<PAGE> 1
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported):
November 16, 1994
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Commission file number: 1-6828 Commission file number: 1-7959
HOTEL INVESTORS TRUST HOTEL INVESTORS CORPORATION
(Exact name of registrant as specified in its (Exact name of registrant as specified in its
charter) charter)
Maryland Maryland
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
52-0901263 (I.R.S. employer identification number) 52-1193298 (I.R.S. employer identification number)
11845 W. Olympic Blvd. 11845 W. Olympic Blvd.
Suite 550 Suite 560
Los Angeles, CA 90064 Los Angeles, CA 90064
(Address of principal executive offices, including (Address of principal executive offices, including
zip code) zip code)
310-575-3900 310-575-3900
(Registrant's telephone number, including area (Registrant's telephone number, including area
code) code)
</TABLE>
Not applicable
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On November 16, 1994, Hotel Investors Trust (the "Trust") and
Hotel Investors Corporation (the "Corporation") reported the completion of
definitive agreements with Starwood Capital Group, L.P. and its affiliates
("Starwood") relating to the previously announced reorganization (the
"Reorganization") with Starwood. Consummation of the Reorganization is subject
to, among other things, approval of the Reorganization and certain related
matters by the shareholders of the Trust and the stockholders of the
Corporation. A proxy statement seeking approval of the Reorganization and
related matters has been sent to shareholders of the Trust and stockholders of
the Corporation for a meeting scheduled to be held on December 15, 1994. The
Reorganization is expected to be consummated by the end of 1994.
The Reorganization will be effected pursuant to a Formation
Agreement among the Trust, the Corporation and Starwood (the "Formation
Agreement"), a copy of which is filed as an exhibit to this Report. The
following description is qualified in its entirety by reference to the
provisions of the Formation Agreement.
The Reorganization will involve a number of related
transactions that will occur simultaneously on the date of the consummation of
the Reorganization (the "Closing Date") pursuant to the terms of the Formation
Agreement. Such transactions include (i) the contribution by the Trust to a
newly formed limited partnership (the "Realty Partnership") of all of the
properties and assets of the Trust, subject to substantially all of the
liabilities of the Trust (including the senior debt (the "Senior Debt") of the
Trust), in exchange for an approximate 28.3% interest as a general partner in
the Realty Partnership, (ii) the contribution by Starwood to the Realty
Partnership of approximately $4,200,000 in cash and certain hotel properties
and first mortgage notes, in exchange for limited partnership units
representing the remaining approximate 71.7% interest in the Realty
Partnership, (iii) the contribution by the Corporation and its subsidiaries to
a newly formed limited partnership (the "Operating Partnership") of all of
their properties and operating assets (except for their gaming assets, which
are to be contributed upon approval by Nevada gaming authorities), subject to
substantially all of their liabilities, in exchange for an approximate 28.3%
interest as a general partner in the Operating Partnership, (iv) the
contribution by Starwood to the Operating Partnership of approximately $800,000
in cash, furnishings and equipment of the hotel properties, in exchange for
limited partnership units representing the remaining approximate 71.7% interest
in the Operating Partnership, (v) subject to the consent of the holders of the
Senior Debt, the cancellation of approximately $63 million of intercompany
indebtedness from the Corporation to the Trust, in consideration for the
guarantee by the Corporation of up to $25 million of the Senior Debt. The
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percentage interests of the Trust, the Corporation and Starwood referred to
above are subject to adjustment as provided in the Formation Agreement.
The limited partnership units of the Realty Partnership and
the Operating Partnership to be held by Starwood will (subject to the ownership
limitation provisions of the Trust and the Corporation which are designed to
preserve the status of the Trust as a REIT for tax purposes) be exchangeable,
together but not separately, for, at the option of the Trust and the
Corporation, either cash, Paired Shares of the Trust and the Corporation
representing up to approximately 71.7% of the Paired Shares after such
exchange, or a combination of cash and such Paired Shares.
In addition if, within six months from the approval of the
Reorganization by the shareholders of the Trust and the stockholders of the
Corporation, Starwood acquires Senior Debt, Starwood will exchange up to
$12,000,000 of such Senior Debt for up to an additional approximate 3.0% of the
outstanding limited partnership units of the Trust and the Corporation. An
affiliate of Starwood is the general partner of a partnership which has the
right to acquire approximately $74.0 million of Senior Debt. Any such units
issued pursuant to such exchange would be exchangeable for Paired Shares on the
same basis as other units issued to Starwood in connection with the
Reorganization.
The Trust and the Corporation also announced that an
individual holding approximately 9.8% of the outstanding Paired Shares who had
opted out of the settlement of certain previously disclosed shareholder
litigation entered into an agreement (the "Assignment Agreement") pursuant to
which he assigned his claims to Starwood. In connection with such assignment
Starwood has agreed to purchase those Paired Shares, at such individual's
election, in a 60-day period beginning on the earlier of the year after the
Closing Date or December 15, 1995, at a price of $5.625 per Paired Share.
Starwood may also elect to purchase such Paired Shares at the same time and on
the same terms. Such individual has agreed not to purchase or sell any Paired
Shares during such period and not more than 4.9% thereafter.
The Trust and the Corporation have agreed that if the
Formation Agreement is terminated under certain circumstances and if within 60
days after such termination the Trust and the Corporation receive from Starwood
a full release (the "Release") of the claims assigned to Starwood, then the
Trust and the Corporation will indemnify Starwood against liabilities, losses
and expenses under or in respect of the Assignment Agreement (other than to the
extent such liabilities, losses or expenses arose from a breach by Starwood);
provided that the aggregate indemnification obligation of the Trust and the
Corporation is limited to $1,800,000. If the Reorganization is consummated and
if prior to December 15, 1995 the Trust and the Corporation
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receive the Release, they will also indemnify Starwood to the extent described
in the preceding sentence. In connection with the Assignment Agreement, the
Trust and the Corporation each accrued shareholder litigation expenses of $1.3
million during the third quarter of 1994.
ITEM 7. EXHIBITS.
2. Formation Agreement among the Trust, the Corporation and Starwood.
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EXHIBIT INDEX
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
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2 Formation Agreement among the Trust, the Corporation and Starwood.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, each registrant has duly caused this report to be signed on its behalf by
the undersigned, thereto duly authorized.
HOTEL INVESTORS TRUST HOTEL INVESTORS CORPORATION
By: /s/ JEFFREY C. LAPIN By: /s/ KEVIN E. MALLORY
------------------------ -------------------------
Jeffrey C. Lapin Kevin E. Mallory
President and Chief Executive Vice President
Executive Officer
Date: November 18, 1994
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EXHIBIT 2
FORMATION AGREEMENT
AMONG
HOTEL INVESTORS TRUST
HOTEL INVESTORS CORPORATION
STARWOOD CAPITAL GROUP, L.P.
BERL HOLDINGS L.P.
STARWOOD APOLLO HOTEL PARTNERS VIII, L.P.
STARWOOD APOLLO HOTEL PARTNERS IX, L.P.
STARWOOD NOMURA HOTEL INVESTORS, L.P.
STARWOOD\WICHITA INVESTORS, L.P.
STARWOOD-HUNTINGTON PARTNERS, L.P.
AND
WOODSTAR PARTNERS I, L.P.
____________________________________
DATED AS OF NOVEMBER 11, 1994
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TABLE OF CONTENTS
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ARTICLE I - FORMATION AND CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1. Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. Closing Date Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF HIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1. Organization of HIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2. HIT Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.3. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.6. Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.7. SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.8. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.9. No Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF HIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.1. Organization of HIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.2. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.3. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.6. Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.7. SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.8. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.9. No Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE
STARWOOD PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.1. Organization of Starwood Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.3. Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.4. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.5. Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.6. Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.7. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.8. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.9. No Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V - ACTIONS PRIOR TO THE CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.1. Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.2. Action by HIT, HIC, Shareholders of HIT
and Stockholders of HIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.3. Board Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.4. Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.5. Lawsuits, Proceedings, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.6. Conduct of Business by HIT, HIC and
Starwood Pending the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.7. Mutual Cooperation; Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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Section 5.8. No Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.9. No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.10. Gaming Law Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.11. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI - ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.1. Abstentions of Starwood Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.2. Waiver of Certain Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.3. Further Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.4. Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.5. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.6. Exclusivity; Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VII - CONDITIONS PRECEDENT TO OBLIGATIONS OF
HIT AND HIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.1. No Misrepresentation or Breach of
Covenants and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.2. No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.3. Opinion of Counsel for Starwood . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.4. No Injunctions or Restraints. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.5. Necessary Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.6. Necessary Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.7. Transaction Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.8. Shareholder and Stockholder Action . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.9. Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VIII - CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE STARWOOD PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.1. No Misrepresentation or Breach
of Covenants and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.2. No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.3. Opinion of Counsel for HIT and HIC. . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.4. No Injunctions or Restraints. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.5. Necessary Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.6. Necessary Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.7. Transaction Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.8. Shareholder and Stockholder Action . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.9. Partnership Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IX - INDEMNIFICATION; SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 9.1. Indemnification by HIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 9.2. Indemnification by HIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 9.3. Indemnification by the Starwood Parties . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.4. Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.5. Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 9.6. Survival of Representations and
Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.7. Satisfaction of Indemnification
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.8. Special Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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ARTICLE X - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 10.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XI - OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.1. Confidential Nature of Information . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.2. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11.4. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 11.5. Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.6. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.7. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.8. Titles and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.9. Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.10. Entire Agreement; Amendments
and Waivers; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.12. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.13. The Trust; Starwood General Partners . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.14. Designation of Starwood as
Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.15. Several Nature of Representations and
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.16. Determinations and Interpretations by
HIT and HIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.17. Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.18. Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.19. HIT and HIC Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.20. Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SCHEDULES TO FORMATION AGREEMENT
Schedule A Starwood Realty Properties and Liabilities
Schedule B Starwood Operating Properties and Liabilities
EXHIBITS TO FORMATION AGREEMENT
Exhibit A Form of Realty Partnership Agreement
Exhibit B Form of Operating Partnership Agreement
Exhibit C Form of Exchange Rights Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Trust Amendment of HIT
Exhibit F Form of Charter Amendment of HIC
Exhibit G Form of Fairness Opinion
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FORMATION AGREEMENT
FORMATION AGREEMENT, dated as of November 11, 1994 (this
"Agreement"), among Hotel Investors Trust, a real estate investment trust
organized under the laws of the State of Maryland ("HIT"), Hotel Investors
Corporation, a corporation organized under the laws of the State of Maryland
("HIC"), Starwood Capital Group, L.P., a limited partnership organized under
the laws of the State of Delaware ("Starwood"), and the entities listed on the
signature pages hereto as Starwood Partners (the "Starwood Partners")(each of
the Starwood Partners and Starwood are collectively referred to as the
"Starwood Parties"). Unless otherwise indicated, certain terms used herein are
used as defined in Section 11.4 hereof.
W I T N E S S E T H :
WHEREAS, HIT is a Maryland real estate investment trust, the
beneficial interest in which on the date hereof is divided into Shares of
Beneficial Interest, $1.00 par value (the "Trust Shares"), which are limited to
30,000,000 Trust Shares;
WHEREAS, HIC is a Maryland corporation having an authorized
capital on the date hereof of 30,000,000 shares of Common Stock, par value $.10
per share (the "Corporation Shares" and, together with the Trust Shares,
"Paired Shares"), and 10,000,000 shares of Preferred Stock, par value $1.00 per
share;
WHEREAS, HIT, and the Starwood Parties desire to, among other
things, provide for the formation, capitalization and operation of a limited
partnership (the "Realty Partnership") under the Delaware Revised Uniform
Limited Partnership Act (the "Delaware RULPA") (through which all future real
estate acquisitions of HIT shall be made) on the terms and conditions set forth
herein and HIC and the Starwood Parties desire to, among other things, provide
for the formation, capitalization and operation of a limited partnership (the
"Operating Partnership" and, together with the Realty Partnership, the
"Partnerships") under the Delaware RULPA on the terms and conditions set forth
herein;
WHEREAS, the respective general partners of the Starwood
Parties have approved the transactions provided for in this Agreement (except
as set forth in Section 11.20) and the Board of Trustees of HIT and the Board
of Directors of HIC have approved the transactions provided for in this
Agreement and have directed that the reorganization contemplated by this
Agreement be submitted for adoption to the shareholders of HIT and the
stockholders of HIC, respectively; and
WHEREAS, HIT, HIC, and the Starwood Parties desire to make
certain representations, warranties and agreements in connection with the
transactions contemplated by this Agreement
<PAGE> 6
and also to prescribe various conditions to the consummation of such
transactions.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
FORMATION AND CLOSING
Section 1.1. Formation. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date (as defined in
Section 1.2) (a) HIT and the Starwood Partners shall form the Realty
Partnership by executing and delivering the Agreement of Limited Partnership
for the Realty Partnership in substantially the form attached to this Agreement
as Exhibit A (the "Realty Partnership Agreement") and by executing and filing
in the Office of the Secretary of State of the State of Delaware a certificate
of limited partnership of the Realty Partnership, (b) HIC, certain subsidiaries
of HIC and the Starwood Partners shall form the Operating Partnership by
executing and delivering the Agreement of Limited Partnership for the Operating
Partnership in substantially the form attached to this Agreement as Exhibit B
(the "Operating Partnership Agreement" and, together with the Realty
Partnership Agreement, the "Partnership Agreements") and by executing and
filing in the Office of the Secretary of State of the State of Delaware a
certificate of limited partnership of the Operating Partnership, (c) each of
the Starwood Partners hereby agrees to acquire the Units of each of the
Partnerships to be acquired by it pursuant to the Partnership Agreements and
(d) HIT, HIC, and the Starwood Parties shall take or cause to be taken all
other actions contemplated herein to be taken on the Closing Date.
Section 1.2. Closing Date. Upon the terms and subject to the
conditions set forth in this Agreement, the transactions contemplated by this
Agreement shall be consummated (the "Closing") at 10:00 a.m., local time, on
the third business day after the meetings of the shareholders of HIT and the
stockholders of HIC provided in Section 5.2, or such other date as may be
agreed upon by HIT, HIC and Starwood, at the offices of Sidley & Austin, 875
Third Avenue, New York, New York 10022, or at such other place or at such other
time as shall be agreed upon by HIT, HIC and Starwood (such date and time being
herein called the "Closing Date").
