1
EXHIBIT 1.2
700,000 Shares
SUNSTONE HOTEL INVESTORS, INC.
COMMON SHARES
UNDERWRITING AGREEMENT
March 24, 1997
XXXXXXXXXX SECURITIES
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Dear Sirs:
SECTION 1. Introductory. Sunstone Hotel Investors, Inc., a Maryland
corporation (the "Company"), proposes to issue and sell 700,000 shares (the
"Firm Common Shares") of its authorized but unissued common stock at $.01 par
value (the "Shares"), to the underwriter named in Schedule A annexed hereto
(the "Underwriter"). In addition, the Company proposes to grant to the
Underwriter an option to purchase up to 105,000 additional Shares (the
"Optional Common Shares") as provided in Section 4 hereof. The Firm Common
Shares and, to the extent such option is exercised, the Optional Common Shares
are hereinafter collectively referred to as the "Common Shares."
You have advised the Company that the Underwriter proposes to make a
public offering of their respective portions of the Common Shares on the
effective date of the registration statement hereinafter referred to, or as
soon thereafter as in your judgment is advisable.
The Company and Sunstone Hotel Investors, L.P., a Delaware limited
partnership (the "Partnership") hereby confirm their respective agreements with
respect to the purchase of the Common Shares by the Underwriter as follows:
SECTION 2. Representations and Warranties of the Company and the
Partnership. The Company and the Partnership hereby jointly and severally
represent and warrant to the Underwriter that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement on Form S-3 (File No.
2
333-16887) with respect to the Common Shares, including a prospectus (the
"Base Prospectus"), has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"),
and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and filed
with the Commission and has become effective. There have been delivered
to you two signed copies of such Registration Statement and amendments,
together with two copies of each exhibit filed therewith. Conformed
copies of such Registration Statement and amendments (but without
exhibits) and of the related preliminary prospectus (the "Preliminary
Prospectus") have been delivered to you in such reasonable quantities as
you have requested for the Underwriter. No stop order suspending the
effectiveness of the registration statement has been issued, and no
proceeding for that purpose has been instituted or, to the Company's
knowledge, threatened by the Commission. The Company will next file with
the Commission one of the following: (i) prior to effectiveness of such
registration statement, a further amendment thereto, including the form of
final prospectus, or (ii) a final prospectus and/or a prospectus
supplement in accordance with Rules 430A and 424(b) of the Rules and
Regulations. As filed, such amendment and form of final prospectus and/or
prospectus supplement, or such final prospectus, shall include all Rule
430A Information (as hereinafter defined) and, except to the extent that
you shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the date and time that this
Agreement was executed and delivered by the parties hereto, or, to the
extent not completed at such date and time, shall contain only such
specific additional information and other changes (beyond that contained
in the latest Preliminary Prospectus) as the Company shall have previously
advised you in writing would be included or made therein.
The term "Registration Statement" shall mean the registration statement as
amended at the time such registration statement becomes or became
effective (the "Effective Date"), including financial statements and all
exhibits and any information deemed by virtue of Rule 430A of the Rules
and Regulations to be included in such Registration Statement at the
Effective Date and any prospectus supplement filed thereafter with the
Commission and shall include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
term "Prospectus" means, collectively, the Base Prospectus together with
any prospectus supplement (the "Prospectus Supplement"), in the respective
forms they are filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations. Any reference herein to the terms
2
3
"amend," "amendment" or "supplement" with respect to the Registration
Statement, the Base Prospectus, any prospectus supplement or the
Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Effective Date, or the date of
the Prospectus, as the case may be, that is incorporated therein by
reference.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus has
conformed in all material respects to the requirements of the Act and the
Rules and Regulations and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and at the time the Registration
Statement becomes effective, and at all times subsequent thereto up to and
including each Closing Date (as hereinafter defined), the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
will contain all material statements and information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, and neither the Registration Statement nor the Prospectus,
nor any amendment or supplement thereto, will include any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, no representation or warranty contained in this Section
2(b) shall be applicable to information contained in or omitted from any
Preliminary Prospectus, the Registration Statement, the Prospectus or any
such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any
Underwriter, directly or through the Representatives, specifically for use
in the preparation thereof.
(c) The Company has been duly formed and is validly existing as a
corporation, is in good standing under the laws of the State of Maryland,
with full power and authority (corporate and other) to own and lease its
properties and conduct its business as currently conducted or as described
in the Prospectus. Except as disclosed in the Registration Statement
neither the Company nor the Partnership owns or controls, directly or
indirectly, any corporation, partnership, association or other entity.
(d) Sunstone Hotel Properties, Inc. (the "Lessee") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Colorado with full power and authority
(corporate and other) to own and lease its properties and conduct its
business as
3
4
described in the Prospectus. Sunstone Hotel Management, Inc., a Colorado
corporation (the "Manager"), has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with full power and authority (corporate
and other) to own and lease its properties and conduct its respective
business as described in the Prospectus.
(e) The Partnership has been duly formed and is validly existing as
a limited partnership under the laws of the State of Delaware with full
power and authority (partnership and other) to own and lease its
properties and conduct its business as currently conducted or as described
in the Prospectus. The Company is and will on each Closing Date be the
sole general partner of the Partnership. Upon the consummation of the
Offering, the Company will own the Units it holds free and clear of all
liens, encumbrances, equities, claims, security interests, voting trusts
or charges. Except as set forth in the Prospectus, each of the Company,
the Partnership, the Lessee and each property to be owned by the
Partnership as of the First Closing Date is, and after the consummation of
the Offering will be, in possession of and operating in compliance with
all authorizations, licenses, permits, consents, certificates and orders
material to the conduct of its business, all of which are valid and in
full force and effect. Each of the Company, the Partnership, the Manager
and the Lessee is, and after the consummation of the Offering will be,
duly qualified to do business and in good standing as a foreign
corporation, real estate investment trust or partnership, as applicable,
in each jurisdiction in which the ownership or leasing of properties or
the conduct of its respective business requires such qualification, except
for jurisdictions in which the failure to so qualify would not have a
material adverse effect upon the Company, the Partnership, the Manager or
the Lessee, as the case may be, and no proceeding has been instituted in
any such jurisdiction, revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or qualification.
(f) All of the issued and outstanding Shares of the Company (the
"Current Shares") have been duly authorized and validly issued, are fully
paid and nonassessable, have been issued in compliance with all federal
and state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase
securities, and conform in all material respects to the description
thereof contained in the Prospectus. All of the issued and outstanding
Units of the Partnership have been validly issued and are fully paid and
nonassessable and have been issued in compliance with all federal and
state securities laws. Except as disclosed in or contemplated by
4
5
the Prospectus and the financial statements of the Company, and the
related notes thereto and except for warrants to acquire 67,892 Units (the
"Warrants"), neither the Company nor the Partnership has outstanding any
options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its capital stock or
partnership interests, as the case may be, or any such options, rights,
convertible securities or obligations.
(g) The Common Shares to be sold by the Company in the public
offering contemplated by this Agreement, when issued, delivered and paid
for in the manner set forth in this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable, have been duly authorized
for listing on the New York Stock Exchange upon official notice of
issuance and will conform in all material respects to the description
thereof contained in the Prospectus. No shareholder of the Company has
any right which has not been waived to require the Company to register the
sale of any shares owned by such shareholder under the Act in the public
offering contemplated by this Agreement. No further approval or authority
of the shareholders or the Board of Directors of the Company will be
required for the issuance and sale of the Common Shares to be sold by the
Company as contemplated herein. The description of the Company's share
option, share bonus and other share plans or arrangements, and the options
or other rights granted and exercised thereunder, set forth in the
Prospectus are accurate in all material respects the information required
to be shown with respect to such plans, arrangements, options and rights.
The Company is, and following the issuance and sale of the Common Shares
will be, in compliance in all material respects with all of the rules and
regulations of the New York Stock Exchange applicable to the Company.
(h) Each of the Company and the Partnership has full legal right,
power and authority to enter into this Agreement and perform the
transactions contemplated hereby. This Agreement has been duly authorized
by the Company and the Partnership, has been duly executed and delivered
by the Company and the Partnership and constitutes a valid and binding
obligation of each of the Company and the Partnership in accordance with
its terms. The making and performance of this Agreement by each of the
Company and the Partnership and the consummation of the transactions
herein contemplated will not violate any provisions of the partnership
agreement, certificate of partnership, charter, by-laws or other
organizational documents, as applicable, of the Company or the Partnership
and will not conflict with, result in the breach or violation of, or
constitute, either by itself or upon notice or the passage of time or
both, a
5
6
material default under (i) any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which the
Company or the Partnership is a party or by which the Company or the
Partnership or any of their respective properties may be bound or affected
or (ii) any statute or any authorization, judgment, decree, order, rule or
regulation of any court or any regulatory body, administrative agency or
other governmental body applicable to the Company or the Partnership or
any of their respective properties. No consent, approval, authorization
or other order of any court, regulatory body, administrative agency or
other governmental body is required, including the satisfaction of any
requirements pursuant to the Xxxx-Xxxxx- Xxxxxx Antitrust Improvements Act
of 1976, as amended, for the execution and delivery of this Agreement or
the consummation of the transactions contemplated by this Agreement,
except for compliance with the Act, the Blue Sky and Canadian securities
laws applicable to the public offering of the Common Shares by the
Underwriter and the clearance of such offering with the National
Association of Securities Dealers, Inc. (the "NASD") and the listing of
additional shares with the New York Stock Exchange.
