<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the quarterly period ended June 30, 1996
----------------------------------
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the transition period from to
--------- ---------
<TABLE>
<CAPTION>
<S> <C>
Commission File Number: 1-6828 Commission File Number: 1-7959
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
Maryland Maryland
(State or other jurisdiction (State or other jurisdiction
of incorporation or organization) of incorporation or organization)
52-0901263 52-1193298
(I.R.S. employer identification no.) (I.R.S. employer identification no.)
2231 East Camelback Road, Suite 410 2231 East Camelback Road, Suite 400
Phoenix, AZ 85016 Phoenix, AZ 85016
(Address of principal executive (Address of principal executive
offices, including zip code) offices, including zip code)
(602) 852-3900 (602) 852-3900
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
(Former name or former address, (Former name or former address,
if changed since last report) if changed since last report)
11835 W. Olympic Blvd., Suite 695 11835 W. Olympic Blvd., Suite 675
Los Angeles, California 90064 Los Angeles, California 90064
</TABLE>
Indicate by check mark whether the Registrants (1) have filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
25,798,886 Shares of Beneficial Interest, par value $0.01 per share, of
Starwood Lodging Trust paired with 25,798,886 Shares of Common Stock, par value
$0.01 per share, of Starwood Lodging Corporation, outstanding as of August 13,
1996.
================================================================================
<PAGE> 2
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements of Starwood Lodging Trust (the
"Trust") and Starwood Lodging Corporation (the "Corporation", and collectively,
the "Company") are provided pursuant to the requirements of this item.
INDEX TO FINANCIAL STATEMENTS
Starwood Lodging Trust and Starwood Lodging Corporation:
Combined Balance Sheets - As of June 30, 1996 and December 31, 1995
Combined Statements of Operations - For the three and six months ended June
30, 1996 and 1995
Combined Statements of Cash Flows - For the six months ended June 30, 1996
and 1995
Starwood Lodging Trust:
Balance Sheets - As of June 30, 1996 and December 31, 1995
Statements of Operations - For the three and six months ended June 30, 1996
and 1995
Statements of Cash Flows - For the six months ended June 30, 1996
and 1995
Starwood Lodging Corporation:
Balance Sheets - As of June 30, 1996 and December 31, 1995
Statements of Operations - For the three and six months ended June 30, 1996
and 1995
Statements of Cash Flows - For the six months ended June 30, 1996
and 1995
Notes to Financial Statements
Starwood Lodging Trust and Starwood Lodging Corporation:
Combined Statement of Operations for the three and six months ended June 30,
1996 and Combined Pro Forma Statement of Operations - for the three and six
months ended June 30, 1995
Notes to Unaudited Combined Pro Forma Statements of Operations for the three
and six months ended June 30, 1996
- 2 -
<PAGE> 3
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
------------- -------------
<S> <C> <C>
ASSETS
Hotel assets held for sale, net ............................. $ 39,446,000 $ 21,063,000
Hotel assets, net ........................................... 471,800,000 315,895,000
------------- -------------
511,246,000 336,958,000
Mortgage notes receivable, net .............................. 59,395,000 79,261,000
Investments ................................................. 46,410,000 2,858,000
------------- -------------
Total real estate investments .......................... 617,051,000 419,077,000
Cash and cash equivalents ................................... 17,878,000 9,332,000
Accounts and interest receivable ............................ 17,379,000 9,595,000
Notes receivable, net ....................................... 1,768,000 1,796,000
Inventories, prepaid expenses and other assets .............. 29,423,000 20,194,000
------------- -------------
$ 683,499,000 $ 459,994,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and revolving lines of credit .. $ 272,573,000 $ 119,100,000
Mortgage and other notes payable ............................ 1,756,000 4,385,000
Accounts payable and other liabilities ...................... 27,532,000 19,022,000
Dividends/distributions payable ............................. 10,677,000 9,284,000
------------- -------------
312,538,000 151,791,000
------------- -------------
Commitments and contingencies
MINORITY INTEREST ........................................... 102,014,000 92,735,000
------------- -------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest at June 30, 1996 and
December 31, 1995, $.01 par value; authorized
100,000,000 shares; outstanding 15,799,000 shares
and 13,799,000 at June 30, 1996 and December 31, 1995,
respectively ............................................. 158,000 138,000
Corporation common stock at June 30, 1996 and December 31,
1995, $.01 par value; authorized 100,000,000 shares;
outstanding 15,799,000 shares and 13,799,000 at
June 30, 1996 and December 31, 1995, respectively ........ 158,000 138,000
Additional paid-in capital .................................. 496,448,000 434,107,000
Distributions in excess of earnings ......................... (227,817,000) (218,915,000)
------------- -------------
268,947,000 215,468,000
------------- -------------
$ 683,499,000 $ 459,994,000
============= =============
</TABLE>
See accompanying notes to financial statements.
- 3 -
<PAGE> 4
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30,
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
REVENUE
Hotel .................................................... $59,441,000 $26,804,000
Gaming ................................................... 6,914,000 7,147,000
Interest from mortgage and other notes ................... 2,236,000 2,555,000
Income from joint ventures and
rents from leased hotel properties .................... 2,079,000 228,000
Other .................................................... 1,179,000 896,000
Loss on sale of real estate assets ....................... (347,000) -
----------- -----------
71,502,000 37,630,000
----------- -----------
EXPENSES
Hotel operations ......................................... 39,603,000 18,077,000
Gaming operations ........................................ 6,357,000 6,312,000
Interest ................................................. 4,403,000 4,910,000
Depreciation and amortization ............................ 5,792,000 3,322,000
Administrative and operating ............................. 2,992,000 1,382,000
----------- -----------
59,147,000 34,003,000
----------- -----------
Income before extraordinary item and minority interest ... 12,355,000 3,627,000
Minority interest ........................................ 3,834,000 2,649,000
----------- -----------
Income before extraordinary item.......................... 8,521,000 978,000
Extraordinary item (net of $413,000 minority interest).... 1,077,000 -
----------- -----------
NET INCOME $ 9,598,000 $ 978,000
=========== ===========
EARNINGS PER PAIRED SHARE
Income before extraordinary item ......................... $ 0.55 $ 0.48
Extraordinary item ....................................... 0.07 -
=========== ===========
NET INCOME PER PAIRED SHARE $ 0.62 $ 0.48
=========== ===========
Weighted average number of paired shares 15,556,000 2,022,000
=========== ===========
</TABLE>
See accompanying notes to financial statements.
- 4 -
<PAGE> 5
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------------
1996 1995
------------ -----------
<S> <C> <C>
REVENUE
Hotel ..................................................... $103,505,000 $49,585,000
Gaming .................................................... 13,743,000 13,816,000
Interest from mortgage and other notes .................... 4,761,000 5,136,000
Income from joint ventures and rents from leased
hotel properties ........................................ 2,673,000 387,000
Other ..................................................... 2,052,000 957,000
Loss on sale of hotel assets .............................. (347,000) (113,000)
------------ -----------
126,387,000 69,768,000
------------ -----------
EXPENSES
Hotel operations .......................................... 69,653,000 34,357,000
Gaming operations ......................................... 12,192,000 12,333,000
Interest .................................................. 7,626,000 10,737,000
Depreciation and amortization ............................. 13,452,000 6,185,000
Administrative and operating .............................. 5,365,000 2,450,000
------------ -----------
108,288,000 66,062,000
------------ -----------
Income before extraordinary item and minority interest .... 18,099,000 3,706,000
Minority interest ......................................... 5,488,000 2,743,000
------------ -----------
Income before extraordinary item .......................... 12,611,000 963,000
Extraordinary item (net of $413,000 and $921,000 minority
interest in 1996 and 1995, respectively) ................ 1,077,000 363,000
------------ -----------
NET INCOME $ 13,688,000 $ 1,326,000
============ ===========
EARNINGS PER PAIRED SHARE
Income before extraordinary item .......................... $ 0.86 $ 0.48
Extraordinary item ........................................ 0.07 0.18
============ ===========
NET INCOME PER PAIRED SHARE $ 0.93 $ 0.66
============ ===========
Weighted average number of paired shares 14,677,000 2,022,000
============ ===========
</TABLE>
See accompanying notes to financial statements.
- 5 -
<PAGE> 6
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
---------------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................... $ 13,688,000 $ 1,326,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Minority interest ................................ 5,488,000 3,664,000
Extraordinary item ............................... (1,077,000) (1,284,000)
Depreciation and amortization .................... 13,452,000 6,185,000
Accretion of discount ............................ (1,560,000) (1,518,000)
Deferred interest ................................ - 649,000
Loss on sale of real estate assets ............... 347,000 113,000
Changes in operating assets and liabilities:
Accounts receivable, inventories, prepaid
expenses and other assets ...................... (16,056,000) (9,773,000)
Accounts payable and other liabilities ........... 7,748,000 1,747,000
------------ ------------
Net cash provided by operating activities .... 22,030,000 1,109,000
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets .......................... (151,552,000) (12,421,000)
Purchase of investments ............................ (44,007,000) -
Decrease in investments ............................ 455,000 -
Net proceeds from sale of hotel assets ............. 3,684,000 -
Increase in mortgage notes receivable .............. (20,114,000) -
Principal received on mortgage and other
notes receivable ............................... 2,571,000 2,322,000
Reorganization costs ............................... (2,786,000)
------------ ------------
Net cash used in financing activities ........ (208,963,000) (12,885,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and other
notes payable ................................. (2,990,000) (33,679,000)
Borrowings under secured notes payable, net ........ 153,473,000 27,156,000
Borrowings under mortgage and other notes .......... 434,000 9,977,000
Capital contributions, net ......................... 1,728,000 14,860,000
Proceeds from equity offerings ..................... 62,363,000 -
Dividends/distributions paid ....................... (19,529,000) -
Purchase of warrants ............................... - (1,300,000)
------------ ------------
Net cash provided by financing activities .... 195,479,000 17,014,000
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS .............. 8,546,000 5,238,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD ........................... 9,332,000 5,065,000
------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD ................................. $ 17,878,000 $ 10,303,000
============ ============
</TABLE>
See accompanying notes to financial statements.
- 6 -
<PAGE> 7
STARWOOD LODGING TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
------------- -------------
<S> <C> <C>
ASSETS
Hotel assets held for sale, net .............................. $ 36,324,000 $ 20,547,000
Hotel assets, net ............................................ 365,498,000 221,063,000
------------- -------------
401,822,000 241,610,000
Mortgage notes receivable, net ............................... 59,395,000 79,261,000
Mortgage notes receivable, Corporation ....................... 87,655,000 68,486,000
Investments .................................................. 45,884,000 2,841,000
------------- -------------
Total real estate investments .......................... 594,756,000 392,198,000
Cash and cash equivalents .................................... 7,340,000 710,000
Rent and interest receivable ................................ 1,953,000 1,841,000
Notes receivable, net ........................................ 1,219,000 1,232,000
Notes receivable, Corporation ................................ 13,555,000 17,978,000
Prepaid expenses and other assets ............................ 19,992,000 11,778,000
------------- -------------
$ 638,815,000 $ 425,737,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and revolving line of credit .... $ 272,573,000 $ 119,100,000
Mortgage and other notes payable ............................. 100,000 100,000
Accounts payable and other liabilities ....................... 4,511,000 4,412,000
Dividends/Distributions payable .............................. 10,677,000 9,284,000
------------- -------------
287,861,000 132,896,000
------------- -------------
Commitments and contingencies
MINORITY INTEREST ............................................ 96,512,000 88,113,000
------------- -------------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest at June 30, 1996
and December 31, 1995, $.01 par value; authorized
100,000,000 shares; outstanding 15,799,000 shares
and 13,799,000 at June 30, 1996 and December 31,
1995, respectively ........................................ 158,000 138,000
Additional paid-in capital ................................... 413,962,000 354,619,000
Distributions in excess of earnings .......................... (159,678,000) (150,029,000)
------------- -------------
254,442,000 204,728,000
------------- -------------
$ 638,815,000 $ 425,737,000
============= =============
</TABLE>
See accompanying notes to financial statements.
- 7 -
<PAGE> 8
STARWOOD LODGING TRUST
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
REVENUE
Rents from Corporation .................................. $11,750,000 $ 5,805,000
Interest from Corporation ............................... 1,915,000 802,000
Interest from mortgage and other notes .................. 2,192,000 2,547,000
Income from joint venture and rents from
other leased hotel properties ........................ 874,000 228,000
Other income ............................................ 667,000 66,000
Loss on sale of real estate assets ...................... (347,000) -
----------- -----------
17,051,000 9,448,000
----------- -----------
EXPENSES
Interest ................................................ 4,271,000 4,599,000
Depreciation and amortization ........................... 3,492,000 2,227,000
Administrative and operating ............................ 1,542,000 418,000
----------- -----------
9,305,000 7,244,000
----------- -----------
Income before minority interest ......................... 7,746,000 2,204,000
Minority interest ....................................... 2,146,000 1,644,000
----------- -----------
NET INCOME $ 5,600,000 $ 560,000
=========== ===========
NET INCOME PER SHARE $ 0.35 $ 0.28
=========== ===========
</TABLE>
See accompanying notes to financial statements.
- 8 -
<PAGE> 9
STARWOOD LODGING TRUST
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------------
1996 1995
-------------- ---------------
<S> <C> <C>
REVENUE
Rents from Corporation .................................... $ 23,254,000 $ 10,968,000
Interest from Corporation ................................. 4,103,000 1,569,000
Interest from mortgage and other notes .................... 4,696,000 5,113,000
Income from joint venture and rents from
other leased hotel properties ........................... 2,230,000 387,000
Other ..................................................... 1,073,000 100,000
Loss on sale of real estate assets ........................ (347,000) (113,000)
------------ ------------
35,009,000 18,024,000
------------ ------------
EXPENSES
Interest .................................................. 7,439,000 10,108,000
Depreciation and amortization ............................. 6,878,000 3,918,000
Administrative and operating .............................. 2,730,000 773,000
------------ ------------
17,047,000 14,799,000
------------ ------------
Income before extraordinary item and minority interest ... 17,962,000 3,225,000
Minority interest ......................................... 5,220,000 2,376,000
------------ ------------
Income before extraordinary item .......................... 12,742,000 849,000
Extraordinary item (net of $ 921,000 minority interest) ... - 363,000
------------ ------------
NET INCOME $ 12,742,000 $ 1,212,000
============ ============
EARNINGS PER PAIRED SHARE
Income before extraordinary item .......................... $ 0.87 $ 0.42
Extraordinary item ........................................ - 0.18
------------ ------------
NET INCOME PER SHARE $ 0.87 $ 0.60
============ ============
</TABLE>
See accompanying notes to financial statements.
- 9 -
<PAGE> 10
STARWOOD LODGING TRUST
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------------
1996 1995
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................. $ 12,742,000 $ 1,212,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Minority interest ........................................ 5,220,000 3,297,000
Extraordinary item ....................................... - (1,284,000)
Depreciation and amortization ............................ 6,878,000 3,918,000
Accretion of discount .................................... (1,560,000) (1,518,000)
Deferred interest......................................... - 649,000
Deferred interest - Corporation .......................... 1,607,000 (939,000)
Loss on sale of real estate assets ....................... 347,000 113,000
Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses and other assets ... (7,369,000) (7,125,000)
Accounts payable and other liabilities ................... 99,000 (1,781,000)
------------- -----------
Net cash provided by operating activities ............ 17,964,000 104,000
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets .................................. (171,563,000) (11,835,000)
Purchase of investments .................................... 964,000 -
Net proceeds from sale of hotel assets ..................... 3,684,000 -
Increase in mortgage notes receivable....................... (17,000,000) -
Increase in mortgage notes receivable, Corporation ......... (20,113,000) -
Principal received on mortgage and other notes receivable .. 2,555,000 2,294,000
Reorganization costs ....................................... - (1,393,000)
Net changes in notes receivable, Corporation ............... (4,878,000) (1,673,000)
------------- -----------
Net cash used in investing activities ................ (206,351,000) (12,607,000)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit ........................... 155,060,000 27,156,000
Principal payments on mortgage and other notes payable ..... (1,587,000) (33,175,000)
Borrowings under mortgage and other notes .................. - 9,977,000
Purchase of warrants ....................................... - (1,235,000)
Capital contributions ...................................... 1,829,000 11,968,000
Proceeds from equity offering .............................. 59,244,000 -
Dividends/distributions paid ............................... (19,529,000) -
------------- -----------
Net cash provided by financing activities ............ 195,017,000 14,691,000
------------- -----------
INCREASE IN CASH AND
CASH EQUIVALENTS ......................................... 6,630,000 2,188,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD ................................... 710,000 255,000
------------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD ......................................... $ 7,340,000 $ 2,443,000
============= ===========
</TABLE>
See accompanying notes to financial statements.
- 10 -
<PAGE> 11
STARWOOD LODGING CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Hotel assets held for sale, net .......................... $ 3,122,000 $ 516,000
Hotel assets, net ........................................ 106,302,000 94,832,000
------------ ------------
109,424,000 95,348,000
Investments .............................................. 526,000 17,000
------------ ------------
Total real estate investments ...................... 109,950,000 95,365,000
Cash and cash equivalents ................................ 10,538,000 8,622,000
Accounts receivable ...................................... 15,426,000 7,754,000
Notes receivable ......................................... 549,000 564,000
Inventories, prepaid expenses and other assets ........... 9,431,000 8,416,000
------------ ------------
$145,894,000 $120,721,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage and other notes payable ......................... $ 1,656,000 $ 4,285,000
Mortgage notes payable, Trust ............................ 87,655,000 68,486,000
Notes payable, Trust ..................................... 13,555,000 17,978,000
Accounts payable and other liabilities ................... 23,021,000 14,610,000
------------ ------------
125,887,000 105,359,000
------------ ------------
Commitments and contingencies
MINORITY INTEREST ........................................ 5,502,000 4,622,000
------------ ------------
SHAREHOLDERS' EQUITY
Corporation common stock at June 30, 1996 and December 31,
1995, $.01 par value; authorized 100,000,000 shares;
outstanding 15,799,000 shares and 13,799,000
at June 30, 1996 and December 31, 1995, respectively... 158,000 138,000
Additional paid-in capital ............................... 82,486,000 79,488,000
Distributions in excess of earnings ...................... (68,139,000) (68,886,000)
------------ ------------
14,505,000 10,740,000
------------ ------------
$145,894,000 $120,721,000
============ ============
</TABLE>
See accompanying notes to financial statements.
- 11 -
<PAGE> 12
STARWOOD LODGING CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
REVENUE
Hotel .................................................... $59,441,000 $26,804,000
Gaming ................................................... 6,914,000 7,147,000
Income from joint venture ................................ 1,205,000 -
Interest from notes receivable ........................... 44,000 8,000
Management fees and other income ......................... 512,000 830,000
----------- -----------
68,116,000 34,789,000
----------- -----------
EXPENSES
Hotel operations ......................................... 39,603,000 18,077,000
Gaming operations ........................................ 6,357,000 6,312,000
Rent, Trust .............................................. 11,750,000 5,805,000
Interest, Trust .......................................... 1,915,000 802,000
Interest, other .......................................... 132,000 311,000
Depreciation and amortization ............................ 2,300,000 1,095,000
Administrative and operating ............................. 1,450,000 964,000
----------- -----------
63,507,000 33,336,000
----------- -----------
Income before minority interest .......................... 4,609,000 1,423,000
Minority interest ........................................ 1,688,000 1,005,000
----------- -----------
Income before extraordinary items ........................ 2,921,000 418,000
Extraordinary item (net of $413,000 minority interest) ... 1,077,000
----------- -----------
NET INCOME $ 3,998,000 $ 418,000
=========== ===========
NET INCOME PER SHARE $ 0.26 $ 0.21
=========== ===========
</TABLE>
See accompanying notes to financial statements.
- 12 -
<PAGE> 13
STARWOOD LODGING CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------------
1996 1995
------------ -----------
<S> <C> <C>
REVENUE
Hotel ..................................................... $103,505,000 $49,585,000
Gaming .................................................... 13,743,000 13,816,000
Income from joint venture ................................. 443,000 -
Interest from notes receivable ............................ 65,000 23,000
Management fees and other income .......................... 979,000 857,000
------------ -----------
118,735,000 64,281,000
------------ -----------
EXPENSES
Hotel operations .......................................... 69,653,000 34,357,000
Gaming operations ......................................... 12,192,000 12,333,000
Rent, Trust ............................................... 23,254,000 10,968,000
Interest, Trust ........................................... 4,103,000 1,569,000
Interest, other ........................................... 187,000 629,000
Depreciation and amortization ............................. 6,574,000 2,267,000
Administrative and operating .............................. 2,635,000 1,677,000
------------ -----------
118,598,000 63,800,000
------------ -----------
Income before minority interest ........................... 137,000 481,000
Minority interest ......................................... 268,000 367,000
------------ -----------
Income (loss) before extraordinary item ................... (131,000) 114,000
Extraordinary item (net of $413,000 minority interest) .... 1,077,000 -
------------ -----------
NET INCOME $ 946,000 $ 114,000
============ ===========
NET INCOME PER SHARE $ 0.06 $ 0.06
============ ===========
</TABLE>
See accompanying notes to financial statements.
- 13 -
<PAGE> 14
STARWOOD LODGING CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ......................................... $ 946,000 $ 114,000
Extraordinary item.................................. (1,077,000) -
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest ................................ 268,000 367,000
Depreciation and amortization .................... 6,574,000 2,267,000
Deferred interest - Trust ........................ (1,607,000) 939,000
Changes in operating assets and liabilities:
Accounts receivable inventories, prepaid
expenses and other assets ...................... (8,687,000) (2,648,000)
Accounts payable and other liabilities ........... 7,649,000 (34,000)
------------ ------------
Net cash provided by operating activities .... 4,066,000 1,005,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets .......................... (23,996,000) (586,000)
Increase in investments ............................ (509,000) -
Principal received on notes receivable ............. 15,000 28,000
Reorganization costs ............................... - (1,393,000)
------------ ------------
Net cash used in investing activities ........ (24,490,000) (1,951,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in notes payable - Trust ................ 4,878,000 1,673,000
Increase in mortgage notes payable - Trust ......... 17,468,000 -
Principal payments on mortgage and other notes
payable .......................................... (3,024,000) (504,000)
Capital contributions (adjustments) ................ (101,000) 2,892,000
Proceeds from offering.............................. 3,119,000
Purchase of Warrants................................ - (65,000)
------------ ------------
Net cash provided by financing activities .... 22,340,000 3,996,000
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS .............. 1,916,000 3,050,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ... 8,622,000 4,810,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ......... $ 10,538,000 $ 7,860,000
============ ============
</TABLE>
See accompanying notes to financial statements.
- 14 -
<PAGE> 15
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q which mandate adherence to
Rule 10-01 of Regulation S-X. Accordingly, these statements do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management of
the Trust and the Corporation, all adjustments necessary for a fair
presentation, consisting only of normal recurring accruals, have been included.
The financial statements presented herein have been prepared in accordance with
the accounting policies described in the Registrants' Joint Annual Report on
Form 10-K/A for the year ended December 31, 1995 and should be read in
conjunction therewith.
NOTE 2. BASIS OF PRESENTATION
The Trust and the Corporation have unilateral control of SLT Realty
Limited Partnership ("Realty") and SLC Operating Limited Partnership
("Operating"), respectively, and therefore, the historical financial statements
of Realty and Operating are consolidated with those of the Trust and the
Corporation, respectively. Paired share information has been adjusted to
reflect a one-for-six reverse stock split effective June 19, 1995.
NOTE 3. HOTEL ASSETS
On January 4, 1996, the Company completed the purchase of the equity in
the Grand Hotel, a 263-room luxury hotel, located in Washington, D.C., for an
additional $13.5 million. The Company had purchased a mortgage interest in the
hotel in September 1995 for $19.5 million.
On March 22, 1996, the Company acquired the 257-room Midland Hotel,
located in Chicago, Illinois, for $21 million in cash.
On April 24, 1996, the Company completed the acquisition of the
442-room Clarion hotel, located at the San Francisco Airport, in Millbrae,
California for approximately $30.5 million in cash.
On April 26, 1996, the Company completed the acquisition of three
Doubletree Guest Suite hotels, consisting of 822 suites, located in Irving,
Texas; Ft. Lauderdale, Florida; and Tampa, Florida for approximately $75 million
in cash.
- 15 -
<PAGE> 16
The Company, in June 1996, acquired the 251-suite Doubletree Guest
Suites hotel and the 177-room Days Inn, both located at the Philadelphia Airport
in Philadelphia, Pennsylvania. The aggregate purchase price for both properties,
inclusive of $2 million in cash reserves was approximately $22.5 million
including $1.8 million in limited partnership units in Realty and Operating
convertible into paired shares.
NOTE 4. OFFERING
On April 12, 1996, the Company completed a public offering of 2,000,000
paired shares (the "April 1996 Offering"). Net proceeds from the April 1996
Offering of approximately $62.4 million were used, in part, to fund the
acquisitions of the 442-room Clarion Hotel located at the San Francisco Airport
(acquired on April 24, 1996) and the Doubletree Guest Suite hotels located in
Irving, Texas; Ft. Lauderdale, Florida; and Tampa, Florida (all three properties
were acquired on April 26, 1996).
NOTE 5. INVESTMENTS
On January 24, 1996, the Company completed the acquisition of an
interest in the 960-room Boston Park Plaza Hotel Complex in Boston,
Massachusetts. The Company formed two limited liability companies in partnership
with Donald Saunders Family L.L.C. ("Saunders"). The Trust contributed
approximately $41.6 million in exchange for a 58.2% interest in each of the
limited liability companies, while Saunders contributed its existing interest in
the asset for the remaining 42.8% interest in each of the limited liability
companies. The Company has accounted for this transaction under the equity
method of accounting.
NOTE 6. HOTEL ASSETS HELD FOR SALE
At June 30, 1996, the Company's portfolio included six hotel properties which
were held for sale. The six properties include the 300-room King 8 Hotel &
Gambling Hall in Las Vegas, Nevada, the 150-room Bourbon Street Hotel and Casino
in Las Vegas, Nevada, the 151-room Bay Valley resort in Bay City, Michigan, the
166-room Best Western in Las Cruces, New Mexico, the 175-room Best Western
Airport in El Paso, Texas and the 142-room Best Western in Savannah, Georgia.
During the quarter ended June 30, 1996 the Company sold the Best Western
Columbus North in Columbus, Ohio for approximately $3.1 million.
NOTE 7. INTEREST RATE HEDGING AGREEMENTS
On January 17, 1996, the Trust entered into two interest rate hedging
agreements known as Treasury locks, which have the effect of fixing the base
rate of interest at 5.7% for debt the Company intends to issue in October, 1996
with an aggregate notional principal amount of $100 million and a term to
maturity of seven years. The actual interest rate will be determined by
reference to this base rate.
At settlement, the Trust will pay or receive an amount which will be
capitalized and amortized over the term of the related debt of seven years. Such
amount is not anticipated to
- 16 -
<PAGE> 17
have a material effect on the Trust's liquidity or operating results. If the
Trust did not issue any such debt, such amount would still be payable or
receivable and would be treated as a loss or gain, accordingly. Such a gain or
loss could have a material effect on the Trust's results from operations;
however due to Management's current intention to issue $100 million of debt in
October of 1996, with a term to maturity of seven years, no such gain or loss is
anticipated.
NOTE 8. SUBSEQUENT EVENTS
On May 14, 1996, the Company announced that they had entered into an
agreement to acquire a portfolio of eight upscale and luxury full-service hotels
including: the 290-room Ritz Carlton in Philadelphia, Pennsylvania; the 373-room
Ritz Carlton in Kansas City, Missouri; the 347-room Westin Hotel in Waltham,
Massachusetts; the 370-room Doubletree Hotel at Concourse in Atlanta, Georgia;
the 739-room Doubletree Hotel LAX in Los Angeles, California; the 450-room
Doubletree Hotel at Horton Plaza in San Diego, California; the 321-room
Doubletree Grand Hotel at Mall of America, Bloomington, Minnesota; and the
251-room Sheraton Ft. Lauderdale Airport Hotel in Dania, Florida (collectively,
the "Teachers Portfolio"), from Teachers Insurance and Annuity Association for
an aggregate purchase price of approximately $309 million in cash. The purchase
was completed on August 12, 1996.
On July 3, 1996, the Company announced that they had entered into an
agreement to acquire nine mid- and up-scale, full-service hotels from Hotels of
Distinction Ventures, Inc. for an aggregate purchase price of $135 million in
cash. The portfolio consists of the 257-room Marque in Atlanta, Georgia; the
247-room Sheraton in Needham, Massachusetts; the 198-room Embassy Suites in Palm
Desert, California; the 297-room Embassy Suites in St. Louis, Missouri; the
215-room Hotel Park in Tucson, Arizona; the 254-room Sheraton Metrodome in
Minneapolis, Minnesota; the 422-room Arlington Park Hilton in Arlington Heights,
Illinois; the 224-room Hilton Hotel in Allentown, Pennsylvania; and the 293-room
Radisson Marque in Winston-Salem, North Carolina (collectively, the "HOD
Portfolio"). The Company entered into a definitive agreement to purchase the HOD
portfolio and expects to complete the acquisition in August, 1996.
On August 7, 1996, the Trust entered into an interest hedging agreement
known as a Treasury lock. The Trust entered into the agreement to eliminate
exposure to fluctuations in ten year interest rates. The agreement is with a
large financial institution and has the effect of fixing a base rate (6.67
percent) at which the Trust can issue debt with a principal amount of $150
million and a term of ten years. The agreement extends until March 1997 at
which time the difference between the current market rate and the base rate will
be determined. The resulting impact on interest over the term of the debt will
be calculated and the Trust will accordingly pay or receive an amount equal to
the calculation. Such amount will be capitalized and amortized over the term of
the debt. If the Trust did not issue any such debt, such amount would still be
payable or receivable and would be treated as a loss or gain, accordingly.
On August 12, 1996, the Company completed a public offering of
10,000,000 paired shares (the "August 1996 Offering"). Net proceeds from the
August 1996 Offering of approximately $338.0 million were used to fund the
acquisition costs of the Teachers Portfolio and the balance is expected to be
used to fund a portion of the acquisition cost of the HOD Portfolio.
- 17 -
<PAGE> 18
NOTE 9. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March and October 1995, the Financial Accounting Standards Board
issued Statements of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of" and
No. 123 "Accounting for Stock-Based Compensation", respectively. These
statements shall be effective for financial statements for fiscal years
beginning after December 15, 1995. Management believes that adoption of Standard
No. 121 will not have a material effect on its financial position or results of
operations. Management intends to adopt the disclosure method of Standard No.
123 and, accordingly, there will be no impact on the Company's financial
position or results of operations.
- 18 -
<PAGE> 19
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended June 30,
--------------------------------
Pro Forma
1996 1995
------------ ------------
<S> <C> <C>
REVENUE
Hotel ............................................ $ 59,441,000 $ 32,670,000
Gaming ........................................... 6,914,000 7,147,000
Interest from mortgage and other notes ........... 2,236,000 2,555,000
Income from joint ventures and rents from leased
hotel properties ............................... 2,079,000 228,000
Management fees and other income ................. 1,179,000 896,000
Loss on sale of hotel assets ..................... (347,000)
------------ ------------
71,502,000 43,496,000
------------ ------------
EXPENSES
Hotel operations ................................. 39,603,000 21,972,000
Gaming operations ................................ 6,357,000 6,312,000
Interest ......................................... 4,403,000 270,000
Depreciation and amortization .................... 5,792,000 4,664,000
Administrative and operating ..................... 2,992,000 1,356,000
------------ ------------
59,147,000 34,574,000
------------ ------------
Income from operations before minority interest .. 12,355,000 8,922,000
Minority interest in Partnerships ................ 3,834,000 2,685,000
------------ ------------
Income from operations ........................... $ 8,521,000 $ 6,237,000
============ ============
Income from operations per paired share .......... $ 0.55 $ 0.45
============ ============
</TABLE>
See accompanying notes to the pro forma statements of operations.
- 19 -
<PAGE> 20
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months ended June 30,
---------------------------------
Pro Forma
1996 1995
------------- -------------
<S> <C> <C>
REVENUE
Hotel ............................................ $ 103,505,000 $ 63,578,000
Gaming ........................................... 13,743,000 13,816,000
Interest from mortgage and other notes ........... 4,761,000 5,136,000
Income from joint ventures and rents
from leased hotel properties ................... 2,673,000 387,000
Management fees and other income ................. 2,052,000 957,000
Loss on sale of hotel assets ..................... (347,000) (113,000)
------------- -------------
126,387,000 83,761,000
------------- -------------
EXPENSES
Hotel operations ................................. 69,653,000 43,296,000
Gaming operations ................................ 12,192,000 12,333,000
Interest ......................................... 7,626,000 539,000
Depreciation and amortization .................... 13,452,000 9,090,000
Administrative and operating ..................... 5,365,000 2,460,000
------------- -------------
108,288,000 67,718,000
------------- -------------
Income from operations before minority interest .. 18,099,000 16,043,000
Minority interest in Partnerships ................ 5,488,000 4,827,000
------------- -------------
Income form operations ........................... $ 12,611,000 $ 11,216,000
============= =============
Income from operations per paired share .......... $ 0.86 $ 0.81
============= =============
</TABLE>
See accompanying notes to the pro forma statements of operations.
- 20 -
<PAGE> 21
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO THE UNAUDITED COMBINED PRO FORMA
STATEMENTS OF OPERATIONS FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 1995
NOTE 1. BASIS OF PRESENTATION
The Trust and the Corporation (collectively, the "Company") have
unilateral control of SLT Realty Limited Partnership ("Realty") and SLC
Operating Limited Partnership ("Operating" and, together with Realty the
"Partnerships"), respectively, and, therefore, the historical financial
statements of Realty and Operating are consolidated with those of the Trust and
the Corporation. Unless the context otherwise requires, all references herein to
the "Company" refer to the Trust and the Corporation, and all references to the
"Trust" and to the "Corporation" include the Trust and the Corporation and those
entities respectively owned or controlled by the Trust or the Corporation,
including Realty and Operating.
Due to the impact of certain events which occurred in 1995, the
historical results of operations and earnings per share for the three and six
months ended June 30, 1995 are not indicative of subsequent and future results
of operations and earnings per share. The Unaudited Combined Pro Forma
Statements of Operations included as part of the financial statements for the
three and six months ended June 30, 1996 give effect, as of the beginning of the
period presented, to the following: the public offering on July 6, 1995 (the
"1995 Offering") by the Trust and the Corporation of 11,787,500 paired shares
raising net proceeds of approximately $245.7 million; the acquisition of the
462-room Sheraton Colony Square in Atlanta, Georgia; the acquisition of the
224-room Embassy Suites in Tempe, Arizona; the acquisition of the 168-room
Omni hotel in Chapel Hill, North Carolina. The pro forma information is based
upon historical information and does not purport to present what actual results
would have been had such transactions, in fact, occurred at the beginning of
the period presented, or to project results for any future period.
NOTE 2. NET INCOME PER PAIRED SHARE
Net income per paired share has been computed using the pro forma weighted
average number of paired shares and equivalent paired shares outstanding for
each period presented.
- 21 -
<PAGE> 22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis should be read in
conjunction with the Management's Discussion and Analysis included in the
Company's Joint Annual Report on Form 10-K/A for the year ended December 31,
1995.
HISTORICAL RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
1996 AND 1995
The following discussion and analysis of the historical results of
operations for the three and six months ended June 30,1996 and 1995 give effect
to transactions on the actual date they were consummated.
THE TRUST:
Rents from the Corporation, which are based in part on hotel revenues,
increased $5.9 million and $12.3 million for the three and six months ended June
30, 1996, respectively as compared to the corresponding periods of 1995. The
increase was primarily the result of rents earned by Realty on 12 hotels
acquired during the twelve months ended June 30, 1996. The investment in 12
hotels (the 462-room Sheraton Colony Square and the 224-room Embassy Suites
Tempe acquired in July 1995; the 652-room Doral Inn acquired in September 1995,
the 364-room Terrace Garden Inn, and 180-room Lenox Inn acquired in October
1995; the 206-room Holiday Inn Calverton acquired in November 1995; the 263-room
Westin, Washington DC acquired in January 1996; the 442-room Clarion Hotel, and
the three Doubletree Guest Suites hotels (822 suites) acquired in April, 1996;
and the 251-suite Doubletree Guest Suites hotel acquired in June, 1996)
accounted for increased rents of $5.4 million and $10.7 million for the three
and six months ended June 30, 1996, respectively, as compared to the
corresponding periods in 1995. In addition, rents earned by the Trust from
continuously owned properties leased by the Corporation increased by $500,000
and $1.6 million for the three and six months ended June 30, 1996, respectively,
as compared to the corresponding periods in 1995.
Interest from the Corporation increased by $1.1 million and $2.5
million for the three and six months ended June 30, 1996, respectively, as
compared to the corresponding periods of 1995. The increase in interest income
was primarily a result of interest on the first mortgage of the Milwaukee
Marriott Hotel which was purchased by Realty in July 1995.
Interest from mortgage and other notes amounted to $2.2 million and
$4.7 million for the three and six months ended June 30, 1996, respectively, as
compared to $2.5 million and $5.1 million, respectively for the corresponding
periods in 1995. The decrease resulted from principal amortization.
- 22 -
<PAGE> 23
Income from joint ventures and rents from other leased hotel properties
increased by $646,000 and $1.8 million for the three and six months ended June
30, 1996, respectively as compared to the corresponding periods in 1995. The
increase primarily resulted from the Trust's 58.2% investment in the 960-room
Boston Park Plaza.
Other income for the six months ended June 30, 1996 includes a $314,000
gain (net of related expenses) realized in connection with the sale of
securities, which were purchased in pursuit of certain properties. Also included
in other income is $314,500 recorded as a result of the Ross Litigation
settlement (see Item I of Part II).