Section 1.3. Closing Date Deliveries. On the Closing Date,
HIT, HIC, and the Starwood Parties, as appropriate, shall execute and deliver
or cause the Realty Partnership or the Operating Partnership to execute and
deliver the following documents: (a) the Partnership Agreements, (b) a
Contribution
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Agreement between HIT and the Realty Partnership in a form to be agreed upon
between HIT and Starwood and containing terms and conditions consistent with
the terms of this Agreement (the "HIT Contribution Agreement"), pursuant to
which, among other things, HIT will convey to the Realty Partnership on the
Closing Date all of the assets and properties (the "HIT Properties") of HIT,
including, without limitation, the notes receivables (the "Notes Receivable")
of HIT, and the Realty Partnership will assume all of the liabilities and
obligations of HIT (other than the liabilities and obligations of HIT pursuant
to this Agreement and the Transaction Agreements (as defined below)), (c) a
Contribution Agreement between HIC and the Operating Partnership in a form to
be agreed upon between HIC and Starwood and containing terms and conditions
consistent with the terms of this Agreement (the "HIC Contribution Agreement"),
pursuant to which, among other things, HIC will convey or cause to be conveyed
to the Operating Partnership on the Closing Date all of the assets and
properties of HIC and of its subsidiaries, other than the capital stock of such
subsidiaries (such assets and properties of HIC and its subsidiaries, other
than such capital stock, being referred to as the "HIC Properties") (except
that the assets and properties of Hotel Investors Corporation of Nevada
("HICN") (such assets and properties of HICN being referred to as the ("HICN
Properties") will be conveyed as provided in Section 6.3) and the Operating
Partnership will assume all of the liabilities and obligations of HIC and of
its subsidiaries (except that the liabilities and obligations of HICN will be
assumed as provided in Section 6.3), other than the liabilities and obligations
of HIC pursuant to this Agreement and the Transaction Agreements, (d) a
Contribution Agreement among Starwood, the Starwood Partners and the Realty
Partnership in a form to be agreed upon between HIT and Starwood and containing
terms and conditions consistent with the terms of this Agreement (the "Starwood
Realty Contribution Agreement"), pursuant to which, among other things, the
Starwood Parties will convey to the Realty Partnership on the Closing Date the
assets and properties generally described in Schedule A hereto (the "Starwood
Realty Properties"), and the Realty Partnership will assume the liabilities and
obligations of the Starwood Parties generally described in Schedule A hereto,
including the liabilities and obligations encumbering, binding upon or related
to the Starwood Realty Assets which are described in the Starwood Realty
Contribution Agreement (other than the liabilities and obligations of the
Starwood Parties pursuant to this Agreement and the Transaction Agreements),
(e) a Contribution Agreement among Starwood, the Starwood Partners and the
Operating Partnership in a form to be agreed upon between HIC and Starwood and
containing terms and conditions consistent with the terms of this Agreement
(the "Starwood Operating Contribution Agreement"), pursuant to which, among
other things, the Starwood Parties will convey to the Operating Partnership on
the Closing Date the assets and properties generally described on Schedule B
hereto (the "Starwood Operating Properties" and, together with the Starwood
Realty Properties, the "Starwood Properties"), and
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the Operating Partnership will assume the liabilities and obligations of the
Starwood Parties generally described on Schedule B hereto, including the
liabilities and obligations encumbering, binding upon or related to the
Starwood Operating Assets which are described in the Starwood Operating
Contribution Agreement (other than the liabilities and obligations of the
Starwood Parties pursuant to this Agreement and the Transaction Agreements),
(f) the Exchange Rights Agreement among the Realty Partnership, the Operating
Partnership, HIT, HIC and the Starwood Parties in substantially the form
attached to this Agreement as Exhibit C (the "Exchange Agreement"), (g) the
Registration Rights Agreement among HIT, HIC and Starwood in substantially the
form attached to this Agreement as Exhibit D (such agreements referred to in
subsections 1.3(a) through 1.3(g) (inclusive) being collectively referred to as
the "Transaction Agreements") and (h) all of the documents, instruments and
opinions required to be delivered pursuant to Articles VII and VIII or required
to be delivered on the Closing Date pursuant to the terms of the Transaction
Agreements.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF HIT
As an inducement to the Starwood Parties to enter into this
Agreement and to consummate the transactions contemplated hereby, HIT
represents and warrants to each of the Starwood Parties and each of the
Partnerships and agrees as follows:
Section 2.1. Organization of HIT. HIT is a real estate
investment trust duly organized, validly existing and in good standing under
the laws of the State of Maryland. HIT is duly qualified to transact business
and is in good standing in each of the jurisdictions in which the ownership or
leasing of the properties used in its business or the conduct of its business
requires such qualification (each of which is listed in the HIT Disclosure
Schedule), other than in such jurisdictions where the failure to be so
qualified and in good standing would not have a Material Adverse Effect on HIT
and its subsidiaries (taken as a whole) or, in addition, after the Closing, on
the Realty Partnership and its subsidiaries (taken as a whole). HIT has all
requisite trust power and authority to own or lease and operate its properties
and to carry on its business as now conducted. HIT has delivered to Starwood
complete and correct copies of the Amended and Restated Declaration of Trust
(the "Trust Declaration") and Trustees' Regulations (the "Trustees'
Regulations") of HIT in each case as amended and in effect on the date hereof.
Section 2.2. HIT Subsidiaries. The HIT Disclosure Schedule
accurately and completely sets forth as to the only
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<PAGE> 9
subsidiary of HIT such subsidiary's name, the jurisdiction of its organization
or formation and a detailed description of its capital structure which
indicates the direct or indirect interest of HIT in such subsidiary. Such
subsidiary is a limited partnership duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and has
all requisite partnership power and authority to own or lease and operate its
properties, and to carry on its business as now conducted. All of the issued
and outstanding equity interests in such subsidiary described in the HIT
Disclosure Schedule as being owned by HIT are validly issued, fully paid and
nonassessable and owned beneficially by HIT, free and clear of any liens or
other encumbrances, other than pursuant to the Credit Agreement or as otherwise
set forth in the HIT Disclosure Schedule, and there are no options, warrants or
other rights to acquire, or agreements or commitments pursuant to which any
such subsidiary is obligated to issue sell, purchase or redeem shares of
capital stock or other equity interests in such subsidiary.
Section 2.3. Capitalization. On the date hereof, the
authorized capital of HIT consists of 30,000,000 Trust Shares, of which
12,132,948 shares are validly issued and outstanding and are fully paid and
nonassessable and of which none is reserved for any purpose, except for
2,858,005 shares issuable upon exercise of the Trust Warrants, the Trust Lender
Warrants and the Trust Options (each as hereinafter defined). HIT has issued
warrants (the "Trust Warrants") to purchase up to an aggregate of 1,659,743
Trust Shares pursuant to a warrant agreement dated as of September 16, 1986 and
warrants (the "Trust Lender Warrants") to purchase up to an aggregate of
888,762 Trust Shares pursuant to a warrant agreement dated as of January 28,
1993. HIT has delivered to Starwood complete and correct copies of each of
such warrant agreements. HIT has granted options to purchase an aggregate of
309,500 Trust Shares ("Trust Options") pursuant to option plans of HIT and HIC.
Except for the Trust Warrants, the Trust Lender Warrants and the Trust Options,
and except as contemplated by this Agreement, there are no options, warrants or
other rights to acquire, or agreements or commitments pursuant to which HIT is
obligated to issue, sell, purchase or redeem, shares of capital stock of HIT.
Section 2.4. Authority. (a) HIT has full trust power and
authority to enter into this Agreement and the other agreements and instruments
contemplated by this Agreement to be entered into by HIT and, subject to the
approval by the shareholders of HIT of the HIT Shareholder Matters (as defined
in Section 5.2), to consummate the transactions contemplated hereby and
thereby.
(b) The execution, delivery and performance of this Agreement
by HIT and the consummation by HIT of the transactions contemplated hereby have
been duly authorized by all necessary trust action on the part of HIT, subject
to the approval by the
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shareholders of HIT of the HIT Shareholder Matters. This Agreement is, and
each other agreement or instrument of HIT contemplated hereby when executed and
delivered will be, the legal, valid and binding agreement of HIT, enforceable
against HIT in accordance with its respective terms.
(c) Neither the execution or delivery of this Agreement by
HIT, nor consummation of the transactions contemplated hereby or compliance
with or fulfillment of the terms and provisions hereof by HIT, will (i)
conflict with, result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights, or result in the
creation or imposition of any encumbrance upon any of the assets of HIT, under
the Trust Declaration, the Trustees' Regulations, the Pairing Agreement dated
June 25, 1980 (the "Pairing Agreement") between HIT and HIC, or any other
instrument, agreement, mortgage, indenture, deed of trust, permit, concession,
grant, franchise, license, judgment, order, award, decree or other restriction
to which HIT is a party or any of its properties is subject or by which it is
bound or any statute, other law or regulatory provision affecting it, (ii)
require the approval, consent or authorization of, or the making of any
declaration, filing or registration with, any third party or any foreign,
federal, state or local court, governmental authority or regulatory body, by or
on behalf of HIT, or (iii) adversely affect the ability of HIT to elect and
qualify to be taxed as a "real estate investment trust", as defined in Section
856 of the Code ("REIT"), for the taxable year ending December 31, 1995 or
adversely affect the ability of HIT to retain its status as grandfathered
pursuant to Section 132(c) of the Deficit Reduction Act of 1984, except for (A)
the applicable requirements of the gaming authorities of the State of Nevada
and of the Clark County, Nevada Liquor and Gaming Licensing Board (the "Nevada
Gaming Approvals"), (B) the filing of appropriate documents with the Securities
and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (C) the consent of the holders of the
indebtedness of HIT (the "Senior Debt") issued pursuant to the Credit Agreement
dated as of January 28, 1993, as amended, and related agreements and documents
(the "Credit Agreement"), (D) approval by the shareholders of HIT of the HIT
Shareholder Matters, (E) those matters set forth in the HIT Disclosure Schedule
and (F) such conflicts, breaches, defaults, events, creations, impositions,
approvals, consents, declarations, filings or authorizations which would not
reasonably be expected to either (x) have a Material Adverse Effect on HIT and
its subsidiaries (taken as a whole) or, in addition, after the Closing, on the
Realty Partnership and its subsidiaries (taken as a whole) or (y) prevent or
hinder the consummation of the transactions contemplated hereby. HIT is
grandfathered pursuant to Section 132(c)(3) of the Deficit Reduction Act of
1984.
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Section 2.5. Litigation. To the knowledge of HIT, except as
disclosed in the HIT Disclosure Schedule or in the SEC Documents (as defined in
Section 2.7), there are no actions, suits or proceedings or court orders or
decrees pending or threatened to which HIT is a party or any of its properties
is subject or by which it is bound before or by any court or governmental
agency, which if determined adversely to the interests of HIT, would reasonably
be expected to either (x) have a Material Adverse Effect on HIT and its
subsidiaries (taken as a whole) or, in addition, after the Closing, on the
Realty Partnership and its subsidiaries (taken as a whole) or (y) prevent or
hinder the consummation of the transactions contemplated hereby.
Section 2.6. Certain Matters. (a) To the knowledge of HIT,
except as disclosed in the HIT Disclosure Schedule, the SEC Documents, or in
reports of consultants or title companies delivered to Starwood prior to the
date of this Agreement, there are no structural, mechanical, HVAC,
environmental, zoning or title conditions relating to the HIT Properties which
would reasonably be expected to have a Material Adverse Effect on HIT and its
subsidiaries (taken as a whole) or, in addition, after the Closing, on the
Realty Partnership and its subsidiaries (taken as a whole).
(b) HIT will be eligible to qualify to elect to be taxed as a
REIT for the taxable year ending December 31, 1995.
Section 2.7. SEC Documents. HIT has previously delivered or
made available to Starwood complete and correct copies of all reports and
statements jointly filed by HIT and HIC with the SEC since May 1, 1991 (the
"SEC Documents"). As of their respective dates, none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
Section 2.8. Financial Information. The combined financial
statements included in the SEC Documents are correct in all material respects,
are in accordance with the books and records of HIT and HIC and present fairly
the combined financial position of HIT and HIC as of the respective dates of
such financial statements and the combined results of their operations and cash
flows for the respective periods covered thereby, in accordance with generally
accepted accounting principles.
Section 2.9. No Finder. Neither HIT nor any party acting on
the behalf of HIT has paid or become obligated to pay any fee or commission to
any broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement, other than to Salomon Brothers Inc and Smith
Barney Inc., whose fees and expenses, to the extent payable, shall be paid by
HIT prior to Closing and other than to Merrill Lynch & Co., whose
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fees and expenses, to the extent payable, shall be paid by HIT and HIC after
the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF HIC
As an inducement to the Starwood Parties to enter into this
Agreement and to consummate the transactions contemplated hereby, HIC
represents and warrants to each of the Starwood Parties and each of the
Partnerships and agrees as follows:
Section 3.1. Organization of HIC. HIC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Maryland. HIC and its subsidiaries are each duly qualified to transact
business and are each in good standing in each of the jurisdictions in which
the ownership or leasing of the properties used in its business or the conduct
of its business requires such qualification (each of which is listed in the HIC
Disclosure Schedule), other than in such jurisdictions where the failure to be
so qualified and in good standing would not have a Material Adverse Effect on
HIC and its subsidiaries (taken as a whole) or, in addition, after the Closing,
on the Operating Partnership and its subsidiaries (taken as a whole). HIC has
all requisite corporate power and authority to own or lease and operate its
properties and to carry on its business as now conducted. HIC has delivered to
Starwood complete and correct copies of the Articles of Incorporation (the "HIC
Articles") and by- laws (the "HIC By-laws") of HIC, in each case as amended and
in effect on the date hereof.
Section 3.2. Subsidiaries. The HIC Disclosure Schedule
accurately and completely sets forth as to (a) each subsidiary of HIC which is
a corporation, its name, the jurisdiction of its incorporation, the number of
shares of its capital stock of each class outstanding and the number of such
outstanding shares owned by HIC and its other subsidiaries and (b) as to each
subsidiary of HIC which is not a corporation, its name, the jurisdiction of its
organization or formation and a detailed description of its capital structure
which indicates the direct or indirect interest of HIC in such subsidiary.
Each subsidiary of HIC is a trust, corporation or partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, organization or formation, as the case may be, and has all
requisite trust, corporate or partnership power and authority to own or lease
and operate its properties, and to carry on its business as now conducted. All
of the issued and outstanding shares of capital stock or other equity interests
in each subsidiary of HIC are validly issued, fully paid and nonassessable and
owned beneficially by HIC, free and clear of any liens or other
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encumbrances, other than pursuant to the Credit Agreement or as otherwise set
forth in the HIC Disclosure Schedule, and there are no options, warrants or
other rights to acquire, or agreements or commitments pursuant to which any
such subsidiary is obligated to issue sell, purchase or redeem shares of
capital stock or other equity interests in such subsidiary.
Section 3.3. Capitalization. On the date hereof, the
authorized capital of HIC consists of (a) 30,000,000 Corporation Shares of
which 12,132,948 shares are validly issued and outstanding and are fully paid
and nonassessable and of which none is reserved for any purpose, except for
2,858,005 shares issuable upon exercise of the Corporation Warrants, the
Corporation Lender Warrants and the Corporation Options (each as hereinafter
defined), and (b) 10,000,000 shares of preferred stock, par value $1.00 per
share, none of which are issued or outstanding or reserved for any purpose.
HIC has issued warrants (the "Corporation Warrants") to purchase up to an
aggregate of 1,659,743 Corporation Shares pursuant to a warrant agreement dated
as of September 16, 1986 and warrants (the "Corporation Lender Warrants") to
purchase up to an aggregate of 888,762 Corporation Shares pursuant to a warrant
agreement dated as of January 28, 1993. HIC has delivered to Starwood complete
and correct copies of each of such warrant agreements. HIC has granted options
to purchase an aggregate of 309,500 (the "Corporation Options") pursuant to
option plans of HIT and HIC. Except for the Corporation Warrants, the
Corporation Lender Warrants and the Corporation Options, and except as
contemplated by this Agreement, there are no options, warrants or other rights
to acquire, or agreements or commitments pursuant to which HIC is obligated to
issue, sell, purchase or redeem shares of capital stock of HIC.
Section 3.4. Authority. (a) HIC has full corporate power and
authority to enter into this Agreement and the other agreements and instruments
contemplated by this Agreement to be entered into by HIC and, subject to the
approval by the stockholders of HIC of the HIC Stockholder Matters (as defined
in Section 5.2), to consummate the transactions contemplated hereby and
thereby.
(b) The execution, delivery and performance of this Agreement
by HIC and the consummation by HIC of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of HIC,
subject to the approval by the stockholders of HIC of the HIC Stockholder
Matters. This Agreement is, and each other agreement or instrument of HIC
contemplated hereby when executed and delivered will be, the legal, valid and
binding agreement of HIC, enforceable against HIC in accordance with its
respective terms.
