
9.1. Access to Hotel Guests................................................................26
9.2. Hotel Meeting Rooms...................................................................26
ARTICLE X TRANSIENT USE OF TIMESHARE MODULES....................................................27
10.1. Exclusive Rights......................................................................27
10.2. Transient Use of Timeshare Units......................................................27
ARTICLE XI TRUST AND RIGHTS OF CLUB MEMBERS......................................................28
11.1 Trust.................................................................................28
11.2. Indemnification.......................................................................29
11.3. VOC...................................................................................29
ARTICLE XII GOVERNING LANGUAGE AND RECORDATION...........................................................29
12.1. Governing Language....................................................................29
12.2. Registration..........................................................................30
ARTICLE XIII EVENTS OF DEFAULT REMEDIES..................................................................30
13.1. Events of Default.....................................................................30
13.2. Remedies..............................................................................31
ARTICLE XIV MISCELLANEOUS PROVISIONS..............................................................32
14.1. Advisory Committee....................................................................32
14.2. Dispute Resolution....................................................................32
14.3. Governing Law; Jurisdiction...........................................................34
14.4. Waivers, Modifications, Remedies......................................................34
14.5. Severability of Provisions............................................................34
14.6. Notices...............................................................................35
14.7. Successors and Assigns................................................................36
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C> <C>
14.8 Entire Agreement......................................................................36
14.9 Counterparts..........................................................................36
15.10 Captions..............................................................................36
14.11 Confidentiality.......................................................................37
14.12 Labor.................................................................................37
14.13 Overflow..............................................................................37
</TABLE>
- iii -
<PAGE> 5
OPERATING AGREEMENT
This Agreement (this "Agreement") is made this [ ] day of [ ]1997,
among STARWOOD PUERTO VALLARTA, S. de R.L. de C.V., a company organized and
existing under the laws of Mexico ("Hotel Company"), C.R. Resorts Puerto
Vallarta, S. de R.L. de C.V., a company organized and existing under the laws
of Mexico ("Timeshare Company"), C.R. Resorts Remainder Company, S. de R.L. de
C.V., a company organized and existing under the laws of Mexico ("Timeshare
Remainder Company"), and Bancomer S.A., Institucion de Banca Multiple, Grupo
Financiero Bancomer, Division Fiduciaria, as trustee ("Trustee") under trust
instrument 55,927 (the "Trust") (collectively, the "Parties" and individually,
a "Party").
RECITALS
A. Reference is made to the Declaration of Condominium contained in
public deed no. 11,924 dated August 8, 1997, granted before Carlos
Castro Segundo, Esq., Notary Public No. 5 of Puerto Vallarta,
Jalisco, and registered in the Public Registry of Property of Puerto
Vallarta, Jalisco, Mexico under Number 17, pages 226-248, volume 857,
1st Section (the "Condominium Declaration").
B. Hotel Company holds title to a condominium property (the "Hotel
Condominium") as more fully described in the Condominium Declaration.
C. The Trustee holds legal title to a condominium interest (the
"Timeshare Condominium") as more fully described in the Condominium
Declaration. Trustee acknowledges it received prior instructions
from the beneficiaries of the Trust to execute this Agreement.
<PAGE> 6
D. Timeshare Company holds title to Class A trust beneficiary rights to
use the Timeshare Condominium for a period of 30 years beginning
August 18, 1997.
E. Timeshare Remainder Company is a beneficiary under the Trust,
including rights to the Timeshare Condominium not held by the
Timeshare Company.
F. Timeshare Remainder Company holds title to Class B trust beneficiary
rights in the Timeshare Condominium.
G. The Condominium Declaration grants the holder of the Hotel
Condominium and the holder of the Timeshare Condominium the undivided
right to use certain roadways and other facilities as more
particularly described in the Condominium Declaration (the
"Condominium Common Facilities").
H. Hotel Company has engaged Westin Mexico, S.A. de C.V. ("Westin") to
operate the property subject to the Condominium Declaration (the
"Property") in accordance with the provisions of this Agreement.
I. The Parties desire to subject the Property, the Condominium Common
Facilities, the Timeshare Condominium and the Hotel Condominium to
the terms and provisions contained in this Agreement as well as to
other applicable provisions contained in the Condominium Regulations.
This Agreement will form a part of the Condominium Regulations and,
therefore, it will be enforceable against and binding to any and all
present and future owners of the Hotel Condominium and Timeshare
Condominium, including beneficiaries of trusts in the case of trustee
ownership.
2
<PAGE> 7
ARTICLE I
DEFINITIONS
Definitions. The capitalized terms used in this Agreement shall have
the following definitions:
Additional Services - shall have the meaning set forth in Section 3.3
hereof.
Capital Expense - the cost of any improvement or betterment of any
nature to the Property which cannot be deducted as a current expense in
accordance with GAAP, including without limitation, the cost of any new or
replacement FF&E.
Capital Expense Budget - shall mean the annual Capital Expense budget
which is in effect from time to time in accordance with the provisions of
Article VI hereto.
Capital Expense Reserve - shall have the meaning set forth in Section
6.2 hereof.
Club Members or Members - the members of Club Regina who hold shares
of stock issued by Club Regina in connection with a "timeshare" (e.g., right to
use) and the VOC Members.
Club Regina - Club Regina, S.A. de C.V.
Club Regina Resorts - shall mean Club Regina Resorts, Inc., a Nevada
corporation.
Committee - shall have the meaning set forth in Section 15.1 hereof.
3
<PAGE> 8
Common Facilities - shall mean the facilities and areas (a) which may
be used by both the Hotel Guests and the Timeshare Guests which are described
on Exhibit C hereto (including, without limitation, the Condominium Common
Facilities) and (b) the utilities, central plant and other such facilities
which service the Property described on Exhibit C hereto. The Common
Facilities include, without limitation, the lobby areas, grounds, swimming
pools, tennis facilities, beach areas and parking facilities. The Common
Facilities shall not include the Timeshare Pools or the Hotel Pools.
Condominium - shall mean the regime of ownership in condominium
created by the Condominium Declaration.
Condominium Association - shall mean the Condominium Assembly
referred to in the Condominium Regulations.
Condominium Common Facilities - shall have the definition set forth
in the Recitals.
Condominium Declaration - shall have the definition set forth in the
Recitals.
Condominium Interest - means the Hotel Condominium or the Timeshare
Condominium.
Condominium Regulations - shall mean the Regulations of the
Condominium Association.
CPI - shall mean the Consumer Price Index for all Urban Consumers
(1984 = 100) published by the Bureau of Labor Statistics of the United States
Department of Labor or if such
4
<PAGE> 9
index shall cease to be quoted, a reasonable index selected by Hotel Company
which is comparable as an indicator of price increases in the United States.
Current Management Agreement - that certain Contract For Operating
And Marketing Services by and between Westin and Hotel Company.
Event of Default - shall have the definition set forth in Section
14.1 hereof.
FF&E - means furniture, fixtures and equipment as defined in the
Uniform System.
First Class Standard - shall have the definition as set forth in
Section 3.1.
GAAP - generally accepted accounting principles in the United States
which are in effect from time to time consistently applied. Any financial or
accounting terms not otherwise defined herein shall be construed and applied
according to United States Generally Accepted Accounting Principles.
Gross Revenues - shall have the meaning set forth in the Uniform
System.
Guest - a Hotel Guest or a Timeshare Guest.
Health Club - the portion of the Property identified as the Health
Club in Exhibit A hereto.
Hotel - shall mean the buildings and other improvements located
within the Hotel Condominium.
Hotel Common Facility - means a Common Facility located upon the
Hotel Property.
5
<PAGE> 10
Hotel Company - shall have the definition as set forth in the
Recitals.
Hotel Condominium - shall have the definition as set forth in the
Recitals.
Hotel Guest - any person occupying a Hotel Room and any other person
utilizing the Hotel Property by permission of the Hotel Company and/or the
Hotel Manager in accordance with the provisions of this Agreement.
Hotel Manager - shall mean the company appointed by the Hotel Company
from time to time to manage (i) the Hotel Property and (ii) the Timeshare
Property to the extent required hereunder. The Hotel Manager shall be a hotel
management company with experience managing first class hotel resort
properties. Hotel Company shall be deemed for purposes of this definition to
be a hotel management company with experience managing first class hotel resort
properties provided that it operates under a franchise of a hotel management
company with experience managing first class hotel resort properties.
Hotel Pools - any swimming pool and related facilities located upon
the Hotel Property.
Hotel Property - shall mean the portions of the Property identified
as the "Hotel" on Exhibit A hereto.
Hotel Room - a guest room located upon the Hotel Property.
Improvement or Improvements - means all structures, facilities,
amenities and the like located on the Property.
Key - means a Hotel Room or Timeshare Module.
6
<PAGE> 11
Law - shall mean all present and future laws, statutes, ordinances,
orders, rules, regulations, requirements of all governments, courts,
departments, agencies, commissions, boards and offices and of any other body or
board or sovereign concurrently or successively exercising similar functions,
and of any other lawful authority having jurisdiction over the Property and/or
the business conducted thereon.
Management Agreement - the management agreement in effect from time
to time between the Hotel Manager and the Hotel Company.
Operating Plan and Budget - shall have the meaning set forth in
Section 3.4.
Person or person - means any individual, firm, corporation,
partnership, limited liability company, trust, association, governmental agency
or political subdivision, or other entity recognized as legally distinct.
Pools - means the Hotel Pools and the Timeshare Pools.
Prime Rate - means the rate of interest from time to time, equal to
the "Prime Rate" as reported from time to time in the "Money Rates" section of
The Wall Street Journal, as published and distributed in New York, New York, or
if such rate shall cease to be published, such other rate as shall at the time
be representative of the rates announced by major U.S. money center banks as
the typical rate of interest charged to their best customers.
Property - shall have the definition set forth in the Recitals.
Reserve Amount - shall mean one-half of one percent (.5%) the Gross
Revenues of the Hotel for the applicable calendar year as reasonably estimated
by Hotel Company.
7
<PAGE> 12
Services - those services described in Exhibit B hereto to be
provided by or on behalf of Hotel Company to the Timeshare Property and the
Timeshare Guests, as applicable.
Shared Facilities - as distinguished from Common Facilities, means,
those areas and facilities described on Exhibit D hereto located upon the Hotel
Property or the Timeshare Property which are open to use by Guests in
accordance with the provisions of Article IV hereof including, without
limitation, the health club and the restaurant located thereon.
Starwood - means Starwood Lodging Trust and/or Starwood Lodging
Corporation.
Supplies - shall have the meaning set forth in Section 3.6 hereof.
Timeshare Common Facility - means a Common Facility located upon the
Timeshare Property.
Timeshare Company - shall have the definition as set forth in the
Recitals.
Timeshare Condominium - shall have the definition as set forth in the
Recitals.
Timeshare Guest - a Club Member or any other person occupying a
Timeshare Module or utilizing the Timeshare Property by permission of Timeshare
Company in accordance with the provisions of this Agreement.
Timeshare Module - each guest room with a bath located within the
Timeshare Property (e.g., a 2 bedroom 2 bath unit constitutes 2 Timeshare
Modules).
8
<PAGE> 13
Timeshare Pools - any swimming pool and related facilities located
upon the Timeshare Property.
Timeshare Property - shall mean the portions of the Property
identified as the "Timeshare Property" on Exhibit A hereto.
Timeshare Remainder Company - shall have the definition as set forth
in the Recitals.
Trust - means the existing trust dated August 18, 1997 contained in
public deed number 55,927 pursuant to which Bancomer, S.A. is the trustee.
Uniform System - the Uniform System of Accounts for Hotels, 8th
Revised Edition, published by the Hotel Association of New York City, Inc.,
except as its provisions may be modified by the application of GAAP, which
shall be controlling in the event of any conflict.
VOC - shall mean Vacation Ownership Club, a California not-for-profit
corporation.
VOC Member - a holder of a membership in VOC.
Westin - shall have the definition as set forth in the Recitals.
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ARTICLE II
AGREEMENT TO RUN WITH THE PROPERTY
2.1. Future Owners. This Agreement is enforceable against and binding
upon any and all present and future owners of the Condominium Interests
including any mortgagee which, under applicable law, may become owner of a
Condominium Interest.
2.2. Mortgages. This Agreement shall be superior to any mortgage placed
upon the Property, the Condominium Interests or any portion thereof which
superiority shall be expressly acknowledged by any applicable mortgagee prior
to recording its mortgage against the Property or any portion thereof.
2.3. Use. The Hotel Property shall be used exclusively for the operation
of a hotel in accordance with the provisions of this Agreement and for no other
purpose. The Timeshare Property shall be used exclusively for the operation of
a "timeshare" resort in accordance with the provisions of this Agreement. In
no event will the Timeshare Property be operated as a hotel offering
accommodations for transient guests other than as expressly provided in this
Agreement. In no event will the Hotel Property be operated as a timeshare.
ARTICLE III
OPERATION OF THE PROPERTY
3.1. First Class Operating Standard. The Hotel Property shall be
operated as a "first class" resort hotel and in a manner consistent with the
standards prevailing in other similar resort hotels. The Timeshare Property
shall be operated as a "first class" timeshare with "first class"
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resort hotel services and in a manner consistent with the standards prevailing
in other resort hotels similar to the Hotel Property. The standard of
operation described in this Section 3.1 is referred to in this Agreement as the
"First Class Standard."
3.2. Provision of Services. Hotel Company shall cause to be provided to
the Timeshare Property the Services in substantially the same manner as such
Services are provided to the Hotel Property to the extent practicable.
Hotel Company shall have the right to contract with a Hotel Manager to provide
the Services to the Timeshare Property and the Timeshare Guests, as applicable,
if the Hotel Manager is providing such Services to the Hotel Property and the
Hotel Guests, as applicable.
3.3. Additional Services. In the event that Hotel Company elects to
provide services ("Additional Services") to the Hotel Property or to the Hotel
Guests as applicable, in addition to the services provided to Hotel Guests as
of the date hereof, then, in such event, Hotel Company shall cause such
Additional Services to be provided to the Timeshare Property and the Timeshare
Guests, as applicable, if the Timeshare Company agrees to pay its pro-rata
share of the costs of such Additional Services in accordance with the
provisions of this Section 3.3. Additional Services shall be provided in
accordance with the First Class Standard. In the event that Hotel Company
elects to provide Additional Services to the Hotel Property and/or the Hotel
Guests, as applicable, it shall provide notice thereof to the Timeshare Company
describing such services and the estimated budget for providing such services
to the Timeshare Property and the Timeshare Guests, as applicable. Timeshare
Company shall have thirty (30) days from receipt of such notice (together with
the estimated budget for such Additional Services) to elect to have such
Additional Services provided to the Timeshare Property and/or the Timeshare
Guests, as
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applicable, in accordance with the provisions of this Article III. In the
event that Timeshare Company fails to request such Additional Services within
the thirty (30) day period described in the preceding sentence it shall be
deemed to have waived its right to have such Additional Services provided to
the Timeshare Property and/or the Timeshare Guests as applicable. In making
such election, Timeshare Company shall adhere to the First Class Standard
requirement of the Agreement. Any Additional Services commenced prior to the
beginning of a calendar year shall be provided in accordance with the estimated
budget therefor subject to adjustment as provided generally for Additional
Services pursuant to Section 3.4.
3.4 Operating Plan and Budget.
(a) Hotel Company shall cause the Hotel Property and the Timeshare
Property to be operated in accordance with an operating plan and budget
approved in accordance with the provisions of this Article III (the "Operating
Plan and Budget"). The Operating Plan and Budget attached hereto as Exhibit E
is approved for the balance of calendar year 1997. On or before November 1 of
each calendar year, Hotel Company shall cause to be prepared and delivered to
Timeshare Company for review, a proposed Operating Plan and Budget for the next
ensuing calendar year in the format of Exhibit E hereto. The proposed
Operating Plan and Budget may be prepared by Hotel Manager. The proposed
Operating Plan and Budget shall be prepared in good faith based upon the First
Class Standard, and shall contain the following items, which shall be set forth
for each month of the calendar year: (i) estimates of total labor costs,
including both fixed and variable labor; (ii) estimates of the supply costs;
(iii) a schedule of any anticipated requirements for funding by Timeshare
Company; (iv) a payroll and staffing schedule; and (v) an
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estimate of the cost of providing the Services and, if applicable, any
Additional Services to the Timeshare Property and the Timeshare Guests.
(b) Hotel Company shall have the exclusive right to approve the
portion of the proposed Operating Plan and Budget applicable to operation of
the Hotel Property, the Shared Facilities and Hotel Common Facilities.
Timeshare Company shall have the right to approve the portion of the Operating
Plan and Budget relating to the direct expenses applicable to the operation of
the Timeshare Property. Hotel Company and Timeshare Company shall each adhere
to the First Class Standard in exercising their respective approval rights with
respect to the Operating Plan and Budget. Hotel Company shall have the
exclusive right to determine (subject to the First Class Standard) the manner
in which the Hotel Property, the Shared Facilities and Hotel Common Facilities
are operated.
(c) The cost of providing the Services (other than the direct
expense items which shall be allocated between the Hotel Company and the
Timeshare Company as set forth in Section 3.5 and 3.6 hereof) shall (subject to
adjustment pursuant to Section 7.1 in the case of construction of additional
Hotel Rooms and/or Timeshare Modules) be allocated between Timeshare Company
and Hotel Company utilizing the historical allocations set forth on Exhibit F
hereto. The cost of providing the Additional Services shall be allocated
exclusively to Hotel Company unless Timeshare Company has elected to have such
Additional Services provided to the Timeshare Property and/or the Members in
accordance with the provisions hereof. If Timeshare Company has elected to
have the Additional Services provided to the Timeshare Property and/or the
Members, as applicable, the costs of providing such Additional Services shall
be allocated between the Timeshare Company and the Hotel Company on a per-Key
basis.
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(d) The Parties acknowledge that the budgeting process is a crucial
factor in the successful operation of the Property and is a key communication
link between the Parties. Approval of any portion of a proposed Operating Plan
and Budget submitted to Timeshare Company shall be deemed to have been obtained
if Timeshare Company does not provide Hotel Company with objections thereto
within thirty (30) days after receiving the proposed Operating Plan and Budget.
Timeshare Company, Hotel Manager and Hotel Company shall discuss any objections
provided by Timeshare Company and Timeshare Company shall then submit proposed
written revisions to the proposed Operating Plan and Budget following such
discussion. Timeshare Company and Hotel Company shall act reasonably and
exercise prudent business judgment in approving or disapproving any portion of
the proposed Operating Plan and Budget submitted to it for approval, but shall,
in all events, adhere to the First Class Standard applicable to the Timeshare
Property.
(e) If the Parties, despite their good faith efforts, are unable to
reach final agreement on the portion of the proposed Operating Plan and Budget
subject to Timeshare Company approval for the next calendar year by January 1
of that year, the matter(s) in dispute may be submitted by Timeshare Company or
Hotel Company to arbitration pursuant to Section 14.2 hereof. Until the
arbitrator(s) issue a decision on the matter(s) submitted, the areas of dispute
shall be governed by those portions of the Operating Plan and Budget in effect
for the preceding calendar year.
(f) Hotel Company shall use reasonable efforts to cause the Hotel
Manager to operate the Property in accordance with the approved Operating Plan
and Budget. In no event shall Hotel Company be responsible to Timeshare
Company for the failure to meet the Operating
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Plan and Budget so long as Hotel Company is using all reasonable efforts to
cause Hotel Manager to operate the Property in its business judgment in
accordance with the approved Operating Plan and Budget.
3.5. Allocation of Other Labor Costs. All labor costs which are incurred
in connection with the provisions of the Services and the Additional Services
which are not allocated in accordance with Section 3.4(c) shall be allocated
directly to the location within the Property where such labor is employed.
3.6. Direct Expense Allocation For Supplies. Hotel Company shall cause
to be purchased on an arms-length basis in accordance with the approved
Operating Plan and Budget all inventories, provisions, consumable supplies and
operating supplies (collectively "Supplies") that are necessary and proper to
maintain and operate the Hotel Property and the Timeshare Property. To the
extent practicable, Supplies shall be allocated directly between the Timeshare
Company and the Hotel Company based upon usage. In order to maintain
accountability for Supplies, the Supplies purchased for use in the Timeshare
Property shall be stored separately from those used in the Hotel Property to the
extent practicable.
3.7. Payment of Operating Expenses. Hotel Company shall cause to be
delivered to Timeshare Company on or about the first day of each calendar month
an estimate of all costs allocable to Timeshare Company for the provision of
Services and Additional Services, if applicable, during such calendar month in
accordance with the provisions of this Agreement together with an explanation
of any costs in excess of the amount contemplated by the approved Operating
Plan and Budget. Timeshare Company shall pay to Hotel Company on or prior to
the 15th day of such calendar month the amount specified in such estimate
provided pursuant to this Section 3.7. In the event that the estimate for any
month exceeds the amount allocable to Timeshare Company hereunder for the
applicable calendar month, Hotel Company will on or prior to the
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15th day of the following calendar month reimburse Timeshare Company for the
excess together with interest calculated thereon at the Prime Rate plus two
(2%) percent per annum. In the event that the estimate for any month is less
than the amount allocable to Timeshare Company hereunder for the applicable
calendar month, Timeshare Company will on or prior to the 15th day of the
following calendar month reimburse Hotel Company for the difference together
with interest calculated thereon at the Prime Rate plus two (2%) percent per
annum.
3.8 Miscellaneous Services Timeshare Company shall cause to be provided
to Hotel Company for the one-year period commencing as of the date hereof the
services described on Exhibit H hereto without any charge therefore.
Hotel Company shall permit Timeshare Company to utilize the Hotel computer
system from time to time pursuant to rules reasonably established by Hotel
Company.
3.9 Books and Records. All books of account and other financial records
of Hotel Company relating in whole or in part to any expense allocable to the
Timeshare Company in accordance with the provisions of this Agreement shall
remain available to the Timeshare Company at all reasonable times at the office
of Hotel Company (or at the election of Hotel Company, the office of Hotel
Manager) for examination, audit, inspection and copying. However, all such
books and records shall remain the property of the Hotel Company.
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ARTICLE IV
SHARED FACILITIES
4.1. Shared Facilities. The Shared Facilities shall be operated by or on
behalf of the Hotel Company subject to the First Class Standard and shall be
made available for use by Hotel Guests and Members on an equivalent basis
provided, however, that Hotel Company may restrict the use of the Shared
Facilities reasonably from time to time for use by groups and/or for special
events and functions. A twenty-percent (20%) discount shall be given to all
Members in the restaurants and lounges constituting the Shared Facilities.
4.2. Allocation of Shared Facilities Costs. Hotel Company shall have
the exclusive right to approve the budget for operating and maintenance expenses
and Capital Expenses with respect to Shared Facilities. The budget for the
Shared Facilities shall be included in the Operating Plan and Budget delivered
to Timeshare Company in accordance with the provisions of Article III hereof.
Hotel Company shall have the obligation to fund all costs associated with
Capital Expenses and operations and maintenance of the Shared Facilities except
that Timeshare Company shall contribute thirty (30%) percent of the cost of
Capital Expenses and operating and maintaining the Health Club (including a
reasonable allocation for employee training, benefits and a reasonable
allocation to management thereof). The costs of operating and maintaining the
Health Club shall be paid by Timeshare Company in the manner described in
Section 3.7.
4.3. Shared Facilities Revenue. Hotel Company shall have the exclusive
right to all revenue generated by the Shared Facilities. All revenue from
operation of the television sets and telephones in the Timeshare Modules shall
be for the account of Hotel Company. Hotel
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Company shall replace and maintain the television sets and telephones in the
Timeshare Modules from time to time as required to maintain the First Class
Standard at its sole cost and expense provided that such facilities are
operated at a profit. In the event such facilities are not operated at a
profit, Timeshare Company shall be responsible for the cost of replacement and
maintenance thereof.
ARTICLE V
COMMON FACILITIES AND POOLS
5.1. Common Facilities. The Common Facilities and the Pools shall be
operated by or on behalf of the Hotel Company in accordance with the First
Class Standard and shall be made available for use by the Guests on an
equivalent basis; provided, however, (a) Hotel Company may restrict the use of
the Hotel Common Facilities (other than the utilities constituting a portion of
the Common Facilities) and Hotel Pools reasonably from time to time for use by
groups and/or for special events and functions (including, without limitation,
the parking facilities, but only from time to time as reasonably required by
Hotel Company), and (b) Timeshare Company may restrict the use of the Timeshare
Common Facilities and Timeshare Pools reasonably from time to time for use by
groups and/or for special events and functions.
5.2. Operating Budget for Common Facilities and Pools. The budget for
the operation and maintenance of the Common Facilities and Pools shall be
approved as provided in Article III hereof. However, with respect to
Condominium Common Facilities, the provision of the first paragraph of Article
8 and of paragraph (f) of Article 15 of the Condominium Regulations shall
apply.
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5.3. Allocation of Costs of Operation of the Common Facilities. The cost
of operation and maintenance of the Common Facilities shall be allocated
between the Timeshare Company and the Hotel Company pursuant to the historical
allocations set forth in Exhibit F hereto.
ARTICLE VI
CAPITAL IMPROVEMENTS
6.1. Capital Improvements. Timeshare Company shall be responsible for
making all capital improvements necessary to maintain the Timeshare Property
(other than Timeshare Common Facilities) in accordance with the First Class
Standard at its sole cost and expense. Hotel Company shall be responsible for
making all capital improvements necessary to maintain the Hotel Property
(including the Shared Facilities but excluding the Common Facilities) in
accordance with the First Class Standard at its sole cost and expense except as
provided in Section 4.2.
6.2. Capital Expense. Hotel Company shall be responsible for causing the
Common Facilities to be replaced and/or refurbished from time to time in
accordance with the First Class Standard subject to Timeshare Company's
obligation to contribute to the cost thereof in accordance with the provisions
of this Article VI. Hotel Company shall cause to be prepared a Capital Expense
Budget for the Common Facilities which shall include a five-year plan for
Capital Expenses anticipated for the Common Facilities and which will be
delivered each year to Timeshare Company on or prior to November 1 of the
calendar year preceding the year to which the budget shall apply. The Capital
Expenses for the Common Facilities shall be allocated between Hotel Company and
Timeshare Company on a per-Key basis. The Capital Expenses for
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the Common Facilities will be funded from the Capital Expense Reserve unless the
Timeshare Company and the Hotel Company approve expenditures in excess of the
Capital Expense Reserve available therefor. However, with regard to the
Condominium Common Facilities, the provisions of Article 8 of the Condominium
Regulations shall apply.
6.3. Common Facilities Capital Expense Plan. Timeshare Company shall have
the right to approve the plan for Capital Expenses for the Timeshare Common
Facilities and the Timeshare Pools. The approval of the plan pursuant to the
preceding sentence shall be with respect to the use of the Capital Expense
Reserve and shall not create any right in Timeshare Company to approve the
amount of the Capital Expense Reserve set forth in Section 6.4 hereof. The
right provided to the Timeshare Company to approve the plan for the Timeshare
Common Facilities shall be subject to the obligation of Timeshare Company to
adhere to the First Class Standard. Hotel Company shall cause the plan to be
delivered to Timeshare Company on or prior to November 1 of the calendar year
to which it applies. The plan proposed by or on behalf of Hotel Company shall
be responded to by Timeshare Company within thirty (30) days of receipt
thereof. Timeshare Company shall provide written notice of any objection to
the proposed plan within such thirty (30) day period. If the Parties, despite
their good faith efforts, are unable to reach final agreement on the plan for
the next calendar year on or prior to January 1 of such calendar year, the
matter(s) in dispute may be submitted by Timeshare Company or Hotel Company to
arbitration pursuant to Section 14.2 hereof. Subject to the provisions of
Section 6.5, all Timeshare Common Facilities capital expenditures shall be made
in accordance with the plan approved pursuant to this Section 6.3. Nothing in
this Agreement shall limit the right of Hotel Company or Timeshare Company to
improve and/or expand the Hotel Common Facilities or the
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Timeshare Common Facilities, as the case may be, at its own cost and expense.
Notwithstanding the above, the provisions of Article 8 of the Condominium
Regulations shall apply with regard to Condominium Common Facilities.
6.4. Capital Expense Reserve. Each of Hotel Company and Timeshare Company
shall fund on the first day of each calendar quarter their pro-rata share as
determined in accordance with Section 6.2 of a reserve (the "Capital Expense
Reserve") to be held by or on behalf of Hotel Company and disbursed as provided
in this Agreement an amount equal to one-quarter ( 1/4) of the Reserve Amount.
Hotel Company shall cause notice of the amount due pursuant to this Section 6.4
to be provided to Timeshare Company at least ten (10) days in advance of the
first day of the applicable calendar quarter.
6.5. Emergency Capital Expenses. In the event of an emergency relating
to preservation of life and/or safety or the disruption of essential guest
services, Hotel Company shall have the right to spend amounts in excess of the
Capital Expense Reserve to alleviate such emergency without the necessity of any
consent therefor from Timeshare Company. Hotel Company shall cause notice to be
provided to Timeshare Company of any such emergency expenses promptly following
such expenditure. Timeshare Company shall promptly following demand therefor
reimburse Hotel Company for any emergency expenditure undertaken pursuant to the
provisions of this Section 6.5.
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ARTICLE VII
EXPANSION OF HOTEL PROPERTY TIMESHARE PROPERTY,
SHARED FACILITIES AND COMMON AREAS
7.1. Expansion of Hotel Rooms or Timeshare Units. Neither Timeshare
Company nor Hotel Company shall develop any additional Timeshare Modules or
Hotel Rooms, as applicable, in addition to the existing units or rooms, unless
the Party desiring to build additional units or rooms can demonstrate to the
reasonable satisfaction of the other Party that such additional units or rooms
will not burden the Property by reducing the ratios at the Common Facilities
and/or the Shared Facilities or otherwise reduce the standard of service at the
Property. Any new development approved shall be in accordance with the First
Class Standard and consistent with the architectural style and character of the
Property. In connection with the approval of any additional Timeshare Modules
or Hotel Rooms, the allocations with respect to the operation, maintenance and
capital improvements with respect to such additional Timeshare Modules or Hotel
Rooms set forth in Section 3.4(c) and Section 5.3(a) shall be modified without
regard to the historical allocations to reflect any increase in the percentage
of costs reasonably allocable to the Hotel Rooms and/or Timeshare Modules, as
the case may be.
7.2. Expansion of Shared Facilities. Hotel Company may at its own
expense expand, improve and/or re-position or restructure the Shared Facilities
or develop new facilities upon the Hotel Property for use by Guests on an
equivalent basis to the extent practicable and otherwise in accordance with the
provisions hereof applicable to the Shared Facilities without the necessity of
any consent therefor provided such facilities are undertaken and developed in a
manner consistent with the First Class Standard. Timeshare Company may at its
own expense develop
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new facilities upon the Timeshare Property for use on an equivalent basis to
the extent practicable by Guests without the necessity of any consent therefor
provided such facilities are undertaken and developed in a manner consistent
with the First Class Standard.
7.3. Development of Exclusive Facilities. Subject to the First Class
Standard, nothing in this Agreement shall limit the right of the Timeshare
Company and/or the Hotel Company to construct additional facilities and/or
amenities (other than additional construction of Timeshare Modules and Hotel
Rooms which are subject to the provisions of Section 7.1) for the exclusive use
of Members or Hotel Guests, as applicable; provided that prior to developing
any exclusive facility (other than restaurants, ballrooms, convention
facilities, or other hotel revenue generating facility other than spas), the
Party desiring to develop such facility shall offer the other Party the right
to participate therein in accordance with the provisions of this Section 7.3.
If Timeshare Company or Hotel Company, as the case may be, desires to develop
additional facilities (other than Hotel Rooms, Timeshare Modules, restaurants,
ballrooms, convention facilities, or other hotel revenue generating facilities
other than spas), it shall provide notice to the other together with an
estimated budget for the development of such facility. The Timeshare Company
or Hotel Company, as the case may be, shall within thirty (30) days of receipt
of such notice, provide notice to the other of its intention to accept or
decline participation in such new facility in accordance with the provisions of
this Section 7.3. In the event notice of participation is not received within
such thirty (30) day period, the other Party will not have the right to utilize
such facility for the benefit of Hotel Guests or Members, as the case may be.
In the event the other Party elects to participate in such new facility, it
shall contribute to the cost of development and operation thereof based upon a
per-Key allocation of such costs and such facility shall be
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operated upon completion and maintained as a Common Facility. Nothing in this
Section 7.3 shall permit any Party to develop any facility on the Property
which is not in accordance with the First Class Standard or which is not
located within its portion of the Property.
ARTICLE VIII
PAYMENT OF AMOUNTS DUE
8.1. Currency. All costs which are to be allocated in accordance with
this Agreement shall be (a) allocated in U.S. dollars if paid in U.S. dollars
and (b) allocated in Mexican pesos if paid in Mexican pesos. All revenues
received which are to be allocated in accordance with this Agreement shall be
(a) allocated in U.S. dollars if received in U.S. dollars and (b) allocated in
Mexican pesos if received in Mexican pesos.
8.2. Interest; Application of Payments. Any amounts due pursuant to this
Agreement which are not paid on or before five (5) days after the date when due
shall bear interest from the date due at the lower of (a) the Prime Rate plus
five (5%) percent or (b) the highest rate of interest permitted by applicable
law.
ARTICLE IX
TIMESHARE MARKETING
9.1. Access to Hotel Guests. Hotel Company shall permit the marketing
personnel and sales representatives of Timeshare Company and its designated
representatives access to the Hotel Property for the purposes of marketing the
Timeshare Units utilizing exclusively the methods set forth on Exhibit G
hereto. Timeshare Company shall conduct such marketing at its
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sole cost and expense. All promotional materials (including, without
limitation, literature, brochures, pamphlets, tent cards, and video and audio
presentations) distributed in the Hotel Rooms shall be subject to Hotel
Company's reasonable approval. Hotel Company shall be permitted to adopt
reasonable rules and regulations with respect to the marketing activities to
ensure that the Hotel Guests receive a hotel experience consistent with the
First Class Standard.
9.2. Hotel Meeting Rooms. Subject to availability, meeting rooms in the
Hotel Property shall be made available to Timeshare Company on a complimentary
basis for use by Timeshare Company for promotional activities and other
activities for Members. Meeting rooms may be reserved by Timeshare Company no
more than two weeks in advance. Timeshare Company will pay for any requested
set up in connection with any meeting on an at- cost basis. Hotel Company
shall provide food and beverage services for events sponsored by Timeshare
Company in the meeting rooms on an at-cost basis, including culinary, set-up,
transportation and service bar costs.
ARTICLE X
TRANSIENT USE OF TIMESHARE MODULES
10.1. Exclusive Rights. Timeshare Company shall not directly or
indirectly sell, market or rent any existing or newly constructed Timeshare
Modules on a transient basis; provided, however, Timeshare Company may (i)
provide complimentary accommodations to prospective Club Members that
participate in marketing presentations arranged by Timeshare Company, and (ii)
rent Timeshare Modules to wholesalers specifically targeting timeshare
purchasers, (iii) rent Timeshare Modules to persons accompanied by Members, and
(iv) rent rooms to timeshare
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operators experiencing overflow of their facilities. Timeshare Company
acknowledges and agrees that a violation by Timeshare Company of this Section
10.1 shall result in material harm to the business of Hotel Company resulting
in substantial damages from lost income and opportunity. In the event of a
violation by the Timeshare Company of the provisions of this Section 10.1 by
Timeshare Company, Hotel Company shall in addition to any other remedy which
Hotel Company has at law or in equity be paid upon demand (i) in the case of
the first violation of this provision, treble damages plus a fine of $25,000,
and (ii) in the case of each additional violation, treble damages plus a fine
of $100,000.
10.2. Transient Use of Timeshare Units. Hotel Company shall except
as provided expressly in Section 10.1 have the exclusive right to rent
Timeshare Units on a transient basis. Any such rental shall be undertaken by
Hotel Company in accordance with the provisions of this Section 10.2.
Timeshare Company has made available for transient use during the annual period
commencing on the date hereof the rooms specified on Exhibit I hereto in
accordance with the provisions of this Section 10.2. All revenue derived from
rental of the Timeshare Units made available pursuant to this Section 10.2
shall be for the account of Hotel Company provided that notwithstanding the
provisions of Articles III, IV and V hereof, all operating costs with respect
to such rooms for the annual period commencing as of the date hereof shall be
for the account of Hotel Company. In consideration of the making available of
such rooms, Hotel Company shall pay to Timeshare Company the sum of $156,250 on
the nine month anniversary of the date hereof and $156,250 on the one year
anniversary of the date hereof. On or prior to September 1 of each subsequent
calendar year, Timeshare Company shall provide Hotel Company with notice of the
Timeshare Units that it elects to make available for the next calendar year and
Timeshare Company and Hotel Company shall negotiate in good faith with respect
to the economic arrangement between them in connection therewith.
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ARTICLE XI
TRUST AND RIGHTS OF CLUB MEMBERS
11.1 Trust. Timeshare Company shall have the exclusive obligation to
satisfy any and all obligations under or pursuant to the Trust to VOC and to
the Club Members subject to the obligation of Hotel Company to comply with the
provisions of this Agreement.
11.2. Indemnification. Timeshare Company shall indemnify and hold
harmless Hotel Company from any and all claims whatsoever made in connection
with any rights under the Trust and/or in connection with any obligations to
VOC and to the Club Members in their capacity as Club Members other than in
connection with a default by Hotel Company under this Agreement. The
provisions of this Section 11.2 shall survive the termination of this
Agreement.
11.3. VOC. Timeshare Company shall use all reasonable efforts to
directly or indirectly control the Board of Directors of VOC and to cause such
directors to vote in favor of any changes to the Common Facilities and the
Shared Facilities permitted under this Agreement to the extent the approval of
VOC is required in connection with any such changes to the Common Facilities
and/or the Shared Facilities.
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ARTICLE XII
GOVERNING LANGUAGE AND RECORDATION
12.1. Governing Language. The Parties agree that this Agreement shall
be translated into Spanish and that both the English and Spanish versions shall
be executed by the Parties, both equally constituting enforceable versions of
this Agreement; provided, however, that as between the Parties and for the
purposes of arbitration, the English version of this Agreement shall be
controlling whenever the laws of the State of New York are applicable under
Section 14.3, and the Spanish version of this Agreement shall be applicable
when the laws of Mexico are applicable under this Agreement.
12.2. Registration. Upon its execution, the Parties agree that they
shall cause this Agreement to be translated into Spanish and registered in the
Public Registry of Property of Puerto Vallarta, Jalisco, Mexico.
ARTICLE XIII
EVENTS OF DEFAULT, REMEDIES
13.1. Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
13.1.1. Any Party shall fail to pay any amount due to another Party
under this Agreement and such failure continues for ten (10) calendar days
following notice thereof; or
13.1.2. A breach of any covenant by any Party to this Agreement, or
any default by any Party in the performance of any other obligation hereunder,
which can be cured by the
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payment of money but which is not cured within ten (10) calendar days
following notice thereof; or
13.1.3. A breach by any Party of any covenant to this Agreement, or
a default in the performance of any material obligation hereunder, which cannot
be cured by the payment of money and which is not cured within thirty (30) days
following notice thereof; an Event of Default shall not exist, however, if
curing the breach or default is not possible within the thirty (30) days and
the defaulting Party commences to cure the breach or default within the
thirty-day period and thereafter proceeds diligently and in good faith to
complete the cure; or
13.1.4. Any action by a Party toward dissolution of its operations;
a general assignment by any of the Party for the benefit of creditors; a
judgment of insolvency against a Party; a voluntary petition for relief under
applicable bankruptcy, insolvency, or similar debtor relief laws or
regulations; the appointment (or petition or application for appointment) of a
receiver, custodian, trustee, conservator, or liquidator to oversee all or any
substantial part of any of the Party's assets or the conduct of its'
businesses; an order for relief against a Party under applicable bankruptcy,
insolvency, or similar debtor relief laws or regulations; a failure generally
by a Party to pay its debts as such debts become due; or written notice by a
party to any governmental body of insolvency or pending insolvency or
suspension of operations; or
13.1.5. A levy or attachment is issued against all or any portion
of the Property resulting from a final judgment against a Party for which all
appeal periods have expired and that is not fully covered by insurance, unless
the defaulting Party has taken steps reasonably satisfactory to protect the
applicable portion of the Property.
29
<PAGE> 34
13.2. Remedies. In the case of an Event of Default, the non-defaulting
party shall have the right to terminate this Agreement. The foregoing shall not
be a limitation upon any other right at law or in equity available to the
non-defaulting Party as a result of an Event of Default. In the event of any
termination of this Agreement, the First Class Standard shall continue to apply
to the Property for all time notwithstanding any such termination of this
Agreement.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1. Advisory Committee. A committee (the "Committee") shall be
established which shall have advisory authority with respect to matters related
to the Property and the business conducted thereon, including, without
limitation, relations with employees, labor union contracts and negotiations,
insurance, capital expenditures, auditors and property management. The
Committee shall not have any legal power or authority but shall provide advice
and recommendations as deemed desirable. The Committee shall be advisory and
no member thereof in its capacity as a member shall act on behalf of Hotel
Company or Timeshare Company. In no event shall any member representative of
Timeshare Company deal directly with the Hotel Company employees or Unions.
The members of the Committee shall include the President of Timeshare Company
who shall initially be John McCarthy, two members designated by Timeshare
Company, two members designated by Hotel Company and one member designated by
Hotel Manager. The Committee shall hold periodic meetings not less frequently
than
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<PAGE> 35
quarterly on not less than fourteen (14) days notice from any Party to the
others. Meetings shall be held in: Mexico City, Federal District or any other
city agreeable to the Parties.
14.2 Dispute Resolution. Any dispute hereunder shall be referred to and
exclusively Mexico City and finally settled by binding arbitration, conducted
in accordance with the International Rules of the American Arbitration
Association. The place of arbitration shall be Mexico City or such other place
as the Parties may agree to in writing. Each Party to the dispute shall be
entitled to select one arbitrator and the two arbitrators selected shall select
a third arbitrator, so as to constitute a panel of three arbitrators; the third
arbitrator selected shall be a person knowledgeable about the hotel and
timeshare business in Mexico. The arbitrators shall decide the issues
submitted to them in accordance with (i) the language, commercial purpose and
restrictions contained in this Agreement and the exhibits hereto and (ii) what
is just and equitable under the circumstances, provided that all substantive
issues shall be determined under applicable law as provided in Section 14.3.
14.2.1 The Parties shall cooperate with one another in the
production and discovery of requested documents, and in the submission and
presentation of arguments to the arbitration panel at the earliest practicable
date; and the decision of the arbitration panel shall be final and binding
upon the Parties.
14.2.2 The Parties hereby renounce all recourse to litigation and
agree that (i) no reference shall be made to any court on any point of law and
(ii) that the ruling and award (if any) of the arbitrators shall be final and
subject to no judicial review. Judgment on the award of
31
<PAGE> 36
the arbitrator may be entered in any court having jurisdiction over the party
against which enforcement of the award is being sought.
14.2.3 The prevailing Party in any arbitration proceeding arising
out of this Agreement shall be entitled to recover all deposits and other costs
of arbitration, including reasonable attorneys' fees, incurred in conducting
the arbitration.
14.2.4 The Parties may if they so agree submit any budget dispute
hereunder to an independent internationally recognized hotel consulting firm
and/or timeshare consulting firm for resolution.
14.3 Governing Law; Jurisdiction. This Agreement and all disputes
relating to the performance or interpretation of any term of this Agreement
shall be construed in accordance with and governed by the laws of the State of
New York applicable to agreements to be performed in New York, provided,
however, to the extent required by the laws of Mexico, the provisions of this
Agreement and all disputes hereunder shall be subject to the laws of Mexico.
14.4 Waivers, Modifications, Remedies. No failure or delay by a Party to
insist on the strict performance of any term of this Agreement, or to exercise
any right or remedy consequent on a breach thereof, shall constitute a waiver
of any breach or any subsequent breach of such term. Neither this Agreement
nor any of its terms may be changed, waived, discharged, or terminated except
by an instrument in writing signed by the Party against whom the enforcement of
the change, waiver, discharge, or termination is sought. No waiver of any
breach shall affect or alter this Agreement, but each and every term of this
Agreement shall continue in full force and effect with respect to any other
then existing or subsequent breach thereof. The remedies
32
<PAGE> 37
provided in this Agreement are cumulative and not exclusive of the remedies
provided by law or in equity.
14.5 Severability of Provisions. If any provisions of this Agreement is
invalid or unenforceable to any extent under applicable law, the remainder of
this Agreement (and the application of this Agreement to other circumstances)
shall not be affected thereby, and each remaining term shall be valid and
enforceable to the fullest extent permitted by law.
14.6 Notices. All notices, consents, determinations, requests, approvals,
demands, reports, objections, directions, and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given and to be effective on the date upon which such
communications are delivered by DHL, Federal Express, or other similar
international courier service, addressed as follows:
(a) If to Hotel Company:
Starwood Lodging Corporation
2231 E. Camelback Road
Phoenix, Arizona 85016
FAX: (602) 852-0984
Attention: Mr. Theodore Darnall
(b) If to Timeshare Company:
Club Regina Resorts, Inc.
Horacio 1855, P.B.
Col. Polanco
11510 Mexico, D.F.
FAX: 011-(525) 557-0691
Attention: Mr. John McCarthy
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<PAGE> 38
(c) If to Trustee:
Avenida Universidad 1200
Colonia Xoco CP 03339
Mexico, D.F.
FAX: (925) 621-6633
Attention: Direccion Fiduciaria
or at such other address as the Party to whom the notice is sent has
designated in accordance with the provisions of this Section.
14.7 Successors and Assigns. This Agreement shall inure to the benefit
of and shall be binding on the successors and assigns of the Parties.
14.8 Entire Agreement. This Agreement and the Exhibits hereto
constitute the entire contract between the Parties and supersede all prior
contracts and understandings, written or oral with respect to the subject matter
hereof.
14.9 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
14.10 Captions. The Table of Contents and captions to the Articles and
Sections of this Agreement are for convenience of reference only and in no way
define, limit, describe, or affect the scope or intent of any part of this
Agreement.
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<PAGE> 39
14.11 Confidentiality. The Parties agree to keep strictly confidential
all information of a proprietary or confidential nature about or belonging to a
Party to which the other Party gains or has access in connection with the
operation of the Property, this Agreement and/or by virtue of the relationship
between the Parties. Except as disclosure may be required to obtain the advice
of professionals or consultants, or financing from an institutional lender, or
in furtherance of a permitted assignment of this Agreement, or as may be
required by law or stock exchange or by the order of any government,
governmental unit, or tribunal, each Party shall make every effort to ensure
that such information is not disclosed to the press or to any other third
person or entity without the prior consent of the other Parties. The
obligations set forth in this Section shall survive any termination of this
Agreement.
14.12 Labor. If Timeshare Company requires an employee of Hotel
Company and/or Hotel Operator to be terminated in accordance with the
provisions of this Agreement without legal cause for such termination under the
Federal Labor Law of Mexico, Timeshare Company shall indemnify and hold
harmless Hotel Company and Hotel Manager from and against any costs and/or
legal fees or expenses in connection with such termination.
14.13 Overflow. If at 6:00 p.m. on any day, the Timeshare Modules are
less than ninety-five (95%) percent occupied (without regard to the application
of this Section 14.13), Timeshare Company shall provide available Timeshare
Modules to Hotel Company at $50 (adjusted for CPI increases) per Timeshare
Module per night. If the Hotel Rooms are less than ninety-five percent (95%)
occupied (without regard to the application of this Section 14.13), Hotel
Company shall provide available Hotel Rooms to Timeshare Company at $30
(adjusted for CPI increases) per Hotel Room per night.
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<PAGE> 40
IN WITNESS WHEREOF, the Parties have executed this Agreement this [___]
day of ____________, 1997.
Witnesses: STARWOOD PUERTO VALLARTA,
S. de R.L. de C.V.
By:
- ------------------------------ ------------------------------------
Its:
- ------------------------------ -----------------------------------
Witnesses: C.R. RESORTS PUERTO VALLARTA,
S. de R.L. de C.V.
By:
- ------------------------------ ------------------------------------
Its:
- ------------------------------ -----------------------------------
Witnesses: C.R. RESORTS REMAINDER
COMPANY, S. de R.L. de C.V.
By:
- ------------------------------ ------------------------------------
Its:
- ------------------------------ -----------------------------------
Witnesses: BANCOMER, S.A. Instituticion de Banca
Multiple, Grupo Financiero Bancomer,
Division Fiduciaria
By:
- ------------------------------ ------------------------------------
Its:
- ------------------------------ -----------------------------------
36
<PAGE> 1
EXHIBIT 10.6
EXECUTION COPY
WARRANT SHARES REGISTRATION RIGHTS AGREEMENT
Dated as of December 5, 1997
by and between
CLUB REGINA RESORTS, INC.
and
JEFFERIES & COMPANY, INC.
<PAGE> 2
WARRANT SHARES REGISTRATION RIGHTS AGREEMENT
This Warrant Shares Registration Rights Agreement (the
"Agreement") is made and entered into as of December 5, 1997, by and between
Club Regina Resorts, Inc., a Nevada corporation (the "Company"), and Jefferies
& Company, Inc. (the "Initial Purchaser") which has agreed to purchase an
aggregate of 100,000 Units (the "Units"), such Units consisting of an aggregate
of $100,000,000 in aggregate principal amount at maturity of the 13% Senior
Notes due 2004 issued by the Company and CR Resorts Capital S. de R. L. de C.
V. ("CR Mexico") and Warrants to purchase an aggregate of 1,869,962 shares of
the Company's Common Stock, $.001 par value, pursuant to the Purchase Agreement
(as defined below).
This Agreement is made pursuant to the Purchase Agreement (the
"Purchase Agreement"), dated as of November 26, 1997, by and among the Company,
CR Mexico and the Initial Purchaser. In order to induce the Initial Purchaser
to purchase the Units, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this
Agreement is one of the conditions to the obligations of the Initial Purchaser
set forth in Section 9 of the Purchase Agreement. All defined terms used but
not defined herein shall have the meanings ascribed to them in the Indenture
(as defined below).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day
in the City of New York, or in the city of the corporate trust office of the
Trustee, on which banks are authorized to close.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Common Stock: The common stock, $.001 par value, of the
Company.
Exchange Act: The Securities Exchange Act of 1934, as amended
from time to time.
Exchange Offer: As defined in the A/B Exchange Registration
Rights Agreement, dated the Closing Date, among the Company, CR Mexico and the
Initial Purchaser.
Holders: As defined in Section 2 hereof.
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<PAGE> 3
Indenture: The Indenture, dated the Closing Date, between the
Company, CR Mexico and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee"), pursuant to which the Units are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms thereof.
NASD: National Association of Securities Dealers, Inc.
Offering Circular means the Offering Circular of the Company
and CR Mexico dated November 26, 1997, relating to the Offering of the Units.
Person: An individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration
Statement at the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Registrable Securities: The Warrants, Warrant Shares and any
other securities issued or issuable with respect to the Warrants or the Warrant
Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization; provided that a security ceases to be a Registrable Security
when it is no longer a Transfer Restricted Security.
Registration Expenses: As defined in Section 6 hereof.
Registration Statement: Any registration statement of the
Company which covers Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such Registration Statement.
Selling Holder: Means a Holder who is selling Registrable
Securities pursuant to Section 3(a) or 3(b) hereof.
Senior Notes: The 13% Senior Notes of the Company and CR
Mexico due 2004, being sold and issued pursuant to the Purchase Agreement and
the Indenture, or any notes exchanged therefor as contemplated by the
Indenture.
Transfer Restricted Securities: A Warrant or Warrant Share,
until such Warrant or Warrant Share, as applicable, (i) has been effectively
registered under the Act and disposed of in accordance with the Registration
Statement covering it, (ii) is distributed to the public pursuant to Rule 144
or (iii) may be sold or transferred pursuant to Rule 144(k) (or any similar
provisions then in force) under the Act or otherwise.