Interest expense decreased by $328,000 and $2.7 million for the three
and six months ended June 30, 1996, respectively as compared to the
corresponding periods of 1995. The decrease was due to the repayment of
approximately $206.5 million of existing indebtedness in connection with the
1995 Offering offset by borrowings under the lines of credit used to acquire the
above mentioned properties.
Depreciation and amortization expense increased by $1.3 million and
$3.0 million during the three and six months ended June 30, 1996, respectively
as compared to the corresponding periods of 1995, principally due to the above
mentioned property acquisitions and to the amortization of financing costs.
Administrative and operating expenses for the three and six months
ended June 30, 1996 increased by $1.1 million and $2.0 million, respectively to
$1.5 million and $2.7 million as compared to $418,000 and $773,000, respectively
for the corresponding periods of 1995. The increase resulted primarily from
increased payroll costs due to the growth of the Trust and costs incurred
relating to the potential acquisition of hotels which ultimately were not
acquired. Administrative and operating expenses includes a payment of $228,000
to Jeffrey C. Lapin, the former President and COO of the Trust pursuant to his
separation agreement.
Minority interest represents primarily the interest of Starwood Capital
in the Realty Partnership for the three and six months ended June 30, 1996.
THE CORPORATION:
Hotel revenues increased by $32.6 million and $53.9 million for the
three and six months ended June 30, 1996, respectively as compared to the
corresponding periods of 1995. The addition of the 12 acquired properties as
discussed above and the addition of the 257-room Midland hotel in Chicago,
Illinois resulted in increases in hotel revenues of $32.0 million and $50.0
million for the three and six months ended June 30, 1996, respectively. The
remaining increase of $600,000 and $3.9 million for the three and six months
ended June 30, 1996, respectively is attributable to other continuously owned
properties.
- 23 -
<PAGE> 24
Hotel gross margin for the second quarter of 1996 was $19.8 million, or
33.4% of hotel revenues, as compared to $8.7 million, or 32.6% of hotel
revenues, for the second quarter of 1995. Hotel gross margin for the six months
ended June 30, 1996 was $33.9 million, or 32.7% of hotel revenues, as compared
to $15.2 million, or 30.7% of hotel revenues, for the corresponding period in
1995. The increases in gross margin were primarily due to increases in REVPAR
and the termination of third-party management agreements.
Gaming revenues for the second quarter of 1996 as compared to the
corresponding period of 1995 decreased by $233,000 to $6.9 million. Gaming
revenues for the six months ended June 30, 1996 as compared to the corresponding
period of 1995 decreased by $73,000 to $13.7 million.
Gaming gross margin for the second quarter of 1996 was $557,000 or 8.1%
of gaming revenues, as compared to $835,000 or 11.7% of gaming revenues, for the
second quarter of 1995. Gaming gross margin for the six months ended June 30,
1996 was $1.6 million or 11.3% of gaming revenues, as compared to $1.5 million
or 10.7% of gaming revenues, for the corresponding period in 1995.
Management fees and other income for the six months ended June 30, 1996
includes $314,500 recorded as a result of the Ross Litigation settlement (see
Item I of Part II) and $399,000 of management fee income from the joint venture
that owns the Boston Park Plaza hotel.
Income from joint venture represents income, after rents to the
Trust, from the Corporation's 58.2% investment in the 960-room Boston Park
Plaza.
Administrative and operating expenses for the three and six months
ended June 30, 1996, increased by $486,000 to $1.5 million or 2.1% of revenues
and by $958,000 to $2.6 million or 2.2% of revenues, respectively, as compared
to $964,000 or 2.8% of revenues and $1.7 million or 2.6% of revenues,
respectively, for the corresponding periods of 1995. The increases were
primarily a result of increases in payroll costs commensurate with the Company's
growth, as well as the assumption of management of hotels previously provided by
third-party operators.
Depreciation and amortization expense increased by $1.2 million and
$4.3 million for the three and six months ended June 30, 1996, respectively, as
compared to the corresponding periods of 1995. The increases were primarily a
result of depreciation on the hotels acquired, as discussed above.
Minority interest represents primarily the interest of Starwood Capital
in the Operating Partnership for the three and six months ended June 30, 1996.
For information with respect to rent and interest to the Trust during
the three and six months ended June 30, 1996 and 1995, see "Trust" immediately
above.
- 24 -
<PAGE> 25
COMBINED HISTORICAL RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 1996 AND COMBINED PRO FORMA RESULTS OF OPERATIONS FOR THE THREE AND SIX
MONTHS ENDED JUNE 30, 1995
INCOME FROM OPERATIONS
Combined income from operations for the second quarter of 1996 was $8.5
million, or $0.55 per paired share, on combined revenues of $71.5 million,
compared to combined pro forma income from operations of $6.2 million, or $0.45
per paired share, on combined revenues of $43.5 million for the corresponding
period in 1995.
Combined income from operations for the six months ended June 30, 1996
was $12.6 million, or $0.86 per paired share, on combined revenues of $126.4
million, compared to combined pro forma net income of $11.2 million, or $0.81
per paired share, on combined revenues of $83.8 million for the corresponding
period in 1995.
INTERNAL GROWTH
On a same-store-sales basis, including all hotels acquired prior to
June 30, 1996, revenues per available room (REVPAR) for the second quarter of
1996 increased 9.7%, from $59.07 to $64.81 over the same period in 1995. The
increase in REVPAR resulted from an increase in average daily rate (ADR) of
9.5%, from $78.79 to $86.28, with the occupancy rate remaining constant.
On a same-store-sales basis, including all hotels acquired prior to
June 30, 1996, revenues per available room (REVPAR) for the six months ended
June 30, 1996 increased 9.6%, from $54.34 to $59.54 over the same period in
1995. The increase in REVPAR resulted from an increase in average daily rate
(ADR) of 8.7%, from $77.58 to $84.35 and a one percentage point increase in
occupancy rates from 70% to 71%.
The overall increase in REVPAR for the second quarter and six months
ended June 30, 1996 was largely attributable to the strong increase in REVPAR at
the Company's upscale market hotels. These hotels experienced an increase in
REVPAR of 11.0% and 10.6% for the second quarter and six months ended June 30,
1996, respectively, as compared to the corresponding periods of 1995. ADR for
the Company's upscale hotels increased 8.1% and 8.1%, for both the second
quarter and the six months ended June 30, 1996, respectively, as compared to the
corresponding periods of 1995. Management believes that ADR increases,
particularly in the upscale segment, reflect increases in demand which continue
to outpace increases in supply.
The following tables summarize average occupancy, ADR and REVPAR on a
year-over-year basis for the Company's owned and operated, nongaming hotels for
the three and six months ended June 30, 1996 and 1995:
- 25 -
<PAGE> 26
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------------------
All Nongaming Hotels: 1996 1995
- -------------------- ---- ----
<S> <C> <C>
Occupancy rate ............................. 75.1% 75.0%
ADR......................................... $86.28 $78.79
REVPAR...................................... $64.81 $59.07
REVPAR % change 9.7%
<CAPTION>
Six Months Ended
June 30,
-------------------------------
All Nongaming Hotels: 1996 1995
- -------------------- ---- ----
<S> <C> <C>
Occupancy rate ............................. 70.6% 70.0%
ADR......................................... $84.35 $77.58
REVPAR...................................... $59.54 $54.34
REVPAR % change 9.6%
<CAPTION>
Three Months Ended
June 30,
-------------------------------
Upscale Hotels: 1996 1995
- -------------- ---- ----
<S> <C> <C>
Occupancy rate ............................. 78.0% 76.0%
ADR......................................... $95.98 $88.75
REVPAR...................................... $74.87 $67.43
REVPAR % change 11.0%
<CAPTION>
Six Months Ended
June 30,
-------------------------------
Upscale Hotels: 1996 1995
- -------------- ---- ----
<S> <C> <C>
Occupancy rate ............................. 72.5% 70.9%
ADR......................................... $90.47 $83.71
REVPAR...................................... $65.59 $59.33
REVPAR % change 10.6%
<CAPTION>
Three Months Ended
June 30,
-------------------------------
<S> <C> <C>
Midscale/Economy Hotels: 1996 1995
- ------------------------ ---- ----
Occupancy rate ............................. 69.1% 72.9%
ADR......................................... $63.52 $57.80
REVPAR...................................... $43.89 $42.16
REVPAR % change 4.1%
<CAPTION>
Six Months Ended
June 30,
-------------------------------
Midscale/Economy Hotels: 1996 1995
- ------------------------ ---- ----
<S> <C> <C>
Occupancy rate ............................. 67.1% 68.6%
ADR......................................... $72.38 $66.27
REVPAR...................................... $48.59 $45.43
REVPAR % change 6.9%
</TABLE>
Management believes that the increases in REVPAR resulted primarily
from increases in demand due to more favorable economic conditions which have
created increased business and leisure travel throughout the United States,
while the supply of hotel rooms has not increased as rapidly. Revenue increases
were greatest at the recently acquired city center properties in Atlanta,
Boston, Chicago, New York, and Washington. REVPAR declined at the Portland
Riverside Inn as a result of the impact of renovations completed in the second
quarter of 1996.
- 26 -
<PAGE> 27
In addition, REVPAR at the Terrace Garden Inn and Dallas Park Central declined
as a result of renovations undertaken during the second quarter of 1996.
Management believes that there are several important factors that have
contributed to the improved profitability of hotel properties, including
increased occupancy and ADR and effective cost management. Because
a substantial portion of the hotels' operating costs and expenses are generally
fixed, the Company derives substantial operating leverage from increases in
revenue. Consequently, primarily as a result of the stronger growth in ADR than
in occupancy, gross margins for the second quarter of 1996 rose to 33.4% from
32.6% in the corresponding quarter in 1995 and rose to 32.7% for the six months
ended June 30, 1996 from 30.7% in the corresponding period in 1995.
EXTERNAL GROWTH
During the six months ended June 30, 1996, the Company acquired the
equity of the 263-room Grand Hotel (renamed The Westin Hotel) in Washington, DC
(January, 1996); a 58.2% interest in the 960-room Boston Park Plaza Hotel
Complex in Boston, Massachusetts (January, 1996); the 257-room Midland Hotel in
Chicago, Illinois (March, 1996); the 442-room Clarion Hotel located at the San
Francisco Airport, in Millbrae California (April 1996), the 260-room
Doubletree Guest Suites hotel in Tampa, Florida, the 254-room Doubletree Guest
Suites hotel in Cypress Creek, Florida, and the 308-room Doubletree Guest
Suites hotel in Irving, Texas (April, 1996), and the 251-room Doubletree Guest
Suites hotel and the 177-room Days Inn, both located at the Philadelphia
Airport in Philadelphia, Pennsylvania (June 1996).
SELF MANAGEMENT
As discussed above, in the twelve months ending June 30, 1996,
Operating has assumed management of 12 hotels acquired during the period, as
well as four continuously owned properties consistent with its business
objective to capture the economic benefits otherwise retained by a third-party
operator. Of the remaining three third-party management agreements in place at
June 30, 1996, all except for one, are expected to be terminated in 1996.
Management believes that the assumption of direct control over the operations of
these hotels will allow the Company to effectively use their experience to
improve operations and implement renovations and expansions.
RENOVATIONS AND REPOSITIONING HOTELS
During the second quarter, the Company substantially completed a $2.1
million renovation of the Portland Riverside Inn in Portland, Oregon.
Additionally, the Company has undertaken renovations of the Dallas Park Central
in Dallas, Texas, the Sheraton Colony Square and Terrace Garden Inn, both
located in Atlanta, Georgia. The Company estimates that it will cost
approximately $20 million to complete such renovations. In April, 1996, the
Company
- 27 -
<PAGE> 28
converted the French Quarter Suites Hotel in Lexington, Kentucky
to a Doubletree Guest Suites franchise.
SEASONALITY AND DIVERSIFICATION
Demand is affected by normally recurring seasonal patterns. Generally,
the Company's portfolio of hotels as a whole has performed better in the second
and third quarters due to decreased travel in the winter months. Future
acquisitions may further affect the seasonality of the Company's current
portfolio.
The Company has continued to implement a business strategy of franchise
and geographic diversification.
OTHER INCOME AND ADMINISTRATIVE AND OPERATING EXPENSES
Other income for the six months ended June 30, 1996 includes a $314,000
gain (net of related expenses) realized in connection with the sale of
securities, which were purchased in pursuit of certain properties. Also included
in other income is $629,000 recorded in connection with the Ross Litigation
settlement (see Item I of Part II).
Administrative and operating expenses for the three and six months
ended June 30, 1996 increased by $1.6 million to $3.0 million or 4.1% of revenue
and by $2.9 million to $5.4 million or 4.2% of revenues, respectively, as
compared to $1.4 million or 3.1% of revenues and $2.5 million or 2.9% of
revenues, respectively, for the corresponding periods of 1995. The increase was
primarily a result of an increase in payroll costs due to additions to the
corporate staffs commensurate with the Company's growth, as well as the
assumption of management of hotels previously provided by third-party operators.
Administrative and operating expenses includes a payment of $228,000 to Jeffrey
C. Lapin, the former President and Chief Operating Officer of the Trust pursuant
to his separation agreement. The increase also resulted from costs relating to
the potential acquisition of hotels which ultimately were not acquired.
- 28 -
<PAGE> 29
COMBINED LIQUIDITY AND CAPITAL RESOURCES
Cash Flow Provided by Operating Activities. The principal source of
cash to be used to fund the Company's operating expenses, interest expense,
recurring capital expenditures and distribution payments by the Trust will be
cash flow provided by operating activities. The Company anticipates that cash
flow provided by operating activities will provide the necessary funds on a
short and long term basis to meet operating cash requirements including all
distributions to shareholders by the Trust. During the first quarter, the Trust
paid a distribution of $0.47 per share for the fourth quarter of 1995. During
the second quarter, the Trust paid a distribution of $0.47 per share for the
quarter ending March 31, 1996, and declared a distribution of $0.49 per share
for the quarter ended June 30, 1996.
Cash Flows from Investing and Financing Activities. Additionally, the
Company intends to finance the acquisition of additional hotel properties, hotel
renovations and capital improvements and provide for general corporate purposes
through three loan facilities with affiliates of Lehman Brothers Inc. and, when
market conditions warrant, to issue additional equity or debt securities.
In March 1996, Realty entered into a loan facility (the "Term Loan")
with an affiliate of Lehman Brothers Inc. The 12-month Term Loan was put in
place to fund the acquisition in March 1996, of the 257-room Midland Hotel in
Chicago and, in April 1996, the facility was increased to $94 million. The Term
Loan is secured by certain properties of the Company on a cross-collateralized
basis. As of June 30, 1996, Realty had borrowed $74 million under the Term Loan,
which accrues interest at a rate equal to the one, two or three month LIBOR, at
the Company's option, plus (a) 1.95 % for the first $20 million and (b) 1.75 %
for the balance of the Term Loan. The Term Loan may be retired from the proceeds
of public or private issuances of equity or debt securities by the Company.
In July, 1996, the maturity date of the Mortgage Loan Funding Facility
(the "Repo Facility") was extended from January 25, 1997 to July 25, 1997. As of
June 30, 1996, Realty had borrowed $71 million under the Repo Facility.
In July 1996, the Company agreed to terms with an institutional lender
for a one-year (extendible to 18 months) $300 million loan to fund a portion of
the acquisition cost of the Teachers Portfolio and the HOD Portfolio (the "1996
Facility"). The 1996 Facility will bear interest at one-month LIBOR plus 1.75%.
The 1996 Facility is subject to the satisfaction of certain conditions,
including the negotiation of definitive documentation.
On April 12, 1996, the Company completed a public offering of 2,000,000
paired shares at a net price to the Company of $31.50 per paired share. The net
proceeds of approximately $62.4 million were used, in part, to fund the
acquisition of the 442-room Clarion Hotel at the San Francisco Airport and the
three Doubletree Guest Suite hotels located in Irving, Texas; Ft. Lauderdale,
Florida and Tampa, Florida.
- 29 -
<PAGE> 30
On August 12, 1996, the Company completed a public offering of
10,000,000 paired shares. Net proceeds from the offering of approximately $338.0
million were used to fund the acquisition costs of the Teachers Portfolio and
the balance is expected to be used to fund a portion of the acquisition cost of
the HOD Portfolio. The remaining portion of the Teachers Portfolio and HOD
Portfolio will be funded through the Acquisition Facility discussed above.
As previously discussed, the Company has substantially completed a $2.1
million renovation of the Portland Riverside Inn, in Portland, Oregon. In
addition, the Company has commenced a major renovation of the Dallas Park
Central Hotel, the renovation of the Sheraton Colony Square Hotel in Atlanta,
Georgia and the renovation of the Terrace Garden Inn in Atlanta, Georgia. The
Company estimates that it will cost approximately $20 million to complete such
renovations. Major and minor renovations of other hotels are also being
contemplated. Sources of capital for major building renovations and expansions
are expected to be: (i) excess funds from operations, (ii) additional debt
financing, and (iii) additional equity raised in the public and private markets.
As of the date of the filing of this report, since January 1, 1995, the Company
has invested over $380 million in hotel assets (approximately $210 million
including capital expenditures for the six months ended June 30, 1996). As part
of its investment strategy, the Company plans to acquire additional hotels.
Future acquisitions are expected to be funded through further draws under the
Acquisition Facility and the Term Loan and the issuance of additional equity or
debt securities. The Company intends to incur additional indebtedness in a
manner consistent with their policy of maintaining a Ratio of Debt-to-Total
Market Capitalization of not more than 50%. Management of each of the Trust and
of the Corporation believes that it will have access to capital resources
sufficient to satisfy the cash requirements of each of the Trust and the
Corporation and to expand and develop their business in accordance with their
strategy for future growth.
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") is one measure
of financial performance of an equity REIT such as the Trust. Combined FFO (as
defined by the National Association of Real Estate Investment Trusts)(1) for the
quarter ended June 30, 1996 grew by 162 percent to $18.2 million, compared to
combined historical FFO of $6.9 million for the corresponding period in 1995 and
grew by 38% compared to pro forma FFO of $13.2 million for the corresponding
period in 1995. The following table shows the calculation of historical and pro
forma combined FFO for the quarter ended June 30, 1996:
- 30 -
<PAGE> 31
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------------------------
Pro Forma Historical
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
(in thousands)
Income before extraordinary item and minority
interest ........................................... $12,355 $ 8,922 $ 3,627
Real estate related depreciation and amortization, net
of amortization of financing costs ................. 5,507 4,250 3,322
Loss on sales of hotel assets ........................ 347
------- ------- -------
FFO $18,209 $13,172 $ 6,949
======= ======= =======
</TABLE>
For the six months ended June 30, 1996 combined FFO grew by 213% to
$31.3 million, compared to combined historical FFO of $10.0 million for the
corresponding period in 1995 and grew by 26% compared to pro forma FFO of $24.8
million for the corresponding period in 1995. The following table shows the
calculation of historical and pro forma combined FFO for the six months ended
June 30, 1996:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------
Pro Forma Historical
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
(in thousands)
Income before extraordinary item and minority
interest ........................................... $18,099 $16,043 $ 3,706
Real estate related depreciation and amortization, net
of amortization of financing costs ................. 12,888 8,676 6,185
Loss on sales of hotel assets ........................ 347 113 113
------- ------- -------
FFO $31,334 $24,832 $10,004
======= ======= =======
</TABLE>
FFO includes $292,000 and $252,000 of interest income recognized in excess of
the actual cash received on mortgage notes receivable (as a result of the notes
having been purchased at a discount) for the quarter ended June 30, 1996 and
1995, respectively, and $518,000 and $545,000 for the six months ended June 30,
1996 and 1995, respectively..
(1) With respect to the presentation of FFO, management elected early
adoption of the "new definition" as recommended in the March 1995
NAREIT White Paper on FFO beginning January 1, 1995. Management and
industry analysts generally consider funds from operations to be one
measure of the financial performance of an equity REIT that provides a
relevant basis for comparison among REITs and it is presented to assist
investors in analyzing the performance of the Company. FFO is defined
as income before minority interest (computed in accordance with
generally accepted accounting principles), excluding gains (losses)
from debt restructuring and sales of property, and real estate related
depreciation and amortization (excluding amortization of financing
costs). FFO does not represent cash generated from operating activities
in accordance with generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash needs. FFO should
not be considered an alternative to net income as an indication of the
Company's financial performance or as an alternative to cash flows from
operating activities as a measure of liquidity.
- 31 -
<PAGE> 32
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the year ended December 31, 1995, the Trust and the Corporation
reached settlement agreements with respect to two purported class action
complaints and one complaint which was purportedly brought on behalf of the
Trust and the Corporation (collectively, the "Shareholder Actions"). The
Shareholder Actions were brought in 1991 and 1992 in each case in connection
with the Trust's purchase of its two hotel/casinos and the Ramada Inn in Indian
Wells, California.
The two purported class actions were filed in the United States
District Court for the Southern District of California in August 1991 and
February 1992 against the Trust, the Corporation and certain current and former
officers, Directors and Trustees. The complaint alleged fraud, violations of
federal and California securities laws, the federal Racketeer Influenced and
Corrupt Organizations Act and ERISA. The actions sought compensatory damages,
rescission and/or treble and exemplary damages plus interest, costs and
attorneys' fees and statutory damages under ERISA. The third action was filed in
the Superior Court for the State of California for San Diego County in March
1992 against certain current and former officers, Directors and Trustees and
alleged breach of fiduciary duty, gross negligence and corporate waste. The
action sought compensatory damages, certain remuneration and costs.
The plaintiffs and defendants in the Shareholder Actions entered into
stipulations of settlement providing for the release of all claims that were or
might have been made in the Shareholder Actions and provided for a $3,250,000
cash settlement fund which, after payment of fees and expenses of plaintiffs'
counsel, will be distributed to the certified plaintiff classes. The Trust and
the Corporation have paid $400,000 (which amount was accrued in 1993) into the
settlement fund, with the balance of the settlement being paid by the insurance
company that issued the directors and officers policy applicable to the period
to which the Shareholder Actions relate and by two former officers and Trustees
of the Trust. The Trust and the Corporation have also agreed to pay the legal
fees and other costs incurred prior to October 12, 1993 by the defendants in the
Shareholder Actions. Holders of approximately 200,000 Paired Shares (the "Ross
Shares") opted out of the settlement.
The stipulation requires that the Trust's Board of Trustees and the
Corporation's Board of Directors establish a joint transaction committee of
independent Trustees and Directors to make recommendations to those Boards with
respect to any transaction proposed in the future by management and having a
fair market value of $20 million or more.
Subsequent to the settlement of the Shareholder Actions, Leonard M.
Ross and his affiliates ("Ross"), who held 198,398 Paired Shares (as adjusted
for the one for six reverse split in June 1995) (the "Ross Shares") and opted
out of the settlement, threatened litigation against the Trust and the
Corporation.
- 32 -
<PAGE> 33
In October 1994, Starwood Capital entered into an agreement with Ross
to settle the threatened litigation in which Starwood Capital agreed, in
exchange for an assignment of Ross' claims against the Trust and the
Corporation, to purchase the Ross Shares, at Ross' election, in a 60-day period
beginning on the earlier of the first anniversary of the closing of the
Reorganization or December 15, 1995 at a price of $33.75 subject to certain
adjustments. Starwood Capital also had the right to elect to purchase such
paired shares at the same time and on the same terms.
The Trust and the Corporation accrued a liability as of December 31,
1994 of $2,648,000 reflecting a reasonable estimate of the cost of settling the
Ross claims.
In connection with the Reorganization, which took place in 1995, the
Trust and Corporation severally agreed that under certain circumstances they
would indemnify Starwood Capital with respect to Starwood Capital's obligations
to Ross, up to a maximum of $1.8 million, upon receipt of a full release from
Starwood Capital of all of the claims assigned by Ross. At December 31, 1995,
the Company had accrued $1.8 million in respect of this potential liability. The
$848,000 reduction in this liability was recorded as an adjustment to
contributed capital during 1995.
Ross elected to sell his paired shares, and in January 1996 those
paired shares were sold to a third party through Merrill Lynch. The paired
shares were sold at a price of $29.625 per paired share; the Trust and the
Corporation paid $1,375,743 in the aggregate pursuant to their indemnity
obligations, and Starwood Capital released the Trust and the Corporation from
all claims assigned to it by Ross. Additionally, the Trust and the Corporation
are entitled to insurance proceeds totaling $205,000 and, as a result,
recognized $629,000 of income in the first quarter of 1996.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
- 33 -
<PAGE> 34
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Exchange Rights Agreement dated June 3, 1996
10.2 Registration Rights Agreement dated June 3, 1996
10.3 Employment Agreement with Ted Darnall dated
April 19, 1996
10.4 Employment Agreement with Eric A. Danziger dated
June 27, 1996
10.5 Separation Agreement with Jeffrey C. Lapin dated
June 18, 1996
10.6 Asset Purchase Agreement by and between 730 Cal Hotel
Properties II, Inc., 730 Georgia Hotel Properties, I,
Inc., 730 Mass Hotel Properties I, Inc., 730 Mo Hotel
Properties I, Inc., 730 Minn Hotel Properties I, Inc.,
730 Penn. Hotel Properties I, Inc., Cal Hotel Properties
I Associates, MRC Properties, Inc. and SLT Realty
Limited Partnership and SLC Operating Limited
Partnership dated as of May 3, 1996 (effective May 14,
1996)
10.7 Asset Purchase Agreement by and between Hotels of
Distinction, Inc., and SLT Realty Limited Partnership
dated as of March 25, 1996 (effective July 3, 1996)
10.8 Asset Purchase Agreement by and between Hotels of
Distinction Ventures, Inc. and the Subsidiary Entities
described therein and SLT Realty Limited Partnership and
SLC Operating Limited Partnership
(b) Reports on Form 8-K
On April 26, 1996, the Trust and Corporation filed a Joint Current
Report on the Form 8-K to report the purchase of the FFCA properties.
On May 16, 1996, the Trust and Corporation filed a Joint Current Report
on the Form 8-K on the Safe Harbor Provisions.
On June 28, 1996, the Trust and Corporation filed a Joint Current
Report on the Form 8-K to report the pending acquisitions of the HOD
and Teachers Portfolios; the acquisitions of the Midland Hotel in
Chicago, Illinois, the Clarion Hotel in San Francisco, California, the
Doubletree Guest Suites in Philadelphia, Pennsylvania, the Days Inn in
Philadelphia, Pennsylvania, and the pending acquisition of the Marriott
Forrestal in Princeton, New Jersey.
- 34 -
<PAGE> 35
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 thereunto duly authorized.
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
Registrant Registrant
/s/ RONALD C. BROWN /s/ ALAN M. SCHNAID
- ------------------------------------ ---------------------------------
Ronald C. Brown Alan M. Schnaid
Senior Vice President and Chief Vice President and Corporate
Financial Officer Controller
(Principal Financial Officer) (Principal Accounting Officer)
Date: August 14, 1996.
- 35 -
<PAGE> 1
EXCHANGE RIGHTS AGREEMENT
This Exchange Rights Agreement (this "Agreement") is made as
of June 3, 1996 among Starwood Lodging Trust, a real estate investment trust
organized under the laws of the State of Maryland (the "Trust"), Starwood
Lodging Corporation, a Maryland corporation (the "Corporation"), SLT Realty
Limited Partnership, a Delaware limited partnership (the "Realty Partnership"),
SLC Operating Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"), Philadelphia HIR Limited Partnership, a Massachusetts
limited partnership ("HIR") and Philadelphia HSR Limited Partnership, a
Massachusetts limited partnership ("HSR"). Unless otherwise indicated,
capitalized terms used herein are used herein as defined in Section 10.
WHEREAS, (i) on the date hereof HSR is making a capital
contribution to the Realty Partnership in return for the issuance by the Realty
Partnership to HSR of Units (as defined in the Amended and Restated Limited
Partnership Agreement of the Realty Partnership (the "Realty Partnership
Agreement")) of the Realty Partnership (the Units issued by the Realty
Partnership being hereinafter called "Realty Units"), (ii) on the date hereof
HSR is making a capital contribution to the Operating Partnership in return for
the issuance by the Operating Partnership to HSR of Units (as defined in the
Amended and Restated Limited Partnership Agreement of the Operating Partnership
(the "Operating Partnership Agreement")) of the Operating Partnership (the Units
issued by the Operating Partnership being hereinafter called the "Operating
Units"), (iii) on or about July 1, 1996 HIR will be making a capital
contribution to the Realty Partnership in return for the issuance by the Realty
Partnership to HIR of Realty Units, and (iv) on or about July 1, 1996 HIR will
be making a capital contribution to the Operating Partnership in return for the
issuance by the Operating Partnership to HIR of Operating Units;
WHEREAS, the parties hereto are entering into this Agreement
to provide for the rights of HIR and HSR to tender Realty Units and Operating
Units in exchange for either Paired Shares (as defined herein), cash or a
combination of Paired Shares and cash, on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants set forth herein, the parties hereto agree as follows:
SECTION 1. RIGHT TO TENDER STARWOOD UNITS. (a) Upon the terms
and subject to the conditions of this Agreement, each holder of Starwood Units
(as defined below) shall have the right to tender to the Trust outstanding
Realty Units and the right to tender to the Corporation outstanding Operating
Units and upon making such tender, in accordance with, and subject to the terms
and conditions hereof, each such holder shall be entitled to receive certain
Paired Shares as provided for below. Notwithstanding anything to the contrary
contained in this Agreement (i) no Realty Unit may be tendered to the Trust
unless simultaneously therewith the tendering holder also tenders to the
Corporation an
<PAGE> 2
Operating Unit and no Operating Unit may be tendered to the Corporation unless
simultaneously therewith the tendering holder also tenders to the Trust a Realty
Unit (a Realty Unit tendered for exchange and the Operating Unit simultaneously
tendered for exchange being hereinafter collectively referred to as a "Starwood
Unit") and (ii) any attempted tender of a Realty Unit or an Operating Unit which
is not accompanied by a simultaneous tender of an Operating Unit or Realty Unit,
respectively, shall be void and of no effect; it being understood that a
simultaneous tender of unequal numbers of Realty Units and Operating Units shall
be valid under this sentence to the extent of the lesser of the number of Realty
Units or Operating Units, as the case may be, included in such tender. Realty
Units and Operating Units shall be deemed tendered at the same time notice would
be given under Section 9.
(b) Notwithstanding any other provision of this Agreement, no
Paired Shares or cash shall be issued or paid in respect of any tender of
Starwood Units (i) if the right to tender Starwood Units and receive Paired
Shares or cash would result in the Trust not satisfying the REIT Requirements in
any respect or would result in any person or entity Beneficially Owning Trust
Shares exceeding the Ownership Limit, (ii) prior to the expiration or
termination of the waiting period applicable to such exchange and issuance, if
any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as it may
be amended from time to time, or (iii) prior to the receipt of all governmental
and regulatory approvals which are required to be obtained prior to such tender
and issuance or payment, including, without limitation, any required approvals
of the gaming authorities of the State of Nevada and of Clark County, Nevada. In
the event that the ability to receive Paired Shares or cash would result in the
Trust not satisfying the REIT Requirements in any respect or would result in any
person or entity Beneficially Owning Trust Shares exceeding the Ownership Limit,
and as a result thereof no Paired Shares or cash may be issued or paid in
respect of any tender of Starwood Units pursuant to Section 1(b)(i) above, then
the parties hereto shall use their respective best efforts to restructure the
terms and provisions of this Agreement (and, if necessary, the Partnership
Agreements), or to agree to terms and provisions in addition to such terms and
provisions, so as to provide to each such party the same substantive rights (or
substantive rights as close thereto as is reasonably practicable) as those
provided by this Agreement and the Partnership Agreements. If the parties are
unsuccessful in such efforts, the Realty Partnership and the Operating
Partnership will, to the extent permitted by the REIT Requirements, purchase
such tendered Starwood Units for cash in an amount equal to the product of (i)
the number of Paired Shares which would have been exchanged pursuant to this
Agreement if such tender had successfully been completed, multiplied by (ii) the
average Paired Shared Closing Price for the 10 trading day period ending one
trading day prior to the date of purchase.
(c) The rights to exchange Starwood Units pursuant to this
Agreement constitute a continuous offer and may not be withdrawn, amended or
modified by the Trust or the Corporation without the prior written consent of
each holder of outstanding Starwood Units adversely affected by such withdrawal,
amendment or modification; provided that any withdrawal, amendment or
modification that does not adversely affect any holder of outstanding Starwood
Units may be effected without the consent of such holder.
-2-
<PAGE> 3
SECTION 2. ACCEPTANCE OF TENDER; ELECTION OF METHOD OF PAYMENT
FOR TENDERED STARWOOD UNITS. (a) Upon the terms and subject to the conditions of
this Agreement, the Trust and the Corporation shall accept Starwood Units
validly tendered in proper form and meeting all of the requirements of this
Agreement. In order for Starwood Units to be validly tendered pursuant to this
Agreement, the registered holder thereof shall deliver to the Trust and the
Corporation, at the address provided pursuant to Section 9, (i) a completed and
duly executed Letter of Transmittal in the form attached hereto as Exhibit A
(the "Letter of Transmittal") and any other documents required by the Letter of
Transmittal and (ii) a calculation, to the best knowledge of such registered
holder after due inquiry (together with such supporting documentation as the
Trust may reasonably request), of the maximum number of Paired Shares that may
be issued to such registered holder without causing either (x) the Trust to not
satisfy the REIT Requirements in any respect or (y) any person or entity to
Beneficially Own Trust Shares exceeding the Ownership Limit. The Trust and the
Corporation shall reasonably make all determinations as to the validity and form
of any tender of Starwood Units in accordance with the provisions of this
Agreement and upon rejection of a tender shall give the tendering holder written
notice of such rejection, which shall include the reasons therefor.
(b) HIR and HSR will have the right to request, as part of a
tender of Starwood Units pursuant to this Section 2, that the Trust and the
Corporation (or, at the election of the Trust and the Corporation, the Realty
Partnership and the Operating Partnership) exchange a minimum number of Starwood
Units for cash ("Cash Request"). The Cash Request must be part of the Letter of
Transmittal (as an attachment or as part of the text of the letter). The price
and terms of payment for each Starwood Unit tendered pursuant to a Cash Request
will be consistent with Sections 4 and 5 (depending on which provision is
applicable to the tender of Starwood Units subject to the Cash Request). The
maximum amount of cash paid by the Trust and the Corporation pursuant to all
Cash Requests under this Agreement will be an aggregate amount of $270,000. The
Trust and the Corporation (or, at the election of the Trust and the Corporation,
the Realty Partnership and the Operating Partnership) will promptly pay to HIR
or HSR, the amount of any Cash Request which fulfills the foregoing requirements
of this clause (b).
(c) Unless otherwise determined by agreement of the Trust and
the Corporation, tenders of Starwood Units pursuant to this Agreement shall be
irrevocable and shall not be subject to withdrawal or modification; provided
that if the Trust and the Corporation make the Paired Share Election with
respect to a tender, then within 3 days after such Election the tendering holder
may elect to revoke such tender so long as (i) no public disclosure of such
tender has been made prior to such revocation and (ii) such tendering holder
reimburses the Trust and the Corporation for all reasonable costs and expenses
incurred in connection with such tender.
(d) Within 15 days after the valid tender pursuant to this
Agreement of Starwood Units, the Trust and the Corporation shall make an
election to pay for such Starwood Units by delivering either (i) Paired Shares
(the "Paired Share Election"), (ii) cash (the "Cash Election") or (iii) a
combination of Paired Shares and cash (the "Combined Election"). Such election
shall be made pursuant to an agreement as to such election
-3-
<PAGE> 4
between the Trust and the Corporation. If the Trust and the Corporation do not
so agree within such 15-day period, they shall be deemed to have made the Cash
Election.
SECTION 3. PAIRED SHARE ELECTION. (a) If with respect to any
tender of Starwood Units pursuant to this Agreement, the Trust and the
Corporation make the Paired Share Election, then within 20 days after such
tender the Trust and the Corporation shall deliver to the tendering holder one
Paired Share for each Starwood Unit validly tendered pursuant to the provisions
of this Agreement.
(b) No fractional Paired Shares or scrip representing
fractional Paired Shares shall be issued upon exchange of Starwood Units
pursuant to this Agreement. If more than one Letter of Transmittal shall be
delivered at one time by the same holder, the number of full Paired Shares which
shall be issuable upon exchange of the Starwood Units tendered thereby shall be
computed on the basis of the aggregate number of Starwood Units so tendered.
Instead of any fractional Paired Shares which would otherwise be issuable upon
exchange of any Starwood Units, the Trust and the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the Paired Share Closing Price on the last business day preceding the date of
exchange.
(c) If a holder exchanges Starwood Units pursuant to this
Agreement, the Trust and the Corporation shall pay any documentary, stamp or
similar issue or transfer tax due on any issue of Paired Shares upon such
exchange. Such holder, however, shall (i) pay to the Trust and the Corporation
the amount of any additional documentary, stamp or similar issue or transfer tax
which is due (or shall establish to the satisfaction of the Trust and the
Corporation the payment thereof) as a result of Paired Shares being issued in a
name other than the name of such holder and (ii) be responsible for all income
or other taxes as a result of such exchange.
SECTION 4. CASH ELECTION. (a) If with respect to any tender of
Starwood Units pursuant to this Agreement, the Trust and the Corporation make or
are deemed to have made the Cash Election, then within 20 days after such tender
the Trust and the Corporation shall pay to the tendering holder an aggregate
amount of cash (the "Aggregate Cash Payment") equal to the product of (i) the
number of Paired Shares which would have been delivered to such holder if the
Trust and the Corporation had made the Paired Share Election with respect to
such tender and (ii) the average Paired Share Closing Price for the 10 trading
day period ending one trading day prior to the date of such tender (it being
agreed that the date of tender shall be the date the tendering registered holder
of the Starwood Units shall be deemed to have given to the Trust and the
Corporation, the Letter of Transmittal and the calculation called for in
Section 2(a) above).