(c) Neither the execution or delivery of this Agreement by
HIC, nor consummation of the transactions
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<PAGE> 14
contemplated hereby or compliance with or fulfillment of the terms and
provisions hereof by HIC, will (i) conflict with, result in a breach of the
terms, conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination or
cancellation or a loss of rights, or result in the creation or imposition of
any encumbrance upon any of the assets of HIC or any of its subsidiaries, under
the HIC Articles, the HIC By-laws, the organizational documents of any
subsidiary of HIC, the Pairing Agreement or any other instrument, agreement,
mortgage, indenture, deed of trust, permit, concession, grant, franchise,
license, judgment, order, award, decree or other restriction to which HIC or
any of its subsidiaries is a party or any of their respective properties is
subject or by which any of them is bound or any statute, other law or
regulatory provision affecting any of them, or (ii) require the approval,
consent or authorization of, or the making of any declaration, filing or
registration with, any third party or any foreign, federal, state or local
court, governmental authority or regulatory body, by or on behalf of HIC or any
of its subsidiaries, except for (A) the Nevada Gaming Approvals, (B) the filing
of appropriate documents with the SEC under the Exchange Act, (C) the consent
of the holders of the Senior Debt, (D) approval by the stockholders of HIC of
the HIC Stockholder Matters, (E) those matters set forth in the HIC Disclosure
Schedule and (F) such conflicts, breaches, defaults, events, creations,
impositions, approvals, consents, declarations, filings or authorizations,
which would not reasonably be expected to either (x) have a Material Adverse
Effect on HIC and its subsidiaries (taken as a whole) or, in addition, after
the Closing, on the Operating Partnership and its subsidiaries (taken as a
whole) or (y) prevent or hinder the consummation of the transactions
contemplated hereby.
Section 3.5. Litigation. To the knowledge of HIC, except as
disclosed in the HIC Disclosure Schedule or in the SEC Documents, there are no
actions, suits or proceedings or court orders or decrees pending or threatened
to which HIC is a party or any of its properties is subject or by which it is
bound before or by any court or governmental agency, which if determined
adversely to the interests of HIC, would reasonably be expected to either (x)
have a Material Adverse Effect on HIC and its subsidiaries (taken as a whole)
or, in addition, after the Closing, on the Operating Partnership and its
subsidiaries (taken as a whole) or (y) prevent or hinder the consummation of
the transactions contemplated hereby.
Section 3.6. Certain Matters. To the knowledge of HIC,
except as disclosed in the SEC Documents, the HIC Disclosure Schedule or in
reports of consultants or title companies delivered to Starwood prior to the
date of this Agreement, there are no structural, mechanical, HVAC,
environmental, zoning or title conditions relating to the HIC Properties which
would reasonably be expected to have a Material Adverse Effect on HIC
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<PAGE> 15
and its subsidiaries (taken as a whole) or, in addition, after the Closing, on
the Operating Partnership and its subsidiaries (taken as a whole).
Section 3.7. SEC Documents. HIC has previously delivered or
made available to Starwood complete and correct copies of the SEC Documents.
As of their respective dates, none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Section 3.8. Financial Information. The combined financial
statements included in the SEC Documents are correct in all material respects,
are in accordance with the books and records of HIT and HIC and present fairly
the combined financial position of HIT and HIC as of the respective dates of
such financial statements and the combined results of their operations and cash
flows for the respective periods covered thereby, in accordance with generally
accepted accounting principles.
Section 3.9. No Finder. Neither HIC nor any party acting on
the behalf of HIC has paid or become obligated to pay any fee or commission to
any broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement, other than to Salomon Brothers Inc and Smith
Barney Inc., whose fees and expenses, to the extent payable, shall be paid by
HIC prior to the Closing and other than to Merrill Lynch & Co., whose fees and
expenses, to the extent payable, shall be paid by HIT and HIC after the
Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE STARWOOD PARTIES
As an inducement to each of HIT and HIC to enter into this
Agreement and to consummate the transactions contemplated hereby, each of the
Starwood Parties severally and not jointly represents and warrants to each of
HIT and HIC and each of the Partnerships and agrees as follows:
Section 4.1. Organization of Starwood Parties. Such Starwood
Party is a limited partnership duly formed, validly existing and in good
standing as a limited partnership under the Delaware RULPA. Such Starwood
Party is duly qualified to transact business and is in good standing in each of
the jurisdictions in which the ownership or leasing of the properties used in
its business or the conduct of its business requires such qualification (each
of which is listed in the Starwood Disclosure Schedule), other than in such
jurisdictions where the failure to be so qualified and in good standing would
not have a Material
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Adverse Effect on the Starwood Properties (taken as a whole) or, in addition,
after the Closing, on the Realty Partnership and its subsidiaries (taken as a
whole) or the Operating Partnership and its subsidiaries (taken as a whole).
Such Starwood Party has all requisite partnership power and authority to own or
lease and operate its properties and to carry on its business as now conducted.
Section 4.2. Authority. (a) Such Starwood Party has full
partnership power and authority to enter into this Agreement and the other
agreements and instruments contemplated by this Agreement to be entered into by
it and to consummate the transactions contemplated hereby and thereby.
(b) The execution, delivery and performance of this Agreement
by such Starwood Party and the consummation by such Starwood Party of the
transactions contemplated hereby have been duly authorized by all necessary
partnership action on the part of such Starwood Party and its partners. This
Agreement is, and each other agreement or instrument of such Starwood Party
contemplated hereby when executed and delivered will be, the legal, valid and
binding agreement of such Starwood Party, enforceable against such Starwood
Party in accordance with its respective terms.
(c) Neither the execution and delivery of this Agreement by
such Starwood Party nor consummation of the transactions contemplated hereby or
compliance with or fulfillment of the terms and provisions hereof by such
Starwood Party will (i) conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of default or an
event creating rights of acceleration, termination or cancellation or a loss of
rights, or result in the creation or imposition of any encumbrance upon any of
the Starwood Properties under the agreement of limited partnership or other
organizational document of such Starwood Party (or, if such Starwood Party has
any subsidiaries, the organizational documents of such subsidiaries), any
instrument, agreement, mortgage, indenture, deed of trust, permit, concession,
grant, franchise, license, judgment, order, award, decree or other restriction
to which such Starwood Party or any of its subsidiaries is a party or any of
their respective properties is subject or by which any of them is bound or any
statute, other law or regulatory provision affecting any of them, or (ii)
require the approval, consent or authorization of, or the making of any
declaration, filing or registration with, any third party or any foreign,
federal, state or local court, governmental authority or regulatory body, by or
on behalf of such Starwood Party or any of its subsidiaries, except for (A) the
Nevada Gaming Approvals, (B) those matters set forth in the Starwood Disclosure
Schedule and (C) such conflicts, breaches, defaults, events, creations,
impositions, approvals, consents, declarations, filings or authorizations which
would not reasonably be expected to either
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(x) have a Material Adverse Effect on the Starwood Properties (taken as a
whole) or, in addition, after the Closing, on the Realty Partnership and its
subsidiaries (taken as a whole) or the Operating Partnership and its
subsidiaries (taken as a whole) or (y) prevent or hinder the consummation of
the transactions contemplated hereby.
Section 4.3. Investment Representations. Such Starwood Party
is an "accredited investor" within the meaning of Rule 501 under the Securities
Act of 1933, as amended (the "Securities Act"), and (except for Woodstar
Partners I, L.P.) was not organized for the purpose of acquiring limited
partnership interests in the Realty Partnership or the Operating Partnership.
Such Starwood Party has sufficient knowledge and experience in financial and
business matters and in investing in entities similar to the Realty Partnership
and the Operating Partnership so as to be able to evaluate the risks and merits
of its investment in the Realty Partnership and the Operating Partnership and
it is able financially to bear the risks thereof. Such Starwood Party has had
an opportunity to discuss the business, management and financial affairs of
HIT, HIC and the Realty Partnership and the Operating Partnership with the
management of HIT and HIC. The limited partnership interests in the Realty
Partnership and the Operating Partnership are being acquired by such Starwood
Party for its own account for the purpose of investment and not with a view to
or for sale in connection with any distribution thereof. Such Starwood Party
understands that (i) the limited partnership interests in the Realty
Partnership and the Operating Partnership have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof or Rule 505 or 506 promulgated under the Securities Act, and (ii) such
interests and, upon any issuance of Trust Shares and Corporation Shares
pursuant to the Exchange Agreement, such Trust Shares and Corporation Shares
must be held indefinitely unless such Shares are registered upon receipt
thereof, or unless a subsequent disposition thereof is registered under the
Securities Act and applicable state securities laws or is exempt from such
registration.
Section 4.4. Litigation. To the knowledge of such Starwood
Party, except as disclosed in the Starwood Disclosure Schedule, there are no
actions, suits or proceedings or court orders or decrees pending or threatened
to which such Starwood Party is a party or any of its properties is subject or
by which it is bound before or by any court or governmental agency, which if
determined adversely to the interests of such Starwood Party, would reasonably
be expected to either (x) have a Material Adverse Effect on the Starwood
Properties (taken as a whole) or, in addition, after the Closing, on the Realty
Partnership and its subsidiaries (taken as a whole) or the Operating
Partnership and
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its subsidiaries (taken as a whole), or (y) prevent or hinder the consummation
of the transactions contemplated hereby.
Section 4.5. Certain Matters. To the knowledge of such
Starwood Party, except as disclosed in the Starwood Disclosure Schedule, or in
reports of consultants or title companies delivered to HIT or HIC prior to the
date of this Agreement, there are no structural, mechanical, HVAC,
environmental, zoning or title conditions relating to (a) the Starwood Realty
Properties to be contributed by such Starwood Party, which would reasonably be
expected to have a Material Adverse Effect on the Starwood Realty Properties
(taken as a whole) or, in addition, after the Closing, on the Realty
Partnership and its subsidiaries (taken as a whole) or (b) the Starwood
Operating Properties to be contributed by such Starwood Party, which would
reasonably be expected to have a Material Adverse Effect on the Starwood
Operating Properties (taken as a whole) or, in addition, after the Closing, on
the Operating Partnership and its subsidiaries (taken as a whole).
Section 4.6. Proxy Statement. Except for the financial
statements described in Section 4.7, none of the information supplied or to be
supplied by such Starwood Party or any of its representatives for inclusion in
the Proxy Statement (as defined in Section 5.1) will, at the time of the
mailing of the Proxy Statement to the shareholders of HIT and the stockholders
of HIC and at the time of the meetings of such shareholders and stockholders
referred to in Section 5.2, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein not misleading. Prior to the mailing of the Proxy Statement, HIT, HIC
and the Starwood Parties shall enter into a letter agreement specifying those
portions of the Proxy Statement which were supplied by the Starwood Parties
(the "Proxy Statement Letter").
Section 4.7. Financial Statements. The income statements,
statements of cash flows and other financial statements supplied by such
Starwood Party to be included in the Proxy Statement or used in preparing
financial statements to be included in the Proxy Statement are (to the
knowledge of such Starwood Party) correct in all material respects, are in
accordance with the books and records of such Starwood Party and present fairly
the financial position and results of operations and cash flows of the
respective properties covered thereby as of their respective dates and for the
respective periods covered thereby, in accordance with generally accepted
accounting principles.
Section 4.8. Employee Benefit Plans. Such Starwood Party is
not (1) an "employee benefit plan" as defined in and subject to the Employment
Retirement Income Security Act of 1974, as amended ("ERISA"), (2) a "plan" as
defined in and subject to
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Section 4975 of the Code or (3) an entity any portion or all of the assets of
which are deemed pursuant to United States Department of Labor Regulation
Section 2510.3-101 or otherwise pursuant to ERISA to be, for any purpose of
ERISA or Section 4975 of the Code, assets of any "employee benefit plan" or
"plan" described in clause (1) or (2) above which invests in such entity by
virtue of such investment.
Section 4.9. No Finder. Neither such Starwood Party nor any
party acting on its behalf has paid or become obligated to pay any fee or any
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement, other than to Merrill Lynch & Co.,
whose fees and expenses, to the extent payable, shall be paid by HIT and HIC
after the Closing.
ARTICLE V
ACTIONS PRIOR TO THE CLOSING DATE
HIT, HIC, and the Starwood Parties (severally and not jointly)
covenant and agree to take the following respective actions between the date
hereof and the Closing Date:
Section 5.1. Proxy Statement. HIT and HIC have prepared and
filed with the SEC a joint proxy statement to solicit proxies in connection
with the meetings of the shareholders of HIT and the stockholders of HIC
referred to in Section 5.2 (the form of such joint proxy statement, together
with any amendments thereof or supplements thereto, mailed to the shareholders
of HIT and the stockholders of HIC in connection with such meetings is herein
referred to as the "Proxy Statement"). HIT and HIC will cause the Proxy
Statement to comply as to form in all material respects with the applicable
requirements of the Exchange Act and the respective rules and regulations
thereunder and will cause the Proxy Statement, at the time of its mailing or
delivery to the shareholders of HIT and the stockholders of HIC and at the time
of the meetings referred to above, to not 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,
that the foregoing shall not apply to the extent that any such untrue statement
of a material fact or omission to state a material fact was made by HIT or HIC
in reliance upon and in conformity with information concerning any Starwood
Party and their respective affiliates or representatives furnished to HIT or
HIC by a Starwood Party or its affiliates or representatives for inclusion in
the Proxy Statement, as set forth in the Proxy Statement Letter. Each Starwood
Party shall, and shall cause its affiliates and representatives to, furnish HIT
and HIC all information concerning itself and the Starwood Properties to be
contributed by it and required for use in the Proxy Statement,
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including, without limitation, audited and unaudited financial statements with
respect to the Starwood Realty Properties contributed by it and required to be
included in the Proxy Statement or which are necessary to prepare pro forma
financial statements and information to be included in the Proxy Statement.
If, at any time prior to the Closing Date, any event should occur which is
required to be described in an amendment of, or a supplement to, the Proxy
Statement, HIT and HIC will cause such event to be so described, and such
amendment shall be promptly filed with the SEC and, as required by law,
disseminated to any shareholders of HIT or any stockholders of HIC. Each of
the Starwood Parties will cooperate fully in connection with such amendment or
supplement, including supplying any and all information with respect to such
Starwood Party (or its affiliates and representatives) and the Starwood
Properties to be contributed by it which is necessary to prepare any such
amendment or supplement.