(i) Coopers & Xxxxxxx L.L.P. ("Coopers & Xxxxxxx"), who has
expressed its opinion with respect to the financial statements and
schedules filed with the Commission or incorporated by reference as a part
of the Registration Statement and included in the Prospectus and in the
Registration Statement, is an independent accountant as required by the
Act and the Rules and Regulations.
(j) The financial statements, together with the related notes
thereto, of the Company and the Lessee set forth or incorporated by
reference in the Registration Statement and Prospectus fairly present the
financial condition of such entities as of the dates indicated and the
results of operations and changes in financial position for the periods
presented. The pro forma financial statements included in the
Registration Statement and the Prospectus comply in all material respects
with the applicable requirements of Rule 11-02 of Regulation S-X of the
Commission and the pro forma adjustments have been properly applied to the
historical amounts in the compilation of such statements. Such
statements, schedules and related notes have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis as certified by the independent accountants named in Section 2(i).
No other financial statements or schedules are required to be included in
the Registration Statement. The selected financial data set forth in the
Prospectus under the caption "Selected Financial Information" fairly
presents the information set forth therein on the basis stated in the
Registration Statement.
6
7
(k) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations which
have not been described or filed as required other than a copy of this
Agreement and the tax opinion to be rendered in connection with this
Offering which will be filed on Form 8-K on or before March 26, 1997.
(l) There are no legal or governmental actions, suits or proceedings
pending in which service of process has been received by an employee of
the Company or, to the best of the Company's knowledge, threatened to
which the Company, the Partnership, the Manager or the Lessee is or may
be, a party or of which property owned or leased by the Company, the
Partnership, or the Lessee is or may be, the subject, or related to
environmental or discrimination matters, which actions, suits or
proceedings might, individually or in the aggregate, prevent or adversely
affect the transactions contemplated by this Agreement or result in a
material adverse change in the condition (financial or otherwise),
properties, business, results of operations or prospects of the Company,
the Partnership, the Manager or the Lessee, taken as a whole; and no labor
disturbance by the employees of the Company, the Partnership, the Manager
or the Lessee exists or to the Company's knowledge is imminent which might
be expected to affect adversely such condition (financial or otherwise),
properties, business, results of operations or prospects. None of the
Company, the Partnership, the Manager nor the Lessee is a party or subject
to the provisions of any material injunction, judgment, decree or order of
any court, regulatory body, administrative agency or other governmental
body.
(m) The Partnership has good and marketable title to the Hotels (as
defined in the Prospectus), subject to no lien, mortgage, pledge, charge
or encumbrance of any kind except (i) those reflected in the financial
statements (or described elsewhere in the Prospectus), or (ii) those which
are not material in amount and do not adversely affect the use made and
proposed to be made of such property by the Company and the Partnership.
The Partnership holds its leased properties under valid and binding
leases, with such exceptions as are not or will not be materially
significant in relation to the business of any of the Partnership. The
Company does not own or lease any real property. The Partnership owns or
leases all such real and personal properties (except for items of
inventory, vehicles, liquor licenses and Franchise Agreements to be held
by the Lessee) as are necessary to operate the Properties as now operated
or as proposed to be operated.
7
8
(n) To the knowledge of the Company (i) no lessee, licensee,
concessionaire or vendor of any portion of any of the Hotels is in default
under any of the leases or licenses governing such properties and there is
no event which, but for the passage of time or the giving of notice, or
both, would constitute a default under any of such leases or licenses,
except such defaults that would not have a material adverse effect on the
condition (financial or otherwise) or on the earnings, business affairs or
business prospects of the Company, the Partnership or the Lessee; (ii) all
such material leases or licenses are assignable without consent or
approval or if such consent or approval is required the applicable consent
or approval has been obtained to assign any such lease or license, to the
Partnership or the Lessee, as applicable; (iii) the current and intended
use and occupancy of each of the Hotels complies with all applicable codes
and zoning laws and regulations, if any, except for such failures to
comply which would not, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise) or on the
earnings, business affairs or business prospects of the Company, the
Partnership or the Lessee; and (iv) there is no pending or to the
Company's knowledge threatened condemnation, zoning change, environmental
or other proceeding or action that will in any material respect affect the
size of, use of, improvements on, construction on, or access to any of the
Hotels or actions that would reasonably be expected to have a material
adverse effect on the condition (financial or otherwise) or on the
earnings, business affairs or business prospects of the Company, the
Partnership or the Lessee.
(o) Since December 31, 1996, and except as described in or
specifically contemplated by the Prospectus: (i) none of the Company, the
Partnership, the Manager nor the Lessee has incurred any material
liabilities or obligations, indirect, direct or contingent, or entered
into any material verbal or written agreement or other transaction which
is not in the ordinary course of business or which could result in a
material reduction in the future earnings of the Company, the Partnership,
the Manager or the Lessee; (ii) none of the Company, the Partnership, the
Manager nor the Lessee has sustained any material loss or interference
with its respective businesses or properties from fire, flood, windstorm,
accident or other calamity, whether or not covered by insurance; (iii)
none of the Company, the Partnership nor the Lessee has paid or declared
any dividends or other distributions with respect to its capital stock
other than a dividend of $0.25 paid by the Company and a distribution of
$0.25 per Unit paid by the Partnership in February, 1997, and none of the
Company, the Partnership, the Manager nor the Lessee is in default in the
payment of principal or interest on any outstanding material debt
8
9
obligations; (iv) there has not been any change in the number of
outstanding Shares (other than upon the sale of the Common Shares or
purchase of shares pursuant to the Company's dividend reinvestment
program) of the Company, the ownership interests in any of the Partnership
or the common stock of the Lessee or indebtedness material to the Company,
the Partnership, the Manager or the Lessee (other than in the ordinary
course of business); and (v) there has not been any material adverse
change in the condition (financial or otherwise), business, properties,
results of operations or prospects of the Company, the Partnership, the
Manager or the Lessee.
(p) Except as disclosed in or specifically contemplated by the
Prospectus, the Company, the Partnership, the Manager and the Lessee have
sufficient trademarks, trade names, patent rights, copyrights, licenses or
other similar rights and proprietary knowledge (collectively,
"Intangibles"), approvals and governmental authorizations to conduct their
businesses as now conducted; the expiration of any Intangibles, approvals
or governmental authorizations would not have a material adverse effect on
the condition (financial or otherwise), business, results of operations or
prospects of the Partnership or the Company or the Lessee; and the Company
has no knowledge of any material infringement by the Partnership of any
Intangibles, and there is no claim being made against the Company, the
Partnership, the Manager or the Lessee regarding any Intangible or other
infringement which could have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of
the Company, the Partnership, the Manager or the Lessee.
(q) Neither the Company nor the Partnership has been advised, or has
reason to believe, that the Company, the Partnership, the Manager and the
Lessee are not conducting business in compliance with all applicable laws,
rules and regulations of the jurisdictions in which any of them is
conducting business, including, without limitation, all applicable local,
state and federal environmental laws and regulations; except where failure
to be in compliance would not materially adversely affect the condition
(financial or otherwise), business, results of operations or prospects of
any such entity.
(r) The Company, the Partnership, the Manager and the Lessee each
has filed all necessary federal, state and foreign income and franchise
tax returns and has paid all taxes shown as due thereon; and to the
Company's knowledge, there is no tax deficiency which has been or might be
asserted or threatened against which could materially and adversely affect
the business, operations or properties of,
9
10
the Company, the Partnership, the Manager or the Lessee, as the case may
be.
(s) Neither the Company nor the Partnership has distributed or will
distribute prior to the First Closing Date any offering material in
connection with the offering and sale of the Common Shares other than the
Prospectus, the Registration Statement and the other materials permitted
by the Act.
(t) None of the Company, the Partnership, the Manager nor the
Lessee has at any time during the last five years (i) made any unlawful
contribution to any candidate for foreign office or failed to disclose
fully any contribution in violation of law or (ii) made any payment to any
federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required
or permitted by the laws of the United States or any jurisdiction thereof.
(u) Neither the Company nor any of its affiliates has taken or will
take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Shares to facilitate the sale or resale of the
Common Shares.
(v) The Company, the Partnership, the Manager or the Lessee, as
applicable, have and maintains liability, property and casualty insurance
(insured by insurers of recognized financial responsibility) in favor of
the Partnership, and in the case of liability insurance, the Lessee and
the Partnership and the Manager, with respect to each of the Hotels, in an
amount and on such terms as is reasonable and customary for businesses of
the type proposed to be conducted by the Partnership, the Manager and the
Lessee, including, among other things, insurance against theft, damage,
destruction and acts of vandalism. Neither the Company nor the
Partnership has received from any insurance company written notice of any
material defects or deficiencies affecting the insurability of any such
Hotels.
(w) Title insurance in favor of the Partnership is in force with
respect to each of the Hotels.
(x) The mortgages and deeds of trust encumbering the Hotels are not
convertible nor does the Company or the Partnership hold a participating
interest therein and such mortgages and deeds of trust are not
cross-defaulted or cross-collateralized to any property not to be owned
directly or indirectly by the Company or the Partnership.