(b) In connection with any Aggregate Cash Payment pursuant to
Section 4(a) or any cash payment pursuant to Section 5(a)(ii), the Trust shall
pay 95% of such Aggregate Cash Payment or such cash payment and the Corporation
shall pay 5% of such Aggregate Cash Payment or such cash payment (such
percentages being herein called the "Issuance Percentages"); provided that the
Trust and the Corporation may from time to time change the Issuance Percentages
based on their determination of the relative fair values of the Trust
-4-
<PAGE> 5
Shares and the Corporation Shares. At the election of the Trust and the
Corporation, the Realty Partnership and the Operating Partnership may purchase
and pay the cash for the Starwood Units.
SECTION 5. COMBINED ELECTION. (a) If with respect to any
tender of Units pursuant to this Agreement, the Trust and the Corporation shall
make the Combined Election, then within 20 days after such tender the Trust and
the Corporation shall (i) notify the tendering holder of the number of such
tendered Units which will be exchanged for cash (the "Cash Units") and the
number of such tendered Units which will be exchanged for Paired Shares (the
"Paired Share Units"), (ii) pay to the tendering holder, in respect of each Cash
Unit validly tendered pursuant to the provisions of this Agreement, an amount of
cash (with each of the Trust and the Corporation paying its then respective
Issuance Percentage of such amount of cash) equal to the average Paired Share
Closing Price for the 10 trading day period ending one trading day prior to the
date of such tender and (iii) deliver to the tendering holder one Paired Share
for each Paired Share Unit validly tendered pursuant to the provisions of this
Agreement.
(b) The provisions of Sections 3(b) and 3(c) of this Agreement
shall apply to the issuance of Paired Shares pursuant to Section 5(a).
SECTION 6. REPRESENTATIONS OF TENDERING HOLDER. Each tender of
Starwood Units (other than a Cash Request) shall constitute a representation and
warranty by the tendering holder of each of the representations and warranties
set forth in the Letter of Transmittal. Without limiting the generality of the
foregoing, unless, at the time of a tender for exchange of Starwood Units
pursuant to this Agreement, a registration statement relating to any Paired
Shares to be delivered upon such tender is effective under the Securities Act of
1933, as amended (the "Securities Act"), such tender shall constitute a
representation and warranty by the tendering holder to the Trust and the
Corporation that such tendering holder (i) is an "accredited investor" within
the meaning of Rule 501 under the Securities Act, (ii) has sufficient knowledge
and experience in financial and business matters and in investing in entities
similar to the Partnerships, the Trust and the Corporation so as to be able to
evaluate the risks and merits of its investment in the Partnerships, the Trust
and the Corporation and it is able financially to bear the risks thereof, (iii)
has had an opportunity to discuss the business, management and financial affairs
of the Trust, the Corporation and the Partnerships with the management of the
Trust, the Corporation and the Partnerships, and (iv) understands that the
Paired Shares 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 such Paired Shares must be held indefinitely unless
a subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from such registration.
SECTION 7. STATUS OF TENDERING HOLDER. Until the holder of
Starwood Units tendered pursuant to this Agreement becomes a holder of record of
the Paired Shares issued in exchange therefor (in the case of a Paired Share
Election or a Combined Election) or until such holder has received cash in
exchange therefor (in the case of a Cash Election or a
-5-
<PAGE> 6
Combined Election), such holder shall continue to hold and own such Starwood
Units for all purposes of the Realty Partnership Agreement and the Operating
Partnership Agreement. In the case of a Paired Share Election or a Combined
Election, no such holder shall have any rights as a shareholder of the Trust or
a stockholder of the Corporation in respect of such Paired Shares until such
holder becomes a holder of record of such Paired Shares.
SECTION 8. RESERVATION OF SHARES; CLOSING OF TRANSFER BOOKS.
(a) The Trust shall reserve and shall at all times have reserved out of its
authorized but unissued Trust Shares, solely for the purpose of effecting the
exchange of Realty Units pursuant to this Agreement, enough Trust Shares to
permit the exchange of the then outstanding Realty Units. The Corporation shall
reserve and shall at all times have reserved out of its authorized but unissued
Corporation Shares, solely for the purpose of effecting the exchange of
Operating Units pursuant to this Agreement, enough Corporation Shares to permit
the exchange of the then outstanding Operating Units. All Paired Shares which
may be issued upon exchange of Starwood Units shall be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issuance thereof other than income taxes resulting from such exchange.
(b) The Trust shall not close its transfer books so as to
prevent the timely issuance of Trust Shares pursuant to this Agreement. The
Corporation shall not close its transfer books so as to prevent the timely
issuance of Corporation Shares pursuant to this Agreement.
SECTION 9. NOTICES. All notices, documents and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally or by overnight mail or when sent by facsimile
transmission, 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 the Trust or the Realty Partnership, to:
Starwood Lodging Trust
11835 West Olympic Boulevard
Suite 695
Los Angeles, California 90064
Attention: Chief Financial Officer
Telecopy No.: (310) 575-9512
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
-6-
<PAGE> 7
If to the Corporation or the Operating Partnership, to:
Starwood Lodging Corporation
11835 West Olympic Boulevard
Suite 675
Los Angeles, California 90064
Attention: Kevin E. Mallory
Telecopy No.: (310) 575-9143
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
If to HIR, to:
Philadelphia HIR Limited Partnership
c/o The Beacon Companies
50 Rowes Wharf
Boston, Massachusetts 02110
Attention: Edwin N. Sidman
Telecopy No.: (617) 261-0152
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attention: Larry Uchill
Telecopy No.: (617) 439-3278
If to HSR, to:
Philadelphia HSR Limited Partnership
c/o The Beacon Companies
50 Rowes Wharf
Boston, Massachusetts 02110
Attention: Edwin N. Sidman
Telecopy No.: (617) 261-0152
-7-
<PAGE> 8
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attention: Larry Uchill
Telecopy No.: (617) 439-3278
SECTION 10. DEFINITIONS. For purposes of this Agreement:
"Beneficially Owning" means owning Trust Shares directly,
indirectly or constructively by a person or entity through the
application of Section 318(a) of the Code, as modified by Section
856(d)(5) of the Code, or Section 544 of the Code, as modified by
Section 856(h) of the Code. The term "Beneficially Own" shall have a
correlative meaning.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Corporation Shares" means the shares of Common Stock, par
value $.01 per share, of the Corporation.
"Declaration of Trust" means the Declaration of Trust of the
Trust dated August 25, 1969, as amended and restated as of June 6,
1988, and as further amended on February 1, 1995 and as the same may be
further amended from time to time.
"Ownership Limit" when used with respect to Trust Shares, has
the meaning set forth in the Declaration of Trust and, when used with
respect to the Corporation Shares, has the meaning set forth in the
Restated Articles, in each case as amended from time to time.
"Paired Share" means a Corporation Share and a Trust Share
which are paired pursuant to the Pairing Agreement.
"Partnership Agreements" means the Realty Partnership
Agreement and the Operating Partnership Agreement.
"Paired Share Closing Price" shall mean, with respect to a
particular date, the last reported sales price regular way on such date
or, in case no such reported sale takes place on such date, the average
of the reported closing bid and asked prices regular way on such date,
in either case on the New York Stock Exchange, or if the Paired Shares
are not then listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Paired Shares are
then listed or admitted to trading or, if not then listed or admitted
to trading on any national
-8-
<PAGE> 9
securities exchange, the closing sale price on such date of the Paired
Shares or, in case no reported sale takes place on such date then, the
average of the closing bid and asked prices on such date, on NASDAQ or
any comparable system. If the Paired Shares are not then quoted on
NASDAQ or any comparable system, the Board of Trustees of the Trust and
the Board of Directors of the Corporation shall in good faith determine
the Paired Share Closing Price.
"Pairing Agreement" means the Pairing Agreement dated June 25,
1980 between the Trust and the Corporation, as it may be amended from
time to time.
"REIT Requirements" shall mean the requirements for the Trust
to (i) qualify as a REIT under the Code and the rules and regulations
promulgated thereunder, (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 the Trust dated as of January 4, 1980.
"Restated Articles" means the Restated Articles of
Incorporation of the Corporation, as amended from time to time after
the date of this Agreement.
"Trust Shares" means the shares of Beneficial Interest, $.01
par value, of the Trust.
SECTION 11. 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 12. 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 13. 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 the Trust, the
Corporation, the Realty Partnership, the Operating Partnership, HIR and HSR
shall have each executed a counterpart of this Agreement.
SECTION 14. 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.
-9-
<PAGE> 10
SECTION 15. EXHIBITS. The 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 16. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
Agreement, including the Exhibits, contains the entire understanding of the
parties hereto with regard to the subject matter contained herein. In addition
to amendments and modifications permitted by Section 1(c), 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.
SECTION 17. GOVERNING LAW. Except to the extent that Maryland
law is mandatorily applicable to the rights and obligations of the shareholders
of the Trust and the stockholders of the Corporation, this Agreement, and the
application or interpretation thereof, shall be governed exclusively 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 18. STARWOOD LODGING TRUST. The parties hereto
understand and agree that the name "Starwood Lodging Trust" is a designation of
the Trust and its Trustees (as Trustees but not personally) under the
Declaration of Trust, and all persons dealing with the Trust shall look solely
to the Trust's assets for the enforcement of any claims against the Trust, and
that the Trustees, officers, agents and security holders of the Trust assume no
personal liability for obligations entered into on behalf of the Trust, and
their respective individual assets shall not be subject to the claims of any
person relating to such obligations.
-10-
<PAGE> 11
SECTION 19. 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 the 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, 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.
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.
STARWOOD LODGING TRUST
By:
-------------------------------
Name:
Title:
STARWOOD LODGING CORPORATION
By:
-------------------------------
Name:
Title:
SLT REALTY LIMITED PARTNERSHIP
By: STARWOOD LODGING TRUST
General Partner
By:
-------------------------------
Name:
Title:
-11-
<PAGE> 12
SLC OPERATING LIMITED PARTNERSHIP
By: STARWOOD LODGING CORPORATION,
Managing General Partner
By:
-------------------------------
Name:
Title:
PHILADELPHIA HIR LIMITED PARTNERSHIP
By:
-------------------------------------
Name:
Title:
PHILADELPHIA HSR LIMITED PARTNERSHIP
By:
------------------------------------
Name:
Title:
-12-
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
as of June 3, 1996 among Starwood Lodging Trust, a real estate investment trust
organized under the laws of Maryland (the "Trust"), Starwood Lodging
Corporation, a Maryland corporation (the "Corporation") and Philadelphia HSR
Limited Partnership, a Massachusetts limited partnership ("HSR"). Unless
otherwise indicated, capitalized terms used herein are used herein as defined in
Section 1.1.
RECITALS
WHEREAS, (i) on the date hereof HSR, is making a capital
contribution to SLT Realty Limited Partnership, a Delaware limited partnership
(the "Realty Partnership"), in return for the issuance by the Realty Partnership
to HSR of Units (as defined in the Amended and Restated Limited Partnership
Agreement of the Realty Partnership) of the Realty Partnership (the Units issued
by the Realty Partnership being hereinafter called the "Realty Units"), (ii) on
the date hereof HSR is making a capital contribution to SLC Operating Limited
Partnership, a Delaware limited partnership (the "Operating Partnership"), in
return for the issuance by the Operating Partnership to HSR of Units (as defined
in the Amended and Restated Limited Partnership Agreement of the Operating
Partnership) of the Operating Partnership (the Units issued by the Operating
Partnership being hereinafter called the "Operating Units"), (iii) on or about
July 1, 1996 Philadelphia HIR Limited Partnership, a Massachusetts limited
partnership ("HIR"), will be making a capital contribution to the Realty
Partnership in return for the issuance by the Realty Partnership to HIR of
Realty Units, and (iv) on or about July 1, 1996 HIR will be making a capital
contribution to the Operating Partnership in return for the issuance by the
Operating Partnership to HIR of Operating Units;
WHEREAS the parties hereto desire to set forth the rights of
HSR and the obligations of the Trust and the Corporation to cause the
registration of the Registerable Securities pursuant to the Securities Act;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND USAGE.
1.1. DEFINITIONS. As used in this Agreement:
Beneficially Owning. "Beneficially Owning" means owning Trust
Shares directly, indirectly or constructively by a Person through the
application of Section 318(a) of the Code, as modified by Section 856(d)(5) of
the Code, or Section 544 of the Code, as modified by Section 856(h) of the Code.
<PAGE> 2
Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Commission. "Commission" shall mean the Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
Continuously Effective. "Continuously Effective", with respect
to a specified registration statement, shall mean that such registration
statement shall not cease to be effective and available for Transfers of
Registrable Securities thereunder for longer than either (i) any ten (10)
consecutive business days, or (ii) an aggregate of fifteen (15) business days
during the period specified in the relevant provision of this Agreement.
Corporation Shares. "Corporation Shares" shall mean the shares
of Common Stock, par value $.01 per share, of the Corporation.
"Declaration of Trust" means the Declaration of Trust of the
Trust dated August 25, 1969, as amended and restated as of June 6, 1988, and as
further amended on February 1, 1995 and as the same may be further amended from
time to time.
Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934 and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
Exchange Rights Agreement. "Exchange Rights Agreement" shall
mean the Exchange Rights Agreement dated the date hereof among the Trust, the
Corporation, HIR, HSR, the Operating Partnership and the Realty Partnership.
"Holders" "Holders" shall mean Philadelphia HIR Limited
Partnership and Philadelphia HSR Limited Partnership.
Issuance Percentages. "Issuance Percentage", when used with
respect to the Trust, shall mean 95% and, when used with respect to the
Corporation, shall mean 5%; provided that the Trust and the Corporation may from
time to time change the Issuance Percentages based on their joint determination
of the relative values of the Trust Shares and Corporation Shares.
Majority Selling Holders. "Majority Selling Holders" means
those Selling Holders whose Registrable Securities included in such registration
represent a majority of the Registrable Securities of all Selling Holders
included therein.
Operating Partnership. "Operating Partnership" shall have the
meaning set forth in the recitals.
Operating Units. "Operating Units" shall have the meaning set
forth in the recitals.
-2-
<PAGE> 3
Ownership Limit. "Ownership Limit" when used with respect to
Trust Shares, has the meaning set forth in the Declaration of Trust of the Trust
and, when used with respect to the Corporation Shares, has the meaning set forth
in the Restated Articles, in each case as amended from time to time.
Paired Shares. "Paired Shares" shall mean the shares of Trust
Shares and shares of Corporation Stock which are "paired" pursuant to the
Pairing Agreement dated June 25, 1980 between the Trust and the Corporation, as
it has been and may be amended from time to time.
Person. "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government or other agency or
political subdivision thereof.
Piggyback Registration. "Piggyback Registration" shall have
the meaning set forth in Section 3.
Realty Partnership. "Realty Partnership" shall have the
meaning set forth in the recitals.
Realty Units. "Realty Units" shall have the meaning set forth
in the recitals.
Register, Registered and Registration. "Register",
"registered", and "registration" shall refer to a registration effected by
preparing and filing a registration statement or similar document in compliance
with the Securities Act, and the declaration or ordering by the Commission of
effectiveness of such registration statement or document.
Registrable Securities. "Registrable Securities" shall mean:
(i) the Paired Shares issued upon exchange of Realty Units and Operating Units
pursuant to the Exchange Rights Agreement; (ii) any Paired Shares or other
securities issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange by the Trust and the Corporation
generally for, or in replacement by the Trust and the Corporation generally of,
such Paired Shares; and (iii) any securities issued in exchange for Paired
Shares in any merger or reorganization of the Trust and the Corporation;
provided, however, that Registrable Securities shall not include any securities
which have theretofore been registered and sold pursuant to the Securities Act
or which have been sold to the public pursuant to Rule 144 or any similar rule
promulgated by the Commission pursuant to the Securities Act, and, provided
further, the Trust and the Corporation shall have no obligation under Sections 2
and 3 to register any Registrable Securities if the Trust and the Corporation
shall deliver to the Holders of such Registrable Securities an opinion of
counsel reasonably acceptable to Holders and which could be relied upon by
Holders or their transferees to the effect that the proposed sale or disposition
of all of the Registrable Securities for which registration was requested does
not require registration under the Securities Act for a sale or disposition in a
single public sale, and offers to remove any and all legends restricting
transfer from the certificates evidencing such Registrable Securities.
Notwithstanding anything to the contrary set forth
-3-
<PAGE> 4
herein, Registrable Securities shall not include (x) any Realty Units or
Operating Units or (y) any Paired Shares issued upon exchange of Units,
exclusive of any exchange of the Realty or Operating Units pursuant to the
Exchange Agreement of even date, between the Trust, the Corporation and other
parties, to any Person (including, without limitation, any Holder).
Registrable Securities then outstanding. "Registrable
Securities then outstanding" shall mean, with respect to a specified
determination date, the Registrable Securities owned by all Holders on such date
and the Registrable Securities which are issuable upon exchange of Realty Units
and Operating Units owned by all Holders on such date.
Registration Expenses. "Registration Expenses" shall have the
meaning set forth in Section 6.1
REIT Requirements. "REIT Requirements" shall mean the
requirements for the Trust to (i) qualify as a REIT under the Code, and the
rules and regulations promulgated thereunder, (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 the Trust dated as of January 4, 1980.
"Restated Articles" means the Restated Articles of
Incorporation of the Corporation, as amended from time to time after the date of
this Agreement.
Securities Act. "Securities Act" shall mean the Securities Act
of 1933 and the rules and regulations of the Commission thereunder, all as the
same may be in effect at the time.
Selling Holders. "Selling Holders" shall mean, with respect to
a specified registration pursuant to this Agreement, Holders whose Registrable
Securities are included in such registration.
Shelf Registration. "Shelf Registration" shall mean a
registration statement that is filed in accordance with the Securities Act for
an offering on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
Transfer. "Transfer" shall mean and include the act of
selling, giving, transferring, creating a trust (voting or otherwise), assigning
or otherwise disposing of (other than pledging, hypothecating or otherwise
transferring as security) (and correlative words shall have correlative
meanings); provided however, that any transfer or other disposition upon
foreclosure or other exercise of remedies of a secured creditor after an event
of default under or with respect to a pledge, hypothecation or other transfer as
security shall constitute a "Transfer".
Trust Shares. "Trust Shares" shall mean the shares of
Beneficial Interest, $.01 par value, of the Trust.
-4-
<PAGE> 5
Underwriters' Representative. "Underwriters' Representative"
shall mean the managing underwriter, or, in the case of a co-managed
underwriting, the managing underwriter designated as the Underwriters'
Representative by the co-managers.
Units. "Units" shall mean Realty Units and Operating Units.
Violation. "Violation" shall have the meaning set forth in
Section 7.1.
1.2. USAGE.
(i) References to a Person are also references to its assigns
and successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be).
(ii) References to Registrable Securities "owned" by a Holder
shall include Registrable Securities beneficially owned by such Person but which
are held of record in the name of a nominee, trustee, custodian, or other agent,
but shall exclude Paired Shares held by a Holder in a fiduciary capacity for
customers of such Person.
(iii) References to a document are to it as amended, waived
and otherwise modified from time to time and references to a statute or other
governmental rule are to it as amended and otherwise modified from time to time
(and references to any provision thereof shall include references to any
successor provision).
(iv) References to Sections or to Schedules or Exhibits are to
sections hereof or schedules or exhibits hereto, unless the context otherwise
requires.
(v) The definitions set forth herein are equally applicable
both to the singular and plural forms and the feminine, masculine and neuter
forms of the terms defined.
(vi) The term "including" and correlative terms shall be
deemed to be followed by "without limitation" whether or not followed by such
words or words of like import.
(vii) The term "hereof" and similar terms refer to this
Agreement as a whole.
(viii) The "date of" any notice or request given pursuant to
this Agreement shall be determined in accordance with Section 11.
SECTION 2. DEMAND SHELF REGISTRATIONS.
2.1. If HSR shall make a written request to the Trust and the
Corporation, then the Trust and the Corporation shall cause there to be filed
with the Commission a registration statement in accordance with the Securities
Act for an offering on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act (a "Shelf Registration"), and the Trust and the Corporation
shall include therein the Registrable Securities requested by
-5-
<PAGE> 6
HSR. Any request made pursuant to this Section 2.1 shall be addressed to the
attention of the Secretary of each of the Trust and the Corporation, and shall
specify the number of Registrable Securities to be registered, the possible
intended methods of disposition thereof and that the request is for a Shelf
Registration pursuant to this Section 2.1.
2.2. (i) The Trust and the Corporation shall be entitled to
postpone for up to 180 days the filing, effectiveness, supplementing or amending
of any registration statement otherwise required to be prepared and filed
pursuant to this Section 2, if the Board of Trustees of the Trust or the Board
of Directors of the Corporation determines that such registration and the
Transfer of Registrable Securities contemplated thereby would interfere with, or
require premature disclosure of, any material financing, acquisition,
disposition, reorganization or other transaction involving the Realty
Partnership, the Operating Partnership, the Trust or the Corporation or any of
their respective subsidiaries and the Trust or the Corporation, as the case may
be, promptly gives HSR notice of such determination. HSR and each Holder hereby
acknowledges that any notice given by the Trust or the Corporation pursuant to
this Section 2.4(i) shall constitute material non-public information and that
the United States securities laws prohibit any Person who has material
non-public information about a company from purchasing or selling securities of
such company or from communicating such information to any other Person under
circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell such securities.
(ii) The Trust and the Corporation shall not be obligated to
file any registration statement under the Securities Act pursuant to this
Section 2 if, within 30 days after their receipt of the written request of HSR
the Trust and the Corporation notify HSR that, prior to their receipt of such
request, they had a plan or intention promptly to register equity securities
under the Securities Act. Holders of Registrable Securities shall have rights to
participate in any such registration on the terms provided in Section 3 hereof.
If HSR makes a request for a Shelf Registration pursuant to Section 2.1 and the
Trust and the Corporation do not file the registration statement pursuant to
this Section 2.2(ii), within 6 months of the written request of HSR then HSR
will not be deemed to have exercised its demand right pursuant to Section 2.1.
2.3. Following receipt of a request for a Shelf Registration,
the Trust and the Corporation shall:
(i) File the registration statement with the Commission as
promptly as practicable, and shall use their respective reasonable efforts to
have the registration declared effective under the Securities Act as soon as
reasonably practicable, in each instance giving due regard to the need to
prepare current financial statements, conduct due diligence and complete other
actions that are reasonably necessary to effect a registered public offering.
(ii) Use their respective reasonable efforts to keep the
relevant registration statement Continuously Effective until the earlier of (x)
1 year after such registration statement is declared effective or (y) such date
as of which all the Registrable Securities under the Shelf Registration
statement have been disposed of in a manner described in the registration
statement.
-6-
<PAGE> 7
2.4. Notwithstanding anything in this Agreement to the
contrary, (a) in no event will the Trust or the Corporation be obligated to
effect more than one Shelf Registration, (b) in no event will the Trust or the
Corporation be obligated to effect any Shelf Registration for less than
$1,000,000 of Paired Shares (the value of Paired Shares, for this purpose, is
equal to the product of (i) the number of Paired Shares subject to the Shelf
Registration and (ii) the average Paired Share Closing Price for the ten (10)
trading day period ending one (1) trading day prior to the date the request for
the Shelf Registration is made), (c) in no event will securities other than
securities that are subject to this Agreement be added to the Shelf Offering,
and (d) no registration shall be effected under this Agreement and no Transfer
of Registrable Securities may be effected if as a result thereof the Trust would
not satisfy the REIT Requirements in any respect or if such registration or
Transfer would result in any Person Beneficially Owning Paired Shares in excess
of the Ownership Limit. For purposes of the preceding sentence, registration
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective, or (ii) if after such registration
statement has become effective, the related offer, sale or distribution of
Registrable Securities thereunder is prohibited by any stop order, injunction or
other order or requirement of the Commission or other governmental agency or
court for any reason not attributable to HSR or the Selling Holders and such
prohibition is not thereafter eliminated. If the Trust and the Corporation shall
have complied with their respective obligations under this Agreement, a right to
demand a registration pursuant to this Section 2 shall be deemed to have been
satisfied upon the effective date of the Shelf Registration, provided no stop
order or similar order, or proceedings for such an order, is thereafter entered
or initiated.
2.5. A registration pursuant to this Section 2 shall be on
such appropriate registration form of the Commission as shall be selected by the
Trust and the Corporation and shall permit the disposition of the Registrable
Securities in accordance with the intended method or methods of disposition
specified in the request pursuant to Section 2.1.
2.6. If any registration pursuant to Section 2 involves an
underwritten offering (whether on a "firm commitment", "best efforts" or "all
reasonable efforts" basis or otherwise), HSR shall select the underwriter or
underwriters and manager or managers to administer such underwritten offering;
provided, however, that each Person so selected shall be acceptable to the Trust
and the Corporation.
2.7. Whenever the Trust and the Corporation shall effect a
registration pursuant to this Section 2 in connection with an underwritten
offering by one or more Selling Holders of Registrable Securities: (i) if such
Selling Holders have requested the inclusion therein of more than one class of
Registrable Securities and the Underwriters' Representative advises HSR that, in
its opinion, the inclusion of more than one class of Registrable Securities
would adversely affect such offering, HSR shall decide which class of
Registrable Securities shall be included therein in such offering and the
related registration and the other class shall be excluded and (ii) if the
Underwriters' Representative advises HSR that, in its opinion, the amount of
securities requested to be included in such offering (whether by Selling Holders
or others, including the Trust and the Corporation) exceeds the amount which can
be sold in such offering within a price range acceptable to the Majority Selling
Holders, securities shall be included in such offering and the related
registration, to the
-7-
<PAGE> 8
extent of the amount which can be sold within such price range in the following
order of priority: first, the Registrable Securities requested to be included in
such registration pursuant to this Section 2, pro rata based on the estimated
gross proceeds from the sale thereof; and second all other securities requested
to be included in such registration. If the amount of Registrable Securities
requested by HSR to be included in such offering pursuant to this Section 2 is
reduced pursuant to the preceding sentence, then HSR will not be deemed to have
exercised its demand right pursuant to Section 2.1.
SECTION 3. PIGGYBACK REGISTRATION.
3.1. If at any time the Trust and the Corporation propose to
register securities under the Securities Act in connection with the public
offering solely for cash on Form S-1, S-2, S-3, or S-11 (or any replacement or
successor forms), the Trust and the Corporation shall promptly give HSR written
notice of such registration. Upon the written request of each Holder given as
promptly as practicable but in any event within 20 days following the date of
such notice, the Trust and the Corporation shall cause to be included in such
registration statement and use their respective reasonable efforts to be
registered under the Securities Act all the Registrable Securities that each
such Holder shall have requested to be registered; provided, however, that such
right of inclusion shall not apply to any registration statement covering an
offering of debt securities or convertible debt securities (any such
registration in which Selling Holders participate pursuant to this Section 3.1
being referred to as a "Piggyback Registration"). The Trust and the Corporation
shall have the absolute right to delay, withdraw or cease to prepare or file any
registration statement for any offering referred to in this Section 3 without
any obligation or liability to HSR or any Holder, it being understood that any
Registrable Securities previously included in any such withdrawn Registration
Statement shall not cease to be Registrable Securities by reason of such
inclusion or withdrawal. Any exercise of Holders of their rights pursuant to
this Section 3, will not be characterized as an exercise of demand rights
pursuant to Section 2.1.
3.2. If the Underwriters' Representative shall advise the
Trust and the Corporation that, in its opinion, the amount or type of
Registrable Securities requested to be included in such registration would
adversely affect such offering, or the timing thereof, then the Trust and the
Corporation will include in such registration, to the extent of the amount and
class which the Trust and the Corporation are so advised can be sold without
such adverse effect in such offering: first, all securities proposed to be sold
by the Trust and the Corporation for their own accounts; second, all other
securities requested to be included in such registration by Starwood Capital
Group, L.P., pursuant to its Registration Rights Agreement with the Trust and
the Corporation; and third, the Registrable Securities requested to be included
in such registration by Holders pursuant to this Section 3 and all other
securities requested to be included in such registration, pro rata based on the
estimated gross proceeds from the sale thereof.
SECTION 4. REGISTRATION PROCEDURES. Whenever required under
Section 2 or Section 3 to effect the registration of any Registrable Securities,
the Trust and the Corporation shall, as expeditiously as practicable:
-8-
<PAGE> 9
4.1. Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use their respective
reasonable efforts to cause such registration statement to become effective;
provided, however, that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Trust and the Corporation shall
furnish to one firm of counsel for the Selling Holders, copies of all such
documents in the form substantially as proposed to be filed with the Commission.
4.2. Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act and rules thereunder with respect to the
disposition of all securities covered by such registration statement. If the
registration is for an underwritten offering, the Trust and the Corporation
shall amend the registration statement or supplement the prospectus whenever
required by the terms of the underwriting agreement entered into pursuant to
Section 5.2. If the registration statement is for a Shelf Registration, the
Trust and the Corporation shall amend the registration statement or supplement
the prospectus so that it will remain current and in compliance with the
requirements of the Securities Act for the period specified in Section 2.3(ii),
and if during such period any event or development occurs as a result of which
the registration statement or prospectus contains a misstatement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the Trust or the
Corporation shall promptly notify each Selling Holder, amend the registration
statement or supplement the prospectus so that each will thereafter comply with
the Securities Act and furnish to each Selling Holder of Registrable Securities
such amended or supplemented prospectus, which each such Holder shall thereafter
use in the Transfer of Registrable Securities covered by such registration
statement. Pending any such amendment or supplement described in this Section
4.2, each such Holder shall cease making offers or Transfers of Registrable
Shares pursuant to the prior prospectus. In the event that any Registrable
Securities included in a registration statement subject to, or required by, this
Agreement remain unsold at the end of the period during which the Trust and the
Corporation are obligated to use their respective reasonable efforts to maintain
the effectiveness of such registration statement, the Trust and the Corporation
may file a post-effective amendment to the registration statement for the
purpose of removing such Registrable Securities from registered status.
4.3. Furnish to each Selling Holder of Registrable Securities,
without charge, such numbers of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus, including
each preliminary prospectus and any amendments or supplements thereto, in each
case in conformity with the requirements of the Securities Act and the rules
thereunder, and such other related documents as any such Selling Holder may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by such Selling Holder.
4.4. Use their respective reasonable efforts (i) to register
and qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such states where an exemption from
registration is not available and as shall be reasonably requested by the
Underwriters' Representative and (ii) to obtain the withdrawal of
-9-
<PAGE> 10
any order suspending the effectiveness of a registration statement, or the
lifting of any suspension of the qualification (or exemption from qualification)
of the offer and transfer of any of the Registrable Securities in any state, at
the earliest possible moment; provided, however, that neither the Trust nor the
Corporation shall be required in connection therewith or as a condition thereto
to qualify to do business or to consent to general service of process in any
state.
4.5. In the event of any underwritten offering, use their
respective reasonable efforts to enter into and perform their respective
obligations under an underwriting agreement (including indemnification and
contribution obligations of underwriters), in usual and customary form, with the
managing underwriter or underwriters of such offering. The Trust and the
Corporation shall also cooperate with the Majority Selling Holders, and the
Underwriters' Representative for such offering in the marketing of the
Registerable Securities, including making available the officers, accountants,
counsel, premises, books and records of the Trust and the Corporation for such
purpose, but neither the Trust nor the Corporation shall be required to incur
any material out-of-pocket expense pursuant to this sentence.
4.6. Promptly notify each Selling Holder of any stop order
issued or threatened to be issued by the Commission in connection therewith and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
4.7. Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and Underwriter (but not more than one firm of counsel to such
Selling Holders), all financial and other information as shall be reasonably
requested by them, and provide any Selling Holder, any underwriter participating
in such offering and the representatives of such Selling Holder and Underwriter
the reasonable opportunity to discuss the business affairs of the Trust and the
Corporation with their principal executives and independent public accountants
who have certified the audited financial statements included in such
registration statement, in each case all as necessary to enable them to exercise
their due diligence responsibility under the Securities Act; provided, however,
that information that the Trust or the Corporation determine to be confidential
and which the Trust or the Corporation advise such Person in writing, is
confidential shall not be disclosed unless such Person signs a confidentiality
agreement reasonably satisfactory to the Trust and the Corporation or the
related Selling Holder of Registrable Securities agrees to be responsible for
such Person's breach of confidentiality on terms reasonably satisfactory to the
Trust and the Corporation.
4.8. Use their respective reasonable efforts to obtain a
so-called "comfort letter" from the independent public accountants of the Trust
and the Corporation, and legal opinions of counsel to the Trust and the
Corporation addressed to the Selling Holders, in customary form and covering
such matters of the type customarily covered by such letters, and in a form that
shall be reasonably satisfactory to HSR. Delivery of any such opinion or comfort
letter shall be subject to the recipient furnishing such written representations
or acknowledgements as are customarily provided by selling shareholders who
receive such comfort letters or opinions.
-10-
<PAGE> 11
4.9. Use their respective reasonable efforts to cause the
Registrable Securities covered by such registration statement (i) if the Paired
Shares are then listed on a securities exchange or included for quotation in a
recognized trading market, to continue to be so listed or included for a
reasonable period of time after the offering, and (ii) to be registered with or
approved by such other United States or state governmental agencies or
authorities as may be necessary by virtue of the business and operations of the
Trust and the Corporation to enable the Selling Holders of Registrable
Securities to consummate the disposition of such Registrable Securities.
4.10. Take such other actions as are reasonably required in
order to expedite or facilitate the disposition of Registrable Securities
included in each such registration.
SECTION 5. SELLING HOLDERS' OBLIGATIONS. It shall be a
condition precedent to the obligations of the Trust and the Corporation to take
any action pursuant to this Agreement with respect to the Registrable Securities
of any Selling Holder of Registrable Securities that such Selling Holder shall:
5.1. Furnish to the Trust and the Corporation such information
regarding such Selling Holder, the number of the Registrable Securities owned by
it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Selling Holder's Registrable
Securities, and to cooperate fully with the Trust and the Corporation in
preparing such registration.
5.2. Agree to sell their Registrable Securities to the
underwriters at the same price and on substantially the same terms and
conditions as the Trust and the Corporation or the other Persons on whose behalf
the registration statement was being filed have agreed to sell their securities,
and to execute the underwriting agreement agreed to by the Majority Selling
Holders (in the case of a registration under Section 2) or the Trust and the
Corporation and the Majority Selling Holders (in the case of a registration
under Section 3).
SECTION 6. EXPENSES OF REGISTRATION. Expenses in connection
with registrations pursuant to this Agreement shall be allocated and paid as
follows:
6.1. With respect to the Shelf Registration, HSR, HIR and the
Selling Holders shall bear and pay all expenses incurred in connection with any
registration, filing, or qualification of Registrable Securities with respect to
such Registration for each Selling Holder, including all registration, filing
and National Association of Securities Dealers, Inc. fees, all fees and expenses
of complying with securities or blue sky laws, all printing expenses, messenger
and delivery expenses, the reasonable fees and disbursements of counsel for the
Trust and the Corporation, and of the independent public accountants for the
Trust and the Corporation, including the expenses of "cold comfort" letters
required by or incident to such performance and compliance (the "Registration
Expenses"), underwriting discounts and commissions relating to Registrable
Securities (which shall be paid on a pro rata basis by the Selling Holders) and
all fees and expenses of counsel for the Selling Holders.
-11-
<PAGE> 12
6.2. The Trust and the Corporation shall bear and pay all
Registration Expenses incurred in connection with any Piggyback Registrations
pursuant to Section 3 but excluding underwriting discounts and commissions
relating to Registrable Securities (which shall be paid on a pro rata basis by
the Selling Holders) and all fees and expenses of counsel for the Selling
Holders. The Trust and the Corporation each agree between themselves that they
shall bear and pay such Registration Expenses in an amount equal to its
respective Issuance Percentage of such Registration Expenses and that they shall
reimburse each other to the extent necessary to cause each of them to so bear
and pay such respective amounts.
SECTION 7. INDEMNIFICATION; CONTRIBUTION. If any Registrable
Securities are included in a registration statement under this Agreement:
7.1. To the extent permitted by applicable law, each of the
Trust and the Corporation, severally and not jointly, shall indemnify and hold
harmless each Selling Holder, each Person, if any, who controls such Selling
Holder within the meaning of the Securities Act, and each officer, director,
partner and employee of such Selling Holder and such controlling Person, against
any and all losses, claims, damages, liabilities and expenses (joint or
several), including reasonable attorneys' fees and disbursements and reasonable
expenses of investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may otherwise become subject under the Securities Act, the
Exchange Act or other federal or state laws, insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"):
(i) Any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any amendments
or supplements thereto; or
(ii) The omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; provided, however, that the indemnification required by
this Section 7.1 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if such settlement is effected without the
consent (not to be unreasonably withheld or delayed) of the Trust or the
Corporation, nor shall the Trust or the Corporation be liable in any such case
for any such loss, claim, damage, liability or expense to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with information furnished to the Trust or the Corporation by the
indemnified party expressly for use in connection with such registration; and
provided, further, that the indemnity agreement contained in this Section 7
shall not apply to the extent that any such loss is based on or arises out of an
untrue statement or alleged untrue statement of a material fact, or an omission
or alleged omission to state a material fact, contained in or omitted from any
preliminary prospectus if the final prospectus shall correct such untrue
statement or alleged untrue statement, or such omission or alleged omission, and
a copy of the final prospectus has not been sent or given to such person at or
prior to the confirmation of sale to such person if an underwriter was under an
obligation to deliver such final prospectus and failed to do so.