Section 5.2. Action by HIT, HIC, Shareholders of HIT and
Stockholders of HIC. HIT shall, as soon as practicable after the Proxy
Statement shall be cleared by the SEC, duly call, give notice of, convene and
hold a meeting of the shareholders of HIT for the purpose of electing trustees
to the Board of Trustees (including the three nominees designated by Starwood
pursuant to Section 5.3) of HIT and approving (i) HIT becoming the general
partner of the Realty Partnership and the contribution to the Realty
Partnership of the HIT Properties, (ii) the issuance of Trust Shares pursuant
to the Exchange Agreement, (iii) the authorization of a reverse stock split of
Trust Shares, (iv) the amendment to the Trust Declaration substantially in the
form attached to this Agreement as Exhibit E, and (v) any other matter required
to be approved by such shareholders pursuant to this Agreement and the
transactions contemplated hereby (collectively, together with the election to
the Board of Trustees of the three nominees designated by Starwood pursuant to
Section 5.3, the "HIT Shareholder Matters"). HIC shall, as soon as practicable
after such clearance, duly call, give notice of, convene and hold a meeting of
the stockholders of HIC for the purpose of electing directors to the Board of
Directors of HIC (including the two nominees designated by Starwood pursuant to
Section 5.3) and approving (i) HIC becoming the general partner of the
Operating Partnership and the contribution to the Operating Partnership of the
HIC Properties, (ii) the issuance of Corporation Shares pursuant to the
Exchange Agreement, (iii) the authorization of a reverse stock split of
Corporation Shares, (iv) the amendment to the HIC Articles in the form attached
to this Agreement as Exhibit F, and (v) any other matter required to be
approved by such stockholders pursuant to this Agreement and the transactions
contemplated hereby (collectively, together with the election to the Board of
Directors of the two nominees designated by Starwood pursuant to Section 5.3,
the "HIC Stockholder Matters"). Subject to the fiduciary duties of the Board
of Trustees of HIT under applicable law and to the last sentence of this
Section 5.2, the
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Board of Trustees of HIT will recommend to its shareholders approval of the HIT
Shareholder Matters. Subject to the fiduciary duties of the Board of Directors
of HIC under applicable law and to the last sentence of this Section 5.2, the
Board of Directors of HIC will recommend to its stockholders approval of the
HIC Shareholder Matters. Each of the Board of Trustees of HIT or the Board of
Directors of HIC may at any time prior to the Closing Date withdraw, modify or
change any recommendation regarding the HIT Shareholder Matters, the HIC
Stockholder Matters, this Agreement or the transactions contemplated hereby or
recommend and declare advisable any other offer, proposal or transaction if in
any such case it determines upon advice of legal counsel that the failure to so
withdraw, modify or change such recommendation could reasonably be expected to
involve it in a breach of fiduciary duties under applicable law.
Section 5.3. Board Representation. HIT shall cause the Board
of Trustees of HIT to consist of five trustees and Starwood will be entitled to
designate three individuals to be nominated in the Proxy Statement by the Board
of Trustees of HIT (the "Starwood HIT Nominees"), such nominees to take office
effective upon their election at the meeting of shareholders of HIT referred to
in Section 5.2. HIC shall, effective upon the receipt of necessary Nevada
Gaming Approvals or such time as such Nevada Gaming Approvals are no longer
required, cause the Board of Directors of HIC to consist of three directors and
Starwood will be entitled to designate two individuals to be nominated in the
Proxy Statement by the Board of Directors of HIC (the "Starwood HIC Nominees"),
such nominees to take office as directors upon receipt of such Nevada Gaming
Approvals or such time as such Nevada Gaming Approvals are no longer required.
One of the Starwood HIT Nominees shall be nominated to each of the classes of
trustees whose terms expire at the annual shareholder meetings of HIT to be
held in 1995, 1996 and 1997. One of the Starwood HIC Nominees shall be
nominated to each of the classes of directors whose terms expire at the annual
stockholders meetings of HIC to be held in 1996 and 1997.
Section 5.4. Investigation. Each of the parties hereto shall
afford to the officers, employees and authorized representatives of each other
party hereto (including, without limitation, independent public accountants,
attorneys, environmental consultants and financial advisors thereof),
reasonable access during normal business hours to its offices, properties,
employees and business and financial records to the extent such party shall
deem necessary or desirable, and shall furnish to each such other party or such
other party's authorized representatives such additional information concerning
the operations, properties and businesses as may be reasonably requested in
writing, to enable such party or such party's authorized representatives to
verify the accuracy of the representations and warranties contained in this
Agreement, and
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to determine whether the conditions set forth in Articles VII and VIII have
been satisfied. Each of the parties hereto agrees that such investigations
shall be conducted in such manner as not to interfere unreasonably with the
operation of the business of any other party. No investigation made by any
party or such party's authorized representatives hereunder shall affect the
representations and warranties of the parties hereunder.
Section 5.5. Lawsuits, Proceedings, Etc. Each party hereto
shall notify each of the other parties hereto promptly upon becoming aware of
any lawsuit, proceeding, claim or investigation that may be threatened,
brought, asserted or commenced against it (a) involving in any way the
transactions contemplated by this Agreement or (b) that would have been listed
or specified as an exception to Sections 2.5, 3.5 or 4.4, as the case may be,
if such lawsuit, proceeding, claim or investigation had arisen prior to the
date hereof.
Section 5.6. Conduct of Business by HIT, HIC and Starwood
Pending the Closing. (a) During the period from the date of this Agreement
through the Closing Date, except as expressly contemplated by this Agreement,
(i) HIT shall carry on its business with respect to the HIT Properties in, and
not enter into any material transaction with respect to the HIT Properties
other than in accordance with, the ordinary course, (ii) HIC shall carry on its
business with respect to the HIC Properties in, and not enter into any material
transaction with respect to the HIC Properties other than in accordance with,
the ordinary course, and (iii) each of the Starwood Parties shall carry on its
business with respect to the Starwood Properties to be contributed by it in,
and not enter into any material transaction with respect to such Starwood
Properties other than in accordance with, the ordinary course (except, in each
case, with respect to HIT or HIC, with the prior written consent of Starwood
and except, in each case with respect to the Starwood Parties, with the prior
written consent of HIT and HIC).
(b) Without limiting the generality of the foregoing, and
except as expressly contemplated by this Agreement, during the period from the
date of this Agreement through the Closing Date, neither HIT nor HIC shall,
without the prior written consent of Starwood (not to be unreasonably
withheld):
(i) take any action that would cause HIT to fail to be
eligible to elect and qualify to be taxed as a REIT, for its taxable
year ending December 31, 1995, or omit to take any action necessary to
cause HIT to be eligible to elect and qualify to be taxed as a REIT
for such taxable year;
(ii) voluntarily sell, transfer or dispose of any real property
or any other material portion of the HIT Properties or of the Notes
Receivable or of the HIC Properties, except pursuant to the provisions
of Section 11.2(c) and except for
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sales of the following assets at any time prior to Closing on the
following terms, which terms are hereby deemed to be approved by
Starwood: (A) sale of the Jacksonville Holiday Inn for a sales price
of $3,600,000 (prior to deductions for commissions and other closing
costs), payable $800,000 cash at closing and the balance in the form
of a secured Note Receivable on the Applicable Terms (for purposes of
this Section 5.6, "Applicable Terms" shall mean a 9% per annum
interest rate, a 30-year amortization schedule and a seven year term);
(B) sale of the Newport Richey Sheraton and the Brunswick Holiday Inn
for an aggregate sales price of $4,300,00 (prior to deductions for
commissions and other closing costs), payable $1,230,000 cash at
closing and the balance in the form of a secured Note Receivable on
the Applicable Terms; and (C) sale of the Fayetteville Ramada for a
sales price of $1,000,000 (prior to deductions for commissions and
other closing costs), payable $250,000 cash at closing and the balance
in the form of a secured Note Receivable on the Applicable Terms;
(iii) refinance any of the HIT Properties, the Notes Receivable or
the HIC Properties (other than in the ordinary course of business)
except for refinancings necessary to meet "balloon" payments on
maturing debt with respect to assets being refinanced; provided that
prior to effecting any such proposed refinancing HIT and HIC will
offer to Starwood the opportunity to provide such refinancing on terms
no less favorable to HIT and HIC than the terms of such proposed
refinancing, and if Starwood does not agree to provide such
refinancing on such terms within five business days of such offer, HIT
and HIC shall be free to effect such proposed refinancing on such
terms;
(iv) incur any costs or expenses that are not in accordance with
capital or operating budgets for the periods in question that have
been approved in writing by Starwood; provided, however, that such
approval shall not be required for non-budgeted costs or expenses (A)
that are non-discretionary in nature, (B) that are in the nature of
emergency expenditures necessary for the preservation of property or
protection of public safety or which are in the nature of enforcement
costs or protective advances with respect to the Notes Receivable, (C)
that are discretionary and that do not exceed, in the aggregate, 10%
of the total of the applicable budget for the period from the date
hereof through Closing or (D) that constitute reasonable out-of-pocket
costs and expenses paid to third parties in connection with the
transactions contemplated by this Agreement;
(v) incur any unsecured debt or lease obligations or purchase
money financing obligations, other than, in each case, in the ordinary
course of business (for example, trade
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payables) or pursuant to a foreclosure under Notes Receivable;
(vi) acquire any additional real estate or other assets (other
than receipt of cash or investments of cash in cash- equivalents and
other than receipt of Notes Receivable in connection with permitted
sales of assets and other than pursuant to a foreclosure under Notes
Receivable);
(vii) enter into any contracts or agreements or terminate any
existing contracts or agreements other than in the ordinary course of
business (other than pursuant to a foreclosure under Notes
Receivable);
(viii) issue or enter into any executory agreement to issue any new
debt securities other than modifications and amendments to the Senior
Debt and debt securities issued (A) under terms which would not
prevent HIT and HIC from performing any of their respective duties or
obligations under this Agreement and (B) the proceeds of which are
used by HIT or HIC to meet scheduled amortization payments on their
respective debt obligations, including, without limitation, "balloon"
payments, or to fund expenditures incurred in the ordinary course of
business; provided, however, that prior to any such proposed issuance
HIT and HIC will offer to Starwood (or its designee) the opportunity
to purchase all or any portion of such issuance (subject to their or
their designees' compliance with the REIT Requirements and any
necessary Nevada Gaming Approvals) on terms no less favorable to HIT
and HIC than the terms of such proposed issuance, and if Starwood does
not agree to purchase such issuance on such terms within five business
days of such offer, HIT and HIC shall be free to effect such proposed
issuance on such terms;
(ix) issue or enter into any executory agreement to issue any new
equity securities other than (A)(1) common shares issued in
replacement of lost, stolen or transferred outstanding shares, (2)
common shares to be issued upon exercise of options or warrants
outstanding prior to June 1, 1994 and referenced in public filings
prior to such date or (3) common shares to be issued upon exercise of
options to purchase up to 100,000 paired shares which may be issued to
directors and key employees of HIC or trustees or key employees of HIT
at exercise prices no less than then current market prices at the time
such options are issued or (B) common shares of equal priority with
shares to be issued pursuant to the Exchange Agreement, issued under
terms which would not prevent HIT and HIC from performing any of their
respective duties or obligations under this Agreement and the proceeds
of which issuance are utilized for purposes described in clause (B) of
the immediately preceding paragraph (viii); provided, however, that
prior to any such
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issuance HIT and HIC will offer to Starwood (or its designee) the
opportunity to purchase all or any portion of such issuance (subject
to their or their designees' compliance with the REIT Requirements and
any necessary Nevada Gaming Approvals) on terms no less favorable to
HIT and HIC than the terms of such proposed issuance, and if Starwood
does not agree to purchase such issuance on such terms within five
business days of such offer, HIT and HIC shall be free to effect such
issuances on such terms; or
(x) declare and pay any dividends or make other distributions
to holders of Paired Shares or repay indebtedness except pursuant to
the terms of such indebtedness.
(c) Without limiting the generality of the foregoing, and
except as otherwise expressly contemplated by this Agreement, during the period
from the date of this Agreement through the Closing Date, none of the Starwood
Parties shall, without the prior written consent of HIT and HIC (not to be
unreasonably withheld):
(i) voluntarily sell, transfer or dispose of any portion to
the Starwood Realty Properties or the Starwood Operating Properties;
(ii) refinance any of the Harvey Debt (as defined in the
Starwood Realty Contribution Agreement) unless such refinancing is
on terms which would be no less favorable to the Realty Partnership
following contribution of the Harvey Hotels Notes (as defined in the
Starwood Realty Contribution Agreement) and the Realty Partnership's
assumption of such debt than the terms of the existing Harvey Debt;
(iii) incur any costs or expenses with respect to the Starwood
Realty Properties or the Starwood Operating Properties that are not in
accordance with capital or operating budgets for the periods in
question that have been approved in writing by HIT and HIC; provided,
however, that such approval shall not be required for non-budgeted
costs or expenses (A) that are non-discretionary in nature, (B) that
are in the nature of emergency expenditures necessary for the
preservation of property or protection of public safety or which are
in the nature of enforcement costs or protective advances with respect
to that portion of the Starwood Realty Properties or the Starwood
Operating Properties constituting notes, (C) that are discretionary
and that do not exceed, in the aggregate, 10% of the total of the
applicable budget for the period from the date hereof through Closing
or (D) that constitute out-of-pocket costs and expenses paid to third
parties in connection with the transactions contemplated by this
Agreement);
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(iv) incur any lease obligations or purchase money financing
obligations with respect to the Starwood Realty Properties or the
Starwood Operating Properties, other than, in each case, in the
ordinary course of business (for example, trade payables or pursuant
to a foreclosure under existing obligations); or
(v) enter into any contracts or agreements or terminate any
existing contracts or agreements binding upon or inuring to the
benefit of the Starwood Realty Properties or the Starwood Operating
Properties other than in the ordinary course of business (other than
pursuant to a foreclosure under existing obligations).
Section 5.7. Mutual Cooperation; Best Efforts. Subject to
the fiduciary duties of the Board of Trustees of HIT and the Board of Directors
of HIC under applicable law, and the fiduciary duties of general partners of
Starwood Parties under applicable law, the parties hereto shall cooperate with
each other, and shall use their respective best efforts to cause the
fulfillment of the conditions to the parties' obligations hereunder and to
obtain as promptly as possible all consents, authorizations, orders or
approvals from each and every third party, whether private or governmental,
required in connection with the transactions contemplated by this Agreement;
provided, however, that the foregoing shall not require Starwood, the Starwood
Partners, HIT, HIC, the Realty Partnership or the Operating Partnership to make
any divestiture or consent to any divestiture in order to obtain any waiver,
consent or approval.
Section 5.8. No Public Announcement. None of the parties
hereto shall, without the approval of the other parties hereto (which may not
be unreasonably withheld), make any press release or other public announcement
concerning the transactions contemplated by this Agreement, except as and to
the extent that such party shall be so obligated by law, in which case each of
such other parties hereto shall be advised and the parties hereto shall use
their reasonable best efforts to cause a mutually agreeable release or
announcement to be issued.
Section 5.9. No Solicitation. From and after the date
hereof, except as otherwise permitted by this Agreement (including Sections 5.2
and 5.6 of this Agreement) HIT and HIC will not, and will instruct their
respective officers and directors not to, solicit or otherwise engage in any
discussions or negotiations with any person other than the Starwood Parties
relating to any Proposal (as hereinafter defined); provided, however, that HIT
or HIC or their respective officers and directors may engage in discussions or
negotiations with any person (provided that neither HIT nor HIC solicited such
discussions or negotiations on or after June 2, 1994) if the Board of Trustees
of HIT and the Board of Directors of HIC determine in good faith upon advice of
legal counsel that a
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failure to engage in such discussions or negotiations could reasonably be
expected to involve the Board of Trustees of HIT or the Board of Directors of
HIC in a breach of fiduciary duties under applicable law; and provided further,
that nothing herein shall prevent the Board of Trustees of HIT or the Board of
Directors of HIC from taking, and disclosing to the shareholders of HIT and the
stockholders of HIC, a position in respect of a Proposal as contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act. In the event that
HIT or HIC reach an agreement with respect to a Proposal with any person other
than the Starwood Parties and such agreement is not consistent with the
obligations of HIT or HIC set forth in this Agreement or with the transactions
contemplated by this Agreement, then, prior to entering into such agreement
they will deliver the notice provided in Section 10.1(g) and pay the fee
provided in Section 11.2. For purposes of this Agreement "Proposal" shall mean
(i) a recapitalization or restructuring of HIT or HIC, (ii) the creation of any
UPREIT, (iii) a sale, disposition or refinancing of all or portions of the HIT
Properties, the Notes Receivable or the HIC Properties, (iv) the issuance of
any additional debt or equity securities of HIT or HIC, (v) the transfer in one
transaction or a series of related transactions of more than 10% of the
existing debt or equity securities of HIT or HIC or (vi) the appointment to the
Board of Trustees of HIT or the Board of Directors of HIC of trustees or
directors designated by a single person and its affiliates, other than Starwood
and its affiliates pursuant to the terms of this Agreement; provided that any
transaction (other than a transaction pursuant to Section 11.2(c)) consented to
by Starwood or permitted by Section 5.6 shall not be a "Proposal."