10
11
(y) Each of the Company, the Partnership, the Manager and the Lessee
(i) is in compliance with any and all applicable foreign, federal, state
and local laws and regulations relating to the protection of human health
and safety, the environment or any Hazardous Material (as hereinafter
defined) ("Environmental Laws"), (ii) has received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) is in compliance with all
terms and conditions of any such permit, license or approval, except where
such noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals are otherwise
disclosed in the Prospectus or would not, singly or in the aggregate, have
a material adverse effect on the Company, the Partnership or the Lessee.
As used herein, "Hazardous Material" shall mean (a) any "hazardous
substance" as defined by the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), (b) any
"hazardous waste" as defined by the Resource Conservation and Recovery
Act, as amended, (c) any petroleum or petroleum product, (d) any
polychlorinated biphenyl and (e) any pollutant or contaminant or
hazardous, dangerous, or toxic chemical, material, waste or substance
regulated under or within the meaning of any other Environmental Law.
(z) To the knowledge of the Company, there is no liability, alleged
liability or potential liability (including, without limitation,
liability, alleged liability or potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources
damages, property damages, personal injuries or penalties), of the
Company, the Partnership, the Manager or the Lessee arising out of, based
on or resulting from (a) the presence or release into the environment of
any Hazardous Material at any location, whether or not owned by the
Company or the Lessee or (b) any violation or alleged violation of any
Environmental Law, which liability, alleged liability or potential
liability is required to be disclosed in the Registration Statement, other
than as disclosed therein, or which liability, alleged liability or
potential liability, singly or in the aggregate, would have a material and
adverse effect on the respective business, prospects, properties,
condition (financial or otherwise) or results of operations of any of the
Hotels or the Company, the Partnership, the Manager or the Lessee.
(aa) None of the Company, the Partnership, the Manager nor the Lessee
is or will conduct their respective businesses in a manner in which any
such entity would become an "investment company" or an entity "controlled"
by an
11
12
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(bb) Neither the assets of the Company nor the Partnership
constitutes, nor will such assets, as of the Closing Date, constitute
"plan assets" under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
(cc) As of the Closing Date, the Company will be organized and will
operate in a manner so as to qualify as a "real estate investment trust"
("REIT") under Sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code"), and has elected to, is qualified to and
intends to remain qualified to, be taxed as a REIT under the Code and
pursuant to any applicable state tax laws. As of the Closing Date, less
than 15 percent of the aggregate adjusted tax bases of both the personal
property and the real property (the "Total Bases") to be leased pursuant
to any Percentage Lease shall consist of the adjusted tax bases of the
personal property (the "Personal Property Bases"), except in each instance
where the failure to maintain such ratios will not disqualify the
Company's election as a REIT or otherwise have a material adverse effect
on the business and operations of the Company; in each succeeding year the
Personal Property Bases in connection with each Percentage Lease will not
exceed 15 percent of the Total Bases for such lease, except in each
instance where the failure to maintain such ratios will not cause the
Company to fail to qualify as a REIT or otherwise have a material adverse
effect on the business and operations of the Company; and the Company has
received a segmentation study from Coopers & Xxxxxxx L.L.P. stating that
based on its projections, during the first five years of the term of each
Percentage Lease less than 15 percent of the Total Bases of each such
Percentage Lease is expected to consist of Personal Property Bases, except
in each instance where the failure to maintain such ratios will not cause
the Company to fail to qualify as a REIT or otherwise have a material
adverse effect on the business and operations of the Company. The Company
does not know of any event which would cause or is likely to cause the
Company to fail to qualify as a REIT at any time. All of the assets,
liabilities and items of income, deduction and credit of the Partnership
are treated as assets, liabilities and items of income, deduction and
credit of the Company under the provisions of the Code and the Partnership
is not, nor will it be, treated as a separate corporation under the
provisions of the Code. The Partnership is treated for federal income tax
purposes as a partnership and not as an association taxable as a
corporation.
(dd) The Company, the Partnership and the Lessee each maintain a
system of internal accounting controls sufficient
12
13
to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain accountability for assets; (iii) access to financial and
corporate books and records is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(ee) Neither the Company, the Partnership nor any other affiliate of
the Company has incurred any liability for a fee, commission or other
compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement other than
as disclosed in the Registration Statement.
(ff) No environmental engineering firm which prepared Phase I
environmental assessment reports of the Properties with respect to the
Hotels as set forth in the Registration Statement was employed for such
purpose on a contingent basis or has any substantial interest in the
Company, the Partnership or the Lessee.
(gg) To the best knowledge of the Company, no general labor problem
exists or is imminent with the employees of any of the Hotels, the
Company, the Manager, the Partnership or the Lessee.
(hh) Each certificate signed by any officer of the Company, the
Partnership or the Lessee or any of their affiliates and delivered to the
Representatives or counsel for the Underwriter shall be deemed to be a
representation and warranty by the Company, the Partnership or the Lessee,
as the case may be, as to the matters covered thereby.
SECTION 3. Representations and Warranties of the Underwriter. The
Underwriter represents and warrants to the Company and the Partnership that the
information set forth (i) on the cover page of the Prospectus with respect to
price, underwriting discounts and commissions and terms of offering and (ii)
under "Underwriting" in the Prospectus was furnished to the Company by and on
behalf of the Underwriter for use in connection with the preparation of the
Registration Statement and the Prospectus and is complete and correct in all
material respects.
SECTION 4. Purchase, Sale and Delivery of Common Shares. On the
basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell
13
14
to the Underwriter the Firm Common Shares. The Underwriter agrees to purchase
from the Company the number of Firm Common Shares described below. The
purchase price per share to be paid by the Underwriter to the Company shall be
$13.20 per share.
Delivery of certificates for the Firm Common Shares to be purchased
by the Underwriter and payment therefor shall be made at such place as set
forth below at such time and date, not later than the third (or, if the Firm
Common Shares are priced, as contemplated by Rule 15c6-1(c) of the Securities
Exchange Act of 1934, after 4:30 P.M. Washington, D.C. Time, the fourth) full
business day following the first date that any of the Common Shares are
released by you for sale to the public, as you shall designate by at least 48
hours' prior notice to the Company (or at such other time and date, not later
than one week after such third full business day as may be agreed upon by the
Company and the Representatives) (the "First Closing Date"); provided, however,
that if the Prospectus is at any time prior to the First Closing Date
recirculated to the public, the First Closing Date shall occur upon the later
of the third or fourth, as the case may be, full business day following the
first date that any of the Common Shares are released by you for sale to the
public or the date that is 48 hours after the date that the Prospectus has been
so recirculated.
Delivery of certificates for the Firm Common Shares shall be made by
or on behalf of the Company to you, against payment by you, for your account,
of the purchase price therefor by wire transfer of same day funds to the order
of the Company for the purposes set forth in the Prospectus. At your option,
the certificates for the Firm Common Shares shall be registered in such names
and denominations as you shall have requested in writing to the Company or the
Company's transfer agent at least two full business days prior to the First
Closing Date, and shall be made available for checking and packaging on the
business day preceding the First Closing Date at a location in New York, New
York or such other location, as may be designated by you. Time shall be of the
essence, and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Underwriter.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to you to purchase the Optional
Common Shares at the purchase price per share to be paid for the Firm Common
Shares, for use solely in covering any over-allotments made by you in the sale
and distribution of the Firm Common Shares. The option granted hereunder may
be exercised at any time (but not more than once) within 30 days after the
first date that any of the Common Shares are released by you for sale to the
public, upon notice by you to the Company setting forth the aggregate number of
Optional
14
15
Common Shares as to which you are exercising the option, the names and
denominations in which the certificates for such shares are to be registered
and the time and place at which such certificates will be delivered. Such time
of delivery (which may not be earlier than the First Closing Date), being
herein referred to as the "Second Closing Date," shall be determined by you,
but if at any time other than the First Closing Date shall not be earlier than
three nor later than five full business days after delivery of such notice of
exercise. At your option, certificates for the Optional Common Shares will be
made available for checking and packaging on the business day preceding the
Second Closing Date at a location in New York, New York or such other location,
as may be designated by you. Payment for the Optional Common Shares shall be
made directly to the Company, or such other party as designated by the Company,
by wire transfer of same-day funds and delivery of the Optional Common Shares
shall be the same as for the Firm Common Shares purchased from the Company as
specified in the two preceding paragraphs. At any time before lapse of the
option, you may cancel such option by giving written notice of such
cancellation to the Company.
Subject to the terms and conditions hereof, the Underwriter proposes
to make a public offering of the Common Shares as soon after the effective date
of the Registration Statement as in your judgment is advisable and at the
public offering price set forth on the cover page of and on the terms set forth
in the Prospectus.
SECTION 5. Covenants of the Company and the Partnership. The
Company and the Partnership covenant and agree that:
(a) The Company will file the Prospectus, properly completed,
pursuant to the applicable paragraph of Rule 424(b) of the Rules and
Regulations within the time period prescribed and will provide evidence
satisfactory to you of such timely filing. Notwithstanding the foregoing,
the Company may file any filing required under the Exchange Act which will
be incorporated by reference into the Registration Statement, any
Preliminary Prospectus or the Prospectus without the need to furnish a
copy to the Underwriter prior to such filing. The Company will promptly
advise you in writing (i) of the receipt of any comments of the
Commission, (ii) of any request of the Commission for amendment of or
supplement to the Registration Statement (either before or after it
becomes effective), any Preliminary Prospectus or the Prospectus or for
additional information, (iii) when the Registration Statement shall have
become effective and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of the
institution of any proceedings for that purpose. If the Commission shall
enter
15
16
any such stop order at any time, the Company will use its best efforts to
obtain the lifting of such order at the earliest possible moment. The
Company will not file any amendment or supplement to the Registration
Statement (either before or after it becomes effective), any Preliminary
Prospectus or the Prospectus of which you have not been furnished with a
copy a reasonable time prior to such filing or to which you reasonably
object or which is not in compliance with the Act and the Rules and
Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the Registration
Statement or the Prospectus which in your judgment may be necessary or
advisable to enable the Underwriter to continue the distribution of the
Common Shares and will use its best efforts to cause the same to become
effective as promptly as possible. The Company will fully and completely
comply with the provisions of Rule 430A of the Rules and Regulations with
respect to information omitted from the Registration Statement in reliance
upon such Rule.