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<PAGE> 4
Warrants: The warrants of the Company issued and sold
pursuant to the Purchase Agreement (excluding the warrants referenced in
Section 2(b) of the Purchase Agreement) and the Warrant Agreement, together
with any warrants issued in substitution or replacement therefor.
Warrant Agreement: The Warrant Agreement dated the Closing
Date by and between the Company and IBJ Schroder Bank & Trust Company, as
Warrant Agent.
Warrant Shares: The Common Stock or other securities which
any Holder may acquire upon exercise of a Warrant, together with any other
securities which such Holder may acquire on account of any such securities,
including, without limitation, as the result of any dividend or other
distribution on Common Stock or any split-up of such Common Stock as provided
for in the Warrant Agreement.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Registrable Securities. The securities entitled to
the benefits of this Agreement are the Registrable Securities.
(b) Holders of Registrable Securities. A Person is
deemed to be a Holder of Registrable Securities whenever such Person owns
Registrable Securities or has the right to acquire such Registrable Securities,
whether or not such acquisition has actually been effected and disregarding any
legal restrictions upon the exercise of such right.
SECTION 3. REGISTRATION
(a) Shelf Registration
(1) The Company shall file and use its best
efforts to be declared effective on or prior to the Exercise Commencement Date
(as defined in the Warrant Agreement), a "shelf" registration with respect to
all Registrable Securities on any appropriate form pursuant to Rule 415 (or
similar rule that may be adopted by the Commission) under the Act (the "Shelf
Registration") covering the issuance of the Warrant Shares by the Company upon
exercise, or if such issuance is not then permitted to be registered by
applicable rule or policy of the Commission, covering resales of the Warrant
Shares. Notwithstanding the foregoing, the Company shall not be required to
file such Shelf Registration on or prior to the consummation of the Exchange
Offer; provided that, in the event the Exchange Offer is consummated later than
the filing time required by the preceding sentence for the Shelf Registration,
the Company shall file such Shelf Registration within 30 days after the date of
the consummation of the Exchange Offer.
(2) If the Holders of a majority of the
Registrable Securities to be registered in the Shelf Registration so elect, an
offering of Registrable Securities pursuant to the Shelf Registration may be
effected in the form of an underwritten offering of Warrant Shares. In such
event, and if the managing underwriters advise the Company and the Holders of
such
3
<PAGE> 5
Registrable Securities in writing that in their opinion the amount of Warrant
Shares proposed to be sold in such offering exceeds the amount of Warrant
Shares which can be sold in such offering, there shall be included in such
underwritten offering the amount of such Warrant Shares which in the opinion of
such underwriters can be sold, and such amount shall be allocated pro rata
among the Holders of such Warrant Shares on the basis of the number of Warrant
Shares requested to be included by such Holders. Registrable Securities not
sold in an underwritten offering contemplated by this Section 3(a)(2) shall
continue to be registered pursuant to the Shelf Registration for the 180-day
period provided for in Section 3(a)(4); provided that such 180-day period shall
be extended on a day-for-day basis for every day that the Holders of
Registrable Securities not sold in the underwritten offering are subject to the
holdback provided for in Section 3(a)(6) below. The Holders of the Warrant
Shares to be registered shall pay all underwriting discounts and commissions of
such underwriters.
(3) If any of the Registrable Securities covered
by the Shelf Registration are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of such Registrable Securities included in such
offering; provided that such investment bank or manager shall be reasonably
satisfactory to the Company.
(4) The Company shall use its best efforts to
keep the Shelf Registration continuously effective for the 180-day period
following the Exercise Commencement Date, and, to the extent that the Shelf
Registration is kept not effective for one or more days during such period, the
Company shall be required to extend the effectiveness of the Shelf Registration
for a like number of days after the expiration of the 180-day period (it being
expressly acknowledged that such extension of the required period of
effectiveness is in addition to, and not in lieu of, the payment of liquidated
damages as provided in Section 4 hereof).
(5) The Company further agrees to use its best
efforts to prevent the happening of any event that would cause any Registration
Statement made pursuant to Section 3(a) hereof to contain a material
misstatement or omission or to be not effective and usable for resale of the
Registrable Securities during the period that such Registration Statement is
required to be effective and usable.
(6) Each Holder of Registrable Securities whose
Registrable Securities are covered by a Registration Statement filed pursuant
to this Section 3(a) agrees, if requested by the managing underwriters in an
underwritten offering of Common Stock the gross proceeds of which equal at
least $10.0 million, not to effect any public sale or distribution of
securities of the Company of the same class as any Securities included in such
Registration Statement, including a sale pursuant to Rule 144 under the Act
(except as part of such underwritten registration), during the 10-day period
prior to, and during the 90-day period beginning on, the closing date of the
underwritten offering made pursuant to such Registration Statement, to the
extent timely notified in writing by the Company or the managing underwriters;
provided that each Holder of
4
<PAGE> 6
Registrable Securities shall be subject to the hold-back restrictions of this
Section 3(a)(6) only once during the term of this Agreement.
The foregoing provisions shall not apply to any
Holder of Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided that any
such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of any
applicable class of Registrable Securities commencing on the date of sale of
such applicable class of Registrable Securities unless it has provided 45 days
prior written notice of such sale or distribution to the underwriter or
underwriters.
(b) Piggyback Registrations
If at any time after the Exercise Commencement Date,
the Company proposes to file a Registration Statement under the Securities Act
with respect to an offering by the Company for its own account or for the
account of any of its security holders of any class of its common equity
securities (other than (i) a Registration Statement on Form S-4 or S-8 (or any
substitute form that may be adopted by the SEC or other form of limited
purpose), (ii) a Registration Statement filed in connection with an exchange
offer or offering of securities solely to the Company's existing security
holders or (iii) a Registration Statement filed in connection with an initial
public offering of the Common Stock of the Company), then the Company shall
give written notice of such proposed filing to the Holders of Registrable
Securities as soon as practicable (but in no event fewer than 15 days before
the anticipated filing date or 10 days if the Company is subject to filing
reports under the Exchange Act and able to use Form S-3 under the Securities
Act), and such notice shall offer such Holders the opportunity to register such
number of shares of Registrable Securities as each such Holder may request in
writing not later than 5 days prior to the anticipated filing date of the
Registration Statement after receipt of such written notice from the Company
(which request shall specify the Registrable Securities intended to be disposed
of by such Selling Holder and the intended method of distribution thereof) (a
"Piggy-Back Registration"). The Company shall use its best efforts to keep
such Piggy-Back Registration continuously effective under the Securities Act
until at least the earlier of (A) 90 days after the effective date thereof or
(B) the consummation of the distribution by the Holders of all of the
Registrable Securities covered thereby. The Company shall use its commercially
reasonable efforts to cause the managing underwriter or underwriters, if any,
of such proposed offering to permit the Registrable Securities requested to be
included in a Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of the Company or any other security
holder included therein, subject to the restrictions set forth in this Section
3(b), and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution thereof. Any
Selling Holder shall have the right to withdraw its request for inclusion of
its Registrable Securities in any Registration Statement pursuant to this
Section 3(b) by giving timely written notice to the Company of its request to
withdraw. The Company may withdraw a Piggy-Back Registration at any time prior
to the time it becomes effective or the Company may elect to delay the
registration; provided, however, that the Company shall give prompt written
notice thereof to participating Selling Holders. The Company will pay all
Registration Expenses in connection with each registration
5
<PAGE> 7
of Registrable Securities requested pursuant to this Section 3(b), and each
Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Registration Statement
effected pursuant to this Section 3(b).
No registration effected under this Section 3(b) and
no failure to effect a registration under this Section 3(b), shall relieve the
Company of its obligation to effect a registration pursuant to Section 3(a)
hereof, and no failure to effect a registration under this Section 3(b) and to
complete the sale of securities registered thereunder in connection therewith
shall relieve the Company of any other obligation under this Agreement.
In a registration pursuant to Section 3(b) hereof
involving an underwritten offering, if the managing underwriter or underwriters
of such underwritten offering have informed, in writing, the Company and the
Selling Holders requesting inclusion in such offering that in such
underwriter's or underwriters' opinion the total number of securities which the
Company, the Selling Holders and any other Persons desiring to participate in
such registration intend to include in such offering is such as to adversely
affect the success of such offering, including the price at which such
securities can be sold, then the Company will be required to include in such
registration only the amount of securities which it is so advised should be
included in such registration. In such event: (x) in cases only involving the
registration for sale of securities for the Company's own account (other than
pursuant to the exercise of piggyback rights herein and in other contractual
commitments of the Company), securities shall be registered in such offering in
the following order of priority: (i) first, the securities which the Company
proposes to register, and (ii) second, provided that no securities sought to be
included by the Company have been excluded from such registration, the
securities of the Holders and other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments of the Company (pro
rata based on the amount of securities sought to be registered by such
Persons); and (y) in cases not involving the registration for sale of
securities for the Company's own account only, securities shall be registered
in such offering in the following order of priority: (i) first, the securities
of any Person whose exercise of a "demand" registration right pursuant to a
contractual commitment of the Company is the basis for the registration
(provided that if such Person is a Holder of Registrable Securities, as among
Holders of Registrable Securities there shall be no priority and Registrable
Securities sought to be included by Holders of Registrable Securities shall be
included pro rata based on the amount of securities held by such Persons), (ii)
second, provided that no securities of such Person referred to in the
immediately preceding clause (i) have been excluded from such registration,
securities of the Holders and other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments (pro rata based on the
amount of securities sought to be registered by such Persons) and (iii) third,
provided that no securities of any other Person have been excluded from such
registration, the securities which the Company proposes to register.
If, as a result of the provisions of this Section
3(b), any Selling Holder shall not be entitled to include all Registrable
Securities in a Piggy-Back Registration that such Selling Holder has requested
to be included, such Selling Holder may elect to withdraw his request to
include Registrable Securities in such registration.
6
<PAGE> 8
(c) The Company covenants and agrees that it will not,
and the Company will not cause or permit any subsidiary of the Company to,
after the date hereof, enter into any agreement or contract that conflicts with
or limits or prohibits the full and timely exercise by the Holders of
Registrable Securities of the rights herein to request a Shelf Registration or
to join in any Piggy-Back Registration subject to the other terms and
provisions hereof.
SECTION 4. LIQUIDATED DAMAGES
If the Registration Statement required to be filed pursuant to
Section 3(a): (i) is not filed with, and declared effective by, the Commission
on or prior to the date Exercise Commencement Date; (ii) following the date
such Registration Statement is declared effective by the Commission, shall
cease to be effective or fail to be usable for its intended purpose during the
period required by this Agreement to remain effective without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself immediately declared effective (each such
event referred to in clauses (i) and (ii), a "Shelf Registration Default") to
the extent permitted by applicable law, the Company shall pay as liquidated
damages and not as a penalty to each Holder during the first 90-day period
immediately following the occurrence, and during the continuance of such Shelf
Registration Default, an amount equal to $.005 per week per Warrant Share then
issuable upon exercise of or in respect of Warrants held by such Holder for
each week or pro rata for a portion of each week thereof that the Shelf
Registration Default continues.
All accrued liquidated damages shall be paid to record Holders
by the Company by wire transfer of immediately available funds, or by mailing a
federal funds check, on each Interest Payment Date (as defined in the
Indenture). All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Registrable Security at the
time such security has been effectively registered under the Act shall survive
until such time as all such obligations with respect to such security have been
satisfied in full.
SECTION 5. REGISTRATION PROCEDURES
(a) General Provisions. In connection with the Company's
registration obligations pursuant to Section 3(a) and 3(b) hereof, the Company
will use its best efforts to effect such registration to permit the sale of
such Registrable Securities in accordance with the intended method or methods
of disposition thereof, and pursuant thereto the Company will as expeditiously
as possible:
(1) use its best efforts to keep such
Registration Statement continuously effective for the 180-day period following
the Exercise Commencement Date and provide or incorporate by reference all
requisite financial statements for such period. Upon the occurrence of any
event that would cause any such Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Registrable Securities during the
period required by this Agreement, the Company shall file promptly an
appropriate amendment to such Registration Statement or file
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<PAGE> 9
appropriate documents that will be so incorporated by reference, (1) in the
case of clause (A), correcting any such misstatement or omission, and (2) in
the case of either clause (A) or (B), use its best efforts to cause such
amendment to be declared effective and such Registration Statement and the
related Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter;
(2) prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement as may
be necessary to keep the Registration Statement effective for the period set
forth in Section 3(a)(4) or 3(b), as applicable, cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Act; and comply in all material
respects with the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement to the
Prospectus; the Company shall not be deemed to have used its best efforts to
keep a Registration Statement effective during the applicable period if it
voluntarily takes any action that would result in Holders of the Registrable
Securities covered thereby not being able to exercise their Warrants or sell
such Registrable Securities during that period unless such action is required
under applicable law, provided that the foregoing shall not apply to actions
taken by the Company in good faith and for valid business reasons, including
without limitation the acquisition or divestiture of assets, so long as the
Company promptly thereafter complies with the requirements of clause (14)
below, if applicable;
(3) advise the underwriter(s), if any, and
Holders promptly and, if requested by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement or
any post-effective amendment thereto, when the same has become effective, (B)
of any request by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or of
the suspension by any state securities commission of the qualification of the
Registrable Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Registrable Securities under state securities or Blue Sky
laws, the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
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(4) make available to each Selling Holder named
in any Registration Statement or Prospectus and each of the underwriter(s) in
connection with such sale, if any, before filing with the Commission, copies of
any Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus and the Company
will not file or will correct any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which the Selling
Holders of the Registrable Securities covered by such Registration Statement or
the underwriter(s) in connection with such sale, if any, shall reasonably
object within five Business Days after the receipt thereof. A Selling Holder
or underwriter, if any, shall be deemed to have reasonably objected to such
filing if such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or
omission or fails to comply with the applicable requirements of the Act;
(5) promptly upon the filing of any document that
is to be incorporated by reference into a Registration Statement or Prospectus,
make available copies of such document to the Selling Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's
representatives available for discussion of such document and other customary
due diligence matters, and include such information in such document prior to
the filing thereof as such Selling Holders or underwriter(s), if any,
reasonably may request;
(6) make available for inspection by a
representative of the Holders of Registrable Securities being sold, any
underwriter participating in any such disposition of Registrable Securities, if
any, and any attorney or accountant retained by such representative of the
Holders or underwriter (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, at the Inspector's expense,
all financial and other records, pertinent corporate documents and properties
of the Company and the subsidiaries of the Company, and cause the officers,
directors and employees of the Company and the subsidiaries of the Company to
supply all information in each case reasonably requested by any such Inspector
in connection with such Registration Statement; provided, however, that (i) in
connection with any such inspection, any such Inspectors shall cooperate to the
extent reasonably practicable to minimize any disruption to the operation by
the Company of its business and (ii) any records, information or documents
shall be kept confidential by such Inspectors, unless (A) such records,
information or documents are in the public domain or otherwise publicly
available or (B) disclosure of such records, information or documents is
required by a court or administrative order or by applicable law and notice of
such requirement is promptly given to the Company after being received;
(7) if requested by any Selling Holders or the
underwriter(s) in connection with such sale, if any, promptly include in any
Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such Selling Holders
and underwriter(s), if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Registrable Securities, information with respect to the
principal amount of Registrable Securities being sold to such underwriter(s),
the purchase price being paid therefor and any other terms of the offering
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<PAGE> 11
of the Registrable Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective amendment as
soon as practicable after the Company is notified of the matters to be included
in such Prospectus supplement or post-effective amendment;
(8) furnish to each Holder and each of the
underwriter(s) in connection with a sale of Warrant Shares, if any, without
charge, at least one copy of the Registration Statement, as first filed with
the Commission, and of each amendment thereto, and make available all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(9) deliver to each Selling Holder and each of
the underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons reasonably may request; the Company hereby consents to the use
of the Prospectus and any amendment or supplement thereto by each of the
Selling Holders and each of the underwriter(s), if any, in connection with the
offering and the sale of the Registrable Securities covered by the Prospectus
or any amendment or supplement thereto;
(10) enter into such agreements (including, unless
not required pursuant to Section 3(a) hereof, an underwriting agreement) and
make such representations and warranties and take all such other actions in
connection therewith that are reasonably necessary in order to expedite or
facilitate the disposition of the Registrable Securities pursuant to any
Registration Statement contemplated by this Agreement as may be reasonably
requested by any Holder of Registrable Securities or underwriter in connection
with any exercise, sale or resale pursuant to any Registration Statement
contemplated by this Agreement, and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration is
an underwritten registration, the Company shall:
(A) furnish to each Selling Holder and
each underwriter, if any, upon the effectiveness of the Registration Statement:
(i) a certificate, dated the date
of effectiveness of the Registration Statement, signed by (x) the President and
(y) any Vice President, the Secretary or an Assistant Secretary of the Company,
confirming, as of the date thereof, the matters of the types set forth in
paragraphs (a), (b), (c) and (d) of Section 9 of the Purchase Agreement and
such other matters as the Holders and/or underwriter(s) may reasonably request;
(ii) an opinion, dated the date of
effectiveness of the Registration Statement, of counsel for the Company,
covering (i) due authorization and enforceability of the Warrants, (ii) a
statement to the effect that such counsel has participated in conferences with
officers and other representatives of the Company and representatives of the
independent public accountants for the Company and have considered the matters
required to be stated therein and the statements contained therein, although
such counsel has not independently verified the accuracy, completeness or
fairness of such statements; and that such counsel advises
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<PAGE> 12
that, on the basis of the foregoing (relying as to materiality to a large
extent upon facts provided to such counsel by officers and other
representatives of the Company and without independent check or verification),
no facts came to such counsel's attention that caused such counsel to believe
that the applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became effective, and
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus contained in such Registration Statement
as of its date and, contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading and
(iii) such other matters of the type customarily covered in opinions of counsel
for an issuer in connection with similar securities offerings, as may
reasonably be requested by such parties. Without limiting the foregoing, such
counsel may state further that such counsel assumes no responsibility for, and
has not independently verified, the accuracy, completeness or fairness of the
financial statements, notes and schedules and other financial, statistical and
accounting data included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(iii) a customary comfort letter,
dated as of the date of effectiveness of the Registration Statement, from the
Company's independent accountants, in the customary form and covering matters
of the type customarily covered in comfort letters to underwriters in
connection with primary underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 9(j) of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by
reference in the underwriting agreement, if any, in connection with any sale or
resale pursuant to any Registration Statement the indemnification provisions
and procedures of Section 7 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and
certificates as may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company
pursuant to this clause (10), if any.
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent required thereunder,
and if at any time the representations and warranties of the Company
contemplated in (A)(i) above cease to be true and correct, the Company shall so
advise the underwriter(s), if any, and Selling Holders promptly and if
requested by such Persons, shall confirm such advice in writing;
(11) prior to any public offering of Registrable
Securities, cooperate with the Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of the
Registrable Securities under the securities or Blue Sky laws of such
jurisdictions as the Holders or underwriter(s), if any, may request and do any
and all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the
11
<PAGE> 13
Registrable Securities covered by the applicable Registration Statement;
provided, however, that where Registrable Securities are offered other than
through an underwritten offering, the Company agrees to cause its counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(a)(11), keep each such
registration or qualification (or exemption therefrom) effective during the
period that the applicable Registration Statement is required to remain
effective under the terms of this Agreement and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions
of the securities covered thereby; provided that the Company shall not be
required to register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of process
in suits or to taxation, other than as to matters and transactions relating to
the Registration Statement, in any jurisdiction where it is not now so subject;
(12) in connection with any sale or exercise of
Registrable Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the Holders and the
underwriter(s), if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends; and to register such Registrable Securities in such
denominations and such names as the Holders or the underwriter(s), if any, may
request at least two Business Days prior to such sale of Registrable
Securities;
(13) use its best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the Holder or Holders thereof or the underwriter(s), if any, to
consummate the exercise or disposition of such Registrable Securities, subject
to the proviso contained in clause (11) above;
(14) if any fact or event contemplated by clause
(3) above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Registrable Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(15) provide a CUSIP number for all Registrable
Securities not later than the effective date of a Registration Statement
covering such Registrable Securities and provide the Trustee under the
Indenture with printed certificates for the Registrable Securities which are in
a form eligible for deposit with the Depository Trust Company;
(16) cooperate and assist in any filings required
to be made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules and
regulations of the NASD, and use its best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies or
authorities as may be
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<PAGE> 14
necessary to enable the Holders selling Registrable Securities to consummate
the disposition of such Registrable Securities;
(17) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable Registration
Statement, as soon as practicable, a consolidated earnings statement meeting
the requirements of Rule 158 (which need not be audited) covering a
twelve-month period beginning after the effective date of the Registration
Statement (as such term is defined in paragraph (c) of Rule 158 under the Act);
(18) cause all Registrable Securities covered by
the Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed;
(19) provide promptly to each Holder upon written
request each document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act;
(20) cooperate with the Holders of Registrable
Securities and the managing underwriter or underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any restrictive
legends whatsoever and shall be in a form eligible for deposit with The
Depository Trust Company ("DTC"); and enable such Registrable Securities to be
in such denominations and registered in such names as the managing underwriter
or underwriters, if any, or Holders may reasonably request at least two
business days prior to any sale of Registrable Securities in a firm commitment
underwritten public offering.;
(21) pay all Registration Expenses in connection
with the registrations requested pursuant to Sections 3(a) and 3(b) hereof.
Each Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Registration Statement
requested pursuant to Section 3(a)(2);
(22) make appropriate officers of the Company
available to the Selling Holders for meetings with prospective purchasers of
the Registrable Securities and prepare and present to potential investors
customary "road show" material in a manner consistent with other new issuances
of other securities similar to the Registrable Securities, in connection with
any proposed sale of the Securities in an aggregate offering of at least $10
million; and
(23) cooperate with the Selling Holders of
Registrable Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends and registered in such names as the Selling Holders may
reasonably request at least two business days prior to the closing of any sale
of Registrable Securities.
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(b) Restrictions on Holders. Each Holder agrees by
acquisition of a Registrable Security that, upon receipt of any notice from the
Company of the existence of any fact of the kind described in Section
5(a)(3)(D) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the applicable Registration Statement until
such Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(a)(14) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, each Holder
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities that was current at the time of receipt of
such notice. In the event the Company shall give any such notice, the time
period regarding the effectiveness of such Registration Statement set forth in
Section 3(a) hereof, as applicable, shall be extended by the number of days
during the period from and including the date of the giving of such notice
pursuant to Section 5(a)(3)(D) hereof to and including the date when each
Selling Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by Section
5(a)(14) hereof or shall have received the Advice.
SECTION 6. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of
or compliance with this Agreement ("Registration Expenses") will be borne by
the Company, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Holder with the NASD (and, if applicable, the
reasonable fees and expenses of any "qualified independent underwriter") and
such Holder's counsel, as may be required by the rules and regulations of the
NASD); (ii) all fees and expenses of compliance with federal securities and
state Blue Sky or securities laws; (iii) all expenses of printing (including,
without limitation, expenses of printing or engraving certificates for the
Registrable Securities in a form eligible for deposit with the Depository Trust
Company and printing of Prospectuses), messenger and delivery services and
telephone; (iv) all fees and disbursements of counsel for the Company and,
subject to Section 7(b) below, the reasonable fees and disbursements of counsel
to the Holders of Transfer Restricted Securities; (v) all application and
filing fees in connection with listing the Registrable Securities on a national
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with each Registration Statement
required hereunder, the Company will reimburse the Holders of Registrable
Securities being registered pursuant to such
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<PAGE> 16
Registration Statement for the reasonable fees and actual disbursements of not
more than one counsel chosen by the Holders of a majority of the principal
amount of such Registrable Securities, or more than one, if, in the reasonable
judgment of counsel for the Holders and counsel for the Company, a conflict
exists among such Holders. Notwithstanding the provisions of this Section 6,
each Holder of Registrable Securities shall pay all registration expenses to
the extent required by applicable law.
SECTION 7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i)
each Holder and (ii) each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) any Holder (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person") and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person
(any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Holder"), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) (collectively, "Losses") caused by
any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement, preliminary prospectus or Prospectus (or any
amendment or supplement thereto) provided by the Company to any holder or any
prospective purchaser of Warrants or Warrant Shares, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such Losses are caused by an untrue statement or omission or alleged
untrue statement or omission that is based upon information relating to any of
the Holders furnished in writing to the Company by any of the Holders.
Notwithstanding the foregoing, the Company shall not be liable in any such case
to the extent that any such Loss arises out of, or is based upon, an untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus if (i) the Selling Holder failed to send or deliver
a copy of the Prospectus with or prior to the delivery of written confirmation
of the sale of Warrant Shares to the person asserting such Loss or who
purchased such Warrant Shares which are the subject thereof and (ii) the
Prospectus would have corrected such untrue statement or omission or alleged
untrue statement or alleged omission; and the Company shall not be liable in
any such case to the extent that any such Loss arises out of, or is based upon,
an untrue statement or alleged untrue statement of material fact or omission or
alleged omission to state a material fact in the Prospectus, if such untrue
statement or alleged untrue statement or omission or alleged omission is
corrected in any amendment or supplement to the Prospectus and if, having been
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented prior to the sale of Warrant Shares, the Selling Holder
thereafter fails to deliver such Prospectus as so amended or supplemented prior
to or concurrently with the sale of the Warrant Shares.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company, and its
directors and officers, and each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the
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<PAGE> 17
Exchange Act) the Company to the same extent as the foregoing indemnity from
the Company to each of the Indemnified Holders, but only with reference to
information relating to such Indemnified Holder furnished in writing to the
Company by such Indemnified Holder expressly for use in any Registration
Statement. In no event shall any Indemnified Holder be liable or responsible
for any amount in excess of the amount by which the total amount received by
such Indemnified Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Indemnified Holder for such Transfer Restricted Securities and (ii) the
amount of any damages that such Indemnified Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission.
(c) In case any action shall be commenced involving any
person in respect of which indemnity may be sought pursuant to Section 7(a) or
7(b) (the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying person") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 7(a) and 7(b), an Indemnified Holder shall not
be required to assume the defense of such action pursuant to this Section 7(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Indemnified Holder). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised in writing by such counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified
parties and all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by a majority of the
Indemnified Holders, in the case of the parties indemnified pursuant to Section
7(a), and by the Company, in the case of parties indemnified pursuant to
Section 7(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party)
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and, prior to the date of such settlement, the indemnifying party shall have
failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could
have been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent that the indemnification provided for
in this Section 7 is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
7(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company, on the one hand, and
of the Indemnified Holder, on the other hand, in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative fault of the Company, on the one hand, and of the Indemnified Holder,
on the other hand, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or by the Indemnified Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 7(a), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any
matter, including any action that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 7, no Holder or its related Indemnified Holders shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of its Transfer
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Restricted Securities pursuant to a Registration Statement exceeds the sum of
(A) the amount paid by such Holder for such Transfer Restricted Securities plus
(B) the amount of any damages which such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 7(d) are several in
proportion to amount of Transfer Restricted Securities held by each of the
Holders hereunder and not joint.
SECTION 8. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Registrable Securities remain outstanding, to make available, upon request of
any Holder of Registrable Securities, to any Holder or beneficial owner of
Registrable Securities in connection with any sale thereof and any prospective
purchaser of such Registrable Securities designated by such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Registrable Securities pursuant to Rule 144A.
SECTION 9. MISCELLANEOUS
(a) Remedies. Each Holder of Registrable Securities, in
addition to being entitled to exercise all rights provided herein, and as
provided in the Purchase Agreement and the Warrant Agreement and granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Agreement and, to the extent not prohibited by
applicable law, hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on
or after the date of this Agreement enter into any agreement with respect to
its securities that conflicts with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. Except as disclosed in the Offering Circular, the Company
has not previously entered into any agreement granting any registration rights
of its securities to any Person except the A/B Exchange Registration Rights
Agreement regarding the Senior Notes executed concurrently herewith. The
rights granted to the Holders of Registrable Securities hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any other agreement in effect on the
date hereof, except where a waiver with respect thereto has been obtained prior
to the date of effectiveness of any Registration Statement required under this
Agreement.
(c) Adjustments Affecting the Registrable Securities.
The Company will not take any action, or permit any change to occur, with
respect to the Registrable Securities which would (i) adversely affect the
ability of any of the Holders of Registrable Securities to include such
Registrable Securities in a registration undertaken pursuant to this Agreement
or (ii)
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<PAGE> 20
materially adversely affect the marketability of the Registrable
Securities in any such registration.
(d) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of a majority of the outstanding Registrable Securities;
provided, however, that Section 7 and Section 9(d) may not be amended, modified
or supplemented without the written consent of each Holder (including any
Person who was a Holder of Registrable Securities disposed of pursuant to any
Registration Statement) affected by any such amendment, modification or
supplement. Notwithstanding the foregoing, a waiver or consent to departure
from the provisions hereof that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by the Holders
of at least a majority of the Registrable Securities being sold.
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the address set forth on
the records of the Warrant Agent under the Warrant Agreement, with a copy to
the Warrant Agent under the Warrant Agreement; and
(2) if to the Company:
Club Regina Resorts, Inc.
10000 Memorial Drive
Houston, TX 77024
Telecopier No.: (713) 223-5825
Attention: Secretary
With a copy to (which shall not constitute notice):
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Suite 1900 - South Pennzoil Place
711 Louisiana Street
Houston, TX 77002
Telecopier No.: (713) 236-0822
Attention: Julien R. Smythe, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt
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<PAGE> 21
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Securities.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF. The Company hereby irrevocably
and unconditionally: (i) submits itself and its property in any legal action
or proceeding relating to this Warrant Registration Rights Agreement or for
recognition and enforcement of any judgment in respect thereof, to the non-
exclusive jurisdiction of the courts of the State of New York and the courts of
the United States of America for the Southern District of New York, and
appellate courts thereof, and consents and agrees to such action or proceeding
being brought in such courts; and (ii) waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in any inconvenient court and
agrees not to plead or claim the same.
(j) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Entire Agreement. This Agreement together with the
other Operative Documents (as defined in the Purchase Agreement) is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the securities sold pursuant to the Purchase Agreement.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
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<PAGE> 22
(l) Securities Held by the Company or Its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities or Warrants is required thereunder, Registrable
Securities or Warrants held by the Company or by any of its affiliates (as such
term is defined in Rule 405 under the Securities Act) shall not be counted (in
either the numerator or the denominator) in determining whether such consent or
approval was given by the Holders of such required percentage.
[Signature Page Follows]
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CLUB REGINA RESORTS, INC.
By:
------------------------
Name:
Title:
JEFFERIES & COMPANY, INC.
By:
------------------------
Name:
Title:
S-1
<PAGE> 1
EXHIBIT 10.7
EXECUTION COPY
================================================================================
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of December 5, 1997
by and among
CLUB REGINA RESORTS, INC.,
CR RESORTS CAPITAL, S. DE R. L. DE C. V.
and
JEFFERIES & COMPANY, INC.
================================================================================
<PAGE> 2
A/B EXCHANGE REGISTRATION RIGHTS AGREEMENT
This A/B Exchange Registration Rights Agreement (this "Agreement") is
made and entered into as of December 5, 1997 by and among CLUB REGINA RESORTS,
INC., a Nevada corporation (the "CR US"), CR RESORTS CAPITAL S. de R. L. de C.
V., a Mexican Sociedad de Responsabilidad Limitada de Capital Variable ("CR
Mexico" and, together with CR US, the "Issuers"), and JEFFERIES & COMPANY, INC.
(the "Initial Purchaser") pursuant to the Purchase Agreement (as defined
below).
This Agreement is made pursuant to the Purchase Agreement, dated
November 26, 1997 (the "Purchase Agreement"), by and among the Issuers and the
Initial Purchaser. In order to induce the Initial Purchaser to purchase the
Series A Notes, the Issuers have agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchaser set forth in Section 9 of
the Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Indenture (as defined herein).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Exchange Offer Registration Statement continuously
effective and the keeping of the Exchange Offer open for a period not less than
the minimum period required pursuant to Section 3(b) hereof, and (iii) the
delivery by the Issuers to the Registrar under the Indenture of Series B Notes
in the same aggregate principal amount as the aggregate principal amount of
Series A Notes that were tendered by Holders thereof pursuant to the Exchange
Offer.
Effectiveness Deadlines: The Exchange Offer Effectiveness Deadline and
the Shelf Effectiveness Deadline.
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Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a
principal amount of Series B Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal
amount of Series A Notes that are tendered by such Holders in connection with
such exchange and issuance.
Exchange Offer Effectiveness Deadline: As defined in Section 3(a)
hereof.
Exchange Offer Filing Deadline: As defined in Section 3(a) hereof.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act and to certain "accredited
investors," as such term is defined in Rule 501(a)(1), (2), (3), (5) and (7) of
Regulation D under the Act.
Filing Deadlines: The Exchange Offer Filing Deadline and the Shelf
Filing Deadline.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of December 5, 1997, between the
Issuers and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee")
pursuant to which the Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchaser: As defined in the preamble hereto.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
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Registration Statement: Any registration statement of the Issuers
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer
Registration Statement or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration Statement, in each
case (i) which is filed pursuant to the provisions of this Agreement and (ii)
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Restricted Broker Dealer: Any Broker Dealer that holds Series B Notes
that were acquired in the Exchange Offer in exchange for Series A Notes that
such Broker Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its affiliates).
Rule 144: Rule 144 promulgated under the Act.
Series A Notes: The Issuers' 13% Series A Senior Notes due 2004 to be
issued pursuant to the Indenture.
Series B Notes: The Issuers' 13% Series B Senior Notes due 2004 to be
issued pursuant to the Indenture in the Exchange Offer.
Shelf Effectiveness Deadline: As defined in Section 4 hereof.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur
of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (b) the date on which
such Note has been disposed of in accordance with a Shelf Registration
Statement, (c) the date on which such Note is disposed of by a Broker-Dealer
pursuant to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including delivery of the Prospectus contained therein)
or (d) the date on which such Note is distributed to the public pursuant to
Rule 144 under the Act. The Exchange Offer shall be on the appropriate form
permitting registration of the Series B Notes to be offered in exchange for the
Series A Notes and to permit resales of Series B Notes by Broker-Dealers that
tendered into the Exchange Offer for Series A Notes that such Broker-Dealer
acquired for its own account as a result of market making activities or other
trading activities (other than Series A Notes acquired directly from the
Issuers or any of their Affiliates) as contemplated by Section 3(c) below.
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SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to
the benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable federal law (after the procedures set forth in Section 6(a) below
have been complied with), the Issuers shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than March 31, 1997 (the "Exchange Offer Filing Deadline"), an Exchange Offer
Registration Statement under the Act relating to the Series B Notes and the
Exchange Offer, (ii) use their best efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, but
in no event later than May 31, 1997 (the "Exchange Offer Effectiveness
Deadline"), (iii) in connection with the foregoing, file (A) all pre-effective
amendments to such Exchange Offer Registration Statement as may be necessary in
order to cause such Exchange Offer Registration Statement to become effective,
(B) if applicable, a post-effective amendment to such Exchange Offer
Registration Statement pursuant to Rule 430A under the Act and (C) cause all
necessary filings in connection with the registration and qualification of the
Series B Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the Series B Notes to be offered in exchange
for the Series A Notes that are Transfer Restricted Securities and to permit
resales of Series B Notes held by Broker-Dealers that tendered into the
Exchange Offer for Series A Notes that such Broker Dealer acquired for its own
account as a result of market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.
(b) The Issuers shall use their best efforts to cause the Exchange
Offer Registration Statement to be effective continuously and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; provided, however, that in no event shall such period be less than 20
Business Days. The Issuers shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Series B Notes shall be included in the Exchange Offer Registration Statement.
The Issuers shall use their best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Business Days thereafter.
(c) The Issuers shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any
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<PAGE> 6
Broker-Dealer who holds Transfer Restricted Securities that were acquired for
its own account as a result of market-making activities or other trading
activities (other than Transfer Restricted Securities acquired directly from
the Issuers or an Affiliate of the Issuers), may exchange such Transfer
Restricted Securities pursuant to the Exchange Offer; however, such
Broker-Dealer may be deemed to be an "underwriter" within the meaning of the
Act and must, therefore, deliver a prospectus meeting the requirements of the
Act in connection with its initial sale of any Series B Notes received by such
Broker-Dealer in the Exchange Offer and that the Prospectus contained in the
Exchange Offer Registration Statement may be used to satisfy such prospectus
delivery requirements. Such "Plan of Distribution" section shall also contain
all other information with respect to such sales by such Broker-Dealers that
the Commission may require in order to permit such sales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Transfer Restricted Securities held by any such Broker-Dealer
except to the extent required by the Commission as a result of a change in
policy, rules or regulations after the date of this Agreement.
The Issuers shall use their best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for sales of Series B Notes by Broker-Dealers, and
to ensure that it conforms with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of one year from the date on which the Exchange Offer is
Consummated or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been sold
pursuant thereto.
The Issuers shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request, and in no event later
than one day after such request, at any time during such one-year period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Issuers have complied with the procedures set forth
in Section 6(a) below) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Issuers prior to the 20th Business Day following the
Consummation of the Exchange Offer (A) that such Holder is prohibited by
applicable law or Commission policy from participating in the Exchange Offer,
or (B) that such Holder may not resell the Series B Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and that the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder, or (C) that such
Holder is a Broker-Dealer and holds Series A Notes acquired directly from the
Issuers or any of their Affiliates, then the Issuers shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i)
the date on which the Issuers determine that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Issuers receive the notice specified in clause (a) (ii) above,
(such earlier date, the "Shelf Filing Deadline"), a shelf registration
statement
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<PAGE> 7
pursuant to Rule 415 under the Act (which may be an amendment to the
Exchange Offer Registration Statement (the "Shelf Registration Statement")),
relating to all Transfer Restricted Securities, provided that the Shelf Filing
Deadline shall in no event be earlier than March 31, 1997; and
(y) use their best efforts to cause such Shelf Registration Statement
to be declared effective by the Commission on or before the 60th day after the
Shelf Filing Deadline (the "Shelf Effectiveness Deadline").
The Issuers shall use their best efforts to keep any Shelf
Registration Statement required by this Section 4(c) continuously effective,
supplemented and amended as required by and subject to the provisions of
Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Notes by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
at least two years (as extended pursuant to Section 6(c)(i)) following the date
that such Shelf Registration Statement first becomes effective under the Act or
such shorter period that will terminate when all Transfer Restricted Securities
covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Issuers in writing, within 20 Business Days after receipt of a request
therefor, the information specified in Item 507 or 508 of Regulation S-K, as
applicable, under the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No Holder
of Transfer Restricted Securities shall be entitled to Liquidated Damages
pursuant to Section 5 hereof unless and until such Holder shall have provided
such information. Each Holder as to which any Shelf Registration Statement is
being effected agrees to furnish promptly in writing to the Issuers all
information required to be disclosed in order to make the information
previously furnished to the Issuers by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the applicable Filing Deadline,
(ii) any of such Registration Statements has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated within 30 Business Days after the date
the Exchange Offer Registration Statement is declared effective by the
Commission, or (iv) any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Issuers hereby
jointly
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<PAGE> 8
and severally agree to pay liquidated damages to each Holder of Transfer
Restricted Securities, with respect to the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal to
$.05 per week per $1,000 principal amount of Transfer Restricted Securities held
by such Holder for each week or portion thereof that the Registration Default
continues. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.25 per week
per $1,000 principal amount of Transfer Restricted Securities; provided that the
Issuers shall in no event be required to pay liquidated damages for more than
one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled thereto in
the manner provided for the payment of interest under the Indenture.
All obligations of the Issuers set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Transfer
Restricted Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Issuers shall comply with all applicable provisions of
Section 6(c) below, shall use their best efforts to effect such exchange and to
permit the resale of Series B Notes by Broker-Dealers that tendered in the
Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of its market making activities or other trading activities
(other than Series A Notes acquired directly from the Issuers or any of their
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and shall comply with all of the following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as
the Exchange Offer, that in the reasonable opinion of counsel to the
Issuers raises a substantial question as to whether the Exchange
Offer is permitted by applicable federal law, the Issuers hereby
agree to seek a no-action letter or other favorable decision from the
Commission allowing the Issuers to Consummate an Exchange Offer for
such Transfer Restricted Securities. The Issuers hereby agree to
pursue the issuance of such a decision to the Commission staff
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level. In connection with the foregoing, the Issuers hereby agree to
take all such other actions as may be requested by the Commission or
otherwise required in connection with the issuance of such decision,
including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission
staff an analysis prepared by counsel to the Issuers setting forth
the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently
pursuing a resolution (which need not be favorable) by the Commission
staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker Dealer) shall furnish, upon
the request of the Issuers, prior to the Consummation of the Exchange
Offer, a written representation to the Issuers (which may be
contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
Affiliate of the Issuers, (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the Series B Notes to be
issued in the Exchange Offer and (C) it is acquiring the Series B
Notes in its ordinary course of business. Each Holder using the
Exchange Offer to participate in a distribution of the Series B Notes
hereby acknowledges and agrees that, if the resales are of Series B
Notes obtained by such Holder in exchange for Series A Notes acquired
directly from the Issuers or an Affiliate thereof, it (1) could not,
under Commission policy as in effect on the date of this Agreement,
rely on the position of the Commission enunciated in Morgan Stanley
and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above), and (2) must comply
with the registration and prospectus delivery requirements of the Act
in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Issuers shall provide a supplemental letter to the
Commission (A) stating that the Issuers are registering the Exchange
Offer in reliance on the position of the Commission enunciated in
Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and,
if applicable, any no-action letter obtained pursuant to clause (i)
above, (B) including a representation that neither Issuer has entered
into any arrangement or understanding with any Person to distribute
the Series B Notes to be received in the Exchange Offer and that, to
the best of each Issuer's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Notes
in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of
the Series B Notes received in the Exchange Offer and (C) any other
undertaking or representation required by the Commission as set forth
in any no-action letter obtained pursuant to clause (i) above, if
applicable.
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(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Issuers shall comply with all the provisions of
Section 6(c) below and shall use their best efforts to effect such registration
to permit the sale of the Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Issuers pursuant to Section 4(b)
hereof), and pursuant thereto the Issuers will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Issuers shall:
(i) use their best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Issuers
shall file promptly an appropriate amendment to such Registration
Statement curing such defect, and, if Commission review is required,
use their best efforts to cause such amendment to be declared
effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the selling Holders promptly and, if requested
by such Persons, confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to any applicable Registration
Statement or any post-effective amendment thereto, when the same has
become effective, (B) of any request by the Commission for amendments
to the Registration Statement or amendments or supplements to the
Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
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preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of
the Transfer Restricted Securities under state securities or Blue Sky
laws, the Issuers shall use their best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to the Initial Purchaser and each selling Holder
named in any Registration Statement or Prospectus in connection with
such sale, if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after
the initial filing of such Registration Statement but excluding
changes made to a Registration Statement that has been previously
furnished to the Holders so long as such changes do not affect the
selling Holders in any respect and would not subject the selling
Holders to liability under the Act), which documents will be subject
to the review and comment of such Holders in connection with such
sale, if any, for a period of at least five Business Days, and the
Issuers will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which the selling Holders of the Transfer Restricted Securities
covered by such Registration Statement in connection with such sale,
if any, shall reasonably object within five Business Days after the
receipt thereof. A selling Holder shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission or fails to comply with
the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or
Prospectus, notify the selling Holders of such
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<PAGE> 12
document and make available copies of such document to the selling
Holders in connection with such sale, if any, make the Issuers'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders may
reasonably request;
(vii) make available at reasonable times for inspection by
the selling Holders and any attorney or accountant retained by such
selling Holders (the "Inspectors") participating in any disposition
pursuant to such Registration Statement, all financial and other
records, pertinent corporate documents of the Issuers and cause the
Issuers' officers, directors and employees to supply all information
reasonably requested by any such Inspector, attorney or accountant in
connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness; provided, however, that (i) in connection with any such
inspection, any such Inspectors shall cooperate to the extent
reasonably practicable to minimize any disruption to the operation by
the Issuers of their business and (ii) any records, information or
documents shall be kept confidential by such Inspectors, unless (A)
such records, information or documents are in the public domain or
otherwise publicly available or (B) disclosure of such records,
information or documents is required by a court or administrative
order or by applicable law and notice of such requirement is promptly
given to the Issuers after being received;
(viii) if requested by any selling Holders in connection with
such sale, if any, promptly include in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders may reasonably
request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
practicable after the Issuers are notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(ix) furnish to each selling Holder in connection with such
sale, if any, without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each amendment
thereto, including all documents incorporated by reference therein and
all exhibits (including exhibits incorporated therein by reference)
(unless such documents or exhibits are readily available at no charge
through an on-line service);
(x) deliver to each selling Holder, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may
request; the Issuers hereby consent to the use (in accordance with
law) of the Prospectus and any amendment or supplement thereto by each
of the selling Holders in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
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(xi) upon the request of any selling Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith that are reasonably necessary in order to
expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement
contemplated by this Agreement as may be reasonably requested by any
Holder of Transfer Restricted Securities in connection with any sale
or resale pursuant to any applicable Registration Statement and in
such connection, the Issuers shall:
(A) upon request of any selling Holder, furnish (or in the
case of paragraphs (2) and (3), use its reasonable best efforts
to cause to be furnished) to each selling Holder, upon the
effectiveness of the Shelf Registration Statement or upon
Consummation of the Exchange Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf of each
Issuer by (x) the President or any Vice President and (y) a
principal financial or accounting officer of each Issuer,
confirming, as of the date thereof, the matters set forth
in paragraphs (a) through (d) of Section 9 of the Purchase
Agreement and such other similar matters as the selling
Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer, or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for
the Issuers covering matters similar to those set forth in
paragraph (h) of Section 9 of the Purchase Agreement and
such other matter as the selling Holders may reasonably
request, and in any event including a statement to the
effect that such counsel has participated in conferences
with officers and other representatives of the Issuers,
representatives of the independent public accountants for
the Issuers and have considered the matters required to be
stated therein and the statements contained therein,
although such counsel has not independently verified the
accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the
foregoing (relying as to materiality to the extent such
counsel deems appropriate upon the statements of officers
and other representatives of the Issuers) and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe
that the applicable Registration Statement, at the time
such Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange
Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date
and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order
to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Without limiting the foregoing,
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such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data
included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the
case may be, from the Issuers' independent accountants, in
the customary form and covering matters of the type
customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the
matters set forth in the comfort letters delivered pursuant
to Section 9(j) of the Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence
compliance with clause (A) above and with any customary
conditions contained in the any agreement entered into by the
Issuers pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that neither
Issuer shall be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal
to the aggregate principal amount of Series A Notes surrendered to the
Issuers by such Holder in exchange therefor or being sold by such
Holder; such Series B Notes to be registered in the name of such
Holder or in the name of the purchaser(s) of such Series B Notes, as
the case may be; in return, the Series A Notes held by such Holder
shall be surrendered to the Issuers for cancellation;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the selling Holders to
facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing
any restrictive legends; and to register such Transfer Restricted
Securities in such denominations and such names as the selling Holders
may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
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(xv) use their best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement
to be registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the seller or sellers
thereof to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with
the Depository Trust Company;
(xvii) otherwise use their best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need
not be audited) covering a twelve-month period beginning after the
effective date of the Registration Statement (as such term is defined
in paragraph (c) of Rule 158 under the Act);
(xviii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate
with the Trustee and the Holders to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to
be so qualified in a timely manner; and
(xix) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Issuers of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof (in each case, a "Suspension
Notice"), such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the applicable Registration Statement until
(i) such Holder's has received copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in
writing by the Issuers that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "Recommencement Date"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Issuers with more recently
dated Prospectuses or (ii) deliver to the Issuers (at the Issuers' expense) all
copies, other than permanent file copies, then in such Holder's possession of
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the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Issuers' performance of or compliance
with this Agreement will be borne by the Issuers, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Series B
Notes to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all fees and disbursements
of counsel for the Issuers; (v) all application and filing fees in connection
with listing the Series B Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Issuers
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Issuers will, in any event, bear their internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Issuers.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Issuers will reimburse the
Purchasers and the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant
to the Shelf Registration Statement, as applicable, for the reasonable fees and
actual disbursements of not more than one counsel chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Issuers agree, jointly and severally, to indemnify and hold
harmless (i) each Holder and (ii) each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) any Holder
(any of the persons referred to in this clause (ii) being hereinafter referred
to as a "controlling person") and (iii) the respective officers, directors,
partners, employees, representatives and agents of any Holder or any
controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Holder"), from and against any
and all losses, claims, damages, liabilities, judgments, (including without
limitation, any legal or other expenses incurred in connection with
investigating or defending any matter, including any action that could give
rise to any such losses, claims, damages, liabilities or judgments)
(collectively, "Losses") caused by any untrue statement or
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<PAGE> 17
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Issuers to any holder or any prospective purchaser of
Series B Notes, or caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such Losses are caused by
an untrue statement or omission or alleged untrue statement or omission that is
based upon information relating to any of the Holders furnished in writing to
the Issuers by any of the Holders. Notwithstanding the foregoing, the Issuers
shall not be liable in any such case to the extent that any such Loss arises
out of, or is based upon, an untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus if (i) the
Holder failed to send or deliver a copy of the Prospectus with or prior to the
delivery of written confirmation of the sale of Series B Notes to the person
asserting such Loss or who purchased such Series B Notes which are the subject
thereof and (ii) the Prospectus would have corrected such untrue statement or
omission or alleged untrue statement or alleged omission; and the Issuers shall
not be liable in any such case to the extent that any such Loss arises out of,
or is based upon, an untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact in the
Prospectus, if such untrue statement or alleged untrue statement or omission or
alleged omission is corrected in any amendment or supplement to the Prospectus
and if, having been furnished by or on behalf of the Issuers with copies of the
Prospectus as so amended or supplemented prior to the sale of Series B Notes,
the Holder thereafter fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale of the Series B Notes.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Issuers, and their
directors and officers, and each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Issuers
to the same extent as the foregoing indemnity from the Issuers to each of the
Indemnified Holders, but only with reference to information relating to such
Indemnified Holder furnished in writing to the Issuers by such Indemnified
Holder expressly for use in any Registration Statement. In no event shall any
Indemnified Holder be liable or responsible for any amount in excess of the
amount by which the total amount received by such Indemnified Holder with
respect to its sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such Indemnified Holder
for such Transfer Restricted Securities and (ii) the amount of any damages that
such Indemnified Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), an Indemnified Holder shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense
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thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of the Indemnified Holder). Any indemnified party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel
shall have been specifically authorized in writing by the indemnifying party,
(ii) the indemnifying party shall have failed to assume the defense of such
action or employ counsel reasonably satisfactory to the indemnified party or
(iii) the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised in writing by such counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party). In any such case, the indemnifying
party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by a
majority of the Indemnified Holders, in the case of the parties indemnified
pursuant to Section 8(a), and by the Issuers, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify
and hold harmless the indemnified party from and against any and all losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business
days after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could
have been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Issuers, on the one hand, and
of the Indemnified Holder, on the other hand, in connection with the statements
or
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omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the Issuers, on the one hand, and of the Indemnified Holder, on the
other hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
either of the Issuers, on the one hand, or by the Indemnified Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 8(a), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Issuers and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any
matter, including any action that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, no Holder or its related Indemnified Holders shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of its Transfer
Restricted Securities pursuant to a Registration Statement exceeds the sum of
(A) the amount paid by such Holder for such Transfer Restricted Securities plus
(B) the amount of any damages which such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(d) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each of the Holders hereunder and not joint.
SECTION 9. RULE 144A
The Issuers hereby agree with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which either
Issuer is not subject to Section 13 or 15(d) of the Securities Exchange Act, to
make available, upon request of any Holder of Transfer Restricted Securities,
to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities designated by such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Act in order to permit
resales of such Transfer Restricted Securities pursuant to Rule 144A.