Section 5.10. Gaming Law Compliance. HIT, HIC and the
Starwood Parties shall make all filings under applicable gaming laws of the
State of Nevada and of the Clark County, Nevada Liquor and Gaming Licensing
Board required to effect the transactions contemplated hereby. The parties
hereto acknowledge that as of the date hereof they have received the Nevada
Gaming Approvals required to be obtained in order to consummate the Closing,
pursuant to the terms of the letter dated September 28, 1994 from the Nevada
Gaming Control Board, a copy of which letter has been made available to all
parties hereto. Each of HIT and HIC and each of the Starwood Parties,
severally and not jointly, warrants that all such filings by it shall be,
accurate as of the date filed and in accordance with the requirements of all
rules and regulations and such gaming laws. Each of HIT, HIC and each of the
Starwood Parties agree to make available, or cause to be made available, to the
other parties such information as may reasonably be requested relative to its
businesses, assets and property as may be required to file any additional
information requested by such agencies under such rules and regulations and
such gaming laws. HIT and HIC will use their best efforts to obtain temporary
approval under Nevada gaming laws for the new directors of HIC to be elected
pursuant to Section 5.3 so as to
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allow each such director to take office as a director as soon as practicable.
Section 5.11. Adjustments. Notwithstanding the provisions of
the Partnership Agreements, the Starwood Realty Contribution Agreement, the
Starwood Operating Contribution Agreement, the HIT Contribution Agreement and
the HIC Contribution Agreement, the respective Partnership Interests (as
defined in the Partnership Agreements) of the partners of the Partnership shall
be increased or decreased on or prior to the date (the "Adjustment Date") which
is ten business days prior to the date on which the Proxy Statement is to be
mailed, and on the Closing Date, in accordance with the following provisions
(without duplication among any such adjustments):
(a) In the case of the Partnership Interest of the Starwood
Parties in each of the Partnerships:
(i) such Partnership Interests shall be decreased if the
principal amount of the Midlantic Notes or the Harvey
Hotel Notes (as each is defined in the Starwood
Realty Contribution Agreement) is reduced after the
date hereof and prior to the Adjustment Date;
(ii) such Partnership Interests shall be increased if the
principal amount of the Harvey Debt (as defined in
the Starwood Realty Contribution Agreement) or of the
debt encumbering the Midlantic Notes is reduced after
the date hereof and prior to the assumption thereof
by the Realty Partnership on the Closing Date; and
(iii) such Partnership Interests shall be increased in the
event that on or prior to the Adjustment Date
Starwood shall irrevocably commit to contribute to
the Realty Partnership on the Closing Date all or
portions of the equity securing the Harvey Hotel
Notes or the equity interest in the Ramada Suites in
Secaucus, New Jersey (in addition to the notes
secured by such equities) (any such contributions to
be valued using a valuation method which is the same
as the method used for valuing the HIT Properties
(exclusive, however, of extraordinary or
non-recurring expenditures) relative to the Starwood
Realty Properties).
(b) If the principal amount of the Midlantic Notes or the
Harvey Hotel Notes is reduced on or after the Adjustment Date and prior to the
assumption thereof by the Realty Partnership on the Closing Date, then the
Starwood Parties shall contribute an additional amount of cash to the Realty
Partnership equal to the amount of such reduction, and the Partnership
Interests of such
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Starwood Partners, as the case may be, shall not be decreased or increased by
reason of such reduction or such additional cash contribution.
(c) In the case of the Partnership Interests of any partner in
the Partnerships, such Partnership Interests shall be decreased if any assets
which are to be contributed to the Partnerships by such partner are not so
contributed; provided, that if any such decrease would cause the aggregate
Partnership Interests of the Starwood Parties to be less than 51%, then the
Starwood Parties shall contribute additional assets to the Partnerships in
order to cause such aggregate Partnership Interests to be equal to 51%, with
any such additional assets to be subject to the approval of HIT and HIC (which
approval shall not be unreasonably withheld or delayed) and shall be valued
using the same valuation principles used in valuing similar assets of the
Starwood Parties contributed to the Partnerships.
(d) In the event and to the extent that the adjustments
provided for in this Section 5.11 would cause the aggregate Partnership
Interests of the Starwood Parties in the Partnerships to be less than 71.725%
(such percentage being the aggregate Partnership Interests of the Starwood
Parties prior to adjustment thereof pursuant to this Section 5.11 (the
"Unadjusted Partnership Interests")), then the Starwood Parties shall have the
right, on or prior to the Adjustment Date, to irrevocably commit to contribute
to the Partnerships on the Closing Date additional cash or other assets in
order to cause the aggregate Partnership Interests of the Starwood Parties, as
adjusted pursuant to this Section 5.11, to equal the aggregate Unadjusted
Partnership Interests of the Starwood Parties. Any such additional
contribution of cash which is to be contributed in lieu of all or a portion of
a note shall be valued based on the discounted value used for purposes of
valuing such note, and any such additional contribution of other assets
(including, without limitation, notes) shall be subject to the approval of HIT
and HIC (which approval shall not be unreasonably withheld or delayed) and
shall be valued using the same valuation principles used in valuing similar
assets of the Starwood Parties contributed to the Partnerships.
(e) On or prior to the Adjustment Date, the Starwood Parties
shall have the right to irrevocably commit to contribute to the Partnerships on
the Closing Date additional assets so as to cause the aggregate Partnership
Interests of the Starwood Parties in the Partnerships to be greater than the
aggregate Unadjusted Partnership Interests of the Starwood Parties. Any such
additional contributions shall be subject to the approval of HIT and HIC (which
approval shall not be unreasonably withheld) and such contributions shall be
valued at such Starwood Party's cost for such assets, plus the excess, if any,
of (x) an amount equal to simple interest at a rate of 10% per annum on the
amount of equity invested by such Starwood Party in such assets during
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the period in which such Starwood Party owned such assets over (y) any net cash
flow (after debt service) received by such Starwood Party during such period.
(f) Notwithstanding the provisions of the Partnership
Agreements, the Starwood Realty Contribution Agreement and the Starwood
Operating Contribution Agreement, at Starwood's election, in lieu of making
contributions to the Partnerships on the Closing Date of certain Starwood
Properties (to be designated by Starwood) in exchange for Units of the
Partnerships, the Starwood Partners shall make such contributions to HIT and
HIC on the Closing Date in exchange for a number of Paired Shares equal to the
number of such Units that such Starwood Partners would have received if such
contributions had been made to the Partnerships; provided that after giving
effect to the issuance of such Paired Shares to such Starwood Partners and
their respective affiliates, the Starwood Parties shall not beneficially own,
in the aggregate, Paired Shares representing more than 4.9% of the then issued
and outstanding Paired Shares (such percentage to be increased to 8.0% after
such time as necessary Nevada Gaming Approvals are obtained or such time as
such Nevada Gaming Approvals are no longer required).
(g) Notwithstanding anything to the contrary set forth in
this Section 5.11, no adjustments shall be made to the Partnership Interests in
the Realty Partnership and the Operating Partnership to the extent that, as a
result thereof, the Partnership Interest of HIT and HIC, respectively, would be
reduced to below 25%, unless HIT and HIC, respectively, in its sole and
absolute discretion, approves in writing such adjustments, which approval may
be unreasonably withheld.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
Section 6.1. Abstentions of Starwood Nominees. So long as
Starwood or any affiliate of Starwood shall have any interest in the Senior
Debt (other than solely as a result of the interests of the Starwood Parties in
the Partnerships), the Starwood HIT Nominees and the Starwood HIC Nominees and
any other member of the Board of Trustees of HIT, the Board of Directors of HIC
or the governing Board of the Operating Partnership who is nominated by
Starwood or is otherwise an affiliate or associate of the Starwood Parties
shall, and Starwood shall use their respective best efforts to cause them to,
abstain from voting upon and excuse and absent themselves from any
deliberations relating to any pending or threatened defaults or any action to
be taken by HIT, HIC or the Partnerships in respect of any pending or
threatened defaults under or in respect of the Senior Debt (whether such
pending or threatened defaults are by HIT, HIC or the holders of the Senior
Debt).
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Section 6.2. Waiver of Certain Claims. None of HIT, HIC, the
Realty Partnership or the Operating Partnership shall ever assert any claim of
equitable subordination or other lender liability claims or defenses against
holders of the Senior Debt based upon any one or more of the following: (a) the
presence on the Board of Trustees of HIT, the Board of Directors of HIC or the
governing board of the Operating Partnership of trustees, directors or members
who were nominated by or at the direction of Starwood, or any actions taken by
such trustees, directors or members as such, (b) the employment by HIT or HIC
of any employees who are affiliates of Starwood or any actions taken by such
employees as such or (c) the transactions contemplated by this Agreement. None
of HIT, HIC, the Realty Partnership or the Operating Partnership shall be
entitled to offset against payments due by them pursuant to the Senior Debt any
payments due to them by reason of a breach or default by any Starwood Party of
its obligations pursuant to or in connection with this Agreement.
Section 6.3. Further Contributions. Pursuant to the
provisions to be contained in the HIC Contribution Agreement and the Operating
Partnership Agreement, upon the receipt of necessary Nevada Gaming Approvals
with respect to the conveyance of the HICN Properties or such earlier time as
such Nevada Gaming Approvals are no longer required ("HICN Approval"), HICN
shall convey to the Operating Partnership or a subsidiary of the Operating
Partnership all of the HICN Properties and all other assets of HICN, and the
Operating Partnership or such subsidiary will assume all of the liabilities and
obligations of HICN on such date. If all or a portion of the HICN Properties
are disposed of prior to the receipt of the HICN Approval, then HIC or HICN
shall contribute to the Operating partnership the net proceeds of such
disposition, promptly upon receipt thereof. If the HICN Approval is not
received on or prior to December 31, 1995, then on such date HIC or HICN will
contribute to the Operating Partnership, with respect to any HICN Properties or
other assets not previously disposed of, cash equal to the fair value of such
HICN Properties and such other assets on December 31, 1995. Such fair value
shall be conclusively determined by an independent appraiser selected by the
Board of Directors of HIC. No additional interests in the Operating
Partnership will be issued upon the transfer of any of the HICN Properties,
such other assets, such net proceeds or such cash. HIC shall contribute to the
Operating Partnership any dividends or other distributions declared or paid by
HICN to HIC prior to the receipt of the HICN Approval, such contributions to be
made upon receipt by HIC of such dividends or other distributions. Neither HIC
nor HICN shall be entitled to any additional Units or Partnership Interests by
reason of any such contribution.
Section 6.4. Senior Debt. If Starwood or any affiliate of
Starwood acquires Senior Debt on or prior to six months after the date on which
the HIT Shareholder Matters shall have been approved by the requisite vote of
the holders of Trust
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Shares and the HIC Stockholder Matters shall have been approved by the
requisite vote of the holders of Corporation Shares, then Starwood or the
Starwood affiliate which so acquires Senior Debt shall contribute all of such
Senior Debt to the Partnerships (up to a maximum of $12 million aggregate
principal amount of Senior Debt) in exchange for a number of additional Units
of the Partnerships equal to [______] Units (such number of Units to be adjusted
as provided in Section 4.1(f) of the Realty Partnership Agreement and Section
4.1(g) of the Operating Partnership Agreement) for each $1,000 aggregate
principal amount of Senior Debt so contributed. Any such contribution of
Senior Debt shall be considered a Capital Contribution for purposes of Section
8.2 of each of the Partnership Agreements.
Section 6.5. [Intentionally Omitted]
Section 6.6. Exclusivity; Excluded Assets. (a) So long as
any officer, director or general partner of, or any other person employed by,
any Starwood Party remains on either the Board of Trustees of HIT or the Board
of Directors of HIC (such period during which any such officer, director,
general partner or other person remains on either such Board being referred to
as the "Noncompete Period"), each of the Starwood Parties agrees that it will
not compete within the United States, directly or indirectly, with the Realty
Partnership, the Operating Partnership, HIT or HIC and that such Starwood Party
will present to the Realty Partnership and the Operating Partnership all
opportunities for acquisitions of (i) fee interests in hotels in the United
States and (ii) debt interests in hotels in the United States where it is
anticipated that the equity will be acquired by the debt holder within one year
from the acquisition of such debt interest. During the Noncompete Period none
of the Starwood Parties or their affiliates may acquire any such fee interests
or debt interests described in clauses (i) and (ii) above. The provisions of
this Section 6.6(a) shall not apply to Excluded Assets (as defined in Section
6.6(b)).
(b) Each Starwood Party hereby grants to the Partnerships the
option, from and after the Closing Date and at any time or times prior to the
earlier of (i) five years from the Closing Date and (ii) the expiration of the
Noncompete Period, to acquire the interest of such Starwood Party in one or
more Excluded Assets (as defined below), subject to receipt of all required
material third party and partner consents and approvals. Upon exercise of such
option from time to time, such Starwood Party shall use its best efforts to
obtain such consents and approvals. Such acquisition by the Partnerships shall
be made for a cash purchase price equal to the fair market value of the
Excluded Assets being acquired, as determined by agreement between the
Partnerships and such Starwood Party or, if they are unable to so agree within
30 days after the exercise of such option, such fair market value shall be
equal to the average of the two closest of three appraisals of such fair market
value,
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such appraisals to be performed by an independent appraiser selected by a
majority of the Disinterested Members of HIT and HIC, an independent appraiser
selected by Starwood and a third independent appraiser selected by agreement of
such first two appraisers. HIT and HIC shall pay all costs and expenses of the
appraiser selected by them and one-half of the costs and expenses of such third
appraiser and Starwood shall pay all costs and expenses of the appraiser
selected by it and one-half of the costs and expenses of such third appraiser.
As used herein, "Excluded Assets" means those fee interests, debt interests or
other investments in the hotel asset investment business of any Starwood Party
or their commonly controlled affiliates existing on the Closing Date.
Section 6.7. Wichita Hotel. (a) The Starwood Party that
contributes to the Realty Partnership and the Operating Partnership the Harvey
Wichita Hotel (the "Wichita Hotel") shall pay to the Operating Partnership in
respect of each of the years ending December 31, 1995, 1996 and 1997, the
amount, if any (the "Shortfall Amount"), by which the Base Amount (as defined
below) for such year exceeds the Cash Flow (as defined below) for such year.
Within 90 days after the end of each such year, the Operating Partnership shall
deliver to such Starwood Party a computation of the Cash Flow and the Shortfall
Amount for such year and within 20 days after such delivery such Starwood Party
shall pay to the Operating Partnership, in immediately available funds, such
Shortfall Amount.