(c) If at any time within the applicable period referred to in
Section 10(a)(3) of the Act or Rule 174 of the Rules and Regulations
during which a prospectus relating to the Common Shares is required to be
delivered any event occurs, as a result of which the Prospectus, including
any amendments or supplements, would include an untrue statement of a
material fact, or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or if
it is necessary at any time to amend the Prospectus, including any
amendments or supplements, to comply with the Act or the Rules and
Regulations, the Company will promptly advise you thereof and will
promptly prepare and file with the Commission, at its own expense, an
amendment or supplement which will correct such statement or omission or
an amendment or supplement which will effect such compliance and will use
its best efforts to cause the same to become effective as soon as
possible; and, in case the Underwriter is required to deliver a prospectus
after the applicable time period, the Company upon request, but at the
expense of the Underwriter, will promptly prepare such amendment or
amendments to the Registration Statement and such Prospectus or
Prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Act and Rule 174 of the Rules and
Regulations, as applicable.
(d) As soon as practicable, but not later than 45 days (or 90 days
if such quarter is the fiscal year end) after the end of the first quarter
ending after one year following the effective date of the Registration
Statement (as defined
16
17
in Rule 158(c) of the Rules and Regulations), the Company will make
generally available to its security holders an earnings statement (which
need not be audited) covering a period of 12 consecutive months beginning
after the effective date of the Registration Statement which will satisfy
the provisions of the last paragraph of Section 11(a) of the Act.
(e) During such period as a prospectus is required by law to be
delivered in connection with sales by the Underwriter or a dealer, the
Company, at its expense, but only for the applicable period referred to in
Section 10(a)(3) of the Act or Rule 174 of the Rules and Regulations, will
furnish to you or mail to your order copies of the Registration Statement,
the Prospectus, the Preliminary Prospectus and all amendments and
supplements to any such documents in each case as soon as available and in
such quantities as you may reasonably request, for the purposes
contemplated by the Act and the Rules and Regulations.
(f) The Company shall cooperate with you and your counsel in order
to qualify or register the Common Shares for sale under (or obtain
exemptions from the application of) the Blue Sky and Canadian securities
laws of such jurisdictions as you designate, will comply with such laws
and will continue such qualifications, registrations and exemptions in
effect so long as reasonably required for the distribution of the Common
Shares; provided, however, that neither the Company nor the Partnership
shall be required to qualify as a foreign real estate investment trust,
corporation or partnership, as applicable, or to file a general consent to
service of process in any such jurisdiction where it is not presently
qualified or where it would be subject to taxation as a foreign real
estate investment trust, corporation or partnership. The Company will
advise you promptly of the suspension of the qualification or registration
of (or any such exemption relating to) the Common Shares for offering;
sale or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance of any
order suspending such qualification, registration or exemption, the
Company, with your cooperation, will use its best efforts to obtain the
withdrawal thereof.
(g) During the period of five years hereafter, the Company will
furnish to the Underwriter: (i) as soon as available after the end of each
fiscal year and mailing to the shareholders, copies of the Annual Report
of the Company containing the balance sheet of the Company as of the close
of such fiscal year and statements of income, shareholders' equity and
cash flows for the year then ended and the
17
18
opinion thereon of the Company's independent public accountants; (ii) as
soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its Shares.
(h) During the period of 120 days after the first date that any of
the Common Shares are released by you for sale to the public, without the
prior written consent of Xxxxxxxxxx Securities (which consent may be
withheld at the sole discretion of Xxxxxxxxxx Securities), the Company
will not, other than pursuant to the Company's share incentive plans and
dividend reinvestment plan, pursuant to redemptions in accordance with the
Partnership Agreement or in connection with the acquisition of real estate
or hotel properties, or in response to the exercise of any outstanding
warrants or in connection with a merger, consolidation or similar
transaction issue, offer, sell, grant options to purchase or otherwise
dispose of any of the Company's equity securities or any other securities
convertible into or exchangeable with its Shares or other equity security.
(i) The Company and the Partnership will apply the net proceeds of
the sale of the Common Shares sold by the Company substantially in
accordance with the statements under the caption "Use of Proceeds" in the
Prospectus.
(j) As necessary, the Company will use its reasonable best efforts
to qualify or register its Common Shares for sale in non-issuer
transactions under (or obtain exemptions from the application of) the Blue
Sky laws of the State of California and the provincial laws of Canada as
specified by the Representatives (and thereby permit market making
transactions and secondary trading in the Company's Common Shares in
California and such Canadian provinces as specified by the
Representatives), will comply with such Blue Sky or Canadian provincial
laws and will use its reasonable best efforts to continue such
qualifications, registrations and exemptions in effect for a period of
five years after the date hereof; provided, however, that neither the
Company nor the Partnership shall be required to qualify as a foreign real
estate investment trust, corporation or partnership, as applicable, or to
file a general consent to service of process in any such jurisdiction
where it is not presently qualified or where it would be subject to
taxation as a foreign real estate investment trust, corporation or
partnership.
18
19
(k) The Company will use its reasonable best efforts to continue the
listing of the Common Shares on the New York Stock Exchange and will
continue to comply in all material respects with all of the rules and
regulations of the New York Stock Exchange applicable to the Company and
the trading of the Common Shares.
(l) The Company will continue to meet the requirements to qualify as
a REIT, effective for the year ending December 31, 1995 and thereafter.
(m) The Company will maintain a transfer agent for the Common Shares
and, if necessary under the jurisdiction of formation of the Company, a
registrar (which may be the same entity as the transfer agent).
(n) The Company and the Partnership will not permit the conversion
of any of the Units into Shares in any manner which would or might affect
the Company's qualification as a REIT.
(o) The Company and the Partnership in good faith will expend
reasonable efforts to enforce the terms of any agreements with the Lessee,
the Manager, Messrs. Alter, Xxxxxxxxx and Enever, or any parties
affiliated with the Lessee or Messrs. Alter, Xxxxxxxxx or Enever.
(p) The Partnership will, per quarter on a cumulative basis, make
available for periodic replacement and refurbishment of furniture,
fixtures and equipment at each of the Hotels an amount equal to 4% of room
revenues (as defined in the Percentage Leases).
You, on behalf of the Underwriter, may, in your sole discretion, waive in
writing the performance by the Company or the Partnership, as applicable, of
any one or more of the foregoing covenants or extend the time for their
performance.
SECTION 6. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective or
is terminated, the Company agrees to pay all costs, fees and expenses incurred
in connection with the performance of its obligations hereunder and in
connection with the transactions contemplated hereby, including without
limiting the generality of the foregoing, (i) all expenses incident to the
issuance and delivery of the Common Shares (including all printing and
engraving costs), (ii) all fees and expenses of the registrar and transfer
agent of the Common Shares, (iii) all necessary issue, transfer and other stamp
taxes in connection with the issuance and sale of the Common Shares to the
Underwriter, (iv) all fees and expenses of the Company's counsel and the
Company's independent accountants, (v) all costs and expenses incurred in
connection with the preparation,
19
20
printing, filing, shipping and distribution of the Registration Statement, each
Preliminary Prospectus and the Prospectus (including all exhibits and financial
statements) and all amendments and supplements provided for herein and the Blue
Sky memorandum, (vi) all filing fees, attorneys' fees and expenses incurred by
the Company or the Underwriter in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all or any part
of the Common Shares for offer and sale under the Blue Sky laws or the
provincial securities laws of Canada, (vii) the filing fee of the NASD and the
related legal fees in connection with such filing (other than counsel fees
incurred relating to compensation issues) and (viii) all other fees, costs and
expenses referred to in Item 14 of the Registration Statement. Except as
provided in this Section 6, Section 8 and Section 10 hereof, the Underwriter
shall pay all of its own expenses, including the fees and disbursements of its
counsel (excluding those relating to qualification, registration or exemption
under the Blue Sky and Canadian provincial securities laws and the Blue Sky
memorandum which fees shall be paid on the First Closing Date or the Second
Closing Date, as applicable).
SECTION 7. Conditions of the Obligations of the Underwriter. The
obligation of the Underwriter to purchase and pay for the Firm Common Shares on
the First Closing Date and the Optional Common Shares on the Second Closing
Date shall be subject to the accuracy of the representations and warranties on
the part of the Company and the Partnership herein set forth as of the date
hereof and as of the First Closing Date or the Second Closing Date, as the case
may be, to the accuracy of the statements of the Company's officers and the
Partnership's officers made pursuant to the provisions hereof, to the
performance by each of the Company and the Partnership of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M. (or, in the case of a registration statement filed pursuant
to Rule 462(b) of the Rules and Regulations relating to the Common Shares,
not later than 10:00 P.M.) New York time, on the date of this Agreement,
or at such later time as shall have been consented to by you; if the
filing of the Prospectus, or any supplement thereto, is required pursuant
to Rule 424(b) of the Rules and Regulations, the Prospectus shall have
been filed in the manner and within the time period required by Rule
424(b) of the Rules and Regulations; and prior to such Closing Date, no
stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Company or you,
shall be contemplated by the Commission; and any request of the Commission
for inclusion of additional information in
20
21
the Registration Statement, or otherwise, shall have been complied with to
your satisfaction.