-12-
<PAGE> 13
7.2. To the extent permitted by applicable law, each Selling
Holder shall indemnify and hold harmless the Trust, the Corporation, each of the
Trustees of the Trust, each of the directors of the Corporation, each of the
officers of the Trust or the Corporation who shall have signed the registration
statement, each Person, if any, who controls the Trust or the Corporation within
the meaning of the Securities Act, any other Selling Holder, any controlling
Person of any such other Selling Holder and each officer, director, partner, and
employee of such other Selling Holder and such controlling Person, against any
and all losses, claims, damages, liabilities and expenses (joint and several),
including reasonable attorneys' fees and disbursements and reasonable expenses
of investigation, incurred by such party pursuant to any actual or threatened
action, suit, proceeding or investigation, or to which any of the foregoing
Persons may otherwise become subject under the Securities Act, the Exchange Act
or other federal or state laws, but only insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any Violation,
in each case to the extent that such Violation arises out of or is based upon
information furnished by such Selling Holder expressly for use in connection
with such registration; provided, however, that (x) the indemnification required
by this Section 7.2 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or expense if such settlement is effected without
the consent of HSR (which consent shall not be unreasonably withheld) and (y) in
no event shall the amount of any indemnity under this Section 7.2 exceed the
gross proceeds from the applicable offering received by such Selling Holder.
7.3. Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified party
may make a claim under this Section 7, such indemnified party shall deliver to
the indemnifying party a written notice thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and disbursements and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time following the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 7 to the extent of such prejudice but shall
not relieve the indemnifying party of any liability that it may have to any
indemnified party otherwise than pursuant to this Section 7. Any fees and
expenses incurred by the indemnified party (including any fees and expenses
incurred in connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within thirty
(30) days of written notice thereof to the indemnifying party (regardless of
whether it is ultimately determined that an indemnified party is not entitled to
indemnification hereunder). Any such indemnified party shall have the right to
employ separate counsel in any such action, claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be the expenses of such indemnified party unless (i) the indemnifying
party has agreed to pay such
-13-
<PAGE> 14
fees and expenses or (ii) the indemnifying party shall have failed to promptly
assume the defense of such action, claim or proceeding or (iii) the named
parties to any such action, claim or proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying party, and
such indemnified party shall have been advised by counsel that there may be one
or more legal defenses available to it which are different from or in addition
to those available to the indemnifying party and that the assertion of such
defenses would create a conflict of interest such that counsel employed by the
indemnifying party could not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties, unless
in the reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified parties
with respect to such action, claim or proceeding, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels).
7.4. If the indemnification required by this Section 7 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to in
this Section 7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any Violation has been committed by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such Violation. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Section 7.1 and Section 7.2, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in Section 7.4(i). No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
-14-
<PAGE> 15
7.5. If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 7 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 7.4.
7.6. The obligations of the Trust, the Corporation and the
Selling Holders of Registrable Securities under this Section 7 shall survive the
completion of any offering of Registrable Securities pursuant to a registration
statement under this Agreement, and otherwise.
SECTION 8. HOLDBACK. Each Holder, if so requested by the
Underwriters' Representative in connection with an offering of any securities
covered by a registration statement filed by Trust and the Corporation, whether
or not Holder's securities are included therein, shall not effect any public
sale or distribution of Paired Shares or any securities convertible into or
exchangeable or exercisable for Paired Shares, including a sale pursuant to Rule
144 under the Securities Act (except as part of such underwritten registration),
during the 15-day period prior to, and during the 180-day period beginning on,
the date such registration statement is declared effective under the Securities
Act by the Commission. In order to enforce the foregoing covenant, the Trust and
the Corporation shall be entitled to impose stop-transfer instructions with
respect to the Registrable Securities of each Selling Holder until the end of
such period.
SECTION 9. AMENDMENT, MODIFICATION AND WAIVERS; FURTHER
ASSURANCES.
(i) This Agreement may be amended with the consent of the
Trust and the Corporation, and the Trust and the Corporation may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Trust and the Corporation shall have obtained the written
consent of HSR to such amendment, action or omission to act and no consent or
agreement of any Holder shall be required for such amendment, action or omission
to act.
(ii) No waiver of any terms or conditions of this Agreement
shall operate as a waiver of any other breach of such terms and conditions or
any other term or condition, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
No written waiver hereunder, unless it by its own terms explicitly provides to
the contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
(iii) Each of the parties hereto shall execute all such
further instruments and documents and take all such further action as any other
party hereto may reasonably require in order to effectuate the terms and
purposes of this Agreement.
-15-
<PAGE> 16
SECTION 10. Assignment; Benefit. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, assigns, executors, administrators or
successors; provided, however, that neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned or delegated (i) by
the Trust and the Corporation without the consent of HSR (which consent shall
not be unreasonably withheld) or (ii) by a Holder, unless the transferee of the
Registrable Securities is an heir or a direct or indirect partner of such
Holder.
SECTION 11. MISCELLANEOUS.
11.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
regard to the conflict of laws principles thereof.
11.2. NOTICES. All notices and requests given pursuant to this
Agreement shall be in writing and shall be made by hand-delivery, first-class
mail (registered or certified, return receipt requested), confirmed facsimile or
overnight air courier guaranteeing next business day delivery to the relevant
address specified in the Exchange Rights Agreement. Except as otherwise provided
in this Agreement, the date of each such notice and request shall be deemed to
be, and the date on which each such notice and request shall be deemed given
shall be: at the time delivered, if personally delivered or mailed; when receipt
is acknowledged, if sent by facsimile; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
business day delivery.
11.3. ENTIRE AGREEMENT; INTEGRATION. This Agreement supersedes
all prior agreements between or among any of the parties hereto with respect to
the subject matter contained herein and therein, and such agreements embody the
entire understanding among the parties relating to such subject matter.
11.4. SECTION HEADINGS. Section headings are for convenience
of reference only and shall not affect the meaning of any provision of this
Agreement.
11.5. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, and all of which
shall together constitute one and the same instrument. All signatures need not
be on the same counterpart.
11.6. SEVERABILITY. If any provision of this Agreement shall
be invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity and enforceability of the remaining provisions of this
Agreement, unless the result thereof would be unreasonable, in which case the
parties hereto shall negotiate in good faith as to appropriate amendments
hereto.
11.7. TERMINATION. This Agreement may be terminated at any
time by a written instrument signed by the Trust, the Corporation and HSR.
Unless sooner terminated in accordance with the preceding sentence, this
Agreement (other than Section 7 hereof) shall terminate in its entirety on such
date as there shall be (a) no Registrable Securities
-16-
<PAGE> 17
outstanding, and (b) no securities outstanding which are convertible or
exchangeable into Registrable Securities; provided that any Paired Shares
previously subject to this Agreement shall not be Registrable Securities
following the sale of any such shares in an offering registered pursuant to this
Agreement.
11.8. STARWOOD LODGING TRUST. The parties hereto understand
and agree that the name "Starwood Lodging Trust" is a designation of the Trust
and its Trustees (as Trustees but not personally) under the Declaration of
Trust, and all persons dealing with the Trust shall look solely to the Trust's
assets for the enforcement of any claims against the Trust, and that the
Trustees, officers, agents and security holders of the Trust assume no personal
liability for obligations entered into on behalf of the Trust, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.
11.9. SUBMISSION TO JURISDICTION. Each of the parties hereto
and each of the Holders 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, 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.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first written above.
STARWOOD LODGING TRUST
By:
---------------------------------
Name:
Title:
STARWOOD LODGING CORPORATION
By:
---------------------------------
Name:
Title:
-17-
<PAGE> 18
PHILADELPHIA HSR LIMITED PARTNERSHIP
By:
---------------------------------
Name:
Title:
-18-
<PAGE> 1
STARWOOD LODGING CORPORATION c/o
Starwood Capital Group, L.P.
Three Pickwick Plaza
Suite 250
Greenwich, CT 06830
VIA FAX
April 19, 1996
Mr. Ted Darnall
226 Salem
Pittsburgh, PA 15241
Dear Ted:
We are very pleased to submit this offer for your full-time employment
by Starwood Lodging Corporation (the "Company") as the Chief Operating Officer
of the Company. As you know, shares of the Company trade on the NYSE and are
paired with those of Starwood Lodging Trust (the "REIT"), which, in 1995, was
the nation's number #1 performing hotel company and the number #1 performing
real estate investment trust in all asset categories. We expect the total
combined capitalization of the Company and the REIT to be well in excess of $1
billion in the near future and, at present, have over $500 million of
transactions in our acquisitions "pipeline". We are very excited about the
prospects of having someone with your talent and abilities join our effort to
build one of the nation's best vertically- integrated hotel companies. The
following will serve to confirm the principal attributes of your employment:
1. START DATE: Your employment will commence on or before May 9, 1996.
2. DUTIES: You shall be the Chief Operating Officer of the Company and
shall perform such duties and services as may be assigned to you from time to
time by the Chief Executive Officer and/or the Board of Directors. You shall
devote your full time and attention to the affairs of the Company and to your
duties as Chief Operating Officer.
3. BASE SALARY: Your initial base salary expressed in annualized terms
will be $275,000 per year, payable bi-weekly and subject to the usual
withholdings for FICA, 401(k) contributions (to the extent the Company has or
adopts a 401(k) program), state and federal unemployment tax and Medicare. The
initial base salary shall be operative for the balance of the calendar year 1996
and for 1997 and will be subject to annual review and potential increase by the
Board of Directors for subsequent calendar years in which you remain in the
employ of the Company.
<PAGE> 2
4. BONUS: You will be eligible to receive a performance bonus based
upon achieving specified performance criteria which will be established by the
Board of Directors. The bonus will be up to 100% of your base salary in effect
for the period for which a bonus is being considered. However, for the calendar
year 1996 you will be guaranteed a minimum bonus equal to 50% of your annualized
base salary as if you had been in the employ of the Company for the entire
calendar year 1996. Any additional bonus for 1996 will be based upon meeting or
exceeding the criteria established by the Board of Directors.
5. EMPLOYEE BENEFITS: You shall be eligible to participate in all
employee benefit programs of the Company as are generally available to other
executives of the Company.
6. OPTIONS: You will receive 50,000 options for paired shares in the
Company and Starwood Lodging Trust on the date your employment commences. Such
options will be at the fair market value (i.e., closing price) of the paired
shares on the NYSE on such date. Such options will vest one-third annually on
each anniversary of your employment commencement date. The contingencies to
vesting and any acceleration of vesting will be the same as are applicable
generally to the options held by other senior executives of the Company. You
will be considered for additional options in the future, based on your and the
Company's performance. At the time shares are delivered pursuant to the exercise
of your options, such shares shall be subject to resale pursuant to the
requirements of Rule 144.
7. RESTRICTED STOCK: You will receive an initial award of $1,000,000 of
restricted stock or of securities having equivalent value pursuant to a
restricted stock and other incentive program, the details of which are currently
being worked on by the Company. The performance criteria and other contingencies
associated with such restricted stock or other securities shall be the same as
those generally applicable to other senior executives of the Company. In no
event will the vesting period for such restricted stock exceed three years and
you will be entitled to receive dividends on your restricted stock even though
the same are not fully vested (subject to prospective forfeiture in the event
and to the extent that the restricted stock grant falls to vest in whole or in
part). We anticipate that, under the program which the Company is currently
developing you will be eligible for additional grants of restricted stock in the
future based on your and the Company's performance.
8. RELOCATION EXPENSES: The Company will pay the reasonable,
out-of-pocket costs of relocating your household furnishings and your family
from Pittsburgh to the Company's new headquarters. As you know, the Company
anticipates moving its current offices from LA in the near future. At the
present time, Atlanta and Fairfield County, CT are both under consideration as
potential areas in which to relocate the Company. While Atlanta appears to be
our lead candidate at the moment, no final decision has been made to this point.
We would anticipate that this decision will be made within the next 30 to 60
days.
Relocation expenses will include the payment of normal escrow costs and
financing costs (up to two (2) points of the loan amount) of a new home. In
addition, such costs will include the actual real estate commissions (to a
maximum of six (6) percent) and other closing costs on the sale of your
Pittsburgh residence.
-2-
<PAGE> 3
You will receive a bridge loan of up to $250,000 to enable you to
purchase a new home at the Company's new headquarters while you are selling your
home in Pittsburgh. Upon sale of your Pittsburgh home, you will pay the bridge
loan down to $150,000. The bridge loan would be secured by a second mortgage on
your new home, would be non-interest bearing and would mature when your
employment ceases with the Company.
In the event you purchase a new home at a time when you still have not
sold your home in Pittsburgh, the Company agrees to reimburse you the cost of
utilities, first mortgage interest, taxes and insurance on your home in
Pittsburgh or, if you prefer, on your new home through the earlier to occur of
the first anniversary of your acquisition of your new home or the sale of your
home in Pittsburgh.
The Company will also reimburse you for out of pocket temporary housing
expenses (for up to six months) and for three househunting trips for you and
your family. In addition, the Company shall reimburse you for up to $3,000 of
out-of-pocket costs incurred by you on weekend visits to your family while you
are employed at a location away from you family's place of residence.
9. TERMINATION/SEVERANCE: The Company reserves the right to terminate
your employment with or without cause at any time. In the event of an
involuntary termination without cause or in the event of any breach by the
Company of your employment agreement entitling you to terminate same (after
expiration of applicable notice and cure periods for the benefit of the
Company), you shall receive, as your sole right, exclusive remedy and liquidated
damages, a termination package equal to twelve (12) months base salary and the
vesting of your options and restricted stock shall be accelerated to the date of
such termination. The Company will also continue to provide medical benefits
coverage during the 12 month period subsequent to the termination of your
employment.
No severance shall be due in the event that you are terminated for
cause or in the event that you leave the full-time employ of the Company
voluntarily.
In the event of any employment-related disputes with respect to your
employment by the Company, then you and the Company agree that the same shall be
resolved through binding arbitration in the jurisdiction of the Company's
headquarters and in accordance with the rules and procedures from time to time
of the American Arbitration Association.
10. REIMBURSEMENT:
The Company has reviewed your existing employment agreement with
Interstate Hotels Corporation dated December 1, 1995. The Company has no desire
to obtain nor to utilize any proprietary or confidential information to which
you may have had access in your current employment with Interstate. Thus, in the
performance of your duties for the Company, you shall not utilize nor disclose
(whether to the Company or to any of its officers, employees, directors or
agents), and the Company agrees that it shall not request that you utilize or
disclose, any trade secrets or other proprietary or confidential information of
your existing employer, including, but without limitation, customer lists. The
Company
-3-
<PAGE> 4
agrees to reimburse you your legal fees for your defense (by counsel to be
chosen by the Company) of any equitable or legal relief which your current
employer may seek against you for any alleged breach of said employment contract
resulting from your employment by the Company and to indemnify you against any
damages sought to be recovered by your current employer for alleged breach of
said employment contract, provided, however, that such reimbursement and
indemnification obligations shall not extend to legal fees incurred with respect
to, nor to damages resulting from, any alleged breach of such contract other
than an alleged violation of the non-competition, confidentiality or
non-solicitation covenants resulting from your employment by the Company. In the
event that, as a result of the foregoing limitations, you are not entitled to
full reimbursement of your legal fees by the Company or to full indemnification
for any damages resulting from alleged breaches of said employment contract,
then your legal fees and any obligation to pay damages shall be prorated between
reimbursable and non-reimbursable components in a fair and equitable manner, as
to be determined from time to time by a mutually acceptable, independent third
party knowledgeable in such matters, who shall be designated in your employment
contract with the Company. The Company reserves the right to settle, in whole or
in part, without your consent and at the Company's sole cost and expense, any
matter for which reimbursement or indemnification obligations have been
undertaken by the Company hereunder so long as the terms of any such settlement
shall not include any admission of liability or of wrongdoing on your part.
This letter represents the entirety of our agreement with respect to
your employment and any prior discussions or negotiations are hereby merged
herein. Once you've accepted this offer, the Company's counsel will prepare a
more formal employment agreement that will incorporate, without limitation, the
principal terms of your employment set forth herein. Such employment will
include mutually acceptable provisions as to the maintenance by you of agreement
with confidentiality with respect to the Company's confidential and/or
proprietary information, as well as a non-compete that will be operative during
the term of your employment.
If this offer is acceptable to you, then please sign this letter in the
space provided below and return a copy of this letter to Barry Sternlicht by
Monday, April 22, 1996.
Ted, on a personal note, I know I speak on behalf of all of the senior
executives of the Company and the REIT in saying that we are delighted for the
Company's extending you this offer and we look forward to building a great
company in tandem with your capabilities
-4-
<PAGE> 5
and experience. You are ready to be the COO of a major company and I believe
that your will find this position to be as challenging and rewarding as you care
to make it.
Very truly yours,
STARWOOD LODGING CORPORATION
By:
-------------------------------
Barry S. Sternlicht
Authorized Signatory
ACCEPTED AND AGREED TO:
- ------------------------------
Ted Darnall
-5-
<PAGE> 1
EMPLOYMENT AGREEMENT
between
STARWOOD LODGING CORPORATION
and
ERIC A. DANZIGER
Employment Agreement dated as of June 27, 1996 between Eric A. Danziger
(the "Executive") and Starwood Lodging Corporation, a Maryland corporation (the
"Company"), with its principal office at 11835 West Olympic Boulevard, Suite
675, West Los Angeles, California 90064.
WHEREAS, the Company desires to employ the Executive as its President
and Chief Executive Officer, and the Executive desires to accept such
employment, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows:
ARTICLE I
Employment
Section 1.01 Position; Responsibilities. The Company hereby employs the
Executive as its President and Chief Executive Officer commencing on July 8,
1996 (the "Commencement Date"). The employment hereunder shall be at will and
shall be terminable by either party with or without cause and with or without
notice; provided, however, the Executive shall give the Company at least 30
days' advance written notice prior to any voluntary termination by the Executive
without cause. The Executive shall perform such duties and services as may be
assigned to him from time to time by the Board of Directors of the Company or
the Management Committee of SLC Operating Limited Partnership (collectively, the
"Board") or any committee of the Board.
Section 1.02 Performance of Duties. The Executive shall duly and
faithfully perform all of the duties assigned to him to the best of his
abilities, and he shall devote his full time, attention and best efforts to the
performance of such duties and shall not engage in any other business activities
except with the prior written approval of the Board.
Section 1.03 Representation and Warranty of Executive. The Executive
hereby represents and warrants to the Company that the Executive is not aware of
any presently existing fact, circumstance or event (including, but without
limitation, any health condition or legal constraint) which would preclude or
restrict him from providing to the Company the services contemplated by this
Agreement, or which would give rise to any breach of any term or provision
hereof, or which could otherwise result in the termination of his employment
hereunder for cause.
<PAGE> 2
ARTICLE II
Compensation
Section 2.01 General. The Company shall compensate the Executive for
all of his services under this Agreement, as set forth below.
Section 2.02 Basic Compensation. The Executive's minimum annual salary
("Base Salary") shall be at the rate of $365,000 and shall be payable in
bi-weekly or other installments in accordance with the Company's normal payment
schedule for senior management. The Base Salary shall be subject to annual
review commencing at the end of 1997 and at the end of each year thereafter, if
the Executive is employed by the Company at that time, and may be increased (but
not decreased) for subsequent years.
Section 2.03 Incentive Compensation. In addition to the Base Salary,
the Company shall pay to the Executive as incentive compensation ("Incentive
Compensation") in respect of each fiscal year of the Company which ends during
the time when the Executive is employed by the Company, an amount determined in
accordance with any bonus or short term incentive compensation program based
upon achieving specified performance criteria which may be established by the
Board either for the Executive or for senior management generally; provided,
however, that in no event may such Incentive Compensation in respect of any
fiscal year of the Company exceed 75% of the Executive's Base Salary for that
year; and provided, further, that the minimum Incentive Compensation for the
Executive for 1996 shall be $150,000.
All Incentive Compensation earned under this Section 2.03 shall be
payable as soon as reasonably practicable, but in no event later than 120 days
after the end of the relevant fiscal year of the Company.
Section 2.04 Stock Options. The Option Committee of the Board has
granted to the Executive, conditioned upon the commencement of his employment by
the Company hereunder, a "Paired Option" under the Starwood Lodging Corporation
1995 Share Option Plan (the "Option Plan") as approved by the stockholders of
the Company at a meeting held December 7, 1995, to purchase 125,000 Paired
Shares of the Company and Starwood Lodging Trust, exercisable at a Purchase
Price equal to the closing price per Paired Share on the New York Stock Exchange
on the date of this Employment Agreement. Such option vests 33 1/3% annually on
each anniversary of the Commencement Date, starting in 1997. Such option expires
ten years from the Commencement Date, and is subject to all other provisions of
the Option Plan; provided, however, that no contingency shall exist to vesting
of the aforesaid Paired Option based on the economic performance of the Company.
The Executive shall be eligible for grants in the future of additional options
under the Option Plan or "Amended Option Plan" (as hereinafter defined) at the
discretion of the Option Committee of the Board. Upon exercise of any option,
all Paired Shares delivered pursuant thereto will be subject to resale and other
restrictions as set forth in the Option Plan or Amended Option Plan, as
applicable. The Board is scheduled to consider at its meeting on June 27, 1996,
certain amendments to the Option Plan which are expected to provide, in addition
to options to purchase Paired Shares for awards of stock appreciation rights,
restricted Paired Shares,
-2-
<PAGE> 3
bonus Paired Shares and performance shares (as so amended the Option Plan is
herein referred to as the "Amended Option Plan").
Section 2.05 Restricted Stock. The Option Committee of the Board has
granted to the Executive, conditioned upon the commencement of his employment by
the Company, $2,500,000 in value of restricted Paired Shares based on the
trailing average three-trading- day closing price of the Paired Shares on the
New York Stock Exchange immediately preceding the date of this Employment
Agreement. The foregoing grant of restricted Paired Shares is not contingent
upon the adoption by the Board of the Amended Option Plan; but in the event the
Board adopts the Amended Option Plan, such grant shall be deemed a grant
pursuant to the Amended Option Plan. The Amended Option Plan, including the
provisions thereof dealing with the issuance of restricted Paired Shares, will
be subject to stockholder approval at the 1996 Annual Meeting of the
stockholders of the Company. The aforesaid restricted Paired Shares shall vest
33 1/3% annually on each anniversary of the Commencement Date, starting in 1997.
Such restricted Paired Shares grant shall be subject to all of the terms and
provisions of the Amended Option Plan in the event the Amended Option Plan is
adopted by the Board; provided, however, that (i) the Executive shall be
entitled to receive dividends on such Restricted Stock even though said grant
shall not be fully vested (subject, however, to forfeiture (of future dividends
only) in the event and to the extent that the restricted Paired Shares fail to
vest in whole or in part); and (ii) no contingency shall exist to vesting of the
aforesaid restricted Paired Shares based on the economic performance of the
Company. The Executive shall be eligible for grants in the future of additional
restricted Paired Shares under the Amended Option Plan at the discretion of the
Option Committee of the Board. Restricted stock shall be subject to resale and
other restrictions as set forth in the Amended Option Plan.
Section 2.06 Performance Units. Subject to the adoption of the Amended
Option Plan by the Board, and effective on the Commencement Date, the Option
Committee of the Board has granted to the Executive 40,000 Performance Shares
("Performance Units") pursuant to the Amended Option Plan. The Amended Option
Plan, including the provisions thereof dealing with the issuance of Performance
Units, will be subject to stockholder approval at the 1996 Annual Meeting of the
stockholders of the Company. Such Performance Units grant and any subsequent
grant shall be subject to all of the terms and provisions of the Amended Option
Plan. The Executive shall be eligible for grants in the future of additional
Performance Units under the Amended Option Plan at the discretion of the
appropriate Committee of the Board. Any Paired Shares issued pursuant to
Performance Units shall be subject to resale and other restrictions as set forth
in the Amended Option Plan. The Company reserves the right to deliver cash in
lieu of Paired Shares pursuant to the Performance Unit program. In connection
with the aforesaid grant of 40,000 Performance Units:
(i) The performance criteria and other contingencies
associated with the Executive's participation in the Performance Unit program
shall be the same as those generally applicable to other senior executives of
the Company except as otherwise expressly set forth in this Employment
Agreement;
-3-
<PAGE> 4
(ii) The Reference Period for the initial grant of 40,000
Performance Units shall be from January 1, 1996 through December 31, 2000. In
the event that, during said Reference Period, the Executive's employment is
terminated by the Executive (without cause against the Company) or by the
Company with cause against the Executive, then the Board may require Executive
to forfeit any interest in the Performance Unit program, including, but without
limitation, in the aforesaid 40,000 Performance Units;
(iii) "Applicable Percentage" as to Executive in respect of
the aforesaid 40,000 Performance Units shall be (1) 10% in 1996, (2) 25% in
1997, (3) 45% in 1998, (4) 70% in 1999 and (5) 100% in 2000;
(iv) In the event that Executive's employment is terminated by
the Company without cause or by the Executive with cause against the Company,
then the Applicable Percentage at the time of termination of said 40,000
Performance Units shall vest (with any remainder of said 40,000 Performance
Units to be forfeited at the discretion of the Board) and the Reference Period
for determining the number of Paired Shares, if any, to be issued in exchange
for the vested Performance Units shall be from January 1, 1996 through such date
of termination or through December 31, 2000 (if December 31, 2000 shall occur
prior to such termination); and
(v) Subject to review and modification by the Board or the
appropriate Committee from time to time, the Company has established that up to
50% of the maximum potential Paired Shares to be awarded pursuant to the
Performance Unit Program (i.e., 140,000 Paired Shares in respect of the
Executive's initial 40,000 Performance Units grant) shall be granted based on
the Company's and Starwood Lodging Trust's achieving or exceeding their combined
funds from operation ("FFO") targets for each fiscal year of the Company ending
during the Reference Period and that the remaining maximum potential Paired
Shares to be awarded shall be granted based on the Company and Starwood Lodging
Trust's achieving, on a combined basis, the following percentile rankings to
their combined competitive set (as established and modified by the Board or the
appropriate Committee from time to time) during the applicable Reference Period:
<TABLE>
<CAPTION>
Total Shareholder Return Paired Shares per Performance Unit to Vest
<S> <C>
A. 95th percentile or better 7.0
B. 85th percentile or better,
but less than A. 6.0
C. 80th percentile or better,
but less than B. 5.0
D. 75th percentile or better,
but less than C. 3.0
E. 60th percentile or better,
but less than D. 2.0
F. 50th percentile or better,
but less than E. 1.0
G. Below 50th percentile 0.0
</TABLE>
-4-
<PAGE> 5
The performance criteria respecting the 40,000 Performance Units referenced
above in this Section 2.06 and in any other Performance Units which may be
granted to Executive, shall be established immediately prior to the grant or at
such other times as may be necessary to comply with the provisions of Section
162(m) of the Internal Revenue Code.
Section 2.07 Proviso. All grants of restricted Paired Shares, of
Performance Units and of any Paired Shares to issue from Performance Units
referred to in this Employment Agreement, are subject to the approval of the
Amended Option Plan by the stockholders of the Company at the 1996 Annual
Meeting of Stockholders of the Company. No assurances can be given by the
Company that such stockholder approval shall be obtained. In the event that such
approval is not obtained, then this Employment Agreement shall continue in
effect and shall be construed without regard to any grants of restricted Paired
Shares, Performance Units or any Paired Shares to issue from Performance Units
and no such grants or the failure thereof to have been approved by the
stockholders of the Company shall be taken into account in connection with the
Executive's compensation and/or severance, nor shall the Executive be entitled
to any compensation in lieu of any such grants or of Paired Shares that would or
might otherwise have issued as a result of such grants. However, in the event
that and so long as the stockholders of the Company shall have approved the
Amended Option Plan, in no event will the Executive be issued less than
$2,500,000 in value of restricted Paired Shares as set forth in Section 2.05
above nor less than 40,000 Performance Units as set forth in Section 2.06 above
(and the Company shall not request that any shareholder approval of Executive's
aforesaid grants be made separately from shareholder approval of the Amended
Option Plan generally, subject to the requirements of applicable law or the
rules of the New York Stock Exchange).
Section 2.08 Relocation Expenses. In recognition of the necessity for
the Executive to relocate his residence from Dallas, Texas, where he currently
resides ("Executive's Dallas Residence"), to the Company's new executive offices
in Phoenix, Arizona (the "New Offices"), the Company shall reimburse the
Executive for his reasonable out-of-pocket expenses for transporting his family
and household furnishings and belongings from Executive's Dallas Residence to
his new residence ("Executive's New Residence") in the community of the
Company's New Offices. Relocation expenses will include, with respect to
Executive's Dallas Residence, (i) normal escrow Costs and (ii) the actual real
estate commission, up to a maximum of 6% of the selling price, and other
out-of-pocket closing costs in respect of the sale of the Executive's Dallas
Residence. Relocation expenses shall also include, in the event the Executive
purchases Executive's New Residence prior to the sale of Executive's Dallas
Residence, the cost of interest on any first Mortgage on Executive's Dallas
Residence from the date of purchase of Executive's New Residence through the
earlier of that date which is 180 days subsequent to the Executive's purchase of
Executive's New Residence or the date as of which Executive's Dallas Residence
shall have been sold; provided, however, that the aggregate amount of such first
mortgage interest included in relocation expenses shall not exceed $35,400. The
Company will also reimburse the Executive for out-of-pocket temporary housing
expenses for the Executive and his family for up to six months respecting the
Executive's employment at the New Offices; provided, however, that in no event
shall the aggregate amount of such temporary housing expenses to be reimbursed
by the Company exceed $30,000.
-5-
<PAGE> 6
In addition, in order to assist the Executive to purchase Executive's
New Residence, the Company will loan the Executive the sum of up to $250,000
(the "Bridge Loan"). Upon the sale of the Executive's Dallas Residence, the
Bridge Loan shall mature. The Bridge Loan will be secured by a second mortgage
on the Executive's New Residence (second only to a conventional first mortgage),
will be non-interest bearing prior to maturity and will mature, if not earlier,
then on the first anniversary of the Commencement Date. The Bridge Loan shall be
funded at closing on the Executive's New Residence. As a condition to the
Company's obligation to make the Bridge Loan and to include the aforesaid first
mortgage interest in relocation expenses, Executive confirms and agrees that
prior to the Commencement Date, (i) Executive will list Executive's Dallas
Residence for sale at a listing price that does not exceed 110% of the
Executive's Dallas Residence's fair market value, and (ii) from and after the
date hereof, Executive shall use his best efforts to sell Executive's Dallas
Residence as expeditiously as possible.
Section 2.09 Other Programs. The Executive shall also be entitled to
participate in all employee benefit plans, including group health care plans, to
take time off for vacation or illness in accordance with the Company's policy
for senior management and to receive all other fringe benefits as are from time
to time made generally available to the senior management of the Company.
Section 2.10 Expense Reimbursements. The Company shall reimburse the
Executive for all proper expenses incurred by him in the performance of his
duties hereunder in accordance with the policies and procedures established by
the Company.
Section 2.11 Withholding. The Base Salary and all other payments to the
Executive for his services to the Company shall be subject to all withholding
and deductions required or permitted by federal, state or other law, including
those authorized by the Executive but not otherwise required by law, including
but not limited to state, federal and local income taxes, unemployment tax,
Medicare, FICA and any contributions pursuant to any employee benefit program
which may be adopted by the Company for the benefit of its senior executives.
ARTICLE III
Termination of Employment
Section 3.01 Events of Termination. As indicated in Section 1.01 above,
the Executive's employment by the Company is at will. Accordingly, it may be
terminated at any time by the Company or the Executive with or without cause
(subject in the case of the Executive to compliance with applicable notice
provisions of this Article III and Section 1.01 above). The Executive shall have
the right to terminate this Agreement for cause in the event of failure by the
Company to provide any of the compensation or benefits to be made available to
the Executive under this Agreement, which is not cured within 30 days following
written notice from the Executive to the Company.
For all purposes of this Agreement, in the event the scope of
Executive's duties and responsibilities as the President and Chief Executive
Officer of the Company are, in the aggregate, materially reduced, or in the
event that Executive is requested by the Board to
-6-
<PAGE> 7
assume duties that are inappropriate for the President and Chief Executive
Officer of the Company, and, in either such event, such reduction or
inappropriate assignment of duties is not cured by the Company within 30 days
following written notice from the Executive to the Company of same, then at any
time within 15 days subsequent to the expiration of the aforesaid 30-day period,
Executive shall have the right to resign from his employment with the Company
(upon 30-days prior written notice) by reason of such reduction or inappropriate
assignment and such termination of employment shall be treated, for all purposes
of this Agreement, as if Executive had been terminated by the Company other than
for "cause"; provided, however, that (i) the foregoing shall not apply to
reductions in Executive's duties due to Executive's illness or disability, and
(ii) the foregoing shall not apply to any temporary suspension of Executive's
duties, in whole or in part, pending results of any Board-commissioned
investigation as to any potential "cause" for termination of Executive's
employment.
The Company shall have the right to terminate for "cause" in the event
of (a) a material breach of this agreement by Executive, including, but without
limitation, Executive's neglect in performing his duties (which shall include
without limitation any such neglect resulting from the Executive's excessive
absenteeism not related to physical or mental illness), (b) any breach by
Executive of his fiduciary duties under Maryland law as an officer of the
Company, or (c) Executive's conviction of a felony.
For all purposes of this agreement, "cause" shall have the applicable
defined meaning as set forth above in this Section 3.01
Section 3.02 Severance Package. In the event the Executive's employment
under this Agreement is terminated under Section 3.01 above either by the
Company other than for "cause" (which shall be deemed to include, without
limitation, a termination due to the Executive's death or permanent disability)
or by the Executive for "cause," then the Executive shall be entitled to receive
the following ("Severance Package"):
(i) an amount equal to one year's Base Salary based on the Base Salary
then in effect;
(ii) the immediate vesting of all outstanding stock options granted
pursuant to Section 2.04 hereof (and, following timely exercise of any such
options, the Executive shall receive title to the shares issued in respect of
such options free and clear of any lien, claim or encumbrance by, through or
under the Company);
(iii) the immediate vesting of all restricted Paired Shares which may
have theretofore been granted to the Executive pursuant to Section 2.05 hereof
(and, following such vesting, the Executive shall enjoy title to such Paired
Shares free and clear of any lien, claim or encumbrance by, through or under the
Company);
(iv) Paired Shares, if any, that are issuable in exchange for all
Performance Units that shall then be vested or which shall have theretofore
vested in accordance with the terms and provisions of Section 2.06 and, in
particular, of paragraph (iv) of said Section 2.06 (and
-7-
<PAGE> 8
following the issuance of any such Paired Shares, the Executive shall enjoy
title to such Paired Shares free and clear of any lien, claim or encumbrance by,
through or under the Company); and
(v) Company paid medical insurance benefits available to all other
senior executives of the Company during the 12-month period subsequent to
termination of employment shall be paid by the Company, and thereafter all COBRA
rights available to the Executive shall be paid by the Executive, but COBRA
rights shall be measured from the termination date.
The parties agree that the foregoing shall be the Executive's sole and
exclusively monetary remedy by reason of termination by the Executive for
"cause" or by reason of any termination by the Company other than for "cause",
it being agreed that as his actual damages would be difficult to measure or
quantify and would be impracticable to determine, such amount shall constitute
liquidated damages for the Executive by reason of such termination by Executive
due to "cause" or by reason of any termination by the Company other than for
"cause".
No Severance Package shall be due or owing to the Executive in the
event that the Company shall terminate the Executive's employment for "cause" or
in the event that the Executive shall terminate his employment with the Company
for reasons other than "cause". In addition, in the event that the Company shall
terminate the Executive's employment for "cause" or in the event that the
Executive shall terminate his employment with the Company for reasons other than
"cause", then all unvested options or unvested restricted Paired Shares then
held by Executive, as well as all Performance Units then held by Executive,
shall be automatically forfeited (subject, however, to any contrary
determination of the Board in its sole discretion).
ARTICLE IV
Noncompetition; Confidential Information
Section 4.01 Other Business Ventures. In addition to the restriction
from having other employment provided in Section 1.02 hereof and except as
expressly contemplated by Article VI below, during the term of the Executive's
employment hereunder the Executive shall not, without the prior written approval
of the Board, directly or indirectly engage in, represent, be connected with or
have a financial interest in any business which is or, to the best of his
knowledge, is about to become competitive with the business of the Company;
provided, however, that nothing herein contained shall be deemed to prohibit the
Executive from being a passive investor owning up to 2% of any class of
outstanding securities of any company whose stock is publicly traded.
Section 4.02 Confidential Information. Except (i) in the course of his
employment with the Company, or (ii) as he may be required pursuant to any law
or court order or similar process, the Executive shall not at any time during or
after the term of the Executive's employment hereunder, directly or indirectly
disclose or use any confidential information or proprietary data with respect to
the Company, Starwood Lodging Trust, or
-8-
<PAGE> 9
any of their respective subsidiaries or affiliates that is not otherwise in the
public domain. In the event of any dispute between the Executive and the Company
or between the Executive or the Company and others, the Executive shall
cooperate with the Company as to redaction or other protective measures with
respect to any unnecessary public disclosure of any such confidential
information or proprietary data.
Section 4.03 Inducing of Company Employees. During the term of the
Executive's employment hereunder, the Executive shall not, except in the course
of the performance of his duties hereunder or with the prior approval of the
Board, in any way directly or indirectly induce or attempt to induce or
otherwise counsel, advise or encourage any person to leave the employ of the
Company. In addition, the Executive shall not, with respect to any person or
persons who to the Executive's best knowledge was employed by the Company,
Starwood Lodging Trust, or their respective subsidiaries or SLT Realty Limited
Partnership or SLC Operating Limited Partnership ("Company Employee") at any
time during the period commencing six months prior to such termination:
(i) for a period of 12 months following the date on which such
termination becomes effective as aforesaid, in any way directly or indirectly
hire, attempt to hire, or cause to be hired any Company Employee, without the
prior written approval of the Board; and
(ii) for a period of 12 months following the date on which such
termination becomes effective as aforesaid, in any way directly or indirectly
induce or attempt to induce or otherwise counsel, advise or encourage any
Company Employee to leave the employment of the Company, Starwood Lodging Trust
or their respective subsidiaries or SLT Realty Limited Partnership or SLC
Operating Limited Partnership, without the prior written approval of the Board.