As used herein, (i) "Cash Flow" means with respect to any year
the cash received by the Operating Partnership from the Wichita Hotel during
such year, less all management fees paid with respect to the Wichita Hotel
(including pursuant to the Management Agreement (as defined below)) for such
year, and less the amount of all actual capital expenditures with respect to
the Wichita Hotel for such year; (ii) "Base Amount" means (x) for the year
ending December 31, 1995, $700,000, (y) for the year ending December 31, 1996,
an amount equal to $800,000 less any Credit Amount (as defined below) for such
year and (z) for the year ending December 31, 1997, an amount equal to $900,000
less any Credit Amount (as defined below) for such year; and (iii) "Credit
Amount" means (x) for the year ending December 31, 1996, the excess, if any, of
the Cash Flow for 1995 over the Base Amount for 1995 and (y) for the year
ending December 31, 1997, the excess, if any, of the Cash Flow for 1996 over
the Base Amount for 1996.
(b) The Operating Partnership shall assume the obligations of
Starwood/Wichita Investors, L.P. ("SWI") under that certain Management
Agreement dated April 11, 1994 between SWI and Harvey Hotel Management
Corporation ("HHM"), as such agreement is to be amended pursuant to that
certain letter agreement dated November 7, 1994 between SWI and HHM (such
Management Agreement, as it may be so amended, the "Management
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Agreement") with respect to the Wichita Hotel and, so long as all required
Shortfall Amounts have been contributed as provided in Section 6.7(a), neither
the Trust nor the Corporation shall take any action to cause the termination of
the Management Agreement prior to December 31, 1997, without the prior written
consent of Starwood.
Section 6.8. Indemnification of Directors and Officers. From
and after the Closing Date, each of HIT and HIC shall, and Starwood shall use
its best efforts to cause HIT and HIC to, indemnify, defend and hold harmless
the respective present officers, directors and employees of HIT and HIC and any
of their respective subsidiaries against all losses, expenses, claims, damages
or liabilities arising out of actions or omissions occurring on or prior to the
Closing Date (including, without limitation, the transactions contemplated by
this Agreement) to the full extent permitted or required under applicable law
(and shall also advance expenses as incurred to the fullest extent permitted
under applicable law, provided that the person to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately determined
that such person is not entitled to indemnification). Each of HIT and HIC
agree that all rights to indemnification, including provisions relating to
advances of expenses incurred in defense of any action or suit, existing in
favor of the present directors, officers and employees of HIT and HIC or any of
their respective subsidiaries (collectively, the "Indemnified Parties") as
provided in the Declaration of Trust of the Trust and the Articles of
Incorporation or By-Laws of the Corporation or pursuant to other agreements, as
in effect as of the date hereof, shall survive the Closing and shall continue
in full force and effect. Each of HIT and HIC shall, and Starwood shall use
its best efforts to cause HIT and HIC to, maintain in effect for not less than
seven years the current policies of directors' and officers' liability
insurance maintained by HIT and HIC with respect to matters occurring prior to
the Closing Date. This Section 6.8 is intended to benefit the Indemnified
Parties.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF HIT AND HIC
The obligations of each of HIT and HIC under this Agreement to
consummate the transactions contemplated hereby to be consummated at the
Closing shall, at the option of each of HIT and HIC, be subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
Section 7.1. No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no material breach by any Starwood Party in
the performance of its covenants and
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agreements herein to be performed at or prior to the Closing Date; on the
Closing Date each of the representations and warranties of any Starwood Party
that is qualified as to materiality shall be true and correct as though made on
the Closing Date, except for changes therein specifically permitted by this
Agreement or resulting from any transaction expressly consented to in writing
by HIT and HIC, permitted by Section 5.6 (including, without limitation,
transactions in the ordinary course of business) or entered into in connection
with the consummation of the transactions contemplated hereby; on the Closing
Date each of the representations and warranties of any Starwood Party that is
not so qualified as to materiality shall be true and correct in all material
respects as though made on the Closing Date, except for changes therein
specifically permitted by this Agreement or resulting from any transaction
expressly consented to in writing by HIT and HIC, permitted by Section 5.6
(including, without limitation, transactions in the ordinary course of
business) or entered into in connection with the consummation of the
transactions contemplated hereby; and there shall have been delivered to HIT
and HIC a certificate or certificates to the foregoing effect, dated the
Closing Date, signed on behalf of each of the Starwood Parties; provided that
the conditions set forth in this Section 7.1 may be appropriately modified
after giving effect to the operation of the covenants and agreements contained
in Sections 5.6 and 5.11.
Section 7.2. No Material Adverse Effect. Between the date
hereof and the Closing Date, there shall have been no Material Adverse Effect
on the Starwood Realty Properties (taken as a whole) or the Starwood Operating
Properties (taken as a whole); and there shall have been delivered to HIT and
HIC a certificate or certificates to such effect, dated the Closing Date,
signed on behalf of each of the Starwood Parties; provided that the condition
set forth in this Section 7.2 may be appropriately modified after giving effect
to the operation of the covenants and agreements contained in Sections 5.6 and
5.11.
Section 7.3. Opinion of Counsel for Starwood. HIT and HIC
shall have received from Rogers & Wells, counsel for the Starwood Parties, an
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to HIT and HIC.
Section 7.4. No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall be in
effect, provided, however, that each of the parties shall have used its best
efforts to prevent the entry of any such injunction or other order and to
appeal as promptly as possible any injunction or other order that may be
entered.
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Section 7.5. Necessary Governmental Approvals. The parties
thereto shall have received all governmental and regulatory approvals and
actions reasonably necessary to consummate the transactions contemplated
hereby, which are either required to be obtained prior to the Closing Date by
applicable law or regulation or are necessary to prevent a Material Adverse
Effect on HIT and its subsidiaries (taken as a whole), or HIC and its
subsidiaries (taken as a whole) or, in addition, after the Closing, on the
Realty Partnership and its subsidiaries (taken as a whole) or the Operating
Partnership and its subsidiaries (taken as a whole).
Section 7.6. Necessary Consents. The parties hereto shall
have received consents, in form and substance reasonably satisfactory to HIT
and HIC, to the transactions contemplated hereby from the other parties to all
material contracts, leases, agreements and permits to which any Starwood Party
is a party or by which any of them is affected and which require such consent
prior to the Closing and are necessary to prevent a Material Adverse Effect on
the Starwood Properties (taken as a whole) or, in addition, after the Closing,
on the Realty Partnership and its subsidiaries (taken as a whole) or the
Operating Partnership and its subsidiaries (taken as a whole).
Section 7.7. Transaction Agreements. Each of the parties
(other than HIT, HIC or a subsidiary of HIC) to each of the Transaction
Agreements shall have entered into such Transaction Agreements substantially in
the forms attached hereto as exhibits or, if not so attached, as agreed to by
the parties.
Section 7.8. Shareholder and Stockholder Action. The HIT
Shareholder Matters shall have been approved by the requisite vote of the
holders of Trust Shares. The HIC Stockholder Matters shall have been approved
by the requisite vote of the holders of Corporation Shares.
Section 7.9. Fairness Opinion. HIT and HIC shall have
received a written fairness opinion from Salomon Brothers Inc (or another
financial advisor chosen by the Board of Trustees of HIT or the Board of
Directors of HIC), dated the date of mailing of the Proxy Statement, in form
and substance reasonably satisfactory to HIT and HIC, to the effect set forth
in Exhibit G hereto.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE STARWOOD PARTIES
The obligations of the Starwood Parties under this Agreement
to consummate the transactions contemplated hereby to be consummated at the
Closing shall, at the option of Starwood,
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be subject to the satisfaction, on or prior to the Closing Date, of the
following conditions:
Section 8.1. No Misrepresentation or Breach of Covenants and
Warranties. There shall have been no material breach by HIT or HIC in the
performance of their respective covenants and agreements herein to be performed
at or prior to the Closing Date; on the Closing Date each of the
representations and warranties of HIT or HIC that is qualified as to
materiality shall be true and correct as though made on the Closing Date,
except for changes therein specifically permitted by this Agreement or
resulting from any transaction expressly consented to in writing by Starwood,
permitted by Section 5.6 (including, without limitation, transactions in the
ordinary course of business) or entered into in connection with the
consummation of the transactions contemplated hereby; on the Closing Date each
of the representations and warranties of HIT and HIC that is not so qualified
as to materiality shall be true and correct in all material respects as though
made on the Closing Date, except for changes therein specifically permitted by
this Agreement or resulting from any transaction expressly consented to in
writing by Starwood, permitted by Section 5.6 (including, without limitation,
transactions in the ordinary course of business) or entered into in connection
with the consummation of the transactions contemplated hereby; and there shall
have been delivered to the Starwood Parties a certificate or certificates to
the foregoing effect, dated the Closing Date, signed on behalf of HIT and HIC;
provided that the conditions set forth in this Section 8.1 may be appropriately
modified after giving effect to the operation of the covenants and agreements
contained in Sections 5.6 and 5.11.
Section 8.2. No Material Adverse Effect. Between the date
hereof and the Closing Date, there shall have been no Material Adverse Effect
on HIT and its subsidiaries (taken as a whole) or HIC and its subsidiaries
(taken as a whole); and there shall have been delivered to Starwood a
certificate with respect to HIT and a certificate with respect to HIC, each to
such effect, dated the Closing Date, signed on behalf of HIT and HIC; provided
that the condition set forth in this Section 8.2 may be appropriately modified
after giving effect to the operation of the covenants and agreements contained
in Sections 5.6 and 5.11.
Section 8.3. Opinion of Counsel for HIT and HIC. The
Starwood Parties shall have received from Sidley & Austin, counsel for HIT and
HIC, an opinion, dated the Closing Date, in form and substance reasonably
satisfactory to Starwood.
Section 8.4. No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall be in
effect,
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provided, however, that each of the parties shall have used its best efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered.
Section 8.5. Necessary Governmental Approvals. The parties
hereto shall have received all governmental and regulatory approvals and
actions reasonably necessary to consummate the transactions contemplated
hereby, which are either required to be obtained prior to the Closing Date by
applicable law or regulation or are necessary to prevent a Material Adverse
Effect on HIT and its subsidiaries (taken as a whole), or HIC and its
subsidiaries (taken as a whole), or, in addition, after the Closing, on the
Realty Partnership and its subsidiaries (taken as a whole), or the Operating
Partnership and its subsidiaries (taken as a whole).
Section 8.6. Necessary Consents. The parties hereto shall
have received consents, in form and substance reasonably satisfactory to
Starwood, to the transactions contemplated hereby from the other parties to all
material contracts, leases, agreements and permits to which HIT or HIC is a
party or by which any of them is affected and which require such consent prior
to the Closing and are necessary to prevent a Material Adverse Effect on HIT
and its subsidiaries (taken as a whole), or HIC and its subsidiaries (taken as
a whole) or, in addition, after the Closing, on the Realty Partnership and its
subsidiaries (taken as a whole) or the Operating Partnership and its
subsidiaries (taken as a whole).
Section 8.7. Transaction Agreements. Each of the parties
(other than the Starwood Parties) to each of the Transaction Agreements shall
have entered into such Transaction Agreements substantially in the forms
attached hereto as exhibits or, if not so attached, as agreed to by the
parties.
Section 8.8. Shareholder and Stockholder Action. The HIT
Shareholder Matters shall have been approved by the requisite vote of the
holders of Trust Shares. The HIC Stockholders Matters shall have been approved
by the requisite vote of the holders of Corporation Shares.
Section 8.9. Partnership Notes. Starwood shall have received
notes (the "Starwood Notes") issued by the Realty Partnership or the Operating
Partnership in a form reasonably satisfactory to Starwood, the Realty
Partnership and the Operating Partnership which notes shall provide that they
shall be payable only if HIT and HIC consummate a public offering of Paired
Shares within 18 months following the Closing Date, which public offering
results in the receipt by HIT and HIC of gross proceeds of not less than $150
million. The amount payable on all Starwood Notes shall be equal to three
fourths of one percent (.75%) of an amount equal to the sum of the total market
value of
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all Paired Shares (assuming the conversion of all outstanding Units if the
Partnerships) upon consummation of such offering and the principal amount of
indebtedness of the Partnerships at such time.
ARTICLE IX
INDEMNIFICATION; SURVIVAL
Section 9.1. Indemnification by HIT. HIT shall indemnify and
hold harmless the Starwood Parties, the Realty Partnership and their respective
subsidiaries, affiliates and successors from and against any and all (x)
liabilities, losses or damages ("Loss") and (y) reasonable out-of-pocket
expenses ("Expense") incurred by the Starwood Parties, the Realty Partnership
or their respective subsidiaries, affiliates and successors in connection with
or arising from (a) any breach or failure to perform by HIT of any of its
agreements, covenants or obligations in this Agreement or any Transaction
Agreement, (b) any breach of any warranty or the inaccuracy of any
representation of HIT contained in this Agreement, any Transaction Agreement or
in any certificate delivered by or on behalf of HIT pursuant hereto or thereto
or (c) HIT's termination of its REIT status for each of the taxable years ended
December 31, 1991, 1992, 1993 and 1994; provided, however, that HIT shall be
required to indemnify and hold harmless under this Section 9.1 only to the
extent that the sum of (i) the aggregate amount of Loss and Expense referred to
above in this Section 9.1 and (ii) the aggregate amount of Loss and Expense
referred to in Section 9.2 exceeds $100,000; and provided, further, that the
obligation of HIT to indemnify and hold harmless pursuant to this Section 9.1
shall be limited to the payment by HIT in the aggregate of an amount equal to
$5,000,000 less the aggregate amount of payments made by HIC pursuant to
Section 9.2.
Section 9.2. Indemnification by HIC. HIC shall indemnify and
hold harmless the Starwood Parties, the Operating Partnership and their
respective subsidiaries, affiliates and successors from and against any and all
Loss and Expense incurred by the Starwood Parties, the Operating Partnership or
their respective subsidiaries, affiliates and successors in connection with or
arising from (a) any breach or failure to perform by HIC of any of its
agreements, covenants or obligations in this Agreement or any Transaction
Agreement, and (b) any breach of any warranty or the inaccuracy of any
representation of HIC contained in this Agreement, any Transaction Agreement or
in any certificate delivered by or on behalf of HIC pursuant hereto or thereto;
provided, however, that HIC shall be required to indemnify and hold harmless
under this Section 9.2 only to the extent that the sum of (i) the aggregate
amount of Loss and Expense referred to above in this Section 9.2 and (ii) the
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aggregate amount of Loss and Expense referred to in Section 9.1 exceeds
$100,000; and provided, further, that the obligation of HIC to indemnify and
hold harmless pursuant to this Section 9.2 shall be limited to the payment by
HIC in the aggregate of an amount equal to $5,000,000 less the aggregate amount
of payments made by HIT pursuant to Section 9.1.
Section 9.3. Indemnification by the Starwood Parties. Each
of the Starwood Parties shall severally and not jointly indemnify and hold
harmless HIT, HIC, the Realty Partnership and the Operating Partnership and
their respective subsidiaries, affiliates and successors from and against any
and all Loss and Expense incurred by HIT, HIC, the Realty Partnership or the
Operating Partnership or their respective subsidiaries, affiliates and
successors in connection with or arising from (a) any breach or failure to
perform by such Starwood Party of any of its agreements, covenants or
obligations in this Agreement or any Transaction Agreement, (b) any breach of
any warranty or the inaccuracy of any representation of such Starwood Party
contained in this Agreement (provided that for purposes of this Section 9.3 the
representations and warranties in Section 4.7 shall not be qualified as to
knowledge and such representations and warranties shall be made as if the
parenthetical phrase contained in Section 4.7 was not contained in Section
4.7), any Transaction Agreement or in any certificate delivered by or on behalf
of such Starwood Party pursuant hereto or thereto and (c) the litigation
described in the Starwood Disclosure Schedule with respect to the Lexington,
Kentucky French Quarters Suites; provided, however, that the Starwood Parties
shall be required to indemnify and hold harmless under this Section 9.3 only to
the extent that the aggregate amount of Loss and Expense referred to above in
this Section 9.3 exceeds $100,000; and provided, further, that the obligation
of the Starwood Parties to indemnify and hold harmless pursuant to this Section
9.3 shall be limited to the payment by the Starwood Parties in the aggregate of
an amount equal to $5,000,000.