18
<PAGE> 20
SECTION 10. MISCELLANEOUS
(a) Remedies. The Issuers acknowledge and agree that any failure by
the either of them to comply with their obligations under Sections 3 and 4
hereof may result in material irreparable injury to the Initial Purchaser or
the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchaser or any Holder may obtain such relief
as may be required to specifically enforce the Issuers' obligations under
Sections 3 and 4 hereof. The Issuers further agree, to the extent not
prohibited by applicable law, to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither Issuer will, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof. Except as disclosed in the
Offering Circular, neither Issuer has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of either Issuer's
securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(d)(i), the Issuers have obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Issuers have obtained the written
consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities (excluding Transfer Restricted Securities held
by the Issuers or their Affiliates). Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount
of Transfer Restricted Securities subject to such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Issuers, on the one
hand, and the Initial Purchaser, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders
hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
19
<PAGE> 21
(ii) if to the Issuers:
Club Regina Resorts, Inc.
10000 Memorial Drive
Houston, TX 77024
Telecopier No.: (713) 223-5825
Attention: Secretary
With a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Suite 1900 - South Pennzoil Place
711 Louisiana Street
Houston, TX 77002
Telecopier No.: (713) 236-0822
Attention: Julien R. Smythe, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Jefferies &
Company, Inc., (in the form attached hereto as Exhibit A) and shall be
addressed to:
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms hereof or of the
Purchase Agreement or the Indenture. If any transferee of any Holder shall
acquire Transfer Restricted Securities in any manner, whether by operation of
law or otherwise, such Transfer Restricted Securities shall be held subject to
all of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such Person shall be entitled
to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
20
<PAGE> 22
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF. The Issuers and, with respect to clause (i)
below, the Initial Purchaser hereby irrevocably and unconditionally: (i) submit
themselves and their property in any legal action or proceeding relating to
this Agreement or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive jurisdiction of the courts of the State of New
York and the courts of the United States of America for the Southern District
of New York, and appellate courts thereof, and consent and agree to such action
or proceeding being brought in such courts; and (ii) waive any objection that
they may now or hereafter have to the venue of any such action or proceeding in
any such court or that such action or proceeding was brought in any
inconvenient court and agree not to plead or claim the same.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(Signature Page Follows)
21
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CLUB REGINA RESORTS, INC.
By:
------------------------
Name:
Title:
CR RESORTS CAPITAL,
S. de R. L. de C.V.
By:
------------------------
Name:
Title:
JEFFERIES & COMPANY, INC.
By:
------------------------
Name:
Title:
S-1
<PAGE> 1
EXHIBIT 10.8
EXECUTION COPY
SERIES B WARRANT REGISTRATION RIGHTS AGREEMENT
Dated as of December 5, 1997
by and between
CLUB REGINA RESORTS, INC.
and
JEFFERIES & COMPANY, INC.
SERIES B WARRANT REGISTRATION RIGHTS AGREEMENT
This Series B Warrant Registration Rights Agreement (the "Agreement")
is made and entered into as of December 5, 1997, by and between Club Regina
Resorts, Inc., a Nevada corporation (the "Company"), and Jefferies & Company,
Inc. ("Jefferies").
In connection with (i) services rendered by Jefferies relating to the
sale by the Company of Units pursuant to the Purchase Agreement dated as of
November 26, 1997 by and among the Company, CR Resorts S. de R.L. de C.V. and
Jefferies (the "Purchase Agreement") and (ii) Jefferies' agreement to accept
payment partly in the form of common stock of the Company for certain advisory
services rendered pursuant to that certain letter agreement (the "Services
Agreement") between the Company and Jefferies dated as of August 18, 1997, the
Company has agreed to provide the registration rights set forth in this
Agreement. All defined terms used but not defined herein shall have the
meanings ascribed to them in the Indenture (as defined below).
The parties hereby agree as follows:
<PAGE> 2
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the corporate trust office of the Trustee,
on which banks are authorized to close.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Common Stock: The common stock, $.001 par value, of the Company.
Exchange Act: The Securities Exchange Act of 1934, as amended from
time to time.
Holders: As defined in Section 2 hereof.
Indenture: The Indenture dated as of December 5, 1997 by and among
the Company, CR Resorts S. de R.L. de C.V. and IBJ Schroder Bank & Trust
Company.
Jefferies Shares: The 249,450 shares of Common Stock issued to
Jefferies pursuant to Section 2(b) of the Purchase Agreement and the 142,850
shares of Common Stock issued to Jefferies as partial payment of amounts owing
to Jefferies under the Services Agreement.
NASD: National Association of Securities Dealers, Inc.
Offering Circular means the Offering Circular of the Company and CR
Mexico dated November 26, 1997, relating to the Offering of the Units.
Person: An individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Registrable Securities: The Warrants, Warrant Shares, Jefferies
Shares and any other securities issued or issuable with respect to the
Warrants, the Warrant Shares or the Jefferies Shares by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization; provided that a security ceases
to be a Registrable Security when it is no longer a Transfer Restricted
Security.
Registration Expenses: As defined in Section 6 hereof.
Registration Statement: Any registration statement of the Company
which covers Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such Registration Statement.
Requisite Securities: Means a number of Registrable Securities equal
to not less than 50% of the Registrable Securities held in the aggregate by all
Holders; provided, however, that with respect to any action to be taken at the
request of the Holders of the Registrable Securities prior to such time as the
Warrants have expired pursuant to the terms hereof and of the Warrant
Agreement, each Warrant outstanding shall be deemed to represent that number of
Registrable Securities for which such Warrant would then be exercisable.
Securities: Means the Warrants, the Warrant Shares and the Jefferies
Shares.
Selling Holder: Means a Holder who is selling Registrable Securities
pursuant to Section 3 hereof.
<PAGE> 3
Transfer Restricted Securities: A Warrant, Warrant Share or Jefferies
Share, until such Warrant, Warrant Share or Jefferies Share, as applicable, (i)
has been effectively registered under the Act and disposed of in accordance
with the Registration Statement covering it, (ii) is distributed to the public
pursuant to Rule 144 or (iii) may be sold or transferred pursuant to Rule
144(k) (or any similar provisions then in force) under the Act or otherwise.
Warrants: The Series B Warrants of the Company issued to Jefferies
pursuant to Section 2(b) of the Purchase Agreement and the Warrant Agreement,
together with any warrants issued in substitution or replacement therefor.
Warrant Agreement: The Series B Warrant Agreement dated the Closing
Date by and between the Company and Jefferies.
Warrant Shares: The Common Stock or other securities which any Holder
may acquire upon exercise of a Warrant, together with any other securities
which such Holder may acquire on account of any such securities, including,
without limitation, as the result of any dividend or other distribution on
Common Stock or any split-up of such Common Stock as provided for in the
Warrant Agreement.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Registrable Securities. The securities entitled to the
benefits of this Agreement are the Registrable Securities.
(b) Holders of Registrable Securities. A Person is deemed to be a
Holder of Registrable Securities whenever such Person owns Registrable
Securities or has the right to acquire such Registrable Securities, whether or
not such acquisition has actually been effected and disregarding any legal
restrictions upon the exercise of such right.
SECTION 3. REGISTRATION
(a) Shelf Registration
(1) If an exemption from the registration requirements of
the Act is not available for any Holder of Warrants to exercise such Warrants,
the Company shall file and use its best efforts to be declared effective on or
prior to 30 days prior to the Exercise Termination Date (as defined in the
Warrant Agreement), a "shelf" registration with respect to all Warrants that
are Registrable Securities on any appropriate form pursuant to Rule 415 (or
similar rule that may be adopted by the Commission) under the Act (the "Shelf
Registration") covering the issuance of the Warrant Shares by the Company upon
exercise, or if such issuance is not then permitted to be registered by
applicable rule or policy of the Commission, covering resales of the Warrant
Shares; provided, however, that the Company shall not be required to effect a
Shelf Registration with respect to Warrants that have been transferred to a
person or entity who, at the time of such transfer, would not have been
entitled to exercise such Warrants pursuant to an exemption from the
registration requirements of the Securities Act.
(2) The Company shall use its best efforts to keep the
Shelf Registration continuously effective for the 30-day period prior to the
Exercise Termination Date, and, to the extent that the Shelf Registration is
kept not effective for one or more days during such period, the Company shall
be required to extend the effectiveness of the Shelf Registration for a like
number of days after the expiration of the 30-day period (it being expressly
acknowledged that such extension of the required period of
<PAGE> 4
effectiveness is in addition to, and not in lieu of, the payment of liquidated
damages as provided in Section 4 hereof).
(3) The Company further agrees to use its best efforts to
prevent the happening of any event that would cause any Registration Statement
made pursuant to Section 3(a) hereof to contain a material misstatement or
omission or to be not effective and usable for resale of the Registrable
Securities during the period that such Registration Statement is required to be
effective and usable.
(4) Each Holder of Registrable Securities whose
Registrable Securities are covered by a Registration Statement filed pursuant
to this Section 3(a) agrees, if requested by the managing underwriters in an
underwritten offering of Common Stock the gross proceeds of which equal at
least $10.0 million, not to effect any public sale or distribution of
securities of the Company of the same class as any Securities included in such
Registration Statement, including a sale pursuant to Rule 144 under the Act
(except as part of such underwritten registration), during the 10-day period
prior to, and during the 90-day period beginning on, the closing date of the
underwritten offering made pursuant to such Registration Statement, to the
extent timely notified in writing by the Company or the managing underwriters;
provided that each Holder of Registrable Securities shall be subject to the
hold-back restrictions of this Section 3(a)(4) only once during the term of
this Agreement.
The foregoing provisions shall not apply to any Holder of
Registrable Securities if such Holder is prevented by applicable statute or
regulation from entering into any such agreement; provided that any such Holder
shall undertake, in its request to participate in any such underwritten
offering, not to effect any public sale or distribution of any applicable class
of Registrable Securities commencing on the date of sale of such applicable
class of Registrable Securities unless it has provided 45 days prior written
notice of such sale or distribution to the underwriter or underwriters.
(b) Piggyback Registrations
If at any time after the Company has consummated an initial
public offering of its Common Stock, the Company proposes to file a
Registration Statement under the Securities Act with respect to an offering by
the Company for its own account or for the account of any of its security
holders of any class of its common equity securities (other than (i) a
Registration Statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC or other form of limited purpose) or (ii) a Registration
Statement filed in connection with an exchange offer or offering of securities
solely to the Company's existing security holders), then the Company shall give
written notice of such proposed filing to the Holders of Registrable Securities
as soon as practicable (but in no event fewer than 15 days before the
anticipated filing date or 10 days if the Company is subject to filing reports
under the Exchange Act and able to use Form S-3 under the Securities Act), and
such notice shall offer such Holders the opportunity to register such number of
shares of Registrable Securities as each such Holder may request in writing not
later than 5 days prior to the anticipated filing date of the Registration
Statement after receipt of such written notice from the Company (which request
shall specify the Registrable Securities intended to be disposed of by such
Selling Holder and the intended method of distribution thereof) (a "Piggy-Back
Registration"). The Company shall use its best efforts to keep such Piggy-Back
Registration continuously effective under the Securities Act
<PAGE> 5
until at least the earlier of (A) 90 days after the effective date thereof or
(B) the consummation of the distribution by the Holders of all of the
Registrable Securities covered thereby. The Company shall use its commercially
reasonable efforts to cause the managing underwriter or underwriters, if any,
of such proposed offering to permit the Registrable Securities requested to be
included in a Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of the Company or any other security
holder included therein, subject to the restrictions set forth in this Section
3(b), and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution thereof. Any
Selling Holder shall have the right to withdraw its request for inclusion of
its Registrable Securities in any Registration Statement pursuant to this
Section 3(b) by giving timely written notice to the Company of its request to
withdraw. The Company may withdraw a Piggy-Back Registration at any time prior
to the time it becomes effective or the Company may elect to delay the
registration; provided, however, that the Company shall give prompt written
notice thereof to participating Selling Holders. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 3(b), and each Holder of
Registrable Securities shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to a Registration Statement effected pursuant
to this Section 3(b).
No registration effected under this Section 3(b) and no
failure to effect a registration under this Section 3(b), shall relieve the
Company of its obligation to effect a registration pursuant to Section 3(a)
hereof, and no failure to effect a registration under this Section 3(b) and to
complete the sale of securities registered thereunder in connection therewith
shall relieve the Company of any other obligation under this Agreement.
In a registration pursuant to Section 3(b) hereof involving an
underwritten offering, if the managing underwriter or underwriters of such
underwritten offering have informed, in writing, the Company and the Selling
Holders requesting inclusion in such offering that in such underwriter's or
underwriters' opinion the total number of securities which the Company, the
Selling Holders and any other Persons desiring to participate in such
registration intend to include in such offering is such as to adversely affect
the success of such offering, including the price at which such securities can
be sold, then the Company will be required to include in such registration only
the amount of securities which it is so advised should be included in such
registration. In such event: (x) in cases only involving the registration for
sale of securities for the Company's own account (other than pursuant to the
exercise of piggyback rights herein and in other contractual commitments of the
Company), securities shall be registered in such offering in the following
order of priority: (i) first, the securities which the Company proposes to
register, and (ii) second, provided that no securities sought to be included by
the Company have been excluded from such registration, the securities of the
Holders and other Persons entitled to exercise "piggy-back" registration rights
pursuant to contractual commitments of the Company (pro rata based on the
amount of securities sought to be registered by such Persons); and (y) in cases
not involving the registration for sale of securities for the Company's own
account only, securities shall be registered in such offering in the following
order of priority: (i) first, the securities of any
<PAGE> 6
Person whose exercise of a "demand" registration right pursuant to a
contractual commitment of the Company is the basis for the registration
(provided that if such Person is a Holder of Registrable Securities, as among
Holders of Registrable Securities there shall be no priority and Registrable
Securities sought to be included by Holders of Registrable Securities shall be
included pro rata based on the amount of securities held by such Persons), (ii)
second, provided that no securities of such Person referred to in the
immediately preceding clause (i) have been excluded from such registration,
securities of the Holders and other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments (pro rata based on the
amount of securities sought to be registered by such Persons) and (iii) third,
provided that no securities of any other Person have been excluded from such
registration, the securities which the Company proposes to register.
If, as a result of the provisions of this Section 3(b), any
Selling Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Selling Holder has requested to be included,
such Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.
(c) Demand Registration
(1) At any time and from time to time after the later to
occur of (i) December 20, 2000 and (ii) 180 days after the date of an initial
public offering of Common Stock of the Company, Holders owning, individually or
in the aggregate, not less than the Requisite Securities may make a written
request, on one occasion (a "Demand Registration"), that the Company register,
the resale of the Registrable Securities, under the Securities Act. The
Company shall file with the SEC and use its best efforts to cause to become
effective under the Securities Act a Registration Statement with respect to
such Registrable Securities within (i) 60 days of receipt of such written
request for a Demand Registration if the Company is then eligible to register
an offering pursuant to Form S-3 under the Securities Act; (ii) 90 days of
receipt of such written request for a Demand Registration if the Company is not
then eligible to register an offering pursuant to Form S-3 under the Securities
Act but is then qualified as a reporting company under the Exchange Act; or
(iii) 180 days of receipt of such written request for a Demand Registration in
any other case. Any such request will specify the number of Registrable
Securities proposed to be sold and will also specify the intended method of
disposition thereof. The Company shall give written notice of such
registration request to all other Holders of Registrable Securities within 15
business days after the receipt thereof. Within 10 days after receipt by any
Holder of Registrable Securities of such notice from the Company, such Holder
may request in writing that such Holder's Registrable Securities be included in
such Registration Statement and the Company shall include in such Registration
Statement the Registrable Securities of any such Holder requested to be so
included (the "Included Securities"). Each such request by such other Holders
shall specify the number of Included Securities proposed to be sold and the
intended method of disposition thereof. Subject to Section 3(c)(2) hereof, the
Company shall be required to register Registrable Securities pursuant to this
Section 3(c)(1) on a maximum of one occasion.
(2) Effective Registration. A Registration Statement
will not be deemed to have been effected as a Demand Registration unless it has
been declared effective by the SEC and the Company has complied in all
<PAGE> 7
material respects with all of its obligations under this Agreement with respect
thereto; provided, however, that if, after such Registration Statement has
become effective, the offering of Registrable Securities pursuant to such
Registration Statement is or becomes the subject of any stop order, injunction
or other order or requirement of the SEC or any other governmental or
administrative agency or court that prevents, restrains or otherwise limits the
sale of Registrable Securities pursuant to such Registration Statement for any
reason not attributable to any Holder participating in such registration and
such Registration Statement has not become effective within a reasonable time
period thereafter (not to exceed 30 days), such Registration Statement will be
deemed not to have been effected. If (i) a registration requested pursuant to
this Section 3(c)(2) is deemed not to have been effected or (ii) a Demand
Registration does not remain effective under the Securities Act until at least
the earlier of (A) an aggregate of 90 days after the effective date thereof or
(B) the consummation of the distribution by the Holders of all of the
Registrable Securities covered thereby, then such registration shall not count
towards determining if the Company has satisfied its obligation to effect a
Demand Registration pursuant to this Section 3(c). For purposes of calculating
the 90-day period referred to in the preceding sentence, any period of time
during which such Registration Statement was not in effect shall be excluded.
The Holders of Registrable Securities shall be permitted to withdraw all or any
part of the Registrable Securities from a Demand Registration at any time prior
to the effective date of such Demand Registration; provided, however, that
should the Holders of Registrable Securities remaining after such withdrawal
own, individually or in the aggregate, less than the Requisite Securities, the
Company shall have the right to terminate or withdraw any registration
initiated by it under Section 3(c) prior to the effectiveness of such
registration.
(3) Underwritten Registrations. If any of the
Registrable Securities covered by a Demand Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will manage the offering will be selected by the Company and
will be reasonably acceptable to the Holders of not less than a majority of the
Registrable Securities to be sold thereunder.
No Holder of Registrable Securities may participate in any
underwritten registration pursuant to a Registration Statement filed under this
Agreement unless such Holder (a) agrees to (i) sell such Holder's Registrable
Securities on the basis provided in and in compliance with any underwriting
arrangements approved by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and (ii) comply with Rules 10b-6
and 10b-7 under the Exchange Act and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
(4) Priority in Demand Registration. In a registration
pursuant to Section 3(c)(1) hereof involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders who have requested
such Demand Registration or who have sought inclusion therein that in such
underwriter's or underwriters' opinion the total number of securities which
the Selling Holders and any other Person desiring to participate in such
registration intend to include in such offering is such as to adversely affect
the success of such offering, including the price at
<PAGE> 8
which such securities can be sold, then the Company will be required to include
in such registration only the amount of securities which it is so advised
should be included in such registration. In such event, securities shall be
registered in such registration in the following order of priority: (i) first,
the securities which have been requested to be included in such registration by
the Holders of Registrable Securities, (ii) second, provided that no securities
sought to be included by the Holders have been excluded from such
registration, the securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments of the Company (pro
rata based on the amount of securities held by such Persons) and (iii) third,
provided that no securities of any other Person sought to be included therein
have been excluded from such registration, securities to be offered and sold
for the account of the Company.
If 25% or more of the Registrable Securities which the Holders have
requested to be included in a registration statement pursuant to Section
3(c)(1) hereof have been excluded from such registration statement pursuant to
the provisions of the foregoing paragraph, then the Holders requesting the
Demand Registration may withdraw such demand and, if such Demand Registration
is withdrawn, such registration shall not count towards determining whether the
Company has satisfied its obligation to effect a Demand Registration pursuant
to Section 3(c)(1) hereof.
(d) The Company covenants and agrees that it will not, and the
Company will not cause or permit any subsidiary of the Company to, after the
date hereof, enter into any agreement or contract that conflicts with or limits
or prohibits the full and timely exercise by the Holders of Registrable
Securities of the rights herein to request a Shelf Registration or to join in
any Piggy-Back Registration subject to the other terms and provisions hereof.
SECTION 4. INTENTIONALLY LEFT BLANK
SECTION 5. REGISTRATION PROCEDURES
(a) General Provisions. In connection with the Company's
registration obligations pursuant to Section 3(a), 3(b) and 3(c) hereof, the
Company will use its best efforts to effect such registration to permit the
sale of such Registrable Securities in accordance with the intended method or
methods of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(1) use its best efforts to keep such Registration
Statement continuously effective for the period specified in Section 3(a), 3(b)
or 3(c), as applicable, and provide or incorporate by reference all requisite
financial statements for such period. Upon the occurrence of any event that
would cause any such Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be effective
and usable for resale of Registrable Securities during the period required by
this Agreement, the Company shall file promptly an appropriate amendment to
such Registration Statement or file appropriate documents that will be so
incorporated by reference, (1) in the case of clause (A), correcting any such
misstatement or omission, and (2) in the case of either clause (A) or (B), use
its best efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for their
intended purpose(s) as soon as practicable thereafter;
<PAGE> 9
(2) prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the period set forth in
Section 3(a)(2), 3(b) or 3(c), as applicable, cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Act; and comply in all material
respects with the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement to the
Prospectus; the Company shall not be deemed to have used its best efforts to
keep a Registration Statement effective during the applicable period if it
voluntarily takes any action that would result in Holders of the Registrable
Securities covered thereby not being able to exercise their Warrants or sell
such Registrable Securities during that period unless such action is required
under applicable law, provided that the foregoing shall not apply to actions
taken by the Company in good faith and for valid business reasons, including
without limitation the acquisition or divestiture of assets, so long as the
Company promptly thereafter complies with the requirements of clause (14)
below, if applicable;
(3) advise the underwriter(s), if any, and Holders
promptly and, if requested by such Persons, confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to any Registration Statement or any
post-effective amendment thereto, when the same has become effective, (B) of
any request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or of
the suspension by any state securities commission of the qualification of the
Registrable Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Registrable Securities under state securities or Blue Sky
laws, the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(4) make available to each Selling Holder named in any
Registration Statement or Prospectus and each of the underwriter(s) in
connection with such sale, if any, before filing with the Commission, copies of
any Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus and the Company
will not file or will correct any such
<PAGE> 10
Registration Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents incorporated
by reference) to which the Selling Holders of the Registrable Securities
covered by such Registration Statement or the underwriter(s) in connection with
such sale, if any, shall reasonably object within five Business Days after the
receipt thereof. A Selling Holder or underwriter, if any, shall be deemed to
have reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission or fails to comply with the
applicable requirements of the Act;
(5) promptly upon the filing of any document that is to
be incorporated by reference into a Registration Statement or Prospectus, make
available copies of such document to the Selling Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's
representatives available for discussion of such document and other customary
due diligence matters, and include such information in such document prior to
the filing thereof as such Selling Holders or underwriter(s), if any,
reasonably may request;
(6) make available for inspection by a representative of
the Holders of Registrable Securities being sold, any underwriter participating
in any such disposition of Registrable Securities, if any, and any attorney or
accountant retained by such representative of the Holders or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, at the Inspector's expense, all financial and other
records, pertinent corporate documents and properties of the Company and the
subsidiaries of the Company, and cause the officers, directors and employees of
the Company and the subsidiaries of the Company to supply all information in
each case reasonably requested by any such Inspector in connection with such
Registration Statement; provided, however, that (i) in connection with any such
inspection, any such Inspectors shall cooperate to the extent reasonably
practicable to minimize any disruption to the operation by the Company of its
business and (ii) any records, information or documents shall be kept
confidential by such Inspectors, unless (A) such records, information or
documents are in the public domain or otherwise publicly available or (B)
disclosure of such records, information or documents is required by a court or
administrative order or by applicable law and notice of such requirement is
promptly given to the Company after being received;
(7) if requested by any Selling Holders or the
underwriter(s) in connection with such sale, if any, promptly include in any
Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such Selling Holders
and underwriter(s), if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Registrable Securities, information with respect to the
principal amount of Registrable Securities being sold to such underwriter(s),
the purchase price being paid therefor and any other terms of the offering of
the Registrable Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be included in such
Prospectus supplement or post-effective amendment;
<PAGE> 11
(8) furnish to each Holder and each of the underwriter(s) in
connection with a sale of Warrant Shares or Jefferies Shares, if any, without
charge, at least one copy of the Registration Statement, as first filed with
the Commission, and of each amendment thereto, and make available all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(9) deliver to each Selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons reasonably may request; the Company hereby consents to the use
of the Prospectus and any amendment or supplement thereto by each of the
Selling Holders and each of the underwriter(s), if any, in connection with the
offering and the sale of the Registrable Securities covered by the Prospectus
or any amendment or supplement thereto;
(10) enter into such agreements (including, unless not
required pursuant to Section 3(a) hereof, an underwriting agreement) and make
such representations and warranties and take all such other actions in
connection therewith that are reasonably necessary in order to expedite or
facilitate the disposition of the Registrable Securities pursuant to any
Registration Statement contemplated by this Agreement as may be reasonably
requested by any Holder of Registrable Securities or underwriter in connection
with any exercise, sale or resale pursuant to any Registration Statement
contemplated by this Agreement, and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration is
an underwritten registration, the Company shall:
(A) if, at the time of the applicable registration, the
Board of Directors of the Company does not include a Director designated by
Jefferies, furnish to each Selling Holder and each underwriter, if any, upon
the effectiveness of the Registration Statement:
(i) a certificate, dated the date of
effectiveness of the Registration Statement, signed by (x) the President and
(y) any Vice President, the Secretary or an Assistant Secretary of the Company,
confirming, as of the date thereof, the matters of the types set forth in
paragraphs (a), (b), (c) and (d) of Section 9 of the Purchase Agreement and
such other matters as the Holders and/or underwriter(s) may reasonably request;
(ii) an opinion, dated the date of effectiveness
of the Registration Statement, of counsel for the Company, covering (i) due
authorization and enforceability of the Warrants (if applicable), (ii) a
statement to the effect that such counsel has participated in conferences with
officers and other representatives of the Company and representatives of the
independent public accountants for the Company and have considered the matters
required to be stated therein and the statements contained therein, although
such counsel has not independently verified the accuracy, completeness or
fairness of such statements; and that such counsel advises that, on the basis
of the foregoing (relying as to materiality to a large extent upon facts
provided to such counsel by officers and other representatives of the Company
and without independent check or verification), no facts came to such counsel's
attention that caused such counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or any post- effective
amendment thereto became effective, and contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to
<PAGE> 12
make the statements therein not misleading, or that the Prospectus contained in
such Registration Statement as of its date and, contained an untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading and (iii) such other matters of the type customarily
covered in opinions of counsel for an issuer in connection with similar
securities offerings, as may reasonably be requested by such parties. Without
limiting the foregoing, such counsel may state further that such counsel
assumes no responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements, notes and
schedules and other financial, statistical and accounting data included in any
Registration Statement contemplated by this Agreement or the related
Prospectus; and
(iii) a customary comfort letter, dated as of the
date of effectiveness of the Registration Statement, from the Company's
independent accountants, in the customary form and covering matters of the type
customarily covered in comfort letters to underwriters in connection with
primary underwritten offerings, and affirming the matters set forth in the
comfort letters delivered pursuant to Section 9(j) of the Purchase Agreement,
without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any sale or resale pursuant
to any Registration Statement the indemnification provisions and procedures of
Section 7 hereof with respect to all parties to be indemnified pursuant to said
Section; and
(C) deliver such other documents and certificates as may
be reasonably requested by such parties to evidence compliance with clause (A)
above and with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company pursuant to this clause (10), if
any.
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent required thereunder,
and if at any time the representations and warranties of the Company
contemplated in (A)(i) above cease to be true and correct, the Company shall so
advise the underwriter(s), if any, and Selling Holders promptly and if
requested by such Persons, shall confirm such advice in writing;
(11) prior to any public offering of Registrable
Securities, cooperate with the Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of the
Registrable Securities under the securities or Blue Sky laws of such
jurisdictions as the Holders or underwriter(s), if any, may request and do any
and all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided, however, that where Registrable Securities
are offered other than through an underwritten offering, the Company agrees to
cause its counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(a)(11), keep
each such registration or qualification (or exemption therefrom) effective
during the period that the applicable Registration Statement is required to
remain effective under the terms of this Agreement and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the securities covered thereby; provided that the Company
shall not be required to register or qualify as a foreign corporation where it
is not now so qualified
<PAGE> 13
or to take any action that would subject it to the service of process in suits
or to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so subject;
(12) in connection with any sale or exercise of
Registrable Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the Holders and the
underwriter(s), if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends; and to register such Registrable Securities in such
denominations and such names as the Holders or the underwriter(s), if any, may
request at least two Business Days prior to such sale of Registrable
Securities;
(13) use its best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the Holder or Holders thereof or the underwriter(s), if any, to
consummate the exercise or disposition of such Registrable Securities, subject
to the proviso contained in clause (11) above;
(14) if any fact or event contemplated by clause (3) above
shall exist or have occurred, prepare a supplement or post-effective amendment
to the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Registrable Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(15) provide a CUSIP number for all Registrable Securities
not later than the effective date of a Registration Statement covering such
Registrable Securities and provide the Trustee under the Indenture with printed
certificates for the Registrable Securities which are in a form eligible for
deposit with the Depository Trust Company;
(16) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use its best efforts to cause such Registration Statement to become
effective and approved by such governmental agencies or authorities as may be
necessary to enable the Holders selling Registrable Securities to consummate
the disposition of such Registrable Securities;
(17) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable Registration
Statement, as soon as practicable, a consolidated earnings statement meeting
the requirements of Rule 158 (which need not be audited) covering a
twelve-month period beginning after the effective date of the Registration
Statement (as such term is defined in paragraph (c) of Rule 158 under the Act);
(18) cause all Registrable Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed;
(19) provide promptly to each Holder upon written request
each document filed with the Commission pursuant to the requirements of Section
13 or Section 15(d) of the Exchange Act;
(20) cooperate with the Holders of Registrable Securities
and
<PAGE> 14
the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive legends whatsoever
and shall be in a form eligible for deposit with The Depository Trust Company
("DTC"); and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter or underwriters, if any,
or Holders may reasonably request at least two business days prior to any sale
of Registrable Securities in a firm commitment underwritten public offering.;
(21) pay all Registration Expenses in connection with the
registrations requested pursuant to Section 3 hereof. Each Holder of
Registrable Securities shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to a Registration Statement requested pursuant
to Section 3(a)(2);
(22) cooperate with the Selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends and registered in such names as the Selling Holders may reasonably
request at least two business days prior to the closing of any sale of
Registrable Securities.
(b) Restrictions on Holders. Each Holder agrees by acquisition of
a Registrable Security that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in Section 5(a)(3)(D) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the applicable Registration Statement until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
5(a)(14) hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable
Securities that was current at the time of receipt of such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3(a) hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
5(a)(3)(D) hereof to and including the date when each Selling Holder covered by
such Registration Statement shall have received the copies of the supplemented
or amended Prospectus contemplated by Section 5(a)(14) hereof or shall have
received the Advice.
SECTION 6. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement ("Registration Expenses") will be borne by the
Company, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Holder with the NASD (and, if applicable, the
reasonable fees and expenses of any "qualified independent underwriter") and
such Holder's counsel, as may be required by the rules and regulations of the
NASD); (ii) all fees and expenses of compliance with federal securities and
state Blue Sky or securities laws;
<PAGE> 15
(iii) all expenses of printing (including, without limitation, expenses of
printing or engraving certificates for the Registrable Securities in a form
eligible for deposit with the Depository Trust Company and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and, subject to Section 7(b) below,
the reasonable fees and disbursements of counsel to the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection with
listing the Registrable Securities on a national exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and
the fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with each Registration Statement required
hereunder, the Company will reimburse the Holders of Registrable Securities
being registered pursuant to such Registration Statement for the reasonable
fees and actual disbursements of not more than one counsel chosen by the
Holders of a majority of the principal amount of such Registrable Securities,
or more than one, if, in the reasonable judgment of counsel for the Holders and
counsel for the Company, a conflict exists among such Holders. Notwithstanding
the provisions of this Section 6, each Holder of Registrable Securities shall
pay all registration expenses to the extent required by applicable law.
SECTION 7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each
Holder and (ii) each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) any Holder (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person") and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person
(any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Holder"), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) (collectively, "Losses") caused by
any untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement, preliminary prospectus or Prospectus (or any
amendment or supplement thereto) provided by the Company to any holder or any
prospective purchaser of Securities, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
Losses are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders.
Notwithstanding the foregoing, the Company shall not be liable in any such case
to the extent that any such Loss arises out of, or is based upon, an untrue
statement or alleged untrue statement or omission or alleged
<PAGE> 16
omission made in any preliminary prospectus if (i) the Selling Holder failed to
send or deliver a copy of the Prospectus with or prior to the delivery of
written confirmation of the sale of Securities to the person asserting such
Loss or who purchased such Securities which are the subject thereof and (ii)
the Prospectus would have corrected such untrue statement or omission or
alleged untrue statement or alleged omission; and the Company shall not be
liable in any such case to the extent that any such Loss arises out of, or is
based upon, an untrue statement or alleged untrue statement of material fact or
omission or alleged omission to state a material fact in the Prospectus, if
such untrue statement or alleged untrue statement or omission or alleged
omission is corrected in any amendment or supplement to the Prospectus and if,
having been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented prior to the sale of Securities, the
Selling Holder thereafter fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale of the Securities.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company, and its
directors and officers, and each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company
to the same extent as the foregoing indemnity from the Company to each of the
Indemnified Holders, but only with reference to information relating to such
Indemnified Holder furnished in writing to the Company by such Indemnified
Holder expressly for use in any Registration Statement. In no event shall any
Indemnified Holder be liable or responsible for any amount in excess of the
amount by which the total amount received by such Indemnified Holder with
respect to its sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such Indemnified Holder
for such Transfer Restricted Securities and (ii) the amount of any damages that
such Indemnified Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 7(a) and 7(b), an Indemnified Holder shall not
be required to assume the defense of such action pursuant to this Section 7(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Indemnified Holder). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party,
<PAGE> 17
and the indemnified party shall have been advised in writing by such counsel
that there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying party (in
which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of the indemnified party). In any such case,
the indemnifying party shall not, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) for all indemnified parties and all such fees and expenses shall
be reimbursed as they are incurred. Such firm shall be designated in writing
by a majority of the Indemnified Holders, in the case of the parties
indemnified pursuant to Section 7(a), and by the Company, in the case of
parties indemnified pursuant to Section 7(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without
its written consent if the settlement is entered into more than twenty business
days after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could
have been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent that the indemnification provided for in this
Section 7 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
7(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company, on the one hand, and
of the Indemnified Holder, on the other hand, in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative fault of the Company, on the one
<PAGE> 18
hand, and of the Indemnified Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, on the one hand,
or by the Indemnified Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and judgments referred to above
shall be deemed to include, subject to the limitations set forth in the second
paragraph of Section 7(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any
matter, including any action that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 7, no Holder or its related Indemnified Holders shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of its Transfer
Restricted Securities pursuant to a Registration Statement exceeds the sum of
(A) the amount paid by such Holder for such Transfer Restricted Securities plus
(B) the amount of any damages which such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 7(d) are several in
proportion to amount of Transfer Restricted Securities held by each of the
Holders hereunder and not joint.
SECTION 8. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Registrable Securities remain outstanding, to make available, upon request of
any Holder of Registrable Securities, to any Holder or beneficial owner of
Registrable Securities in connection with any sale thereof and any prospective
purchaser of such Registrable Securities designated by such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Registrable Securities pursuant to Rule 144A.
SECTION 9. MISCELLANEOUS
(a) Remedies. Each Holder of Registrable Securities, in addition
to being entitled to exercise all rights provided herein, and as provided in
the Purchase Agreement and the Warrant Agreement and granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and, to the extent not prohibited by applicable
law, hereby agrees to waive the
<PAGE> 19
defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company will not on or after
the date of this Agreement enter into any agreement with respect to its
securities that conflicts with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
Except as disclosed in the Offering Circular, the Company has not previously
entered into any agreement granting any registration rights of its securities
to any Person except the Notes Exchange Registration Rights Agreement and the
Warrant Shares Registration Rights Agreement (in each case as defined in the
Purchase Agreement) executed concurrently herewith. The rights granted to the
Holders of Registrable Securities hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
securities under any other agreement in effect on the date hereof, except where
a waiver with respect thereto has been obtained prior to the date of
effectiveness of any Registration Statement required under this Agreement.
(c) Adjustments Affecting the Registrable Securities. The Company
will not take any action, or permit any change to occur, with respect to the
Registrable Securities which would (i) adversely affect the ability of any of
the Holders of Registrable Securities to include such Registrable Securities in
a registration undertaken pursuant to this Agreement or (ii) materially
adversely affect the marketability of the Registrable Securities in any such
registration.
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of a majority of the outstanding Registrable Securities; provided, however,
that Section 7 and Section 9(d) may not be amended, modified or supplemented
without the written consent of each Holder (including any Person who was a
Holder of Registrable Securities disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by the Holders
of at least a majority of the Registrable Securities being sold.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(1) if to a Holder, at the address set forth for such
Holder on the records of the Warrant register or the Common Stock register, a
applicable, of the Company, with a copy to:
Jefferies & Company, Inc.,
11100 Santa Monica Boulevard
Los Angeles, CA 90025
Attn: Jerry Gluck
<PAGE> 20
and
(2) if to the Company:
Club Regina Resorts, Inc.
10000 Memorial Drive
Houston, TX 77024
Telecopier No.: (713) 223-5825
Attention: Secretary
With a copy to (which shall not constitute notice):
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Suite 1900 - South Pennzoil Place
711 Louisiana Street
Houston, TX 77002
Telecopier No.: (713) 236-0822
Attention: Julien R. Smythe, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Securities.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF. The Company hereby irrevocably and
unconditionally: (i) submits itself and its property in any legal action or
proceeding relating to this Agreement or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive jurisdiction of the courts of
the State of New York and the courts of the United States of America for the
Southern District of New York, and appellate courts thereof, and consents and
agrees to such action or proceeding being brought in such courts; and (ii)
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in any such court or that such action or proceeding was
brought in any inconvenient court and agrees not to plead or claim the same.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
<PAGE> 21
(k) Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the securities sold pursuant to the Purchase Agreement.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(l) Securities Held by the Company or Its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities or Warrants is required thereunder, Registrable Securities or
Warrants held by the Company or by any of its affiliates (as such term is
defined in Rule 405 under the Securities Act) shall not be counted (in either
the numerator or the denominator) in determining whether such consent or
approval was given by the Holders of such required percentage.
(m) Subsequent Agreement. If (a) Jefferies is afforded the
reasonable opportunity by the Company to review and comment on the New
Registration Rights Agreement (as defined below) and (b) the Holders of
Registrable Securities are afforded the opportunity to enter into a
registration rights agreement (the "New Registration Rights Agreement") between
such Holders, other shareholders of the Company and the Company that (y)
contains registration rights with respect to the Holders that are substantially
similar to those set forth in Section 3 hereof and that contains other
customary terms and (z) affords such Holders registration and other rights that
are no less favorable than the rights granted to Greenmex, LLC (or any
successor thereto) under such New Registration Rights Agreement, this Agreement
will terminate on the effective date of the New Registration Rights Agreement
(so long as such Holders have been given reasonable advance notice of the
effective date of the New Registration Rights Agreement and have been afforded
the opportunity to and enter into the New Registration Rights Agreement prior
to its effective date).
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
CLUB REGINA RESORTS, INC.
By:
----------------------------
Name:
Title:
JEFFERIES & COMPANY, INC.
By:
----------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.9
CLUB REGINA RESORTS, INC.
1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN
1. PURPOSE. The purpose of this 1997 Non-Employee Directors' Stock Plan (the
"Plan") of Club Regina Resorts, Inc., a Nevada corporation (the "Company"), is
to advance the interests of the Company and its stockholders by providing a
means to attract and retain highly qualified persons to serve as non-employee
directors of the Company and to enable such persons to acquire or increase a
proprietary interest in the Company, thereby promoting a closer identity of
interests between such persons and the Company's stockholders.
2. DEFINITIONS. In addition to terms defined elsewhere in the Plan, the
following are defined terms under the Plan:
(a) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to include
regulations thereunder and successor provisions and regulations thereto.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
References to any provision of the Exchange Act shall be deemed to include rules
thereunder and successor provisions and rules thereto.
(c) "Fair Market Value" of a Share on a given date mean the last sales
price or, if last sales information is generally unavailable, the average of the
closing bid and asked prices per Share on such date (or, if there was no trading
or quotation in the stock on such date, on the next preceding date on which
there was trading or quotation) as reported in The Wall Street Journal;
provided, however, that the "Fair Market Value" of a Share subject to Options
granted effective on the date on which the Company commences an Initial Public
Offering shall be the price of the shares so issued and sold, as set forth in
the first final prospectus used in such Initial Public Offering.
(d) "Initial Public Offering" means an initial public offering of shares
in a firm commitment underwriting registered with the Securities and Exchange
Commission in compliance with the provisions of the Securities Act of 1933, as
amended.
(e) "Option" means the right, granted to a director under Section 6, to
purchase a specified number of Shares at the specified exercise price for a
specified period of time under the Plan. All Options will be non-qualified stock
options.
(f) "Participant" means a person who, as a non-employee director of the
Company, has been granted an Option or Deferred Shares which remain outstanding
or who has elected to be paid fees in the form of Shares or Deferred Shares
under the Plan.
(g) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
<PAGE> 2
(h) "Share" means a share of common stock, $.001 par value, of the Company
and such other securities as may be substituted for such Share or such other
securities pursuant to Section 7.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
Section 8, the total number of Shares reserved and available for issuance under
the Plan is 200,000. Such Shares may be authorized but unissued Shares, treasury
Shares, or Shares acquired in the market for the account of the Participant. For
purposes of the Plan, Shares that may be purchased upon exercise of an Option or
delivered in settlement of Deferred Shares will not be considered to be
available after such Option has been granted or Deferred Share credited, except
for purposes of issuance in connection with such Option or Deferred Share;
provided, however, that, if an Option expires for any reason without having been
exercised in full, the Shares subject to the unexercised portion of such Option
will again be available for issuance under the Plan.
4. ADMINISTRATION OF THE PLAN. The Plan will be administered by the Board of
Directors of the Company; provided, however, that any action by the Board
relating to the Plan will be taken only if, in addition to any other required
vote, such action is approved by the affirmative vote of a majority of the
directors.
5. ELIGIBILITY. Each director of the Company who, on any date on which an
Option is to be granted under Section 6, is not an employee of the Company or
any subsidiary of the Company will be eligible, at such date, to be granted an
Option under Section 6. No person other than those specified in this Section 5
will be eligible to participate in the Plan.
6. OPTIONS. An Option to purchase 5,000 Shares, subject to adjustment as
provided in Section 7, will be automatically granted, (i) at the closing of the
Initial Public Offering, to each person who is serving as a director of the
Company at that time or who becomes a director of the Company at that time and
who is eligible under Section 5 at that time, and thereafter (ii) at the
effective date of his initial election to the Board of Directors (if after the
Initial Public Offering), to each person so elected who is eligible under
Section 5 at that date. In addition, an Option to purchase 5,000 Shares, subject
to adjustment as provided in Section 7, will be automatically granted, at the
close of business of each annual meeting of stockholders of the Company, to each
member of the Board of Directors who is eligible under Section 5 at the close of
business of such annual meeting. Notwithstanding the foregoing, any person who
was automatically granted an Option to purchase 5,000 Shares at the effective
date of initial election to the Board of Directors shall not be automatically
granted an Option to purchase [5,000] shares at the first annual meeting of
stockholders following such initial election if such annual meeting takes place
within three months of the effective date of such person's initial election to
the Board of Directors.
(a) EXERCISE PRICE. The exercise price per Share purchasable upon exercise
of an Option will be equal to 100% of the Fair Market Value of a Share on the
date of grant of the Option.
(b) OPTION EXPIRATION. A Participant's Option will expire at the earlier
of (i) 10 years after the date of grant or (ii) one year after the date the
Participant ceases to serve as a director of the Company for any reason.
2
<PAGE> 3
(c) EXERCISABILITY. Each Option may be exercised commencing immediately
upon its grant.
(d) METHOD OF EXERCISE. A Participant may exercise an Option, in whole
or in part, at such time as it is exercisable and prior to its expiration, by
giving written notice of exercise to the Secretary of the Company, specifying
the Option to be exercised and the number of Shares to be purchased, and paying
in full the exercise price in cash (including by check) or by surrender of
Shares already owned by the Participant having a Fair Market Value at the time
of exercise equal to the exercise price, or by a combination of cash and Shares.
7. ADJUSTMENT PROVISIONS. In the event any dividend or other distribution
(whether in the form of cash, Shares or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, exchange of Shares or other securities of the Company,
extraordinary dividend (whether in the form of cash, Shares, or other property),
liquidation, dissolution, or other similar corporate transaction or event
affects the Shares such that an adjustment is appropriate in order to prevent
dilution or enlargement of each Participant's rights under the Plan, then an
adjustment shall be made, in a manner that is proportionate to the change to the
Shares and otherwise equitable, in (i) the number and kind of Shares remaining
reserved and available for issuance under Section 3, (ii) the number and kind of
Shares to be subject to each automatic grant of an Option under Section 6, and
(iii) the number and kind of Shares issuable upon exercise of outstanding
Options, and/or the exercise price per Share thereof (provided that no
fractional Shares will be issued upon exercise of any Option). In addition, the
Board of Directors is authorized to make such adjustments in recognition of
unusual or non-recurring events (including, without limitation, events described
in the preceding sentence) affecting the Company or any subsidiary or the
financial statements of the Company or any subsidiary, or in response to changes
in applicable laws, regulations or accounting principles. The foregoing
notwithstanding, no adjustment may be made hereunder except as will be necessary
to maintain the proportionate interest of the Participant under the Plan and to
preserve, without exceeding, the value of outstanding Options and potential
grants of Options and the value of outstanding Deferred Shares.
8. CHANGES TO THE PLAN. The Board of Directors may amend, alter, suspend,
discontinue, or terminate the Plan or authority to grant Options under the Plan
without the consent of stockholders or Participants, except that any amendment
or alteration will be subject to the approval of the Company's stockholders at
or before the next annual meeting of stockholders for which the record date is
after the date of such Board action if such stockholder approval is required by
any federal or state law or regulation or the rules of any stock exchange or
automated quotation system as then in effect, and the Board may otherwise
determine to submit other such amendments or alterations to stockholders for
approval; provided, however, that, without the consent of an affected
Participant, no such action may materially impair the rights of such Participant
with respect to any previously granted Option or any previous payment of fees in
the form of Shares or Deferred Shares.
9. GENERAL PROVISIONS.
(a) AGREEMENTS. Options and any other right or obligation under the
Plan may be evidenced by agreements or other documents executed by the Company
and the Participant incorporating the terms and
3
<PAGE> 4
conditions set forth in the Plan, together with such other terms and conditions
not inconsistent with the Plan, as the Board of Directors may from time to time
approve.
(b) COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company will not be
obligated to issue or deliver Shares in connection with any Option in a
transaction subject to the registration requirements of the Securities Act of
1933, as amended, or any other federal or state securities law, any requirement
under any listing agreement between the Company and any stock exchange or
automated quotation system, or any other law, regulation, or contractual
obligation of the Company, until the Company is satisfied that such laws,
regulations, and other obligations of the Company have been complied with in
full. Certificates representing Shares issued under the Plan will be subject to
such stop-transfer orders and other restrictions as may be applicable under such
laws, regulations, and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
(c) LIMITATIONS ON TRANSFERABILITY. Options and any other right under
the Plan will not be transferable by a Participant except by will or the laws of
descent and distribution (or to a designated beneficiary in the event of a
Participant's death), and will be exercisable during the lifetime of the
Participant only by such Participant or his or her guardian or legal
representative; provided, however, that Options (and rights relating thereto)
may be transferred to one or more trusts or other beneficiaries during the
lifetime of the Participant for purposes of the Participant's estate planning or
at the Participant's death, and such transferees may exercise rights thereunder
in accordance with the terms thereof, but only if and to the extent then
permitted under Rule 16b-3 and consistent with the registration of the offer and
sale of Shares related thereto on Form S-8, Form S-3, or such other registration
form of the Securities and Exchange Commission as may then be filed and
effective with respect to the Plan. The Company may rely upon the beneficiary
designation last filed in accordance with this Section 9(c) Options and other
rights under the Plan may not be pledged, mortgaged, hypothecated, or otherwise
encumbered, and shall not be subject to the claims of creditors of any
Participant.
(d) NO RIGHT TO CONTINUE AS A DIRECTOR. Nothing contained in the Plan
or any agreement hereunder will confer upon any Participant any right to
continue to serve as a director of the Company.
(e) NO STOCKHOLDER RIGHTS CONFERRED. Nothing contained in the Plan or
any agreement hereunder will confer upon any Participant (or any person or
entity claiming rights by or through a Participant) any rights of a stockholder
of the Company unless and until Shares are in fact issued to such Participant
(or person) or, in the case an Option, such Option is validly exercised in
accordance with Section 6.
(f) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board of Directors nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other compensatory arrangements for directors as it may deem
desirable.
(g) GOVERNING LAW. The validity, construction, and effect of the Plan
and any agreement hereunder will be determined in accordance with the laws of
the State of Nevada, without giving effect to principles of conflicts of laws,
and applicable federal law.
4
<PAGE> 5
10. STOCKHOLDER APPROVAL, EFFECTIVE DATE, AND PLAN TERMINATION. The Plan will
be effective as of the date of its adoption by the Board, subject to stockholder
approval prior to the commencement of the Initial Public Offering, and, unless
earlier terminated by action of the Board of Directors, shall terminate at such
time as no Shares remain available for issuance under the Plan and the Company
and Participants have no further rights or obligations under the Plan.
5
<PAGE> 1
EXHIBIT 10.10
INDEMNITY AGREEMENT
This Indemnity Agreement (this Agreement) dated as of [________] 1997, is
by and between Club Regina Resorts, Inc., a Nevada corporation (the Company),
and the person whose name is set forth on the signature page hereof under the
heading "INDEMNITEE" (Indemnitee).
R E C I T A L S
A. Indemnitee will serve as an officer and/or director of the Company,
and the Company wishes Indemnitee to serve in such capacity;
B. the Company's Bylaws (the Bylaws), and its Articles of Incorporation
(the Articles), provide for the indemnification of the directors, officers,
employees and agents of the Company and also provide that the Company can
further indemnify such parties pursuant to an agreement or otherwise;
C. the Nevada General Corporation Law, as amended (the NGCL),
specifically provides that indemnification and advancement of expenses provided
in such statute shall not be exclusive of any other rights under any agreement,
and thereby contemplates that agreements may be entered into between the Company
and its directors, officers, employees and agents with respect to the
indemnification of such persons; and
D. to induce Indemnitee to serve as an officer and/or director of the
Company in the future, the Company has deemed it to be in its best interest to
enter into this Agreement with Indemnitee.
W I T N E S S E T H
NOW, THEREFORE, in consideration of Indemnitee's agreement to serve as an
officer or a member of the Company's Board of Directors (the Board) beginning
[_______], the mutual promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto stipulate and agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following capitalized
terms shall have the meanings ascribed to them in this Section.
<TABLE>
<S> <C>
Action - any threatened, pending or completed action,
suit or proceeding, whether civil, criminal,
administrative, or investigative.
Affiliate - any corporation, partnership (general or
limited), limited liability company, joint
venture, trust, or any other organization or
enterprise, foreign or domestic (i) in which
the Company owns, either directly or
indirectly, more than 50% of the outstanding
voting capital stock or other ownership
interest or (ii) over which the Company,
either directly or indirectly, exercises, or
has the ability to exercise, control or
dominion.
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Agent - a duly appointed and authorized officer,
director, employee, agent, representative,
or fiduciary.
Board - the Board of Directors of the Company as
constituted from time to time.