ARTICLE V
Miscellaneous
Section 5.01 Notices. Any notice or request required or permitted to be
given hereunder shall be sufficient if in writing and delivered personally or
sent by registered or certified mail, return receipt requested, as follows: if
to the Executive, to his address as set forth in the records of the Company, and
if to the Company, to its address hereinabove set forth, or to any other address
designated by either party by notice similarly given. Such notice shall be
deemed to have been given upon the personal delivery or such mailing thereof, as
the case may be.
Section 5.02 Assignment and Succession. The rights and obligations of
the Company under this Agreement shall inure to the benefit of and be binding
upon its successors and assigns. The Executive's rights and obligations
hereunder are personal and may not be assigned; provided, however that in the
event of the termination of the Executive's employment due to the Executive's
death or permanent disability, the Executive's legal representative shall have
the right to receive the Severance Package as more particularly set forth in
Section 3.02 above.
-9-
<PAGE> 10
Section 5.03 Headings. The Article, Section , paragraph and
subparagraph headings are for convenience of reference only and shall not
define or limit the provisions hereof.
Section 5.04 Arbitration. In the event of any controversy, dispute or
claim arising out of or related to this Agreement or the Executive's employment
by the Company, the parties shall negotiate in good faith in an attempt to reach
a mutually acceptable settlement of such dispute. If negotiations in good faith
do not result in a settlement of any such controversy, dispute or claim, it
shall be finally settled by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association, subject to the
following:
(a) The Arbitrator shall be determined from a list of names of
five impartial arbitrators (each of whom shall be a retired judge) experienced
in commercial arbitration matters supplied by the American Arbitration
Association (the "Association") chosen by Executive and the Company each in turn
striking a name from the list until one name remains.
(b) The expenses of the arbitration shall be borne equally by
each party; and each party shall bear its own legal fees and expenses, except
that the prevailing party shall be awarded his or its reasonable attorney's
fees.
(c) The Arbitrator shall determine whether and to what extent
any party shall be entitled to damages under this agreement. No party shall be
entitled to punitive damages, and each party waives all such rights if any.
(d) The Arbitrator shall not have the power to add to nor
modify any of the terms or conditions of the this Agreement. The Arbitrator's
decision shall not go beyond what is necessary for the interpretation and
application of the provision of this Agreement in respect of the issue before
the Arbitrator. The Arbitrator shall not substitute his or her judgement for
that of the parties in the exercise of rights granted or retained by this
Agreement. The Arbitrator's award or other permitted remedy, if any, and the
decision shall be based upon the issue as drafted and submitted by the
respective parties and the relevant and competent evidence adduced at the
hearing.
(e) The Arbitrator shall have the authority to award any
remedy or relief provided for in this Agreement, in addition to any other remedy
or relief (including provisional remedies and relief) that a court of competent
jurisdiction could order or grant. In addition, the Arbitrator shall have the
authority to decide issues relating to the interpretation, meaning or
performance of this Agreement even if such decision would constitute an advisory
opinion in a court proceeding or if the issues would otherwise not be ripe for
resolution in a court proceeding, and any such decision shall bind the parties
in their continuing performance of this Agreement. The Arbitrator's written
decision shall be rendered within sixty days of the hearing. The decision
reached by the Arbitrator shall be final and binding upon the parties as to the
matter in dispute. To the extent that the relief or remedy granted by the
Arbitrator is relief or remedy on which a court could enter judgement, a
judgement upon the award rendered by the Arbitrator shall be entered in any
court having
-10-
<PAGE> 11
jurisdiction thereof (unless in the case of an award of damages, the full amount
of the award is paid within 10 days of its determination by the Arbitrator).
Otherwise, the award shall be binding on the parties in connection with their
continuing performance of this Agreement and in any subsequent arbitral or
judicial proceedings between the parties.
(f) The arbitration shall take place in the locale of the
Company's principal executive offices.
(g) The arbitration proceeding and all filing, testimony,
documents and information relating to or presented during the arbitration
proceeding shall be disclosed exclusively for the purpose of facilitating the
arbitration process and for no other purpose and shall be deemed to be
information subject to the confidentiality provisions of this Agreement.
(h) The parties shall continue performing their respective
obligations under this Agreement notwithstanding the existence of a dispute
while the dispute is being resolved unless and until such obligations are
terminated or expire in accordance with the provisions hereof.
(i) The Arbitrator may, in his or her sole discretion, order a
pre-hearing exchange of information including production of documents, exchange
of summaries of testimony or exchange of statements of position, and shall
schedule promptly all discovery and other procedural steps and otherwise assume
case management initiative and control to effect an efficient and expeditious
resolution of the Dispute. At any oral hearing of evidence in connection with an
arbitration proceeding, each party and its counsel shall have the right to
examine its witness and to cross-examine the witnesses of the other party. No
testimony of any witness shall be presented in written form unless the opposing
party or parties shall have the opportunity to cross-examine such witness,
except as the parties otherwise agree in writing.
(j) Notwithstanding the dispute resolution procedures
contained in this Section 11, either party may apply to any court having
jurisdiction (i) to enforce this Agreement to arbitrate, (ii) to seek
provisional injunctive relief so as to maintain the status quo until the
arbitration award is rendered or the Dispute is otherwise resolved, or (iii) to
challenge or vacate any final judgment, award or decision of the Arbitrator that
does not comport with the express provisions of this Section 11.
Section 5.05 Invalidity. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality or enforceability of the remaining provisions hereof shall
not in any way be affected or impaired.
Section 5.06 Waivers. No omission or delay by either party hereto in
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof, or the exercise of
any other right, power or privilege.
-11-
<PAGE> 12
Section 5.07 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 5.08 Entire Agreement. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof. No representation, promise
or inducement has been made by either party hereto that is not embodied in this
Agreement and neither party shall be bound by or liable for any alleged
representation, promise or inducement not set forth herein. This Agreement may
not be amended, except by a written instrument hereafter signed by each of the
parties hereto.
Section 5.09 Interpretation. The parties hereto acknowledge and agree
that each party and its or his counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its drafting. Accordingly,
(i) the rules of construction to the effect that any ambiguities are resolved
against the drafting party shall not be employed in the interpretation of this
Agreement, and (ii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in favor of or against any
party regardless of which party was generally responsible for the preparation of
this Agreement.
Section 5.10 Governing Law. This Agreement and the performance hereof
shall be construed and governed in accordance with the internal laws of the
State of Arizona without reference to principles of conflict of laws.
ARTICLE VI
SPECIAL PROVISIONS
Section 6.01 Prior Employment. Prior to his employment by the Company,
the Executive was employed by Wyndham Hotels Corporation ("Wyndham"). The
Company has no desire to obtain nor to utilize any proprietary or confidential
information to which the Executive may have had access in his current employment
with Wyndham. The Executive shall not in the performance of his duties hereunder
utilize or disclose (whether to the Company or any of its officers, employees,
directors or agents) any trade secrets or other proprietary or confidential
information of Wyndham to which the Executive may have had access during his
employment with Wyndham. The Company agrees that it will not request the
Executive to utilize or disclose any trade secrets or other proprietary or
confidential information of Wyndham, including but without limitation, customer
lists.
Section 6.02 Special Company Obligations. The obligations of the
Company set forth in the following paragraphs (a), (b) and (c) are herein
individually and collectively referred to as the "Special Company Obligations."
The Special Company Obligations shall terminate, prospectively, and be of no
further prospective force or effect in the event that Executive shall terminate
his employment voluntarily for any reason or in the event that the Company shall
terminate the Executive's employment with "cause." In addition, in the event
that, within 12 months after Executive's receipt of any benefit in respect of
the Special Company Obligations, Executive shall terminate his employment
voluntarily for any reason
-12-
<PAGE> 13
or in the event that the Company shall terminate the Executive's employment with
"cause," then Executive shall, within 30 days after written demand by the
Company, return any such benefit received within such 12-month period (but
Executive shall not be obligated to return any such benefit received prior to
such 12-month period). The Special Company Obligations are as follows:
(i) In the event that the Executive's $2,700,000 stock loan ("Existing
Loan") is required to be prepaid in the context of a settlement of any and all
issues which Executive may have with Wyndham that is on a basis reasonably
acceptable to the Company, then the Company shall use its best efforts to cause
a third party to make Executive a loan ("Replacement Loan") to refinance such
Existing Loan. Any such Replacement Loan shall be secured by a first lien pledge
of 168,000 shares of Wyndham and shall mature (or be renewed to mature) on the
earlier of (i) the scheduled maturity date of the Existing Loan or (ii) that
date which is 18 months following the date as of which Executive's Wyndham
shares shall have been registered for sale under the Securities Act of 1933 as
amended. The rate of interest on and other terms of such Replacement Loan shall
be commercially reasonable for similar such loans provided by commercial
lenders. Executive shall, in any event, use his best efforts to divest himself
of at least a sufficient number of Executive's shares in Wyndham by that date
which is 18 months following the date as of which Executive's Wyndham shares
shall have been registered so that the value of Executive's interest in the
Company and Starwood Lodging Trust thereafter exceed the value of Executive's
shareholder interests in Wyndham (and, for all purposes in this subparagraph
(i), shares held for the benefit of Executive's immediate family shall be deemed
to be part of Executive's shareholder interest in, as appropriate, the Company,
Starwood Lodging Trust or Wyndham). In addition, as the Company would prefer not
to have to use its best efforts to cause to be made the Replacement Loan,
Executive shall use reasonable efforts to modify the Existing Loan, if so
requested by Wyndham or in respect to a response by Wyndham for Executive's
prepayment of the Existing Loan, by increasing the rate of interest thereunder
to a market rate and/or agreeing to a shorter maturity for said Existing Loan.
(ii) Executive represents and warrants to the Company that to the best
of Executive's knowledge, Executive is not obligated to sell his Wyndham stock
at any time at a price less than market. In consideration and in reliance on
such representation, the Company agrees that in the event there currently is
such an obligation, then the Company shall make Executive whole of any excess of
such stock's fair market value at the time of sale over the price that Executive
is obligated to accept for such stock; provided, however, that (i) in the event
any such obligation exists, Executive shall use his best efforts to sell such
stock to the Company or its designee at fair market value rather than to any
other party (including, but without limitation, Wyndham) and (ii) in no event
shall the Company be obligated to make Executive whole for the excess, if any,
of the fair market value at time of sale over the fair market value of the
Wyndham stock on that date which is 18 months following the date as of which
Executive's Wyndham shares shall have been registered.
(iii) Executive represents and warrants to the Company that to the best
of Executive's knowledge, Executive is not obligated to accept deferred
consideration on any sale of his Wyndham stock. In consideration and in reliance
on such representation, the
-13-
<PAGE> 14
Company agrees that in the event there currently is such an obligation, then the
Company shall make Executive whole for any excess of (i) an amount equal to (a)
such stock's fair market value at the time of sale less (b) all current
consideration received at the time of sale, over (ii) the net present value of
any deferred consideration on any sale of Executive's Wyndham stock. For
purposes of determining the net present value of any such deferred
consideration, the stream of scheduled payments comprising such deferred
consideration shall be discounted to the date of sale at a discount rate equal
to the average annual yield to maturity, as of the date of sale of such Wyndham
stock, of U.S. Treasury obligations having maturities comparable to the maturity
of such deferred consideration.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officer and the Executive has signed this Agreement as of
the day and year fist above written.
STARWOOD LODGING CORPORATION
By:
----------------------------
Name:
--------------------------
Its:
---------------------------
-------------------------------
ERIC A. DANZIGER
-14-
<PAGE> 1
SEPARATION AGREEMENT
BETWEEN
STARWOOD LODGING TRUST
AND
JEFFREY C. LAPIN
This Separation Agreement (the "Agreement") is entered into as
of June 18, 1996 between Starwood Lodging Trust, a Maryland real estate
investment trust (the "Company") and Jeffrey C. Lapin ("Lapin").
RECITALS
WHEREAS, Lapin has been employed by the Company as a senior
executive since 1988, and the Company and Lapin are parties to a currently
effective Executive Employment Agreement dated November 11, 1994 (the
"Employment Agreement"); and
WHEREAS, the Company and Lapin mutually desire to terminate
the Employment Agreement and Lapin's employment by the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises
contained herein, the parties agree as follows:
1. Termination. Lapin's employment by the Company will
terminate on June 18, 1996 (the "Termination Date"). The Company and its Board
of Trustees recognize and acknowledge the contributions which Lapin has made, as
referenced in the Press Release referred to in Paragraph (a) of Section 9 and
the recommendation letter referred to in Section 17 hereof.
2. Resignation. Lapin hereby resigns as an officer of the
Company and as a member of the Board of Trustees of the Company, and as an
officer or director of any subsidiary of the Company or Starwood Lodging
Corporation (the "Corporation"), effective on the Termination Date.
3. Payments. Promptly upon the Termination Date, the Company
will pay to Lapin:
(a) any unpaid portion of Lapin's current Base Salary
(as defined in the Employment Agreement) of $225,000 per annum accrued through
the Termination Date, as well as an amount equal to such Base Salary for the
balance of the term of the Employment Agreement (through January 31, 1997);
<PAGE> 2
(b) $75,000, representing the minimum Bonus that
Lapin would have received under the Employment Agreement for 1996;
(c) $37,500, representing mutually agreed upon
vacation time accrued and unpaid through the Termination Date.
The Company shall deduct from all payments
to Lapin under this Section 3, all amounts required by law to be withheld for
Social Security contributions and Federal and state income taxes, and shall pay
them over to the appropriate tax receiving agency.
4. Medical Insurance. Lapin and his dependents will continue
to be covered, at the Company's cost, under the Company's medical, dental and
related insurance program (or if such coverage is not available the Company will
at its cost supply equivalent coverage), for a period of eighteen months from
the Termination Date, or for such shorter period until Lapin commences other
employment and receives medical insurance coverage that is at least equivalent
to that of the Company's. Lapin shall have COBRA rights for such coverage for
eighteen months thereafter, at Lapin's expense.
5. Lapin Loan. Lapin is currently indebted to the Company in
the amount of $250,000 pursuant to a Promissory Note in that principal sum dated
July 6, 1995 (the "Lapin Loan"). Subject to Paragraph (d) of Section 7, on the
first anniversary of the Termination Date, the Company shall be deemed to have
forgiven $150,000 of the said principal sum of $250,000 including all interest
on such forgiven amount accrued and unpaid to that date; and the unpaid balance
of the Lapin Loan shall mature on the third anniversary of the Termination Date.
The Note evidencing the Lapin Loan shall be amended to reflect such changes; and
in all other respects the terms of the Lapin Loan shall remain unchanged.
6. Options.
(a) In June 1995, Lapin was granted an option (the
"1995 Option") under the Company's 1995 Share Option Plan (the "Plan") to
purchase 25,000 paired shares ("Paired Shares") of the Company and the
Corporation which was to vest in three equal annual increments. On the
Termination Date, the 1995 Option shall be amended to provide as of that date it
is 50% vested; and subject to Paragraph (d) of Section 7, the balance shall vest
on the first anniversary of the Termination Date. The Options Committee of the
Trust has determined to make the foregoing amendments, subject to execution of
this Agreement and the occurrence of the Termination Date.
(b) The Options Committee of the Trust has granted to
Lapin, subject to the execution of this Agreement and the occurrence of the
Termination Date, an additional ten year option under the Plan (the "1996
Option") to purchase 5,000 Paired Shares at $37 7/8 per Paired Share (the
"Strike Price" which is the fair market value of a Paired Share on the date of
grant). The 1996 Option will be 66 2/3% vested on the Termination Date, and the
balance will vest in full on January 31, 1997 and will not be subject to any
contingencies. Upon each exercise of the 1996 Option, the Company will also
2
<PAGE> 3
pay to Lapin an amount per Paired Share purchased pursuant to such exercise
equal to the excess, if any, over $16.50 of the lesser of (i) the then fair
market value of a Paired Share (which shall be the closing price of a Paired
Share on the New York Stock Exchange on the date of exercise), or (ii) the
Strike Price. The 1996 Option will be exercisable in minimum increments of 1000
Paired Shares.
(c) The above options, as well as all prior options
granted to Lapin by the Company, shall be deemed amended to the extent necessary
to provide that they are exercisable for their full maximum term, and that any
provision requiring an earlier exercise as a consequence of any cessation or
termination of employment by Lapin shall be inapplicable.
7. Standstill, Etc.
(a) Lapin agrees that for a period of three years
following the Termination Date (the "Three Year Period"), neither Lapin nor any
person or entity controlled by Lapin shall directly or indirectly, without the
consent of the Company, (i) commence or be involved with others who commence any
tender or exchange offer, proxy contest or solicitation, or any similar
transaction involving the Company or the Corporation, or (ii) purchase or be
part of a group which purchases any Paired Shares in excess of 4.9% of the then
outstanding Paired Shares or any other class of securities of the Company or the
Corporation in excess of 4.9% of the outstanding securities of such class.
(b) During the Three Year Period, neither on the one
hand Lapin, nor on the other hand the Company or the Corporation or any current
or future executive officers or trustees or directors of the Company or the
Corporation or of Starwood Capital Group, L.P. or Starwood Capital Group L.L.C.
(collectively, the "Company Parties") shall make any disparaging comments or
remarks respecting the other party. For this purpose, "disparaging" shall be
limited to comments or remarks which impugn or cast doubt upon past, present or
future employment performance or business accomplishments or business
activities, or the likelihood of future business success, which comments or
remarks are made in such a way as to be reasonably likely to have a deleterious
affect on the reasonable efforts of the other party to further his or its
business career or business.
No such disparagement shall be deemed to have
occurred (i) if made by Lapin to members of his immediate family or to any of
the Company Parties (unless made in such a way as to require reporting under
Item 6 of Form 8-K under the Securities Exchange Act of 1934, as amended), (ii)
if made by a member of the Company Parties to another member thereof or to
Lapin, (iii) if made in the context of a legally recognized privilege (e.g.,
comments made by a party to his or its legal counsel), or (iv) if made of record
and under oath in any judicial or administrative proceedings before a court or
other body of competent jurisdiction, including but without limitation, any
arbitration proceeding pursuant to this Agreement.
In addition, no such disparagement shall be deemed to
have occurred if (i) such comments or remarks are not made to "Excluded Parties"
(which means,
3
<PAGE> 4
individually and collectively, members of the press, financial analysts or
persons who work for financial analysts, holders of any class of the Company's
or the Corporation's securities (other than Lapin, members of his immediate
family or Company Parties or holders of less than 0.5% of the Paired Shares) or
prospective employers or business associates of Lapin or the Company who
identify themselves as such or persons or groups including persons who can
reasonably be expected to be or include prospective employers or business
associates of Lapin or the Company), and (ii) the person allegedly making such
comments or remarks shall have issued a written retraction thereof, with a copy
to the aggrieved party within 10 days following receipt of a written demand for
retraction from the aggrieved party which demand is given within 10 days after
the aggrieved party receives knowledge of such comments or remarks (a
"Retraction Demand") and such person has not within the previous twelve-month
period either issued a retraction of another alleged comment or remark in
response to a Retraction Demand or been determined by the Arbitrator to have
disparaged the aggrieved party under this Paragraph (b) of Section 7.
(c) No violation of the above Paragraph (b) of this
Section 7 shall be deemed to have occurred unless the Arbitrator shall have so
determined under Section 26 (the "Arbitrator"), and as a condition to assessing
damages (but not as a condition to awarding equitable relief) shall also
determine that disparaging comments or remarks within the meaning of such
Paragraph have not been made by the complaining party or if made and subject to
cure by retraction under Paragraph (b) that a Retraction Demand was given by the
aggrieved party and that no such retraction was issued.
(d) Subject to the above Paragraph (c)and except as
provided in paragraph (e) of this Section 7, for each violation of Paragraph (b)
of this Section 7 which the Arbitrator determines to have occurred, the
aggrieved party shall be entitled to his or its actual damages according to
proof and he or it shall also be entitled to punitive damages but only if the
Arbitrator determines that the disparaging comments or remarks (i) constitute
defamation or other willful tort, or (ii) are made to an Excluded Party. In
addition, in the event that the Arbitrator determines that there has been a
violation of this Paragraph (b) of this Section 7 by the Company, then the
Arbitrator may determine if and the extent to which the forgiveness of the Lapin
Loan referred to in Section 5 and the vesting of the unvested portion of the
1995 Option referred to in Paragraph (a) of Section 6 shall accelerate; and in
the event that the Arbitrator determines that Lapin has violated the provisions
of Paragraph (b) of Section 7, then the Arbitrator may determine if and if and
the extent to which the Lapin Loan forgiveness referred to in Section 5 shall
not occur or the remaining vesting of the 1995 Option referred to in Paragraph
(a) of Section 6 shall not occur.
(e) Subject to the above Paragraph (c), for the first
violation of Paragraph (b) of this Section 7 which the Arbitrator determines to
have occurred, the aggrieved party shall be entitled to receive as liquidated
damages, and not as a forfeiture, the amount of $100,000. The parties agree that
with respect to the foregoing provision for liquidated damages, actual damages
would be difficult to measure or quantify and would be impracticable to
determine and, accordingly, the liquidated damages so provided shall be the sole
and exclusive monetary remedy for the first such violation.
4
<PAGE> 5
8. Consulting Services.
(a) For a period of time commencing on the
Termination Date and ending eighteen months thereafter (the "Eighteen Month
Period"), Lapin shall serve the Company as a consultant. Lapin's duties shall be
to continue as in the past for at least 90 days to oversee the properties
currently owned by the Company in Las Vegas, Nevada (the King 8 Hotel and Casino
and the Bourbon Street Hotel and Casino), and to assist in the attempted sale of
such properties, and otherwise as shall be reasonably requested by the Company's
Board of Trustees consistent with Lapin's prior duties and position and in such
a way so as to not interfere with his other duties or activities subsequent to
the Termination Date. For his services under this Paragraph (a) of Section 8,
Lapin shall be paid by the Company the total sum of $235,000 in eighteen equal
monthly installments on the first day of each month of the Eighteen Month
Period, commencing July 1, 1996. In addition, if in the performance of any
duties under the Consulting Agreement, Lapin shall incur any reasonable out of
pocket costs and expenses, the same shall be promptly reimbursed by the Company
following a written request in accordance with the Company's normal expense
reimbursement procedures. Lapin shall render such services at times and places
that are reasonably convenient to the Company and Lapin. Lapin shall not be
required to spend more than 40 hours in any month in the first 90 days and 20
hours in any month thereafter in the performance of his duties under the above
provisions of Paragraph (a). The above payments and reimbursements shall
continue to be made notwithstanding any charge or allegation that Lapin has not
or may not have fulfilled his obligations under this Paragraph (a) until and
unless the Arbitrator under Section 26 shall determine that the provisions of
this Paragraph (a) have been breached by Lapin and shall determine the extent,
if any, to which the Company may be excused from its performance obligations
under this Paragraph (a).
(b) The amounts payable under this Section 8 shall be
due and payable without regard as to the extent to which the Company shall
request Lapin's services hereunder and without regard to the number of hours
actually devoted by Lapin to such consulting services. The Company acknowledges
that it is not retaining Lapin's exclusive services under any of this Section 8,
and that Lapin shall be free to engage in such other employment and business
activities as Lapin in his sole discretion may determine. Lapin shall be under
no obligation to account for any amounts he may otherwise earn or receive during
or after the Eighteen Month Period, whether by other employment or otherwise,
and the Company shall have no right or claim in or to any compensation or profit
that may accrue to Lapin during such period or otherwise.
(c) Except for the casino oversight responsibilities
during the first 90 days after the Termination Date referenced in the above
Paragraph (a) of this Section 8, nothing herein shall obligate the Company to
utilize Lapin's services at any time or from time to time, and the Company
reserves the right to have other persons or parties (who may or may not be
employees of the Company) perform supplementary oversight functions with respect
to the casinos at any time during the aforesaid 90 days period or exclusive
oversight functions with respect to the casinos at any time subsequent to the
aforesaid 90 day period.
5
<PAGE> 6
(d) The Company is currently seeking to sell its
interest in the King 8 Hotel and Casino in Las Vegas, Nevada (the "King 8
Property"). If, during the Eighteen Month Period, the Company enters into a
binding agreement (which may be subject to normal conditions, including, but not
limited to, approval by gaming authorities) to sell or to lease for longer than
1 year ("Long-Term Lease"), which subsequently closes (whether before or after
the expiration of the Eighteen Month Period), then the Company shall pay to
Lapin the higher of (i) $200,000 (increased to $250,000 if Lapin introduces the
buyer or otherwise assists in the sale of the King 8 Property), or (ii) if the
purchase price (including assumption of debt), or in the case of a lease the
implied present value of the property, exceeds $20 million, one percent of the
purchase price or such implied present value, as the case may be. Such payment
shall be made upon the closing of the transaction (and in the event of a dispute
over whether Lapin shall be entitled to more than $200,000, the Company shall
pay to Lapin at the closing no less than $200,000 and shall arbitrate with Lapin
pursuant to Section 26 hereof, whether any further amount is due.)
(e) In the event the King 8 Property is not sold
during the Eighteen Month Period, but during such time, the Company receives and
declines a bona fide offer from a credible party to purchase or enter into a
Long-Term Lease of the King 8 Property for a purchase price or implied present
value, as the case may be, of $20 million or more, then the Company shall be
obligated pay $200,000 to Lapin at the expiration of such Eighteen Month Period
(increased to $250,000 if Lapin introduces the offeror or otherwise assists the
Company's consideration of such offer). In the event that the Company disputes
Lapin's entitlement to any payment pursuant to this Paragraph (e), then the
Company shall pay to Lapin the amount, if any, it concedes Lapin has earned
hereunder and shall arbitrate the dispute over the balance pursuant to Section
26 hereof.
(f) For purposes of determining the implied present
value of the property under this Section 8, the total of lease rental payments
or proposed lease rental payments (net of property expenses and capital costs
required by the lease to be incurred by the Landlord) shall be valued at their
then present value using as the applicable discount rate the average yield to
maturity ratio on United States Treasury obligations of comparable maturity to
the term of the lease as of the date such lease was entered into or, as
applicable, was proposed to have been entered into.
(g) The Company acknowledges that any offer during
such Eighteen Month Period directly or indirectly by or on behalf of Tito
Tiberti or Tom Smiley or any group in which either of them participates,
directly or indirectly, shall be deemed for purposes of this Section 8 to be an
introduction by Lapin.
9. Publicity.
(a) Prior to the execution of this Agreement, Lapin
and the Company have agreed on the text of a press release ("Press Release")
announcing Lapin's resignation as an officer and Trustee of the Company, and
Lapin's termination of employment with the Company, the form of which is
attached hereto as Exhibit A; and except as the Company may be required by law
to disclose, the Company shall not make any
6
<PAGE> 7
materially different public statements regarding Lapin's resignation and
termination of employment without Lapin's prior written consent. Lapin likewise
agrees not to issue any other Press Release or make any materially different
public statements regarding his resignation as an officer and Trustee or the
termination of his employment with the Company without the Company's prior
written consent. The Press Release shall be released by the Company immediately
following the execution and delivery of this Agreement by all parties hereto.
(b) Other than the disclosure set forth in the Press
Release, the terms of this Agreement and the negotiations culminating in the
execution and delivery of this Agreement shall be kept confidential by each of
the parties, except only (i) to the extent that disclosure thereof is required
by the legal obligations of a party, (ii) such disclosure is made by Lapin to
members of his immediate family or to any of the Company Parties or to a
prospective employer or business associate who requests the same, (iii) such
disclosure is made by a member of the Company Parties to another member thereof
or to Lapin, (iv) such disclosure is made in the context of a legally recognized
privilege, or (v) such disclosure is made of record and under oath in any
judicial or administrative proceedings before a court or other body of competent
jurisdiction, including but without limitation any arbitration proceeding
pursuant to this Agreement. In addition, from and after the Termination Date,
(1) Lapin shall not purport to act in any official capacity for the Company in
connection with any activities, including but not limited to any contact with
the press, financial analysts, or holders of securities of the Company or the
Corporation, and (2) Lapin agrees not to discuss with persons known to him to be
shareholders of the Company or the Corporation (other than members of his
family, members of the Company Parties or holders of immaterial amounts of
Paired Shares) the business of the Company or Corporation.
(c) The Company agrees that all responses to
inquiries from prospective employers or business associates of Lapin shall be
consistent with statements in the Press Release referred to in Paragraph (a) of
Section 9, and the Recommendation Letter referred to Section 17, and shall not
in any way contradict those statements.
10. Use of Office, Etc. The Company intends to remove its
executive offices from Los Angeles, California to Phoenix, Arizona or another
location in the near future. Lapin shall continue to have the use of his
existing office, including HVAC, office staff and support as in the past during
normal business hours, until the executive offices of the Trust and the
Corporation are physically moved to Phoenix, Arizona or another location.
Thereafter, Lapin shall be entitled to remain in such office until such time as
the Trust and Corporation sublease the existing office space and the sub-tenant
requires physical possession (or access for tenant improvements work) or until
such earlier time as the Company abandons such space and surrenders to the
landlord in whole or partial settlement of its obligations; provided however,
that during such period as Lapin shall be entitled to remain in such office
following the relocation of the executive offices of the Company and the
Corporation, no office staff or support services need be provided other than as
may be provided by Ms. Jayne Gordon pursuant to any separate agreement she may
enter into with the Company. Lapin may retain all of his furniture and computer
equipment currently in his personal office at no cost and the Company
relinquishes any claim thereto.
7
<PAGE> 8
11. Termination. Upon execution of this Agreement, the
Employment Agreement shall be deemed terminated and of no further force and
effect, except that the indemnification provisions of Section 3.5 (which shall
not be deemed to apply to any breach by Lapin of this Agreement) and the
confidentiality provisions of Section 4.2 shall continue to be applicable and
the non-inducement provisions of clause (ii) of Section 4.3 thereof shall also
be applicable (without regard to any reason or basis for termination of Lapin's
employment) for the Eighteen Month Period. Without limitation on the foregoing,
Lapin will promptly return to the Company all business records of the Company in
his possession (subject to Lapin's retaining copies of items such as his
rolodex, chron copies of correspondence and the like), including but not limited
to Company files, computer tapes or diskettes. However, except as and to the
extent specifically provided, nothing contained in this Agreement shall be
deemed to affect any option agreement between the Company and Lapin or the
Corporation and Lapin or the Indemnification Agreement between the Company and
Lapin dated June 8, 1995 or the Indemnification Agreement between the
Corporation and Lapin dated June 8, 1995.
12. Representations and Warranties.
(a) Lapin represents and warrants that there is not
now pending any action, complaint, petition, charge, grievance, or any other
form of administrative, legal or arbitral proceeding by Lapin against the
Company or any of its officers or trustees or any other of the Company Parties.
(b) The Company represents and warrants that any and
all actions on the part of the Board of Trustees of the Company, or of the
Options Committee, the Compensation Committee or any of the other committees of
the Board of Trustees necessary to authorize or implement any of the provisions
of this Agreement have been duly and validly taken.
13. Mutual Release.
(a) Except for the obligations set forth in this
Agreement, Lapin, on his own behalf and on behalf of any Individual Retirement
Account or pension trust solely for his benefit which is the holder of Paired
Shares, hereby fully, unconditionally and irrevocably releases the Company, the
Corporation, SLT Realty Limited Partnership, SLC Operating Limited partnership
("SLC"), all officers, trustees or directors of the Company or the Corporation,
all members of the Management Committee of SLC, all entities controlled by or
under common control with the Company or the Corporation, Starwood Capital
Group, L.P., Starwood Capital Group, L.L.C. and all entities controlled by Barry
S. Sternlicht (the "General Releasees") of and from any and all claims, demands,
actions and causes of action of any kind and nature, in law, equity or
otherwise, under contract, tort, statutory or common law, known or unknown,
suspected or unsuspected, disclosed or undisclosed, which Lapin may have had,
may now have or may in the future have by reason of any matter, cause or thing
done, omitted or suffered to be done prior to the date hereof. In addition, and
without limitation on the foregoing, except for the obligations in this
Agreement, Lapin hereby fully, unconditionally and irrevocably releases the
General Releasees and all entities
8
<PAGE> 9
controlled by or under common control with any of them, all past and present
employees, officers and directors of any of the General Releasees and any of
such entities and all owners of direct or indirect interests in any of the
General Releasees or such entities, and their respective counsel, of and from
any and all claims, demands, actions and causes of action of any kind and
nature, in law, equity or otherwise under contract, tort, statutory or common
law, known or unknown, suspected or unsuspected, disclosed or undisclosed,
directly or indirectly, which Lapin may have had, may now have, or may in the
future have, arising out of or in any way connected with Lapin's relationship in
any and all capacities with the Company or the Corporation prior to the date
hereof, and the employment of Lapin by the Company or the termination of that
employment, including without limitation, claims, if any, pursuant to the
Employment Agreement or pursuant to any federal, state or local law, such as,
but not limited to, the Age Discrimination in Employment Act of 1967, 29 U.S.C.
Section 621, et seq.; Title VII of the Civil rights Act of 1964, as amended, 42
U.S.C. Section 2000(e), et seq.; the Civil Rights Act of 1866, as amended, 42
U.S.C. Section 1981, et seq.; the Fair Labor Standards Act of 1939, as amended,
29 U.S.C. Section 201, et seq.; the Equal Pay Act, 29 U.S.C. Section 206(d); the
Orders of the California Industrial Welfare Commission regulating wages, hours
and working conditions; each and every provision of the California Labor and
Insurance Codes; Article 1, Section 1 of the California Constitution; the
Rehabilitation Act of 1973, as amended, 29 U.S.C., Section 701, et seq.;
Americans with Disabilities Act, 104 Stat. 327; the Employee Retirement Income
Security Act of 1974, 29 U.S.C., Section 1001, et seq.; the National Labor
Regulations Act, as amended, 29 U.S.C., Section 151, et seq.; the California
Fair Employment and Housing Act, as amended, California Government Code,
Section 12900, et seq.; the Uruh Civil Rights Act, as amended, California Civil
Code, Section 51, et seq.
(b) Except for the obligations set forth in this
Agreement, the Company on its own behalf and on behalf of all General Releasees
hereby fully, unconditionally and irrevocably releases Lapin of and from any and
all claims, demands, actions and causes of action of any kind and nature, in
law, equity or otherwise, under contract, tort, statutory or common law, known
or unknown, suspected or unsuspected, disclosed or undisclosed, which any of
them may have had, may now have, or may in the future have by reason of any
matter, cause or thing done, omitted or suffered to be done prior to the date
hereof. Except for the obligations set forth in this Agreement, the Company on
its own behalf and on behalf of all the persons and entities released in any way
by Lapin under Paragraph (a) of Section 13, hereby fully, unconditionally and
irrevocably releases Lapin and all of the persons released by Lapin in the above
paragraph (a) of Section 13 of and from any and all claims, demands, actions and
causes of action of any kind and nature, in law, equity or otherwise, under
contract, tort, statutory or common law, known or unknown, suspected or
unsuspected, and disclosed or undisclosed, which any of them may have had, may
now have or may in the future have arising out of or in any way connected with
Lapin's relationship in any and all capacities with the Company or the
Corporation prior to the date hereof, and the employment of Lapin by the Company
or the termination of that employment. Without limitation on the generality of
the foregoing, included in the foregoing release is a release of any and all
such claims, demand, actions, and causes of action, directly or indirectly
arising out of or in any way connected with Lapin's relationship in any and all
capacities with the Company or the Corporation prior to the date hereof,
including
9
<PAGE> 10
but not limited to the employment of Lapin by the Company or the termination of
that employment or Lapin's actions or non-actions as an officer or trustee of
the Company.
14. (Intentionally Omitted.)
15. Waiver of Civil Code Section 1542. Lapin and the Company
each acknowledge that he or it has read and understands Section 1542 of the
Civil Code of the State of California which reads as follows:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have
materially affected his settlement with the debtor.
Lapin and the Company each hereby expressly waives and relinquishes all rights
and benefits under that section and any similar law of any state or territory of
the United States with respect to the release he or it is granting in this
Agreement.
16. (Intentionally Omitted)
17. Recommendation Letter. The Company has given a favorable
recommendation letter with respect to Lapin, in the form of Exhibit B hereto,
which Lapin may show to any prospective employers or business associates or
others. Lapin has responded with a letter to Barry Sternlicht in the form of
Exhibit C hereto.
18. Integration; Counterparts. This Agreement contains the
entire agreement between the parties and constitutes the complete, final and
exclusive embodiment of their agreement with respect to the subject matter
hereof. This Agreement supersedes and renders null and void any other prior
agreement between the parties. This Agreement is executed without reliance upon
any promise, warranty or representation by the parties or any representative of
the parties other than those expressly contained herein, and the parties have
carefully read this Agreement, and sign the same of their own free will. This
Agreement may be executed in counterparts.
19. Choice of Law. This Agreement shall be deemed to have been
entered into and shall be construed and enforced in accordance with the laws of
the State of California as applied to contracts made and to be performed
entirely within California.
20. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective heirs,
personal representatives, successors and assigns.
21. Costs and Expenses. The Company and Lapin shall each bear
their own legal fees in connection with the negotiation, preparation, execution
and enforcement of this Agreement except that the Company shall pay directly
$15,000 of Lapin's legal fees. In other respects, except as specifically
provided herein, Lapin and the Company will each bear
10
<PAGE> 11
their own costs and expenses including attorneys' fees incurred in or arising
out of or the matters released herein.
22. Severability. Should any provision hereof for any reason
be deemed or held invalid or unenforceable, in whole or in part, by a court of
law, such determination shall not affect any other provision of this Agreement.