(b) There shall have been furnished to you on each Closing Date, in
form and substance satisfactory to you, except as otherwise expressly
provided below:
(i) An opinion of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for
the Company, the Partnership, the Manager and the Lessee, or Xxxxxxx
Xxxxx Xxxxxxx & Ingersoll, special Maryland counsel to the Company,
addressed to the Underwriter and dated the First Closing Date, or the
Second Closing Date, as the case may be, to the effect that:
(1) The Company has been duly formed and is validly
existing as a corporation, is in good standing under the laws of
the state of Maryland, and is duly qualified to do business as a
foreign corporation and is in good standing in all other
jurisdictions where the ownership or leasing of properties or
the conduct of its business requires such qualification, except
for jurisdictions in which the failure to so qualify would not
reasonably be expected to have a material adverse effect on the
Company, the Partnership or any Property, and has the requisite
power to own its properties and conduct its business
substantially as described in the Registration Statement; and,
to such counsel's knowledge, other than the Partnership, the
Company does not own or control, directly or indirectly, any
corporation, association, partnership or other entity;
(2) Each of the Lessee and Manager has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Colorado, and is duly
qualified to do business as a foreign corporation and is in good
standing in each of the states in which it leases real property
from the Partnership and has the requisite corporate power and
authority to own its properties and conduct its business as
described in the Registration Statement;
(3) The Partnership has been duly formed and is validly
existing as a limited partnership under the laws of the State of
Delaware, is duly qualified to do business as a foreign limited
partnership and is in good standing in each of the states in
which it owns real property, has the requisite partnership power
and authority to own and lease its properties and conduct its
business
21
22
as currently conducted as described in the Prospectus. The
Company is the sole general partner of the Partnership, which
Units, to such counsel's knowledge shall be held free and clear
of all liens, encumbrances, equities, claims, security interests,
voting trusts or charges;
(4) All of the issued and outstanding Shares have been
duly authorized and validly issued; all outstanding Shares were
duly registered under the Act or were issued in transactions
exempt from the registration requirements of the Act and were
duly registered or subject to an available exemption from the
registration requirements of the applicable state securities or
blue sky laws, are fully paid and nonassessable, were not
issued in violation of or subject to any statutory, or to such
counsel's knowledge, other preemptive rights or other rights to
subscribe for or purchase any securities and conformed in all
material respects to the description thereof incorporated by
reference in the Registration Statement; provided however that
such counsel need not express any opinion with respect to the
registration or availability of an exemption under applicable
state securities or blue sky laws for Common Shares issued
pursuant to an underwritten public offering;
(5) The Company has given proper authorization to
ChaseMellon Shareholder Service, L.L.C. (the "Transfer Agent")
to issue the Firm Common Shares to you at the First Closing by
electronic transfer through the FAST system of The Depository
Trust Company, upon receipt of telephonic notification from you
and the Company to issue such shares. Upon your payment of the
agreed consideration for the Firm Common Shares in accordance
with the provisions of the Underwriting Agreement, and the
electronic transfer to you of the Firm Common Shares by the
Transfer Agent, the Firm Common Shares will be duly authorized
and validly issued, fully paid and nonassessable, and will not
have been issued in violation of or subject to any preemptive
rights or (to our knowledge) other rights to subscribe for or
purchase securities from the Company;
(6) Except as disclosed in or specifically contemplated by
the Prospectus, the Company's Annual Report on 10-K for the year
ended December 31, 1996 or the Company's Proxy Statement
prepared in connection with its 1997 annual stockholders
meeting, to such counsel's knowledge, there are no outstanding
options, warrants or other rights calling for the issuance of,
and no commitments, plans or arrangements to
22
23
issue, any shares of capital stock of the Company or any security
convertible into or exchangeable for capital stock of the
Company;
(7)(a) To such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or
preventing the use of the Prospectus has been issued and no
proceedings for that purpose have been instituted or are pending
or contemplated by the Commission and any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) of
the Rules and Regulations has been made in the manner and within
the time period required by such Rule 424(b);
(b) The Registration Statement, the Prospectus and any
amendment or supplement thereto (except for the financial
statements and schedules and other financial and statistical
information included therein as to which such counsel need
express no opinion) comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations;
and
(c) To such counsel's knowledge, there are no legal or
governmental actions, suits or proceedings pending (in which
service or notice of process has been received by the Company)
or threatened against the Company which are required to be
described in the Prospectus which are not described as required;
(8) The Company has the corporate power and authority to
enter into this Agreement, to sell and deliver the Common Shares
to be sold by it to the Underwriter and to consummate the other
transactions contemplated herein; the Partnership has the
partnership power and authority to enter into this Agreement and
to consummate the transactions contemplated herein; this
Agreement has been duly and validly authorized by all necessary
partnership action by each of the Company and the Partnership,
respectively, has been duly and validly executed and delivered
by and on behalf of each of the Company and the Partnership; and
no approval, authorization, order, consent, registration,
filing, qualification, license or permit of or with any court,
regulatory, administrative or other governmental body is
required for the execution and delivery of this Agreement by
each of the Company and the Partnership or the consummation of
23
24
the transactions contemplated by this Agreement, except such as
have been obtained and are in full force and effect under the Act
and such as may be required under applicable Blue Sky or Canadian
securities laws in connection with the purchase and distribution
of the Common Shares by the Underwriter and the clearance of such
offering with the NASD;
(9) The execution and delivery of the Underwriting
Agreement and the issuance of the Common Shares contemplated
therein will not conflict with, result in the material breach
of, or constitute, either by itself or upon notice or the
passage of time or both, a material default under, any
agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument listed on Schedule 1 to
any of the Backup Officers' Certificates; or violate any of the
provisions of the partnership certificate, partnership
agreement, articles of incorporation or bylaws, or other
organizational documents, as applicable, of the Company, the
Partnership, or the Lessee; or to our knowledge, violate any
California statute, judgment, decree, order, rule or regulation
of any court or California governmental body having jurisdiction
over the Company, the Partnership, the Lessee, or any of their
property;
(10) Such counsel has not received written notice that the
Company, the Partnership or the Lessee is in violation of its
respective declaration of trust, partnership certificate,
partnership agreement, certificate of incorporation or bylaws,
or other organizational documents, as applicable, or is in
breach of or default with respect to any provision of any
agreements, mortgages, deeds of trust, leases, franchises,
licenses, indentures, permits or other instruments listed in
Schedule 1 to any of the Officers' Certificates delivered
pursuant to Section 7(b)(iii) of this Agreement, known to such
counsel and which is required to be filed as an item 10 exhibit
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, to which the Company, the Partnership or the
Lessee is a party or by which they or any of their properties
may be bound or affected, except where such default would not
materially adversely affect the Company, the Partnership or the
Lessee, as the case may be;
24
25
(11) To such counsel's knowledge, no holders of securities
of the Company or the Partnership have rights to register
Shares, Units or other securities because of the filing of the
Registration Statement by the Company or the offering;
(12) No transfer taxes are required to be paid to the
states of Maryland and New York in connection with the sale and
delivery of the Common Shares to the Underwriter hereunder;
(13) Neither the Company nor the Partnership is or will be
an "investment company" within the meaning of the 1940 Act;
(14) Each of the Closing Agreements has been duly
authorized, executed and delivered by the Company, the
Partnership or the Lessee, as applicable, and constitutes a
valid and binding agreement on such parties, enforceable in
accordance with its terms, except as may be limited or otherwise
affected by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
the rights of creditors generally and by principles of equity,
whether considered at law or in equity, and except with respect
to those provisions relating to indemnities or contributions for
liabilities under the Act, as to which no opinion need be
expressed;
(15) The Common Shares have been duly authorized for
listing by the New York Stock Exchange upon official notice of
issuance; and
(16) An opinion on the REIT status of the Company and the
treatment of the Partnership as a partnership for federal income
tax purposes in form and substance satisfactory to Underwriter's
counsel.
In rendering such opinion, such counsel may rely as to matters
of local law, on opinions of local counsel, and as to matters of
fact, on certificates of officers of the Company, the Partnership or
the Lessee, as applicable, and certificates and verbal advice of
governmental officials, in which case their opinion is to state that
they are so doing and that the Underwriter is justified in relying on
such opinions or certificates and copies of said opinions or
certificates are to be attached to the opinion. Such counsel shall
also include a statement to the effect
25
26
that although such counsel is not passing upon and does not assume
responsibility for the accuracy, completeness or fairness of the
statements contained therein, nothing has come to such counsel's
attention that would lead such counsel to believe that either at the
effective date of the Registration Statement or at the applicable
Closing Date the Registration Statement or the Prospectus, or any
amendment or supplement thereto, contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading
(other than with respect to the financial statements, the notes
thereto and the related financial schedules and other financial or
statistical data as to which such counsel need express no opinion).