Change in Control - shall have occurred if the Company's
stockholders approve (x) a merger or
consolidation of the Company with any other
entity (other than a merger or consolidation
which would result in the Company's voting
securities outstanding immediately prior
thereto continuing to represent (either by
remaining outstanding or by being converted
into voting securities of the surviving
entity) at least 51% of the combined voting
power of the voting securities of the
Company or such surviving entity outstanding
immediately after such merger or
consolidation), (y) a plan of complete
liquidation of the Company or (z) an
agreement or agreements for the sale or
disposition, in a single transaction or a
series of related transactions, by the
Company of all or substantially all of its
property and assets. Notwithstanding the
foregoing, events otherwise constituting a
Change in Control in accordance with the
foregoing shall not constitute a Change in
Control if such events are solicited by the
Company and are approved, recommended or
supported by the Board in actions taken
prior to, and with respect to, such events.
Damages - losses, penalties, fines, judgments, amounts
paid in settlement, or other damages and
expenses (including reasonable legal and
investigative expenses).
Enterprise - a corporation, general partnership limited
partnership, limited liability company,
joint venture, trust or any other
organization or enterprise.
Nevada Court - a court in the State of Nevada.
</TABLE>
2. AGREEMENT TO SERVE. Indemnitee will serve as an officer or a director
of the Company and/or its Affiliates at the will of the Company or under
separate contract, if such exists, and/or will serve as an officer or a director
of such other Affiliate Enterprise as the Company may request, and shall act in
each such capacity so long as he is duly authorized by the Company in accordance
with the Bylaws or Articles or until such time as Indemnitee tenders his
resignation in writing at the office of the Company.
2
<PAGE> 3
3. INDEMNIFICATION
(a) GENERAL INDEMNIFICATION.
(i) Subject to the exclusions set forth in Section 9, the
Company shall indemnify Indemnitee:
(1) If Indemnitee is a person who was or is a party or is
threatened to be made a party to any Action (other than an action
by or in the right of the Company or any of its Affiliates),
because he is or was acting as an Agent of the Company or any of
its Affiliates, or is or was serving at the request of the
Company as an Agent of another Enterprise, or because of anything
done or not done by him in any such capacity, against Damages
incurred by him in connection with the investigation, defense or
appeal of such Action if:
(a) in the case of a civil, administrative or
investigative (other than criminal) action, suit or
proceeding, he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best
interests of the Company; or
(b) in the case of a criminal action, suit or
proceeding, he reasonably believed his conduct was lawful;
(2) If Indemnitee is a person who was or is a party or is
threatened to be made a party to any Action by or in the right of
the Company or any of its Affiliates to procure a judgment in its
favor because he is or was acting as an Agent of the Company or
any of its Affiliates, or is or was serving at the request of the
Company as an Agent of another Enterprise, or because of anything
done or not done by him in any such capacity, against all Damages
incurred by him in connection with the investigation, defense,
settlement or appeal of such Action if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company; provided, however, that no
indemnification under this subsection shall be made in respect of
any claim, issue, or matter as to which such person shall have
been adjudged to be liable to the Company or any of its
Affiliates unless and then only to the extent that a Nevada Court
or the court in which such Action was brought shall determine
upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses
which the Nevada Court or such other court shall deem proper; and
(ii) To the extent Indemnitee has been successful on the merits
or otherwise in defense of any Action referred to in Section 3(a)(i),
or in the defense of any claim, issue or matter described therein,
against all Damages incurred by him in connection with the
investigation, defense or appeal of such Action.
3
<PAGE> 4
(b) ADDITIONAL INDEMNITY. The parties hereto intend that Indemnitee
shall be indemnified pursuant to this Agreement to the fullest extent
authorized and permitted by the provisions of the Articles, Bylaws, NGCL,
or any other applicable law. If the Articles, Bylaws, NGCL, or any other
applicable law is amended or modified after the date hereof, the parties
hereby agree that Indemnitee shall be entitled any additional
indemnification rights resulting from such amendment or modification, but
only to the extent that such amendment or modification permits the Company
to provide broader indemnification rights than the Articles, Bylaws, NGCL,
or applicable law permitted the Company to provide prior to such amendment
or modification.
(c) INDEMNIFICATION OF ESTATE. If Indemnitee is deceased and is
entitled to indemnification under any provision of this Agreement, the
Company shall indemnify Indemnitee's estate and his spouse, heirs,
administrators, and executors against, and the Company shall, and does
hereby agree to, assume any and all Damages incurred by or for Indemnitee
or his estate in connection with the investigation, defense, settlement or
appeal or any such Action. Further, when requested in writing by the spouse
of Indemnitee and/or the heirs, executors or administrators of Indemnitee's
estate, the Company shall provide appropriate evidence of the Company's
agreement set out herein to indemnify Indemnitee against and to assume such
Damages.
(d) PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Damages incurred by or for him in the investigation,
defense, appeal or settlement of such Action but not, however, for all of
the total amount thereof, the Company shall nevertheless indemnify
Indemnitee against the portion thereof to which Indemnitee is entitled.
4. NOLO CONTENDERE. The termination of any Action which is covered by
this Agreement by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent shall not, of itself, create a presumption for
the purposes of this Agreement that Indemnitee did not meet any particular
standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by applicable law.
5. PAYMENT OF CLAIMS; DETERMINATION OF INDEMNIFICATION RIGHTS
(a) DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not Indemnitee has met the standard of conduct required to
qualify and entitle him, partially or fully, to indemnification under the
provisions hereof shall be made by the Board by a majority vote of a quorum
consisting of directors who were not parties to the subject Action;
provided, however, that if such quorum is not obtainable, the Board, by a
majority vote of disinterested directors, shall appoint independent legal
counsel (who may be the outside counsel regularly employed by the Company),
which will issue a written opinion stating whether Indemnitee has met the
appropriate standard of conduct set forth herein; provided further, if all
directors are deemed to be interested, such independent legal counsel shall
be appointed by a majority vote of the entire Board. The fees and expenses
of counsel in connection with making said determination shall be paid by
the Company and, if requested by such counsel, the Company shall give such
counsel
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<PAGE> 5
an appropriate written agreement with respect to the payment of its
fees and expenses and such other matters as may be reasonably requested by
counsel.
(b) CLAIMS FOR INDEMNIFICATION. Indemnitee shall make any and all
claims for indemnification or requests for advances covered by this
Agreement in writing. Such written claim or request shall contain
sufficient information to reasonably inform the Company about the nature
and extent of the indemnification or advance sought by Indemnitee.
(c) JUDICIAL REVIEW OF INDEMNIFICATION. Notwithstanding Section 5(a),
Indemnitee may, either before or within two years after a determination
regarding indemnification has been made pursuant to the terms of this
Agreement, petition a Nevada Court or any other court of competent
jurisdiction to determine whether Indemnitee is entitled to indemnification
pursuant to the provisions hereof, and such court shall thereupon have the
exclusive authority to make such determination unless and until such court
dismisses or otherwise terminates such Action without having made such
determination. Such court shall, as petitioned, make an independent
determination of whether Indemnitee was entitled to indemnification
pursuant to his Agreement, and, if so, the extent of such indemnification.
If the court shall determine that Indemnitee is entitled to indemnification
hereunder as to any claim, issue, or matter involved in the Action with
respect to which there has been no prior determination pursuant hereto or
with respect to which there has been a prior determination pursuant hereto
that Indemnitee was not entitled, or was only partially entitled, to
indemnification hereunder, the Company shall pay all Damages incurred by
Indemnitee in connection with such judicial determination , as well as the
amount of indemnification specified by such court (to the extent that such
indemnification has not already been paid).
(d) BURDEN OF PROOF. If under applicable law the entitlement of
Indemnitee to be indemnified under this Agreement depends on whether a
standard of conduct has been met, the burden of proof of establishing that
Indemnitee did not act in accordance with such standard of conduct shall
rest with the Company. Indemnitee shall be presumed to have acted in
accordance with such standard and be entitled to indemnification or
advancement of expenses hereunder, as the case may be, unless, based upon a
preponderance of the evidence, it shall be determined by the party
reviewing Indemnitee's conduct that the Indemnitee did not meet such
standard.
6. CHANGE IN CONTROL. If there has not been a Change in Control after
the date hereof, the determination of the (i) rights of Indemnitee to
indemnification and payment of losses and expenses under this Agreement or under
the provisions of the Articles, Bylaws, and the NGCL, (ii) standard of conduct
and (iii) evaluation of the reasonableness of amounts claimed by Indemnitee
shall be made in accordance with Section 5(a) or in such other manner as may be
required by the NGCL or other applicable law. If there has been a Change in
Control after the date hereof, such determination and evaluation shall be made
by a special, independent counsel (which may be the outside counsel regularly
employed by the Company) who is selected by Indemnitee and approved by the
Company, which approval shall not be unreasonably withheld.
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<PAGE> 6
7. LIMITATION OF ACTIONS; RELEASE OF CLAIMS. No Action shall be brought
and no cause of Action shall be asserted by or on behalf of the Company, or any
of its Affiliates, against Indemnitee, his spouse, heirs, executors, or
administrators after the expiration of two years from the date Indemnitee ceases
(for any reason) to serve in any one or more of the capacities covered by this
Agreement, and any claim or cause of Action of the Company, or any of its
Affiliates, shall be extinguished and deemed released unless asserted by filing
of a legal Action within such two year period.
8. SUBROGATION. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents, instruments and papers
and take all actions reasonably requested by the Company to implement such
subrogation rights.
9. LIMITATION OF INDEMNIFICATION RIGHTS. The Company shall not be liable
under this Agreement to make any payment in connection with any claim made
against Indemnitee:
(a) for which payment is actually made to Indemnitee under a valid and
collectible insurance policy, except in respect of any excess beyond the
amount of payment under such insurance;
(b) for which Indemnitee has already been indemnified by the Company
or any of its Affiliates or any other Enterprise of which Indemnitee serves
as Agent by request of the Company, otherwise than pursuant to this
Agreement;
(c) for an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Company within the meaning of Section 16(b)
of the Securities Exchange Act of 1934, as amended, or similar provisions
of any state statutory law or common law;
(d) brought about or contributed to by the knowingly fraudulent,
deliberate, dishonest or willful misconduct of Indemnitee; or
(e) for which indemnification under this Agreement is determined by a
final adjudication of a court of competent jurisdiction to be unlawful and
violative of public policy.
10. PARTICIPATION BY THE COMPANY. With respect to any such Action as to
which Indemnitee notifies the Company of the commencement thereof:
(a) Company will be entitled to participate therein at its own
expense;
(b) Except as otherwise provided below, to the extent that it may
wish, the Company (jointly with any other indemnifying party similarly
notified) will be entitled to assume the defense thereof, with counsel
satisfactory to Indemnitee. After receipt of notice from the Company to
Indemnitee of the Company's election so to assume the defense thereof, the
Company will not be liable to Indemnitee under this Agreement for
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<PAGE> 7
any legal or other expenses subsequently incurred by Indemnitee in
connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have the
right to employ his own counsel in such Action but the fees and expenses of
such counsel incurred after notice from the Company of its assumption of
the defense thereof shall be at the expense of Indemnitee unless: (i) the
employment of counsel by Indemnitee has been authorized by the Company,
(ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of
the defense of such Action, or (iii) the Company shall not in fact have
employed counsel to assume the defense of such Action, in each of which
cases the fees and expenses of counsel employed by Indemnitee shall be
subject to indemnification pursuant to this Agreement. The Company shall
not be entitled to assume the defense of any Action brought in the name of
or on behalf of the Company or as to which Indemnitee shall have made the
conclusion provided for in (ii) above; and
(c) The Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any Action effected without
its written consent, which consent shall not be unreasonably withheld. The
Company shall not settle any Action in any manner which would impose any
penalty or limitation on Indemnitee without Indemnitee's written consent,
which consent shall not be unreasonably withheld.
11. ADVANCES
(a) ADVANCES. Upon any threatened or pending Action in which
Indemnitee is a party or is involved and which may give rise to a right of
indemnification under this Agreement, following written request to the
Company by Indemnitee, the Company shall promptly pay to Indemnitee amounts
to cover expenses reasonably incurred (or to be reasonably incurred) by
Indemnitee in such proceeding in advance of its final disposition upon the
receipt by the Company of (i) a written undertaking executed by or on
behalf of Indemnitee to repay the advance if it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company
as provided in this Agreement and (ii) satisfactory evidence as to the
amount of such expenses.
(b) REPAYMENT OF ADVANCES OR OTHER EXPENSES. Indemnitee agrees that
Indemnitee shall reimburse the Company for all expenses paid by the Company
in defending any Action against Indemnitee upon and only to the extent that
it shall be determined pursuant to this Agreement or by final judgment or
other final adjudication under the provisions of the NGCL or any applicable
law that Indemnitee is not entitled to be indemnified by the Company for
such expenses.
12. OTHER RIGHTS AND REMEDIES. Any indemnification or advance payment of
expenses made pursuant to any provision in this Agreement shall be in addition
to any other rights to which Indemnitee may be entitled in any capacity under
any provision of law, the Bylaws and Articles, any governing instrument of any
Affiliate, this or any other agreement, or pursuant to any vote of the governing
body of any Affiliate or of disinterested members of the Board.
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13. INSURANCE
(a) NO OBLIGATION TO MAINTAIN INSURANCE. The Company shall not under
any circumstances be obligated to maintain an insurance policy or insurance
policies providing officers' and directors' insurance (Insurance).
(b) INSURANCE COVERAGE. If the Company maintains Insurance,
Indemnitee shall be covered by such Insurance in accordance with its terms
to the maximum extent of coverage applicable to any director or officer
then serving the Company.
14. DURATION. All agreements and obligations of the Company contained
herein shall continue during the period Indemnitee is an Agent of the Company or
any of its Affiliates or serves as an Agent at the request of the Company for
any other Enterprise and shall continue thereafter so long as Indemnitee shall
be subject to any possible Action because Indemnitee was an Agent of the Company
or any of its Affiliates or serving in any other capacity referred to herein.
15. NOTICE. Promptly after receipt by Indemnitee of notice of the
commencement of any Action, Indemnitee shall, if he anticipates or contemplates
making a claim for expenses or an advance pursuant to this Agreement, notify the
Company of the commencement of such Action; provided, however, that any delay in
so notifying the Company shall not constitute a waiver or release by Indemnitee
of rights hereunder and that any omission by Indemnitee to so notify the Company
shall not relieve the Company from any liability which it may have to Indemnitee
hereunder or otherwise than under this Agreement.
16. INTENT OF PARTIES. The Company expressly confirms and agrees that it
has entered into this Agreement and assumed the obligations imposed on the
Company hereby to induce Indemnitee to serve as an officer and/or director of
the Company and acknowledges that Indemnitee is relying upon this Agreement in
agreeing to serve in such capacity.
17. EFFECTIVENESS OF AGREEMENT. This Agreement is effective for, and shall
apply to, (i) any claim which is asserted or threatened before, on or after the
date of this Agreement but for which no Action has been brought prior to the
date hereof and (ii) any Action which is threatened before, on or after the date
of this Agreement but which is not pending prior to the date hereof. This
Agreement shall not apply to any Action which was brought before the date of
this Agreement. So long as the foregoing is satisfied, this Agreement shall be
effective for, and be applicable to, acts or omissions occurring to, on or after
the date hereof.
18. MISCELLANEOUS
(a) SEVERABILITY. If any provision of this Agreement shall be held to
be unenforceable under any applicable law, then such unenforceability shall
not invalidate the entire Agreement. Such provision shall be deemed to be
modified to the extent necessary to render it enforceable, and if no such
modification shall render it enforceable, then this Agreement shall be
construed as if not containing the provisions held to be unenforceable, and
the rights and obligations of the parties shall be construed and enforced
accordingly.
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(b) ENTIRE AGREEMENT. This Agreement, those documents expressly
referred to herein and any other documents of even date herewith embody the
complete agreement and understanding between the parties hereto and
supersede and pre-empt any prior understandings, agreements or
representations between the parties, written, oral or otherwise, which may
have related to the subject matter hereof in any way.
(c) IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which together shall constitute one and the same
instrument.
(d) HEADINGS. The headings used in this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
(e) USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein," "hereof," and "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular paragraph,
subparagraph, section, subsection, or other subdivision. Whenever the
context may require, any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns, pronouns and verbs shall include the plural and vice versa.
(f) MODIFICATION; WAIVER; TERMINATION. No supplement, modification,
or amendment, or termination of this Agreement shall be effective unless
executed in writing by both of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
(g) NOTICES. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given
if delivered by hand (return receipt requested) or sent by overnight
delivery service, cable, telegram, or facsimile transmission to the parties
at the following addresses or at such other addresses as shall be specified
by the parties by like notice:
(i) if to Indemnitee, to the address on the signature page
hereof; and
(ii) if to the Company, to:
Club Regina Resorts, Inc.
711 Louisiana, Suite 2310
Houston, Texas 77002
Attention: President
Notice so given shall, in the case of notice so given by mail,
be deemed to be given and received on the fourth calendar day after
posting, in the case of notice so given by overnight delivery service, on
the date of actual delivery and, in the case of notice so given by cable,
telegram, facsimile transmission or, as the case may be, personal delivery.
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(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEVADA, EXCLUDING CONFLICT OF LAWS PRINCIPLES.
(i) SURVIVAL; CONTINUATION. The rights of Indemnitee under this
Agreement shall inure to the benefit of Indemnitee, his heirs, executors,
administrators, personal representatives and assigns, and this Agreement
shall be binding upon the Company, its successors and assigns. If the
Company, in a single transaction or series of related transactions, sells,
leases, exchanges, or otherwise disposes of all or substantially all of its
property and assets, the Company shall, as a condition precedent to any
such transaction, cause effective provision to be made so that the Persons
acquiring such property and assets shall become bound by and replace the
Company under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first above written.
CLUB REGINA RESORTS, INC.
By:
----------------------------
Douglas Y. Bech, Chairman
INDEMNITEE
By:
----------------------------
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EXHIBIT 10.11
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this Agreement), dated as of
January ____, 1998, is by and among Club Regina Resorts, Inc., a Nevada
corporation (the Company), and those stockholders of the Company listed on
Schedule A (collectively, the Stockholders).
RECITALS
A. The Stockholders own that number of shares of common stock,
par value $.001 (the Common Stock), of the Company set forth
beside each Stockholder's name on the signature page hereof.
B. The Company desires to grant the Stockholders the registration
rights contained herein and the Stockholders desire to provide
for the controlled distribution of their shares of common
stock.
AGREEMENT
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each Stockholder and the Company, the parties hereto agree as
follows:
SECTION 1
DEFINITIONS
1.1 SPECIFIC DEFINITIONS. The following terms are defined as
follows:
Affiliate shall have the meaning indicated in Rule 12b-2 under the
Exchange Act.
Board shall mean the board of directors of the Company.
Common Stock shall have the meaning indicated in the Recitals.
Effective Time shall mean the date that is 180 days after an IPO.
Exchange Act shall mean the Securities Exchange Act of 1934, as
amended.
Indemnified Party shall have the meaning indicated in Section 6.3.
Indemnifying Party shall have the meaning indicated in Section 6.3.
Inspectors shall have the meaning indicated in Section 3.1 (1).
IPO shall mean the first firm, underwritten, public offering of the
Company's common stock pursuant to a registration statement filed with the
Securities and Exchange Commission.
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Loss or Losses shall have the meaning indicated in Section 6. 1.
Person shall mean any business entity (including, without limitation,
a corporation, partnership (limited or general), limited liability company or
business trust) or a natural person.
Prospectus shall have the meaning indicated in Section 6. 1.
Register, registered and registration and words of similar import
shall mean a registration effected by preparing and filing with the SEC a
registration statement in compliance with the Securities Act, and the
declaration and ordering by the SEC of effectiveness of such registration
statement or document.
Registrable Common Stock shall mean (i) at or prior to the Effective
Time, any Common Stock held or acquired by any Stockholder (or its permitted
assigns) and any securities issued or issuable in respect of any Registrable
Common Stock by way of any stock split or stock dividend or in connection with
any combination of shares, recapitalization, merger, consolidation,
reorganization or otherwise and (ii) after the Effective Time, any Common Stock
issued pursuant to a resolution of the Board stating that such Common Stock
shall be deemed Registrable Common Stock under this Agreement.
SEC shall mean the United States Securities and Exchange Commission.
Securities Act shall mean the Securities Act of 1933, as amended.
SECTION 2
REGISTRATION RIGHTS
2.1 PIGGYBACK REGISTRATION RIGHTS.
(a) If at any time from and after an IPO the Company shall propose
to register any Common Stock for public sale under the Securities Act, the
Company shall give the Stockholders prompt written notice of the proposed
registration and shall include in such registration on the same terms and
conditions as the other securities included in such registration such number of
shares of Registrable Common Stock as the Stockholders shall request within 10
business days after the giving of such notice; provided, however, that the
Company may at any time prior to the effectiveness of any such registration
statement, in its sole discretion and without the consent of any Stockholder,
abandon the proposed offering in which any Stockholder had requested to
participate; and provided further that any Stockholder shall be entitled to
withdraw any or all of its shares of Registrable Common Stock to be included in
a registration statement under this Section 2.1(a) at any time prior to the
date on which the registration statement with respect to such shares of
Registrable Common Stock is declared effective by the SEC. The Company shall be
entitled to select the investment bankers and/or managers, if any, to be
retained in connection with any registration referred to in this Section
2.1(a).
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<PAGE> 3
(b) RESTRICTIONS ON PIGGYBACK REGISTRATION RIGHTS.
Notwithstanding anything to the contrary contained elsewhere herein, the
registration rights granted to the Stockholders in Section 2.1(a) are expressly
subject to the following terms and conditions:
(i) The Company shall not be obligated to include the
number of shares of Registrable Common Stock in an offering as contemplated by
Section 2.1(a) if the managing underwriter or underwriters of a proposed
underwritten offering advise the Company in writing that in its or their good
faith judgment the total amount of securities, including securities requested
to be included in a registration of Company Common Stock pursuant to this
Section 2.1 and other similar securities, to be included in such offering may
jeopardize the success of such offering by the inclusion of such number (or a
portion of such number) of shares (after consideration of all relevant factors
including, without limitation, the impact of any delay caused by including such
shares).
(ii) The Company shall not be obligated to include any
shares of Registrable Common Stock in any registration by the Company of any
Common Stock in connection with any merger, acquisition, exchange offer, or any
other business combination, including any transaction within the scope of Rule
145 promulgated pursuant to the Securities Act, subscription offer, dividend
reinvestment plan or stock option or other director or employee incentive or
benefit plan.
(iii) The Company shall not be required to include a
Stockholder's Registrable Common Stock in an offering unless such Stockholder
accepts the terms of the underwriting agreement between the Company and the
managing underwriter or underwriters and otherwise complies with the provisions
of Section 6. If the Stockholder accepts the terms of the underwriting
agreement and otherwise complies with the provisions of Section 6, then the
securities to be included in such offering shall be allocated first to the
Company and then, to the extent that any additional securities can, in the good
faith judgment of such managing underwriter or underwriters, be sold without
creating any such jeopardy to the success of such offering, pro rata among each
Person participating in the offering based upon the number of shares of Common
Stock initially requested to be sold by each such holder.
(iv) If some but less than all of a Stockholder's shares
of Registrable Common Stock are included in an offering contemplated by a
registration statement pursuant to Section 2.1(a), such Stockholder shall
execute one or more "lockup" letters, in customary form, setting forth an
agreement by such Stockholder not to offer for sale, sell, grant any option for
the sale of, or otherwise dispose of, directly or indirectly, any shares of
Common Stock, or any securities convertible into or exchangeable into or
exercisable for any shares of Common Stock, for such period not to exceed six
months from the date such offering commences, which the managing underwriter or
underwriters of such offering may reasonably request.
2.2 DEMAND REGISTRATION RIGHTS.
(a) (i) Upon receipt of a written request from holders of
more than 50% of the Registrable Common Stock after the Effective Time, to
register under the Securities Act (whether for purposes of a public offering,
an exchange offer or otherwise) all or part of the Registrable Common Stock
held by such Stockholders, the Company shall as expeditiously as reasonably
possible prepare and file, and use its best efforts to cause to become
effective as soon thereafter as practicable, a registration statement under the
Securities Act to effect the offering of such
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Registrable Common Stock in the manner specified in such request, including,
without limitation, on a "shelf" or "delayed" basis; and (ii) the Company shall
be entitled to select and retain one or more investment bankers or managers
reasonably acceptable to the Stockholders in connection with any underwritten
offerings made pursuant to this Section 2.2.
(b) TERMS AND CONDITIONS OF DEMAND REGISTRATION RIGHTS.
Notwithstanding anything to the contrary contained elsewhere herein, the
registration rights granted to the Stockholders in Section 2.2(a) are expressly
subject to the following terms and conditions:
(i) Upon receipt of a request to register Registrable
Common Stock pursuant to Section 2.2(a), the Company shall give the
Stockholders prompt written notice of the proposed registration and will give
such Stockholders the right to include their shares of Registrable Common Stock
in such registration on the same terms and conditions as the requesting
Stockholders. Each Stockholder so notified shall have 20 days to request that
their Registrable Common Stock be included in such registration. Failure to so
request shall be deemed a waiver of such Stockholder's rights with respect to
such registration unless such registration is not completed.
(ii) The Company shall not be required to include a
Stockholder's Registrable Common Stock in an offering unless such Stockholder
accepts the terms of the underwriting agreement between the Company and the
managing underwriter or underwriters and otherwise complies with the provisions
of Section 6. If the Stockholder accepts the terms of the underwriting
agreement and otherwise complies with the provisions of Section 6, then the
securities to be included in such offering shall be allocated first to the
Stockholders requesting registration of their Registrable Common Stock
hereunder, and then, to the extent that any additional securities can, in the
good faith judgment of such managing underwriter or underwriters, be sold
without creating any such jeopardy to the success of such offering, among the
Company and other Persons having the right to register securities in connection
with such registration. To the extent it is impracticable to include all of the
Registrable Common Stock requested to be included in such registration, then
the shares of Registrable Common Stock to be sold shall be allocated pro rata
among each Stockholder participating in the offering based upon the number of
shares of Registrable Common Stock initially requested to be sold by each such
Stockholder. If the underwriters determine that less than 25% of the original
shares of Registrable Common Stock requested to be included in such
registration cannot be registered, then the holders of 51% of the Registrable
Common Stock requested to be included may withdraw the request for registration
and such request shall not count hereunder.
(iii) The Stockholders shall be entitled to one request to
register Registrable Common Stock under the terms of Section 2.2(a). Each such
request shall include a request as to whether the requesting Stockholders
desire such registration to be a firm underwritten registration or a continuous
or "shelf" registration; provided that the Company shall not be required to
comply with a request for a "shelf" registration if its Board of Directors
determines that such an action would be harmful to the Company's stock price or
otherwise. A "request" as it is used in this subparagraph (iii) shall be deemed
to have occurred only upon completion of a requested registration and the
subsequent sale of Registrable Common Stock.
(iv) In no event shall the Registrable Common Stock to be
offered under a registration statement prepared and filed pursuant to Section
2.2(a) constitute less than 5% of the
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then outstanding shares of Common Stock, unless the shares of Registrable Common
Stock to be offered comprise all of the shares of Registrable Common Stock held
by all of the Stockholders. For purposes of meeting the 5% threshold of this
Section 2.2(b)(iv), the Stockholders may aggregate their shares of Registrable
Common Stock to be included therein.
(v) The Company shall be entitled to defer for a
reasonable period of time, but not in excess of 90 days, the filing of any
registration statement otherwise required to be prepared and filed by it under
Section 2.2(a) if the Company notifies the Stockholders having made a
registration request within ten business days after the Company has received
the registration request under Section 2.2 that the Company (i) is at such time
conducting or about to conduct an underwritten public offering of its
securities for its own account and the Board determines in good faith that such
offering would be materially adversely affected by such registration requested
by the Stockholders or (ii) would be required to disclose in such registration
statement information not otherwise then required by law to be publicly
disclosed and, in the good faith judgment of the Board, such disclosure might
adversely affect any material business transaction or negotiation in which the
Company is then engaged. If the Company elects to defer the filing of a
registration statement pursuant to this Section 2.2(b)(v), the Stockholders may
withdraw their request, in writing, during the time of such deferral and such
request shall not be counted toward the limit set forth in Section 2.2(b)(iii).
(vi) The Stockholders shall not be entitled to exercise
their rights pursuant to Section 2.2(a) during the 180-day period immediately
following the effective date of any registration statement filed by the Company
under the Securities Act (other than on Form S-8 or another similar form) in
respect of an offering or sale of securities of the Company by or on behalf of
the Company or any other stockholder of the Company.
(vii) If some but less than all of a Stockholder's shares
of Registrable Common Stock are included in an offering contemplated by a
registration statement pursuant to Section 2.2(a) and the offering is an
underwritten offering, such Stockholder shall execute one or more "lockup"
letters, in customary form, setting forth an agreement by such Stockholder not
to offer for sale, sell, grant any option for the sale of, or otherwise dispose
of, directly or indirectly, any shares of Common Stock, or any securities
convertible into or exchangeable into or exercisable for any shares of Common
Stock, for a period of not longer than that which any investment banker or
manager engaged in connection with such offering may reasonably request from
the date such offering commences.
SECTION 3
COVENANTS
3.1 COVENANTS OF THE COMPANY. In connection with any offering of
shares of Registrable Common Stock pursuant to this Agreement, the Company
shall:
(a) Prepare and file with the Commission such amendments
and post-effective amendments to the registration statement as may be
necessary to keep the registration statement effective for a period of
not less than 120 days, or such shorter period which will terminate
when all Registrable Common Stock covered by such registration
statement have been sold or withdrawn at the request of participating
holders of Common
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Stock and cause the prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act;
(b) Make available to each Stockholder and to each
managing underwriter, if any, (i) at least two business days prior to
filing with the SEC, any registration statement covering shares of
Registrable Common Stock, any amendment or supplement thereto, and any
prospectus used in connection therewith, which documents will be
subject to the reasonable review of such Stockholders and such
underwriter, and, with respect to a registration statement prepared
pursuant to Section 2, the Company shall not file any such documents
with the SEC to which any such Stockholder shall reasonably object;
and (ii) a copy of any and all transmittal letters or other
correspondence with the SEC or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any
domestic or foreign securities exchange) relating to such offering of
shares of Registrable Common Stock;
(c) Furnish to each Stockholder and each managing
underwriter, if any, such number of copies of such registration
statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference
therein) and the prospectus included in such registration statement
(including each preliminary prospectus and prospectus supplement) as
such Stockholder or such underwriter may reasonably request to
facilitate the sale of the shares of Registrable Common Stock;
(d) After the filing of such registration statement,
promptly notify each Stockholder of any stop order issued or, to the
knowledge of the Company, threatened to be issued by the SEC and
promptly take all reasonable actions to prevent the entry of such stop
order or to obtain its withdrawal if entered;
(e) Use its commercially reasonable efforts to qualify
such shares of Registrable Common Stock for offer and sale under the
securities, "blue sky" or similar laws of such jurisdictions
(including any foreign country or any political subdivision thereof in
which shares of Common Stock are then listed) as any Stockholder or
any underwriter shall reasonably request and use its commercially
reasonable effort, to obtain all appropriate registrations, permits
and consents required in connection therewith, except that the Company
shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction where it is not
so qualified, or to subject itself to taxation or to file a general
consent to service of process in any such jurisdiction;
(f) Furnish to each managing underwriter, if any, an
opinion of counsel for the Company addressed to each of them, dated as
of the date of the closing of the offering of shares of Registrable
Common Stock, and a "comfort" letter or letters signed by the
Company's independent public accountants, each in reasonable and
customary form and covering such matters of the type customarily
covered by opinions or comfort letters delivered by such parties in
underwritten public offerings, and use its commercially reasonable
efforts to have copies of such opinions and comfort letters delivered
to each Stockholder participating in the offering;
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(g) Promptly inform each Stockholder (i) in the case of
any offering of shares of Registrable Common Stock in respect of which
a registration statement is filed under the Securities Act, of the
date on which such registration statement or any post-effective
amendment thereto becomes effective and, if applicable, of the date of
filing a Rule 430A prospectus (and, in the case of an offering abroad
of shares of Registrable Common Stock, of the date when any required
filing under the securities and other laws of such foreign
jurisdictions shall have been made and when the offering may be
commenced in accordance with such laws) and (ii) of any request by the
SEC, any securities exchange, government agency, self-regulatory body
or other body having jurisdiction for any amendment of or supplement
to any registration statement or preliminary prospectus or prospectus
included therein or any offering memorandum or other offering document
relating to such offering;
(h) Subject to Section 3.1(i), until the earlier of (i)
such time as all of the shares of Registrable Common Stock being
offered have been disposed of in accordance with the intended method
of disposition by such Stockholder set forth in the registration
statement or other offering document (and the expiration of any
prospectus delivery requirements in connection therewith) or (ii) the
expiration of 120 days after such registration statement or other
offering document becomes effective (unless the offering is a
continuous offering of securities under Rule 415, in which case until
the earliest of the date the offering is completed and the second
anniversary of such effective date; provided, that if the
effectiveness of such registration statement is suspended for any
reason, then the period contemplated by clause (i) above shall extend
for the time such registration statement's effectiveness was
suspended) keep effective and maintain any registration, qualification
or approval obtained in connection with the offering of the shares of
Registrable Common Stock, and amend or supplement the registration
statement or prospectus or other offering document used in connection
therewith to the extent necessary to comply with applicable securities
laws;
(i) Use its commercially reasonable efforts to have the
shares of Registrable Common Stock listed on any domestic and foreign
securities exchanges on which the Common Stock is then listed;
(j) As promptly as practicable, notify each Stockholder
at any time when a prospectus relating to the sale of the shares of
Registrable Common Stock is required by law to be delivered in
connection with sales by an underwriter or dealer, of the occurrence
of an event requiring the preparation of a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
such shares, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading, and as
promptly as practicable make available to each Stockholder and to each
managing underwriter, if any, any such supplement or amendment; if the
Company shall give such notice, the Company shall extend the period
during which such registration statement shall be maintained effective
as provided in Section 3.1(a) or Section 3.1(i) by the number of days
during the period from and including the date of the giving of such
notice to the date when the Company shall make available to each
Stockholder such supplemented or amended prospectus;
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(k) Make available for inspection during the normal
business hours of the Company by any Stockholder, any underwriter
participating in such offering, and any attorney, accountant or other
agent retained by any such Stockholder or any such underwriter in
connection with the sale of shares of Registrable Common Stock
(collectively, the Inspectors), all relevant financial and other
records, pertinent corporate documents and properties of the Company
as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the officers, directors and
employees of the Company to supply all information reasonably
requested by any such Inspector in connection with such registration
statement; provided, however, that (i) in connection with any such
inspection, any such Inspectors shall cooperate to the extent
reasonably practicable to minimize any disruption to the operation by
the Company of its business and (ii) any records, information or
documents shall be kept confidential by such Inspectors, unless (A)
such records, information or documents are in the public domain or
otherwise publicly available or (B) disclosure of such records,
information or documents is required by a court or administrative
order or by applicable law and notice of such requirement is promptly
given to the Company after being received;
(l) Enter into usual and customary agreements (including
an underwriting agreement in usual and customary form) and take such
other actions as are reasonably required to expedite or facilitate the
sale of the Registrable Common Stock.
(m) Make "generally available to its security holders"
(within the meaning of Rule 158 under the Securities Act) an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder no later than 45 days after the end of the
12-month period beginning with the first day of the Company's first
fiscal quarter commencing after the effective date of the registration
statement, which earnings statement shall cover said 12-month period;
(n) If requested by the managing underwriter or
underwriters or the Stockholder, promptly incorporate in a prospectus
supplement or post-effective amendment such information as the
managing underwriter or underwriters or any participating Stockholder,
as the case may be, reasonably requests to be included therein,
including, without limitation, information with respect to the number
of shares of Registrable Common Stock being sold by the Stockholder to
any underwriter or underwriters, the purchase price being paid
therefor by such underwriter or underwriters and with respect to any
other terms of an underwritten offering of the Registrable Common
Stock to be sold in such offering, and promptly make all required
filings of such prospectus by supplement or post-effective amendment;
and
(o) Take all other commercially reasonable steps
necessary to effect the registration of the Registrable Common Stock
contemplated hereby.
3.2 COVENANT OF STOCKHOLDERS. Each Stockholder agrees and
covenants that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3.1(i), such Stockholder will
forthwith discontinue disposition of Registrable Common Stock pursuant to the
registration statement covering such Registrable Common Stock until such
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Stockholder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.1(i), and, if so directed by the Company, such
Stockholder will deliver to the Company all copies, other than permanent file
copies, then in such Stockholder's possession of the most recent prospectus
covering such Registrable Securities at the time of receipt of such notice.
SECTION 4
RESTRICTIONS ON PUBLIC SALE BY THE COMPANY AND OTHERS
The Company agrees not to effect any public sale or distribution of
any securities during the 180-day period commencing on the effective date of a
registration statement filed pursuant to Section 2.2, except in connection with
any merger, acquisition, exchange offer, or any other business combination,
including any transaction within the scope of Rule 145 promulgated pursuant to
the Securities Act, subscription offer, dividend reimbursement plan or stock
option or other director or employee incentive or benefit plan;
SECTION 5
EXPENSES
All expenses incurred in connection with the registration of
Registrable Common Stock, including, without limitation, all filing fees,
escrow fees, fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements, if any, of the Company's counsel in
connection with blue sky qualifications of the Registrable Common Stock),
rating agency fees, printing expenses, messenger and delivery expenses,
internal expenses (including, without limitation, all salaries and expenses of
the Company's officers and employees performing legal or accounting duties),
the fees and expenses incurred in connection with the listing of the securities
to be registered on each securities exchange on which similar securities issued
by the Company are then listed, and fees and disbursements of counsel for the
Company and the Company's independent certified public accountants (including
the expenses of any special audit or "cold comfort" letters required by or
incident to such performance) directly attributable to the registration of
securities, Securities Act liability insurance (if the Company elects to obtain
such insurance), and the fees and expenses of any special experts or other
persons retained by the Company will be borne by the Company. The Company shall
have no obligation to pay and shall not pay any underwriting fees, discounts or
commissions in connection with any Registrable Common Stock registered pursuant
to this Agreement or any out-of-pocket expenses (including, without limitation,
legal fees) of the holders thereof in connection therewith.
SECTION 6
INDEMNIFICATION
6.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Stockholder, its officers, directors and
agents, and will agree to indemnify and hold harmless any underwriter of
Registrable Common stock, and each person, if any, who controls any of the
foregoing persons within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (individually, a Loss; collectively, Losses) arising
from or caused by (a) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus
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relating to the Registrable Common Stock (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (b) any violation or alleged violation
by the Company of the Securities Act, any blue sky laws, securities laws or
other applicable laws of any state in which shares of Registrable Common Stock
are offered and relating to action or inaction required of the Company in
connection with such offering; and will reimburse each such person for any
legal or other out-of-pocket expenses reasonably incurred in connection with
investigating, or defending against, any such Loss (or any proceeding in
respect thereof), subject to Section 6.3, except that the indemnification
provided for in this Section 6.1 shall not apply to Losses that are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon and in conformity with information furnished in writing to the
Company by or on behalf of any Stockholder expressly for use therein.
Notwithstanding the foregoing, the Company shall not be liable in any such case
to the extent that any such Loss arises out of, or is based upon, an untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus if (i) a Stockholder failed to send or deliver a
copy of the prospectus included in the relevant registration statement at the
time it became effective (the Prospectus) with or prior to the delivery of
written confirmation of the sale of Registrable Common Stock to the person
asserting such Loss or who purchased such Registrable Common Stock which are
the subject thereof if, in either case, such delivery is required by the
Securities Act and (ii) the Prospectus would have corrected such untrue
statement or omission or alleged untrue statement or alleged omission; and the
Company shall not be liable in any such case to the extent that any such Loss
arises out of, or is based upon, an untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact in the Prospectus, if such untrue statement or alleged untrue
statement or omission or alleged omission is corrected in any amendment or
supplement to the Prospectus and if, having previously been furnished by or on
behalf of the Company with copies of the Prospectus as so amended or
supplemented, a Stockholder thereafter fails to deliver such Prospectus as so
amended or supplemented prior to or concurrently with the sale of Registrable
Common Stock if such delivery is required by the Securities Act.
6.2 INDEMNIFICATION BY STOCKHOLDERS. Each Stockholder agrees to
indemnify and hold harmless the Company, its officers and directors, and each
person, if any, who controls the Company within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent
as the indemnity made pursuant to Section 6.1(a) from the Company to such
Stockholder, but only with reference to (a) information furnished in writing by
or on behalf of such Stockholder expressly for use in any registration
statement or prospectus relating to shares of Registrable Common Stock, or any
amendment or supplement thereto, or any preliminary prospectus or (b) any
Losses of the Company that would not have been incurred but for such
Stockholder failing to deliver an amended Prospectus as contemplated by the
last sentence of Section 6.1.
6.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 6.1 or
6.2, such person (the Indemnified Party) shall promptly notify the person
against whom such indemnity may be sought (the Indemnifying Party) in writing,
provided that the omission to so notify the Indemnifying Party will not relieve
the Indemnifying
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Party of any liability it may have under this Agreement or otherwise except to
the extent of any Loss arising from such omission. The Indemnifying Party, upon
the request of the Indemnified Party, shall retain counsel reasonably
satisfactory to such Indemnified Party to represent such Indemnified Party and
any others the Indemnifying Party may designate in such proceeding and shall
pay the fees and disbursements of such counsel related to such proceeding. In
any such proceeding, any Indemnified Party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party unless (a) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention, (b) the Indemnifying Party
shall have failed to comply with its obligations under the preceding sentence
or (c) the Indemnified Party shall have been advised by the Indemnifying
Party's counsel in writing that actual or potential differing interests exist
between the Indemnifying Party and the Indemnified Party. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent, which consent shall not be unreasonably withheld. The
Indemnifying Party shall not agree to any settlement as the result of which any
remedy or relief, other than monetary damages for which the Indemnifying Party
shall be fully responsible, shall be applied to or against an Indemnified Party
without the prior written consent of such Indemnified Party.
6.4 CONTRIBUTION. If the indemnification provided for in this
Section 6.4 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any Losses referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses in
such proportion to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the Losses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 6.3, any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding. No party
shall be liable for contribution with respect to any action or claim settled
without its written consent, which consent shall not be unreasonably withheld.
Notwithstanding the provisions of this Section 6.4, no Stockholder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Common Stock of such Stockholder was
offered to the public exceeds the amount of any damages which such Stockholder
has otherwise been required to pay due to such untrue or alleged untrue
statement or omission of alleged omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4 were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
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SECTION 7
TERMINATION
This Agreement shall terminate with respect to any Stockholder and
their Common Stock upon the earlier of (a) the first such instance as such
Stockholder ceases to own any shares of Common Stock or (b) with respect to
Stockholders that hold less than 10% of the issued and outstanding Common Stock
(other than with respect to any such Stockholder that is an Affiliate of the
Company), the second anniversary (or if the holding period for non affiliates
contemplated by Rule 144(d)(1) under the Securities Act is amended, such amount
of time) of the date such Stockholder purchased the last share of Common Stock
that such Stockholder purchased from the Company. For this Section 7, a
Stockholder shall be deemed to own any and all Common Stock owned by (i) such
Stockholder and (ii) its Affiliates. Notwithstanding the foregoing, the
Company's and Stockholders' rights, duties and obligations under Section 5 and
Section 6 shall survive the termination of this Agreement.
SECTION 8
AVAILABLE INFORMATION
The Company shall take such reasonable actions and file such
information, documents and reports as shall be required by the SEC as a
condition to the availability of Rule 144 and Rule 144A, or any successor
provisions.
SECTION 9
ASSIGNMENT OF RIGHTS
9.1 ASSIGNMENT OF RIGHTS. The rights of any Stockholder under this
Agreement with respect to any Registrable Common Stock owned by such
Stockholder may not be assigned, except to (i) an Affiliate, (ii) an employee
(or controlled Affiliate thereof) of a Stockholder, or (iii) another
Stockholder having rights to register securities hereunder.
SECTION 10
MISCELLANEOUS
10.1 PROVISION OF INFORMATION. Each Stockholder shall, and shall
cause it officers, directors, employees and agents to complete and execute all
such questionnaires as the Company shall reasonably request in connection with
any registration pursuant to this Agreement.
10.2 INJUNCTIONS. Irreparable damage would occur if any of the
provisions of this Agreement were not performed in accordance with its
specified terms or were otherwise breached. Therefore, the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms of
provisions hereof in any court having jurisdiction, such remedy being in
addition to any other remedy to which they may be entitled at law or in equity.
10.3 SEVERABILITY. If any term or provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable, the remainder of
the terms and provisions set forth
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herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their best
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term or provision.
10.4 FURTHER ASSURANCES. Subject to the specific terms of this
Agreement, each Stockholder and the Company shall make, execute, acknowledge
and deliver such other instruments and documents, and take all such other
actions, as may be reasonably required to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
10.5 ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the
entire understanding of the parties with respect to the transactions
contemplated hereby and supersedes all agreements and understandings entered
into prior to the execution hereof. This Agreement may be modified or
provisions may be waived hereunder only by a written instrument duly executed
by or on behalf of the Company and other Stockholders who collectively own in
excess of 50% of the Registrable Common Stock; provided that no such amendment
which materially and adversely effects less than all holders of Registrable
Common Stock shall be effective except with respect to such materially and
adversely affected holders that consent to such amendment in writing. In
addition, shares of Common Stock and Stockholders may be added to this
Agreement upon the resolution of a majority of the Board of Directors of the
Company to such effect.
10.6 COUNTERPARTS. For the convenience of the parties hereto, any
number of counterparts of this Agreement may be executed by the parties hereto,
but all such counterparts shall be deemed one and the same instrument.
10.7 NOTICES. All notices, consents, requests, demands, and other
communications hereunder shall be in writing and shall be given by hand or by
mail (return receipt requested) or sent by overnight delivery service, cable,
telegram, or facsimile transmission to the parties at the address specified
beside each party's name on the signature pages hereto or at such other address
as shall be specified by the parties by like notice.
Notice so given shall, in the case of notice so given by mail, be
deemed to be given and received on the fourth business day after posting, in
the case of notice so given by overnight delivery service, on the day after
notice is deposited with such service, and in the case of notice so given by
cable, telegram, facsimile transmission or, as the case may be, personal
delivery, on the date of actual delivery.
10.8 GOVERNING LAW. This Agreement is governed by the laws of the
state of Texas without regard to any choice of law principles.
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10.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of and be enforceable by and against the
successors and permitted assigns of the parties hereto, including and without
the need for an express assignment, subsequent holders of Registrable Common
Stock that are permitted assigns pursuant to Section 9.1. Except as provided
herein, the parties may not assign their rights under this Agreement and the
Company may not delegate its obligations under this Agreement. Any attempted
assignment or delegation prohibited hereby shall be void.
10.10 PARTIES IN INTEREST. Except as otherwise specifically provided
herein, nothing in this Agreement expressed or implied is intended or shall be
construed to confer any right or benefit upon any person, firm or corporation
other than Stockholder and the Company and their respective successors and
permitted assigns.
10.11 SHARES SUBJECT TO THIS AGREEMENT; EFFECTIVE TIME. All shares
of Registrable Common Stock owned or acquired by any Stockholder at or after
the Effective Time shall be subject to, and entitled to the benefit of this
Agreement, such rights to be effective from and after the Effective Time.
IN WITNESS WHEREOF, Each Stockholder and the Company have caused this
Agreement to be duly executed as of the date first above written.
[STOCKHOLDER]
Number of Shares of
Common Stock: [________]
Address: By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CLUB REGINA RESORTS, INC.
Address: By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
10,000 Memorial Drive
Houston, Texas 77024
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EXHIBIT 10.12
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement, dated as of January __________, 1998, is
by and among Club Regina Resorts, Inc., a Nevada corporation (the Company),
Criswell Associates, L.L.C. (Criswell LLC), William T. Criswell, IV (Criswell),
Douglas Elliman Funding Corp., a Delaware corporation (DE Funding and, together
with Criswell and Criswell, LLC, the Criswell Parties), John McCarthy
(McCarthy), Greenmex LLC (Greenmex) and certain partners of CR Management
Company listed on Schedule I (the Raintree Shareholders and, together with
McCarthy, the Criswell Parties and Greenmex, the Shareholders).
In consideration of the mutual representations, covenants and
agreements contained herein, and certain other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. CAPITALIZATION OF THE COMPANY. Each Shareholder represents and
warrants to the Company and the other Shareholders that such Shareholder owns
the number of shares of Stock set forth on the signature pages hereto. The
Company represents and warrants to each Shareholder that as of the date hereof,
the authorized capital stock of the Company consists of 45,000,000 shares of
Stock of which only 10,701,300 are issued and outstanding, and 5,000,000 shares
of Preferred Stock, par value $.001 per share, of which 37,500 shares of Class A
Preferred are issued and outstanding.
2. RESTRICTION ON DISPOSITION. So long as this Agreement is in
effect, the Shareholders will not Transfer any shares of Stock which they
currently own or may hereafter acquire (the Shares), except in a Qualifying
Disposition or as otherwise provided in this Agreement; provided, however, the
Criswell Parties may transfer any of their Shares without restriction, except as
provided in Section 4(d). Subject to this Agreement, the Shareholders shall be
entitled to exercise all rights of ownership of their Shares.
3. DEFINITIONS.
Affiliate - with respect to any Person (i) any Person directly or
indirectly controlling, controlled by or under management control with such
Person, or (ii) any officer, director, general partner, member or trustee of, or
Person serving in a similar capacity with respect to, such Person. For purposes
of this definition, the terms "controlling, "controlled by" or "under management
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Board - defined in the Company's Articles of Incorporation, Bylaws or
other organizational documents.
Conversion Date - shall mean the earlier of (i) the date that the
Company closes a firm underwritten, public offering of its voting equity
securities pursuant to a Registration Statement filed with the Securities and
Exchange Commission and (ii) the date on which the Company shall close its
merger into another company that is not an Affiliate of any
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Shareholder or of the Company or shall effect a sale of all or substantially all
of its assets that is not an Affiliate of any Shareholder.
Person - any natural person, corporation, joint venture, trust,
partnership (general or limited), limited liability company, governmental body
(whether local, state or federal) or other entity.
Qualifying Disposition - any Transfer of Shares to an Affiliate of the
transferor or an employee of the transferor, or in the case of an entity holding
Shares, the Transfer by such entity of Shares to holders of interests in, or
employees of, such entity as of the date hereof.
ROFO Parties - the Raintree Shareholders, collectively, and Greenmex.
Stock - the Company's Common Stock, $.001 par value.
Transactions - the transactions arising under this Agreement.
Transfer - (i) any sale, assignment or transfer of Stock, (ii) a
transfer of an equity interest or a beneficial interest in a Person that holds
Stock, (iii) a pledge or hypothecation of Stock or any equity or beneficial
interest therein, (iv) a transfer of securities convertible into or exchangeable
for or other options or rights to acquire Stock or any equity or beneficial
interest therein, and (v) any other direct or indirect transfer or disposition
of the Stock or an equity or beneficial interest therein.
4. TRANSFERS
(a) Take Along Rights
(i) If any Raintree Shareholder (the Take Along Shareholder)
proposes to Transfer more than 5% of the issued and outstanding shares
of Common Stock to any Person (other than to another Shareholder or in
a Qualifying Disposition) (the Proposed Purchaser) in a Transfer that
is not a Qualifying Disposition, it shall provide a notice (the Take
Along Notice) of its intent to Transfer Shares and shall offer to each
other Shareholder other than Greenmex (each an Other Shareholder) the
right to participate in such sale. The Take Along Notice shall include:
a copy of the Proposed Purchaser's offer in writing stating its terms
and conditions, including the number and price per Share of the Shares
to be purchased, the method of payment and the proposed closing date
(which shall not be sooner than the end of 40 days after such Notice
has been given). Each Other Shareholder shall have 15 days after
delivery of the Take Along Notice to notify the Take Along Shareholder
as to how many shares such Other Shareholder desires to require the
Proposed Purchaser to purchase. Such indication of interest shall be
binding on the applicable Other Shareholder. 30 days after delivery of
the Take Along Notice, the Take Along Shareholder shall provide notice
to the Other Shareholders as to how many of their Shares shall be sold
in the proposed Transfer.