Section 9.4. Notice of Claims. If a party believes that any
of the persons entitled to indemnification under this Article IX has suffered
or incurred any Loss or incurred any Expense, whether or not the applicable
dollar limitation specified by Sections 9.1, 9.2 or 9.3 has been exceeded, such
party shall notify the indemnifying party promptly in writing describing such
Loss or Expense, the amount thereof, if known, and the method of computation of
such Loss or Expense, all with reasonable particularity and containing a
reference to the provisions of this Agreement, any Transaction Agreement or any
certificate delivered pursuant hereto in respect of which such Loss or Expense
shall have occurred; provided, however, that the omission by such indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its indemnification obligation under this Article IX except to the
extent that such indemnifying party is materially damaged as a
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result of such failure to give notice. If any action at law or suit in equity
is instituted by or against a third party with respect to which any of the
persons entitled to indemnification under this Article IX intends to claim any
liability or expense as Loss or Expense under this Article IX, any such person
shall promptly notify the indemnifying party of such action or suit as
specified in this Section 9.4 and Section 9.5. Any party entitled to
indemnification hereunder shall use reasonable efforts to minimize any Loss or
Expense for which indemnification is sought hereunder.
Section 9.5. Third Party Claims. In the event of any claim
for indemnification hereunder resulting from or in connection with any claim or
legal proceeding by a third party, the indemnified persons shall give such
notice thereof to the indemnifying party not later than twenty business days
prior to the time any response to the asserted claim is required, if possible,
and in any event within fifteen days following the date such indemnified person
has actual knowledge thereof; provided, however, that the omission by such
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its indemnification obligation under this Article IX
except to the extent that such indemnifying party is materially damaged as a
result of such failure to give notice. In the event of any such claim for
indemnification resulting from or in connection with a claim or legal
proceeding by a third party, the indemnifying party may, at its sole cost and
expense, assume the defense thereof; provided, however, that counsel for the
indemnifying party, who shall conduct the defense of such claim or legal
proceeding, shall be reasonably satisfactory to the indemnified party; and
provided, further, that if the defendants in any such actions include both the
indemnified persons and the indemnifying party and the indemnified persons
shall have reasonably concluded that there may be legal defenses or rights
available to them which have not been waived and are in actual or potential
conflict with those available to the indemnifying party, the indemnified
persons shall have the right to select one law firm reasonably acceptable to
the indemnifying party to act as separate counsel, on behalf of such
indemnified persons, at the expense of the indemnifying party. Unless the
indemnified persons are represented by separate counsel pursuant to the second
proviso of the immediately preceding sentence, if an indemnifying party assumes
the defense of any such claim or legal proceeding, such indemnifying party
shall not consent to entry of any judgment, or enter into any settlement, that
(a) is not subject to indemnification in accordance with the provisions in this
Article IX, (b) provides for injunctive or other non-monetary relief affecting
the indemnified persons or (c) does not include as an unconditional term
thereof the giving by each claimant or plaintiff to such indemnified persons of
a release from all liability with respect to such claim or legal proceeding,
without the prior written consent of the indemnified persons (which consent, in
the case of clauses (b) and (c), shall
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not be unreasonably withheld); and provided, further, that, unless the
indemnified persons are represented by separate counsel pursuant to the second
proviso of the immediately preceding sentence, the indemnified persons may, at
their own expense, participate in any such proceeding with the counsel of their
choice without any right of control thereof. So long as the indemnifying party
is in good faith defending such claim or proceeding, the indemnified persons
shall not compromise or settle such claim or proceeding without the prior
written consent of the indemnifying party, which consent shall not be
unreasonably withheld. If the indemnifying party does not assume the defense
of any such claim or litigation in accordance with the terms hereof, the
indemnified persons may defend against such claim or litigation in such manner
as they may deem appropriate, including, without limitation, settling such
claim or litigation (after giving prior written notice of the same to the
indemnifying party and obtaining the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld) on such terms as the
indemnified persons may deem appropriate, and the indemnifying party will
promptly indemnify the indemnified persons in accordance with the provisions of
this Section 9.5.
Section 9.6. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive until
the first anniversary of the Closing Date (except for the representation of HIT
pursuant to Section 2.6(b), which shall survive until the second anniversary of
the Closing Date), at which time such representations and warranties will
terminate and be of no force and effect. Any claim under this Article IX for
Loss or Expense in respect of any representations and warranties must be
asserted in writing prior to the first anniversary of the Closing Date, except
for such a claim in respect of the representation of HIT pursuant to Section
2.6(b), which must be asserted in writing prior to the second anniversary of
the Closing Date. Notwithstanding the foregoing, if a claim of a breach of a
representation or warranty under this Article IX is asserted in writing prior
to the applicable time period set forth above in this Section 9.6, then such
representation or warranty, as it relates to such claim, shall survive until
the Loss or Expense in respect thereof, if any, is finally determined and paid
by the indemnifying party.
Section 9.7. Satisfaction of Indemnification Obligations.
From and after the Closing, any indemnifying party who is otherwise obligated
to make an indemnification payment pursuant to this Article IX may in lieu of
such payment transfer Units (as defined in the Realty Partnership Agreement and
the Operating Partnership Agreement) pursuant to and subject to the provisions
of Section 5.5 of each of the Realty Partnership Agreement and the Operating
Partnership Agreement.
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Section 9.8. Special Indemnities. (a) In the event that this
Agreement is terminated other than pursuant to Section 10.1(b) or 10.1(d),
then:
(i) HIT and HIC shall severally indemnify and hold harmless
the Starwood Parties and their respective subsidiaries, affiliates and
successors from and against any and all Loss and Expense incurred by
the Starwood Parties or their respective subsidiaries, affiliates and
successors in connection with or arising from any action, suit or
proceeding brought against such Starwood Party by any holder of Paired
Shares (other than any of the Ross Parties (as defined below) in
connection with the Assignment Agreement (as defined below)) relating
to the transactions contemplated by this Agreement, other than to the
extent such Loss or Expense arose from a breach by a Starwood Party of
its obligations under either this Agreement, any other agreement
entered into in connection with this Agreement or the Assignment
Agreement or a breach by a Starwood Party or its affiliates or
successors of any fiduciary duty to the plaintiff in any such action,
suit or proceeding; and
(ii) if, within 60 days after the effectiveness of such termination,
HIT and HIC receive from Starwood (and any other person having any
right to assert claims or causes of action ("Assigned Claims")
assigned to Starwood pursuant to that certain Assignment Agreement
dated November 7, 1994 (the "Assignment Agreement") by and among
Starwood and Leonard M. Ross and certain affiliated entities of his
(the "Ross Parties")) a full and complete general release (the
"Release") of the Assigned Claims, then HIT and HIC shall severally
indemnify and hold harmless Starwood and its affiliates and related
parties who have any liability or obligations under the Assignment
Agreement from and against any and all Loss and Expense under or in
respect of the Assignment Agreement, other than to the extent such
Loss or Expense arose from a breach by a Starwood Party of its
obligations under either this Agreement, any other agreement entered
into in connection with this Agreement or the Assignment Agreement or
a breach by Starwood or its affiliates or such related parties of any
duty to the Ross Parties; provided that the obligation of HIT and HIC
to indemnify and hold harmless for Loss and Expense pursuant to this
clause (ii) shall be limited to the payment by HIT and HIC in the
aggregate of an amount equal to $1,800,000.
(b) Notwithstanding anything to the contrary contained in
this Agreement or in any Transaction Agreement, in the event the Closing is
consummated, then:
(i) none of HIT, HIC, the Realty Partnership or the Operating
Partnership shall assume any obligations or liabilities under the
Assignment Agreement;
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(ii) in consideration of Starwood's agreement that any
recovery with respect to the Assigned Claims shall not exceed
$1,800,000, HIT and HIC hereby agree to toll the expiration of the
limitations period in respect of the Assigned Claims to January 31,
1996;
(iii) the Partnership Interests of each of HIT and HIC in the
Realty Partnership and the Operating Partnership, respectively, shall
be increased as if they had made an additional cash contribution to
the Partnerships equal to 50% of any Applied Proceeds (as defined
below);
(iv) if on or prior to December 15, 1995 HIT and HIC are
provided with the Release, then HIT and HIC shall indemnify and hold
harmless to the extent provided in Section 9.8(a)(ii); and
(v) HIT and HIC shall indemnify and hold harmless to the
extent provided in Section 9.8(a)(i).
As used herein "Applied Proceeds" means any insurance or other
proceeds which are deposited into escrow to be applied to reduce the price to
be paid to the Ross Parties under the Assignment Agreement, whether or not such
proceeds are so applied.
(c) Starwood shall not transfer, assign or otherwise convey
the Assigned Claims to any person. The provisions of Sections 9.4 and 9.5
shall apply to the indemnification obligations pursuant to this Section 9.8.
ARTICLE X
TERMINATION
Section 10.1. Termination. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement may be terminated at
any time prior to the Closing Date:
(a) by the mutual consent of HIT, HIC and Starwood;
(b) by HIT or HIC upon any material breach by a Starwood
Party of any of its representations, warranties or covenants contained
in this Agreement; provided that such Starwood Partner shall have been
given a reasonable opportunity to cure such breach;
(c) by Starwood upon any material breach by HIT or HIC of any
of its representations, warranties or covenants contained in this
Agreement; provided that HIT or HIC, as the case may be, shall have
been given a reasonable opportunity to cure such breach;
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(d) by HIT or HIC if any of the conditions specified in
Article VII has not been met or waived at such time as it is no longer
possible to satisfy such condition;
(e) by Starwood if any of the conditions specified in Article
VIII has not been met or waived at such time as it is no longer
possible to satisfy such condition;
(f) by HIT or HIC or Starwood if the Closing shall not have
been consummated on or before January 31, 1995 (provided that Starwood
may extend such date to March 31, 1995 in order to facilitate the
approval by the shareholders of HIT of the HIT Shareholder Matters or
the approval by the stockholders of HIC of the HIC Stockholder Matters
and provided further that if Starwood so extends such date, then,
notwithstanding anything to the contrary contained in this Agreement,
HIT and HIC may take appropriate action (including, without
limitation, the preparation and filing of proxy materials for the
approval of the merger of HIT and HIC) in order to allow them to
consummate the Third Closing (as defined in the Credit Agreement)
pursuant to, and within the time period provided by, the Credit
Agreement); provided that prior to March 31, 1995 no party may
terminate this Agreement pursuant to this Section 10.1(f) if such
party shall then be in material breach of any of its representations,
warranties or covenants contained herein; or
(g) by HIT or HIC, upon 15 days' prior written notice, by HIT
or HIC to Starwood, in the event that as set forth in Section 5.9 HIT
or HIC enters into an agreement with any person other than the
Starwood Parties which is not consistent with the obligations of HIT
or HIC set forth in this Agreement or with the consummation of the
transactions contemplated by this Agreement (such notice to include an
explanation of such inconsistencies); provided that in entering into
such agreement HIT and HIC materially complied with the provisions of
Section 5.9.
In the event that this Agreement shall be terminated pursuant to this Section
10.1, all further obligations of the parties under this Agreement (other than
Section 9.8, the other provisions of Article IX (but only to the extent that
such other provisions relate to a breach which forms the basis for such
termination) and Sections 11.1, 11.2 and 11.10), shall terminate without
further liability of any party to the others; provided, however, that nothing
herein shall relieve any party from liability for its nonperformance or breach
of any provision of this Agreement if performance of or compliance with such
provision was within its reasonable control.
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ARTICLE XI
OTHER PROVISIONS
Section 11.1. Confidential Nature of Information. Each party
agrees that it will treat in strict confidence all documents, materials and
other information which it obtains regarding the other parties during the
course of the negotiations leading to the consummation of the transactions
provided for herein and the preparation of this Agreement; and if for any
reason whatsoever the transactions contemplated by this Agreement shall not be
consummated, each party shall return to the other party all copies of
non-public documents and materials which have been furnished or acquired in
connection therewith and shall not use or disseminate such documents, materials
or other information for any purpose whatsoever.
Section 11.2. Fees and Expenses. (a) Except as otherwise
provided in this Section 11.2, each of the parties hereto shall bear its own
costs and expenses (including, without limitation, fees and disbursements of
its counsel, accountants and other financial, legal, accounting or other
advisors) incurred by it in connection with the preparation, negotiation,
execution and delivery of the memorandum of understandings dated June 13, 1994
among HIT, HIC and Starwood, this Agreement, each of the other documents and
instruments executed in connection with or contemplated by this Agreement and
the consummation of the transactions contemplated hereby and thereby
(collectively "Acquisition Expenses").
(b) In the event that the Closing occurs, HIT and HIC will
cause the Partnerships to reimburse the Starwood Parties for their reasonable
out-of-pocket Acquisition Expenses, upon receipt by the Partnerships of
reasonable documentation therefor.
(c) In the event of a Qualifying Termination (as defined
below), (i) if the Qualifying Termination is pursuant to Section 10.1(g), then
the written notice effecting such Qualifying Termination shall be accompanied
by payment to Starwood in readily available federal funds of an aggregate fee
of $3,500,000, or if such Qualifying Termination is pursuant to Section
10.1(f), then HIT and HIC shall pay such $3,500,000 fee to Starwood within ten
business days after the giving by any party of the written notice effecting
such Qualifying Termination (it being understood that if Qualifying
Terminations are effected pursuant to both Section 10.1(f) and Section 10.1(g),
Starwood shall be entitled to receive only one such fee pursuant to this clause
(i)), (ii) within 10 business days after receipt by HIT and HIC from Starwood
of reasonable documentation therefor, HIT and HIC shall reimburse the Starwood
Parties for their respective reasonable out-of-pocket Acquisition Expenses, and
(iii) Starwood may elect, by written notice delivered to HIT on the date which
is no later than 10 business days subsequent to the date on which
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the $3,500,000 fee pursuant to clause (c)(i) above is paid, to cause HIT to
purchase the Assets (as defined in the Asset Purchase Agreement (the "Albany
Agreement") dated as of August 30, 1994 among HIT, HIC and Berl Holdings, L.P.
("Berl")) from Berl on substantially the same terms and conditions as Berl
purchased such Assets pursuant to the Albany Agreement, such purchase by HIT to
be consummated within 30 days after the giving of such notice; provided that
the purchase price for the Assets shall be equal to the purchase price for the
Assets paid by Berl pursuant to the Albany Agreement plus the excess, if any,
of (A) an amount equal to simple interest at a rate of 10% per annum on the
amount of equity invested by Berl during the period in which it owned such
Assets pursuant to such purchase over (B) any net cash flow (after debt
service) received by Berl during such period.
For purposes of this Section 11.2(c), a "Qualifying
Termination" shall mean (i) a termination of this Agreement pursuant to Section
10.1(g) or (ii) a termination of this Agreement by Starwood pursuant to Section
10.1(f) if as of the date of such termination either (A) the meetings of the
shareholders of HIT and the stockholders of HIC referred to in Section 5.2
shall not have been held, unless such meetings were not held because of
circumstances or occurrences beyond the reasonable control of HIT and HIC or
(B) HIT and HIC shall then be engaged in substantive negotiations or
discussions with persons other than the Starwood Parties with respect to a
Proposal (as defined in Section 5.9).