This Agreement shall not be subject to avoidance or rescission as a result of
any matter or circumstance, including but without limitation, the invalidity or
unenforceability of any particular provision hereof or of the application of any
such provision to any particular matter or circumstance, nor as a result of any
breach or default of any party to perform, in whole or in part, any of its
duties or obligations hereunder.
23. Notices. All notices and other communications required or
provided for in this Agreement shall be in writing and shall be personally
delivered or sent by registered or certified mail postage pre-paid with return
receipt requested, or sent by telegram, telex, telecopy or similar form of
telecommunication, and shall be deemed given when received at the address of the
addressee. Any such notices or communication shall be addressed as follows:
If to the Company: Starwood Lodging Trust
c/o Starwood Capital Group, L.P.
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attn: Barry S. Sternlicht, Chairman and
Chief Executive Officer
with copies to: Starwood Capital Group, L.P.
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attn: Madison F. Grose, Esq.
and to: Jeffer, Mangels, Butler & Marmaro, LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067-5010
Attn: Marc Marmaro, Esq.
If to Lapin: Jeffrey C. Lapin
1317 Palisades Drive
Pacific Palisades, California 90272
11
<PAGE> 12
with a copy to: Bright & Lorig
633 West Fifth Street, Suite 3330
Los Angeles, California 90071
Attn: Frederick A. Lorig, Esq.
24. Settlement of Claims. It is understood that this is a
compromise settlement of disputed claims, and that the promises of payments in
consideration of this Agreement shall not be construed to be an admission of any
liability or obligation whatever, by either party to the other party, or to any
other person whomsoever.
25. Further Assurances. Each party hereto shall prepare,
execute and deliver such other instruments, agreements or documents as may be
reasonably required in order to carry out the purposes of this Agreement.
26. Arbitration. Any and all disputes, controversies or claims
("Dispute") between the parties relating to the interpretation or enforcement or
performance of this Agreement shall be resolved by binding arbitration in
accordance with the then current Commercial Arbitration Rules of the American
Arbitration Association, subject only to the following provisions:
(a) The Arbitrator shall be determined from a list of
names of five impartial arbitrators (each of whom shall be a retired judge of
the Superior Court of the State of California or a retired Justice of the Court
of Appeal of the State of California) experienced in commercial arbitration
matters supplied by the American Arbitration Association (the "Association")
chosen by Lapin and the Company each in turn striking a name from the list until
one name remains.
(b) The expenses of the arbitration shall be borne
equally by each party, and each party shall bear its own legal fees and
expenses, except that Lapin's fees and expenses in connection with each such
arbitration shall be advanced by the Company if Lapin shall undertake to
reimburse the Company if the Arbitrator determines that Lapin is not the
prevailing party in the Arbitration.
(c) The Arbitrator shall determine whether and to
what extent any party shall be entitled to damages or equitable relief and, if
applicable, the extent, if any, which the forgiveness of the Lapin Loan
referenced in Section 5 and the future vesting of the 1995 Option referenced in
Paragraph (a) of Section 6 shall be accelerated or shall not occur. No party
shall be entitled to punitive damages, except that as provided in Paragraph (d)
of Section 7, the Arbitrator may assess punitive damages against the Company or
Lapin.
(d) The Arbitrator shall not have the power to add to
nor modify any of the terms or conditions of the this Agreement. The
Arbitrator's decision shall not go beyond what is necessary for the
interpretation and application of the provision of this Agreement in respect of
the issue before the Arbitrator. The Arbitrator shall not substitute his or her
judgement for that of the parties in the exercise of rights granted or retained
by this Agreement. The Arbitrator's award or other permitted remedy, if any, and
the decision
12
<PAGE> 13
shall be based upon the issue as drafted and submitted by the respective parties
and the relevant and competent evidence adduced at the hearing.
(e) The Arbitrator shall have the authority to award
any remedy or relief provided for in this Agreement, in addition to any other
remedy or relief (including provisional remedies and relief) that a court of
competent jurisdiction could order or grant. In addition, the Arbitrator shall
have the authority to decide issues relating to the interpretation, meaning or
performance of this Agreement even if such decision would constitute an advisory
opinion in a court proceeding or if the issues would otherwise not be ripe for
resolution in a court proceeding, and any such decision shall bind the parties
in their continuing performance of this Agreement. The Arbitrator's written
decision shall be rendered within sixty days of the hearing. The decision
reached by the Arbitrator shall be final and binding upon the parties as to the
matter in dispute. To the extent that the relief or remedy granted by the
Arbitrator is relief or remedy on which a court could enter judgement, a
judgement upon the award rendered by the Arbitrator shall be entered in any
court having jurisdiction thereof (unless in the case of an award of damages,
the full amount of the award is paid within 10 days of its determination by the
Arbitrator). Otherwise, the award shall be binding on the parties in connection
with their continuing performance of this Agreement and in any subsequent
arbitral or judicial proceedings between the parties.
(f) The arbitration shall take place in Los Angeles,
California if commenced by Lapin, or in Phoenix, Arizona or Los Angeles,
California if commenced by the Company.
(g) The arbitration proceeding and all filing,
testimony, documents and information relating to or presented during the
arbitration proceeding shall be disclosed exclusively for the purpose of
facilitating the arbitration process and for no other purpose and shall be
deemed to be information subject to the confidentiality provisions of this
Agreement.
(h) The parties shall continue performing their
respective obligations under this Agreement notwithstanding the existence of a
Dispute while the Dispute is being resolved unless and until such obligations
are terminated or expire in accordance with the provisions hereof. In the event
that the Arbitrator determines that the Company in bad faith has failed to
continue to perform its payment or other obligations to Lapin under this
Agreement without a determination by the Arbitrator that it is entitled to do
so, the Arbitrator shall have the authority to accelerate the full amount of all
sums which are then or which may thereafter become due or payable under this
Agreement from the Company to Lapin or to require that the Company post an
unconditional Bank letter of credit which Lapin may draw upon at any time for
the amount of all such sums which may thereafter become payable by the Company
to Lapin and in addition, order that the Company pay all of Lapin's legal fees
and other costs in connection with the Arbitration and any enforcement of the
Arbitrator's judgment or award.
(i) The Arbitrator may, in his or her sole
discretion, order a pre- hearing exchange of information including production of
documents, exchange of summaries of testimony or exchange of statements of
position, and shall schedule promptly all discovery
13
<PAGE> 14
and other procedural steps and otherwise assume case management initiative and
control to effect an efficient and expeditious resolution of the Dispute. At any
oral hearing of evidence in connection with an arbitration proceeding, each
party and its counsel shall have the right to examine its witness and to
cross-examine the witnesses of the other party. No testimony of any witness
shall be presented in written form unless the opposing party or parties shall
have the opportunity to cross-examine such witness, except as the parties
otherwise agree in writing.
(j) Notwithstanding the dispute resolution procedures
contained in this Section 26, either party may apply to any court having
jurisdiction (i) to enforce this Agreement to arbitrate, (ii) to seek
provisional injunctive relief so as to maintain the status quo until the
arbitration award is rendered or the Dispute is otherwise resolved, or (iii) to
challenge or vacate any final judgment, award or decision of the Arbitrator that
does not comport with the express provisions of this Section 26.
27. No Presumption Against Drafter. The Company and Lapin have
jointly participated in the negotiation and drafting of this Agreement. In the
event of any ambiguity or question of intent or interpretation, this Agreement
shall be construed as if drafted jointly by them, and no presumptions or burdens
of proof shall arise favoring any party by virtue of the authorship of any
provision of this Agreement.
28. Disclaimer. The name "Starwood Lodging Trust" is the
designation of Starwood Lodging Trust and its Trustees (as Trustees but not
personally under a Declaration of Trust dated August 25, 1969, as amended and
restated), and all persons dealing with Starwood Lodging Trust must look solely
to Starwood Lodging Trust's property for the enforcement of any claims against
Starwood Lodging Trust, as the Trustees, officers, agents and security holders
of Starwood Lodging Trust assume no personal obligations of Starwood Lodging
Trust, and their respective properties shall not be subject to claims of any
person relating to such obligation.
14
<PAGE> 15
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year first above written.
The Company: Starwood Lodging Trust, a Maryland real estate
investment trust
By
---------------------------------------------
Barry S. Sternlicht, Chairman of the Board
and Chief Executive Officer
Lapin:
-----------------------------------
Jeffrey C. Lapin
15
<PAGE> 1
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made this 3rd
day of May, 1996, by and among 730 CAL HOTEL PROPERTIES II, Inc., a Delaware
corporation, 730 GEORGIA HOTEL PROPERTIES I, INC., a Delaware corporation, 730
MASS HOTEL PROPERTIES I, INC., a Delaware corporation, 730 MO HOTEL PROPERTIES
I, INC., a Delaware corporation, 730 MINN HOTEL PROPERTIES I, INC., a Delaware
corporation, 730 PENN. HOTEL PROPERTIES I, INC., a Delaware corporation, CAL
HOTEL PROPERTIES I ASSOCIATES, a California general partnership, and MRC
PROPERTIES, INC., a Delaware corporation (as "Sellers"), and SLT REALTY LIMITED
PARTNERSHIP, a Delaware Limited Partnership ("SLT"), and SLC OPERATING LIMITED
PARTNERSHIP, a Delaware Limited Partnership ("SLC"), jointly (SLT and SLC are
collectively hereinafter referred to as "Buyer").
WITNESSETH:
In consideration of the Earnest Money Deposit (as that term is
hereinafter defined) and the mutual covenants and agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by the parties hereto, Sellers, Buyer and Escrow
Agent hereby agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. For the purposes of this Agreement (including all of
the Exhibits and Schedules attached hereto), the following terms will have the
meanings ascribed thereto below:
"Acknowledgment and Assumption Agreement" has the meaning set forth in
Section 2.10 hereof.
"ADA" means Title III of the Americans with Disabilities Act of 1990,
as amended, together with all rules and regulations now or hereafter promulgated
thereunder.
"Additional Earnest Money Deposit" has the meaning set forth in Section
3.2.4 hereof.
"Adverse Title Claim" has the meaning set forth in Section 4.3.1
hereof.
"Affiliate" has the meaning set forth in Rule 12b-2 promulgated under
the Securities Exchange Act of 1934.
<PAGE> 2
"Affiliated Group" means an affiliated group as defined in Section 1504
of the Code (or any similar combined, consolidated or unitary group defined
under state, local or foreign income tax law).
"Alcoholic Beverage Licensing Agency" means all of the governmental
agencies, authorities, boards, and other bodies which have the authority to
license the sale and consumption of alcoholic beverages in each of the
jurisdictions in which the Hotels are located.
"Allocation Schedule" has the meaning set forth in Section 3.1 hereof.
"Approved Group Receivables" means city ledger receivables relating to
airline crew bookings or cruise line group bookings.
"As Is" has the meaning set forth in Section 5.9.
"Assignment of Intangibles" has the meaning set forth in Section 9.5.6
hereof.
"Assignment of Management Agreement" has the meaning set forth in
Section 9.5.4 hereof.
"Assignment of Third Party Agreements" has the meaning set forth in
Section 9.5.3 hereof
"Assumed Liabilities" has the meaning given in Section 2.9.
"Atlanta Consumables" means all food and beverages (including alcoholic
to the extent permitted by applicable law and non-alcoholic), engineering,
maintenance, guest room and housekeeping supplies (including soap, cleaning
materials and matches), stationery, menus, printing and other supplies of all
kinds owned by the Atlanta Seller which are located upon and used in connection
with the operation and maintenance of the Atlanta Hotel as of the Closing Date,
excluding, however, any item described above that the Atlanta Seller is not
permitted to transfer pursuant to the terms of the Atlanta Management Agreement.
"Atlanta Deed" means the special or limited warranty deed to be
executed and delivered by the Atlanta Seller at the Closing in the form attached
hereto as Exhibit B-1 conveying title to the Atlanta Hotel, subject only to the
Permitted Exceptions.
"Atlanta Equipment Leases" means those certain leases (whether
operating or capital) relating to tangible personal property used in the
operation and maintenance of the Atlanta Hotel which can be assigned to Buyer
and which are more particularly described on Schedule C-1 attached hereto.
2
<PAGE> 3
"Atlanta FF&E" means all tangible personal property, excluding the
Atlanta Consumables, owned by the Atlanta Seller as of the Closing Date and
located on the Atlanta Real Property and used in connection with the ownership,
operation and maintenance of the Atlanta Hotel, including, without limitation,
all fixtures, furniture, furnishings, fittings, equipment, computer hardware,
and non-proprietary software, machinery, apparatus, artwork, books and records
of the Atlanta Seller, appliances, china, glassware, linens, silverware, keys
and uniforms owned by the Atlanta Seller.
"Atlanta Hotel" means the Doubletree Hotel at Concourse located in
Atlanta, Georgia, and includes collectively and without limitation, the Atlanta
Real Property, the Atlanta FF & E, the Atlanta Consumables, the Atlanta
Intangibles, the Atlanta Leases, the Atlanta Equipment Leases, the Atlanta
Operating Agreements, the Atlanta Management Agreement, and any and all other
aspects of the ownership and operation thereof.
"Atlanta Intangibles" means all of the Atlanta Seller's rights, if any,
to any telephone numbers currently in use at the Atlanta Hotel; all as built
plans and specifications in the possession of the Atlanta Seller; warranties and
guaranties (to the extent assignable) relating to the Atlanta Hotel; original,
or where appropriate, copies of all financial, personnel and other books,
records and files relating to the ownership or operation of the Atlanta Hotel
wherever located and held by the Atlanta Seller or its agents, in computer
readable form where available without additional cost or expense, and all
Intellectual Property used in the operation of the Atlanta Hotel; in each case
including, without limitation, the items set forth on Schedule F-] attached
hereto, excluding, however, any item described above that the Atlanta Seller is
not permitted to transfer pursuant to the terms of the Atlanta Management
Agreement.
"Atlanta Leases" means those certain leases relating to space within
the Atlanta Hotel as more particularly described on Schedule B-1 attached
hereto.
"Atlanta Management Agreement" means that certain Management Agreement,
dated April 5, 1994, by and between the Atlanta Seller and the Atlanta Manager,
relating to the management of the Atlanta Hotel.
"Atlanta Manager" means Doubletree Hotels Corporation.
"Atlanta Operating Agreements" means those certain service contracts
and other agreements, licenses, franchises, concessions or other arrangements
relating to the operation and maintenance of the Atlanta Hotel other than the
Atlanta Equipment Leases, the Atlanta Lease or the Atlanta Management Agreement,
and more particularly described on Schedule D-1 attached hereto.
"Atlanta Real Property" means that certain tract of land located in
Atlanta, Georgia which is more particularly described on Schedule A-1 attached
hereto, together with all buildings, improvements and fixtures located thereon
as of the Closing Date, and all rights,
3
<PAGE> 4
privileges and appurtenances pertaining thereto including all of Atlanta
Seller's right, title and interest in and to all rights-of-way, open or proposed
streets, alleys, easements, strips or gores of land adjacent thereto.
"Atlanta Seller" means 730 Georgia Hotel Properties I, Inc.
"Bloomington Consumables" means all food and beverages (including
alcoholic to the extent permitted by applicable law and non-alcoholic),
engineering, maintenance, guest room and housekeeping supplies (including soap,
cleaning materials and matches), stationery, menus, printing and other supplies
of all kinds owned by the Bloomington Seller which are located upon and used in
connection with the operation and maintenance of the Bloomington Hotel as of the
Closing Date, excluding, however, any item described above that the Bloomington
Seller is not permitted to transfer pursuant to the terms of the Bloomington
Management Agreement.
"Bloomington Deed" means the special or limited warranty deed to be
executed and delivered by the Bloomington Seller at the Closing in the form
attached hereto as Exhibit B-3 conveying title to the Bloomington Hotel, subject
to only the Permitted Exceptions.
"Bloomington Equipment Leases" means those certain leases (whether
operating or capital) relating to tangible personal property used in the
operation and maintenance of the Bloomington Hotel which can be assigned to
Buyer and which are more particularly described on Schedule C-3 attached hereto.
"Bloomington FF&E" means all tangible personal property, excluding the
Bloomington Consumables, owned by the Bloomington Seller as of the Closing Date
and located on the Bloomington Real Property and used in connection with the
ownership, operation and maintenance of the Bloomington Hotel, including,
without limitation, all fixtures, furniture, furnishings, fittings, equipment,
computer hardware, and non-proprietary software, machinery, apparatus, artwork,
books and records of the Bloomington Seller, appliances, china, glassware,
linens, silverware, keys and uniforms owned by the Bloomington Seller.
"Bloomington Hotel" means the Doubletree Grand Hotel located in
Bloomington, Minnesota, and includes collectively and without limitation, the
Bloomington Hotel Real Property, the Bloomington Hotel FF & E, the Bloomington
Hotel Consumables, the Bloomington Hotel Intangibles, the Bloomington Hotel
Leases, the Bloomington Hotel Equipment Leases, the Bloomington Hotel Operating
Agreements, the Bloomington Hotel Management Agreement, and any and all other
aspects of the ownership and operation thereof.
"Bloomington Intangibles" means all of the Bloomington Seller's rights,
if any, to any telephone numbers currently in use at the Bloomington Hotel; all
as built plans and specifications in the possession of the Bloomington Seller;
warranties and guaranties (to the extent assignable) relating to the Bloomington
Hotel; original, or where appropriate, copies of all financial, personnel and
other books, records and files relating to the ownership or operation of
4
<PAGE> 5
the Bloomington Hotel wherever located and held by the Bloomington Seller or its
agents, in computer readable form where available without additional cost or
expense, and all Intellectual Property used in the operation of the Bloomington
Hotel; in each case including, without limitation, the items set forth on
Schedule F-3 attached hereto, excluding, however, any item described above that
the Bloomington Seller is not permitted to transfer pursuant to the terms of the
Bloomington Management Agreement.
"Bloomington Leases" means those certain leases relating to space
within the Bloomington Hotel as more particularly described on Schedule B-3
attached hereto.
"Bloomington Management Agreement" means that certain Management
Agreement, dated November, 1993, by and between the Bloomington Seller and the
Bloomington Manager, relating to the management of the Bloomington Hotel, as
amended.
"Bloomington Manager" means DT Management, Inc., as successor by merger
to Harbor Hotel Corporation.
"Bloomington Operating Agreements" means those certain service
contracts and other agreements, licenses, franchises, concessions or other
arrangements relating to the operation and maintenance of the Bloomington Hotel
other than the Bloomington Equipment Leases, the Bloomington Leases or the
Bloomington Management Agreement, and being more particularly described on
Schedule D-3 attached hereto.
"Bloomington Real Property" means that certain tract of land located in
Bloomington, Minnesota which is more particularly described on Schedule A
attached hereto, together with all buildings, improvements and fixtures located
thereon as of the Closing Date, and all rights, privileges and appurtenances
pertaining thereto including all of Bloomington Seller's right, title and
interest in and to all rights-of-way, open or proposed streets, alleys,
easements, strips or gores of land adjacent thereto.
"Bloomington Seller" means 730 Minn Hotel Properties I, Inc., a
Delaware corporation.
"Bloomington Sponsorship Agreement" means that certain Mall of America
Official Sponsor Agreement between the Bloomington Seller and Minntertainment
Company, dated February 23, 1994, as amended.
"Buyer's Conditions" has the meaning set forth in Section 8.1.
"Capital Expenditures" means any expenditure for replacement, repair,
improvement or addition to the Hotels which is, in accordance with generally
accepted accounting principles, consistently applied, an expenditure which
should be capitalized on the books and records of Seller.
5
<PAGE> 6
"Capital Expenditure Deficiency" means the deficiency) if any, for all
of the Hotels, computed as of the Closing Date of(a) the Capital Expenditures
actually made by Sellers at the Hotels for the period January 1, 1996 through
the Closing Date (excluding Capital Expenditures which were budgeted for prior
years in the books and records of each Hotel but deferred until 1996), below (b)
4.75% of the aggregate Hotel Revenues for such period.
"Capital Expenditure Excess" means the excess (other than expenditures
that are attributable to the payment of any Cost of Defects) if any, for all of
the Hotels, computed as of the Closing Date of (a) the Capital Expenditures
actually made by Sellers at the Hotels for the period January 1, 1996 through
the Closing Date (excluding Capital Expenditures which were budgeted for prior
years in the books and records of each Hotel but deferred until 1996), over (b)
4.75% of the aggregate Hotel Revenues for such period.
"Capital Lease Obligations" means all capital leases pertaining to the
Hotels except those set forth on Schedule 9.3.18.
"Casualty Notice" has the meaning set forth in Section 12.1 hereof
"Certificate and Release" has the meaning set forth in Section 5.15
hereof.
"Closing" has the meaning set forth in Section 9.1 hereof.
"Closing Date" means July 15, 1996, or such earlier date as may be
mutually agreed upon by the parties hereto, and subject to extension as provided
in this Agreement.
"Closing Statement" has the meaning set forth in Section 9.5.19 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means that certain Confidentiality
Agreement dated February 8, 1996 and executed by Sellers and Buyer.
"Consumables" means collectively the Atlanta Consumables, the Fort
Lauderdale Consumables, the Bloomington Consumables, the San Diego Consumables,
the Kansas City Consumables, the LAX Consumables, the Philadelphia Consumables,
and the Waltham Consumables.
"Continuing Inspection Period" means that period commencing upon the
expiration of the Preliminary Inspection Period and ending on the expiration of
the Full Inspection Period.
"Conveyance Documents" means collectively, the Deeds, Bills of Sale,
Assignments of Management Agreements, Assignments of Third Party Agreements,
Assignments
6
<PAGE> 7
of Intangibles and LAX Assignment of Lessee's Interest, the Assignment of
Bloomington Sponsorship Agreement, and the Assignment of Fort Lauderdale License
Agreement.
"Cost of Defects" has the meaning set forth in Section 5.6.2 hereof as
finally determined and adjusted.
"Cost of Defects Refund Agreement" has the meaning set forth in Section
9.3.17 hereof.
"Cost of Omitted Liabilities" has the meaning set forth in Section
6.2.6 hereof.
"Deeds" means collectively the Atlanta Deed, the Fort Lauderdale Deed,
the Bloomington Deed, the San Diego Deed, the Kansas City Deed, the LAX Deed,
the Philadelphia Deed, and the Waltham Deed.
"Deficiency Amount" means the sum of the Cost of Defects and the Cost
of Omitted Liabilities.
"Designated Personnel" has the meaning set forth in Section 13.17.
"Earnest Money Deposits" has the meaning set forth in Section 3.2
hereof.
"Earnest Money Escrow Agreement" means the escrow agreement to be
entered into by and among Sellers, Buyer and Escrow Agent in substantially the
same form as Exhibit L pursuant to which the Earnest Money Deposit will be held
by Escrow Agent.
"Effective Date" means May 3, 1996.
"Eminent Domain Notice" has the meaning set forth in Section 12.2
hereof.
"Employees" means all employees of the Hotels.
"Environmental Laws" means collectively (a) the Resource Conservation
and Recovery Act of 1976, 42 USC +SC6901 et. seq. (RCRA), as amended; (b) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
USC +SC9601 et. seq. (CERCLA), as amended; (c) the Hazardous Materials
Transportation Act, 49 USC +SC 1801, et. seq., as amended; (d) applicable laws
of the State in which the Project is located; and (e) any federal, state or
local regulations, rules or orders issued or promulgated under or pursuant to
any of the foregoing or otherwise by any department, agency or other
administrative, regulatory or judicial body.
"Equipment Leases" means collectively the Atlanta Equipment Leases, the
Fort Lauderdale Equipment Leases, the Bloomington Equipment Leases, the San
Diego Equipment
7
<PAGE> 8
Leases, the Kansas City Equipment Leases, the LAX Equipment Leases, the
Philadelphia Equipment Leases, and the Waltham Equipment Leases.
"Escrow Agent" means the Title Company, or a trust company affiliated
therewith, in either case, in its capacity as escrowee under the Earnest Money
Escrow Agreement.
"Excluded Liabilities " means all liabilities of Sellers other than the
Assumed Liabilities.
""Failure of Title" has the meaning set forth in Section 4.3 hereof.
"FF&E" means collectively the Atlanta FF&E, the Fort Lauderdale FF&E,
the Bloomington FF&E) the San Diego FF&E, the Kansas City FF&E, the LAX FF&E,
the Philadelphia FF&E, and the Waltham FF&E.
"Fort Lauderdale Consumables" means all food and beverages (including
alcoholic to the extent permitted by applicable law and non-alcoholic),
engineering, maintenance, guest room and housekeeping supplies (including soap,
cleaning materials and matches), stationery, menus, printing and other supplies
of all kinds owned by the Fort Lauderdale Seller which are located upon and used
in connection with the operation and maintenance of the Fort Lauderdale Hotel as
of the Closing Date, excluding, however, any item described above that the Fort
Lauderdale Seller is not permitted to transfer pursuant to the terms of the Fort
Lauderdale Management Agreement.
"Fort Lauderdale Deed" means the special or limited warranty deed to be
executed and delivered by the Fort Lauderdale Seller at the Closing in the form
attached hereto as Exhibit B-2 conveying title to the Fort Lauderdale Hotel,
subject only to the Permitted Exceptions.
"Fort Lauderdale Equipment Leases" means those certain leases (whether
operating or capital) relating to tangible personal property used in the
operation and maintenance of the Fort Lauderdale Hotel which can be assigned to
Buyer and which are more particularly described on Schedule C-2 attached hereto.
"Fort Lauderdale FF&E" means all tangible personal property, excluding
the Fort Lauderdale Consumables, owned by the Fort Lauderdale Seller as of the
Closing Date and located on the Fort Lauderdale Real Property and used in
connection with the ownership, operation and maintenance of the Fort Lauderdale
Hotel, including, without limitation, all fixtures, furniture, furnishings,
fittings, equipment, computer hardware, and non-proprietary software, machinery,
apparatus, artwork, books and records of the Fort Lauderdale Seller, appliances,
china, glassware, linens, silverware, keys and uniforms owned by the Fort
Lauderdale Seller.
8
<PAGE> 9
"Fort Lauderdale Hotel" means the Sheraton Fort Lauderdale Airport
Hotel located in Dania, Florida and includes collectively and without
limitation, the Fort Lauderdale Real Property, the Fort Lauderdale FF&E, the
Fort Lauderdale Consumables, the Fort Lauderdale Intangibles, the Fort
Lauderdale Leases, the Fort Lauderdale Equipment Leases, the Fort Lauderdale
Operating Agreements, the Fort Lauderdale Management Agreement, and any and all
other aspects of the ownership and operation thereof.
"Fort Lauderdale Intangibles" means all of the Fort Lauderdale Seller's
rights, if any, to any telephone numbers currently in use at the Fort Lauderdale
Hotel; all as built plans and specifications in the possession of the Fort
Lauderdale Seller; warranties and guaranties (to the extent assignable) relating
to the Fort Lauderdale Hotel; original, or where appropriate, copies of all
financial, personnel and other books, records and files relating to the
ownership or operation of the Fort Lauderdale Hotel wherever located and held by
the Fort Lauderdale Seller or its agents, in computer readable form where
available without additional cost or expense, and all Intellectual Property used
in the operation of the Fort Lauderdale Hotel; in each case including, without
limitation, the items set forth on Schedule F-2 attached hereto, excluding,
however, any item described above that the Fort Lauderdale Seller is not
permitted to transfer pursuant to the terms of the Fort Lauderdale Management
Agreement.
"Fort Lauderdale Leases" means those certain leases relating to space
within the Fort Lauderdale Hotel as more particularly described on Schedule B-2
attached hereto.
"Fort Lauderdale License Agreement" means that certain License
Agreement at the Fort Lauderdale Hotel between the Fort Lauderdale Seller and
ITT Sheraton Corp. which is anticipated by Sellers to be executed by the parties
thereto and to become effective prior to Closing.
"Fort Lauderdale Management Agreement" means that certain Management
Agreement, dated August, 1995, by and between the Fort Lauderdale Seller and the
Fort Lauderdale Manager, relating to the management of the Fort Lauderdale
Hotel.
"Fort Lauderdale Manager" means Seaway Hospitality Corporation.
"Fort Lauderdale Operating Agreements" means those certain service
contracts and other agreements, licenses, franchises, concessions or other
arrangements relating to the operation and maintenance of the Fort Lauderdale
Hotel other than the Fort Lauderdale Equipment Leases, the Fort Lauderdale
Leases and the Fort Lauderdale Management Agreement, and being more particularly
described on Schedule D-2 attached hereto.
"Fort Lauderdale Real Property" means that certain tract of land
located in Dania, Florida which is more particularly described on Schedule A-2
attached hereto, together with all buildings, improvements and fixtures located
thereon as of the Closing Date, and all rights, privileges and appurtenances
pertaining thereto including all of Fort Lauderdale Seller's right, title
9
<PAGE> 10
and interest in and to all rights-of-way, open or proposed streets, alleys,
easements, strips or gores of land adjacent thereto.
"Fort Lauderdale Seller" means MRC Properties, Inc, a Delaware
corporation.
"Full Inspection Period" means the period Commencing on the date of the
execution and delivery of this Agreement by the last executing party and ending
on June 28, 1996 at 5:00 p.m. Eastern Daylight Time.
"Gross Receipts Tax Mutual Indemnity" has the meaning set forth in
Section 9.7.2 hereof.
"Hotel Revenue" means, for any period, the gross revenues, as
determined under the Uniform System, arising or derived from the operations of
the Hotels during such period, including, without limitation, all room revenues,
food and beverage revenues, group sales revenues, banquet sales revenues, and
any and all other revenues associated therewith.
"Hotel" means any one of the Hotels or a particular Hotel as the
context requires.
"Hotels" means collectively the Atlanta Hotel, the Fort Lauderdale
Hotel, the Bloomington Hotel, the San Diego Hotel, the Kansas City Hotel, the
LAX Hotel, the Philadelphia Hotel, and the "Waltham Hotel.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, together with the rules and regulations promulgated
thereunder.
"
"Income and Expense Statements means those certain income and expense
statements for 1995 pertaining to each of the Hotels which were prepared by
Managers and have been furnished by Sellers to Buyer and which are more
particularly described on Schedule 5.1.3 attached hereto.
"Indemnity Fund" has the meaning set forth in Section 9.8 hereof.
"Information Documents" has the meaning set forth in Section 5.1
hereof.
"Initial Earnest Money Deposits " has the meaning set forth in Section
3.2.3 hereof.
"Inspecting Engineer" has the meaning set forth in Section 5.6 hereof.
"Intangibles" means collectively the Atlanta Intangibles, the Fort
Lauderdale Intangibles, the Bloomington Intangibles, the San Diego Intangibles,
the Kansas City Intangibles, the LAX Intangibles, the Philadelphia Intangibles,
and the Waltham Intangibles.
10
<PAGE> 11
"Intellectual Property" means all of the following owned by, issued to
or licensed to any Seller and used in the conduct of the business of the Hotels:
trademarks, service marks, trade dress, logos and trade names, together with all
goodwill associated therewith and all registrations, applications, renewals,
translations, adaptations, derivations and combinations thereof, copyrights and
copyrightable works and all registrations, applications and renewals therefor;
trade secrets and confidential information (including, without limitation,
ideas, drawings, specifications, designs, plans, proposals, financial and
accounting data, business and marketing plans, and customer and supplier lists);
computer software; other intellectual property rights; and all copies and
tangible embodiments of the foregoing (in whatever form or medium).
"Kansas City Consumables" means all food and beverages (including
alcoholic to the extent permitted by applicable law and non-alcoholic),
engineering, maintenance, guest room and housekeeping supplies (including soap,
cleaning materials and matches), stationery, menus, printing and other supplies
of all kinds owned by the Kansas City Seller which are located upon and used in
connection with the operation and maintenance of the Kansas City Hotel as of the
Closing Date, excluding, however, any item described above that the Kansas City
Seller is not permitted to transfer pursuant to the terms of the Kansas City
Management Agreement.
"Kansas City Deed" means the special or limited warranty deed to be
executed and delivered by the Kansas City Seller at the Closing in the form
attached hereto as Exhibit B-5 conveying title to the Kansas City Hotel, subject
only to the Permitted Exceptions.
"Kansas City Equipment Leases" means those certain leases (whether
operating or capital) relating to tangible personal property used in the
operation and maintenance of the Kansas City Hotel which can be assigned to
Buyer and which are more particularly described on Schedule C-5 attached hereto.
"Kansas City FF&E" means all tangible personal property, excluding the
Kansas City Consumables, owned by the Kansas City Seller as of the Closing Date
and located on the Kansas City Real Property and used in connection with the
ownership, operation and maintenance of the Kansas City Hotel, including,
without limitation, all fixtures, furniture, furnishings, fittings, equipment,
computer hardware, and non-proprietary software, machinery, apparatus, artwork,
books and records of the Kansas City Seller, appliances, china, glassware,
linens, silverware, keys and uniforms owned by the Kansas City Seller.
"Kansas City Hotel" means The Ritz-Carlton Kansas City located in
Kansas City, Missouri, and includes collectively and without limitation, the
Kansas City Real Property, the Kansas City FF&E, the Kansas City Consumables,
the Kansas City Intangibles, the Kansas City Leases, the Kansas City Equipment
Leases, the Kansas City Operating Agreements, the Kansas City Management
Agreement, and any and all other aspects of the ownership and operation thereof.
11
<PAGE> 12
"Kansas City Intangibles" means all of the Kansas City Seller's rights,
if any, to any telephone numbers currently in use at the Kansas City Hotel; all
as built plans and specifications in the possession of the Kansas City Seller;
warranties and guaranties (to the extent assignable) relating to the Kansas City
Hotel; original, or where appropriate, copies of all financial, personnel and
other books, records and files relating to the ownership or operation of the
Kansas City Hotel wherever located and held by the Kansas City Seller or its
agents, in computer readable form where available without additional cost or
expense, and all Intellectual Property used in the operation of the Kansas City
Hotel; in each case including, without limitation, the items set forth on
Schedule F-5 attached hereto, excluding, however, any item described above that
the Kansas City Seller is not permitted to transfer pursuant to the terms of the
Kansas City Management Agreement.
"Kansas City Leases" means those certain leases relating to space
within the Kansas City Hotel as more particularly described on Schedule B-5
attached hereto.
"Kansas City Management Agreement" means that certain Management
Agreement, dated October 1, 1994, by and between the Kansas City Seller and the
Kansas City Manager, relating to the management of the Kansas City Hotel.
"Kansas City Manager" means The Ritz-Carlton Hotel Company, L.L.C.
"Kansas City Operating Agreements" means those certain service
contracts and other agreements, licenses, franchises, concessions or
arrangements relating to the operation and maintenance of the Kansas City Hotel
other than the Kansas City Equipment Leases, the Kansas City Leases and the
Kansas City Management Agreement, and being more particularly described on
Schedule D-5 attached hereto.
"Kansas City Real Property" means that certain tract of land located in
Kansas City, Missouri which is more particularly described on Schedule A-5
attached hereto, together with all buildings, improvements and fixtures located
thereon as of the Closing Date, and all rights, privileges and appurtenances
pertaining thereto including all of Kansas City Seller's right, title and
interest in and to all rights-of-way, open or proposed streets, alleys,
easements, strips or gores of land adjacent thereto.
"Kansas City Seller" means 730 Mo Hotel Properties I, Inc., a Delaware
corporation.
"LAX Assignment of Lessee's Interest" means the Assignment of Lessee's
Interest in the form attached hereto as Exhibit C pursuant to which the
leasehold interest of the LAX Seller in and to the LAX Ground Lease will be
transferred and assigned to Buyer.
"LAX Consumables" means all food and beverages (including alcoholic to
the extent permitted by applicable law and non-alcoholic), engineering,
maintenance, guest room and
12
<PAGE> 13
housekeeping supplies (including soap, cleaning materials and matches),
stationery, menus, printing and other supplies of all kinds owned by the LAX
Seller which are located upon and used in connection with the operation and
maintenance of the LAX Hotel as of the Closing Date, excluding, however, any
item described above that Sellers are not permitted to transfer pursuant to the
terms of the LAX Management Agreement.
"LAX Deed" means the special or limited warranty deed to be executed
and delivered by the LAX Seller at the Closing in the form attached hereto as
Exhibit B-6 conveying title to the LAX Improvements, subject only to the
Permitted Exceptions.
"LAX Equipment Leases" means those certain leases (whether operating or
capital) relating to tangible personal property used in the operation and
maintenance of the LAX Hotel which can be assigned to Buyer and which are more
particularly described on Schedule C-6 attached hereto.
"LAX FF&E" means all tangible personal property, excluding the LAX
Consumables, owned by the LAX Seller as of the Closing Date and located on the
LAX Real Property and used in connection with the ownership, operation and
maintenance of the LAX Hotel, including, without limitation, all fixtures,
furniture, furnishings, fittings, equipment, computer hardware, and
non-proprietary software, machinery, apparatus, artwork, books and records of
the LAX Seller, appliances, china, glassware, linens, silverware, keys and
uniforms owned by the LAX Seller.
"LAX Ground Lease" means that certain Ground Lease, dated January 31,
1984, entered into by and between S. Charles Lee and George E. Keiter, as
trustees under the will of Miriam A. Lee, Lee & Keiter Development Co., a
limited partnership, Coast Mortgage Corporation, and S. Charles Lee and George
E. Keiter, as trustees under Trust Agreement dated August 17, 1970, as
"Landlord," and Watt High-Rise Aviation Co., a California limited partnership,
as "Tenant," as amended, transferred and assigned to the LAX Seller.
"LAX Hotel" means the Doubletree Hotel-LAX located in Los Angeles,
California, and includes collectively and without limitation, the LAX Real
Property, the LAX FF & E, the LAX Consumables, the LAX Intangibles, the LAX
Leases, the LAX Equipment Leases, the LAX Operating Agreements, the LAX
Management Agreement, and any and all other aspects of the ownership and
operation thereof.