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<PAGE> 3
(ii) The number of Shares each accepting Other Shareholder and
the Take Along Shareholder shall have the right to sell shall be
determined by solving the following equation for "X":
A X
--- = ---
B C
Where: "A" equals the number of Shares the applicable
Shareholder proposed to sell to the Proposed
Purchaser;
"B" equals the total number of Shares all of the
Other Shareholders and the Take Along Shareholder
requested to be sold to the Proposed Purchaser;
"C" equals the number of Shares the Proposed
Purchaser has agreed to purchase.
(ii) The Proposed Purchaser shall be required to purchase the
Other Shareholder's Shares at the same price per Share and upon the
same terms and conditions as the Take Along Shareholder's proposed
Transfer.
(b) Right of First Offer. If either ROFO Party desires to sell
(the Selling Party) its Stock (or any portion thereof) in a Transfer that is
not a Qualifying Disposition, then
(i) such ROFO Party shall first give notice to the other ROFO
Party (a Sale Notice) which shall constitute a request for an offer to
purchase the interest of the Selling Party by such other party. The
other ROFO Party shall have a period of 30 days thereafter to make a
written offer (the First Offer) to the Selling Party to purchase such
interest at the all-cash price set forth in the First Offer to the
Selling Party. If more than one Raintree Shareholder makes a bid, then
the highest bid shall be deemed to be the First Offer. If only one ROFO
Party makes a bid, then such bid shall be deemed to be the First Offer;
and
(ii) a First Offer shall be accepted or refused by the Selling
Party within 10 days after its receipt thereof. If the Selling Party
does not accept the First Offer from the other party within such 10-day
period, then the Selling Party may, within the ensuing 180-day period
(the Transferability Period), sell its interest to a third party but
only at a price which is higher than the First Offer. Failure by any
ROFO Party to respond to a Sale Notice within the period provided
herein shall constitute a waiver of all rights of such party under this
Section 4 but only with respect to the particular Sale Notice to which
such failure relates. If the Selling Party does not accept the First
Offer, does not consummate a sale at a higher price within the
Transferability Period and wishes to sell after the Transferability
Period, then the Selling Party shall be required to comply with the
foregoing procedures set forth in this Section 4.
(c) Expressly Permitted Transfers. Notwithstanding any other
provision contained herein, and without the provisions of Sections 4(a) or 4(b)
becoming applicable, a Shareholder may
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<PAGE> 4
make a gift or donation to his spouse or any of his lineal descendants, to a
trust for any such persons' benefit, or a partnership, the ownership interests
in which are not readily transferable, owned by such persons, provided that such
donee agrees in writing (satisfactory to counsel for the Company) to take such
Shares subject to this Agreement. Any such transfer to a child who is then under
21 years old must be conditioned upon the transferor Shareholder retaining and
reserving for himself the right to do any act with respect to the transferred
Shares on behalf of such transferee that is permitted, authorized or required
hereby.
(d) Right of First Refusal.
(i) Each Criswell Party agrees that it will give notice
(a Right of First Refusal Notice) to the Raintree Shareholders if it
receives a bona fide offer from any unaffiliated third party (a First
Refusal Proposed Purchaser) any part of the business of which (or any
part of the business of its Affiliate(s)) is in direct competition with
the Company's business (it being understood that a Person will be
deemed to be in direct competition with the Company if it is (i) in the
business of the Company anywhere in the world or (ii) in the business
of financing "timeshare" receivables or purchasing "timeshare"
receivables), that it intends to accept (a Third Party Competitor
Offer), to purchase its Shares. Each Right of First Refusal Notice
shall include the identity of the First Refusal Proposed Purchaser and
its Affiliates and an offer (the Right of First Refusal Offer) to sell
such Shareholders' Shares to the Raintree Shareholders at the same
price and on the same terms and conditions as is contained in the Third
Party Competitor Offer; provided that the Right of First Refusal Offers
shall include terms and conditions containing customary representations
and warranties and indemnification provisions. The Raintree
Shareholders shall have 30 days from the date the Right of First
Refusal Offer is deemed given (the Notice Period) to accept or reject
the Right of First Refusal Offer in writing. A Raintree Shareholder's
failure to provide the applicable Criswell Party with notice of its
acceptance or rejection of the Right of First Refusal Offer within the
Notice Period shall be deemed to be a rejection. If any Raintree
Shareholders accept the Right of First Refusal Offer, during the Notice
Period it (or together with the other Raintree Shareholders, they)
shall make a binding offer in writing (the Acceptance) to purchase all
of the Shares contemplated to be sold by the applicable Criswell Party.
(ii) Upon the expiration of the Notice Period, or upon
the earlier receipt of rejection of the Right of First Refusal Offer in
writing by all of the Raintree Shareholders, the applicable Criswell
Party(ies) shall be released from their obligations under this Section
4(d) as to their Shares for a period of 60 days. The applicable
Criswell Party shall then be entitled to sell all, and only all, of the
Shares offered by such Criswell Party, and only pursuant to the Third
Party Competitor Offer. A Shareholder shall remain subject to this
Agreement to the extent it retains any Shares.
(iii) To the extent more than one Raintree Shareholder
exercises its rights under a Right of First Refusal Offer, such
Raintree Shareholders shall pro rate their rights to purchase Shares
hereunder based on their relative ownership of Shares.
5. PLEDGES. If any Shareholder desires to pledge or otherwise
encumber all or any part of his Shares as collateral for a loan, or otherwise,
he may do so only subject to this Agreement.
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<PAGE> 5
6. BOARD OF DIRECTORS.
(a) As of and from today, the Company's Board of Directors
(the Board) shall consist of up to seven persons. The ROFO Parties and McCarthy
agree to vote any shares of Stock they may now or hereafter beneficially own,
directly or indirectly, in favor of the election of John McCarthy and the number
of persons nominated by the following Shareholders as members of the Board:
Raintree Shareholders 3
Greenmex 1
Raintree Shareholders (provided that 2 (the Independent Directors)
Greenmex shall have the right to
approve such directors, which approval
shall not be unreasonably withheld or
delayed; provided further that such
directors shall be "independent"
directors and that a director appointed
at the request of Jefferies & Co.,
shall be deemed to be an independent
director and reasonably acceptable to
Greenmex)
(b) Each ROFO Party shall cause its director(s) (other than
the Independent Directors) to vote in accordance with, and to cause the
transactions contemplated by the terms of this Agreement.
7. APPROVAL OF PRE-IPO FINANCING. Greenmex will have the right to
approve prior to the Conversion Date any financing arrangement the Company makes
(debt or equity) with any Person that is an Affiliate of a Raintree Shareholder;
provided that such approval shall not be unreasonably withheld or delayed.
8. ENFORCEMENT. The Shares shall not be Transferred on the
Company's books and no Transfer thereof shall be effective unless and until this
Agreement has been complied with, and in case of violation of this Agreement by
the attempted Transfer of the Shares without compliance with the terms and
provisions hereof, such Transfer shall be invalid and of no effect and the
Company and/or the Shareholders who are not attempting to transfer the Shares
shall have the right to compel the Shareholder who is attempting to transfer the
Shares, and/or the purported transferee, to transfer and deliver the same in
accordance with Section 4. Injunctive relief is the appropriate remedy for the
irreparable harm that would occur from a Transfer in violation of this
Agreement.
9. SPECIFIC PERFORMANCE. The parties hereto recognize that the
Stock cannot be readily purchased or sold on the open market and that it is to
the benefit of the Company and the Shareholders that this Agreement be carried
out; and for those and other reasons, the parties hereto would be irreparably
damaged if this Agreement is not specifically enforced in the event of a breach
hereof. If any controversy concerning the rights or obligations to purchase or
sell any Shares arises, or if this Agreement is breached, the parties hereto
hereby agree that remedies at law might be inadequate and that, therefore, such
rights and obligations, and this Agreement, shall be
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<PAGE> 6
enforceable by specific performance. The remedy of specific performance shall
not be an exclusive remedy, but shall be cumulative of all other rights and
remedies of the parties hereto at law, in equity or under this Agreement.
10. FAILURE TO DELIVER STOCK. If a Shareholder (or its personal
representative) having become obligated to transfer its Shares hereunder shall
fail to deliver the certificates representing such Shares in accordance with
this Agreement, the purchaser of such Shares may, at its option, in addition to
all other remedies he may have, send to such Shareholder (or its personal
representative) by registered mail, return receipt requested, the applicable
purchase price for such Shares. Thereupon, the Company, upon written notice to
such Shareholder (or its personal representative), shall: (a) cancel on its
books the certificates representing the Shares to be sold, (b) issue in the name
of the purchaser, in lieu thereof, a new certificate representing such Shares,
and (c) deliver such new certificate to the purchaser, and thereupon all of the
rights of such Shareholder (or its personal representative) in and to said
Shares shall terminate.
11. RELEASE FROM AGREEMENT, TRANSFEREE AND FUTURE SHAREHOLDERS.
The Company and the Shareholders shall cause any transferee of any Shares
(including (i) under Section 4, (ii) in a Qualifying Disposition, or (iii) in
the case of the Criswell Parties and their assigns, pursuant to permitted
transfers under Section 2 not covered by Section 4(d)) to execute a consent, in
the form attached as Exhibit A, to be bound by this Agreement pursuant to which
such transferee shall become a Shareholder; provided that any Shareholder (other
than a Criswell Party (and not such parties' assigns unless in a Qualifying
Disposition)) holding less than 3% of the issued and outstanding shares of
Common Stock shall be automatically released from this Agreement, shall no
longer have any rights hereunder and shall have the legend on such Shareholders'
certificates with respect to this Agreement removed.
12. MISCELLANEOUS
(a) Endorsement. Upon the execution of this Agreement, each
certificate representing Shares shall be surrendered to the Company and the face
thereof shall be endorsed substantially as follows:
SEE REVERSE SIDE FOR RESTRICTIONS ON TRANSFER.
The reverse side of each such certificate shall be endorsed substantially as
follows:
THE TRANSFER OF THE SHARES OF STOCK EVIDENCED BY THIS
CERTIFICATE ARE SUBJECT TO THE SHAREHOLDERS' AGREEMENT, BY
AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS, DATED
[_____________], 1998. UPON WRITTEN REQUEST TO THE COMPANY
AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE,
THE COMPANY WILL FURNISH TO THE HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE A COPY OF SUCH SHAREHOLDERS' AGREEMENT.
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<PAGE> 7
After endorsement the certificates shall be returned to the Shareholders, who,
shall, subject to the terms of this Agreement, be entitled to exercise all
rights of ownership of such Stock. All certificates representing shares of Stock
hereafter issued by the Corporation shall bear the same endorsement and be
subject to the terms of this Agreement.
(b) Notices. Any notice, consent or other communication
to be given under this Agreement by any party to any other party shall
be in writing and shall be either:
(i) personally delivered,
(ii) mailed by registered or certified mail, postage
prepaid with return receipt requested,
(iii) delivered by overnight express delivery service
or same-day local courier service, or
(iv) delivered by telex or fax (in either case with
follow up pursuant to (i), (ii) or (iii) above), to the
address set forth beneath the signature of the parties hereto,
or at such other address as may be designated by the parties
from time to time in accordance with this Section.
Notices delivered personally, by overnight express delivery
service or by local courier service shall be deemed given as of actual
receipt. Mailed notices shall be deemed given five business days after
mailing. Notices delivered by telex or fax shall be deemed given upon
receipt by the sender of the answerback (in the case of a telex) or
transmission confirmation (in the case of a fax).
(c) Tax Stamps; Negotiable Form. Whenever any of the
Shares are to be Transferred pursuant to this Agreement, the Person
selling such Shares shall affix to the stock certificates representing
such Shares any necessary documentary stamp taxes and shall deliver
such certificates in negotiable form for Transfer without necessity for
further endorsement.
(d) Binding Effect. This Agreement, including, but not
limited to, the rights and conditions contained herein in connection
with Transfer of the Shares, shall be binding upon each party that has
executed this Agreement (regardless of whether all parties have
executed this Agreement), together with their respective executors,
administrators, successors, personal representatives, heirs and
assigns.
(e) Governing Law and Venue. The parties acknowledge and
agree that this Agreement and the obligations and undertakings of the
parties hereunder will be performable in Harris County, Texas. This
Agreement shall be governed by, and construed in accordance with, the
laws of Nevada without reference to its choice-of-law principles. If
any action is brought to enforce or interpret this Agreement, venue for
such action shall be in Harris County, Texas.
(f) Severability. If any provision of this Agreement is
held to be unenforceable under current or future laws, such provision
shall be fully severable and this Agreement shall be construed and
enforced as if such unenforceable provision never comprised a part
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<PAGE> 8
hereof; and the remaining provisions hereof shall remain in full force
and effect and shall not be affected by the unenforceable provision or
by its severance herefrom. Furthermore, in lieu of such unenforceable
provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such unenforceable
provision as may be possible and be enforceable.
(g) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings relating to the subject matter hereof.
(h) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.
(i) Amendments. This Agreement may be amended, modified
or supplemented only by a written instrument executed by holders of 67%
of the Shares subject to this Agreement at the time of such amendment;
provided that any such amendment which does not affect all Holders
equally shall not be effective unless approved by all Holders not
equally affected; provided further that no amendment to Section 4(a) or
4(d) shall be effective without the consent of Criswell LLC.
(j) Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
any of the terms or provisions hereof.
(k) Termination of this Agreement. This Agreement shall
continue until, and shall terminate immediately upon: (i) execution of
a written agreement of termination by the ROFO Parties and Criswell LLC
(or any of their assigns which is or are an Affiliate of the ROFO
Parties or of the Criswell Parties), (ii) the Conversion Date, (iii)
the adjudication of the Company as bankrupt or insolvent by a court of
competent jurisdiction, (iv) the sale of all or substantially all of
the Company's assets to an unAffiliated third party(ies), (v) the
merger of the Company, other than with an Affiliate, in which the
Company is not the surviving corporation, (vi) the consolidation of the
Company with one or more other corporations that are not Affiliates of
any Shareholder or of the Company, or (vii) any time that only one
Shareholder owns Shares.
[NEXT PAGE IS SIGNATURE PAGE]
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
CLUB REGINA RESORTS, INC. METRO MEXICO INVESTMENT PARTNERS
By: By:
------------------------------- -------------------------------------
Name: Douglas Y. Bech Name: Walker Harman
Title: Chairman Title:
----------------------------------
ADDRESS ADDRESS
10,000 Memorial Dr. 3600 Marquette
Houston, TX 77024 Dallas, TX 72225
_____ Shares
THOMAS R. POWERS DOUGLAS Y. BECH
By: By:
------------------------------- -------------------------------------
Name: Thomas R. Powers, Individually Name: Douglas Y. Bech, Individually
ADDRESS ADDRESS
1929 Olympia 11543 Raintree Circle
Houston, TX 77019 Houston, TX 77024
_____ Shares _____ Shares
JOHN MCCARTHY S. DOUGLAS ELLIMAN FUNDING CORP.
By: By:
------------------------------- -------------------------------------
Name: John McCarthy S., Individually Name: Howard P. Milstein
Title: Chairman
ADDRESS ADDRESS
c/o Club Regina Resorts, Inc.
Horacio 1855 P.B. Col. Polanco ----------------------------------------
Mexico, D.F. 11510
----------------------------------------
_____ Shares _____ Shares
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<PAGE> 10
GREENMEX, LLC CRISWELL ASSOCIATES, L.L.C.
By: By:
------------------------------- -------------------------------------
Name: Name: William T. Criswell, IV
-----------------------------
Title: Title: Manager
----------------------------
ADDRESS ADDRESS
3 Pickwick Plaza
Greenwich, CT 06830 ----------------------------------------
----------------------------------------
_____ Shares _____ Shares
WILLIAM T. CRISWELL, IV
By:
-------------------------------
Name: William T. Criswell, IV, individually
ADDRESS
- ----------------------------------
- ----------------------------------
_____ Shares
10
<PAGE> 11
EXHIBIT A
Consent
Having purchased shares of Common Stock of Club Regina Resorts, Inc.,
the undersigned hereby agrees that the Company's Shareholders' Agreement, the
form of which is attached as Exhibit A, shall bind it as if it had been a party
to such Shareholders' Agreement as of the date thereof.
NAME OF SHAREHOLDER
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
NUMBER OF SHARES
ADDRESS
A-1
<PAGE> 1
EXHIBIT 10.13
CLUB REGINA RESORTS, INC.
1997 LONG-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of this 1997 Long-Term Incentive Plan (the
"Plan") of Club Regina Resorts, Inc., a Nevada corporation (the "Company"), is
to advance the interests of the Company and its stockholders by providing a
means to attract, retain and reward executive officers and other key employees
and consultants of and service providers to the Company and its subsidiaries
(including consultants and others providing services of substantial value) and
to enable such persons to acquire or increase a proprietary interest in the
Company, thereby promoting a closer identity of interests between such persons
and the Company's stockholders.
2. DEFINITIONS. The definitions of awards under the Plan, including
Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock, Stock
granted as a bonus or in lieu of other awards, Dividend Equivalents and Other
Stock-Based Awards are set forth in Section 6 of the Plan. Such awards,
together with any other right or interest granted to a Participant under the
Plan, are termed "Awards." For purposes of the Plan, the following additional
terms shall be defined as set forth below:
(a) "Award Agreement" means any written agreement, contract,
notice or other instrument or document evidencing an Award.
(b) "Beneficiary" shall mean the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" shall mean
(i) the failure of an employee to substantially perform
his covenants and duties (other than any such failure
resulting from his disability);
(ii) the engaging by an employee in willful, reckless or
grossly negligent misconduct which is materially
injurious to Employer or any of its affiliates,
monetarily or otherwise;
(iii) the misappropriation of the Company's funds; or
(iv) an employee's commission of an act of dishonesty,
affecting the Company or its affiliates, or the
commission of an act constituting common law fraud or
a felony.
(e) A "Change in Control" shall be deemed to have occurred if:
<PAGE> 2
(i) any person (other than the Company, an employee
benefit plan of the Company or any holder of the
Company's voting securities on the date hereof),
acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the
Exchange Act) of any voting security of the Company
and immediately after such acquisition such Person
is, directly or indirectly, the Beneficial Owner of
voting securities representing 50 percent or more of
the total voting power of all of the then-
outstanding voting securities of the Company;
(i) the following individuals no longer constitute a
majority of the members of the Board: (A) the
individuals who, as of the date hereof, constitute
the Board (the "Original Directors"); (B) the
individuals who thereafter are elected to the Board
and whose election, or nomination for election, to
the Board was approved by a vote of at least
two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional
Original Directors" immediately following their
election); and (C) the individuals who are elected to
the Board and whose election, or nomination for
election, to the Board was approved by a vote of at
least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office
(such directors also becoming "Additional Original
Directors" immediately following their election);
(iii) the stockholders of the Company approve a merger,
consolidation, recapitalization or reorganization of
the Company, or a reverse stock split of outstanding
voting securities, or consummation of any such
transaction if stockholder approval is not obtained,
other than any such transaction which would result in
at least 75 percent of the total voting power
represented by the voting securities of the surviving
entity outstanding immediately after such transaction
being Beneficially Owned by at least 75 percent of
the holders of outstanding voting securities of the
Company immediately prior to the transaction, with
the voting power of each such continuing holder
relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of the Company shall approve a plan
of complete liquidation of the Company or an
agreement for the sale or disposition by the Company
of all or a substantial portion of the Company's
assets (i.e., 50 percent or more of the total assets
of the Company).
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code shall be deemed to
include regulations thereunder and successor provisions and regulations
thereto.
(g) "Committee" means the entire Board of Directors of the
Company, or Compensation Committee of the Board, or such other Board committee
as may be designated by the Board to administer the Plan.
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<PAGE> 3
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act
shall be deemed to include rules thereunder and successor provisions and rules
thereto.
(i) "Fair Market Value" means, with respect to Stock, Awards, or
other property, the fair market value of such Stock, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Committee, provided, however, that (i) if the Stock is listed on a
national securities exchange or quoted in an interdealer quotation system, the
Fair Market Value of such Stock on a given date shall be based upon the last
sales price or, if unavailable, the average of the closing bid and asked prices
per share of the Stock on such date (or, if there was no trading or quotation
in the Stock on such date, on the next preceding date on which there was
trading or quotation) as reported in the Wall Street Journal (or other
reporting service approved by the Committee), (ii) the "Fair Market Value" of
Stock subject to Options granted effective upon commencement of the Initial
Public Offering shall be the Initial Public Offering price of the shares so
issued and sold in the Initial Public Offering, as set forth in the first final
prospectus used in such offering (the provisions of clause (i) notwithstanding)
and (iii) the "Fair Market Value" of Stock prior to the date of the Initial
Public Offering shall be as determined by the Board of Directors.
(j) "Initial Public Offering" shall mean an initial public
offering of shares of Stock in a firm commitment underwriting registered with
the Securities and Exchange Commission in compliance with the provisions of the
Securities Act of 1933, as amended.
(k) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(l) "Participant" means a person who, at a time when eligible
under Section 5 hereof, has been granted an Award under the Plan.
(m) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
and applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(n) "Stock" means the Common Stock, $.001 par value, of the
Company and such other securities as may be substituted for Stock or such other
securities pursuant to Section 4.
3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by
the Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions
of the Plan:
(i) to select persons to whom Awards may be granted;
(ii) to determine the type or types of Awards to be
granted to each such person;
(iii) to determine the number of Awards to be granted, the
number of shares of Stock to which an Award will
relate, the terms and conditions of any
3
<PAGE> 4
Award granted under the Plan (including, but not
limited to, any exercise price, grant price or
purchase price, any restriction or condition, any
schedule for lapse of restrictions or conditions
relating to transferability or forfeiture,
exercisability or settlement of an Award, and waivers
or accelerations thereof, performance conditions
relating to an Award (including performance conditions
relating to Awards not intended to be governed by
Section 7(f) and waivers and modifications thereof)),
based in each case on such considerations as the
Committee shall determine), and all other matters to
be determined in connection with an Award;
(iv) to determine whether, to what extent and under what
circumstances an Award may be settled, or the
exercise price of an Award may be paid, in cash,
Stock, other Awards, or other property, or an Award
may be canceled, forfeited, or surrendered;
(v) to determine whether, to what extent and under what
circumstances cash, Stock, other Awards or other
property payable with respect to an Award will be
deferred either automatically, at the election of the
Committee or at the election of the Participant;
(vi) to prescribe the form of each Award Agreement, which
need not be identical for each Participant;
(vii) to adopt, amend, suspend, waive and rescind such
rules and regulations and appoint such agents as the
Committee may deem necessary or advisable to
administer the Plan;
(viii) to correct any defect or supply any omission or
reconcile any inconsistency in the Plan and to
construe and interpret the Plan and any Award, rules
and regulations, Award Agreement or other instrument
hereunder; and
(ix) to make all other decisions and determinations as may
be required under the terms of the Plan or as the
Committee may deem necessary or advisable for the
administration of the Plan.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. Unless authority
is specifically reserved to the Board under the terms of the Plan, the
Company's Certificate of Incorporation or Bylaws, or applicable law, the
Committee shall have sole discretion in exercising authority under the Plan.
Any action of the Committee with respect to the Plan shall be final, conclusive
and binding on all persons, including the Company, subsidiaries of the Company,
Participants, any person claiming any rights under the Plan from or through any
Participant and stockholders, except to the extent the Committee may
subsequently modify, or take further action not consistent with, its prior
action. If not specified in the Plan, the time at which the Committee must or
may make any determination shall be determined by the Committee, and any such
determination may thereafter be modified by the Committee (subject to Section
8(e)). The express grant of any specific power to the Committee, and the taking
of any action by the Committee, shall not be construed as limiting any power or
authority of the Committee. The Committee may delegate to officers or managers
of the Company or any
4
<PAGE> 5
subsidiary of the Company the authority, subject to such terms as the Committee
shall determine, to perform administrative functions and, with respect to
Participants not subject to Section 16 of the Exchange Act, to perform such
other functions as the Committee may determine, to the extent permitted under
Rule 16b-3, if applicable, and other applicable law.
(c) LIMITATION OF LIABILITY. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company's independent certified public accountants or any
executive compensation consultant, legal counsel or other professional retained
by the Company to assist in the administration of the Plan. No member of the
Committee, nor any officer or employee of the Company acting on behalf of the
Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee and any officer or employee of the Company acting on
its behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination or
interpretation.
4. STOCK SUBJECT TO PLAN.
(a) AMOUNT OF STOCK RESERVED. The total amount of Stock that may
be subject to outstanding Awards, determined immediately after the grant of any
Award, shall not exceed the greater of 800,000 shares of Stock or 8% of the
total number of shares of Stock outstanding at the time of such grant.
Notwithstanding the foregoing, the number of shares that may be delivered upon
the exercise of ISOs shall not exceed 1,000,000, subject in each case to
adjustment as provided in Section 4(c), and the number of shares that may be
delivered as Restricted Stock and Deferred Stock (other than pursuant to an
Award granted under Section 7(f)) shall not in the aggregate exceed 1,000,000,
provided, however, that shares subject to ISOs, Restricted Stock or Deferred
Stock Awards shall not be deemed delivered if such Awards are forfeited, expire
or otherwise terminate without delivery of shares to the Participant. To the
extent that an Award is only to be paid in cash or is paid in cash, any shares
of Stock subject to such Award shall again be available for the grant of an
Award. Any shares of Stock delivered pursuant to an Award may consist, in whole
or in part, of authorized and unissued shares, treasury shares or shares
acquired in the market for a Participant's Account.
(b) ANNUAL PER-PARTICIPANT LIMITATIONS. During any calendar year,
no Participant may be granted Awards that may be settled by delivery of more
than 15% of all of the stock subject to the Plan under Section 4(a) shares of
Stock, subject to adjustment as provided in Section 4(c). In addition, with
respect to Awards that may be settled in cash (in whole or in part), no
Participant may be paid during any calendar year cash amounts relating to such
Awards that exceed the greater of the Fair Market Value of the number of shares
of Stock set forth in the preceding sentence at the date of grant or the date
of settlement of Award. This provision sets forth two separate limitations, so
that Awards that may be settled solely by delivery of Stock will not operate to
reduce the amount of cash-only Awards, and vice versa; nevertheless, Awards
that may be settled in Stock or cash must not exceed either limitation.
(c) ADJUSTMENTS. If the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Stock or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase or exchange of Stock or other
securities, liquidation, dissolution, or other similar corporate transaction or
event, affects the Stock such that an adjustment is appropriate to prevent
dilution
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<PAGE> 6
or enlargement of the rights of Participants under the Plan, then the Committee
shall, in such manner as it may deem equitable, adjust any or all of (i) the
number and kind of shares of Stock reserved and available for Awards under
Section 4(a), including shares reserved for the ISOs and Restricted and
Deferred Stock, (ii) the number and kind of shares of Stock specified in the
Annual Per-Participant Limitations under Section 4(b), (iii) the number and
kind of shares of outstanding Restricted Stock or other outstanding Award in
connection with which shares have been issued, (iv) the number and kind of
shares that may be issued in respect of other outstanding Awards and (v) the
exercise price, grant price or purchase price relating to any Award (or, if
deemed appropriate, the Committee may make provision for a cash payment with
respect to any outstanding Award). In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence) affecting the Company
or any subsidiary or the financial statements of the Company or any subsidiary,
or in response to changes in applicable laws, regulations, or accounting
principles. The foregoing notwithstanding, no adjustments shall be authorized
under this Section 4(c) with respect to ISOs or SARs in tandem therewith to the
extent that such authority would cause the Plan to fail to comply with Section
422(b)(1) of the Code.
5. ELIGIBILITY. Executive officers and other key employees of the Company
and its subsidiaries, including any director or officer who is also such an
employee, and persons who provide consulting or other services to the Company
deemed by the Committee to be of substantial value to the Company, are eligible
to be granted Awards under the Plan. In addition, a person who has been offered
employment by the Company or its subsidiaries is eligible to be granted an
Award (other than an Award of an ISO) under the Plan, provided that such Award
shall be canceled if such person fails to commence such employment, and no
payment of value may be made in connection with such Award until such person
has commenced such employment. The foregoing notwithstanding, no member of the
Compensation Committee shall be eligible to be granted Awards under the Plan.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine, including
terms requiring forfeiture of Awards in the event of termination of employment
or service of the Participant. Except as provided in Section 6(f), 6(h), or
7(a), or to the extent required to comply with requirements of the Delaware
General Corporation Law that lawful consideration be paid for Stock, only
services may be required as consideration for the grant (but not the exercise)
of any Award.
(b) OPTIONS. The Committee is authorized to grant Options
(including "reload" options automatically granted to offset specified exercises
of Options) on the following terms and conditions ("Options"):
(i) EXERCISE PRICE. The exercise price per share of Stock
purchasable under an Option shall be determined by
the Committee; provided, however, that, except as
provided in Section 7(a), such exercise price shall
be not less than the Fair Market Value of a share on
the date of grant of such Option.
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<PAGE> 7
(ii) TIME AND METHOD OF EXERCISE. The Committee shall
determine the time or times at which an Option may be
exercised in whole or in part, the methods by which
such exercise price may be paid or deemed to be paid,
the form of such payment, including, without
limitation, cash, Stock, other Awards or awards
granted under other Company plans or other property
(including notes or other contractual obligations of
Participants to make payment on a deferred basis,
such as through "cashless exercise" arrangements, to
the extent permitted by applicable law), and the
methods by which Stock will be delivered or deemed to
be delivered to Participants.
(iii) ISOS. The terms of any ISO granted under the Plan
shall comply in all respects with the provisions of
Section 422 of the Code, including but not limited to
the requirement that no ISO shall be granted more
than ten years after the effective date of the Plan.
Anything in the Plan to the contrary notwithstanding,
no term of the Plan relating to ISOs shall be
interpreted, amended, or altered, nor shall any
discretion or authority granted under the Plan be
exercised (unless requested by the affected
Participant), so as to disqualify either the Plan or
any ISO under Section 422 of the Code.
(iv) TERMINATION OF EMPLOYMENT.
(A) Subject to the express terms and conditions
of the Plan, if, and to the extent that, the
terms and conditions under which an Award may
be exercised or settled after a Participant's
termination of employment for any particular
reason shall not have been set forth (x) in
the relevant Award Agreement, by and as
determined by the Committee in its sole
discretion, or (y) in the Participant's
employment agreement, if any, the following
terms and conditions shall apply as
appropriate and as not inconsistent with the
terms and conditions, if any, contained in
such Award Agreement and/or employment
agreement:
(1) Except as otherwise provided in this
Section 6(b)(iv)(A)(1), if a
Participant's employment with the
Company and its Subsidiaries is
terminated for any reason, such
Participant's rights, if any, to
exercise any then exercisable
Options, if any, shall terminate 90
days after the date of such
termination and thereafter the
Participant (and such Participant's
estate, designated beneficiary or
other legal representative) shall
forfeit any rights or interests in
or with respect to any such Options.
The Committee, in its sole
discretion, may determine that such
Participant's Options (other than
ISOs), if any, to the extent
exercisable immediately prior to any
termination of employment (other
than a termination due to death,
retirement or disability), may
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<PAGE> 8
remain exercisable for an additional
specified time period after such 90
day period expires (subject to any
other applicable terms and
provisions of the Plan (and any
rules or procedures thereunder) and
the relevant Award Agreement). If
any termination of employment is due
to retirement or disability, a
Participant shall have the right,
subject to the applicable terms and
provisions of the Plan (and any
rules or procedures thereunder) and
the relevant Award Agreement, (a) to
exercise Options that are not ISOs,
if any, at any time within 180 days
following such termination due to
retirement or disability (to the
extent such Participant was entitled
to exercise any such Awards
immediately prior to such
termination) and (b) to exercise
ISOs, if any, at any time within 90
days following a termination due to
retirement and 180 days following a
termination due to disability (to
the extent such Participant was
entitled to exercise any such Awards
immediately prior to such
termination). If any Participant
dies while entitled to exercise an
Option, if any, such Participant's
estate, designated beneficiary or
other legal representative, as the
case may be, shall have the right,
subject to the applicable provisions
of the Plan (and any rules or
procedures thereunder) and the
relevant Award Agreement, to
exercise such then exercisable
Options, if any, at any time within
180 days from the date of such
Participant's death (but in no event
more than one year from the date of
such Participant's termination due
to retirement or disability, except,
in the case of ISOs, in no event
more than 90 days from the date of
such Participant's termination due
to retirement).
(2) If a Participant's employment with
the Company and its Subsidiaries is
terminated for any reason
(including, without limitation,
disability, retirement or death)
prior to the actual or deemed
satisfaction and/or lapse of the
restrictions, terms and conditions
applicable to a grant of Restricted
Stock, such Restricted Stock shall
immediately be canceled and the
Participant (and such other
Participant's estate, designated
beneficiary or other legal
representative) shall forfeit any
rights or interests in and with
respect to any such Restricted
Stock.
(c) STOCK APPRECIATION RIGHTS. The Committee is authorized to
grant SARs on the following terms and conditions ("SARs"):
(i) RIGHT TO PAYMENT. An SAR shall confer on the
Participant to whom it is granted a right to receive,
upon exercise thereof, the excess
8
<PAGE> 9
of (A) the Fair Market Value of one share of Stock on
the date of exercise (or, if the Committee shall so
determine in the case of any such right other than one
related to an ISO, the Fair Market Value of one share
at any time during a specified period before or after
the date of exercise), over (B) the grant price of the
SAR as determined by the Committee as of the date of
grant of the SAR, which, except as provided in Section
7(a), shall be not less than the Fair Market Value of
one share of Stock on the date of grant.
(ii) OTHER TERMS. The Committee shall determine the time
or times at which an SAR may be exercised in whole or
in part, the method of exercise, method of
settlement, form of consideration payable in
settlement, method by which Stock will be delivered
or deemed to be delivered to Participants, whether an
SAR shall be in tandem with any other Award, and any
other terms and conditions of any SAR. Limited SARs
that may only be exercised upon the occurrence of a
Change in Control may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee
may determine. Limited SARs may be either
freestanding or in tandem with other Awards.
(d) RESTRICTED STOCK. The Committee is authorized to grant
Restricted Stock on the following terms and conditions ("Restricted Stock"):
(i) GRANT AND RESTRICTIONS. Restricted Stock shall be
subject to such restrictions on transferability and
other restrictions, if any, as the Committee may
impose, which restrictions may lapse separately or in
combination at such times, under such circumstances,
in such installments, or otherwise, as the Committee
may determine. Except to the extent restricted under
the terms of the Plan and any Award Agreement
relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights
of a stockholder including, without limitation, the
right to vote Restricted Stock or the right to
receive dividends thereon.
(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of employment or service
(as determined under criteria established by the
Committee) during the applicable restriction period,
Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the
Company; provided, however, that the Committee may
provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating
to Restricted Stock will be waived in whole or in
part in the event of termination resulting from
specified causes.
(iii) CERTIFICATES FOR STOCK. Restricted Stock granted
under the Plan may be evidenced in such manner as the
Committee shall determine. If certificates
representing Restricted Stock are registered in the
name of the Participant, such certificates may bear
an appropriate legend referring to the terms,
conditions, and restrictions applicable to such
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<PAGE> 10
Restricted Stock, the Company may retain physical
possession of the certificate, and the Participant
shall have delivered a stock power to the Company,
endorsed in blank, relating to the Restricted Stock.
(iv) DIVIDENDS. Dividends paid on Restricted Stock shall
be either paid at the dividend payment date in cash
or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends,
or the payment of such dividends shall be deferred
and/or the amount or value thereof automatically
reinvested in additional Restricted Stock, other
Awards, or other investment vehicles, as the
Committee shall determine or permit the Participant
to elect. Stock distributed in connection with a
Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which
such Stock or other property has been distributed,
unless otherwise determined by the Committee.
(e) DEFERRED STOCK. The Committee is authorized to grant Deferred
Stock subject to the following terms and conditions ("Deferred Stock"):
(i) AWARD AND RESTRICTIONS. Delivery of Stock will occur
upon expiration of the deferral period specified for
an Award of Deferred Stock by the Committee (or, if
permitted by the Committee, as elected by the
Participant). In addition, Deferred Stock shall be
subject to such restrictions as the Committee may
impose, if any, which restrictions may lapse at the
expiration of the deferral period or at earlier
specified times, separately or in combination, in
installments or otherwise, as the Committee may
determine.
(ii) FORFEITURE. Except as otherwise determined by the
Committee, upon termination of employment or service
(as determined under criteria established by the
Committee) during the applicable deferral period or
portion thereof to which forfeiture conditions apply
(as provided in the Award Agreement evidencing the
Deferred Stock), all Deferred Stock that is at that
time subject to such forfeiture conditions shall be
forfeited; provided, however, that the Committee may
provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating
to Deferred Stock will be waived in whole or in part
in the event of termination resulting from specified
causes.
(f) BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The
Committee is authorized to grant Stock as a bonus, or to grant Stock or other
Awards in lieu of Company obligations to pay cash under other plans or
compensatory arrangements. Stock or Awards granted hereunder shall be subject
to such other terms as shall be determined by the Committee.
(g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant
Dividend Equivalents entitling the Participant to receive cash, Stock, other
Awards or other property equal
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<PAGE> 11
in value to dividends paid with respect to a specified number of shares of Stock
("Dividend Equivalents"). Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award. The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Stock, Awards or other investment
vehicles, and subject to such restrictions on transferability and risks of
forfeiture, as the Committee may specify.
(h) OTHER STOCK-BASED AWARDS. The Committee is authorized, subject
to limitations under applicable law, to grant such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Stock and factors that may influence the
value of Stock, as deemed by the Committee to be consistent with the purposes
of the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase
rights for Stock, Awards with value and payment contingent upon performance of
the Company or any other factors designated by the Committee and Awards valued
by reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries ("Other Stock Based Awards"). The
Committee shall determine the terms and conditions of such Awards. Stock issued
pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such times,
by such methods, and in such forms, including, without limitation, cash, Stock,
other Awards, or other property, as the Committee shall determine. Cash awards,
as an element of or supplement to any other Award under the Plan, may be
granted pursuant to this Section 6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with or in substitution for any other
Award granted under the Plan or any award granted under any other plan of the
Company, any subsidiary or any business entity to be acquired by the Company or
a subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. Awards granted in addition to or in tandem with
other Awards or awards may be granted either as of the same time as or a
different time from the grant of such other Awards or awards.
(b) TERM OF AWARDS. The term of each Award shall be for such
period as may be determined by the Committee; provided, however, that in no
event shall the term of any ISO or an SAR granted in tandem therewith exceed a
period of ten years from the date of its grant (or such shorter period as may
be applicable under Section 422 of the Code).
(c) FORM OF PAYMENT UNDER AWARDS. Subject to the terms of the Plan
and any applicable Award Agreement, payments to be made by the Company or a
subsidiary upon the grant, exercise or settlement of an Award may be made in
such forms as the Committee shall determine, including, without limitation,
cash, Stock, other Awards or other property, and may be made in a single
payment or transfer, in installments or on a deferred basis. Such payments may
include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant or
crediting of Dividend Equivalents in respect of installment or deferred
payments denominated in Stock.
11
<PAGE> 12
(d) LOAN PROVISIONS. With the consent of the Committee, and
subject at all times to, and only to the extent, if any, permitted under and in
accordance with, laws and regulations and other binding obligations or
provisions applicable to the Company, the Company may make, guarantee or
arrange for a loan or loans to a Participant with respect to the exercise of
any Option or other payment in connection with any Award, including the payment
by a Participant of any or all federal, state or local income or other taxes
due in connection with any Award. Subject to such limitations, the Committee
shall have full authority to decide whether to make a loan or loans hereunder
and to determine the amount, terms and provisions of any such loan or loans,
including the interest rate to be charged in respect of any such loan or loans,
whether the loan or loans are to be with or without recourse against the
borrower, the terms on which the loan is to be repaid and conditions, if any,
under which the loan or loans may be forgiven.
(e) PERFORMANCE-BASED AWARDS. The Committee may, in its
discretion, designate any Award the vesting, exercisability or settlement of
which is subject to the achievement of performance conditions as a
performance-based Award subject to this Section 7(f), to qualify such Award as
"qualified performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder. The performance objectives for an Award
subject to this Section 7(f) shall consist of one or more business criteria and
a targeted level or levels of performance with respect to such criteria, as
specified by the Committee but subject to this Section 7(f). Performance
objectives shall be objective and shall otherwise meet the requirements of
Section 162(m)(4)(C) of the Code. Business criteria used by the Committee in
establishing performance objectives for Awards subject to this Section 7(f)
shall be selected exclusively from among the following:
(i) Annual return on capital;
(ii) Annual earnings per share;
(iii) Annual cash flow provided by operations;
(iv) Changes in annual revenues; and/or
(v) Strategic business criteria, consisting of one or
more objectives based on meeting specified revenue,
market penetration, geographic business expansion
goals, cost targets, and goals relating to
acquisitions or divestitures.
The levels of performance required with respect to such business
criteria may be expressed in absolute or relative levels. Achievement of
performance objectives with respect to such Awards shall be measured over a
period of not less than one year nor more than five years, as the Committee may
specify. Performance objectives may differ for such Awards to different
Participants. The Committee shall specify the weighting to be given to each
performance objective for purposes of determining the final amount payable with
respect to any such Award. The Committee may, in its discretion, reduce the
amount of a payout otherwise to be made in connection with an Award subject to
this Section 7(f), but may not exercise discretion to increase such amount, and
the Committee may consider other performance criteria in exercising such
discretion. All determinations by the Committee as to the achievement of
performance objectives
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<PAGE> 13
shall be in writing. The Committee may not delegate any responsibility with
respect to an Award subject to this Section 7(f).
(f) ACCELERATION UPON A CHANGE OF CONTROL. Notwithstanding
anything contained herein to the contrary, unless otherwise provided by the
Committee in an Award Agreement, all conditions and restrictions relating to an
Award, including limitations on exercisability, risks of forfeiture and
conditions and restrictions requiring the continued performance of services or
the achievement of performance objectives with respect to the exercisability or
settlement of such Award, shall immediately lapse upon a Change in Control.
8. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company shall not be
obligated to issue or deliver Stock in connection with any Award or take any
other action under the Plan in a transaction subject to the registration
requirements of the Securities Act of 1933, as amended, or any other federal or
state securities law, any requirement under any listing agreement between the
Company and any national securities exchange or automated quotation system or
any other law, regulation or contractual obligation of the Company until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full. Certificates representing shares of
Stock issued under the Plan will be subject to such stop-transfer orders and
other restrictions as may be applicable under such laws, regulations and other
obligations of the Company, including any requirement that a legend or legends
be placed thereon.
(b) LIMITATIONS ON TRANSFERABILITY. Awards and other rights under
the Plan will not be transferable by a Participant except by will or the laws
of descent and distribution or to a Beneficiary in the event of the
Participant's death, and, if exercisable, shall be exercisable during the
lifetime of a Participant only by such Participant or his guardian or legal
representative; provided, however, that such Awards and other rights (other
than ISOs and SARs in tandem therewith) may be transferred to one or more
transferees during the lifetime of the Participant, and may be exercised by
such transferees in accordance with the terms of such Award consistent with the
requirements for registration of the offer and sale of Stock on Form S-8 or
Form S-3 or a successor registration form of the Securities and Exchange
Commission, and permitted by the Committee. Awards and other rights under the
Plan may not be pledged, mortgaged, hypothecated or otherwise encumbered, and
shall not be subject to the claims of creditors.
(c) NO RIGHT TO CONTINUED EMPLOYMENT OR SERVICE. Neither the Plan
nor any action taken hereunder shall be construed as giving any employee or
other person the right to be retained in the employ or service of the Company
or any of its subsidiaries, nor shall it interfere in any way with the right of
the Company or any of its subsidiaries to terminate any employee's employment
or other person's service at any time.
(d) TAXES. The Company and any subsidiary is authorized to
withhold from any Award granted or to be settled, any delivery of Stock in
connection with an Award, any other payment relating to an Award or any payroll
or other payment to a Participant amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award, and
to take such other action as the Committee may deem advisable to enable the
Company and Participants to satisfy obligations for the payment of withholding
taxes
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<PAGE> 14
and other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any such action shall be subject to the approval of
the Company's stockholders at or before the next annual meeting of stockholders
for which the record date is after such Board action if such stockholder
approval is required by any federal or state law or regulation or the rules of
any stock exchange or automated quotation system on which the Stock may then be
listed or quoted, and the Board may otherwise, in its discretion, determine to
submit other such changes to the Plan to stockholders for approval; provided,
however, that, without the consent of an affected Participant, no such action
may materially impair the rights of such Participant under any Award
theretofore granted to him. The Committee may waive any conditions or rights
under, or amend, alter, suspend, discontinue, or terminate, any Award
theretofore granted and any Award Agreement relating thereto; provided,
however, that, without the consent of an affected Participant, no such action
may materially impair the rights of such Participant under such Award.
(f) NO RIGHTS TO AWARDS; NO STOCKHOLDER RIGHTS. No Participant or
employee shall have any claim to be granted any Award under the Plan, and there
is no obligation for uniformity or consistency of treatment of Participants and
employees. Except as may be expressly provided herein, no Award shall confer on
any Participant any of the rights of a stockholder of the Company unless and
until Stock is duly issued or transferred and delivered to the Participant in
accordance with the terms of the Award or, in the case of an Option, the Option
is duly exercised.
(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a general creditor
of the Company; provided, however, that the Committee may authorize the
creation of trusts or make other arrangements to meet the Company's obligations
under the Plan to deliver cash, Stock, other Awards, or other property pursuant
to any Award, which trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with
the consent of each affected Participant.
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan
by the Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other compensatory arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the
Plan, and such arrangements may be either applicable generally or only in
specific cases.
(i) NO FRACTIONAL SHARES. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
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(j) COMPLIANCE WITH CODE SECTION 162(M). It is the intent of the
Company that employee Options, SARs and other Awards designated as Awards
subject to Section 7(e) shall constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m). Accordingly, if any
provision of the Plan or any Award Agreement relating to such an Award does not
comply or is inconsistent with the requirements of Code Section 162(m), such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements, and no provision shall be deemed to confer upon
the Committee or any other person discretion to increase the amount of
compensation otherwise payable in connection with any such Award upon
attainment of the performance objectives.
(k) GOVERNING LAW. The validity, construction and effect of the
Plan, any rules and regulations relating to the Plan and any Award Agreement
shall be determined in accordance with the laws of the State of Nevada, without
giving effect to principles of conflicts of laws, and applicable federal law.
(l) EFFECTIVE DATE; PLAN TERMINATION. The Plan shall become
effective as of the date of its adoption by the Board, subject to stockholder
approval without 12 months of such adoption, and shall continue in effect until
terminated by the Board.
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EXHIBIT 10.14
_______________________________________________________________________________
TAX ALLOCATION
AGREEMENT
By and among
CLUB REGINA RESORTS, INC.
and
BANCOMER, S.A., INSTITUCION DE BANCA MULTIPLE, GRUPO FINANCIERO
_______________________________________________________________________________
<PAGE> 2
TAX ALLOCATION AGREEMENT
This Tax Allocation Agreement (this "AGREEMENT"), is made and entered
into to be effective as of August 18, 1997, by and between Club Regina Resorts,
Inc., a Nevada corporation ("BUYER") and Bancomer, S.A., Institucion de Banca
Mulitiple, Grupo Financiero, a Mexican corporation ("SELLER").
W I T N E S S E T H
WHEREAS, on December 20, 1996, Buyer, Seller, Desarrollos Turisticos
Regina, S. de R.L. de C.V. (formerly Desarrollos Turisticos, Bancomer, S.A. de
C.V.) (the "COMPANY") and CR Hotel Acquisition Company, LLC entered into a Stock
Purchase Agreement (as amended and restated by a First Amended and Restated
Stock Purchase Agreement dated as of June 25, 1997 and by a Second Amended and
Restated Stock Purchase Agreement dated as of August 18, 1997 hereinafter the
"PURCHASE AGREEMENT"), providing for the sale by Seller to Buyer of all of the
outstanding equity securities of the Company, as well as all of the equity
securities of the Real Estate Companies (as therein defined), held by Seller
(the "STOCK").
WHEREAS, in order to implement the sale of the Stock as contemplated in
the Purchase Agreement, Seller agreed to carry out before the Closing Date (as
defined in the Purchase Agreement), certain acts including those which are more
fully described in Exhibit A hereto (the "PRE-ACQUISITION ACTS"), except for
those Pre-Acquisition Acts described in paragraphs E., F., G., J., and M. of
said Exhibit, and
WHEREAS, the parties to this Agreement desire to clarify their
respective rights and obligations with respect to certain tax and other related
liabilities.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Defined Terms. All capitalized terms used herein and not otherwise
defined shall have the meaning ascribed to them in the Purchase Agreement.
ARTICLE II
TAX ALLOCATION
2.1 Allocation of Tax Liability. (a) Seller shall be responsible for
and shall indemnify and hold Buyer, the Company and its Subsidiaries and their
respective Affiliates, absolutely harmless from and against all Taxes relating
to the ownership and operations of the Company and its Subsidiaries for all
taxable periods ending on or prior to the Closing Date, including the period
beginning January 1, 1997 and ending on the Closing Date,
<PAGE> 3
including all Damages incurred by any of them relating to tax audits for all
years open for the assessment of deficiencies through and including any taxable
period ending on or before the Closing Date. The obligation of Seller set forth
in this Section shall not be subject to any limitations, if any, contained
elsewhere in this Agreement or the Purchase Agreement, but will survive the
Closing Date until the expiration of the applicable statute of limitations
(giving effect to any waiver or extension thereof).
(b) Except as otherwise provided for herein, Buyer shall be responsible
for and shall indemnify and hold Seller absolutely harmless against all Taxes
relating to the ownership and operations of the Company and its Subsidiaries for
all taxable periods beginning after the Closing Date or taxable transactions
carried out and completed after the Closing Date, including all Damages incurred
by any of them for all taxable periods beginning after the Closing Date.
(c) Taxes attributable to a taxable period beginning before and ending
after the Closing Date shall, except as otherwise provided hereunder, be
allocated between Seller and Buyer on the actual activities carried out, taxable
income or taxable loss of the Company and its Subsidiaries during such
pre-closing partial period and such post-closing partial period based on an
actual closing of the books and records of the Company and each of its
Subsidiaries. The asset tax attributable to the Seller will be calculated using
the tax basis of the assess and those deductible liabilities of the Company and
its Subsidiaries as recorded on their books and records throughout the period
from January 1, 1997 to August 17, 1997 multiplied by the applicable asset tax
rate multiplied by the number of days between January 1, 1997 to August 17, 1997
divided by 365.
(d) Buyer shall inform Seller of (i) the commencement of any audit or
examination; (ii) any proposals of deficiencies; and (iii) the assessment of
deficiencies with respect to the Company or any of its Subsidiaries. Items (i),
(ii) and (iii), shall be limited to Taxes relating to the ownership and
operations of the Company and its Subsidiaries for all taxable periods ending on
or prior to the Closing Date, including the period beginning January 1, 1997 and
ending on the Closing Date. Seller shall not settle, compromise, accept, reject,
protest, or appeal any adjustment or proposed adjustment in connection with any
Tax audit or examination with respect to the Company or any of its Subsidiaries
unless Seller has first obtained Buyer's written approval with respect to such
adjustment, which written approval will not be unreasonably withheld. Buyer,
after receipt of notice regarding any claim, proceeding or litigation with
respect to (i),(ii) and (iii), shall notify Seller, within a term equivalent to
half of the deadline period remaining for presenting response by Seller to the
corresponding agencies, of such claim, proceeding or litigation. If Buyer does
not comply with the preceding sentence, then Buyer shall be liable for such
claim, proceeding or litigation. Buyer additionally agrees to provide Seller
with any and all documentation hereto related that Seller shall reasonably
request in order to respond, answer and/or defend any such claim, proceeding,
litigation or notice.