Section 11.3. Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed given when
delivered personally or by overnight mail, or four days after being mailed (by
registered mail, return receipt requested) to a party at the following address
(or to such other address as such party may have specified by notice given to
the other parties pursuant to this provision):
If to HIT to:
Hotel Investors Trust
11845 West Olympic Boulevard, Suite 550
Los Angeles, California 90064
Attention: Jeffrey C. Lapin
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
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If to HIC to:
Hotel Investors Corporation
11845 West Olympic Boulevard, Suite 560
Los Angeles, California 90064
Attention: Kevin E. Mallory
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
If to a Starwood Party to:
Starwood Capital Group, L.P.
c/o Sternlicht Holdings II, Inc.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Barry S. Sternlicht
with a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Robert E. King, Jr.
Section 11.4. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person
that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such
first person;
(b) an "associate" of any person means (i) a corporation or
organization of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10 percent or more of
a class of equity securities, (ii) any trust or other estate in which
such person has substantial beneficial interest or as to which such
person serves as trustee or in the similar capacity and (iii) any
relative or spouse of such person, or any relative of such spouse, who
has the same home as such person or who is a director or officer of
the person or any of its parents or subsidiaries.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
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(d) "Disinterested Members" when used with respect to the
Trust has the meaning set forth in the Code of Regulations of the
Trust and, when used with respect to the Corporation, has the meaning
set forth in the By-Laws of the Corporation, in each case as amended
from time to time.
(e) "HIC Disclosure Schedule" means the disclosure letter
dated the date hereof delivered by HIC to Starwood and relating to
this Agreement.
(f) "HIT Disclosure Schedule" means the disclosure letter
dated the date hereof delivered by HIT to Starwood and relating to
this Agreement.
(g) the "knowledge of HIC" means the actual knowledge of the
persons listed in the HIC Disclosure Schedule.
(h) the "knowledge of HIT" means the actual knowledge of the
persons listed in the HIT Disclosure Schedule.
(i) the "knowledge of such Starwood Party" means the actual
knowledge of the persons listed in the Starwood Disclosure Schedule.
(j) "Material Adverse Effect" means any change or effect
(or any development that, insofar as can reasonably be foreseen, would
result in any change or effect) that is materially adverse to the
business, properties, assets, condition (financial or otherwise) or
results of operations of the applicable person or persons; and
(k) "person" means an individual, corporation, partnership,
limited liability company, association, trust unincorporated
organization or other entity.
(l) "REIT Requirements" shall mean the requirements for HIT
to (i) qualify as a REIT, (ii) avoid any federal income or excise tax
liability, (iii) retain its status as grandfathered pursuant to
Section 132(c)(3) of the Deficit Reduction Act of 1984 and (iv) retain
the benefits of that certain private letter ruling issued by the
Internal Revenue Service to HIT dated as of January 4, 1980.
(m) "Starwood Disclosure Schedule" means the disclosure
letter dated the date hereof delivered by Starwood to HIT and HIC and
relating to this Agreement.
(n) "subsidiary" shall mean with respect to any person, any
other person of which more than 50% of the outstanding voting power is
owned, directly or indirectly, by such first person or by one or more
subsidiaries of such first person.
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Section 11.5. Partial Invalidity. In case any one or more of
the provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
Section 11.6. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective permitted successors or assigns.
Section 11.7. Execution in Counterparts. This Agreement may
be executed in one or more counterparts, each of which shall be considered an
original counterpart, and shall become a binding agreement when HIT, HIC, and
each of the Starwood Parties shall have each executed one counterpart.
Section 11.8. Titles and Headings. Titles and headings to
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
Section 11.9. Schedules and Exhibits. The schedules
(including, without limitation, the HIT Disclosure Schedule, the HIC Disclosure
Schedule and the Starwood Disclosure Schedule) and exhibits referred to in this
Agreement shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
Section 11.10. Entire Agreement; Amendments and Waivers;
Assignment. This Agreement contains the entire understanding of the parties
hereto with regard to the subject matter contained herein. The parties hereto,
by mutual agreement in writing, may amend, modify and supplement this
Agreement. The failure of any party hereto to enforce at any time any
provision of this Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this Agreement or any part
hereof or the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach. Except as expressly
provided herein, the rights and obligations of the parties under this Agreement
may not be assigned or transferred by any party hereto without the prior
written consent of the other parties hereto.
Section 11.11. Governing Law. Except to the extent that
Maryland law is mandatorily applicable to the rights and obligations of the
shareholders of HIT and the stockholders of
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HIC, this Agreement, and the application or interpretation thereof, shall be
exclusively governed by its terms and by the internal laws of the State of New
York, without regard to principles of conflicts of laws as applied in the State
of New York or any other jurisdiction which, if applied, would result in the
application of any laws other than the internal laws of the State of New York.
Section 11.12. No Third-Party Beneficiaries. Except for
Article IX, nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon any person other than the parties hereto and
successors and assigns permitted by Section 11.6 any right, remedy or claim
under or by reason of this Agreement.
Section 11.13. The Trust; Starwood General Partners. Each of
the parties hereto acknowledge and agree that (a) the name "Hotel Investors
Trust" is a designation of HIT and its Trustees (as Trustees but not
personally) under a Declaration of Trust dated August 25, 1969, as amended and
restated as of June 6, 1988, and all persons dealing with HIT shall look solely
to the HIT's assets for the enforcement of any claims against HIT, and the
Trustees, officers, agents and security holders of HIT assume no personal
liability for obligations entered into on behalf of HIT, and their respective
individual assets shall not be subject to the claims of any person relating to
such obligations and (b) all persons dealing with any Starwood Party shall look
solely to the assets of such Starwood Party for the enforcement of any claims
against such Starwood Party and the general partner of such Starwood Party, and
the officers, agents and security holders of such general partner assume no
personal liability for obligations entered into on behalf of such Starwood
Party, and their respective individual assets shall not be subject to the
claims of any person relating to such obligations.
Section 11.14. Designation of Starwood as Representative.
Each of the Starwood Partners irrevocably designates Starwood as its
representative, attorney-in-fact and agent authorized to act on behalf of such
Starwood Partner in connection with all matters arising pursuant to this
Agreement, including, without limitation, all amendments, modifications and
supplements to this Agreement and all waivers, consents and approvals pursuant
to this Agreement. HIT, HIC, the Realty Partnership, the Operating Partnership
and their respective affiliates and representatives shall be entitled to rely
on any act of Starwood as such attorney- in-fact and agent as being the duly
authorized and binding act of each Starwood Partner.
Section 11.15. Several Nature of Representations and
Agreements. Notwithstanding anything to the contrary in this Agreement, the
representations, warranties, covenants and agreements of each party to this
Agreement shall be several and
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not joint and no party shall have any responsibility or liability for any
breach of this Agreement by any other party hereto.
Section 11.16. Determinations and Interpretations by HIT and
HIC. All determinations of the Trust (or the Board of Trustees of the Trust)
and the Corporation (or the Board of Directors of the Corporation) provided for
in or pursuant to this Agreement shall be made by their respective
Disinterested Members. All interpretations of the terms of this Agreement
shall be resolved on behalf of the Trust and the Corporation by their
respective Disinterested Members.
Section 11.17. Submission to Jurisdiction. Each of the
parties hereto irrevocably submits and consents to the jurisdiction of the
United States District Court for the Southern District of New York and United
States District Court for the Central District of California in connection with
any action or proceeding arising out of or relating to this Agreement or any
Transaction Document and the transactions contemplated hereby and thereby, and
irrevocably waives any immunity from jurisdiction thereof and any claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled in any such action or proceeding.
Section 11.18. Approvals and Consents. Unless otherwise
expressly set forth herein, any agreement, approval or consent required a party
hereto shall not be unreasonably withheld or delayed.
Section 11.19. HIT and HIC Contributions. Notwithstanding
anything to the contrary contained in this Agreement or in any Transaction
Agreement, in the event that either HIT or HIC does not receive a consent
described in Section 8.6, then at the option of HIT or HIC, as the case may be,
HIT or HIC, as the case may be, shall hold the related asset in trust for the
use and benefit of the Realty Partnership or the Operating Partnership, as the
case may be (the "Transferee"), and shall retain the related liability for the
account and at the expense of the Transferee and take such other reasonable
action in order to place the Transferee, insofar as reasonably possible, in the
same position as would have existed had such asset been transferred and such
liability been assumed by the Transferee (with such assets and liability to be
transferred to and assumed by the Transferee upon receipt of the related
consent). Failure to obtain such consent shall not be a condition to the
obligation of any party hereto to consummate the transactions contemplated
hereby.
Section 11.20. Execution. In the event that this Agreement
is not executed prior to the Closing Date by either or both of Starwood Apollo
Hotel Partners VIII, L.P. or Starwood Apollo Hotel Partners IX (a "Nonexecuting
Person"), then, notwithstanding anything to the contrary contained in this
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Agreement, this Agreement shall continue in effect and shall be binding upon
all other parties hereto which execute this Agreement, it being understood that
in such event the Partnership Interests of the partners in the Partnerships
shall be adjusted in accordance with Section 5.11 to reflect the contributions
not being made by the Nonexecuting Person or Persons.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto or by their duly authorized officers, all as of
the date first above written.
HOTEL INVESTORS TRUST
a Maryland real estate investment trust
By:________________________________
Name:
Title:
HOTEL INVESTORS CORPORATION
a Maryland corporation
By:________________________________
Name:
Title:
STARWOOD CAPITAL GROUP, L.P.,
By: BSS CAPITAL PARTNERS, L.P,
general partner
By: STERNLICHT HOLDINGS II, INC.,
general partner
By:__________________________
Name:
Title:
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STARWOOD PARTNERS:
BERL HOLDINGS L.P.
By: BERL HOLDINGS I, INC.,
general partner
By:___________________________
Name:
Title:
STARWOOD APOLLO HOTEL PARTNERS VIII, L.P.
By: SAHI, INC.,
general partner
By:___________________________
Name:
Title:
By: AP-GP MIDSTAR HOTELS VII, INC.,
general partner
By:___________________________
Name:
Title:
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STARWOOD APOLLO HOTEL PARTNERS IX, L.P.
By: SAHI, INC.,
general partner
By:___________________________
Name:
Title:
By: AP-GP MIDSTAR HOTELS IX, INC.,
general partner
By:___________________________
Name:
Title:
STARWOOD NOMURA HOTEL INVESTORS, L.P.
By: SNHI, INC.,
general partner
By:___________________________
Name:
Title:
-52-
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STARWOOD/WICHITA INVESTORS, L.P.
By: STARWOOD OPPORTUNITY FUND, II, L.P.,
general partner
By: STARWOOD CAPITAL GROUP, L.P.,
general partner
By: BSS CAPITAL PARTNERS, L.P.,
general partner
By: STERNLICHT HOLDINGS II,
INC., general partner
By:______________________
Name:
Title:
STARWOOD-HUNTINGTON PARTNERS, L.P.
By: SRL HOLDING, INC.,
general partner
By:___________________________
Name:
Title:
WOODSTAR PARTNERS I, L.P.
By: STARWOOD CAPITAL GROUP, L.P.,
general partner
By: BSS CAPITAL PARTNERS, L.P.,
general partner
By: STERNLICHT HOLDINGS II, INC.,
general partner
By:______________________
Name:
Title:
-53-
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SCHEDULE A
TO
FORMATION AGREEMENT
Starwood Realty Properties and Liabilities
The Starwood Partners will contribute to the Realty
Partnership the following assets (together with associated liabilities):
- $4,200,000 in cash
- a mixed-use property located in Lexington, Kentucky and
including a 155-suite hotel known as the French Quarters
Suites (all of which will be leased by the Realty Partnership
to the Operating Partnership after the Reorganization and will
be managed by the Operating Partnership after the
Reorganization), as well as an approximate 12,000 rentable
square foot office building and approximately 38,000 gross
leasable square feet of retail space, subject to the
assumption by the Realty Partnership of related indebtedness
in the aggregate principal amount of $1,517,000, which
indebtedness is also secured by mortgages on the Albany
Holiday Inn and the Capitol Hill Suites, referred to below,
and is cross defaulted and cross collateralized with the
$6,800,000 mortgage indebtedness secured by the Doubletree
Club Rancho Bernardo, referred to below.
- a 152-suite property located in Washington, D.C., known as the
Capitol Hill Suites (which will be leased by the Realty
Partnership to the Operating Partnership after the
Reorganization and will be managed by the Operating
Partnership after the Reorganization).
- a 151-room hotel located in Albany, Georgia, known as the
Albany Holiday Inn purchased by Starwood as described in
Section 11.2(c) of the Formation Agreement (which hotel will
be leased by the Realty Partnership to the Operating
Partnership after the Reorganization and will be managed by
the Operating Partnership after the Reorganization).
- a 209-room hotel located in Rancho Bernardo, California, known
as the Doubletree Club Rancho Bernardo (which will be leased
by the Realty Partnership to the Operating Partnership after
the
A-1
<PAGE> 59
Reorganization and will be managed by the Operating
Partnership), subject to the assumption by the Realty
Partnership of related indebtedness in the aggregate principal
amount of $6,800,000, which indebtedness is cross defaulted
and cross collateralized with the 1,517,000 mortgage
indebtedness secured by the French Quarters Suites (and
related mixed-use property), the Capitol Hill Suites and the
Albany Holiday Inn, all referenced above.
- a 259-room hotel located in Wichita, Kansas, known as the
Harvey Wichita Inn, subject to the assumption by the Realty
Partnership of related indebtedness in the aggregate principal
amount of $2,250,000. The Starwood Partner contributing the
hotel will guarantee the cash flow therefrom pursuant to
Section 6.7 of the Formation Agreement.
- first mortgage notes in the aggregate principal amount of
[$55,000,000] at June 30, 1994 (subject to the assumption by
the Realty Partnership of related indebtedness in the
aggregate principal amount of [$30,700,000]), which are
secured by (i) a 506-room hotel in Dallas, Texas known as the
Harvey DFW Airport Hotel, (ii) a 429-room hotel in Addison,
Texas known as the Harvey Addison Hotel and (iii) a 295-room
hotel in Dallas, Texas known as the Harvey Bristol Suites.
These notes are guaranteed personally by an individual.
- a first mortgage note in the aggregate principal amount of
[$12,500,000] at June 30, 1994, which is secured by a 151-room
hotel in Secaucus, New Jersey known as the Ramada Suites.
- first mortgage notes in the aggregate principal amount of
[$11,500,000] at June 30, 1994, which are secured by a
203-room hotel in Atlantic City, New Jersey, known as the
Atlantic City Inn, as well as by an adjacent parking lot and
certain additional collateral, subject to the assumption by
the Realty Partnership of related indebtedness in the
aggregate principal amount of [$9,000,000], which indebtedness
is also secured by the Ramada Suites first mortgage note and
the Atlantic City Inn (and related collateral) first mortgage
note, all referenced above.
The contributions of the hotel properties by the Starwood
Partners to the Realty Partnership will not include certain operating assets or
furnishings, inventory or equipment, all of which will be contributed by the
Starwood Partners to the Operating Partnership.
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SCHEDULE B
TO
FORMATION AGREEMENT
Starwood Operating Properties and Liabilities
The Starwood Partners will contribute to the Realty
Partnership the following assets (together with associated liabilities):
$800,000 of cash, certain leases and operating assets (including furnishings,
inventory and equipment) of the French Quarters, Capitol Hill Suites, Albany
Holiday Inn and Doubletree Rancho Bernardo hotels contributed by the Starwood
Partners to the Realty Partnership. Those leases will be similar to the
current leases from the Trust to the Corporation.