"LAX Improvements" all buildings, structures, and other improvements
located upon the LAX Real Property.
"LAX Intangibles" means all of the LAX Seller's rights, if any, to any
telephone numbers currently in use at the LAX Hotel; all as built plans and
specifications in the possession of the LAX Seller; warranties and guaranties
(to the extent assignable) relating to the LAX Hotel; original, or where
appropriate, copies of all financial, personnel and other books, records and
files
13
<PAGE> 14
relating to the ownership or operation of the LAX Hotel wherever located and
held by the LAX Seller or its agents, in computer readable form where available
without additional cost or expense, and all Intellectual Property used in the
operation of the LAX Hotel; in each case including, without limitation, the
items set forth on Schedule F-6 attached hereto, excluding, however, any item
described above that the LAX Seller is not permitted to transfer pursuant to the
terms of the LAX Management Agreement.
"LAX Leases" means those certain leases relating to space within the
LAX Hotel as more particularly described on Schedule B-6 attached hereto.
"LAX Management Agreement" means that certain Management Agreement,
dated July 1, 1994, by and between the LAX Seller and the LAX Manager, relating
to the management of the LAX Hotel.
"LAX Manager" means Doubletree Hotels Corporation.
"LAX Operating Agreements" means those certain service contracts and
other agreements, licenses, franchises, concessions or other arrangements
relating to the operation and maintenance of the LAX Hotel other than the LAX
Equipment Leases, the LAX Leases and the LAX Management Agreement, and being
more particularly described on Schedule D-6 attached hereto.
"LAX Real Property" means the LAX Seller's leasehold estate in and to
that certain tract of land located in Los Angeles, California which is more
particularly described on Schedule A-6 attached hereto, together with all
buildings, improvements and fixtures located thereon as of the Closing Date, and
all rights, privileges and appurtenances pertaining thereto including all of LAX
Seller's right, title and interest in and to all rights-of-way, open or proposed
streets, alleys, easements, strips or gores of land adjacent thereto.
"LAX Seller" means 730 Cal Hotel Properties II, Inc., a Delaware
corporation.
"Leases" means collectively the Atlanta Leases, the Fort Lauderdale
Leases, the Bloomington Leases, the San Diego Leases, the Kansas City Leases,
the LAX Leases, the Philadelphia Leases, and the Waltham Leases.
"Legal Requirements" means all federal, state and local laws, statutes,
ordinances, rules and regulations affecting or in any way relating to the Hotels
or their operations, including, without limitation, the Environmental Laws, ADA,
and the Occupational Safety and Health Act of 1970, as amended.
"Liabilities" means any liability, obligation, cost or expense of any
nature whatsoever, whether now known or unknown, asserted or unasserted, accrued
or unaccrued,
14
<PAGE> 15
liquidated, unliquidated or due or to become due, including, without limitation,
any liability in respect of taxes of any kind whatsoever that affect the Hotels
or the operation thereof.
"Limitation Date" has the meaning set forth in Section 6.5 hereof.
"Liquor License" means with respect to each of the Hotels the license
or licenses pursuant to which the sale of alcoholic beverages for on-site
consumption is authorized by the Alcoholic Beverage Licensing Authority having
jurisdiction over the particular Hotel.
"Major Building System" has the meaning set forth in Section 5.6
hereof.
"Major Defects" has the meaning set forth in Section 5.6.1 hereof.
"Management Agreements" means collectively the Atlanta Management
Agreement, the Fort Lauderdale Management Agreement, the Bloomington Management
Agreement, the San Diego Management Agreement, the Kansas City Management
Agreement, the LAX Management Agreement, the Philadelphia Management Agreement,
and the Waltham Management Agreement.
"Managers" means collectively the Atlanta Manager, the Fort Lauderdale
Manager, the Bloomington Manager, the San Diego Manager, the Kansas City
Manager, the LAX Manager, the Philadelphia Manager, and the Waltham Manager.
"Omitted Liabilities" has the meaning set forth in Section 6.2.6.1
hereof.
"Operating Agreements" means collectively the Atlanta Operating
Agreements, the Fort Lauderdale Operating Agreements, the Bloomington Operating
Agreements, the San Diego Operating Agreements, the Kansas City Operating
Agreements, the LAX Operating Agreements, the Philadelphia Operating Agreements,
and the Waltham Operating Agreements.
"Ordinary Course of Business" means, with respect to each Hotel, the
ordinary course of business generally consistent with past custom and practice
(including with respect to quantity and frequency) for such Hotel, giving due
regard and effect to the terms and conditions of Management Agreement and the
Third Party Agreements.
"Permitted Exceptions" means the easements, restrictions, encumbrances
and other exceptions to title to the Hotels, as set forth in Schedules E-1
through E-8 attached hereto.
"Permitted Investments" has the meaning set forth in the Earnest Money
Escrow Agreement.
"Personal Property" has the meaning set forth in Section 4.3.1 hereof.
15
<PAGE> 16
"Philadelphia Consumables" means all food and beverages (including
alcoholic to the extent permitted by applicable law and non-alcoholic),
engineering, maintenance, guest room and housekeeping supplies (including soap,
cleaning materials and matches), stationery, menus, printing and other supplies
of all kinds owned by the Philadelphia Seller which are located upon and used in
connection with the operation and maintenance of the Philadelphia Hotel as of
the Closing Date, excluding, however, any item described above that the
Philadelphia Seller is not permitted to transfer pursuant to the terms of the
Philadelphia Management Agreement.
"Philadelphia Deed" means the special or limited warranty deed to be
executed and delivered by the Philadelphia Seller at the Closing in the form
attached hereto as Exhibit B-7 conveying title to the Philadelphia Hotel,
subject only to the Permitted Exceptions.
"Philadelphia Equipment Leases" means those certain leases (whether
operating or capital) relating to tangible personal property used in the
operation and maintenance of the Philadelphia Hotel which can be assigned to
Buyer and which are more particularly described on Schedule C-7 attached hereto.
"Philadelphia FF&E" means all tangible personal property, excluding the
Philadelphia Consumables, owned by the Philadelphia Seller as of the Closing
Date and located on the Philadelphia Real Property and used in connection with
the ownership, operation and maintenance of the Philadelphia Hotel, including,
without limitation, all fixtures, furniture, furnishings, fittings, equipment,
computer hardware, and non-proprietary software, machinery, apparatus, artwork,
books and records of the Philadelphia Seller, appliances, china, glassware,
linens, silverware, keys and uniforms owned by the Philadelphia Seller.
"Philadelphia Hotel" means The Ritz-Carlton Philadelphia located in
Philadelphia, Pennsylvania, and includes collectively and without limitation,
the Philadelphia Real Property, the Philadelphia FF&E, the Philadelphia
Consumables, the Philadelphia Intangibles, the Philadelphia Leases, the
Philadelphia Equipment Leases, the Philadelphia Operating Agreements, the
Philadelphia Management Agreement, and any and all other aspects of the
ownership and operation thereof.
"Philadelphia Intangibles" means all of the Philadelphia Seller's
rights, if any, to any telephone numbers currently in use at the Philadelphia
Hotel; all as built plans and specifications in the possession of the
Philadelphia Seller; warranties and guaranties (to the extent assignable)
relating to the Philadelphia Hotel; original, or where appropriate, copies of
all financial, personnel and other books, records and files relating to the
ownership or operation of the Philadelphia Hotel wherever located and held by
the Philadelphia Seller or its agents, in computer readable form where available
without additional cost or expense, and all Intellectual Property used in the
operation of the Philadelphia Hotel; in each case including, without limitation,
the items set forth on Schedule F-7 attached hereto, excluding, however, any
item described above that the Philadelphia Seller is not permitted to transfer
pursuant to the terms of the Philadelphia Management Agreement.
16
<PAGE> 17
"Philadelphia Leases" means those certain leases relating to space
within the Philadelphia Hotel as more particularly described on Schedule B-7
attached hereto.
"Philadelphia Management Agreement" means that certain Amended and
Restated Operating Agreement, dated July 18, 1988, by and between Liberty Place
Hotel Associates and the Philadelphia Manager, relating to the management of the
Philadelphia Hotel.
"Philadelphia Manager" means The Ritz-Carlton Hotel Company.
"Philadelphia Operating Agreements" means those certain service
contracts and other agreements, licenses, franchises, concessions or other
arrangements relating to the operation and maintenance of the Philadelphia Hotel
other than the Philadelphia Equipment Leases, the Philadelphia Leases and the
Philadelphia Management Agreement, and being more particularly described on
Schedule D-7 attached hereto.
"Philadelphia Real Property" means that certain tract of land and
certain air rights parcel located in Philadelphia, Pennsylvania which are more
particularly described on Schedule A- 7 attached hereto, together with all
buildings, improvements and fixtures located thereon and therein as of the
Closing Date, and all rights, privileges and appurtenances pertaining thereto
including all of Philadelphia Seller's right, title and interest in and to all
rights-of-way, open or proposed streets, alleys, easements, strips or gores of
land adjacent thereto, and all so-called "touch down" sites and easements
necessary to provide vertical support to the improvements located within the air
rights parcel.
"Philadelphia Seller" means 730 Penn. Hotel Properties I, Inc., a
Delaware corporation.
"Preliminary Earnest Money Deposit" has the meaning set forth in
Section 3.2.2 hereof.
"Preliminary Inspection" has the meaning set forth in Section 5.6
hereof.
"Preliminary Inspection Period" means the period commencing on the date
of the execution and delivery of this Agreement by the last executing party and
ending on May 31, 1996 at 5:00 p.m. Eastern Daylight Time.
"Purchase Price" has the meaning set forth in Section 3.1 hereof.
"Purchase Price Adjustment Amount" has the meaning specified in Section
3.4 hereof.
17
<PAGE> 18
"Readily Achievable ADA Work" means the readily achievable repairs,
improvements and other work required to be performed at each of the Hotels
substantially in accordance with the guidelines set forth on Schedule 7.2.12
hereto.
"Real Property" means collectively the Atlanta Real Property, the Fort
Lauderdale Real Property, the Bloomington Real Property, the San Diego Real
Property, the Kansas City Real Property, the LAX Real Property, the Philadelphia
Real Property, and the Waltham Real Property.
"San Diego Consumables" means all food and beverages (including
alcoholic to the extent permitted by applicable law and non-alcoholic),
engineering) maintenance, guest room and housekeeping supplies (including soap,
cleaning materials and matches), stationery, menus, printing and other supplies
of. all kinds owned by the San Diego Seller which are located upon and used in
connection with the operation and maintenance of the San Diego Hotel as of the
Closing Date, excluding, however, any item described above that the San Diego
Seller is not permitted to transfer pursuant to the terms of the San Diego
Management Agreement.
"San Diego Deed" means the special or limited warranty deed to be
executed and delivered by the San Diego Seller at the Closing in the form
attached hereto as Exhibit B-4 conveying title to the San Diego Hotel, subject
only to the Permitted Exceptions.
"San Diego Equipment Leases" means those certain leases (whether
operating or capital) relating to tangible personal property used in the
operation and maintenance of the San Diego Hotel which can be assigned to Buyer
and which are more particularly described on Schedule C-4 attached hereto.
"San Diego FF&E" means all tangible personal property, excluding the
San Diego Consumables, owned by the San Diego Seller as of the Closing Date and
located on the San Diego Real Property and used in connection with the
ownership, operation and maintenance of the San Diego Hotel, including, without
limitation, all fixtures, furniture, furnishings, fittings, equipment, computer
hardware, and non-proprietary software, machinery, apparatus, artwork, books and
records of the San Diego Seller, appliances, china, glassware, linens,
silverware, keys and uniforms owned by the San Diego Seller.
"San Diego Hotel" means the Doubletree Hotel at Horton Plaza located in
San Diego, California and includes collectively and without limitation, the San
Diego Real Property, the San Diego FF&E, the San Diego Consumables, the San
Diego Intangibles, the San Diego Leases, the San Diego Equipment Leases, the San
Diego Operating Agreements, the San Diego Management Agreement, and any and all
other aspects of the ownership and operation thereof.
"San Diego Intangibles" means all of the San Diego Seller's rights, if
any, to any telephone numbers currently in use at the. San Diego Hotel; all as
built plans and specifications in the possession of the San Diego Seller;
warranties and guaranties (to the extent assignable)
18
<PAGE> 19
relating to the San Diego Hotel; original, or where appropriate, copies of all
financial, personnel and other books, records and files relating to the
ownership or operation of the San Diego Hotel wherever located and held by the
San Diego Seller or its agents, in computer readable form where available
without additional cost or expense, and all Intellectual Property used in the
operation of the San Diego Hotel; in each case including, without limitation,
the items set forth on Schedule F-4 attached hereto, excluding, however, any
item described above that the San Diego Seller is not permitted to transfer
pursuant to the terms of the San Diego Management Agreement.
"San Diego Leases" means those certain leases relating to space within
the San Diego Hotel as more particularly described on Schedule B-4 attached
hereto.
"San Diego Management Agreement" means that certain Management
Agreement, dated as of January 3, 1992, by and between the San Diego Seller and
the San Diego Manager, relating to the management of the San Diego Hotel.
"San Diego Manager" means DT Management, Inc.
"San Diego Operating Agreements" means those certain service contracts
and other agreements, licenses, franchises, concessions or other arrangements
relating to the operation and maintenance of the San Diego Hotel other than the
San Diego Equipment Leases, the San Diego Leases and the San Diego Management
Agreement, and being more particularly described on Schedule D-4 attached
hereto.
"San Diego Real Property" means that certain tract of land located in
San Diego, California which is more particularly described on Schedule A-4
attached hereto, together with all buildings, improvements and fixtures located
thereon as of the Closing Date, and all rights, privileges and appurtenances
pertaining thereto including all of San Diego Seller's right, title and interest
in and to all rights-of-way, open or proposed streets, alleys, easements, strips
or gores of land adjacent thereto.
"San Diego Seller" means Cal Hotel Properties I Associates, a
California general partnership.
"San Diego Seller Managing Partner" means 730 Cal Hotel Properties I,
Inc., a California corporation.
"San Diego Seller Non-Managing Partners" means DT Real Estate, Inc., an
Arizona corporation, and DTR Limited Partnership, an Arizona limited
partnership.
"Satisfactory Insurer" has the meaning given in Section 4.3.3.
19
<PAGE> 20
"Sellers" means collectively the Atlanta Seller, the Fort Lauderdale
Seller, the Bloomington Seller, the San Diego Seller, the Kansas City Seller,
the LAX Seller, the Philadelphia Seller, and the Waltham Seller.
"Sellers' Accountant" means Pannell Kerr Forster.
"Sellers' Conditions" has the meaning set forth in Section 8.2 hereof.
"Sellers' Default" has the meaning set forth in Section 11.2 hereof.
"Sellers' Knowledge" has the meaning set forth in Section 13.17 hereof.
"Signing Deposit" has the meaning set forth in Section 3.2.1 hereof.
"Specific Disclosures" has the meaning given in Section 5.3 hereof.
"Surveys" has the meaning set forth in Section 4.1 hereof.
"Third Party Agreements" means collectively the Leases, the LAX Ground
Lease, the Equipment Leases and the Operating Agreements.
"Title Commitments" has the meaning set forth in Section 4.2.
"Title Company" means Chicago Title Insurance Company or any other
Satisfactory Insurer selected by Buyer.
"Trade Payables" means open accounts payable to trade vendors or
suppliers of each of the Hotels.
"Transaction" means the purchase and sale transaction contemplated by
this Agreement.
"Uniform System" means the Uniform System of Accounts for Hotels, 8th
Edition.
"Waltham Consumables" means all food and beverages (including alcoholic
to the extent permitted by applicable law and non-alcoholic), engineering,
maintenance, guest room and housekeeping supplies (including soap, cleaning
materials and matches), stationery, menus, printing and other supplies of all
kinds owned by the Waltham Seller which are located upon and used in connection
with the operation and maintenance of the Waltham Hotel as of the Closing Date,
excluding, however, any item described above that the Waltham Seller is not
permitted to transfer pursuant to the terms of the Waltham Management Agreement.
20
<PAGE> 21
"Waltham Deed" means the special or limited warranty deed to be
executed and delivered by the Waltham Seller at the Closing in the form attached
hereto as Exhibit B-8 conveying title to the Waltham Hotel, subject only to the
Permitted Exceptions.
"Waltham Equipment Leases" means those certain leases (whether
operating or capital) relating to tangible personal property used in the
operation and maintenance of the Waltham Hotel which can be assigned to Buyer
and which are more particularly described on Schedule C-8 attached hereto.
"Waltham FF&E" means all tangible personal property, excluding the
Waltham Consumables, owned by the Waltham Seller as of the Closing Date and
located on the Waltham Real Property and used in connection with the ownership,
operation and maintenance of the Waltham Hotel, including, without limitation,
all fixtures, furniture, furnishings, fittings, equipment, computer hardware,
and non-proprietary software, machinery, apparatus, artwork, books and records
of the Waltham Seller, appliances, china, glassware, linens, silverware, keys
and uniforms owned by the Waltham Seller.
"Waltham Hotel" means the Westin Hotel located in Waltham,
Massachusetts, and includes collectively and without limitation, the Waltham
Real Property, the Waltham FF & E, the Waltham Consumables, the Waltham
Intangibles, the Waltham Leases, the Waltham Equipment Leases, the Waltham
Operating Agreements, the Waltham Management Agreement, and any and all other
aspects of the ownership and operation thereof.
"Waltham Intangibles" means all of the Waltham Seller's rights, if any,
to any telephone numbers currently in use at the Waltham Hotel; all as built
plans and specifications in the possession of the Waltham Seller; warranties and
guaranties (to the extent assignable) relating to the Waltham Hotel; original,
or where appropriate, copies of all financial, personnel and other books,
records and files relating to the ownership or operation of the Waltham Hotel
wherever located and held by the Waltham Seller or its agents, in computer
readable form where available without additional cost or expense, and all
Intellectual Property used in the operation of the Waltham Hotel; in each case
including, without limitation, the items set forth on Schedule F-8 attached
hereto, excluding, however, any item described above that the Waltham Seller is
not permitted to transfer pursuant to the terms of the Waltham Management
Agreement.
"Waltham Leases" means those certain leases relating to space within
the Waltham Hotel as more particularly described on Schedule B-8 attached
hereto.
"Waltham Management Agreement" means that certain Management Agreement,
dated as of April 1, 1993, by and between the Waltham Seller and the Waltham
Manager, relating to the management of the Waltham Hotel.
"Waltham Manager" means Westin Hotel Company.
21
<PAGE> 22
"Waltham Operating Agreements" means those certain service contracts
and other agreements, franchises, concessions or other arrangements relating to
the operation and maintenance of the Waltham Hotel other than the Waltham
Equipment Leases, the Waltham Leases and the Waltham Management Agreement and
being more particularly described on Schedule D-8 attached hereto.
"Waltham Real Property" means that certain tract of land located in
Waltham Massachusetts which is more particularly described on Schedule A-8
attached hereto, together with all buildings, improvements and fixtures located
thereon as of the Closing Date, and all rights, privileges and appurtenances
pertaining thereto including all of Waltham Seller's right, title and interest
in and to all rights-of-way, open or proposed streets, alleys, easements, strips
or gores of land adjacent thereto.
"Waltham Seller" means 730 Mass Hotel Properties I, Inc., a Delaware
corporation.
1.2 CAPTIONS. Titles and captions of articles and Sections set forth in
this Agreement are inserted only as a matter of convenience and for reference,
and in no way define, limit, extend or describe the scope of this Agreement or
the meaning of any provision set forth herein.
1.3 NUMBER AND GENDER. Whenever required by the context, the singular
number shall include the plural and the gender of any pronoun shall include the
other genders.
ARTICLE II
PURCHASE AND SALE OF HOTELS
2.1 THE ATLANTA HOTEL. The Atlanta Seller hereby agrees to sell and
Buyer hereby agrees to purchase the Atlanta Hotel on the terms and conditions
set forth in this Agreement.
2.2 THE BLOOMINGTON HOTEL. The Bloomington Seller hereby agrees to sell
and Buyer hereby agrees to purchase the Bloomington Hotel on the terms and
conditions set forth in this Agreement.
2.3 THE FORT LAUDERDALE HOTEL. The Fort Lauderdale Seller hereby agrees
to sell and Buyer hereby agrees to purchase the Fort Lauderdale Hotel on the
terms and conditions set forth in this Agreement.
2.4 THE KANSAS CITY HOTEL. The Kansas City Seller hereby agrees to sell
and Buyer hereby agrees to purchase the Kansas City Hotel on the terms and
conditions set forth in this Agreement.
22
<PAGE> 23
2.5 THE LAX HOTEL. The LAX Seller hereby agrees to sell and Buyer
hereby agrees to purchase the LAX Hotel on the terms and conditions set forth in
this Agreement.
2.6 THE PHILADELPHIA HOTEL. The Philadelphia Seller hereby agrees to
sell and Buyer hereby agrees to purchase the Philadelphia Hotel on the terms and
conditions set forth in this Agreement.
2.7 THE SAN DIEGO HOTEL. The San Diego Seller hereby agrees to sell and
Buyer hereby agrees to purchase the San Diego Hotel on the terms and conditions
set forth in this Agreement.
2.8 THE WALTHAM HOTEL. The Waltham Seller hereby agrees to sell and
Buyer hereby agrees to purchase the Waltham Hotel on the terms and conditions
set forth in this Agreement.
2.9 ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, Buyer shall assume and become responsible for all
of the Assumed Liabilities at and after the Closing. The Buyer shall not assume
and shall have no responsibility for any Excluded Liability. For purposes of
this Agreement, "Assumed Liabilities" shall mean: (i) all Liabilities of Sellers
under the Third Party Agreements, Bloomington Sponsorship Agreement, and Fort
Lauderdale License Agreement arising or accruing in respect to periods on or
after the Closing Date except for any such liabilities relating to a breach or
default which arose prior to the Closing Date; (ii) Liabilities of Sellers under
the Third Party Agreements arising or accruing in respect to periods prior to
the Closing Date and for which Liabilities Buyer receives an adjustment to the
Purchase Price pursuant to Section 9.3 hereof; and (iii) those Liabilities (if
any) of Seller set forth on Schedule 2.9.
2.10 DESIGNEES OF BUYER. At or prior to Closing, Buyer may designate
Affiliates of Buyer as the grantees to be named in one or more of the Conveyance
Documents and may instruct Sellers in writing to execute and deliver one or more
of the Conveyance Documents to the designees so designated by Buyer. Each such
designee must execute and deliver an Acknowledgment and Assumption Agreement in
the form attached hereto as Exhibit K pursuant to which each such designee shall
acknowledge that such designee is an assignee of Buyer with respect to one or
more of the Hotels or a portion thereof; and shall agree to assume and discharge
all of the obligations of Buyer at Closing and thereafter arising under this
Agreement with respect to such Hotel or portion thereof. The designation of such
Affiliates and the execution and delivery of the Conveyance Documents to them by
Sellers in accordance with Buyer's instructions shall not relieve or discharge
Buyer of any of its obligations arising under this Agreement, and Buyer shall
remain jointly and severally and primarily liable for the performance of all
such obligations by it and by its designated Affiliates. Sellers hereby
acknowledge that Buyer has advised Sellers that Buyer contemplates that SLT
Realty Limited Partnership, a Delaware limited partnership, will be the grantee
under the Deeds and the LAX Assignment of Lessee's Interest, and certain other
Conveyance Documents to be designated by Buyer not later than three (3) business
days prior to the Closing Date, and SLC Operating Limited Partnership, a
Delaware
23
<PAGE> 24
limited partnership, will be the transferee under the balance of the Conveyance
Documents. Buyer assumes all risks associated with the designation of such
entities including, without limitation, any and all risks arising from or
related to the designation of one entity as the transferee under the Deeds and
another entity as the transferee under the balance of the Conveyance Documents.
Buyer acknowledges that whether such a division of ownership is permitted under
the Management Agreements and Third Party Agreements is an issue to he resolved
solely by Buyer, and Sellers have made no representation whatsoever with respect
thereto.
ARTICLE III
PURCHASE PRICE, DEPOSITS; AND ADJUSTMENT
3.1 PURCHASE PRICE. The aggregate purchase price to be paid by Buyer
for the purchase of the Hotels (the "Purchase Price") is the sum of Three
Hundred and Nine Million and No/100 Dollars ($309,000,000), which sum shall be
allocated to the Hotels in accordance with the Allocation Schedule attached
hereto as Schedule 3.1 or such other allocation schedule as Buyer and Sellers
mutually agree upon acting reasonably and in good faith. The Purchase Price will
be paid in full at Closing by federal wire transfer of good and collected funds
for same day credit on the Closing Date to the account of Sellers or such other
account as Sellers may in their sole discretion direct in writing in one or more
bank accounts maintained by Sellers or Affiliates of Sellers in one or more
National Banking Associations in the New York, New York metropolitan area.
Sellers may designate in writing one or more of Sellers or one or more
Affiliates of Sellers as the designee for receipt of the Purchase Price, and
payment of the Purchase Price to such designee in accordance with Sellers'
instructions shall constitute full and complete payment of the Purchase Price
for all purposes of this Agreement.
3.2 EARNEST MONEY DEPOSITS. Buyer has made or agreed to make certain
Earnest Money Deposits as more particularly described in this Section 3.2, which
when fully funded will equal Ten Million and No/100 ($10,000,000). The Signing
Deposit will be paid by Buyer to Sellers and the remainder of the Earnest Money
Deposits will be paid by Buyer to the Escrow Agent and will be held, invested,
and applied by Escrow Agent in accordance with the terms and conditions of this
Agreement and the Earnest Money Escrow Agreement. At closing, Buyer will receive
a credit against the Purchase Price for the entire principal amount of all
Earnest Money Deposits, and shall receive a further credit against the Purchase
Price for one-half of the interest earned on the Preliminary and Additional
Earnest Money Deposits. The remaining amount of the interest earned on the
Preliminary and Additional Earnest Money Deposits will be paid by Escrow Agent
to Sellers or to their designee at Closing.
3.2.1 SIGNING DEPOSIT. Contemporaneously with the execution and
delivery hereof; Buyer has paid to Sellers the sum of Five Hundred Thousand and
No/100 Dollars ($500,000), which sum will constitute the Signing Deposit under
this Agreement.
24
<PAGE> 25
3.2.2 PRELIMINARY EARNEST MONEY DEPOSIT. On or before 5:00 p.m.
Eastern Daylight Time on May 13,1996, Buyer will deposit with Escrow Agent the
sum of Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000) by
wire transfer (in accordance with the wire transfer instructions set forth in
Schedule 3.2.2 hereof) of immediately available funds, which sum will constitute
the Preliminary Earnest Money Deposit under this Agreement.
3.2.3 INITIAL EARNEST MONEY DEPOSITS. The Signing Deposit and the
Preliminary Earnest Money Deposit together will constitute the Initial Earnest
Money Deposits under this Agreement.
3.2.4 ADDITIONAL EARNEST MONEY DEPOSIT. Unless Buyer elects to
terminate this Agreement prior to the expiration of the Full Inspection Period
as provided in Section 5.7 hereof; then not later than 5:00 p.m. Eastern
Daylight Time on the later to occur of: (i) the last business day of the Full
Inspection Period and (ii) the first business day following final determination
of the Purchase Price Adjustment, if any, pursuant to the provisions of this
Agreement, Buyer will deposit with Escrow Agent the additional sum of Five
Million and No/100 Dollars ($5,000,000) by wire transfer in accordance with the
instructions set forth on Schedule 3.2.2 hereof of immediately available funds,
which sum shall constitute the Additional Earnest Money Deposit.
3.2.5 REFUNDABLE AND NONREFUNDABLE DEPOSITS. Except for Buyer's
right to receive a refund of the principal amount of the Preliminary Earnest
Money Deposit in the event Sellers elect to terminate this Agreement prior to
the expiration of the Preliminary Inspection Period as provided in Section 3.5
hereof; the Earnest Money Deposits will be nonrefundable for any reason
whatsoever, other than a Failure of Title, a Seller's Default, or as provided in
Section 12.2.3 hereof. Accordingly, in the event Sellers do elect to terminate
this Agreement prior to the expiration of the Preliminary inspection Period in
accordance with the provisions of Section 3.5 hereof; then unless Buyer's
election is due to a Failure of Title, the Signing Deposit, together with all
interest earned thereon, will become the sole property of Sellers without
restriction or any obligation to refund all or any portion thereof to Buyer, and
Escrow Agent will refund to Buyer the entire principal amount of' the
Preliminary Earnest Money Deposit, together with all interest earned thereon
during the Preliminary Inspection Period. If Sellers do not elect to terminate
this Agreement prior to the expiration of the Full Inspection Period, then the
entire amount of the Earnest Money Deposits will be nonrefundable for any reason
whatsoever, other than a Failure of Title, a Seller's Default, or as provided in
Section 12.2.3 hereof. Buyer acknowledges and agrees that the Earnest Money
Deposits represent reasonable compensation to Sellers for withholding the Hotels
from the market during the Inspection Periods and for allowing Buyer access to
financial, operating, title and other information concerning the Hotels that
would otherwise be confidential information, and Buyer therefore agrees that
loss of any or all of the Initial Earnest Money Deposits in accordance with the
terms of this Agreement will not constitute a forfeiture or penalty, but is
intended by the parties to represent reasonable compensation to Sellers for the
actions of Sellers described above, regardless of whether Buyer closes the
Transaction.
25
<PAGE> 26
3.3 INVESTMENT OF EARNEST MONEY DEPOSITS. Under the terms of the
Earnest Money Escrow Agreement, Escrow Agent shall be obligated to invest the
Earnest Money Deposits held by Escrow Agent in one or more Permitted Investments
designated by Buyer and approved by Sellers in their reasonable discretion, or
otherwise invested in accordance with the mutual agreement of Buyer, Sellers and
Escrow Agent.
3.4 PURCHASE PRICE ADJUSTMENT. Buyer will be entitled to an adjustment
to the Purchase Price (the "Purchase Price Adjustment") equal to the excess of
the Deficiency Amount over One Million Two Hundred Fifty Thousand and No/100
Dollars ($1,250,000), but in no event will any Purchase Price Adjustment exceed
the sum of Six Million Two Hundred Fifty Thousand and No/100 Dollars
($6,250,000). In the event the Deficiency Amount is equal to or less than the
sum of One Million Two Hundred Fifty and No/100 Dollars ($1,250,000), Buyer will
not be entitled to any credit against or reduction to the Purchase Price and
shall have no claim whatsoever against any of Sellers with respect to any of the
matters which gave rise to the Omitted Liabilities, the Cost of Defects or other
costs of curing any deficiencies related to the physical condition of the
Hotels, the Legal Requirements, or the ADA.
3.5 SELLERS' RIGHT TO TERMINATE. In the event the Purchase Price
Adjustment would otherwise exceed the sum of Six Million Two Hundred Fifty
Thousand and No/100 Dollars ($6,250,000), then within ten (10) days after the
amount of the Deficiency Amount has been finally determined pursuant to Sections
5.6 and 7.5 hereof; Sellers shall have the option either: (i) to elect by
written notice to Buyer to terminate this Agreement by written notice to Buyer,
or (ii) to elect to withdraw from the Transaction one (but not more than one)
Hotel that is identified by the Inspecting Engineer (as provided in Section 5.6
hereof) as one with Major Defects, but only if the withdrawal of such Hotel
would cause the Purchase Price Adjustment to be equal to or less than
$6,250,000. In the event Sellers elect to terminate this Agreement, the entire
principal amount of the Preliminary Earnest Money Deposit, together with all
interest earned thereon will be paid over to Buyer, and Sellers will be entitled
to retain the entire amount of the Signing Deposit without restriction or any
further obligation to Buyer with respect thereto. In the event Sellers elect to
withdraw a Hotel from the Transaction, then the Purchase Price shall be reduced
by an amount equal to the portion of the Purchase Price shown on the Allocation
Schedule as being allocated to the withdrawn Hotel, and the cost of curing the
Major Defects attributed to the withdrawn Hotel will be disregarded for all
purposes of this Agreement. In such event, for the purpose of calculating the
Purchase Price Adjustment, as provided in Section 3.4, the $1,250,000 threshold
will be reduced in the same proportion as the proportion the value of the
withdrawn Hotel as set forth on the Allocation Schedule bears to the Purchase
Price. If Sellers elect to terminate this Agreement pursuant to clause (i)
above, Buyer may, by written notice to Sellers within five (5) business days
following such election by Sellers, require Sellers to proceed with the Closing
under this Agreement in which case Buyer will receive a Purchase Price
Adjustment of $6,250,000.
26
<PAGE> 27
ARTICLE IV
SURVEY AND TITLE
4.1 SURVEY. Within five(5) business days after the Effective Date,
Sellers will deliver to Buyer a copy of the most recent surveys of the Hotels as
Sellers have in their possession. Buyer shall obtain, at Buyer's cost and
expense, no later than the expiration of the Preliminary Inspection Period, a
current survey of the Real Property with respect to each Hotel, prepared by a
licensed surveyor satisfactory to Buyer, which surveys will be in accordance
with the 1992 Minimum Standard Requirements for ALTA/ASCM Land Title Surveys
jointly established and adopted by the American Land Title Association and the
American Society of Cartographers and Mapmakers for a Class A Urban Area Survey)
and certified to Buyer, Buyer's designees, the Title Company and such other
parties as Buyer may request (collectively, the "Surveys").
4.2 TITLE REVIEW. Prior to or contemporaneously with the execution and
delivery of this Agreement, Sellers will deliver to Buyer copies of Sellers'
existing title insurance policies. Buyer shall obtain, at Buyer's cost and
expense, no later than the expiration of the Preliminary Inspection Period, a
title insurance commitment from the Title Company for an ALTA Owner's Title
Insurance Policy Form B-1970 (or such other form reasonably acceptable to Buyer)
for each Real Property, other than the LAX Real Property, and an ALTA Leasehold
Title Insurance Policy Form B-1970 (or such other form reasonably acceptable to
Buyer) for the LAX Real Property, naming Buyer or Buyer's designees as the
proposed insured for the amounts set forth in the Allocation Schedule (the
"Title Commitments"). Buyer agrees to accept title to the Real Property subject
to the Permitted Exceptions, and Buyer will notify Sellers of any objections to
the title exceptions (other than Permitted Exceptions) or other matters set
forth in the Title Commitments not later than the expiration of the Preliminary
Inspection Period.
4.3 FAILURE OF TITLE. For all purposes of this Agreement, a Failure of
Title shall be deemed to have occurred if and only if each and every one of the
conditions set forth Sections 4.3.1 through 4.3.4 hereof shall have occurred and
be continuing as of the date of the Failure of Title.
4.3.1 TITLE DEFECTS. There shall exist of record in the official
deed records of the jurisdiction in which any Hotel exists, or otherwise in
written notice form, a lien or other claim by a person or entity other than
Sellers, Buyer, or their respective Affiliates of any right, title, or interest
in or to the Real Property or the FF&E or any of the other personal property,
tangible or intangible, to be transferred to Buyer pursuant to this Agreement
(collectively, the "Personal Property"), other than the Permitted Exceptions,
and if; with respect to any such claim which is not a lien securing a liquidated
amount, such claim, if adjudicated and decided adversely to the owner of the
Hotels, would have a substantial, material and adverse effect upon the income
producing potential of the Hotels or the right of the owner of the Hotels to
operate them in substantially the same manner in which they are presently
operated (such liens and claims being hereinafter referred to as an "Adverse
Title Claim"). Any lien, security interest or other claim
27
<PAGE> 28
pertaining to the LAX Real Property that would have priority over the LAX Ground
Lease will be an "Adverse Title Claim."
4.3.2 NOTICE TO SELLERS. Prior to the expiration of the Preliminary
Inspection Period, Buyer shall have provided notice to Sellers specifying the
existence of an Adverse Title Claim and providing Sellers with all facts and
Circumstances known to Buyer with respect to the Adverse Title Claim, including,
without limitation, a copy of the Title Commitment or other written evidence
showing the Adverse Title Claim as an exception to title to any of the Real
Property or Personal Property; provided, however, in the event Buyer first
learns of the Adverse Title Claim after the expiration of the Preliminary
Inspection Period, then the notice to Sellers shall have been provided not later
than 10 days after Buyer first learned of the Adverse Title Claim or the Closing
Date, whichever first occurs.
4.3.3 NON-INSURABILITY. Sellers shall have refused or been unable,
after the expiration of thirty days after Seller has received the notice
contemplated by Section 4.3.2 hereof; to cause a Satisfactory Title Insurer to
issue a commitment to insure title to any portion of the Real Property that is
the subject of an Adverse Title Claim either without exception for the Adverse
Title Claim or with affirmative insurance against the enforcement of the Adverse
Title Claim; provided, however, that any such affirmative insurance shall be
from a Satisfactory Insurer and that such policy shall include the obligation of
such Satisfactory Insurer to give identical coverage to Buyer's current and
future lenders (if any) and to any transferee of Buyer's interest in the
affected property (and such transferee's lenders, if any). For purposes of this
Agreement, a "Satisfactory Insurer" means one or more of the title insurers
listed on 4.3.3.
4.3.4 REFUSAL TO WITHDRAW. In the event the conditions set forth in
Sections 4.4.1 through 4.4.3 hereof are all present and continuing, Sellers
shall refuse for a period often days after the expiration of the thirty day
period specified in Section 4.3.3 hereof to agree either: (i) provided the
Adverse Title Claim does not relate solely to Personal Property, to withdraw the
Hotel (but not more than one (1)) that is affected by the Adverse Title Claim
from the Transaction and to give to Buyer a credit against the Purchase Price in
an amount equal to the portion of the purchase price allocated to the affected
Hotel as shown on the Allocation Schedule, or (ii) if the Adverse Title Claim is
one that can be cured solely by the payment of money, or is one that relates
solely to the Personal Property, to pay the full amount of the Adverse Title
Claim at or prior to Closing.