<PAGE> 4
(e) Regarding profit sharing to workers of the Company or any of its
Subsidiaries, Seller shall be responsible for any such profit sharing to worker
corresponding to periods up to the Closing Date. The profit sharing to workers
which may be payable for a period beginning before and ending after the Closing
Date shall be allocated between Seller and Buyer based on an actual closing of
the books and records of each the Company and its Subsidiaries and respective
Affiliates as of the Closing date.
(f) Tax Returns. Buyer at its own cost and expense will be responsible
for the filing of all Tax Returns of the Company or any of its Subsidiaries for
all periods ending after the Closing Date. Seller shall cooperate, at its own
cost and expense, with Buyer in the filing of all Tax Returns and reports with
respect to the ownership and operations of the Company and its Subsidiaries
which are required to be filed for all periods ending on or before the Closing
Date and in the period beginning before and ending after the Closing Date
(giving effect to any extensions available therefor).
2.2 Indemnification by Seller. Subject to the provisions of this
Article II, and without in any way limiting the obligations of Seller under
Article 2.1 of the Purchase Agreement, Seller shall protect, indemnify and hold
harmless the Buyer, the Company and its Subsidiaries and their respective
Affiliates from any and all Damages to which the Buyer, the Company and its
Subsidiaries and their respective Affiliates may become subject if such Damages
arise out of or are based upon:
(a) Any adverse change in the assets, liabilities, operations,
condition (financial or otherwise) of the Company or any of its Subsidiaries
from that reflected in the Interim Historical Balance Sheet, including changes
for Tax purposes, or the assumption of any obligation or liability either
accrued, absolute, contingent or otherwise for Taxes or the creation of
Encumbrances over any of their assets whether real, personal or intangible,
solely as a result of, or with respect to, any of the Pre-Acquisition Acts;
(b) Any charge to the Company or any of its Subsidiaries or the Buyer
(or its respective Affiliates) with any violation of any Applicable Fiscal Law
deriving from or related to any of the Pre-Acquisition Acts, which charge or
violation, if determined adversely to the Company, any of its Subsidiaries or
the Buyer (or any of its Affiliates) would adversely affect their business or
the results of their operations or if it reasonably is expected to affect the
rights of Buyer to own the Stock or operate the Business;
(c) Failure by the Company or any of its Subsidiaries to have caused to
be timely filed with appropriate federal, state, local and other Governmental
Entities any documentation required to be filed with respect to the Company or
its Subsidiaries, in connection with or otherwise relating to the
Pre-Acquisition Acts or the failure to pay all Taxes due with respect to such
documentation;
(d) Any notice of deficiency, assessment, audit or investigation by any
Governmental Entity with respect to the Company or its Subsidiaries or any
adjustment proposed by any Governmental Entity in connection with any of the
Company's or its Subsidiaries' tax returns deriving from the conduct of any of
the Pre-Acquisition Acts;
<PAGE> 5
(e) Any Proceeding of any nature existing prior to or after the Closing
arising out of any of the Pre-Acquisition Acts, or arising out of facts or
circumstances that existed at or prior to the Closing that are related to any of
the Pre-Acquisition Acts; or
(f) Any liabilities for federal, state or local Taxes, incurred or
accrued by the Buyers or their respective Affiliates, the Company or any of the
Subsidiaries as a result of the consummation of any of the Pre-Acquisition Acts.
2.3. Reimbursement of Taxes. Buyer expressly agrees that with respect
to any litigation, claim or proceeding which Seller shall have been a party to
during the pre-acquisition period of time, Seller shall be the sole party
responsible and/or beneficiary of the outcome of any such claim, proceeding or
litigation, and, f such outcome should result in a reimbursement or right to
set-off against any other taxes of any nature in favor of Seller, then Buyer
shall reimburse and/or indemnify Seller for such amount within 30 days after the
date of the decision. Seller expressly agrees that it will be its exclusive
responsibility to properly carry out all necessary activities and procedures to
obtain the final decision of said litigation, claim or proceeding. Seller
expressly agrees to furnish official evidence of a decision granting a
reimbursement or right to set-off.
2.4 Time Limits on Liability. Anything contained in this Agreement to
the contrary notwithstanding, the liability of Seller for indemnity shall only
extend during the time in which the statutes of limitations expires pursuant to
Mexican law provisions.
2.5 Indemnification Procedures. The obligations and liabilities of
Seller hereunder with respect to Damages shall be governed by the provisions of
Article 2.3 of the Purchase Agreement. Seller will agree to pay any such amount
that may be applicable under this indemnification provision within 30 days.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to the Buyer as follows:
3.1 Organization and Qualification. Seller is a corporation duly
organized and validly existing under the laws of Mexico and has the corporate
power and authority to enter into and perform this Agreement.
3.2 Validity of Agreement. This Agreement has been duly executed and
delivered by Seller and constitutes a legal, valid and binding obligation of
Seller, enforceable against it in accordance with its terms.
<PAGE> 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Qualification. Buyer is a corporation duly
organized and validly existing under the laws of the United States and has the
corporate power and authority to enter into and perform this Agreement.
4.2 Validity of Agreement. This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable against it in accordance with its terms.
ARTICLE V.
GENERAL PROVISIONS
5.1 Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements of Seller contained in this Agreement
shall survive the Closing.
5.2 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received, as follows:
(a) If to Seller:
Javier Fernandez Carbajal
Chief Financial Officer
Miguel Garcia y Garcia
General Counsel
Alejandro Rodriguez Mirelles
Director of Mergers and Acquisitions
BANCOMER, S.A.
Av. Universidad 1200
Col. Xoco
03339 Mexico, D.F.
(b) If to Buyer:
CLUB REGINA RESORTS, INC.
1900 Pennzoil Place-South tower
711 Louisiana Street
Houston, Texas 77002
U.S.A.
<PAGE> 7
Greenberg Traurig
c/o Andrew Zobler
153 E. 53rd Street
New York, New York 10022
or to such other address as either party shall have specified by notice
in writing to the other party.
5.3 Entire Agreement. This Agreement supplements and does not
supersede the Purchase Agreement.
5.4 Binding Effect; Benefit. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns. No right or obligation of Seller under this Agreement
may be assigned by Seller without the prior written consent of Buyer; provided,
however, that Buyer shall be entitled to assign this Agreement to an Affiliate
prior notice to Seller.
5.5 Severability. If any provision of this Agreement shall be declared
by any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
5.6 Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
5.7 Mediation/Arbitration. The provisions of Article XII of the
Purchase Agreement are hereby incorporated by reference.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
BANCOMER, S.A. INSTITUCION DE BANCA
MULTIPLE, GRUPO FINANCIERO
By:
------------------------------------
Javier Fernandez Carbajal
Title Chief Financial Officer
CLUB REGINA RESORTS, INC.
By:
------------------------------------
Douglas Y. Bech
Title President
<PAGE> 1
EXHIBIT 10.15
PRIVILEGED AND CONFIDENTIAL
AGREEMENT
by and among
RAINTREE CAPITAL COMPANY LLC.
CLUB REGINA RESORTS, INC.,
and
STARWOOD CAPITAL GROUP, L.L.C.
Dated as of May 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE I
DEFINITIONS AND CONSTRUCTION................................................ 2
Section 1.1 Captions.............................................. 2
Section 1.2 Number and Gender..................................... 2
Section 1.3 Terms................................................. 2
Section 1.4 Other Definitional Provisions......................... 2
Section 1.5 Definitions........................................... 3
ARTICLE II
PURCHASE OF STOCK AND LLC INTERESTS......................................... 6
Section 2.1 Purchase and Sale of the Purchased Company Stock...... 6
Section 2.2 Closing, Delivery and Payment......................... 6
Section 2.3 Agreements Concerning Ancillary Matters............... 6
Section 2.4 Termination........................................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RAINTREE AND THE COMPANY.................. 7
Section 3.1 Organization and Good Standing........................ 7
Section 3.2 Authorization and Validity............................ 8
Section 3.3 Organization and Good Standing of the
Relevant Company Subsidiaries......................... 8
Section 3.4 Capitalization of the Company......................... 8
Section 3.5 Capitalization of the Relevant Company Subsidiaries... 8
Section 3.6 Consents and Approvals................................ 8
Section 3.7 Non-Contravention..................................... 9
Section 3.8 Absence of Undisclosed Liabilities of the Company
and the Relevant Company Subsidiaries................. 9
Section 3.9 Litigation and Claims................................. 9
Section 3.10 Compliance with Laws.................................. 9
Section 3.11 Contracts............................................. 10
Section 3.12 Finder's Fees and Advisors' Fees...................... 10
Section 3.13 Bancomer Agreement.................................... 10
Section 3.14 Confirmation.......................................... 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER..................................... 10
Section 4.1 Organization and Good Standing of Buyer............... 10
Section 4.2 Buyer's Authorization and Validity.................... 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 4.3 Consents and Approvals................................ 11
Section 4.4 Non-Contravention of Buyer............................ 11
Section 4.5 Finder's Fees......................................... 11
ARTICLE V
COVENANTS................................................................... 11
Section 5.1 Access................................................ 11
Section 5.2 Taking of Necessary Action............................ 12
Section 5.3 Transactional Services................................ 12
Section 5.4 Notice of Certain Changes............................. 13
Section 5.5 Press Releases........................................ 13
Section 5.6 Bancomer Agreement.................................... 13
Section 5.7 Co-Buyer.............................................. 14
Section 5.8 Restructuring......................................... 14
Section 6.1 Conditions to the Obligations of Buyer
and the Company....................................... 14
Section 6.2 Conditions to the Obligations of Buyer................ 15
Section 6.3 Conditions to the Obligations of the Company.......... 15
ARTICLE VII
SURVIVAL; INDEMNIFICATION................................................... 16
Section 7.1 Survival.............................................. 16
Section 7.2 Indemnification by Raintree and the Company........... 16
Section 7.3 Indemnification by Buyer.............................. 16
Section 7.4 Notice, Participation and Duration.................... 16
ARTICLE VIII
TERMINATION................................................................. 17
Section 8.1 Termination........................................... 17
Section 8.2 Buyer Termination Option.............................. 18
Section 8.3 Effect of Termination................................. 18
ARTICLE IX
REMEDIES.................................................................... 18
Section 9.1 Equitable Remedy...................................... 18
Section 9.2 Damages............................................... 18
ARTICLE X
MISCELLANEOUS............................................................... 19
Section 10.1 Due Diligence......................................... 19
Section 10.2 Notices .............................................. 19
Section 10.3 Amendment; Waiver..................................... 20
Section 10.4 Assignment............................................ 20
Section 10.5 Binding Effect........................................ 20
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
Section 10.6 Entire Agreement...................................... 20
Section 10.7 Parties in Interest................................... 20
Section 10.8 Public Disclosure..................................... 20
Section 10.9 Counterparts.......................................... 20
Section 10.10 Submission to Jurisdiction; Selection of Forum........ 21
Section 10.11 Headings.............................................. 21
Section 10.12 Severability.......................................... 21
Section 10.13 Third Parties......................................... 21
Section 10.14 Incorporation of Exhibits, Schedules and Annexes...... 21
Section 10.15 Waivers............................................... 22
</TABLE>
Exhibit A Form of Bancomer Agreement
iii
<PAGE> 5
AGREEMENT, (this "Agreement") dated as of May 12, 1997, among RAINTREE
CAPITAL COMPANY, LLC, a Texas limited company ("Raintree"), CLUB REGINA RESORTS,
INC., a Nevada corporation (the "Company"), and STARWOOD CAPITAL GROUP, L.L.C.,
a Connecticut limited liability Company ("Buyer").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Amended and Restated Stock Purchase
Agreement (the "Bancomer Agreement"), to be dated on or about the date hereof,
among Bancomer S.A, Institucion de Banca Multiple, Grupo Financiero, a Mexican
corporation ("Bancomer"), Desarollos Turisticos Bancomer, S.A. de C.V., a
Mexican corporation ("DTB"), the Company and CR Hotel Acquisition Company, LLC,
a Delaware limited liability company ("CR Hotel"), the Company will agree to
purchase all of the issued and outstanding Capital Stock of DTB;
WHEREAS, DTB owns all of the issued and outstanding common stock of
each of Desarollos Turisticos Integrales Cabo San Lucas, S.A. de C.V., Promotora
Turistica Nizuc, S.A. de C.V. and Promotora y Desarrolladora Pacifico, S.A. de
C.V., each, a Mexican corporation.
WHEREAS, the parties hereto intend that the (i) Timeshare Business and
the Other Business (collectively the "Timeshare/Other Business"); and (ii) the
Hotel Business are intended to be owned by separate entities;
WHEREAS, Buyer and Raintree (including affiliates of Raintree) are
willing to loan $750,000 and $3,000,000 respectively, to a newly formed Mexican
finance subsidiary ("MFS") for the purpose of loaning such proceeds to the newly
formed indirect Mexican subsidiary of the Company to be used to facilitate the
acquisition of the Timeshare/Other Business.
WHEREAS, Buyer will receive warrants to acquire 20% of the equity of
the Company as of the Closing Date for $150,000 (representing Buyer's share of
expenses as provided herein) and the other considerations described herein.
WHEREAS, as of the date hereof, SLT Realty Limited Partnership
("Lodging"), has entered into an agreement with Raintree and the Company to
purchase a limited liability company interest in CR Hotel in accordance with the
terms thereof (the "Lodging Agreement");
WHEREAS, Buyer initially agreed to acquire a controlling interest in
the Hotel Business and a minority interest in the Timeshare/Other Business in
accordance with that certain Agreement among Raintree, the Company and Buyer
dated May 9, 1997 (the "Prior Agreement");
WHEREAS, Buyer and the Company agreed that it is in the best interests
of Buyer and the Company for an affiliate of Buyer, Lodging, to acquire a
controlling interest in the Hotel Business and for Buyer to acquire an interest
in the Company as provided herein.
<PAGE> 6
WHEREAS, to effectuate the foregoing, the parties have agreed to
terminate the Prior Agreement.
WHEREAS, the parties believe that the business of Buyer will facilitate
the Company's acquisition of the Capital Stock of DTB and the creation of
long-term value for the Company in the ownership and growth of the
Timeshare/Other Business;
WHEREAS, the parties expect that there will be significant
opportunities to do business together in the future;
WHEREAS, the Company intends to adopt appropriate, public company, long
term incentive programs providing for stock options, stock grants or similar
stock incentive plans (the "Stock Option Plan") for key management employees
(not investors) consistent with acceptable business practices;
WHEREAS, the Company may raise future financing, privately or publicly,
to develop into a world-class vacation interval company;
NOW THEREFORE, in consideration of the above and the mutual covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged by the parties
hereto, Raintree, the Company and Buyer hereby agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Captions. Titles and captions of articles and sections set
forth in this Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the meaning, of any provision set forth herein.
Section 1.2 Number and Gender. Whenever required by the context, the
singular number shall include the plural and vice versa and the gender of any
pronoun shall include the other gender.
Section 1.3 Terms. Terms may be defined in the text of this Agreement
and, unless otherwise indicated, shall have such meaning throughout this
Agreement.
2
<PAGE> 7
Section 1.4 Other Definitional Provisions.
(a) The words "hereof," "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(b) The terms "dollars" and "$" means United States dollars.
Section 1.5 Definitions.
"Ancillary Agreements" is defined in the Bancomer Agreement.
"Bancomer" is defined in the Recitals.
"Bancomer Agreement" is defined in the Recitals.
"Bancomer Escrow Agreement" means the "Escrow Agreement" as
defined in the Bancomer Agreement.
"Bancomer Transactions" means the transactions contemplated by
the Bancomer Agreement.
"Business Days" is defined in the Bancomer Agreement.
"Buyer" is defined in the Recitals.
"Buyer Indemnitees" is defined in Section 0.
"Capital Stock" means with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
voting, or non-voting) of such Persons capital stock or equity interests whether
now outstanding or issued after the date hereof, including but not limited to
all common stock and preferred stock.
"Claim" is defined in Section 0.
"Closing" is defined in Section 2.2.
"Closing Date" is defined in Section 2.2.
"Commitments" is defined in the Bancomer Agreement.
"Company" is defined in the Recitals.
"Company Common Stock" means the common stock of the Company.
3
<PAGE> 8
"Company Indemnities" is defined in Section 0.
"CR Hotel" is defined in the Recitals.
"Damages" is defined in the Bancomer Agreement.
"Default" by any party ("Defaulting Party") shall include the
failure to consummate the Closing on or before the Termination Date if the
failure to consummate the Closing on or before such date resulted from the
willful and knowing failure by the Defaulting Party to fulfill any undertaking
or commitment provided for herein that is required to be fulfilled by such
Defaulting Party at or prior to Closing.
"DTB" is defined in the Recitals.
"Enforceable" means an agreement or contract is "Enforceable",
if it constitutes the legal, valid and binding obligation of the applicable
Person enforceable against such Person in accordance with its terms, subject to
bankruptcy, reorganization, insolvency and similar Laws of general application
relating to or affecting the rights of creditors, and subject to general
principles of equity.
"Governmental Body" is defined in the Bancomer Agreement.
"Hotel Business" means (i) the "Hotel Business" as defined in
the Bancomer Agreement and (ii) one-half of the Capital Stock of Corporacion
Habitacional Mexicana, S.A.
"Indemnitee" is defined in Section 0.
"Indemnitor" is defined in Section 0.
"IPO" means an initial public offering of a company's common
stock pursuant to the rules and regulations of the Securities Act of 1933, as
amended.
"Laws", mean, all laws (common or statutory), statutes,
ordinances, rules, regulations and decrees applicable to the referenced matter.
"Liabilities" is defined in the Bancomer Agreement.
"Lien" is defined in the Bancomer Agreement.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on or with respect to the business, assets, financial
condition or results of operations of such Person and its Subsidiaries taken as
a whole.
4
<PAGE> 9
"Mezzanine Note" has the meaning assigned to "US $50 million
Mezzanine Note" in the Bancomer Agreement.
"MFS" is defined in the Recitals.
"Person" is defined in the Bancomer Agreement.
"Prior Agreement" is defined in the Recitals.
"Proceedings" is defined in the Bancomer Agreement.
"Purchased Company Stock" is defined in the Recitals.
"Raintree" is defined in the Recitals.
"Relevant Company Subsidiaries" means the Timeshare Holding
Company and the Timeshare Subsidiaries.
"Requisite Regulatory Approvals" means all permits, approvals,
filings, consent and waivers required to be obtained or made, and all waiting
periods required to expire, before the consummation of the Transactions, as
applicable, under all Laws of any jurisdiction, domestic or foreign, having
jurisdiction over the Transactions.
"Starwood" means collectively Buyer and Lodging.
"Stock Option Plan" is defined in the Recitals.
"Subsidiary" is defined in the Bancomer Agreement.
"Termination Date" is defined in Section 1.1 of the Bancomer
Agreement.
"Timeshare Assets" is defined in Section 1.1 of the Bancomer
Agreement.
"Timeshare Business" is defined in the Bancomer Agreement.
"Timeshare Holding Company" means the Mexican corporation to
be organized to hold the Capital Stock of DTB.
"Timeshare Loan" is defined in Section 2.1.
"Timeshare Note" has the meaning assigned to "US $45 million
Timeshare Senior Mortgage Note" in the Bancomer Agreement.
"Timeshare/Other Business" means all of the assets, business
and operations of DTB other than the Hotel Business.
5
<PAGE> 10
"Timeshare Subsidiaries" means the indirect subsidiaries of
the Company to be formed in accordance with Article XV of the Bancomer Agreement
in connection with the Timeshare Business.
"Transactions" means the transactions contemplated by this
Agreement.
"Transfer Taxes" is defined in the Bancomer Agreement.
ARTICLE II
INVESTMENT
Section 2.1 Purchase and Sale of the Purchased Company Stock. On the
terms and subject to the conditions set forth herein, at the Closing, the Buyer
shall pay by wire transfer of immediately available funds to Bancomer the sum of
$750,000. Raintree and affiliates shall cause the $3,000,000 subject to the
Bancomer Escrow Agreement to be applied to the purchase price thereunder in
accordance with the terms thereof. In consideration of the foregoing and the
other obligations of the parties hereto, the $3,750,000 applied as set forth in
this Section 2.1 shall be recognized as a loan (the "Timeshare Loans") to a
newly formed Mexican corporation to be owned by Buyer and Raintree (and
affiliates) ("Raintree Sub"), which, in turn, will loan such monies to a direct
or indirect Mexican subsidiary of the Company to be applied to the purchase of
the Timeshare/Other Business under the Bancomer Agreement. The Timeshare Loan
shall bear interest at 16.5% per annum. In the event that interest is not paid
in cash on a quarterly basis, then any unpaid and accrued interest shall bear
interest at 12% per annum. Any interest not paid at the time the Company may
conduct its IPO shall be paid in shares of the Company's Common Stock priced at
85% of the IPO price per share. It is contemplated that interest on the
Timeshare Loans will not be paid in cash so long as the acquisition loans of the
Timeshare/Other Business from Bancomer exceed $45 million. In addition to the
foregoing and in consideration of the expenses borne by Buyer pursuant to
Section 5.3 and other matters contained herein, Buyer shall receive warrants to
purchase Company Common Stock equal to 20% of the equity of the Company as of
the Closing Date for no additional consideration. The warrants shall be
exercised at the option of the holder on or before the date the Company may
conduct an IPO and shall contain appropriate antidilution provisions. In the
event of an IPO, each holder of the Timeshare Loans will have the right to
convert the principal balance of the applicable Timeshare Loan into the
Company's Common Stock priced at 85% of the IPO price per share. In the event of
an IPO, each holder of the Timeshare Loans will have the right to convert the
principal balance of the applicable Timeshare Loan into the Company's Common
Stock priced at 85% of the IPO price per share.
Section 2.2 Closing, Delivery and Payment.
(a) The Transactions shall be consummated (the "Closing") at
the offices of Bancomer S A., Institucion de Banca Multiple, Grupo Financiero,
Av. Universidad 1200, Col.
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Xoco, 03339 Mexico, D.F., concurrently with the closing of the Bancomer
Transactions, or at such other place and time as the parties may mutually agree.
The date on which such Closing occurs is referred to as the "Closing Date". The
parties shall conduct a pre-closing at the offices of Akin, Gump, Strauss, Hauer
& Feld, L.L.P., 1900 Pennzoil Place - South Tower, 711 Louisiana, Houston, Texas
77002 on the date that is five (5) Business Days prior to the Closing Date, or
at such other time and place as the parties may mutually agree.
(b) The transactions contemplated by Article XV of the
Bancomer Agreement will be undertaken at Closing or promptly thereafter as
provided in the Bancomer Agreement.
Section 2.3 Agreements Concerning Ancillary Matters. In connection
with the Transactions, the parties hereto agree to the following.
(i) If Raintree or Buyer desires to sell (the "Selling
Party") its interest in the Capital Stock of the Company (or any
portion thereof), then such party shall first give notice to the other
party (a "Sale Notice") which shall constitute a request for an offer
to purchase the interest of the Selling Party by the other party. The
other party shall have a period of thirty (30) days thereafter to make
a written offer (the "First Offer") to the Selling Party to purchase
such interest at the all-cash price set forth in the First Offer to the
Selling Party. Such First Offer shall be accepted or refused by the
Selling Party within ten (10) days after its receipt thereof. If the
Selling Party does not accept the First Offer from the other party
within such ten (10) day period, then the Selling Party may, within the
ensuing 180 day period, sell its interest to a third party but only at
a price which is higher than the First Offer. Failure by the other
party to respond to a Sale Notice within the period provided herein
shall constitute a waiver of all rights of the other party under this
Section 2.3(i) but only with respect to the particular Sale Notice to
which such failure relates. If the Selling Party does not accept the
First Offer, does not consummate a sale at a higher price within the
180 day period after the date of delivery of the Sale Notice and wishes
to sell in more than 180 days after the date of delivery of the Sale
Notice, then the Selling Party shall be required to comply with the
foregoing procedures set forth in this Section 2.3(i). The provisions
of this Section 2.3(i) shall not be applicable to transfers to
affiliates or changes in control of such affiliates.
(ii) the Company shall be managed by a Board of Directors
consisting of three Raintree representatives, a representative of
Starwood, John McCarthy and two other persons to be selected by
Raintree. Starwood shall have the continuing right to collectively
nominate one member of the Board of Directors.
(iii) John McCarthy shall be the Chief Executive Officer
of the Company and shall have primary responsibility for operations in
Mexico and such other areas approved by the Board of Directors of the
Company and (ii) John McCarthy shall be the President and Chief
Operating Officer of the Company.
(iv) the Company agrees to consult with Buyer as to the
appointment of
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such other executive officers for the Company consistent with its
growth and business strategy as an upscale timeshare developer and
public company and in issues of compensation and other material
decisions.
(v) Buyer will have the right to approve prior to the
IPO any financing of the Company (debt or equity) with any person which
is not a bona-fide unaffiliated third party as to Raintree and its
principals.
Section 2.4 Termination. The Prior Agreement is hereby terminated and
is null and void and of no further force or effect and no party hereto shall
have any obligation thereunder whatsoever.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RAINTREE AND THE COMPANY
Raintree and the Company hereby represent and warrant to Buyer as of
the date hereof and as of the Closing Date (except that representations and
warranties that are made as of a specific date need be true only as of such
date) as follows:
Section 3.1 Organization and Good Standing. The Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has engaged in no business other than the
entering into of the Bancomer Agreement, this Agreement and performance
thereunder. Raintree is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization.
Section 3.2 Authorization and Validity. Raintree and the Company have
all requisite power and authority to enter into this Agreement and, subject to
obtaining all Requisite Regulatory Approvals referenced in Section 0, to carry
out its obligations hereunder. Each of the execution, delivery and performance
by the Company and Raintree of this Agreement has been duly authorized by all
requisite action. This Agreement is Enforceable against the Company and
Raintree.
Section 3.3 Organization and Good Standing of the Relevant Company
Subsidiaries. Each Relevant Company Subsidiary will be duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and by the Closing Date will have all requisite corporate power and
authority to own, lease and operate all properties and assets then owned, leased
or operated by it and to carry on its business as then conducted. As of the
Closing Date, each Relevant Company Subsidiary will be duly qualified to conduct
business in all jurisdictions in which the nature of the business transacted by
it requires qualification.
Section 3.4 Capitalization of the Company. As of the Closing Date, the
authorized Capital Stock of the Company will be duly authorized, and when
issued, validly issued, fully paid and non-assessable. Douglas Y. Bech is the
record owner of all of the Capital Stock of the
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Company as of the date hereof. Buyer will be delivered shares of Company Common
Stock equal to 20% of the outstanding Capital Stock of the Company on a fully
diluted basis. There are no Commitments or preemptive rights with respect to the
Capital Stock of the Company which would effect the Company's ability to perform
in accordance with the provisions of this Agreement. Buyer acknowledges that the
Company may adopt a Stock Option Plan which will dilute Buyer and the other
Common Stock holders pro-rata.
Section 3.5 Capitalization of the Relevant Company Subsidiaries. All of
the Capital Stock of each Relevant Company Subsidiary will, on the Closing Date,
be duly authorized, validly issued, fully paid and non-assessable. As of the
Closing Date, the Company shall own all of the issued and outstanding Capital
Stock of each Relevant Company Subsidiary free and clear of all Liens and
encumbrances other than as contemplated by the Bancomer Agreement. There will be
no Commitments or preemptive rights with respect to the Capital Stock of the
Relevant Company Subsidiaries except as required generally with respect to such
Capital Stock under Mexican law.
Section 3.6 Consents and Approvals. Except as required by the Bancomer
Agreement, as of the Closing Date, no Requisite Regulatory Approval applicable
to the Transactions which has not been obtained is required to be obtained by
the Company, Raintree or any of the Relevant Company Subsidiaries from, and no
notice or filing will be required to be given by the Company, Raintree or the
Relevant Company Subsidiaries to or made by the Company, Raintree or the
Relevant Company Subsidiaries with, any Governmental Body or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement.
Section 3.7 Non-Contravention. As of the Closing Date, the execution,
delivery and performance by the Company and by Raintree of this Agreement and
the consummation of the Transactions by the Company will not (i) violate any
provision of the Certificate of Incorporation, Bylaws (or other similar
documents) or other organizational documents of the Company, Raintree or any
Relevant Company Subsidiary, (ii) subject, as to performance, to obtaining the
consents referred to in Section 0, (A) result in the breach of, or constitute a
default under, or result in the termination, cancellation or acceleration
(whether after the giving of notice or the lapse of time or both) of any right
or obligation or the Company, Raintree or any Relevant Company Subsidiary under,
or to a loss of any benefit to which the Company, Raintree or any Relevant
Company Subsidiary is entitled under, any contract or other instrument to which
the Company, or any Relevant Company Subsidiary is a party or (B) except as
contemplated by the Bancomer Agreement, result in the creation of any Lien upon
any of the Capital Stock of the Company, Raintree or any Relevant Company
Subsidiary, or (iii) to the knowledge of the Company and/or Raintree, violate or
result in a breach of or constitute a default under any order or Law applicable
to the Company, Raintree or any Relevant Company Subsidiary, including any
Governmental Body approval.
Section 3.8 Absence of Undisclosed Liabilities of the Company and the
Relevant Company Subsidiaries. Except as contemplated by this Agreement or the
Bancomer Agreement,
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the Company and each Relevant Company Subsidiary is not subject to any
Liabilities.
Section 3.9 Litigation and Claims. There is no pending Proceeding that
has been commenced by or against the Company, Raintree or any Relevant Company
Subsidiary that would be expected to materially and adversely affect the
Company, Raintree, the Transactions or impair the ability of the Company to
perform under the Bancomer Agreement.
Section 3.10 Compliance with Laws. From their inception, the businesses
of the Company and each Relevant Company Subsidiary will have been conducted in
compliance with all applicable Laws (including, but not limited to, those
relating to licenses and permits for the ownership, occupancy and operation of
its properties). The Company has or will have by the Closing Date all
Governmental Body approvals necessary for the conducting of its businesses as
currently (and as planned to be) conducted and, by the Closing Date, each
Relevant Company Subsidiary will have all Governmental Body approvals necessary
for the conducting of its business as then conducted. There are no proceedings
pending or, to the knowledge of the Company and/or Raintree, threatened which
may result in the revocation, cancellation or suspension of any such
Governmental Body approval. As of the date hereof, no investigation or review by
any Governmental Body (including, but not limited to, any audit or similar
review by any Federal, state or local taxing authority) with respect to the
Company or any of its respective properties is, to the knowledge of the Company,
pending or threatened.
Section 3.11 Contracts. This Agreement, the Bancomer Agreement, and the
agreements contemplated thereby are the only contracts to which the Company and
each Relevant Company Subsidiary is or, to the Company's knowledge, will be a
party or to which any of their businesses, or properties is or, to the Company's
knowledge, will be subject.
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Section 3.12 Finder's Fees and Advisors' Fees. Neither Raintree nor the
Company has dealt with any broker or finder in connection with the Transactions,
and no broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions contemplated hereby or by the Bancomer
Agreement other than Jefferies & Company, Inc. Raintree and the Company agree to
indemnify and hold harmless Buyer against any Liability incurred because of any
brokerage commission or finder's fee alleged to be payable because of any act,
omission or statement of the indemnifying party. The Company is solely
responsible for any obligations to Jefferies & Company, Inc.
Section 3.13 Bancomer Agreement. Nothing has come to the attention of
Raintree or the Company after due inquiry which would cause either Raintree or
the Company to believe that any of the representations and warranties of
Bancomer set forth in the Bancomer Agreement are not true and correct.
Section 3.14 Confirmation. Raintree and Buyer confirm that each of the
representations and warranties of the Company under the Bancomer Agreement are
true and correct.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Raintree and the Company as of the
date hereof and as of the Closing Date (except that the representations and
warranties that are made as of a specific date need be true only as of such
date) as follows:
Section 4.1 Organization and Good Standing of Buyer. Buyer is a limited
liability company duly organized, validly existing and in good standing under
the law of the jurisdiction of its incorporation.
Section 4.2 Buyer's Authorization and Validity. Buyer has all requisite
power and authority to enter into this Agreement and subject to obtaining all
Requisite Regulatory Approvals referenced in Section 0 to carry out its
obligations hereunder and thereunder. Each of the execution, delivery and
performance by Buyer of this Agreement has been duly authorized by all requisite
action. This Agreement is Enforceable against Buyer.
Section 4.3 Consents and Approvals. Except as may be required under the
laws of Mexico or any subdivision or agency thereof, no Requisite Regulatory
Approval applicable to the Transactions which has not been obtained is required
to be obtained by Buyer from, and no notice or filing is required to be given by
Buyer to or made by Buyer with, any Governmental Body or other Person in
connection with the execution, delivery and performance by Buyer of this
Agreement.
Section 4.4 Non-Contravention of Buyer. The execution, delivery and
performance by Buyer of this Agreement, and the consummation of the
Transactions, do not and will not (i) violate any provision of the Certificate
of Formation, Operating Agreement (or other similar
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documents) or other organizational documents of Buyer, (ii) subject, as to
performance, to obtaining the consents referred to in Section 0, (A) result in
the breach of, or constitute a default under, or result in the termination,
cancellation or acceleration (whether after the giving of notice or the lapse of
time or both) of any right or obligation of Buyer under, or to a loss of any
benefit to which Buyer is entitled under, any contract or other instrument to
which Buyer is a party or (B) except as contemplated by this Agreement or the
Bancomer Agreement, result in the creation of any Lien upon the Purchased Common
Stock (iii) to the knowledge of Buyer, violate or result in a breach of or
constitute a default under any order or Law applicable to Buyer, including any
Governmental Approval.
Section 4.5 Finder's Fees. Buyer represents and warrants that it has
dealt with no broker or finder in connection with any of the Transactions, no
broker or other person is entitled to any commission or finder's fee in
connection with any of the Transactions except as set forth in Section 0. Buyer
agrees to indemnify and hold harmless Raintree, CR Hotel and the Company
against any Liability incurred because of any brokerage commission or finder's
fee alleged to he payable because of any act, omission or statement of Buyer.
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ARTICLE V
COVENANTS
Section 5.1 Access.
(a) Prior to the Closing, Raintree and the Company shall
permit Buyer and its representatives to have access, during regular business
hours and upon reasonable advance notice, to all information, wherever located,
obtained by Raintree or the Company from Bancomer under the Bancomer Agreement
or from any advisors or other source with respect to the Transactions under the
control or direction of Raintree and/or the Company.
(b) In the event of the termination of this Agreement, Buyer
shall promptly deliver to the Company, all original documents, work papers and
other material obtained by Buyer or on its behalf from Raintree and the Company,
or any of their respective agents, employees or representatives as a result
hereof or in connection herewith whether so obtained before or after the
execution hereof. Buyer shall at all times prior to the Closing Date, and in the
event of termination of this Agreement, cause any information so obtained to be
kept confidential and will not use, or permit the use of, such documents, work
papers and other materials in its business or any other manner or for any other
purpose except as contemplated hereby. The foregoing shall not preclude Buyer
from (i) disclosing any information obtained from Raintree or the Company to
Buyer's consultants, accountants, legal advisors or other similar
representatives, (ii) using or disclosing such information which currently is
known generally to the public or which subsequently has come into the public
domain, other than because of disclosure in violation of this Agreement, (iii)
using or disclosing of such information that becomes available to Buyer on a
non-confidential basis from a source other than Raintree, the Company or
Raintree's or the Company's agents provided that such source does not have an
obligation prohibiting the disclosure of such information, (iv) disclosure to
Buyer's officers, directors and/or affiliates or (v) disclosing such information
required by Law or court order, provided, that, as soon as Buyer has knowledge
of the requirement for such disclosure, Buyer will promptly give the Company
oral and then written notice of the nature of the Law or order requiring
disclosure and the disclosure to be made in accordance therewith.
Section 5.2 Taking of Necessary Action. Subject to this Agreement and
Law, Buyer, Raintree and the Company shall use their best efforts promptly to
take or cause to be taken all action and promptly to do or cause to be done all
things necessary, proper or advisable under applicable Laws and regulations to
consummate and make effective the Transactions. Without limiting the foregoing,
each of Buyer and the Company shall, and the Company shall cause each of its
Subsidiaries to, use their best efforts to obtain and make all consents,
approvals, assurances or filings of or with third parties and Governmental
Bodies necessary for the consummation of the Transactions. Each of the parties
shall cooperate with the others in good faith to help the other satisfy its
obligations under this Section 0. If at any time after the Closing Date any
further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers or directors of each party to this Agreement
shall take that necessary action.
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Section 5.3 Transactional Services.
(a) At the Closing, (i) Starwood and (ii) the Company shall
each pay by wire transfer 50% of all third party fees and expenses incurred by
Starwood and the Company in connection with the transactions contemplated hereby
and by the Bancomer Agreement and the Lodging Agreement other than the fees and
expenses of Akin, Gump, Strauss, Haver & Feld, L.L.P. and Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel; provided, Starwood's share of fees and
expenses incurred by the Company shall not exceed $500,000; and provided,
further, that 30% of the Starwood obligation pursuant to this Section 5.3 shall
be paid by Buyer pursuant hereto (not to exceed $150,000) and 70% of the
Starwood obligation shall be paid by Lodging pursuant to Section 5.3(a) of the
Lodging Agreement (not to exceed $350,000). Nothing in this Agreement,
including, without limitation, in this Section 0(a), shall limit the right of
Buyer, Lodging or the Company to engage any counsel, accountant or other advisor
at its own expense subject to the obligation to make payments for services
rendered in accordance with the provisions of this Section 0(a) in the case of
Buyer and Section 5.3(a) of the Lodging Agreement in the case of Lodging.
(b) The services and work product of Santamarina y Steta,
counsel to the Company in Mexico for the Bancomer Transactions shall also be for
Starwood's benefit. Starwood (or Buyer and Lodging separately as they may
determine) may engage their own Mexican local counsel, the expense for which
shall be allocated as contemplated by Section 5.3(a) of this Agreement in the
case of Buyer and Section 5.3(a) of the Lodging Agreement in the case of
Lodging. It is understood that Ernst & Young has been engaged to conduct a
USGAAP audit of the historical financial statements of DTB as well as a review
of interim financial statements on a USGAAP basis, and to provide tax and
related advisory services. It is contemplated that Ernst & Young will provide
Buyer with a complete briefing of its tax and financing analysis of the Bancomer
Transactions. The Company and Buyer will consult as to the engagement of other
tax advisors, accountants, consultants or attorneys for the Bancomer
Transactions to supplement the work done to date. All other consultants
previously engaged by the Company and the work product thereof will be made
available to Buyer.
Section 5.4 Notice of Certain Changes. Each party hereto shall give
prompt written notice to the other parties hereto of the occurrence or
non-occurrence, of any event which would be likely to cause any representation
or warranty herein to be untrue or inaccurate, or any covenant, condition or
agreement herein not be complied with or satisfied.
Section 5.5 Press Releases. The Company and Buyer shall consult with
each other as to the timing, form and substance of any press release or public
disclosure of matters related to this Agreement or any of the transactions
contemplated by this Agreement; provided, however; that nothing in this Section
0 shall be deemed to prohibit any party to this Agreement from making any
disclosure that if required to fulfill that parry's disclosure obligations
imposed by Law or stock exchange requirements.
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Section 5.6 Bancomer Agreement. Buyer and the Company shall each have
the right to approve any modifications to the Bancomer Agreement and any
decisions or actions taken with respect thereto prior to the Closing Date which
approvals shall not be unreasonably withheld, delayed or conditioned, including,
without limitation, the approval of the Ancillary Agreements and the
continuation of beneficial interests of Bancomer pursuant to Section 2.4(d) of
the Bancomer Agreement. Buyer and the Company shall seek the agreement of
Bancomer to (i) pay for the title insurance contemplated by the Bancomer
Agreement and (ii) apply the "Defects" deduction contemplated by the Bancomer
Agreement as an offset against cash due Bancomer at the closing under the
Bancomer Agreement. In the event of a default by Bancomer under the Bancomer
Agreement, Buyer and the Company shall agree upon any and all actions to be
taken in connection therewith. In the event that damages are obtained against
Bancomer pursuant to Section 10.2(f) of the Bancomer Agreement, such damages
shall be shared equally between Starwood and the Company after payment of all
reasonable legal fees and expenses of Starwood and the Company in connection
therewith.
Section 5.7 Co-Buyer. Starwood and the Company shall consult with
Mexican counsel promptly following the date hereof to determine if any Requisite
Regulatory Approvals would be required to provide Starwood with the rights under
Section 6.6 of the Bancomer Agreement as a "Co-Buyer" as defined therein. In the
event that Mexican counsel advises that no Requisite Regulatory Approvals are
required in connection therewith, the Company shall notify Bancomer that
Starwood is a "Co-Buyer" under Section 6.6 of the Bancomer Agreement. In the
event that any Requisite Regulatory Approvals would be so required to provide
such rights to Starwood, Starwood agrees that it will not require that the
Company request that Starwood be made a "Co- Buyer" under the Bancomer Agreement
if allocation for such Requisite Regulatory Approvals would delay the closing
under the Bancomer Agreement.
Section 5.8 Restructuring. The parties agree to continue to analyze
the transaction structure and to restructure same as the parties may under such
circumstances agree, provided that none of the parties will suffer any economic
or other detriment in connection with such restructuring.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Obligations of Buyer and the Company.
The obligations of the parties hereto to effect the Closing are subject to the
satisfaction (or waiver prior to the Closing) of the following conditions:
(a) (i) No order and no other legal restraint or prohibition
that would prevent, enjoin or have the effect of preventing the consummation of
the transactions contemplated by this Agreement or the Bancomer Agreement shall
be in effect; provided, however, that no party may invoke this condition unless
such party shall have complied fully with its obligations under Section 0 and,
in addition shall have used all commercially reasonable efforts to have any such
order vacated; and
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(ii) There shall not be commenced or threatened in writing,
or be continuing, any Proceeding which would prevent, enjoin or have the effect
of preventing the consummation of the transactions contemplated by this
Agreement and/or the Bancomer Agreement.
(iii) The Bancomer Agreement shall have been executed and
delivered by the parties thereto in substantially the form attached hereto as
Exhibit A hereto or, at Buyer's option, a closing shall have occurred under the
existing agreements of the Company and CR Hotel with respect to the acquisition
contemplated by the Bancomer Agreement.
(b) All Requisite Regulatory Approvals required under this
Agreement shall have been made or obtained and shall be in full force and affect
and shall not have expired or been rescinded.
(c) All conditions precedent to the obligations of the Company
to closing of the Bancomer Transactions shall have been satisfied or waived by
the Company and Buyer.
(d) Raintree and such other shareholders of the Company as may
be required to effectuate the provisions thereof shall ensure the issue and
delivery to Buyer of a loan agreement reflecting the provisions of Section 2.1
and Buyer shall have received warrants in a form contemplated by Section 2.1 and
Buyer and Raintree (and affiliates) shall have entered into a shareholders
agreement with respect to matters related to the ownership of the Company Common
Stock which shall contain such terms and conditions as Buyer and such
shareholders shall agree consistent with the terms hereof.
(e) The Company and the Buyer shall have approved the
Ancillary Agreements.
(f) The closing under the Lodging Agreement shall occur
concurrently herewith.
Section 6.2 Conditions to the Obligations of Buyer. The obligation of
Buyer to effect the Closing is subject to the satisfaction (or waiver by the
Buyer) prior to the Closing of the following conditions:
(a) The representations and warranties of the Company
contained herein shall have been true and correct in all material respects when
made and shall be true and correct in all material respects as of the Closing,
as if made as of the Closing (except that representations and warranties that
are made as of a specific date need be true in all material respects only as of
such date).
(b) The Company shall have delivered to Buyer the certificates
representing the warrants described in Section 2.1.
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(c) The covenants and agreements of the Company to be
performed on or prior to the Closing shall have been performed in all material
respects.
(d) Title insurance with respect to the real property and
improvements used in connection with the Timeshare Business shall have been
delivered in accordance with the provisions of the Bancomer Agreement.
Section 6.3 Conditions to the Obligations of the Company. The
obligation of the Company to effect the Closing is subject to the satisfaction
(or waiver prior to the Closing) of the following conditions:
(a) The representations and warranties of Buyer contained
herein shall have been true and correct in all material respects when made and
shall be true and correct in all material respects as of the Closing, as if made
as of the Closing (except that representations and warranties that are made as
of a specific date need be true in all material respects only as of such date).
(b) The covenants and agreements of Buyer to be performed on
or prior to the Closing shall have been duly performed in all material respects.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1 Survival. The representations and warranties of the
Company and Buyer contained in this Agreement and any document, instrument or
certificate delivered in connection with the Transactions shall survive the
Closing.
Section 7.2 Indemnification by Raintree and the Company. Raintree and
the Company agree to indemnify and hold harmless Buyer and its officers,
directors, shareholders, Affiliates, employees and agents (the "Buyer
Indemnitees") from any and all Damages, directly or indirectly resulting from,
relating to, arising out of or attributable to: (a) any breach of or inaccuracy
in any representation or warranty of the Company and/or Raintree contained in
this Agreement, and (b) subject to Section 9.2, any breach or nonperformance,
partial or total, by the Company and/or Raintree of any covenant or agreement of
the Company and/or Raintree contained in this Agreement.
Section 7.3 Indemnification by Buyer. Buyer agrees to indemnify and
hold harmless the Company and Raintree and their officers, directors,
shareholders, Affiliates, employees and agents (the "Company Indemnities") from
any and all Damages, directly or indirectly resulting from, arising out of or
attributable to: (a) any breach of or inaccuracy in any representation or
warranty of Buyer contained in this Agreement, and (b) subject to Section 9.2,
any breach or non-performance, partial or total, by Buyer of any covenant or
agreement of Buyer contained in this Agreement.
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Section 7.4 Notice, Participation and Duration. If a claim by a third
party is made against a party indemnified pursuant to this Article VII
("Indemnitee"), and if such Indemnitee intends to seek indemnity with respect
thereto under this Article VII, the Indemnitee shall promptly, and in any event
within 10 days of the assertion of any claim or the discovery of any fact upon
which Indemnitee intends to base a claim for indemnification under this
Agreement (a "Claim"), notify the party or parties from whom indemnification is
sought (the "Indemnitor") of such Claim. Upon any Claim, Indemnitor, at its
option, may assume (with legal counsel reasonably acceptable to the Indemnitee)
the defense of any Proceeding in connection with the Indemnitee's Claim, and may
assert any defense of Indemnitee or Indemnitor, provided that Indemnitee shall
have the right at its own expense to participate jointly with Indemnitor in the
defense of any Proceeding in connection with the Indemnitee's Claim and
provided, further, if Indemnitee has interests in such matters which are or
which may be adverse to Indemnitor, then, in such event, Indemnitor shall pay
all reasonable costs of Indemnitee's counsel. If Indemnitor elects to undertake
the defense of any Claim hereunder, Indemnitee shall cooperate with Indemnitor
to the extent reasonably requested in regard to all matters relating to the
Claim (including, without limitation, corrective actions required by applicable
Law, assertion of defenses and the determination, negotiation and settlement of
all Damages) so as to permit Indemnitor's management of the same with regard to
the amount of Damages payable to indemnitor hereunder. Indemnitor shall not
settle any indemnifiable Claim without the prior written consent of Indemnitee
unless such settlement involves only the payment of money by indemnitor and the
claimant provides to Indemnitee a release, in form and substance reasonably
satisfactory to Indemnitee, from all Liability in respect of such Claim.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Closing.
(a) by written agreement of the Company and Buyer;
(b) by the Company after the occurrence and during the
continuation of a Default by Buyer under this Agreement and/or by Lodging under
the Lodging Agreement, provided that no Default or event which, with notice
and/or the lapse of time, would constitute a Default by the Company (other than
a Default caused by Buyer's Default) shall have occurred and be continuing;
(c) by Buyer after the occurrence and during the continuation
of a Default by the Company under this Agreement and/or by the Company under the
Lodging Agreement, provided that no Default, or event which, with notice and/or
the lapse of time, would constitute a Default, by Buyer (other than a Default
caused by the Company's Default) shall have occurred and be continuing.
(d) by Buyer, if the conditions precedent to Buyer's
obligation to close hereunder have not been satisfied prior to the Termination
Date.
18
<PAGE> 23
(e) by the Company, if the conditions precedent to the
Company's obligation to close hereunder have not been satisfied by the
Termination Date (other than conditions precedent related to default by Bancomer
under the Bancomer Agreement which shall be subject to the provisions of Section
8.2).
Termination of this Agreement pursuant to this Section 0 shall be effected by
written notice by the party terminating this Agreement to the other party of the
termination and the basis for such termination.
Section 8.2 Buyer Termination Option. Buyer shall have the right to
terminate this Agreement if Bancomer shall default under the Bancomer Agreement,
provided, however, that so long as Buyer has not exercised its right to
terminate this Agreement pursuant to this Section 0 in the event of a default by
Bancomer under the Bancomer Agreement, Buyer and the Company shall diligently
seek to enforce the rights of the Company and CR Hotel under the Bancomer
Agreement in a prudent manner.
Section 8.3 Effect of Termination. In the event of the termination of
this Agreement in accordance with Section 0 or Section 0, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
Liability to the other party hereto or their respective Affiliates, directors,
officers or employees, except for the obligations of the parties hereto
contained in Sections 0(b) and 0 and Articles VII, IX and X, and except that
nothing herein will relieve any party from liability for any breach of this
Agreement prior to such termination.
19
<PAGE> 24
ARTICLE IX
REMEDIES
Section 9.1 Equitable Remedy. The Company acknowledges that Buyer will
be irreparably damaged (and Damages at law would be an inadequate remedy) if
this Agreement is not specifically enforced. Therefore, in the event of a breach
of threatened breach by the Company and/or Raintree of any provision of this
Agreement, then Buyer shall be entitled, in addition to all other rights or
remedies provided for hereunder, to an injunction restraining such breach
without being required to show any actual Damage or to post an injunction bond,
and/or to obtain a decree for specific performance of the provisions of this
Agreement.
Section 9.2 Damages.
(a) In no event shall any consequential, incidental,
expectation or punitive damages or action for specific performance be permitted
to the Company and/or Raintree hereunder; it being agreed that the Company's
remedy for default by Buyer shall be to bring an action for recovery of its
out-of-pocket costs.
(b) The Company hereby acknowledges that Buyer may suffer
Damages as a result of a Default hereunder. Accordingly if for any reason the
Company and/or Raintree defaults under this Agreement, Buyer, at its sole
election may pursue against the Company and Raintree an action for specific
performance of this Agreement. In no event shall any consequential, incidental,
expectation or punitive damages be permitted to Buyer hereunder, it being agreed
that Buyer's remedy for default by the Company and/or Raintree shall be to bring
an action for specific performance and recovery of its out-of-pocket costs.
ARTICLE X
MISCELLANEOUS
Section 10.1 Due Diligence. Buyer shall perform a due diligence review
of the Timeshare/Other Business and Raintree and the Company shall fully
cooperate with Buyer in connection therewith; provided, however, that such due
diligence review shall be only for Buyer's informational purposes except
notwithstanding any other provisions of this Agreement, Buyer may upon written
notice to the Company and Raintree on or prior to 5:00p.m. on May 20, 1997
terminate this Agreement based upon its due diligence review (the determination
of which shall be in the sole and absolute discretion of Buyer), in which event,
no parties hereto shall have any further obligation hereunder except as
expressly provided herein. No investigation by any party to this Agreement into
the business, operations and condition of any other party shall diminish in any
way the effect of any representations or warranties made by such other party in
this Agreement or shall relieve such other party of any of its obligations under
this Agreement. The parties agree that any item disclosed on any schedule to
this Agreement shall be deemed to be disclosed for all purposes of this
Agreement, notwithstanding the fact that such item was not disclosed on any
other schedule to this Agreement.