(ii) Such opinion or opinions of O'Melveny & Xxxxx LLP, counsel
for the Underwriter, dated the First Closing Date or the Second
Closing Date, as the case may be, with respect to the formation of
the Company, the execution and delivery of the Agreement, the
validity of the Common Shares, certain legal matters related to the
Registration Statement and the Prospectus and other related matters
as you may reasonably require, and the Company shall have furnished
to such counsel such documents and shall have exhibited to them such
papers and records as they may reasonably request for the purpose of
enabling them to pass upon such matters. In connection with such
opinions, such counsel may rely on representations or certificates of
officers of the Company and governmental officials.
(iii) A certificate of each of the Company, executed by the
Chairman of the Board and President of the Company solely in their
capacity as such, and the Partnership executed by an authorized
officer of its general partner solely in his capacity as such, dated
the First Closing Date or the Second Closing Date, as the case may
be, to the effect that:
(1) The representations and warranties of the Company and
the Partnership set forth in Section 2 of this Agreement are
true and correct as of the date of this Agreement and as of the
First Closing Date or the Second Closing Date, as the case may
be, and the Company and the Partnership each has complied with
all the agreements and satisfied all of the conditions on its
part to be performed or satisfied on or prior to such Closing
Date;
26
27
(2) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary
Prospectus filed as a part of the Registration Statement or any
amendment thereto; no stop order suspending the effectiveness of
the Registration Statement has been issued; and to the best of
the knowledge of the respective signers, no proceedings for that
purpose have been instituted or are pending or contemplated
under the Act;
(3) Each of the respective signers of each certificate has
carefully examined the Registration Statement and the
Prospectus; in his opinion and to the best of his knowledge, the
Registration Statement and the Prospectus and any amendments or
supplements thereto contain all statements required to be stated
therein; and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any
material fact required to be stated therein, in light of the
circumstances under which they were made, or necessary to make
the statements therein not misleading;
(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral, transaction
or event has occurred which should have been set forth in an
amendment to the Registration Statement or in a supplement to or
amendment of any prospectus which has not been incorporated by
reference into the Prospectus or Registration Statement or
disclosed in such a supplement or amendment;
(5) As to the Company's certificate only, since the
respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as
disclosed in or contemplated by the Prospectus, there has not
been any material adverse change or a development involving a
material adverse change in the condition (financial or
otherwise), business, properties, results of operations,
management or prospects of the Company or, to the best of such
officer's knowledge, any of the Hotels; and no legal or
governmental action, suit or proceeding is pending or, to the
best knowledge of such officer, threatened against the Company,
or, to the best of such officer's knowledge, any of the Hotels
which is material to the Company or any of the Hotels, as
applicable, whether or not arising
27
28
from transactions in the ordinary course of business, or which
may adversely affect the transactions contemplated by this
Agreement; since such dates and except as so disclosed, the
Company has not entered into any verbal or written agreement or
other transaction which is not in the ordinary course of business
or which could reasonably be expected to result in a material
reduction in the future earnings of the Company or the
Partnership or incurred any material liability or obligation,
direct, contingent or indirect, made any material adverse change
in its short-term debt or funded debt or repurchased or otherwise
acquired any of the Company's Shares or the Partnership's
interests; and the Company, has not declared or paid any
dividend, or made any other distribution, upon its outstanding
Shares payable to shareholders of record on a date prior to the
First Closing Date or Second Closing Date except as set forth in
the Prospectus and except for the dividend of $0.25 paid by the
Company in February, 1997;
(6) As to the Partnership's certificate only, since the
respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as
disclosed in or contemplated by the Prospectus, there has not
been any material adverse change or a development involving a
material adverse change in the condition (financial or
otherwise), business, properties, results of operations,
management or prospects of the Partnership, or to the best of
such officer's knowledge, any of the Hotels; and no legal or
governmental action, suit or proceeding is pending or, to the
best knowledge of such officer, threatened against the
Partnership or, to the best of such officer's knowledge, any of
the Hotels, which is material to the Partnership or any of the
Hotels, as applicable, whether or not arising from transactions
in the ordinary course of business, or which may adversely
affect the transactions contemplated by this Agreement; since
such dates and except as so disclosed, the Partnership has not
entered into any verbal or written agreement or other
transaction which is not in the ordinary course of business or
which could reasonably be expected to result in a material
reduction in the future earnings of the Company or the
Partnership or incurred any material liability or obligation,
direct, contingent or indirect, made any change in its
partnership interests, made any material
28
29
adverse change in its short-term debt or funded debt or
repurchased or otherwise acquired any of the Partnership's
interests other than as set forth on Schedule B; and the
Partnership has not declared or paid any dividend, or made any
other distribution, upon its outstanding partnership interests
payable to partners of record on a date prior to the First
Closing Date or Second Closing Date, except as set forth in the
Prospectus and except for the distribution of $0.25 per Unit paid
by the Partnership in February, 1997;
(7) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and
except as disclosed in or contemplated by the Prospectus, none
of the Hotels (or any other hotel property owned by the
Partnership) has sustained a material loss or damage by strike,
fire, flood, windstorm, accident or other calamity (whether or
not insured); and
(8) To the best knowledge of such officer, each of the
Company, the Partnership and each of the Hotels owned by the
Partnership (i) will be in compliance with any and all
applicable Environmental Laws, (ii) will have received all
permits, licenses or other approvals required under applicable
Environmental Laws to conduct its operations and (iii) will be
in compliance with all terms and conditions of any such permit,
license or approval except where such noncompliance with
Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals are
otherwise disclosed in the Prospectus or would not, singly or in
the aggregate, have a material adverse effect on the Company,
the Partnership or any Hotel.
(iv) On the date that this Agreement is executed and also on the
First Closing Date and the Second Closing Date a letter addressed to
you from Coopers & Xxxxxxx L.L.P., as independent accountants, the
first one to be dated the day of this Agreement, the second one to
be dated the First Closing Date and the third one (in the event of a
Second Closing) to be dated the Second Closing Date, in form and
substance satisfactory to the Representatives, to the effect that:
(1) Coopers & Xxxxxxx L.L.P. is an independent certified
public accountants with respect to the
29
30
Company and the Partnership within the meaning of the Act and the
Rules and Regulations;
(2) It is its opinion that the financial statements,
historical summaries and any supplementary financial information
and supporting schedule included or incorporated by reference in
the Registration Statement and the Prospectus examined by them
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and
Regulations;
(3) The financial statements of each of the entities and
properties included in the Prospectus for the periods referenced
therein to the extent applicable, were reviewed by them in
accordance with the standards established by the American
Institute of Certified Public Accountants and based upon their
review they are not aware of any material modifications that
should be made to such financial statements or historical
summaries for them to be in conformity with generally accepted
accounting principles and such financial statements comply as to
form in all material respects with the applicable requirements
of the Act and the Rules and Regulations;
(4) Based upon procedures set forth in detail in such
letter, including a reading of the latest available interim
financial statements of the Company and inquiries of officials
of the Company responsible for financial and accounting matters,
nothing has come to their attention which causes them to believe
that:
(A) the unaudited financial information with respect to
the results of operations for and at the end of each of the five
years (or such lesser period, if applicable) in the period ended
December 31, 1996 do not comply as to form in all material
respects with the applicable accounting requirements of the Act
and the Rules and Regulations or are not presented in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included in the Registration Statement, or do not
agree with the corresponding amounts in the audited financial
statements for each of the years then
30
31
ended, or that with respect to the unaudited pro forma financial
statements, such financial statements do not comply as to form
in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations and the
pro forma adjustments have not been properly applied to the
historical amounts in the compilation of such statements, or
(B) at a specified date not more than five days prior to
the date of this Agreement, (i) there has been any change in the
assets or shareholders' equity, as compared with the amounts
shown in the December 31, 1996 balance sheet of the Company
included in the Registration Statement, (ii) there has been any
increase in indebtedness or other liabilities as compared with
the amounts shown in the December 31, 1996 historical or pro
forma balance sheets related to the Hotels (other than accrued
interest) or during the period December 31, 1996 to a specified
date not more than five days prior to the date of this
Agreement, there were any decreases, as compared with the
corresponding period in the preceding year, in combined revenues
or net income of the Hotels, except in all instances for
changes, increases or decreases which the Registration Statement
and the Prospectus disclose have occurred or may occur or (iii)
there has been any decrease since December 31, 1996 in room
revenues or total revenues from the Hotels which would adversely
affect the Percentage Lease revenue of the Company or the
Partnership, in each case as compared with the corresponding
period of the preceding year, except in each case for decreases
which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
(5) In addition to the examination referred to in their
opinions and the procedures referred to above, they have carried
out certain specified procedures, not constituting an audit, in
accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial
information which are included in the Registration Statement and
Prospectus and which were specified by you, and have found such
amounts, percentages and financial information to be in
agreement with, or derived from, the relevant accounting,
financial and other records of the Company, the Partnership and
the Present Owners.
31
32
(v) On or before the First Closing Date, a copy of the
segmentation study of Coopers & Xxxxxxx L.L.P. referred to in
Section 2(cc).
(c) The Firm Common Shares and the Optional Common Shares shall have
been approved for listing on the New York Stock Exchange, subject to
official notice of issuance, and the NASD, upon review of the terms of the
public offering, shall not have objected to such offering, such terms or
the Underwriter's participation in the same.
(d) The Company shall have furnished to you such further
certificates and documents as you shall have reasonably requested.