Section 10.2 Notices. All notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
(including electronic transmission) and shall be (as elected by the person
giving such notice) hand delivered by messenger or courier
20
<PAGE> 25
service, electronically transmitted, or mailed (airmail if international) by
registered or certified mail (postage prepaid), return receipt requested,
addressed to:
<TABLE>
<S> <C>
To Buyer: With a copy (which shall not constitute notice) to:
Starwood Capital Group, L.L.C. Greenberg Traurig
3 Pickwick Plaza 153 East 53rd Street
Greenwich, Connecticut 06830 New York, New York 10022
(203) 861-2100 Attn: Robert J. Ivanhoe, Esq.
Telefax: (203) 861-2101 (212) 801-9333
Telefax: (212) 223-7161
To Raintree or the Company: With a copy (which shall not constitute notice) to:
Raintree Capital Company LLC. Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Pennzoil Place - South Tower Pennzoil Place - South Tower
Suite 2310, 711 Louisiana Suite 1900
Houston, Texas 77002 Houston, Texas 77002
Attn: Douglas Y. Bech Attn: David S. Peterman, Esq.
(713) 220-5821 (713) 220-5803
Telefax: (713) 236-0822 Telefax: (713) 236-0822
</TABLE>
or to such address as any party may designate by notice complying with the terms
of this Section. Each such notice shall be deemed delivered (a) on the date
delivered if by personal delivery; (b) on the date of transmission with
confirmed answer back if by electronic transmission; and (c) on the date upon
which the return receipt is signed or delivery is refused or the notice is
designated by the postal authorities as not deliverable, as the case may be, if
mailed.
Section 10.3 Amendment; Waiver. The provisions of this Agreement may
not be amended, supplemented, waived or changed orally, but only by a writing
signed by the party as to whom enforcement of any such amendment, supplement,
waiver or modification is sought and making specific reference to this
Agreement;
Section 10.4 Assignment. Except as provided in this Section 0, no party
shall assign his or its rights and/or obligations under this Agreement without
the prior written consent of each other party to this Agreement. Buyer shall
have the right to assign its rights hereunder to one or more affiliates thereof
provided that such affiliate or affiliates, as the case may be, has the ability
to perform all obligations hereunder, including, without limitation, to make the
cash payment to Bancomer required in accordance with the provisions hereof
(including, without limitation, SLT Realty Limited Partnership or SLC Operating
Limited Partnership or their respective affiliates).
Section 10.5 Binding Effect. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties and their respective legal representatives, successors and permitted
assigns, whether so expressed or not.
21
<PAGE> 26
Section 10.6 Entire Agreement. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and between such parties.
Section 10.7 Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer upon any Person other than Buyer, Raintree, the Company or
their successors or permitted assigns, any rights or remedies under or because
of this Agreement.
Section 10.8 Public Disclosure. Notwithstanding anything herein to the
contrary, each of the parties to this Agreement hereby agrees with the other
party hereto that, except as may be required to comply with the requirements of
any applicable Laws, and the rules and regulations of each stock exchange upon
which the securities of one of the parties is listed, no press release or
similar public announcement or communication shall, if prior to the Closing, be
made or caused to be made concerning the execution or performance of this
Agreement unless the parties shall have consulted in advance with respect
thereto.
Section 10.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument. Confirmation of
execution by electronic transmission of a facsimile signature page shall be
binding upon any party so confirming.
Section 10.10 Submission to Jurisdiction; Selection of Forum. This
Agreement and all transactions contemplated by this Agreement shall be governed
by, and construed and enforced in accordance with, the laws of Delaware. Each
party hereto agrees that it shall bring any action or proceeding in respect of
any claim arising out of or related to this Agreement or the transactions
contained in or contemplated by this Agreement, whether in tort or contract or
at law or in equity, exclusively in Delaware (the "Chosen Courts") and solely in
connection with claims arising under this Agreement or the transactions
contained in or contemplated by this agreement (i) irrevocably submits to the
exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying
venue in any such action or proceeding in the Chosen Courts, (iii) waives any
objection that the Chosen Courts are an inconvenient forum or do not have
jurisdiction over any party hereto and (iv) agrees that service or process upon
such party in any such action or proceeding shall be effective if notice is
given in accordance with Section 0 of this Agreement.
Section 10.11 Headings. The headings contained in this Agreement are
for convenience of reference only, are not to be considered a part of the
Agreement and shall not limit or otherwise affect in any way the meaning or
interpretation of this Agreement.
Section 10.12 Severability. If any provision of this Agreement or any
other agreement entered into pursuant hereto is contrary to, prohibited by or
deemed invalid under applicable law or regulation, such provision shall, be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given full force and effect so far as possible. If any provision of this
Agreement may be construed in
22
<PAGE> 27
two or more ways, one of which would render the provision invalid or otherwise
voidable or unenforceable and another of which would render the provision valid
and enforceable, such provision shall have the meaning which renders it valid
and enforceable.
Section 10.13 Third Parties. Unless expressly stated herein to the
contrary (including, without limitation, Sections 0 and 0), nothing in this
Agreement, whereto express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties hereto and their respective legal representatives, successors and
permitted assigns. Nothing in this Agreement is intended to relieve or discharge
the Liability of any third persons to any party to this Agreement, nor shall any
provision give any third persons any right of subrogation or action over or
against any party to this Agreement.
Section 10.14 Incorporation of Exhibits, Schedules and Annexes. All
exhibits, schedules and annexes referred to in this Agreement and attached
hereto are hereby made a part of this Agreement by this reference.
Section 10.15 Waivers. The failure or delay of any party at any time tn
require performance by another party of any provision of this Agreement, even if
known, shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder. Any waiver by any
party of any breach of any provision of this Agreement should not be construed
as a waiver of any continuing or succeeding breach of such provision, a waiver
of the provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on any party in any circumstances shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
23
<PAGE> 28
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
RAINTREE CAPITAL COMPANY LLC,
a Texas limited liability company
By:
--------------------------------------
Name: Douglas Y. Bech
Title: Executive Managing Director
CLUB REGINA RESORTS, INC.,
a Nevada corporation
By:
--------------------------------------
Name: Douglas Y. Bech
Title: President
STARWOOD CAPITAL GROUP, L.L.C.,
a Connecticut limited liability company
By:
--------------------------------------
Name: Merrick Kleeman
Title: Managing Director
24
<PAGE> 1
EXHIBIT 10.16
PRIVILEGED AND CONFIDENTIAL
AGREEMENT
by and among
RAINTREE CAPITAL COMPANY LLC.
CLUB REGINA RESORTS, INC.,
and
SLT REALTY LIMITED PARTNERSHIP
Dated as of May 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND CONSTRUCTION................................................................... 2
Section 1.1 Captions......................................................... 2
Section 1.2 Number and Gender................................................ 2
Section 1.3 Terms............................................................ 2
Section 1.4 Other Definitional Provisions.................................... 2
Section 1.5 Definitions...................................................... 2
ARTICLE II
PURCHASE OF STOCK AND LLC INTERESTS............................................................ 6
Section 2.1 Purchase and Sale of the Purchased LLC Interests................. 6
Section 2.2 Adjustment....................................................... 7
Section 2.3 Closing, Delivery and Payment.................................... 7
Section 2.4 Agreements Concerning Ancillary Matters.......................... 7
Section 2.5 Possible Pink Tower Conversion................................... 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RAINTREE AND THE COMPANY..................................... 10
Section 3.1 Organization and Good Standing................................... 10
Section 3.2 Authorization and Validity....................................... 10
Section 3.3 Organization and Good Standing of the Relevant
Company Subsidiaries............................................. 11
Section 3.4 Capitalization of the Company.................................... 11
Section 3.5 Capitalization of the Relevant Company Subsidiaries.............. 11
Section 3.6 Consents and Approvals........................................... 11
Section 3.7 Non-Contravention................................................ 11
Section 3.8 Absence of Undisclosed Liabilities of the
Company and the Relevant Company Subsidiaries.................... 12
Section 3.9 Litigation and Claims............................................ 12
Section 3.10 Compliance with Laws............................................. 12
Section 3.11 Contracts........................................................ 12
Section 3.12 Finder's Fees and Advisors' Fees................................. 12
Section 3.13 Bancomer Agreement............................................... 13
Section 3.14 Confirmation..................................................... 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER........................................................ 13
Section 4.1 Organization and Good Standing of Buyer.......................... 13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.2 Buyer's Authorization and Validity............................... 13
Section 4.3 Consents and Approvals........................................... 13
Section 4.4 Non-Contravention of Buyer....................................... 13
Section 4.5 Finder's Fees.................................................... 14
ARTICLE V
COVENANTS...................................................................................... 14
Section 5.1 Access........................................................... 14
Section 5.2 Taking of Necessary Action....................................... 15
Section 5.3 Transactional Services........................................... 15
Section 5.4 Notice of Certain Changes........................................ 16
Section 5.5 Press Releases................................................... 16
Section 5.6 Bancomer Agreement............................................... 16
Section 5.7 Hotel Subsidiary and Hotel Holding Company
Organizational Documents......................................... 17
Section 5.8 Co-Buyer......................................................... 17
Section 5.9 Requisite Regulatory Approvals................................... 17
Section 5.10 Restructuring.................................................... 17
Section 5.11 Working Capital Adjustment....................................... 17
ARTICLE VI
CONDITIONS TO CLOSING.......................................................................... 18
Section 6.1 Conditions to the Obligations of Buyer
and the Company.................................................. 18
Section 6.2 Conditions to the Obligations of Buyer........................... 18
Section 6.3 Conditions to the Obligations of the Company..................... 19
ARTICLE VII
SURVIVAL; INDEMNIFICATION...................................................................... 19
Section 7.1 Survival......................................................... 19
Section 7.2 Indemnification by Raintree and the Company...................... 19
Section 7.3 Indemnification by Buyer......................................... 20
Section 7.4 Notice, Participation and Duration............................... 20
ARTICLE VIII
TERMINATION.................................................................................... 20
Section 8.1 Termination...................................................... 20
Section 8.2 Buyer Termination Option......................................... 21
Section 8.3 Effect of Termination............................................ 21
ARTICLE IX
REMEDIES....................................................................................... 22
Section 9.1 Equitable Remedy................................................. 22
Section 9.2 Damages.......................................................... 22
</TABLE>
ii
<PAGE> 4
<TABLE>
ARTICLE X
<S> <C> <C>
MISCELLANEOUS.................................................................................. 22
Section 10.1 Due Diligence.................................................... 22
Section 10.2 Notices.......................................................... 23
Section 10.3 Amendment; Waiver................................................ 23
Section 10.4 Assignment....................................................... 23
Section 10.5 Binding Effect................................................... 24
Section 10.6 Entire Agreement................................................. 24
Section 10.7 Parties in Interest.............................................. 24
Section 10.8 Public Disclosure................................................ 24
Section 10.9 Counterparts..................................................... 24
Section 10.10 Submission to Jurisdiction; Selection of Forum................... 24
Section 10.11 Headings......................................................... 25
Section 10.12 Severability..................................................... 25
Section 10.13 Third Parties.................................................... 25
Section 10.14 Incorporation of Exhibits, Schedules and Annexes................. 25
Section 10.15 Waivers.......................................................... 25
ARTICLE XI
POST CLOSING MATTERS........................................................................... 26
Exhibit A Form of Bancomer Agreement
</TABLE>
iii
<PAGE> 5
AGREEMENT, (this "Agreement") dated as of May 12, 1997, among RAINTREE
CAPITAL COMPANY, LLC, a Texas limited company ("Raintree"), CLUB REGINA RESORTS,
INC., a Nevada corporation (the "Company"), and SLT REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership ("Buyer").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Amended and Restated Stock Purchase
Agreement (the "Bancomer Agreement"), to be dated on or about the date hereof,
among Bancomer S.A, Institucion de Banca Multiple, Grupo Financiero, a Mexican
corporation ("Bancomer"), Desarollos Turisticos Bancomer, S.A. de C.V., a
Mexican corporation ("DTB"), the Company and CR Hotel Acquisition Company, LLC,
a Delaware limited liability company ("CR Hotel"), the Company will agree to
purchase all of the issued and outstanding Capital Stock of DTB;
WHEREAS, DTB owns all of the issued and outstanding common stock of each
of Desarollos Turisticos Integrales Cabo San Lucas, S.A. de C.V., Promotora
Turistica Nizuc, S.A. de C.V. and Promotora y Desarrolladora Pacifico, S.A. de
C.V., each, a Mexican corporation.
WHEREAS, the parties hereto intend that the (i) Timeshare Business and
the Other Business (collectively the "Timeshare/Other Business"); and (ii) the
Hotel Business are intended to be owned by separate entities;
WHEREAS, Buyer desires to acquire in accordance with the terms hereof a
limited liability company interest in CR Hotel as provided herein (the
"Purchased LLC Interests") for an aggregate purchase price of $132,750,000,
payable by Buyer paying $57,750,000 in cash and taking subject to the Hotel Note
(unless Buyer provides financing in lieu of such Hotel Note in accordance with
the terms hereof);
WHEREAS, as of the date hereof, Starwood Capital Group, L.L.C., a
Connecticut limited liability company ("Capital") has entered into an agreement
with Raintree and the Company to make a loan to an affiliate of the Company and
with respect to the purchase of stock in the Company in accordance with the
terms thereof.;
WHEREAS, the parties believe that the business of Buyer will facilitate
the Company's acquisition of the Capital Stock of DTB and the creation of
long-term value for the Company in the ownership and growth of the
Timeshare/Other Business and the Hotel Business;
NOW THEREFORE, in consideration of the above and the mutual covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged by the parties
hereto, Raintree, the Company and Buyer hereby agree as follows:
<PAGE> 6
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Captions. Titles and captions of articles and sections set
forth in this Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the meaning, of any provision set forth herein.
Section 1.2 Number and Gender. Whenever required by the context, the
singular number shall include the plural and vice versa and the gender of any
pronoun shall include the other gender.
Section 1.3 Terms. Terms may be defined in the text of this Agreement
and, unless otherwise indicated, shall have such meaning throughout this
Agreement.
Section 1.4 Other Definitional Provisions
(a) The words "hereof," "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(b) The terms "dollars" and "$" means United States dollars.
Section 1.5 Definitions
"Ancillary Agreements" is defined in the Bancomer Agreement.
"Aggregate Annual Fees" is defined in Section 2.4(c).
"Bancomer" is defined in the Recitals.
"Bancomer Agreement" is defined in the Recitals.
"Bancomer Escrow Agreement" means the "Escrow Agreement" as
defined in the Bancomer Agreement.
"Bancomer Transactions" means the transactions contemplated by
the Bancomer Agreement.
"Business Days" is defined in the Bancomer Agreement.
"Buyer" is defined in the Recitals.
"Buyer Indemnitees" is defined in Section 0.
2
<PAGE> 7
"Buyer Rate" means the rate of either return or interest, as the
case may be, that is the lower of 12% per annum and Buyer's actual aggregate
cost of debt capital on an annualized basis with respect to the $75,000,000 debt
replacing or refinancing the Hotel Note as provided herein, provided however,
Buyer Rate shall be not less than 12% until July 1, 2000.
"Capital Stock" means with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
voting, or non-voting) of such Persons capital stock or equity interests whether
now outstanding or issued after the date hereof, including but not limited to
all common stock and preferred stock.
"Claim" is defined in Section 0.
"Closing" is defined in Section 0.
"Closing Date" is defined in Section 0.
"Commitments" is defined in the Bancomer Agreement.
"Company" is defined in the Recitals.
"Company Common Stock" means all of the Capital Stock of the
Company.
"Company Indemnities" is defined in Section 0.
"Corporate Banking" is defined in the Bancomer Agreement.
"CR Hotel" is defined in the Recitals.
"Damages" is defined in the Bancomer Agreement.
"Default" by either party ("Defaulting Party") shall include the
failure to consummate the Closing on or before the Termination Date if the
failure to consummate the Closing on or before such date resulted from the
willful and knowing failure by the Defaulting Party to fulfill any undertaking
or commitment provided for herein that is required to be fulfilled by such
Defaulting Party at or prior to Closing.
"DTB" is defined in the Recitals.
"Enforceable" means an agreement or contract is "Enforceable", if
it constitutes the legal, valid and binding obligation of the applicable Person
enforceable against such Person in accordance with its terms, subject to
bankruptcy, reorganization, insolvency and similar Laws of general application
relating to or affecting the rights of creditors, and subject to general
principles of equity.
3
<PAGE> 8
"Escrow Agent" means Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel in its capacity as escrow agent under the Escrow Agreement.
"Escrow Agreement" means an Escrow Agreement by and among, Buyer,
the Company and Escrow Agent, pursuant to which on or prior to the date hereof
Buyer will deposit $1,500,000 into escrow in the form reasonably approved by the
Company, Buyer and Escrow Agent consistent with the provisions hereof and
providing such rights as are customary for the protection of Escrow Agent.
"Escrow Deposit" means the $1.5 million deposit to be held by
Escrow Agent in accordance with the provisions of the Escrow Agreement.
"Governmental Body" is defined in the Bancomer Agreement.
"Hotel Business" means (i) the "Hotel Business" as defined in the
Bancomer Agreement and (ii) one-half of the Capital Stock of Corporacion
Habitacional Mexicana, S.A.
de C.V.
"Hotel Management Agreement" is defined in Section 0(c).
"Hotel Note" had the meaning assigned to "US $75 million Hotel
Senior Mortgage Note" in the Bancomer Agreement.
"Hotel Subsidiaries" means the wholly-owned subsidiaries of DTB
owning the Hotel Business.
"Indemnitee" is defined in Section 0.
"Indemnitor" is defined in Section 0.
"Laws", mean, all laws (common or statutory), statutes,
ordinances, rules, regulations and decrees applicable to the referenced matter.
"Liabilities" is defined in the Bancomer Agreement.
"Lien" is defined in the Bancomer Agreement.
"LLC Interests" means the limited liability company interests of
CR Hotel to be held initially by Buyer (or its designated affiliate or
affiliates) and the Company pursuant to a limited liability company operating
agreement approved by Buyer and the Company in accordance with the terms hereof.
Buyer shall receive a 16.5% priority annual cumulative return with respect to
$43,100,000 ($42,750,000 of cash contributed and $350,000 of expenses paid
pursuant to Section 5.3). In addition Buyer shall be entitled to an annual
cumulative priority
4
<PAGE> 9
return equal to (a) the Buyer Rate with respect to imputed debt equal to
$15,000,000, and (b) amortization of such imputed debt at the amortization rate
under the Hotel Note or the replacement thereof, as the case may be. The
priority returns will be calculated and paid on a quarterly basis and all
remaining Net Cash Flow, net of current and accumulated priority returns, on a
quarterly basis shall be distributed 80% to Buyer and 20% to the Company.
"Manager" means Westin Hotels or the affiliate thereof managing
the operation of the Hotel Business.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on or with respect to the business, assets, financial
condition or results of operations of such Person and its Subsidiaries taken as
a whole.
"Net Cash Flow" means the difference between (i) the gross
operating revenue of the Hotel Business and (ii) the sum of all operating
expenses of the Hotel Business including, but not limited to, (a) capital
expenditure reserves, (b) operating reserves, (c) seasonality adjustments, (d)
management fees, (e) insurance, (f) all federal and local taxes (including asset
taxes and income taxes), (g) the greater of (1) a 5% furniture, fixture and
equipment reserve and (2) the amount, if any, by which expenditures for
furniture, fixtures and equipment actually made in any year exceed the total
amount of reserves therefor, and (h) debt service on the Hotel Note or any
replacements, refinancings, modifications, extensions or increases thereof or
additional indebtedness of CR Hotel.
"NOI" means the difference between gross operating revenue of the
Hotel Business and the sum of all operating expenses of the Hotel Business
(including, without limitation, management fees, insurance, all federal and
local taxes (including asset taxes) but excluding income taxes and the greater
of (x) a 5% reserve for furniture, fixtures and equipment and (y) the amount, if
any, by which expenditures for furniture, fixtures and equipment actually made
in any year exceed the total amount of reserves therefor).
"Person" is defined in the Bancomer Agreement.
"Proceedings" is defined in the Bancomer Agreement.
"Purchased Common Stock" is defined in the Recitals.
"Purchased LLC Interests" is defined in the Recitals.
"Raintree" is defined in the Recitals.
"Relevant Company Subsidiaries" means the Timeshare Holding
Company and the Timeshare Subsidiaries.
"Requisite Regulatory Approvals" means all permits, approvals,
filings, consent
5
<PAGE> 10
and waivers required to be obtained or made, and all waiting periods required to
expire, before the consummation of the Transactions, as applicable, under all
Laws of any jurisdiction, domestic or foreign, having jurisdiction over the
Transactions.
"Starwood" means collectively Buyer and Capital.
"Subsidiary" is defined in the Bancomer Agreement.
"Termination Date" is defined in Section 1.1 of the Bancomer
Agreement.
"Timeshare Assets" is defined in Section 1.1 of the Bancomer
Agreement.
"Timeshare Business" is defined in the Bancomer Agreement.
"Timeshare Holding Company" means the Mexican corporation to be
organized to hold the Capital Stock of DTB.
"Timeshare/Other Business" means all of the assets, business and
operations of DTB other than the Hotel Business.
"Timeshare Subsidiaries" means the indirect subsidiaries of the
Company to be formed in accordance with Article XV of the Bancomer Agreement in
connection with the Timeshare Business.
"Transactions" means the transactions contemplated by this
Agreement.
"Transfer Taxes" is defined in the Bancomer Agreement.
ARTICLE II
PURCHASE OF STOCK AND LLC INTERESTS
Section 2.1 Purchase and Sale of the Purchased LLC Interests. On the
terms and subject to the conditions set forth herein, at the Closing, the (i)
Buyer shall pay by wire transfer of immediately available funds to Bancomer the
sum of $56,250,000, (ii) $1.5 million shall be paid by wire transfer of
immediately available funds to Bancomer from the escrow as provided in Section
0, and (iii) Buyer, at its option, shall either (a) take subject to the Hotel
Note, or (b) provide financing in the amount of $75,000,000 at the Buyer Rate to
be secured by the Hotel Business in lieu of the Hotel Note. Buyer acknowledges
that the interest in CR Hotel in the Hotel Business will be subject to either
the Hotel Note or the financing provided by Buyer as provided in the preceding
sentence. In the event that Buyer does not elect to provide the $75,000,000
financing described above, then, in such event, Buyer shall have a continuing
right to refinance the Hotel Note at the Buyer Rate upon notice to CR and
Corporate Banking. Buyer and the Company agree that the Hotel Note will provide
for a right of prepayment without penalty or premium.
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Section 2.2 Adjustment. At Closing, Buyer's Escrow Deposit under the
Escrow Agreement shall be applied toward the purchase price of the Purchased LLC
Interests.
Section 2.3 Closing, Delivery and Payment
(a) The Transactions shall be consummated (the "Closing") at the
offices of Bancomer S A., Institucion de Banca Multiple, Grupo Financiero, Av.
Universidad 1200, Col. Xoco, 03339 Mexico, D.F., concurrently with the closing
of the Bancomer Transactions, or at such other place and time as the parties may
mutually agree. The date on which such Closing occurs is referred to as the
"Closing Date". The parties shall conduct a pre-closing at the offices of Akin,
Gump, Strauss, Hauer & Feld, L.L.P., 1900 Pennzoil Place - South Tower, 711
Louisiana, Houston, Texas 77002 on the date that is five (5) Business Days prior
to the Closing Date, or at such other time and place as the parties may mutually
agree.
(b) At the Closing, the Company shall cause DTB to transfer the
Capital Stock of the Hotel Subsidiaries to the Hotel Holding Company which, in
turn, will be owned 100% by CR Hotel. The transactions contemplated by Article
XV of the Bancomer Agreement will be undertaken at Closing or promptly
thereafter as provided in the Bancomer Agreement.
Section 2.4 Agreements Concerning Ancillary Matters. In connection with
the Transactions, the parties hereto agree to the following.
(a) Right of First Refusal.
(i) The Company intends to develop additional timeshare
businesses and projects. In such connection the Company may acquire or
develop hotel facilities in conjunction with such timeshare projects. If
the Company elects to provide for third party equity participation in
such hotel facilities, then the Company shall offer the Buyer a right of
first refusal with respect thereto on mutually agreeable terms. The
right of first refusal shall require that any hotel project or interest
therein acquired provide in connection therewith or in the operation of
the hotel property thereafter for management of the hotel by a manager
which does not operate a hotel competitive with the project in the same
local market.
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(b) Right of First Offer. Buyer, CR Hotel and the Company agree
that:
(i) If the Company or Buyer desires to sell (the "Selling
Party") its interest in CR Hotel (or any portion thereof), then such
party shall first give notice to the other party (a "Sale Notice") which
shall constitute a request for an offer to purchase the interest of the
Selling Party by the other party. The other party shall have a period of
thirty (30) days thereafter to make a written offer (the "First Offer")
to the Selling Party to purchase such interest at the all cash price set
forth in the First Offer to the Selling Party. Such First Offer shall be
accepted or refused by the Selling Party within ten (10) days after its
receipt thereof. If the Selling Party does not accept the First Offer
from the other party within such ten (10) day period, then the Selling
Party may, within the ensuing 180 day period, sell its interest to a
third party but only at a price which is higher than the First Offer.
Failure by the other party to respond to a Sale Notice within the period
provided herein shall constitute a waiver of all rights of the other
party under this Section 0(b)(i) but only with respect to the particular
Sale Notice to which such failure relates. If the Selling Party does not
accept the First Offer, does not consummate a sale at a higher price
within the 180 day period after the date of delivery of the Sale Notice
and wishes to sell in more than 180 days after the date of delivery of
such notice, then the Selling Party shall be required to comply with the
foregoing procedures set forth in this Section 0(b)(i). The provisions
of this Section 0(b)(i) shall not be applicable to transfers to
affiliates or charges in control of such affiliates.
(c) Agreement Regarding Hotel Business. Buyer shall through CR
Hotel and the Hotel Subsidiaries have exclusive control of the Hotel Business
provided that Buyer shall consult with the Company on a regular basis with
respect thereto. Buyer shall have the option to cause the Hotel Subsidiaries to
enter into a management agreement (the "Hotel Management Agreement") with
Manager in accordance with the provisions hereof. The Hotel Management Agreement
if entered into with Manager shall be in a form utilized generally by Manager
with respect to other properties managed by Manager. Buyer shall cause the
existing management agreements between Westin and DTB and/or its subsidiaries to
be terminated without penalty as of the Closing Date. The management agreement
or franchise agreement, as the case may be, entered into at the Closing or
promptly thereafter, including, the Hotel Management Agreement (if with Manager)
shall be subject to approval of the Company which shall not be unreasonably
withheld, delayed or conditioned. The Hotel Management Agreement shall contain
provisions no less favorable to the Hotel Subsidiaries than the following (it
being agreed that the following provisions are acceptable):
(i) Manager shall receive an annual base management fee
equal to 3% of gross revenues of the Hotel Business;
(ii) Manager shall receive an annual incentive management
fee equal to (A) 10% of NOI of the Hotel Business above $16 million and
(B) 20% of NOI of the Hotel Business above $19 million; provided,
however, in no event shall the incentive
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management fee in any year exceed 5 1/4% of the gross revenues of the
Hotel Business.
(iii) The Hotel Management Agreement shall have a term of
twenty (20) years. In the event the Hotel Business is sold to an
unrelated third party prior to the end of the term (but after year 5
prior to which there shall be no termination right), a termination fee
shall be paid to Manager equal to three times the prior year base fee
and incentive management fees (annually, the "Aggregate Annual Fees"),
reduced to two times Aggregate Annual Fees after year 7, and to
Aggregate Annual Fees after year nine. There shall be no termination fee
payable on a sale after year ten. The termination fee shall be
applicable on a pro-rata basis in the case of a sale of less than all of
the Hotel Business.
(iv) The hotels shall be operated under the name "Westin
Regina" so long as Manager is operating the hotels or the hotel is being
operated pursuant to a franchise with Manager.
(d) Cross Use of Facilities.
(i) CR Hotel and the Company shall allocate the costs of
certain services and property between the Hotel Businesses and the
Timeshare Business on substantially the same basis as is being currently
allocated between the Hotel Business and Timeshare/Other Business as
reflected in the financial statements of Manager and DTB. In addition,
Buyer agrees to cause CR Hotel to cause the Hotel Business to continue
to provide the services and amenities to Club Regina members on
substantially the same basis as is currently being provided by the Hotel
Business to Club Regina members. In addition, Buyer shall, and shall
cause CR Hotel to, support the Timeshare Business with respect to
marketing on substantially the same basis as is currently being provided
by Westin and the Hotel Business. Buyer and the Company shall endeavor
to enter into written agreements which document the above referenced
services, amenities and support currently provided to the Timeshare
Business and Club Regina and the terms and conditions on which such
services, amenities and support are currently provided.
(ii) Buyer and the Company agree that a Regina Advisory
Committee will be formed to promote the Hotel Business and the Timeshare
Business and the working relationships between CR Hotel, Manager and the
Company and that such committee shall have advisory authority with
respect to all related matters such as relations with employees, labor
union contracts and negotiations, insurance, capital expenditures,
auditors and property management personnel. John McCarthy, two other
Company representatives, two Buyer representatives and one Manager
representative shall be on this Committee. This Committee shall meet not
less often than quarterly and more often as the Company, Capital and/or
Buyer deem appropriate. It is not intended that this Committee will have
any legal power or authority but shall provide advice and
recommendations as it deems desirable to CR Hotel and the Company.
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(e) Escrow Agreement. On or before May 16, 1997, Buyer shall
deposit the Escrow Deposit into the escrow account as contemplated by the Escrow
Agreement.
(f) Agreement to Transfer Timeshare/Other Properties to the
Company.
(i) Buyer hereby agrees to cause CR Hotel to transfer
legal title to all assets held with respect to the Timeshare/Other
Business as provided in the Bancomer Agreement.
(ii) Buyer and the Company agree that the Transfer Taxes
associated with transferring the Timeshare/Other Business assets as
provided in the Bancomer Agreement shall be borne 50% by Buyer and 50%
by the Company.
(iii) Buyer and Company agree that title insurance with
respect to the Hotel Properties except to the extent paid for by
Bancomer shall be borne 50% by Buyer and 50% by Company and the title
insurance with respect to the Timeshare Properties except to the extent
paid for by Bancomer shall be borne 50% by Buyer and 50% by Company.
(g) Use of "Regina" Name. Buyer and the Company agree that the Company
shall own all rights to the Club Regina name and that it shall grant CR Hotel a
royalty-free license in perpetuity to use the "Regina" name at the Hotel
Properties at no cost.
Section 2.5 Possible Pink Tower Conversion. Buyer and the Company will
explore the economic feasibility of converting that certain structure known as
the "Pink Tower" located at the Hotel Property in Cancun, to Timeshare property
on a joint venture basis or sale at fair market value or such other terms and
conditions as Buyer and the Company may agree.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RAINTREE AND THE COMPANY
Raintree and the Company hereby represent and warrant to Buyer as of
the date hereof and as of the Closing Date (except that representations and
warranties that are made as of a specific date need be true only as of such
date) as follows:
Section 3.1 Organization and Good Standing. The Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has engaged in no business other than the
entering into of the Bancomer Agreement, this Agreement and performance
thereunder. Raintree is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization.
Section 3.2 Authorization and Validity. Raintree and the Company
have all requisite power and authority to enter into this Agreement and, subject
to obtaining all Requisite Regulatory Approvals referenced in Section 0, to
carry out its obligations hereunder. Each of the
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execution, delivery and performance by the Company and Raintree of this
Agreement has been duly authorized by all requisite action. This Agreement is
Enforceable against the Company and Raintree.
Section 3.3 Organization and Good Standing of the Relevant Company
Subsidiaries. Each Relevant Company Subsidiary will be duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and by the Closing Date will have all requisite corporate power and
authority to own, lease and operate all properties and assets then owned, leased
or operated by it and to carry on its business as then conducted. As of the
Closing Date, each Relevant Company Subsidiary will be duly qualified to conduct
business in all jurisdictions in which the nature of the business transacted by
it requires qualification.
Section 3.4 Capitalization of the Company. As of the Closing Date, the
authorized Capital Stock of the Company will be duly authorized, and when
issued, validly issued, fully paid and non-assessable. Douglas Y. Bech is the
record owner of all of the Capital Stock of the Company as of the date hereof.
There are no Commitments or preemptive rights with respect to the Capital Stock
of the Company which would effect the Company's ability to perform in accordance
with the provisions of this Agreement.
Section 3.5 Capitalization of the Relevant Company Subsidiaries. All of
the Capital Stock of each Relevant Company Subsidiary will, on the Closing Date,
be duly authorized, validly issued, fully paid and non-assessable. As of the
Closing Date, the Company shall own directly or indirectly all of the issued and
outstanding Capital Stock of each Relevant Company Subsidiary free and clear of
all Liens and encumbrances other than as contemplated by the Bancomer Agreement.
There will be no Commitments or preemptive rights with respect to the Capital
Stock of the Relevant Company Subsidiaries except as required generally with
respect to such Capital Stock under Mexican law.
Section 3.6 Consents and Approvals. Except as required by the Bancomer
Agreement, as of the Closing Date, no Requisite Regulatory Approval applicable
to the Transactions which has not been obtained is required to be obtained by
the Company, Raintree or any of the Relevant Company Subsidiaries from, and no
notice or filing will be required to be given by the Company, Raintree or the
Relevant Company Subsidiaries to or made by the Company, Raintree or the
Relevant Company Subsidiaries with, any Governmental Body or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement.
Section 3.7 Non-Contravention. As of the Closing Date, the execution,
delivery and performance by the Company and by Raintree of this Agreement and
the consummation of the Transactions by the Company will not (i) violate any
provision of the Certificate of Incorporation, Bylaws (or other similar
documents) or other organizational documents of the Company, Raintree or any
Relevant Company Subsidiary, (ii) subject, as to performance, to obtaining the
consents referred to in Section 0, (A) result in the breach of, or constitute a
default under, or result in the termination, cancellation or acceleration
(whether after the giving of notice or the lapse of time or both) of any right
or obligation or the Company, Raintree or any Relevant
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Company Subsidiary under, or to a loss of any benefit to which the Company,
Raintree or any Relevant Company Subsidiary is entitled under, any contract or
other instrument to which the Company, or any Relevant Company Subsidiary is a
party or (B) except as contemplated by the Bancomer Agreement, result in the
creation of any Lien upon any of the Capital Stock of the Company, Raintree or
any Relevant Company Subsidiary, or (iii) to the knowledge of the Company and/or
Raintree, violate or result in a breach of or constitute a default under any
order or Law applicable to the Company, Raintree or any Relevant Company
Subsidiary, including any Governmental Body approval.
Section 3.8 Absence of Undisclosed Liabilities of the Company and the
Relevant Subsidiaries. Except as contemplated by this Agreement or the Bancomer
Agreement, the Company and each Relevant Company Subsidiary is not subject to
any Liabilities.
Section 3.9 Litigation and Claims. There is no pending Proceeding that
has been commenced by or against the Company, Raintree or any Relevant Company
Subsidiary that would be expected to materially and adversely affect the
Company, Raintree, the Transactions or impair the ability of the Company to
perform under the Bancomer Agreement.
Section 3.10 Compliance with Laws. From their inception, the businesses
of the Company and each Relevant Company Subsidiary will have been conducted in
compliance with all applicable Laws (including, but not limited to, those
relating to licenses and permits for the ownership, occupancy and operation of
its properties). The Company has or will have by the Closing Date all
Governmental Body approvals necessary for the conducting of its businesses as
currently (and as planned to be) conducted and, by the Closing Date, each
Relevant Company Subsidiary will have all Governmental Body approvals necessary
for the conducting of its business as then conducted. There are no proceedings
pending or, to the knowledge of the Company and/or Raintree, threatened which
may result in the revocation, cancellation or suspension of any such
Governmental Body approval. As of the date hereof, no investigation or review by
any Governmental Body (including, but not limited to, any audit or similar
review by any Federal, state or local taxing authority) with respect to the
Company or any of its respective properties is, to the knowledge of the Company,
pending or threatened.
Section 3.11 Contracts. This Agreement, the Bancomer Agreement, and the
agreements contemplated thereby are the only contracts to which the Company and
each Relevant Company Subsidiary is or, to the Company's knowledge, will be a
party or to which any of their businesses, or properties is or, to the Company's
knowledge, will be subject.
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Section 3.12 Finder's Fees and Advisors' Fees. Neither Raintree nor the
Company has dealt with any broker or finder in connection with the Transactions,
and no broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions contemplated hereby or by the Bancomer
Agreement other than Jefferies & Company, Inc. Raintree and the Company agree to
indemnify and hold harmless Buyer against any Liability incurred because of any
brokerage commission or finder's fee alleged to be payable because of any act,
omission or statement of the indemnifying party. The Company is solely
responsible for any obligations to Jefferies & Company, Inc.
Section 3.13 Bancomer Agreement. Nothing has come to the attention of
Raintree or the Company after due inquiry which would cause either Raintree or
the Company to believe that any of the representations and warranties of
Bancomer set forth in the Bancomer Agreement are not true and correct.
Section 3.14 Confirmation. Raintree and Buyer confirm that each of the
representations and warranties of the Company under the Bancomer Agreement are
true and correct.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Raintree and the Company as of the
date hereof and as of the Closing Date (except that the representations and
warranties that are made as of a specific date need be true only as of such
date) as follows:
Section 4.1 Organization and Good Standing of Buyer. Buyer is a limited
partnership duly organized, validly existing and in good standing under the law
of the jurisdiction of its incorporation.
Section 4.2 Buyer's Authorization and Validity. Buyer has all requisite
power and authority to enter into this Agreement and subject to obtaining all
Requisite Regulatory Approvals referenced in Section 0 to carry out its
obligations hereunder and thereunder. Each of the execution, delivery and
performance by Buyer of this Agreement has been duly authorized by all requisite
action. This Agreement is Enforceable against Buyer.
Section 4.3 Consents and Approvals. Except as may be required under the
laws of Mexico or any subdivision or agency thereof, no Requisite Regulatory
Approval applicable to the Transactions which has not been obtained is required
to be obtained by Buyer from, and no notice or filing is required to be given by
Buyer to or made by Buyer with, any Governmental Body or other Person in
connection with the execution, delivery and performance by Buyer of this
Agreement.
Section 4.4 Non-Contravention of Buyer. The execution, delivery and
performance by Buyer of this Agreement, and the consummation of the
Transactions, do not and will not (i) violate any provision of the Certificate
of Limited Partnership, Agreement of Limited Partnership
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(or other similar documents) or other organizational documents of Buyer, (ii)
subject, as to performance, to obtaining the consents referred to in Section 0
(A) result in the breach of, or constitute a default under, or result in the
termination, cancellation or acceleration (whether after the giving of notice or
the lapse of time or both) of any right or obligation of Buyer under, or to a
loss of any benefit to which Buyer is entitled under, any contract or other
instrument to which Buyer is a party or (B) except as contemplated by the
Bancomer Agreement or by this Agreement, result in the creation of any Lien upon
the LLC Interests to be held by the Company or (iii) to the knowledge of Buyer,
violate or result in a breach of or constitute a default under any order or Law
applicable to Buyer, including any Governmental Approval.
Section 4.5 Finder's Fees. Buyer represents and warrants that it has
dealt with no broker or finder in connection with any of the Transactions, no
broker or other person is entitled to any commission or finder's fee in
connection with any of the Transactions except as set forth in Section 0. Buyer
agrees to indemnify and hold harmless Raintree, CR Hotel and the Company against
any Liability incurred because of any brokerage commission or finder's fee
alleged to he payable because of any act, omission or statement of Buyer.
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ARTICLE V
COVENANTS
Section 5.1 Access.
(a) Prior to the Closing, Raintree and the Company shall permit
Buyer and its representatives to have access, during regular business hours and
upon reasonable advance notice, to all information, wherever located, obtained
by Raintree or the Company from Bancomer under the Bancomer Agreement or from
any advisors or other source with respect to the Transactions under the control
or direction of Raintree and/or the Company.
(b) In the event of the termination of this Agreement, Buyer
shall promptly deliver to the Company, all original documents, work papers and
other material obtained by Buyer or on its behalf from Raintree and the Company,
or any of their respective agents, employees or representatives as a result
hereof or in connection herewith whether so obtained before or after the
execution hereof. Buyer shall at all times prior to the Closing Date, and in the
event of termination of this Agreement, cause any information so obtained to be
kept confidential and will not use, or permit the use of, such documents, work
papers and other materials in its business or any other manner or for any other
purpose except as contemplated hereby. The foregoing shall not preclude Buyer
from (i) disclosing any information obtained from Raintree or the Company to
Buyer's consultants, accountants, legal advisors or other similar
representatives, (ii) using or disclosing such information which currently is
known generally to the public or which subsequently has come into the public
domain, other than because of disclosure in violation of this Agreement, (iii)
using or disclosing of such information that becomes available to Buyer on a
non-confidential basis from a source other than Raintree, the Company or
Raintree's or the Company's agents provided that such source does not have an
obligation prohibiting the disclosure of such information, (iv) disclosure to
Buyer's officers, directors and/or affiliates or (v) disclosing such information
required by Law or court order, provided, that, as soon as Buyer has knowledge
of the requirement for such disclosure, Buyer will promptly give the Company
oral and then written notice of the nature of the Law or order requiring
disclosure and the disclosure to be made in accordance therewith.
Section 5.2 Taking of Necessary Action. Subject to this Agreement and
Law, Buyer, Raintree and the Company shall use their best efforts promptly to
take or cause to be taken all action and promptly to do or cause to be done all
things necessary, proper or advisable under applicable Laws and regulations to
consummate and make effective the Transactions. Without limiting the foregoing,
each of Buyer and the Company shall, and the Company shall cause each of its
Subsidiaries to, use their best efforts to obtain and make all consents,
approvals, assurances or filings of or with third parties and Governmental
Bodies necessary for the consummation of the Transactions. Each of the parties
shall cooperate with the others in good faith to help the other satisfy its
obligations under this Section 0. If at any time after the Closing Date any
further action is necessary or desirable to carry out the purpose of this
Agreement, including, without limitation, to vest the Hotel Holding Company or a
Subsidiary thereof and the Timeshare Holding Company or a Subsidiary thereof
with full title to all properties, assets, rights, approvals immunities and
franchises of the Hotel Business and the Timeshare Business, respectively, the
proper officers or directors of each party to this Agreement shall take that
necessary action.
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Section 5.3 Transactional Services.
(a) At Closing (i) Starwood and (ii) the Company shall each pay
by wire transfer 50% of all third party fees and expenses incurred by Starwood
and the Company in connection with the transactions contemplated hereby and by
the Bancomer Agreement and the Capital Agreement other than the fees and
expenses of Akin, Gump, Strauss, Hauer & Feld, L.L.P. and Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, provided, Starwood's share of fees and
expenses incurred by the Company shall not exceed $500,000; and provided,
further, that 30% of the Starwood obligation pursuant to this Section 5.3(a)
shall be paid by Capital pursuant to Section 5.3(a) of the Capital Agreement
(not to exceed $150,000) and 70% of the Starwood obligation will be paid by
Buyer pursuant hereto (not to exceed $350,000). Nothing in this Agreement,
including, without limitation, in this Section 0(a), shall limit the right of
Buyer, Capital or the Company to engage any counsel, accountant or other advisor
at its own expense subject to the obligation to make payments for services
rendered in accordance with the provisions of this Section 0(a).
(b) The services and work product of Santamarina y Steta, counsel
to the Company in Mexico for the Bancomer Transactions shall also be for
Starwood's benefit. Starwood (or Buyer and Capital separately as they may
determine) may engage their own Mexican local counsel, the expense for which
shall be allocated as contemplated by Section 5.3(a) of this Agreement in the
case of Buyer and Section 5.3(a) of the Capital Agreement in the case of
Capital. It is understood that Ernst & Young has been engaged to conduct a
USGAAP audit of the historical financial statements of DTB as well as a review
of interim financial statements on a USGAAP basis, and to provide tax and
related advisory services. It is contemplated that Ernst & Young will provide
Buyer with a complete briefing of its tax and financing analysis of the Bancomer
Transactions. The Company and Buyer will consult as to the engagement of other
tax advisors, accountants, consultants or attorneys for the Bancomer
Transactions to supplement the work done to date. All other consultants
previously engaged by the Company and the work product thereof will be made
available to Buyer.
Section 5.4 Notice of Certain Changes. Each party hereto shall give
prompt written notice to the other party hereto of the occurrence or
non-occurrence, of any event which would be likely to cause any representation
or warranty herein to be untrue or inaccurate, or any covenant, condition or
agreement herein not be complied with or satisfied.
Section 5.5 Press Releases. The Company and Buyer shall consult with
each other as to the timing, form and substance of any press release or public
disclosure of matters related to this Agreement or any of the transactions
contemplated by this Agreement; provided, however; that nothing in this Section
0 shall be deemed to prohibit any party to this Agreement from making any
disclosure that if required to fulfill that parry's disclosure obligations
imposed by Law or stock exchange requirements.
Section 5.6 Bancomer Agreement. Buyer and the Company shall each have
the right
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to approve any modifications to the Bancomer Agreement and any decisions or
actions taken with respect thereto prior to the Closing Date which approvals
shall not be unreasonably withheld, delayed or conditioned, including, without
limitation, the approval of the Ancillary Agreements and the continuation of
beneficial interests of Bancomer pursuant to Section 2.4(d) of the Bancomer
Agreement. Buyer and the Company shall seek the agreement of Bancomer to (i) pay
for the title insurance contemplated by the Bancomer Agreement and (ii) apply
the "Defects" deduction contemplated by the Bancomer Agreement as an offset
against cash due Bancomer at the closing under the Bancomer Agreement. In the
event of a default by Bancomer under the Bancomer Agreement, Buyer and the
Company shall agree upon any and all actions to be taken in connection
therewith. In the event that damages are obtained against Bancomer pursuant to
Section 10.2(f) of the Bancomer Agreement, such damages shall be shared equally
between Starwood and the Company after payment of all reasonable legal fees and
expenses of Starwood and the Company in connection therewith. From and after the
Closing Date, the Company shall have the right to enforce all rights under the
Bancomer Agreement relating to the Timeshare/Other Business, to make all
decisions thereunder in connection therewith and to enforce all indemnification
provisions thereof with respect to matters related to the Timeshare Business.
From and after the Closing date, CR Hotel shall have the right to enforce all
rights under the Bancomer Agreement relating to the Hotel Business and to make
all decisions thereunder in connection therewith and to enforce all
indemnification provisions thereof with respect to matters related to the Hotel
Business.
Section 5.7 Hotel Subsidiary and Hotel Holding Company Organizational
Documents. Buyer shall have the right to approve prior to the Closing the
organizational documents of each of the Hotel Subsidiaries and the Hotel Holding
Company and the Boards of Directors thereof for the purpose of ensuring that
Buyer through CR Hotel shall have the exclusive right from and after the Closing
Date to control such corporations.
Section 5.8 Co-Buyer. Buyer and the Company shall consult with Mexican
counsel promptly following the date hereof to determine if any Requisite
Regulatory Approvals would be required to provide Starwood with the rights under
Section 6.6 of the Bancomer Agreement as a "Co-Buyer" as defined therein. In the
event that Mexican counsel advises that no Requisite Regulatory Approvals are
required in connection therewith, the Company shall notify Bancomer that
Starwood is a "Co-Buyer" under Section 6.6 of the Bancomer Agreement. In the
event that any Requisite Regulatory Approvals would be so required to provide
such rights to Starwood, Starwood agrees that it will not require that the
Company request that Starwood be made a "Co-Buyer" under the Bancomer Agreement
if allocation for such Requisite Regulatory Approvals would delay the closing
under the Bancomer Agreement.
Section 5.9 Requisite Regulatory Approvals. In the event that Buyer
determines upon advice of Mexican counsel that the transaction structure
contemplated by this Agreement may require a Requisite Regulatory Approval that
would delay the closing under the Bancomer Agreement, the parties hereto, at the
election of the Buyer, will restructure the transaction whereby Buyer will
become a non-member manager of CR Hotel and will make a participating loan
thereto, in each case, in such manner as to duplicate as nearly as possible the
transaction
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structure and the economics contemplated by this Agreement pursuant to
documentation required by Buyer subject to the Company's prior written approval
which shall not be unreasonably withheld, delayed or conditioned. The Company
shall diligently, continuously and in good faith use all reasonable commercial
efforts to obtain the assistance of Bancomer in connection with all Requisite
Regulatory Approvals required to effectuate the transactions in the form
contemplated by this Agreement.
Section 5.10 Restructuring. The parties agree to continue to analyze
the transaction structure and to restructure same as the parties may under such
circumstances agree, provided that none of the parties will suffer any economic
or other detriment in connection with such restructuring.
Section 5.11 Working Capital Adjustment. The Company and Buyer shall
adjust as between the Hotel Business and the Timeshare/Other Business at the
Closing the "Working Capital" of DTB.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Obligations of Buyer and the Company. The
obligations of the parties hereto to effect the Closing are subject to the
satisfaction (or waiver prior to the Closing) of the following conditions:
(a) (i) No order and no other legal restraint or prohibition that
would prevent, enjoin or have the effect of preventing the consummation of the
transactions contemplated by this Agreement or the Bancomer Agreement shall be
in effect; provided, however, that no party may invoke this condition unless
such party shall have complied fully with its obligations under Section 0 and,
in addition shall have used all commercially reasonable efforts to have any such
order vacated; and
(ii) There shall not be commenced or threatened in writing, or be
continuing, any Proceeding which would prevent, enjoin or have the effect of
preventing the consummation of the transactions contemplated by this Agreement
and/or the Bancomer Agreement.
(iii) The Bancomer Agreement shall have been executed and
delivered by the parties thereto in substantially the form attached hereto as
Exhibit A hereto or, at Buyer's option, a closing shall have occurred under the
existing agreements of the Company and CR Hotel with respect to the acquisition
contemplated by the Bancomer Agreement.
(b) All Requisite Regulatory Approvals required under this
Agreement shall have been made or obtained and shall be in full force and affect
and shall not have expired or been rescinded.
(c) All conditions precedent to the obligations of the Company to
closing of
18
<PAGE> 23
the Bancomer Transactions shall have been satisfied or waived by the Company and
Buyer.
(d) The Company and the Buyer shall have entered into the
Operating Agreement of CR Hotel which shall contain such terms and conditions as
Buyer and the Company shall agree consistent with the terms hereof.
(e) The Company and the Buyer shall have approved the Ancillary
Agreements.
(f) The closing under the Capital Agreement shall occur
concurrently herewith.
Section 6.2 Conditions to the Obligations of Buyer. The obligation of
Buyer to effect the Closing is subject to the satisfaction (or waiver by the
Buyer) prior to the Closing of the following conditions:
(a) The representations and warranties of the Company contained
herein shall have been true and correct in all material respects when made and
shall be true and correct in all material respects as of the Closing, as if made
as of the Closing (except that representations and warranties that are made as
of a specific date need be true in all material respects only as of such date).
(b) The Company shall have delivered to Buyer the certificates
representing the Purchased LLC Interests.
(c) The covenants and agreements of the Company to be performed
on or prior to the Closing shall have been performed in all material respects.
(d) Title insurance with respect to the real property and
improvements used in connection with the Hotel Business shall have been
delivered in accordance with the provisions of the Bancomer Agreement.
Section 6.3 Conditions to the Obligations of the Company. The
obligation of the Company to effect the Closing is subject to the satisfaction
(or waiver prior to the Closing) of the following conditions:
(a) The representations and warranties of Buyer contained herein
shall have been true and correct in all material respects when made and shall be
true and correct in all material respects as of the Closing, as if made as of
the Closing (except that representations and warranties that are made as of a
specific date need be true in all material respects only as of such date).