(e) There shall have been delivered to you the Firm Common Shares
and, if any Optional Common Shares are purchased, the Optional Common
Shares in the manner required pursuant to Section 4 hereof.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to O'Melveny & Xxxxx LLP, counsel for you. The Company shall furnish
you with such manually signed or conformed copies of such opinions,
certificates, letters and documents as you request. Any certificate signed by
any officer of the Company and delivered to you or to your counsel shall be
deemed to be a representation and warranty by the Company to you as to the
statements made therein.
If any condition to the Underwriter's obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon written notification by you to
the Company without liability on the part of you or the Company, except for the
expenses to be paid or reimbursed by the Company pursuant to Sections 6 and 8
hereof and except to the extent provided in Section 10 hereof.
SECTION 8. Reimbursement of Underwriter's Expenses. Notwithstanding
any other provisions hereof, if this Agreement shall be terminated by you
pursuant to the last paragraph of Section 7, or if the sale to the Underwriter
of the Common Shares at the First Closing is not consummated because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse you upon demand for all out-of-pocket expenses that shall have been
reasonably incurred by you and them in connection with the proposed purchase
and the sale of the Common Shares, including but not limited to fees and
disbursements of counsel relating directly to the offering contemplated by the
Prospectus. Any such termination shall be without liability of any party to
any other party except that the
32
33
provisions of this Section 8, Section 6 and Section 10 shall at all times be
effective and shall apply.
SECTION 9. Effectiveness of Registration Statement. You and the
Company will use your and its best efforts to prevent the issuance of any stop
order suspending the effectiveness of the Registration Statement and, if such
stop order be issued, to obtain as soon as possible the lifting thereof.
SECTION 10. Indemnification. (a) The Company and the Partnership,
jointly and severally, agree to indemnify and hold harmless the Underwriter and
each person, if any, who controls the Underwriter within the meaning of the Act
against any losses, claims, damages, liabilities or expenses, joint or several,
to which the Underwriter or such controlling person may become subject, under
the Act, the Exchange Act, or other federal, state or Canadian statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company or the Partnership, as applicable), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as contemplated
below) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state in
any of them a material fact required to be stated therein or necessary to make
the statements in any of them not misleading, or arise out of or are based in
whole or in part on any inaccuracy in the representations and warranties of the
Company or the Partnership contained herein or any failure of the Company or
the Partnership to perform its obligations hereunder or under law; and will
reimburse the Underwriter and each such controlling person for any legal and
other expenses as such expenses are reasonably incurred by the Underwriter or
such controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that neither the Company nor the Partnership will be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company and the Partnership pursuant to Section 3
hereof; and provided further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any Preliminary
Prospectus, the indemnity agreement contained in this Section 10(a) shall not
inure to the benefit of the Underwriter from whom the person asserting any such
losses, claims, damages, liabilities or expenses purchased the Common Shares
concerned (or to the benefit of any person controlling the Underwriter) to the
33
34
extent that any such loss, claim, damage, liability or expense of the
Underwriter or controlling person results from the fact that a copy of the
Prospectus was not sent or given to such person at or prior to the written
confirmation of sale of such Common Shares to such person as required by the
Act. In addition to its other obligations under this Section 10(a), the
Company and the Partnership agree that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged
statement or omission, or any inaccuracy in the representations and warranties
of the Company or the Partnership herein or failure to perform its obligations
hereunder, all as described in this Section 10(a), they will reimburse the
Underwriter not less than on a quarterly basis for all reasonable legal or
other expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Company's or the Partnership's obligation to reimburse the Underwriter for
such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. To the extent that
any such interim reimbursement payment is so held to have been improper, the
Underwriter shall promptly return it to the Company or the Partnership, as
applicable, together with interest, compounded daily, determined on the basis
of the prime rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by Bank of America NT&SA,
San Francisco, California (the "Prime Rate"). Any such interim reimbursement
payments which are not made to the Underwriter within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement will be in addition to any liability which
the Company or the Partnership may otherwise have.
(b) The Underwriter will indemnify and hold harmless the Company,
each of its directors, each of its officers who signed the Registration
Statement, the Partnership and each person, if any, who controls the Company or
the Partnership within the meaning of the Act, against any losses, claims,
damages, liabilities or expenses to which the Company, or any such director,
officer, the Partnership, or controlling person may become subject, under the
Act, the Exchange Act, or other federal or state statutory law or regulation,
or at common law or otherwise (including in settlement of any litigation, if
such settlement is effected with the written consent of the Underwriter),
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof as contemplated below) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state
34
35
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with the information furnished to the Company and the
Partnership pursuant to Section 3 hereof; and will reimburse the Company, or
any such director, officer, the Partnership or any controlling person of the
Company or the Partnership for any legal and other expense reasonably incurred
by the Company, or any such director, officer, the Partnership, any controlling
person of the Company or the Partnership in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. In addition to its other obligations under this
Section 10(b), the Underwriter agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged
statement or omission, or any inaccuracy in the representations and warranties
of the Underwriter herein or the failure to perform its obligations hereunder,
all as described in this Section 10(b), that it will reimburse expenses as
provided in this Section 10(b) as incurred, but no less frequently than
quarterly, notwithstanding the absence of a judicial determination at to the
propriety and enforceability of the Underwriter's obligation to reimburse the
Company, the Partnership (and, to the extent applicable, each officer, trustee
or controlling person of the Company or the Partnership) on a quarterly basis
for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. To the extent that
any such interim reimbursement payment is so held to have been improper, the
Company or the Partnership (and, to the extent applicable, each officer,
director or controlling person of the Company or the Partnership) shall
promptly return it to the Underwriter together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made within 30 days of a request for reimbursement,
shall bear interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section, notify the indemnifying party in writing of the
commencement thereof; but the omission to notify the indemnifying party will
not relieve it from any liability which it may have to any
35
36
indemnified party for contribution or otherwise than under the indemnity
agreement contained in this Section or to the extent it is not prejudiced as a
proximate result of such failure. In case any such action is brought against
any indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be entitled
to participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be a conflict between the positions of the
indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available
to the indemnifying party, the indemnified party or parties shall have the
right to select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties; provided, however, that the indemnifying party shall only be
obligated to pay the reasonable fees and expenses of a single law firm employed
by all of the indemnified parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying party.
(d) If the indemnification provided for in this Section 10 is
required by its terms, but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under Sections
(a), (b) or (c) of this Section 10 in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any losses, claims, damages, liabilities or expenses referred to
herein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Partnership and the Underwriter from
the offering of the Common Shares or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such
36
37
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, the
Partnership and the Underwriter in connection with the statements or omissions
or inaccuracies in the representations and warranties herein which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits received
by the Company, the Partnership and the Underwriter shall be deemed to be in
the same proportion, in the case of the Company and the Partnership as the
total price paid to the Company, for the Common Shares sold by the Company to
the Underwriter (net of underwriting commissions, but before deducting
expenses), and in the case of the Underwriter as the underwriting commissions
received by it bears to the total of such amounts paid to the Company and
received by the Underwriter as underwriting commissions. The relative fault of
the Company, the Partnership and the Underwriter shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact or the inaccurate or the alleged inaccurate representation and/or
warranty relates to information supplied by the Company, the Partnership or the
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section (c) of this Section 10, any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section (c) of this Section 10 with respect to notice of commencement of any
action shall apply if a claim for contribution is to be made under this Section
(d); provided, however, that no additional notice shall be required with
respect to any action for which notice has been given under Section (c) of this
Section 10 for purposes of indemnification. The Company, the Partnership and
the Underwriter agree that it would not be just and equitable if contribution
pursuant to this Section 10 were determined solely 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.
Notwithstanding the provisions of this Section 10, the Underwriter shall not be
required to contribute any amount in excess of the amount of the total
underwriting commissions received by the Underwriter in connection with the
Common Shares underwritten by it and distributed to the public. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(e) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth
37
38
in Sections 10(a) or 10(b) hereof, including the amounts of any requested
reimbursement payments and the method of determining such amounts, shall be
settled by arbitration conducted under the provisions of the Constitution and
Rules of the Board of Governors of the New York Stock Exchange, Inc. or
pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for arbitration or
written notice of intention to arbitrate, therein electing the arbitration
tribunal. In the event the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice, then the party
responding to said demand or notice is authorized to do so. Such an
arbitration would be limited to the operation of the interim reimbursement
provisions contained in Section 10(a) hereof and would not resolve the ultimate
propriety or enforceability of the obligation to reimburse expenses which is
created by the provisions of such Sections 10(a) and 10(b) hereof.
SECTION 11. Default of Underwriter. It shall be a condition to this
Agreement and the obligation of the Company to sell and deliver the Common
Shares hereunder, that the Underwriter shall purchase and pay for all the
Common Shares agreed to be purchased by it hereunder upon tender to it in
accordance with the terms hereof.
SECTION 12. Effective Date. This Agreement shall become effective
immediately as to Sections 6, 8, 10, 13 and 14 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement
has not become effective, at 8:00 A.M., California time, on the first full
business day following the effectiveness of the Registration Statement, or (ii)
if at the time of execution of this Agreement the Registration Statement has
been declared effective, at 2:00 P.M., California time, on the first full
business day following the date of execution of this Agreement; but this
Agreement shall nevertheless become effective at such earlier time after the
Registration Statement becomes effective as you may determine on and by notice
to the Company or by release of any of the Common Shares for sale to the
public. For the purposes of this Section 12, the Common Shares shall be deemed
to have been so released upon the release for publication of any newspaper
advertisement relating to the Common Shares or upon the release by you of
telegrams offering the Common Shares for sale to securities dealers, whichever
may occur first.