(b) The covenants and agreements of Buyer to be performed on or
prior to the Closing shall have been duly performed in all material respects.
19
<PAGE> 24
<PAGE> 25
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1 Survival. The representations and warranties of the Company
and Buyer contained in this Agreement and any document, instrument or
certificate delivered in connection with the Transactions shall survive the
Closing.
Section 7.2 Indemnification by Raintree and the Company. Raintree and
the Company agree to indemnify and hold harmless Buyer and its officers,
directors, shareholders, Affiliates, employees and agents (the "Buyer
Indemnitees") from any and all Damages, directly or indirectly resulting from,
relating to, arising out of or attributable to: (a) any breach of or inaccuracy
in any representation or warranty of the Company and/or Raintree contained in
this Agreement, and (b) subject to Section 9.2, any breach or nonperformance,
partial or total, by the Company and/or Raintree of any covenant or agreement of
the Company and/or Raintree contained in this Agreement.
Section 7.3 Indemnification by Buyer. Buyer agrees to indemnify and
hold harmless the Company and Raintree and their officers, directors,
shareholders, Affiliates, employees and agents (the "Company Indemnities") from
any and all Damages, directly or indirectly resulting from, arising out of or
attributable to: (a) any breach of or inaccuracy in any representation or
warranty of Buyer contained in this Agreement, and (b) subject to Section 9.2,
any breach or non-performance, partial or total, by Buyer of any covenant or
agreement of Buyer contained in this Agreement.
Section 7.4 Notice, Participation and Duration. If a claim by a third
party is made against a party indemnified pursuant to this Article VII
("Indemnitee"), and if such Indemnitee intends to seek indemnity with respect
thereto under this Article VII, the Indemnitee shall promptly, and in any event
within 10 days of the assertion of any claim or the discovery of any fact upon
which Indemnitee intends to base a claim for indemnification under this
Agreement (a "Claim"), notify the party or parties from whom indemnification is
sought (the "Indemnitor") of such Claim. Upon any Claim, Indemnitor, at its
option, may assume (with legal counsel reasonably acceptable to the Indemnitee)
the defense of any Proceeding in connection with the Indemnitee's Claim, and may
assert any defense of Indemnitee or Indemnitor, provided that Indemnitee shall
have the right at its own expense to participate jointly with Indemnitor in the
defense of any Proceeding in connection with the Indemnitee's Claim and
provided, further, if Indemnitee has interests in such matters which are or
which may be adverse to Indemnitor, then, in such event, Indemnitor shall pay
all reasonable costs of Indemnitee's counsel. If Indemnitor elects to undertake
the defense of any Claim hereunder, Indemnitee shall cooperate with Indemnitor
to the extent reasonably requested in regard to all matters relating to the
Claim (including, without limitation, corrective actions required by applicable
Law, assertion of defenses and the determination, negotiation and settlement of
all Damages) so as to permit Indemnitor's management of the same with regard to
the amount of Damages payable to Indemnitor hereunder. Indemnitor shall not
settle any indemnifiable Claim without the prior
20
<PAGE> 26
written consent of Indemnitee unless such settlement involves only the payment
of money by Indemnitor and the claimant provides to Indemnitee a release, in
form and substance reasonably satisfactory to Indemnitee, from all Liability in
respect of such Claim.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Closing.
(a) by written agreement of the Company and Buyer;
(b) by the Company after the occurrence and during the
continuation of a Default by Buyer under this Agreement and/or by Capital under
the Capital Agreement, provided that no Default or event which, with notice
and/or the lapse of time, would constitute a Default by the Company (other than
a Default caused by Buyer's Default) shall have occurred and be continuing;
(c) by Buyer after the occurrence and during the continuation of
a Default by the Company under this Agreement and/or by the Company under the
Capital Agreement, provided that no Default, or event which, with notice and/or
the lapse of time, would constitute a Default, by Buyer (other than a Default
caused by the Company's Default) shall have occurred and be continuing.
(d) by Buyer, if the conditions precedent to Buyer's obligation
to close hereunder have not been satisfied prior to the Termination Date.
(e) by the Company, if the conditions precedent to the Company's
obligation to close hereunder have not been satisfied prior to the Termination
Date (other than conditions precedent related to default by Bancomer under the
Bancomer Agreement which shall be subject to the provisions of Section 8.2).
Termination of this Agreement pursuant to this Section 0 shall be effected by
written notice by the party terminating this Agreement to the other party of the
termination and the basis for such termination.
Section 8.2 Buyer Termination Option. Buyer shall have the right to
terminate this Agreement if Bancomer shall default under the Bancomer Agreement,
provided, however, that so long as Buyer has not exercised its right to
terminate this Agreement pursuant to this Section 0 in the event of a default by
Bancomer under the Bancomer Agreement, Buyer and the Company shall diligently
seek to enforce the rights of the Company and CR Hotel under the Bancomer
Agreement in a prudent manner.
Section 8.3 Effect of Termination. In the event of the termination of
this Agreement
21
<PAGE> 27
in accordance with Section 0 or Section 0 this Agreement shall thereafter become
void and have no effect, and no party hereto shall have any Liability to the
other party hereto or their respective Affiliates, directors, officers or
employees, except for the obligations of the parties hereto contained in this
Section 0 and in Sections 0(b) and 0 and Articles VII, IX and X, and except that
nothing herein will relieve any party from liability for any breach of this
Agreement prior to such termination, (ii) unless terminated by the Company
pursuant to Section 8.1(b), the Escrow Deposit shall be returned to Buyer
immediately together with all interest accrued thereon, and (iii) if terminated
by the Company pursuant to Section 8.1(b) the Escrow Deposit shall be applied as
directed by a court of competent jurisdiction.
ARTICLE IX
REMEDIES
Section 9.1 Equitable Remedy. Each of the Company and Buyer acknowledge
that they will be irreparably damaged (and Damages at law would be an inadequate
remedy) if this Agreement is not specifically enforced. Therefore, in the event
of a breach of threatened breach by any party of any provision of this
Agreement, then the other parties shall be entitled, in addition to all other
rights or remedies provided for hereunder, to an injunction restraining such
breach without being required to show any actual Damage or to post an injunction
bond, and/or to obtain a decree for specific performance of the provisions of
this Agreement.
Section 9.2 Damages.
(a) In no event shall any consequential, incidental,
expectation or punitive damages be permitted hereunder; it being agreed that the
Company's remedy for default by Buyer shall be to bring an action for specific
performance and recovery of its out-of-pocket costs.
(b) The Company hereby acknowledges that Buyer may suffer
Damages as a result of a Default hereunder. Accordingly if for any reason the
Company defaults under this Agreement, Buyer, at its sole election may pursue
against the Company an action for specific performance of this Agreement. In no
event shall any consequential, incidental, expectation or punitive damages be
permitted hereunder, it being agreed that Buyer's remedy for default by the
Company and/or Raintree shall be to bring an action for specific performance and
recovery of its out-of-pocket costs.
22
<PAGE> 28
ARTICLE X
MISCELLANEOUS
Section 10.1 Due Diligence. Buyer shall perform a due diligence review
of the Hotel Business and Raintree and the Company shall fully cooperate with
Buyer in connection therewith; provided, however, that such due diligence review
shall be only for Buyer's informational purposes except notwithstanding any
other provisions of this Agreement, Buyer may upon written notice to the Company
and Raintree on or prior to noon on May 20, 1997 terminate this Agreement based
upon its due diligence review (the determination of which shall be in the sole
and absolute discretion of Buyer), in which event, the Escrow Deposit shall be
immediately returned to Buyer (together with all interest accrued thereon) and
no parties hereto shall have any further obligation hereunder except as
expressly provided herein. No investigation by any party to this Agreement into
the business, operations and condition of any other party shall diminish in any
way the effect of any representations or warranties made by such other party in
this Agreement or shall relieve such other party of any of its obligations under
this Agreement. The parties agree that any item disclosed on any schedule to
this Agreement shall be deemed to be disclosed for all purposes of this
Agreement, notwithstanding the fact that such item was not disclosed on any
other schedule to this Agreement.
Section 10.2 Notices. All notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
(including electronic transmission) and shall be (as elected by the person
giving such notice) hand delivered by messenger or courier service,
electronically transmitted, or mailed (airmail if international) by registered
or certified mail (postage prepaid), return receipt requested, addressed to:
To Buyer: With a copy (which shall not
constitute notice) to:
SLT Realty Limited Partnership Greenberg Traurig
2231 E. Camelback Road, Suite 410 153 East 53rd Street
Phoenix, Arizona 85016 New York, New York 10022
Steve Goldman Attn: Robert J. Ivanhoe, Esq.
(602) 852-3916 (212) 801-9333
Telefax: (602) 852-0984 Telefax: (212) 223-7161
To Raintree or the Company: With a copy (which shall not
constitute notice) to:
Raintree Capital Company LLC. Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Pennzoil Place - South Tower Pennzoil Place - South Tower
Suite 2310, 711 Louisiana Suite 1900
Houston, Texas 77002 Houston, Texas 77002
Attn: Douglas Y. Bech Attn: David S. Peterman, Esq.
(713) 220-5821 (713) 220-5803
Telefax: (713) 236-0822 Telefax: (713) 236-0822
or to such address as any party may designate by notice complying with the terms
of this Section. Each such notice shall be deemed delivered (a) on the date
delivered if by personal delivery; (b) on the date of transmission with
confirmed answer back if by electronic transmission; and (c) on
23
<PAGE> 29
the date upon which the return receipt is signed or delivery is refused or the
notice is designated by the postal authorities as not deliverable, as the case
may be, if mailed.
Section 10.3 Amendment; Waiver. The provisions of this Agreement may
not be amended, supplemented, waived or changed orally, but only by a writing
signed by the party as to whom enforcement of any such amendment, supplement,
waiver or modification is sought and making specific reference to this
Agreement;
Section 10.4 Assignment. Except as provided in this Section 0, no
party shall assign his or its rights and/or obligations under this Agreement
without the prior written consent of each other party to this Agreement. Buyer
shall have the right to assign its rights hereunder to one or more affiliates
thereof provided that such affiliate or affiliates, as the case may be, has the
ability to perform all obligations hereunder, including, without limitation, to
make the cash payment to Bancomer required in accordance with the provisions
hereof.
Section 10.5 Binding Effect. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties and their respective legal representatives, successors and permitted
assigns, whether so expressed or not.
Section 10.6 Entire Agreement. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and between such parties.
Section 10.7 Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer upon any Person other than Buyer, Raintree, the Company or
their successors or permitted assigns, any rights or remedies under or because
of this Agreement.
Section 10.8 Public Disclosure. Notwithstanding anything herein to the
contrary, each of the parties to this Agreement hereby agrees with the other
party hereto that, except as may be required to comply with the requirements of
any applicable Laws, and the rules and regulations of each stock exchange upon
which the securities of one of the parties is listed, no press release or
similar public announcement or communication shall, if prior to the Closing, be
made or caused to be made concerning the execution or performance of this
Agreement unless the parties shall have consulted in advance with respect
thereto.
Section 10.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument. Confirmation of
execution by electronic transmission of a facsimile signature page shall be
binding upon any party so confirming.
Section 10.10 Submission to Jurisdiction; Selection of Forum. This
Agreement and all transactions contemplated by this Agreement shall be governed
by, and construed and enforced in
24
<PAGE> 30
accordance with, the laws of Delaware. Each party hereto agrees that it shall
bring any action or proceeding in respect of any claim arising out of or related
to this Agreement or the transactions contained in or contemplated by this
Agreement, whether in tort or contract or at law or in equity, exclusively in
Delaware (the "Chosen Courts") and solely in connection with claims arising
under this Agreement or the transactions contained in or contemplated by this
agreement (i) irrevocably submits to the exclusive jurisdiction of the Chosen
Courts, (ii) waives any objection to laying venue in any such action or
proceeding in the Chosen Courts, (iii) waives any objection that the Chosen
Courts are an inconvenient forum or do not have jurisdiction over any party
hereto and (iv) agrees that service or process upon such party in any such
action or proceeding shall be effective if notice is given in accordance with
Section 0 of this Agreement.
Section 10.11 Headings. The headings contained in this Agreement are
for convenience of reference only, are not to be considered a part of the
Agreement and shall not limit or otherwise affect in any way the meaning or
interpretation of this Agreement.
Section 10.12 Severability. If any provision of this Agreement or any
other agreement entered into pursuant hereto is contrary to, prohibited by or
deemed invalid under applicable law or regulation, such provision shall, be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given full force and effect so far as possible. If any provision of this
Agreement may be construed in two or more ways, one of which would render the
provision invalid or otherwise voidable or unenforceable and another of which
would render the provision valid and enforceable, such provision shall have the
meaning which renders it valid and enforceable.
Section 10.13 Third Parties. Unless expressly stated herein to the
contrary (including, without limitation, Sections 0 and 0, nothing in this
Agreement, whereto express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties hereto and their respective legal representatives, successors and
permitted assigns. Nothing in this Agreement is intended to relieve or discharge
the Liability of any third persons to any party to this Agreement, nor shall any
provision give any third persons any right of subrogation or action over or
against any party to this Agreement.
Section 10.14 Incorporation of Exhibits, Schedules and Annexes. All
exhibits, schedules and annexes referred to in this Agreement and attached
hereto are hereby made a part of this Agreement by this reference.
Section 10.15 Waivers. The failure or delay of any party at any time tn
require performance by another party of any provision of this Agreement, even if
known, shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder. Any waiver by any
party of any breach of any provision of this Agreement should not be construed
as a waiver of any continuing or succeeding breach of such provision, a waiver
of the provision itself, or a waiver of any right, power or remedy under this
Agreement. No notice to or demand on any party in any circumstances shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
25
<PAGE> 31
ARTICLE XI
POST CLOSING MATTERS
Buyer and the Company acknowledge and agree that (i) the matters
described in Article XV of the Bancomer Agreement shall occur at Closing, or as
promptly as practicable thereafter, and (ii) the separation of the Hotel
Business property and the Timeshare/Other Business property will require the
establishment of a condominium regime (or similar structure) for ownership,
management and operation of the common structural, support and amenity features
including, without limitation, the engine room, telephone system, television
network, fitness center, athletic facilities, swimming pools, storage facilities
and maintenance facilities.
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
RAINTREE CAPITAL COMPANY LLC,
a Texas limited liability company
By:
---------------------------------------
Name: Douglas Y. Bech
Title:Executive Managing Director
CLUB REGINA RESORTS, INC.,
a Nevada corporation
By:
---------------------------------------
Name: Douglas Y. Bech
Title: President
SLT REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: STARWOOD LODGING TRUST, a
Maryland corporation, general partner
By:
----------------------------------
Name: [ ]
Title: [ ]
26
<PAGE> 1
EXHIBIT 12.1
CLUB REGINA RESORTS, INC.
Calculation of Fixed Charges and the Ratio of Net Income (Loss)
before Mexican taxes, amortization of debt issue costs,
original issue discount, and preferred dividends to Fixed Charges
(In thousands)
<TABLE>
<CAPTION>
Historic Data
--------------------------------------------------------------------
Seven and
Pro Forma Data one-half Company's results
------------------------- Months for the
Description Years ended December 31, Year ended December 31, Ended year ended
- ----------- ------------------------- ------------------------ August 18, December 31,
1996 1997 1996 1997 1997 1977
---- ---- ---- ---- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
Mexican taxes............ $ (1,284) $ 1,695 $ (9,767) $(5,321) $ 3,282 $1,674
Fixed Charges:
Cash interest............ 13,650 13,250 10,357 2,537 2,827 3,726
Non cash interest........ 2,278 2,259 -- -- -- 551
Preferred dividends...... 619 619 -- -- -- 232
-------- ------- -------- ------- ------- ------
Total................ 16,547 16,128 10,357 2,537 2,827 4,509
Income (loss) before
Mexican taxes and
fixed changes............ 15,263 17,823 590 (2,784) (455) 2,835
======== ======= ======= ======= ======= ======
Ratio of Income (loss) before
Mexican taxes and
fixed charges............ -- 1.1x -- -- --
Amount that fixed charges
exceed net income (loss)
before Mexican taxes and
fixed charges............ $ 1,284 $ 9,767 $ 5,321 $ 3,282 $1,674
========= ======= ======= ======= ======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Club Regina Resorts, Inc.
Subsidiaries
(formed under the laws of the
United States unless otherwise indicated)
Canarias Future, SL+
CR Resorts Parent Nominee Holding, LLC
CR Resorts Capital, S. de R.L. de C.V.*
CR Resorts Holding, S. de R.L. de C.V.*
Timeshare Nominee Holding, LLC
CR Resorts Remainder Company, S. de R.L. de C.V*
Top Acquisition Sub, S. de R.L. de C.V.*
CR Resorts Cancun, S. de R.L. de C.V.*
CR Resorts Cabos, S. de R.L. de C.V.*
CR Resorts Puerto Vallarta, S. de R.L. de C.V.*
Desarrollos Turisticos Regina, S. de R.L de C.V.*
Corporacion Habitacional Mexicana, S.A. de C.V.*
Desarollos Turisticos Integrales Cozumel, S.A. de C.V.*
Corporacion Mexitur, S.A. de C.V.*
Servicios Turisticos Integrales Cobamex, S.A. de C.V.*
Club Regina, S.A. de C.V.*
- --------
+ Formed under the laws of Spain.
* Formed under the laws of the United Mexican States.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of (a) our report dated March 20, 1998 (except for the second and third
paragraphs of Note 10 as to which the date is March 27, 1998) with respect to
the consolidated balance sheets of Club Regina Resorts, Inc. and Subsidiaries as
of December 31, 1997 and August 18, 1997 and the consolidated statements of
operations, shareholders' equity and cash flows for the year ended December 31,
1997, for the period January 1, 1997 through August 18, 1997 and for the period
August 19, 1997 through December 31, 1997; (b) our report dated March 20, 1998
(except for Note 6 as to which the date is March 27, 1998) with respect to the
consolidated balance sheets of CR Resorts Capital, S. de R.L. de C.V. as of
December 31, 1997 and August 18, 1997, and the consolidated statements of income
and retained earnings and cash flows for the period August 19, 1997 (inception)
through December 31, 1997; (c) our report dated June 5, 1997 (except for Note 11
as to which the date is August 18, 1997) with respect to the consolidated
statements of operations and cash flows of Desarollos Turisticos Bancomer, S.A.
de C.V. and Subsidiaries for the years ended December 31, 1996 and 1995; and (d)
our report dated March 20, 1998 with respect to the consolidated statements of
operations and cash flows of Desarrollos Turisticos Bancomer, S.A. de C.V. and
Subsidiaries for the period January 1, 1997 through August 18, 1997, all of
which are included in Amendment No. 1 to the Registration Statement on Form S-4
of Club Regina Resorts, Inc. and CR Resorts Capital, S. de R.L. de C.V. for the
registration of $100,000,000 13% Senior Notes, Series B, due 2004.
Ernst & Young LLP
Miami, Florida
April 17, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
------------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
CLUB REGINA RESORTS, INC.
CR RESORTS CAPITAL, S. de R.L. de C.V.
(Exact name of obligor as specified in its charter)
Nevada 76-0549149
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10000 Memorial Drive
Houston, Texas 77024
(Address of principal executive offices) (Zip Code)
------------------
SENIOR NOTES, SERIES B DUE 2004
(Title of indenture securities)
---------------------------------------------------
<PAGE> 2
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
New York State Banking Department
Two Rector Street, New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust
powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
The obligor is not an affiliate of the trustee.
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities of the obligor are
outstanding, furnish the following information:
(a) Title of the securities outstanding under each such
other indenture.
None
(b) A brief statement of the facts relied upon as a basis
for the claim that no conflicting interest within the meaning
of Section (310)(b)(1) of the Act arises as a result of the
trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as
compared with the securities issued under such other
indentures.
Not applicable
<PAGE> 3
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with
respect to the securities under this indenture.
Explain the nature of any such default.
None
(b) If the trustee is a trustee under another indenture
under which any other securities, or certificates of
interest or participation in any other securities, of
the obligor are outstanding, or is trustee for more
than one outstanding series of securities under the
indenture, state whether there has been a default
under any such indenture or series, identify the
indenture or series affected, and explain the nature
of any such default.
Not applicable
<PAGE> 4
Item 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust
Company as amended to date. (See Exhibit 1A to Form T-1,
Securities and Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to
Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise
corporate trust powers, as amended to date (See Exhibit
4 to Form T-1, Securities and Exchange Commission File
No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as
amended to date (See Exhibit 4 to Form T-1, Securities
and Exchange Commission File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee
required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as exhibits
hereto. Following the description of such Exhibits is a reference to the
copy of the Exhibit heretofore filed with the Securities and Exchange
Commission, to which there have been no amendments or changes.
<PAGE> 5
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 24th day of March, 1998.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
---------------------------------
Stephen J. Giurlando
Assistant Vice President
<PAGE> 7
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issuance by Club Regina
Resorts, Inc. and CR Resorts Capital, S. de R.L. de C.V. of its Senior
Notes, Series B due 2004, we hereby consent that reports of examinations by
Federal, State, Territorial, or District authorities may be furnished by
such authorities to the Securities and Exchange Commission upon request
therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
----------------------------------
Stephen J. Giurlando
Assistant Vice President
Dated: March 24, 1998
<PAGE> 8
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
------------
ASSETS
<S> <C>
1. Cash and balance due from depository institutions:
a. Noninterest-bearing balances and currency and coin .....................................................$ 45,276
b. Interest-bearing balances.................................................................................$ 121,534
2. Securities:
a. Held-to-maturity securities...............................................................................$ 184,821
b. Available-for-sale securities.............................................................................$ 74,043
3. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries and
in IBFs:
Federal Funds sold and Securities purchased under agreements to resell .......................................$ 202,104
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income................................................$ 1,797,414
b. LESS: Allowance for loan and lease losses...............................................$ 61,962
c. LESS: Allocated transfer risk reserve...................................................$ -0-
d. Loans and leases, net of unearned income, allowance, and reserve .........................................$ 1,735,452
5. Trading assets held in trading accounts.......................................................................$ 479
6. Premises and fixed assets (including capitalized leases)......................................................$ 2,952
7. Other real estate owned.......................................................................................$ -0-
8. Investments in unconsolidated subsidiaries and associated companies $ -0-
9. Customers' liability to this bank on acceptances outstanding..................................................$ 1,447
10. Intangible assets.........................................................................................$ -0-
11. Other assets..............................................................................................$ 67,256
12. TOTAL ASSETS..............................................................................................$ 2,435,364
</TABLE>
<PAGE> 9
<TABLE>
LIABILITIES
<S> <C>
13. Deposits:
a. In domestic offices.......................................................................................$ 791,520
(1) Noninterest-bearing ...............................................................$ 247,397
(2) Interest-bearing ..................................................................$ 544,123
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs ............................................$ 1,229,810
(1) Noninterest-bearing ....................................................................$ 14,607
(2) Interest-bearing . ...............................................................$ 1,215,203
14. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase $ 10,000
15. a Demand notes issued to the U.S. Treasury $ 5,000
b. Trading Liabilities........................................................................................$ 108
16. Other borrowed money:
a. With a remaining maturity of one year or less...............................................................$ 83,453
b. With a remaining maturity of more than one year.............................................................$ 1,763
c. With a remaining maturity of more than three years..........................................................$ 2,242
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding........................................................$ 1,447
19. Subordinated notes and debentures...............................................................................$ -0-
20. Other liabilities...............................................................................................$ 70,284
21. TOTAL LIABILITIES...............................................................................................$ 2,195,627
22. Limited-life preferred stock and related surplus................................................................$ -0-
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus...................................................................$ -0-
24. Common stock....................................................................................................$ 29,649
25. Surplus (exclude all surplus related to preferred stock)........................................................$ 217,008
26. a. Undivided profits and capital reserves .....................................................................$ (7,130)
b. Net unrealized gains (losses) on available-for-sale securities .............................................$ 210
27. Cumulative foreign currency translation adjustments.............................................................$ -0-
28. TOTAL EQUITY CAPITAL............................................................................................$ 239,737
29. TOTAL LIABILITIES AND EQUITY CAPITAL............................................................................$ 2,435,364
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 8,994,591
<SECURITIES> 0
<RECEIVABLES> 41,828,506
<ALLOWANCES> 7,045,583
<INVENTORY> 964,301
<CURRENT-ASSETS> 55,503,779
<PP&E> 13,719,698
<DEPRECIATION> 78,317
<TOTAL-ASSETS> 116,863,921
<CURRENT-LIABILITIES> 9,973,290
<BONDS> 90,779,975
0
38
<COMMON> 10,701
<OTHER-SE> 13,041,034
<TOTAL-LIABILITY-AND-EQUITY> 116,863,921
<SALES> 19,239,499
<TOTAL-REVENUES> 26,280,292
<CGS> 5,667,161
<TOTAL-COSTS> 26,962,593
<OTHER-EXPENSES> 991,879
<LOSS-PROVISION> 2,348,960
<INTEREST-EXPENSE> 3,726,276
<INCOME-PRETAX> (1,674,180)
<INCOME-TAX> 1,661,781
<INCOME-CONTINUING> (3,335,961)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,335,961)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> (.40)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
CLUB REGINA RESORTS, INC.
CR RESORTS CAPITAL, S. de R.L. de C.V.
OFFER TO EXCHANGE ITS
13% SENIOR NOTES DUE 2004, SERIES B FOR
ANY AND ALL OF ITS 13% SENIOR NOTES DUE 2004, SERIES A
PURSUANT TO THE PROSPECTUS, DATE [ ], 1998.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON [ ], 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
By registered or certified mail: By hand or overnight delivery:
IBJ SCHRODER BANK & TRUST COMPANY IBJ SCHRODER BANK & TRUST COMPANY
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Securities Processing Window,
Attn: Reorganization Operations Department Subcellar One, (SC-1)
(212) 858-2103
By Facsimile: Confirm by Telephone:
(212) 858-2611 (212) 858-2103 -- Customer Service
</TABLE>
---------------------
Delivery of this Instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated [ ], 1998 (the "Prospectus"), of Club Regina
Resorts, Inc., a Nevada corporation, and CR Resorts Capital, S. de R.L. de C.V.,
a Mexican sociedad de responsabilidad limitada (the "Issuers"), and this Letter
of Transmittal (this "Letter"), which together constitute the Issuers' offer
(the "Exchange Offer") to exchange an aggregate principal amount at maturity of
up to $100 million of 13% Senior Notes due 2004, Series B (the "Series B Notes")
of the Issuers for a like principal amount of the issued and outstanding 13%
Senior Notes due 2004, Series A (the "Series A Notes") of the Issuers from the
Holders thereof.
This Letter is to be completed by a Holder of Series A Notes either if
certificates are to be forwarded herewith or if a tender of certificates for
Series A Notes, if available, is to be made by book-entry transfer to the
account maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer -- Book-Entry Transfer" section of the Prospectus and an Agent's
Message is not delivered. Tenders by book-entry transfer may also be made by
delivering an Agent's Message in lieu of this Letter. The term "Agent's Message"
means a message, transmitted by the Book- Entry Transfer Facility to and
received by the Exchange Agent and forming a part of a Book-Entry Confirmation
(as defined below), which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the tendering participant, which
acknowledgment states that such participant has received and agrees to be bound
by this Letter and that the Issuers may enforce this Letter against such
participant. Holders of Series A Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Series A Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other
documents required by this Letter to the Exchange Agent on or prior to the
Expiration Date, must tender their Series A Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 1. Delivery of documents
to the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent. The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
<PAGE> 2
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
DESCRIPTION OF 13% SENIOR NOTES DUE 2004, SENIOR NOTES (SERIES A NOTES)
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
AGGREGATE PRINCIPAL TENDERED (MUST BE IN
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED INTEGRAL MULTIPLES
(PLEASE FILL IN, IF BLANK) NUMBER(S) BY CERTIFICATE(S) OF $1,000)*
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Total
- --------------------------------------------------------------------------------------------------------------
* Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of Series A Notes
will be deemed to have tendered the entire aggregate principal amount represented by the column labeled
"Aggregate Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and principal amounts on a separate
signed schedule and affix the list to this Letter of Transmittal.
The minimum permitted is $1,000 in principal amount of Series A Notes. All other tenders must be integral
multiples of $1,000
-------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTION 5)
To be completed ONLY if certificates for Series A Notes in a principal amount
not tendered or not purchased, or Series B Notes issued in exchange for Series A
Notes accepted for exchange are to be issued in the name of someone other than
the undersigned.
Issue Certificate to:
Name:
-----------------------------------------------
(Please Print)
Address:
-----------------------------------------------
- ------------------------------------------------
(Include Zip Code)
- ------------------------------------------------
(Tax Identification or Social Security No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 5)
To be completed ONLY if certificates for Series A Notes in a principal amount
not tendered or not purchased, or Series B Notes issued in exchange for Series A
Notes accepted for exchange are to be sent to someone other than that shown
below.
Mail Certificate to:
Name:
-------------------------------------------------------------------------
(Please Print)
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
2
<PAGE> 3
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Series A Notes indicated
above. Subject to and effective upon the acceptance for exchange of the
principal amount of Series A Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Series A Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company) with respect to the
tendered Series A Notes with full power of substitution to (i) deliver
certificates for such Series A Notes to the Company and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company and
(ii) present such Series A Notes for transfer on the books of the Company and
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Series A Notes, all in accordance with the terms of the Exchange Offer.
The power of attorney granted in this paragraph shall be deemed irrevocable and
coupled with an interest.
The name(s) and address(es) of the registered Holder(s) should be printed
herein under "Description of 13% Senior Notes Due 2004, Series A" (unless a
label setting forth such information appears thereunder), exactly as they appear
on the Series A Notes tendered hereby. The certificate number(s) and the
principal amount of Series A Notes to which this Letter of Transmittal relates,
together with the principal amount of such Series A Notes that the undersigned
wishes to tender, should be indicated in the appropriate boxes herein under
"Description of 13% Senior Notes Due 2004, Series A."
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Series A Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Company. The
undersigned hereby further represents that any Series B Notes acquired in
exchange for Series A Notes tendered hereby will have been acquired in the
ordinary course of business of the Holder receiving such Series B Notes, that
neither the Holder nor any such other person has an arrangement with any person
to participate in the distribution of such Series B Notes and that neither the
Holder nor any such other person is an "affiliate," as defined under Rule 405 of
the Securities Act, of the Company or any of its affiliates. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
assignment, transfer and purchase of the Series A Notes tendered hereby.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of Series
B Notes. If the undersigned is a broker-dealer that will receive Series B Notes
for its own account in exchange for Series A Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Series B
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Series A Notes, when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
If any tendered Series A Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Series A
Notes will be returned, without expense, to the undersigned at the address shown
below or at a different address as may be indicated herein under "Special
Payment Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Series A Notes pursuant to the
procedures described under the caption "The Exchange Offer -- Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
3
<PAGE> 4
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the Series B Notes issued in exchange for
the Series A Notes accepted for exchange and return any Series A Notes not
tendered or not exchanged in the name(s) of the undersigned. Similarly, unless
otherwise indicated under "Special Delivery Instructions," please send the
certificates representing the Series B Notes issued in exchange for the Series A
Notes accepted for exchange and any certificates for Series A Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s). In the event that
both "Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the Series B Notes issued
in exchange for the Series A Notes accepted for exchange and return any Series A
Notes not tendered or not exchanged in the name(s) of, and send said
certificates to, the person(s) so indicated. The undersigned recognizes that the
Company has no obligation pursuant to the "Special Payment Instructions" and
"Special Delivery Instructions" to transfer any Series A Notes from the name of
the registered Holder(s) thereof if the Company does not accept for exchange any
of the Series A Notes so tendered.
4
<PAGE> 5
________________________________________________________________________________
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
<TABLE>
<S> <C>
X
----------------------------------------------------- ----------------------------------------------, 1998
X
----------------------------------------------------- ----------------------------------------------, 1998
Signature(s) of Owner Date
Area code and Telephone Number
--------------------------------------------------------------------------------
</TABLE>
If a Holder is tendering any Series A Notes, this Letter must be signed by
the registered Holder(s) as the name(s) appear(s) on the certificate(s) for the
Series A Notes or by any person(s) authorized to become registered Holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 4.
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Type or Print)
Capacity:
-----------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 4)
Signature(s) Guaranteed by an Eligible Institution:
----------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name and Firm)
Dated: , 1998
-------------------------------------------------------------------
________________________________________________________________________________
5
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER OF 13% SENIOR
NOTES DUE 2004,
SERIES B FOR ANY AND ALL OF THE 13% SENIOR NOTES DUE 2004,
SERIES A OF CLUB REGINA RESORTS, INC. AND CR RESORTS CAPITAL, S. DE R.L. DE C.V.
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This letter is to be completed by Holders either if certificates are to be
forwarded herewith or if tenders are to be made pursuant to the procedures for
delivery by book-entry transfers set forth in "The Exchange Offer -- Book-Entry
Transfer" section of the Prospectus and an Agent's Message is not delivered.
Tenders by book-entry transfer may also be made by delivering an Agent's Message
in lieu of this Letter of Transmittal. The term "Agent's Message" means a
message, transmitted by the Book-Entry Transfer Facility to and received by the
Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by, and makes the
representations and warranties contained in, the Letter of Transmittal and that
the Company may enforce the Letter of Transmittal against such participant.
Certificates for all physically tendered Series A Notes, or Book-Entry
confirmation, as the case may be, as well as a properly completed and duly
executed Letter (or manually signed facsimile hereof or Agent's Message in lieu
thereof) and any other documents required by this Letter, must be received by
the Exchange Agent at the address set forth herein on or prior to the Expiration
Date, or the tendering Holder must comply with the guaranteed delivery
procedures set forth below.
Holders whose certificates for Series A Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Series A
Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution,
(ii) prior to 5:00 P.M. New York City time on the Expiration Date, the Exchange
Agent must receive from such Eligible Institution a properly completed and duly
executed (or facsimile thereof or Agent's Message in lieu thereof) Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of the Holder of Series A Notes and the amount of Series A Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five business days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Series A
Notes, or a Book-Entry Confirmation, and any other documents required by the
Letter will be deposited by the Eligible Institution with the Exchange Agent,
and (iii) the certificates for all physically tendered Series A Notes, in proper
form for transfer, or Book-Entry Confirmation, as the case may be, and all other
documents required by this Letter are received by the Exchange Agent within five
business days after the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Series A Notes and all other
required documents is at the election and risk of the tendering Holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Series A Notes are sent by mail, it is suggested that the
mailing be made by overnight or hand delivery services sufficiently in advance
of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00
P.M., New York City time, on the Expiration Date, No Letter, Notice of
Guaranteed Delivery or Series A Notes should be sent to the Company.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Series A Notes and withdrawal of tendered
Series A Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the right to waive
any defects or irregularities or conditions of tender as to the Exchange Offer
and/or particular Series A Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter)
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Series A Notes must be cured within
such time as the Company shall determine. Neither the
6
<PAGE> 7
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Series A
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Series A Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Series A
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders of Series A Notes,
unless otherwise provided in this Letter, as soon as practicable following the
Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. TENDER BY HOLDER.
Only a Holder of Series A Notes may tender such Series A Notes in the
Exchange Offer. Any beneficial Holder of Series A Notes who is not the
registered Holder and who wishes to tender should arrange with the registered
Holder to execute and deliver this Letter on his or her behalf or must, prior to
completing and executing this Letter and delivering his or her Series A Notes,
either make appropriate arrangements to register ownership of the Series A Notes
in such Holder's name or obtain a properly completed bond power form the
registered Holder.
3. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Series A Notes evidenced by a submitted certificate
are to be tendered, the tendering Holder(s) should fill in the aggregate
principal amount of Series A Notes to be tendered in the box above entitled
"Description of Series A Notes -- Principal Amount Tendered." A reissued
certificate representing the balance of nontendered Series A Notes will be sent
to such tendering Holder, unless otherwise provided in the appropriate box on
this Letter, promptly after the Expiration Date. All of the Series A Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
4. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES
If this Letter is signed by the registered Holder of the Series A Notes
tendered hereby, the signature must correspond exactly with the name as written
on the fact of the certificates without any change whatsoever.
If any tendered Series A Notes are owned by record by two or more joint
owners, all such owners must sign this letter.
If any tendered Series A Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this letter is signed by the registered Holder or Holders of the
Series A Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Series B
Notes are to be issued, or any untendered Series A Notes are to reissued, to a
person other than the registered Holder, then endorsements of any certificates
transmitted hereby or separate bond powers are required. Signature on such
certificate(s) must be guaranteed by an Eligible Institution.
If this letter is signed by a person other than the registered Holder or
Holders of any certificate specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered Holder or Holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should indicate when signing, and, unless waived by the Company, proper
evidence satisfactory to the Company of their authority to so act must be
submitted.
7
<PAGE> 8
Endorsements on certificates for Series A Notes or signatures on bond
powers required by this Instruction 4 must be guaranteed by an Eligible
Institution.
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Series A Notes are tendered; (i) by a registered
Holder of Series A Notes (which term, for purposes of the Exchange Offer,
includes any participant in the Book-Entry Transfer Facility system whose name
appears on a security position listing as the Holder of such Series A Notes) who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions," on this Letter, or (ii) for the account of an Eligible
Institution.
5. SPECIAL ISSUANCE AND DELIVER INSTRUCTIONS.
Tendering Holders of Series A Notes should indicate in the applicable box
the name and address to which Series B Notes issues pursuant to the Exchange
Offer and/or substitute certificates evidencing Series A Notes not exchanged are
to be issued or sent, if different from the name or address of the person
signing this Letter. In the case of issuance in a different name, the tax
identification or social security number of the person named must also be
indicated. Noteholders tendering Series A Notes by book-entry transfer may
request that Series A Notes not exchanged be credited to such account maintained
at the Book-Entry Transfer Facility as such noteholder may designate hereon. If
no such instructions are given, such Series A Notes not exchanged will be
returned to the name or address of the person signing this Letter.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Series A Notes to it or its order pursuant to the Exchange Offer. If,
however, Series B Notes and/or substitute Series A Notes are to be delivered to,
or are to be registered or issued in the name of any person other than the
registered Holder of the Series A Notes tendered hereby, or if tendered Series A
Notes are registered in the name of any person other than the person signing
this Letter, or if a transfer tax is imposed for any reason other than the
transfer of Series A Notes to the Company or its order pursuant to the Exchange
Offer, the amount of any such transfer taxes (whether imposed on the registered
Holder or any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payments of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Series A Notes specified in this
Letter.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to amend, waive satisfaction of or
modify any or all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders of Series A Notes, by execution of this Letter
or an Agent's Message in lieu thereof, shall waive any right to receive notice
of the acceptance of their Series A Notes for exchange.
9. MUTILATED, LOST, STOLEN OR DESTROYED SERIES A NOTES.
Any Holder whose Series A Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent at the address and telephone number indicated above.
8
<PAGE> 9
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a registered Holder of Series A Notes or
Series B Notes is required to provide the Trustee (as payer) with such Holder's
correct Tax Identification Number ("TIN") on Substitute Form W-9 below or
otherwise establish a basis for exemption from backup withholding. If such
Holder is an individual, the TIN is his or her social security number. If the
Trustee is not provided with the correct TIN, a $50 penalty may be imposed by
the Internal Revenue Service, and payments made to such Holder with respect to
the Series A Notes or Series B Notes may be subject to backup withholding.
Certain Holders (including among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Trustee a properly completed Internal Revenue Service Form W-8, signed under
penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can
be obtained from the Trustee.
If backup withholding applies, the Trustee is required to withhold 31% of
any payments made to the Holder or other payee. Backup withholding is not an
additional Federal income tax. Rather, the Federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Series A
Notes or Series B Notes, the Holder is required to provide the Trustee with: (i)
the Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute W-9 is correct (or that such Holder is awaiting a TIN)
and that (A) such Holder is exempt from backup withholding, (B) the Holder has
not been notified by the Internal Revenue Service that the Holder is subject to
backup withholding as a result of failure to report all interest or dividends,
or (C) Internal Revenue Service has notified the Holder that the Holder is no
longer subject to backup withholding; and (ii) if applicable, an adequate basis
for exemption.
9
<PAGE> 10
PAYER'S NAME:
------------------------------------------------------------------
<TABLE>
<S> <C> <C>
____________________________________________________________________________________________________________________
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT ----------------------------
SUBSTITUTE RIGHT AND CERTIFY BY SIGNING AND DATING. SOCIAL SECURITY NUMBER
FORM W-9 OR
DEPARTMENT OF THE
TREASURY -- INTERNAL ----------------------------
REVENUE SERVICE EMPLOYER IDENTIFICATION NUMBER
----------------------------------------------------------------------------------
PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PART 3 --
PERJURY, I CERTIFY THAT: AWAITING TIN [ ]
(1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT
TAXPAYER IDENTIFICATION NUMBER (OR I AM
WAITING FOR A NUMBER TO BE ISSUED TO ME)
AND
(2) I AM NOT SUBJECT TO BACKUP WITHHOLDING
BECAUSE (I) I AM EXEMPT FROM BACKUP
WITHHOLDING, (II) I HAVE NOT BEEN NOTIFIED
BY THE INTERNAL REVENUE SERVICE ("IRS")
THAT I AM SUBJECT TO BACKUP WITHHOLDING AS
A RESULT OF FAILURE TO REPORT ALL INTEREST
OR DIVIDENDS, OR (III) THE IRS HAS NOTIFIED
ME THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
----------------------------------------------------------------------------------
CERTIFICATE INSTRUCTIONS -- YOU MUST CROSS OUT ITEM (2) IN PART 2 ABOVE IF
YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING
BECAUSE OF UNDER REPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN.
HOWEVER, IF AFTER BEING NOTIFIED BY THE IRS THAT YOU WERE SUBJECT TO BACKUP
PAYEE'S REQUEST FOR WITHHOLDING YOU RECEIVE ANOTHER CERTIFICATION FROM THE IRS STATING THAT YOU
TAXPAYER IDENTIFICATION ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING, DO NOT CROSS OUT ITEM (2).
NUMBER ("TIN")
SIGNATURE __________ DATE __________ , 1998
-----------------------------------------------------------------------------
NAME (PLEASE PRINT)
____________________________________________________________________________________________________________________
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU UNDER THE SERIES A NOTES OR THE SERIES B NOTES.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
<TABLE>
<S> <C>
__________________________________________________________________________________________________________________
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTY OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND
EITHER (A) 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 (B) I INTEND TO
MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER
IDENTIFICATION NUMBER WITHIN SIXTY (60) DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL
BE WITHHELD UNTIL I PROVIDE A NUMBER.
-------------------------------------------------------------- ------------------------------ , 1998
Signature Date
--------------------------------------------------------------
Name (Please Print)
_______________________________________________________________________________________________________________
</TABLE>
10
<PAGE> 11
OFFER TO EXCHANGE ITS
13% SENIOR NOTES DUE 2004, SERIES B
FOR
ANY AND ALL OF ITS 13% SENIOR NOTES DUE 2004, SERIES A
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Club Regina Resorts, Inc. and CR Resorts Capital, S. de R.L. de C.V. (the
"Issuers") are offering, upon and subject to the terms and conditions set forth
in the Prospectus, dated [ ], 1998 (the "Prospectus"), and the enclosed
letter of transmittal (the "Letter of Transmittal"), to exchange (the "Exchange
Offer") its 13% Senior Notes due 2004, Series B (the "Series B Notes") for any
and all of its outstanding 13% Senior Notes due 2004, Series A (the "Series A
Notes"). The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
December 5, 1997, among the Company and the other signatories thereto.
We are requesting that you contact your clients for whom you hold Series A
Notes regarding the Exchange Offer. For your information and for forwarding to
your clients for whom you hold Series A Notes registered in your name or in the
name of your nominee, or who hold Series A Notes registered in their own names,
we are enclosing the following documents:
1. Prospectus dated [ ], 1998;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Series A Notes are not immediately available or
time will not permit all required documents to reach the Exchange Agent
prior to the Expiration date (as defined below) or if the procedure for
book-entry transfers cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose
account you hold Series A Notes registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer; and
5. Return envelopes addressed to IBJ Schroder Bank & Trust Company,
the Exchange Agent for the Series A Notes.
Your prompt action is requested. The Exchange Offer will expire at 5:00
P.M., New York City time, on [ ], 1998, unless extended by the Company
(the "Expiration Date"). The Series A Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time before the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Series A Notes should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and the Prospectus.
If Holders of Series A Notes wish to tender, but it is impracticable for
them to forward their certificates for Series A Notes prior to the expiration of
the Exchange Offer or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effect by following the guaranteed delivery
procedures described in the Prospectus under "The Exchange Offer -- Guaranteed
Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and related documents to the
beneficial owners of Series A Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Series A Notes pursuant to the Exchange Offer,
except as set forth in Instruction 6 of the Letter of Transmittal.
11
<PAGE> 12
The terms of the Series B Notes and the Series A Notes are substantially
identical in all material respects, except that the Series B Notes will not
contain terms with respect to transfer restrictions.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to IBJ
Schroder Bank & Trust Company, the Exchange Agent for the Series A Notes, at its
address and telephone number set forth on the front of the Letter of
Transmittal.
Very truly yours,
Club Regina Resorts, Inc.
CR Resorts Capital, S. de R.L. de
C.V.
---------------------
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
12
<PAGE> 13
NOTICE OF GUARANTEED DELIVERY FOR
CLUB REGINA RESORTS, INC. AND CR RESORTS CAPITAL, S. DE R.L. DE C.V.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Club Regina Resorts, Inc. (the "Company") and CR Resorts
Capital, S. de R.L. de C.V. (collectively, the "Issuers") made pursuant to the
Prospectus, dated March [ ], 1998 (the "Prospectus"), if certificates for Series
A Notes of the Company are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Company prior to 5:00 P.M., New York
City time, on the Expiration Date of the Exchange Offer. Such form may be
delivered or transmitted by facsimile transmission, mail or hand delivery to IBJ
Schroder Bank & Trust Company (the "Exchange Agent") as set forth below. In
addition, in order to utilize the guaranteed delivery procedure to tender Series
A Notes pursuant to the Exchange Offer, a completed signed and dated Letter of
Transmittal (or facsimile thereof) must also be received by the Exchange Agent
prior to 5:00 P.M., New York City time, with five business days after the
expiration date of the Exchange Offer. Capitalized terms not defined herein are
defined in the Prospectus.
By registered or certified mail:
IBJ SCHRODER BANK & TRUST COMPANY
P.O. BOX 84
BOWLING GREEN STATION
NEW YORK, NEW YORK 10274-0084
ATTN: REORGANIZATION OPERATIONS DEPARTMENT
By hand or overnight delivery:
IBJ SCHRODER BANK & TRUST COMPANY
ONE STATE STREET
NEW YORK, NEW YORK 10004
ATTN: SECURITIES PROCESSING WINDOW, SUBCELLAR ONE, (SC-1)
(212) 858-2103
By Facsimile:
(212) 858-2611
Confirm by Telephone:
(212) 858-2103 -- CUSTOMER SERVICE
---------------------
Delivery of this Instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
13
<PAGE> 14
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount at maturity of Series A Notes set forth below,
pursuant to the guaranteed delivery procedure described in "The Exchange
Offer -- Guaranteed Delivery Procedures" section of the Prospectus.
Principal Amount of Series A Notes Tendered:
<TABLE>
<S> <C>
$
- ---------------------------------------
Certificate Nos. (if available):
- --------------------------------------- If Series A Notes will be delivered by book-entry transfer
Total Principal Amount Represented by to The Depository Trust Company, provide account number.
Old Notes Certificate(s):
$ Account Number ------------------------------------------
- ---------------------------------------
</TABLE>
14
<PAGE> 15
CLUB REGINA RESORTS, INC. AND CR RESORTS CAPITAL, S. DE R.L. DE C.V.
OFFER TO EXCHANGE ITS
13% SENIOR NOTES DUE 2004, SERIES B
FOR
ANY AND ALL OF ITS 13% SENIOR NOTES DUE 2004, SERIES A
To Our Clients:
Enclosed for your consideration are a Prospectus, dated [ ],
1998 (the "Prospectus") and a Letter of Transmittal ("Letter of Transmittal")
relating to an offer (the "Exchange Offer") by Club Regina Resorts, Inc. (the
"Company") and CR Resorts Capital, S. de R.L. de C.V. to exchange their 13%
Senior Notes due 2004, Series B (the "Series B Notes") for any and all of their
13% Senior Notes due 2004, Series A (the "Series A Notes").
This material is being forwarded to you as the beneficial owner of Series A
Notes carried by us in your account but not registered in your name.
Accordingly, we request instructions as to whether you wish us to tender
any or all such Series A Notes held by us for your account pursuant to the terms
and conditions set forth in the enclosed Prospectus and Letters of Transmittal.
We urge you to read these documents carefully before conveying your instructions
to us.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender your Series A Notes on your behalf in accordance
with the provisions of the Exchange Offer. The Exchange Offer will expire at
5:00 P.M., New York City time, on [ ], 1998, unless extended by
the Issuers (the "Expiration Date"). The Series A Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time before the Expiration Date.
If you wish to have us tender any or all of your Series A Notes on your
behalf, please so instruct us by completing, executing, detaching and returning
to us the attached instruction form. The accompanying copy of the Letter of
Transmittal have been furnished to you for your information only and may not be
used by you to tender your Series A Notes for exchange.
The Exchange Offer is not being made to, nor will tenders be accepted from
Holders of Series A Notes in any jurisdiction in which making of the Exchange
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction.
15
<PAGE> 16
Instructions
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer with respect to
Series A Notes.
- ------------------------------
This will instruct you whether to tender the principal amount of the Series
A Notes indicated below held by you for the account of the undersigned and/or
consent to the amendments and waivers, pursuant to the terms and conditions set
forth in the Prospectus and the related Letters of Transmittal. [Check the
appropriate box.]
Box 1 [ ] Please TENDER $ principal amount of Series A Notes
------------------
held by you for my account on the Letter of Transmittal.
Box 2 [ ] Please do NOT TENDER any Series A Notes at this time.
Date:
--------------------------------------------------------
- ---------------------------------------------------------------
Signature(s)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Please type or print name(s) here
Tenders of Old Securities will be accepted only in principal amounts equal
to $1,000 or integral multiples thereof.
16
<PAGE> 17
________________________________________________________________________________
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
________________________________________________________________________________
________________________________________________________________________________
PLEASE SIGN HERE
X
------------------------------------------------------------------------------
X
------------------------------------------------------------------------------
Signature(s) of Owner(s) or Authorized Signatory Date
Area Code and Telephone Number:
------------------------------------------------
Must be signed by the Holder(s) of Series A Notes as their name(s) appear(s) on
certificates for Series A Notes or on a security position listing, or by
person(s) authorized to become registered Holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in fiduciary or representative capacity, such person must set
forth his or her full title below.
Please print name(s) and address(es)
Name(s):
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
Address(es)
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
________________________________________________________________________________
17
<PAGE> 18
________________________________________________________________________________
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the United
States, hereby guarantees that the certificates representing the principal
amount at maturity of Series A Notes tendered hereby in proper form for
transfer, or timely confirmation of the book-entry transfer of such Series A
Notes into the Exchange Agent's account at The Depository Trust Company pursuant
to the procedures set forth in "The Exchange Offer -- Guaranteed Delivery
Procedures" section of the Prospectus, together with a properly completed and
duly executed Letter of Transmittal (or a manually signed facsimile thereof)
with any required signature guarantee and any other documents required by the
Letter of Transmittal, will be received by the Exchange Agent at the address set
forth above, no later than five business days after the date of execution
hereof.
- --------------------------------------------------------------------------------
Name of Firm Authorized Signature
- --------------------------------------------------------------------------------
Address Title
Name:
- ----------------------------------------- --------------------------------
Zip Code (Please Type or Print)
Area Code and Tel. No. Dated:
---------------------- ---------------------------
________________________________________________________________________________
NOTE: DO NOT SEND CERTIFICATES FOR SERIES A NOTES WITH THIS FORM, CERTIFICATES
FOR SERIES A NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
18