SECTION 13. Termination. Without limiting the right to terminate
this Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you
or by you by notice to the Company at any time prior to the time this
Agreement shall become effective as to all its provisions, and any such
termination shall be
38
39
without liability on the part of the Company to you (except for the
expenses to be paid or reimbursed by the Company pursuant to Sections 6
and 8 (if applicable) hereof and except to the extent provided in Section
10 hereof) or of you to the Company (except to the extent provided in
Section 10 hereof).
(b) This Agreement may also be terminated by you prior to the First
Closing Date by notice to the Company (i) if additional material
governmental restrictions, not in force and effect on the date hereof,
shall have been imposed upon trading in securities generally or minimum or
maximum prices shall have been generally established on the New York Stock
Exchange or on the American Stock Exchange or in the over the counter
market by the NASD, or trading in securities generally shall have been
suspended on either such Exchange or in the over the counter market by the
NASD, or a general banking moratorium shall have been established by
federal, New York or California authorities; (ii) if an outbreak of major
hostilities or other national or international calamity or any substantial
change in political, financial or economic conditions shall have occurred
or shall have accelerated or escalated to such an extent, as, in your
judgment, to affect adversely the marketability of the Common Shares;
(iii) if any adverse event shall have occurred or shall exist which makes
untrue or incorrect in any material respect any statement or information
contained in the Registration Statement or Prospectus or which is not
reflected in the Registration Statement or Prospectus but should be
reflected therein in order to make the statements or information contained
therein not misleading in any material respect; or (iv) if there shall be
any action, suit or proceeding pending or threatened, or there shall have
been any development involving particularly the business or properties or
securities of the Company, the Partnership or the transactions
contemplated by this Agreement, which, in your reasonable judgment, may
materially and adversely affect the Company's or the Partnership's
business or earnings and makes it impracticable or inadvisable to offer or
sell the Common Shares. Any termination pursuant to this Section (b)
shall be without liability on the part of you to the Company or on the
part of the Company to you (except for expenses to be paid or reimbursed
by the Company pursuant to Sections 6 and 8 hereof and except to the
extent provided in Section 10 hereof).
SECTION 14. Representations and Indemnities to Survive Delivery.
The respective indemnities, agreements, representations, warranties and other
statements of the Company, the Partnership, the Company's and the Partnership's
officers and of the Underwriter set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by
or on behalf of you or the Company or the
39
40
Partnership or any of its or their partners, officers or trustees or any
controlling person, as the case may be, and will survive delivery of and
payment for the Common Shares sold hereunder and any termination of this
Agreement.
SECTION 15. Notices. All communications hereunder shall be in
writing and, if sent to the Underwriter shall be mailed, delivered, telecopied
or telegraphed and confirmed to you at 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000, Telecopier: (000) 000-0000, Attention: Xxx Xxxxxxx III
with a copy to O'Melveny & Xxxxx LLP, Embarcadero Center West 000 Xxxxxxx
Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, Telecopier: (000) 000-0000,
Attention: Xxxxx X. Xxxxx; and if sent to the Company or the Partnership
shall be mailed, delivered or telegraphed and confirmed to the Company at 000
Xxxxx xx Xxxxxxxxxx, Xxxxx 000 Xxx Xxxxxxxx, Xxxxxxxxxx 00000, Telecopier:
(000) 000-0000, Attention: Xxxxxx X. Alter with a copy to Xxxxxxx, Phleger &
Xxxxxxxx LLP, 0000 XxxXxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx
00000, Telecopier: (000) 000-0000, Attention: Xxxxx X. Xxxxx. The Company,
the Partnership or you may change the address for receipt of communications
hereunder by giving notice to the others.
SECTION 16. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto, and to the benefit of the officers and
directors and controlling persons referred to in Section 10, and in each case
their respective successors, personal representatives and assigns, and no other
person will have any right or obligation hereunder. No such assignment shall
relieve any party of its obligations hereunder. The term "successors" shall not
include any purchaser of the Common Shares as such from you merely by reason of
such purchase.
SECTION 17. Intentionally Omitted.
SECTION 18. Partial Unenforceability. The invalidity or
unenforceability of any section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other section, paragraph or
provision hereof. If any section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 19. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
SECTION 20. General. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the
40
41
subject matter hereof. This Agreement may be executed in several counterparts,
each one of which shall be an original, and all of which shall constitute one
and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be
amended or modified, and the observance of any term of this Agreement may be
waived, only by a writing signed by the Company, the Partnership and you.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon
it will become a binding agreement among the Company, the Partnership and you,
all in accordance with its terms.
Very truly yours,
SUNSTONE HOTEL INVESTORS, INC.
By: /s/ XXXXXX X. ALTER
---------------------------------
Xxxxxx X. Alter, President
SUNSTONE HOTEL INVESTORS, L.P.
By: SUNSTONE HOTEL INVESTORS, INC.
Its: General Partner
By: /s/ XXXXXX X. ALTER
---------------------------------
Xxxxxx X. Alter, President
The foregoing Underwriting Agreement
is hereby confirmed and accepted by us
in San Francisco, California as of the
date first above written.
XXXXXXXXXX SECURITIES
-------------------------------------
Managing Director
41
42
SCHEDULE A
Amount of
Securities
to be
Underwriter Purchased
----------- ---------
Xxxxxxxxxx Securities 700,000
-------
Total 700,000
=======
43
SCHEDULE B
CUMULATIVE UNIT ISSUANCE CHART
FOR SUNSTONE HOTEL INVESTORS, INC.
SSI REIT UNITS
1. 2. 3. 4. 5. 6. 7. 8. 9.
COMMON OTHER LPs TOTAL
TRANSACTION DATE NEW UNITS NEW SHARES STOCK(1) GP(2) LP UNITS UNITS(3)
----------- ---- --------- ---------- ---------- ------- ---------- --------- ----------
Opening Balance 08/23/96 N/A N/A 10,323,500 117,823 10,205,677 1,458,800 11,782,300
Over-Allotment 09/10/96 600,000 600,000 10,923,500 123,823 10,799,677 1,458,800 12,382,300
for Secondary
Public Offering
Redemption of 10/04/96 (3,000) N/A 10,923,500 123,793 10,799,707 1,455,800 12,379,300
Units by
Steamboat Hotel
Partners, Ltd.
Issuance of Shares 10/10/96 7,500 7,500 10,931,000 123,868 10,807,132 1,455,800 12,386,800
to Directors
Issuance of Shares 10/16/96 1,250 1,250 10,932,250 123,881 10,808,369 1,455,800 12,388,050
to Xxxxxxxx Xxxxxx
Acquisition of 10/29/96 706,347 N/A 10,932,250 130,944 10,801,306 2,162,147 13,094,397
Summit Hotels
Issuance of shares to
Xxxxxxx Xxxxx 11/10/96 1,500 1,500 10,933,750 130,959 10,802,791 2,162,147 13,095,897
DRIP Issuance 11/15/96 1,182 1,182 10,934,932 130,971 10,803,961 2,162,147 13,070,079
DRIP Issuance 12/15/96 1,525 1,525 10,986,457 130,986 10,805,471 2,162,147 13,098,604
Public Offering 1/15/97 4,000,000 4,000,000 14,936,457 170,986 14,765,471 2,162,147 17,098,604
Over-Allotment for
Public Offering 1/15/97 600,000 600,000 15,536,457 176,986 15,359,471 2,162,147 17,698,604
DRIP Issuance 1/15/97 1,448 1,448 15,537,905 177,000 15,360,905 2,162,147 17,700,052
Acquisition of Holiday
Inn - San Diego 1/17/97 68,936 N/A 15,537,905 177,000 15,360,905 2,231,083 17,768,988
Adjustment to Sunstone
GP Account 1/17/97 N/A N/A 15,537,905 177,690 15,360,215 2,231,083 17,768,988
Issuance of Shares to
Xxxxxxxx Xxxxxx 1/17/97 1,250 1,250 15,539,155 177,702 15,361,453 2,231,083 17,770,238
DRIP Issuance 2/14/97 4,564 4,564 15,543,719 177,748 15,365,971 2,231,083 17,774,802
Xxxxxxx Unit
Redemption 2/19/97 (1,170) N/A 15,543,719 177,737 15,365,982 2,229,913 17,773,632
Issuance of Director's
Shares 3/21/97 190 190 15,543,909 17,773,822
Adjustment of
Sunstone GP Account N/A N/A 15,543,909 177,740 15,366,169 2,230,103 17,774,012
Xxxxxx Unit Redemption 3/10/97 (5,170) N/A 15,543,909 177,688 15,366,221 2,224,933 17,768,842
Issuance of Shares to
Xxxxxx Xxxxxx 3/12/97 3,000 3,000 15,546,909 177,718 15,369,191 2,224,933 17,771,842
DRIP Issuance 3/17/97 3,335 3,335 15,550,244 177,751 15,372,493 2,224,933 17,775,177
____________________
(1) Common Stock (column 5) should always equal SSI REIT Units outstanding
(column 6 + column 7).
(2) Units held by Sunstone Hotel Investors, Inc. as G.P. (column 6) must
always equal 1% of the total outstanding limited partnership units
(column 9).
(3) Total Units (column 9) should always equal REIT Units (columns 6 + 7)
plus Other LP Units (column 8).