4.3.5 REFUND OF SIGNING DEPOSIT AND INTEREST. If a Failure of Title
shall occur, then Buyer may elect by written notice to Sellers delivered at or
prior to Closing: (i) to terminate this Agreement if such Failure of Title
effects more than one (1) Hotel, in which case, Seller shall refund to Buyer the
Signing Deposit, together with interest thereon at the rate of 4.5% per annum,
and Buyer shall be entitled to a refund by Escrow Agent of Earnest Money
Deposits, together with all interest earned thereon; (ii) to terminate this
Agreement as to only the Hotel affected by such Failure of Title (but not more
than one (1) such Hotel), in which case Buyer shall receive a credit against the
Purchase Price in an amount equal to the portion of the Purchase Price
28
<PAGE> 29
allocated to the affected Hotel as shown on the Allocation Schedule; or (iii) to
waive such Failure of Title and proceed to Closing pursuant to the terms hereof
without offset or other adjustment to the Purchase Price other than for matters
Sellers are required to cure pursuant to Section 4.6.
4.4 TITLE CONCLUSIVELY SATISFACTORY. Unless there occurs a Failure of
Title, then subject to the provisions of Section 4.6 hereof; title to the Real
Property and Personal Property shall be deemed conclusively satisfactory to
Buyer for all purposes of this Agreement, and Buyer will not be entitled to
terminate this Agreement on account of any title defect or receive a credit
against the Purchase Price with respect thereto.
4.5 POSTPONEMENT OF CLOSING. In the event the Closing Date would
otherwise occur prior to the expiration of any of the time periods specified in
Section 4.3 hereof; the Closing Date will be extended to a date specified by
Sellers, which date will be not less than 30 days nor more than 60 days from the
date on which the Closing Date would have otherwise occurred.
4.6 PAYMENT OF CERTAIN TITLE CLAIMS. In the event Buyer's objection to
Sellers' title to the Real Property or the Personal Property relates to a claim
arising by, through or under Sellers, and: (i) such claim can be cured solely by
the payment of money; and (ii) such claim is not a Permitted Exception, then
regardless of whether such claims result in a Failure of Title, Seller will pay
and discharge (or otherwise discharge the lien of or bond over) such claim at or
prior to Closing. Notwithstanding any other provision hereof to the contrary)
Sellers' liability under this Section 4.6 will not exceed $2,500,000 unless such
claim is attributable to or arises from facts and circumstances within Sellers'
Knowledge in which case Sellers' liability under this Section 2.6 will not be
limited.
ARTICLE V
INFORMATION CONCERNING THE HOTELS
5.1 INFORMATION DOCUMENTS. Sellers have or will promptly make available
to Buyer certain documentation (collectively, the "Information Documents")
pertaining to the Hotels, in each case, however, only to the extent available
and in the possession of Sellers, Managers and their Affiliates, including,
without limitation, the information described below.
5.1.1 PLANS AND SPECIFICATIONS. Plans and specifications relating
to the Hotels and the construction of any component of the Hotels will be made
available for Buyer's inspection.
5.1.2 MISCELLANEOUS AGREEMENTS. Copies of the Third Party
Agreements and all warranties, guaranties and commission agreements relating to
the Hotels on the date this Agreement is executed by Sellers will be made
available for Buyer's inspection.
29
<PAGE> 30
5.1.3 INCOME AND EXPENSE STATEMENTS. Unaudited detailed income and
expense statements for calendar years 1994 and 1995 and the first quarter of
1996 (or such shorter period with respect to Hotels acquired by Sellers in 1994
or later) for the Hotels will be made available for Buyer's inspection.
5.1.4 MANAGEMENT AGREEMENTS. Copies of the Management Agreements,
the Fort Lauderdale License Agreement and the Bloomington Sponsorship Agreement
will be made available for Buyer's inspection.
5.1.5 TITLE INFORMATION. The existing surveys) title insurance
policies, and other title information in the possession of Sellers, Managers or
their Affiliates will be made available for Buyer's inspection.
5.1.6 MISCELLANEOUS. Subject to the provisions of Sections 5.2,
5.13 and 5.14 hereof, Sellers will also make available such other documents and
information as may be requested by Buyer or as Sellers may determine is
appropriate in connection with Buyer's inspection of the Hotels, including,
Without limitation, information and documentation relating to the matters
described in Section 5.3 hereof.
5.2 CERTAIN CONFIDENTIAL INFORMATION. Buyer acknowledges and agrees
that Sellers or Affiliates of Sellers may have the following confidential
information concerning the Hotels: state and federal income tax returns and
filing information, internal evaluations and appraisals, loan files pertaining
to mortgage financing provided by an Affiliate of Sellers to Sellers'
predecessors in title to each of the Hotels, personnel files relating to
discharged employees of the Hotels, and privileged attorney-client
communications. Buyer disclaims any interest in examining any such confidential
information and acknowledges and agrees that Sellers and Affiliates of Sellers
may withhold such information from Buyer, and that the withholding of such
information is not in violation of any duty or obligation owed to Buyer under
this Agreement or otherwise, regardless of the content thereof. Buyer and
Sellers ratify and affirm the Confidentiality Agreement and agree that any
documents delivered under this Agreement are subject to the Confidentiality
Agreement. Nothing in this Agreement shall be deemed a modification or waiver of
the Confidentiality Agreement, and in the event of a conflict between the
Confidentiality Agreement and this Agreement, the terms of the Confidentiality
Agreement will control.
5.3 SPECIFIC DISCLOSURES. Buyer acknowledges and agrees that Sellers
have made certain specific disclosures concerning certain of the Hotels, and
that notwithstanding such disclosures, Buyer desires to proceed with the
Transaction, including without limitation, the deposit of the Earnest Money
Deposits. Buyer acknowledges and agrees that the descriptions of the disclosures
set forth in this Section (the "Specific Disclosures") are intended only as a
summary of certain disclosures made to Buyer and not as a complete disclosure of
the full scope of the problems, defects, and conditions identified and disclosed
by Sellers to Buyer with respect to each Hotel. Buyer understands that such
problems, defects, and conditions may be more extensive than indicated in the
following summaries or in other information furnished to Buyer by
30
<PAGE> 31
Sellers. Buyer also understands that such problems, defects, and conditions may
not be curable in all cases, and that if curable, the cost may exceed Buyer's
expectations.
5.3.1 ACQUISITION OF HOTELS. Each of the Hotels was acquired by its
respective Sellers either through foreclosure or the acceptance of a deed in
lieu of foreclosure on the respective dates described in Schedule 5.3.1. As a
result, Sellers have little, if any, operational information with respect to the
Hotels prior to the ownership thereof by Sellers.
5.3.2 THE BLOOMINGTON HOTEL. According to local press reports,
expansion of the existing airport facilities is under consideration, which
expansion may include the development of a new east-west runway which could
impact the Bloomington Hotel.
5.3.3 THE FORT LAUDERDALE HOTEL.
5.3.3.1 ADA COMPLIANCE. On January 16, 1996, a complaint was
filed in the U.S. District Court, Southern District of Florida, alleging that
the Fort Lauderdale Hotel violates the ADA and seeking certain injunctive
relief. The Fort Lauderdale Seller is negotiating a settlement With the
plaintiff whereby certain modifications would be performed to the Fort
Lauderdale Hotel and the case would be dismissed. The settlement will probably
require certain modifications to be made immediately and others that would be
required to be performed after the Closing Date.
5.3.3.2 EXTERIOR GLASS. The Fort Lauderdale Seller is
investigating deficiencies with the Fort Lauderdale Hotel's exterior window
glass.
5.3.4 THE KANSAS CITY HOTEL.
5.3.4.1 CABLE AGREEMENTS. The Kansas City Hotel is serviced
by a cable television service provider that is engaged in various disputes
concerning the term of its agreement and ownership rights to cable installed in
the Kansas City Hotel. The existing contract with the cable television provider
runs through September 6, 1996, and notice of intent to terminate must be given
by the owner of the Kansas City Hotel before June 8, 1996.
5.3.4.2 TENANT LEASE EXPIRATION. The existing office lease
with Smith Barney, Inc. will expire prior to Closing and the Kansas City Seller
has engaged a broker to assist in locating a new tenant.
5.3.5 THE PHILADELPHIA HOTEL.
5.3.5.1 LABOR ELECTION. The Engineering Department of the
Philadelphia Hotel recently elected to join the Teamsters Union and the
Housekeeping Department has filed a petition with the National Labor Relations
Board seeking a union election.
31
<PAGE> 32
5.3.5.2 MANAGEMENT AGREEMENT. By letter dated January 2,
1996, counsel for the Philadelphia Seller notified the Philadelphia Manager of
its intent to terminate the Philadelphia Management Agreement effective sixty
(60) days after the date of such notice. By letter dated January 15, 1996,
counsel for the Philadelphia Seller notified the Philadelphia Manager that the
Philadelphia Seller either would require any subsequent manager to hire not less
than 66 2/3% of the Employees of the Philadelphia Hotel or would extend the
termination notice period to the extent necessary to comply with the
requirements of the WARN Act. Copies of these letters have been provided to
Buyer.
5.3.5.3 EQUITABLE MORTGAGE. A claim of a right to an
equitable mortgage has been asserted in a lawsuit styled "HCB Contractors v.
Liberty Place Hotel Associates," now pending in the United States District Court
for the Eastern District of Pennsylvania as Civil Action No. 91 CV 5350.
5.3.5.4 AIR RIGHTS. Substantially all of the Philadelphia
Real Property consists of air rights and certain appurtenances thereto.
5.3.6 THE WALTHAM HOTEL. Environmental studies performed on behalf
of the Waltham Owner have disclosed the potential for contamination to the
Waltham Real Property remaining after remediation efforts that were performed by
a prior owner of the Waltham Real Property and before construction of the Hotel.
Notices concerning the potential contamination have been sent to agencies of the
Commonwealth of Massachusetts.
5.4 ASSIGNABILITY OF RIGHTS. Buyer has the obligation to determine the
assignability of the Third Party Agreements, the Management Agreements, the LAX
Ground Lease, the Bloomington Sponsorship Agreement and the Fort Lauderdale
License Agreement. Sellers will cooperate with Buyer and will use diligent
efforts (but will not be obligated) to obtain any consents required in
connection with an assignment of the Management Agreements, the Fort Lauderdale
License Agreement, the Bloomington Sponsorship Agreement, Third Party
Agreements, and the LAX Ground Lease described in the LAX Assignment of Lessee's
Interest. The Management Agreements, Third Party Agreements, and the LAX Ground
Lease are confidential and will not be distributed or disclosed by Buyer to any
person or entity not associated with Buyer. If the Transaction fails to close
for any reason whatsoever, Buyer will return to Sellers all of the Documents
which Sellers have delivered to Buyer in accordance with this Section 5.4 and
will not retain any copies thereof. THE FURNISHING OF ANY MATERIALS, DOCUMENTS,
REPORTS OR AGREEMENTS DESCRIBED ABOVE WILL NOT BE INTERPRETED IN ANY MANNER AS A
REPRESENTATION OR WARRANTY OF ANY TYPE OR K[ND BY SELLERS OR ANY OFFICER,
DIRECTOR, EMPLOYEE, AGENT, OR OTHER PARTY RELATED IN ANY WAY TO SELLERS,
INCLUDING WITHOUT LIMITATION, ANY WARRANTY OR REPRESENTATION WITH RESPECT TO THE
TRUTH OR ACCURACY OF ANY WARRANTY, REPRESENTATION, OR STATEMENT OF FACT MADE
THEREIN.
32
<PAGE> 33
5.5 INSPECTION OF HOTELS. During the Full Inspection Period, Buyer
covenants and agrees that it will inspect the Hotels at its sole cost and
expense. Buyer will also (i) examine the books and records of each of the
Hotels; (ii) interview the Managers with respect to the operation and management
of the Hotels; (iii) interview the general manager of each of the Hotels and
other key employees; (iv) examine the physical structures; environmental
condition and, the FF&E of each Hotel; (v) review the Management Agreements, the
Fort Lauderdale License Agreement, the Bloomington Sponsorship Agreement and
Third Party Agreements; (vi) conduct studies to determine compliance of the
Hotels with the Legal Requirements; and (vii) otherwise CONDUCT A COMPLETE AND
THOROUGH INVESTIGATION AND EXAMINATION OF THE HOTELS EMPLOYING THE HIGHEST
LEVELS OF DUE DILIGENCE. To the extent Buyer does not presently have available
its own employees to conduct such examinations and inspections, Buyer will
retain such consultants, independent contractors, and other professional
advisors as necessary to enable it to fulfill its obligation to employ the
highest levels of due diligence. Buyer will provide Managers with reasonable
prior written notice regarding the scope and execution of such studies, and
shall not unreasonably disturb or interfere with the operation, management or
use of the Hotels by the Managers, or Sellers, or Sellers' agents, or any tenant
of the Hotels or by any such tenant's customers, invitees or guests, not
unreasonably interfere with or disturb any guest or occupant or customer of the
Hotels, and not damage or affect the physical structure or the appearance of the
Hotels in any way. Buyer will be responsible for any and all losses, damages,
charges and other costs associated with such inspections and studies, and Buyer
covenants and agrees to return the Hotels to the same condition as existed prior
to such inspections and studies. Buyer agrees not to allow any liens to attach
against the Hotels as a result of such inspections and studies and agrees to
indemnify and hold Sellers harmless from and against any and all claims,
charges, actions, costs, Suits, damages, injuries, or other liabilities which
arise, either directly or indirectly from Buyer or its agent's or employee's
entry onto the Hotels prior to Closing. The obligation provided in the
immediately preceding sentence will survive the Closing. Notwithstanding any
provision of this Agreement to the contrary, no failure on the part of Buyer to
perform any specified level of due diligence shall be asserted by any Seller,
whether or not in connection with any litigation, (i) as a default by Buyer
under this Agreement, (ii) as the failure of a covenant under this Agreement
pursuant to Section 8.2.2, (iii) as an action giving rise to a claim by any
Seller for damages or a right to specifically enforce such covenant, or (iv) as
an action, in whole or in part, that mitigates or excuses Sellers' obligations
and covenants under this Agreement.
5.6 PRELIMINARY INSPECTION PERIOD. Not later than 5:00 p.m. Eastern
Daylight Time on the third business day after the execution and delivery of this
Agreement by the last executing party, Buyer and Sellers shall designate a
mutually acceptable engineering firm (the "Inspecting Engineer") to be retained
by Buyer at Buyer's sole expense to conduct an investigation (the "Preliminary
Inspection") of the soundness of the structural components of improvements
constituting a part of the Real Property and the adequacy and condition of the
mechanical, electrical and plumbing, elevator, and HVAC systems and components
thereof (collectively, the "Major Building Systems"). Sellers will have the
right to review and approve the terms of the engagement of the Inspecting
Engineer, including the scope of the work the Inspecting Engineer
33
<PAGE> 34
will be asked to perform. The Preliminary Inspection must be conducted and
completed prior to the expiration of the Preliminary Inspection Period. The
Inspecting Engineer will be required to submit to Buyer a written report of the
Preliminary Inspection, an original of which Buyer will promptly provide to
Sellers prior to the expiration of the Preliminary Inspection Period. The
written report will identify any Major Defects discovered by the Inspecting
Engineer during the course of the Preliminary Inspection and will include the
Inspecting Engineer's estimate of the cost to correct any Major Defects.
5.6.1 MAJOR DEFECTS. For the Purposes of this Agreement, the term
"Major Defects" shall mean with respect to the Major Building Systems only those
conditions which in the reasonable, good faith opinion of the Inspecting
Engineer: (i) render one or more of the Major Building Systems (or any component
thereof) inadequate to serve its intended purposes and require repair or
replacement to permit operation of the Hotels at the existing levels of
operation without any extraordinary increase in maintenance operating or
replacement costs; (iii) render economically impractical the continued operation
of the affected Hotel as it is presently being operated; or (iv) present danger
to life and property or fail to conform to Legal Requirements. NO MATTERS OTHER
THAN THOSE WHICH ARE DESCRIBED IN THE PRECEDING CLAUSES (i), (ii) AND (iii) OF
THIS SECTION 5.6.1 WILL QUALIFY AS MAJOR DEFECTS, AND NOTWITHSTANDING THE
FOREGOING, THE FOLLOWING MATTERS SHALL NOT CONSTITUTE MAJOR DEFECTS, REGARDLESS
OF WHETHER THEY WOULD OTHERWISE BE INCLUDED WITHIN THE SCOPE OF CLAUSES (i),
(ii) AND (iii)) OF THIS SECTION 5.6.1: (A) ANY MATTER DISCLOSED TO BUYER IN
SECTION 5.3 OF THIS AGREEMENT, (B) ANY MATTER, THE CORRECTION OF WHICH IS
CONTEMPLATED UNDER ANY EXISTING BUDGET FOR ANY OF THE HOTELS AS A MATTER TO BE
CORRECTED DURING THE ORDINARY COURSE OF BUSINESS AND WHICH SELLERS HAVE
COMPLETED ON OR PRIOR TO CLOSING, OR (C) ANY FAILURE OF ANY COMPONENT OF THE
HOTELS TO CONFORM TO THE REQUIREMENTS OF THE ADA (OTHER THAN THE MATTERS
DESCRIBED ON SCHEDULE 7.2.12) OR TO ANY ENVIRONMENTAL LAWS; OR (D) ANY
INEFFICIENCY OR OBSOLESCENCE DUE TO AGE, AS LONG AS THE MAJOR BUILDING SYSTEM IS
OTHERWISE IN WORKING ORDER AND HAS BEEN PROPERLY MAINTAINED.
5.6.2 COST OF CURING MAJOR DEFECTS. Unless objected to by Sellers,
the cost of correcting all Major Defects shall be the amount of the Inspecting
Engineer's estimate (referred to as the "Cost of Defects"). In the event Sellers
object to the identification by the Inspecting Engineer of a Major Defect or
object to the Inspecting Engineer's estimated cost of curing any identified
Major Defect, Sellers may provide written notice of Sellers' objection to Buyer,
and Sellers and Buyer agree to act diligently and in good faith to resolve
Sellers' objections as promptly as reasonably practicable. If the parties are
unable to resolve Sellers' objection within five days after receipt by Buyer of
Sellers objections, then Sellers, may notify Buyer of Sellers' intention to
retain an independent engineering firm selected and paid for by Sellers subject
to Buyer's reasonable approval to review the report of the Inspecting Engineer
and to make independent determinations of whether any particular facts and
conditions give rise to a Major Defect, and if so, to provide an independent
estimate of the cost of curing the Major Defect. Failure by Sellers to give such
notice within said five (5) day period shall for all purposes hereof
34
<PAGE> 35
be deemed to be and constitute acceptance by Sellers of the determination of the
Inspecting Engineer as to the existence and cost to repair of any Major Defects
identified by the Inspecting Engineer. Any independent engineering firm retained
by Sellers (the "Reviewing Engineer") must complete its investigation and
provide a written report thereof to the Sellers and Buyer not later than fifteen
days after Sellers notice to Buyer of Sellers' intention to retain an
independent engineering firm, which report shall specify those Major Defects
identified in the Inspecting Engineer's report which, in the reasonable good
faith opinion of the Reviewing Engineer do not qualify as Major Defects and
shall further provide an estimate by the Reviewing Engineer of the cost of
correcting those Major Defects with respect to which the Reviewing Engineer
disagrees with the estimate of the Inspecting Engineer. Upon receipt of the
report of the Reviewing Engineer, the Inspecting Engineer will review the report
of the Reviewing Engineer and if the Inspecting Engineer agrees with the
determinations of the Reviewing Engineer, then the report of the Reviewing
Engineer may be adopted in whole or in part as the report of the Inspecting
Engineer and shall be binding and conclusive upon the parties to the extent so
adopted. If the Inspecting Engineer disagrees with any portions of the report of
the Reviewing Engineer, then not later than five days after receipt by the
Inspecting Engineer of the report of the Reviewing Engineer, the Inspecting
Engineer and the Reviewing Engineer will select a third engineering firm which
shall be directed to review the reports and conclusions of the two engineers and
to resolve any differences between the two reports. The determination of the
third engineering firm shall be binding and conclusive upon the parties for all
purposes. Sellers and Buyer will each pay one half of the costs and expenses of
such third engineering firm.
5.7 BUYER'S DISCRETIONARY RIGHT TO TERMINATE. During the Continuing
Inspection Period, Buyer shall have the right to terminate this Agreement if
Buyer determines that the Hotels or The Management Agreements, the Fort
Lauderdale License Agreement, the Bloomington Sponsorship Agreement and the
Third Party Agreements are not satisfactory to Buyer, or Buyer otherwise elects
not to pursue the purchase of the Hotels for any reason. Any such election shall
be in writing, and upon receipt thereof by Sellers, this Agreement will
terminate with respect to any and all obligations of the parties hereto with
respect to further performance of any obligations arising under or out of this
Agreement. In the event Buyer elects to terminate this Agreement pursuant to
this Section 5.7, the entire amount of the Initial Earnest Money Deposits shall
be nonrefundable. Promptly upon any such termination, Escrow Agent shall pay
over to Sellers the entire amount of the Preliminary Earnest Money Deposit,
together with all interest earned thereon.
5.8 CONTINUING AGREEMENT. If Buyer does not elect to terminate this
Agreement during the Continuing Inspection Period, then: (i) this Agreement will
remain in full force and effect; (ii) Buyer will deposit the Additional Earnest
Money Deposit not later than the time specified in Section 3.2.4, and (iii)
BUYER WILL BE DEEMED TO HAVE ACCEPTED THE HOTELS ON AN "AS IS" BASIS, SUBJECT TO
THE PROVISIONS OF ARTICLES VII, VIII, IX, XI AND XII AND THE TERMS AND
CONDITIONS OF THE CONVEYANCE DOCUMENTS. In the event Buyer does not elect to
terminate this Agreement prior to the expiration of the Full Inspection Period,
then the sole obligation of the Sellers with respect to the physical condition
of the Hotels will be
35
<PAGE> 36
to deliver possession of the Hotels to Buyer in substantially the same physical
condition (excluding normal wear and tear) as existed on the last day of the
Full Inspection Period. Subject to the provisions of Articles VII, VIII, IX and
XII, BUYER HAS AGREED TO ACCEPT POSSESSION OF THE HOTELS ON THE CLOSING DATE ON
AN "AS IS" BASIS. SELLERS AND BUYER AGREE THAT THE HOTELS WILL BE SOLD "AS IS,"
AND, EXCEPT AS SET FORTH IN SECTION 6.2 HEREOF, SUCH SALE WILL BE WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED (INCLUDING, WITHOUT
LIMITATION, WARRANTY OF INCOME POTENTIAL, OPERATING EXPENSES, USES,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), AND SELLERS DO HEREBY
DISCLAIM AND RENOUNCE ANY SUCH REPRESENTATION OR WARRANTY.
5.9 AS IS DEFINED. For purposes of this Agreement, the term "As Is"
means, as and where the Hotels presently exist as of the last day of the
Inspection Period, including, without limitation, all faults, defects, claims,
liens, and other conditions of every kind or description with respect to (a) the
physical and environmental condition of the Hotels (including defects seen and
unseen and conditions natural and artificial), (b) provided there exists no
Failure of Title to the Real Property as disclosed by Buyer's title examination,
(c) provided there exists no Failure of Title to the FF&E, (d) Sellers' rights
and liabilities under the Management Agreements, the Fort Lauderdale License
Agreement, the Bloomington Sponsorship Agreement and the Third Party Agreements,
(e) Sellers' rights, title, and interest in and to the Intangibles, (f) all
laws, ordinances, rules and regulations to which the Hotels are subject under
any applicable governmental or regulatory jurisdiction, (g) the financial
operations of the Hotels, (h) all claims, demands, actions, or causes of action
that relate in any way to the Hotels or the ownership and operation thereof,
whether known or unknown, and (i) all other matters related in any way to the
ownership and operation of the Hotels, whether known or unknown, subject in each
case to the obligations of. Sellers under Articles VII, VIII, IX, XI and XII and
the terms of the Conveyance Documents.
5.10 ACCESS TO THE HOTELS. Buyer or a representative of Buyer will have
access to the Hotels (subject to the rights of guests of the Hotels and the
rights of others under the Management Agreements, the Fort Lauderdale License
Agreement, the Bloomington Sponsorship Agreement and the Third Party Agreements)
prior to the Closing during normal business hours provided Buyer notifies
Sellers a reasonable period in advance of the time Buyer desires access to the
Hotels and Buyer is accompanied by a representative of Sellers during any such
visit to the Hotels or to any one of them. In addition to the foregoing rights
of access, Buyer will have the right, from and after expiration of the Full
Inspection Period, to designate up to three employees of Buyer or its
Affiliates, which employees will have access to the Hotels for the purposes of
monitoring Sellers' obligations under Article VII and generally preparing for
transfer of the Hotels upon the Closing Date.
5.11 OPERATION AND MAINTENANCE PRIOR TO CLOSING. Notwithstanding
Buyer's right to purchase the Hotels pursuant to this Agreement, Sellers hereby
retain, subject to the conditions, limitations and covenants of Sellers set
forth in Article VII, all rights to own, operate, lease,
36
<PAGE> 37
contract or otherwise exercise the rights of ownership of the Hotels prior to
Closing without the consent or approval of Buyer.
5.12 HAZARDOUS MATERIALS. Sellers make no representations or warranties
whatsoever to Buyer regarding: (i) compliance with any Environmental Laws or
other Legal Requirements, or (ii) the presence, location or scope of any
materials, waste, contaminates, pollutants, or other substances or conditions
which are toxic, dangerous, radioactive, disease causing, carcinogenic,
infectious, caustic, or contain petroleum products or by-products, asbestos,
heavy metals, or are defined as toxic, dangerous to health or otherwise
hazardous by reference to an Environmental Laws. During the Inspection Period,
Buyer will make such studies and investigations, conduct such tests and surveys
and engage such independent contractors, environmental engineers, environmental
consultants, and experts as necessary to enable Buyer to evaluate any and all
environmental risks associated with the ownership and operation of the Hotels.
5.13 AVAILABILITY OF INFORMATION FROM SELLERS. Buyer acknowledges that
it understands that Sellers have files and documents regarding the Hotels in
more than one location. BUYER ASSUMES THE RESPONSIBILITY TO NOTIFY SELLERS OF
THE FILES AND DOCUMENTS BUYER WISHES TO INSPECT. ALL SUCH FILES AND DOCUMENTS
(OTHER THAN CONFIDENTIAL INFORMATION OF THE TYPE IDENTIFIED IN SECTION 5.2) WILL
BE MADE AVAILABLE FOR BUYER'S INSPECTION, REVIEW AND COPYING AND SELLERS SHALL
USE REASONABLE EFFORTS TO COLLECT SUCH DOCUMENTS AND FILES FOR SUCH INSPECTION,
REVIEW AND COPYING AT SELLERS' OFFICE AT 730 THIRD AVENUE, NEW YORK, NEW YORK
10017, AND TO OTHERWISE FACILITATE SUCH ACTIVITIES BY BUYER. Buyer has been
informed that Sellers' files may not be complete in all respects and that
Sellers may not have complete information concerning the Hotels or any one of
them, particularly with respect to any period prior to ownership by Sellers.
Much of the information that Sellers have about the Hotels was obtained from
third parties; therefore, such information may not be accurate or complete, and
Buyer understands and agrees that such information should not be relied upon and
should be verified to Buyer's satisfaction during the Inspection Period.
5.14 INFORMATION FROM SELLERS' AGENTS. Subsequent to the date of this
Agreement, Buyer may request from the Hotel Managers and the other parties to
the Third Party Agreements and from other agents, employees, and independent
contractors of the Sellers certain information or opinions regarding the Hotels
or some aspect of the Hotels, and their history, condition or prospects for
future use or development by Buyer. Although Sellers are willing to cooperate
with Buyer, and Sellers will instruct their respective agents, employees,
independent contractors and Hotel Managers to cooperate with Buyer, SELLERS ARE
UNWILLING TO SELL THE HOTELS UNLESS SELLERS ARE RELEASED FROM LIABILITY BY BUYER
FOR (i) STATEMENTS OR OPINIONS MADE BY OR INFORMATION FURNISHED BY SELLERS'
AGENTS UNLESS THE STATEMENTS OR OPINIONS ARE INCORPORATED AS SELLERS
REPRESENTATIONS INTO THIS AGREEMENT OR THE CLOSING DOCUMENTS EXECUTED BY
SELLERS, OR (ii) INFORMATION WITHHELD BY SELLERS' AGENTS, EMPLOYEES, INDEPENDENT
CONTRACTORS, AND HOTEL
37
<PAGE> 38
MANAGERS UNLESS SUCH INFORMATION WAS WITHHELD FROM BUYER AT THE EXPRESS
DIRECTION OF AN OFFICER OF ONE OF THE SELLERS AND WAS UNKNOWN TO THE BUYER.
5.15 BUYER CERTIFICATE AND RELEASE. It is a condition precedent to the
obligations of Sellers under this Agreement that the Certificate and Release
attached hereto as Exhibit A be fully executed by Buyer and delivered to Sellers
at Closing. The Certificate and Release certifies the truth and accuracy as of.
Closing of the statements of fact, together with supporting documentation, as
set forth in this Section. The Certificate and Release is intended to reflect
and support the fact that Buyer and consultants, independent contractors, and
other professional advisors of Buyer's choice have (or could have) (i)
physically inspected the Hotels, (ii) determined the fair market value of the
Hotels in their As Is condition, (iii) analyzed the present and projected uses
of the Hotels, (iv) independently verified the completeness and accuracy of the
Information Documents and all other information provided by Sellers and/or their
agents which Buyer deems necessary or material to close the Transaction, and (v)
independently tested and examined the Hotels from a physical, structural and
environmental standpoint, and (vi) otherwise conducted a complete and thorough
investigation and examination of the Hotels, employing prudent due diligence and
that Buyer accepts the Hotels As is. The Certificate and Release further
releases Sellers from and waives all claims against and liability of Sellers to
Buyer for any structural, physical or environmental condition at the Hotels and
further releases Sellers from and waives all liability of Sellers to Buyer for
any and all claims or causes of action based on, connected with or arising out
of, any Environmental Laws, requirement or liability imposed under the ADA or
any other Legal Requirements or otherwise asserted against the Hotels or Sellers
or Buyer by any person or entity whatsoever. The Certificate and Release
confirms that Buyer is not relying upon any representation, inducement or
unperformed promise of. Sellers or Sellers' agents except to the extent such
inducement, representation or unperformed promise is set forth herein, in the
Certificate or the Closing Documents to be executed by Sellers.
5.16 ANTITRUST NOTIFICATION. Buyer and Sellers will promptly determine
whether the Transaction is subject to the notification requirements of the HSR
Act and, if such approval is required, will complete any required reports and
file with the appropriate governmental agencies the notification and report form
required and any supplemental information which may be reasonably requested in
connection therewith pursuant to the HSR Act. It will be a condition of Closing
that the filing and waiting period requirements of the HSR Act relating to the
Transaction have been complied with in all material respects and that both
Sellers and Buyer have obtained clearance, to the extent required under the HSR
Act, to the Transaction. Sellers and Buyer will make a request for an early
termination of the waiting period requirements. Each party will be responsible
for all filing fees, application fees and other fees payable in connection with
any filing or submission made by such party pursuant to the HSR Act.
38
<PAGE> 39
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Buyer. Buyer represents and warrants to Sellers as follows:
6.1.1 CORPORATE AUTHORITY. Buyer has full power and authority
to enter into this Agreement and to assume and perform all of Buyer's
obligations under this Agreement, and the person executing this Agreement on
behalf of Buyer has been duly authorized and is empowered to bind Buyer to this
Agreement.
6.1.2 SOPHISTICATED BUYER. Buyer is an experienced investor
that specializes in the investment in and ownership and operation of hotel
properties in geographically diverse markets. As such, it is a sophisticated
real estate owner, investor and manager with particular experience in the
acquisition, ownership and operation of hotels similar to the Hotels. Buyer
warrants and represents that it has the ability through its own employees, or
through agents, independent contractors, consultants or other experts with whom
it has a relationship, to evaluate fully the investment characteristics of the
Hotels and to assess fully all issues pertaining to title to the Real Estate and
the FF&E, the value of the Consumables, the rights and liabilities of Sellers
and Buyer as the successor to Sellers under the Management Agreements, the
License Agreement, the Sponsorship Agreement and the Third Party Agreements, the
value of each of the Hotels, the past performance of each of the Hotels, the
projected performance of each of the Hotels, the structural integrity and
soundness of all improvements and structures located on the Real Estate, the
environmental condition of each of the Hotels, and the compliance of the Hotels
and the operation and management thereof with all Legal Requirements.
Accordingly, Buyer warrants and represents that, except for the representations
and warranties expressly made by Sellers in this Agreement, Buyer has not and
will not rely upon any warranty, representation, statement of fact, or other
information made by or furnished by or on behalf of Sellers or any of their
Affiliates, but is relying solely on its own investigations, assessments,
evaluations, and those of its own employees, agents, independent contractors,
consultants, and other experts with whom it is dealing in connection with this
Transaction.
6.2 SELLERS. Sellers represent and warrant to Buyer as follows:
6.2.1 ORGANIZATION AND GOOD STANDING. Each of the Sellers is
duly organized, validly existing and in good standing under the laws of the
State of its organization and is qualified to do business and is in good
standing in the state in which such Seller's Hotel is located.
6.2.2 AUTHORITY. Each of Sellers has the full power and
authority to enter into this Agreement and to assume and perform all of its
respective obligations under this Agreement and the person executing this
Agreement on behalf of each of them has been duly authorized and is empowered to
bind each of such Sellers. This Agreement constitutes the valid and legally
binding obligation of each of the Sellers (other than the San Diego Seller), and
is enforceable in accordance with its terms and conditions.
39
<PAGE> 40
6.2.3 SPECIAL PARTNERSHIP NOTICE. Buyer has been informed and
understands that the owner of the San Diego Hotel is a California general
partnership in which the San Diego Seller Managing Partner, an Affiliate of
Sellers, is the managing general partner. Under the terms of the partnership
agreement pursuant to which the San Diego Seller was formed, the San Diego
Seller Managing Partner is obligated to provide notice to the San Diego Seller
Non-Managing Partners of any proposed sale of the San Diego Hotel accompanied by
a copy of the offer that the San Diego Seller desires to accept and Sellers have
provided such notice on or prior to execution and delivery hereof.
6.2.4 NONCONTRAVENTION. To the best of Sellers' Knowledge,
neither the execution and the delivery of this Agreement by Sellers, nor the
consummation of the transactions contemplated in this Agreement will (i) cause a
material violation of any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any government,
governmental agency or court to which Sellers or the San Diego Managing Partner
are subject or any provision of the certificate of incorporation, bylaws or
partnership agreement of Sellers or the San Diego Seller Managing Partner, or
(ii) cause a material conflict with, result in a material breach of, constitute
a material default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice under
any agreement, contract, lease, license, instrument or other arrangement set
forth on Schedules B, C, D, other than those for which Required Consents shall
be obtained or those which would not have a material adverse effect with respect
to the Hotels taken as a whole. To the best of Sellers' Knowledge, none of the
Sellers nor the San Diego Seller Managing Partner needs to give any notice to,
make any filing with, or obtain any authorization, consent or approval of any
government or governmental agency in order to consummate the transactions
contemplated in this Agreement.
6.2.5 NO LITIGATION. Except for the Specific Disclosures and
as set forth on Schedule 6.2.8, to the best of Sellers' Knowledge there is no
litigation, claim, action or proceeding, actual or threatened, by any person,
entity or governmental agency which would materially and adversely affect the
use or occupancy of any of the Real Property or operation of the Hotel located
thereon or any part thereof.
6.2.6 INCOME AND EXPENSE STATEMENTS. To the best of Sellers'
Knowledge, the Income and Expense Statements fairly and accurately reflect the
financial operation of the Hotels as of the date of each such statement.
6.2.6.1 OMITTED LIABILITIES. In the event Buyer claims that
the Income and Expense Statements and state the net operating income of the
Hotels or otherwise fail to disclose any Liabilities (other than extraordinary,
non-recurring expenses) which, under generally accepted accounting principles
consistently applied, should have been included as an expense on the Income and
Expense Statements but was omitted, as finally determined pursuant to Section
6.2.6.2 hereof (referred to as the "Omitted Liabilities"), then Buyer must
notify Sellers in writing of its claim prior to 5:00 p.m. Eastern Daylight Time
on June 12, 1996. Any such notice must
40
<PAGE> 41
state in detail the basis for Buyer's calculation of the aggregate amount of all
Omitted Liabilities, broken down by Hotel. Omitted Liabilities will not include
any amounts attributable to adjustments to depreciation, amortization and
accrual schedules adopted by Sellers or Managers, but the foregoing exclusion
shall not apply to disputes regarding the inclusion of any items appearing on
such schedules.
6.2.6.2 DISPUTE RESOLUTION. In the event Sellers disagree in
any respect with Buyer's notice provided in Section 6.2.6.1, the parties agree
to act diligently and in good faith to resolve their differences. In the event
the parties have not resolved their differences within five days from the date
Sellers receive such notice, Sellers may then retain at their expense their own
independent certified public accounting firm to review such notice and Buyer's
calculation of the Omitted Liabilities and submit a report to Buyer within
fifteen days from the expiration of said five day period. Buyer and Seller will
then instruct their respective independent certified public accounting firms to
confer in good faith in an effort to resolve the differences of the parties with
respect to the any continuing differences with respect to the Omitted
Liabilities. Any resolution by the two independent certified public accounting
firms will be binding and conclusive upon the parties for all purposes of this
Agreement. In the event the two independent certified accounting firms are
unable to resolve the differences within five days after the expiration of said
fifteen day period, then the two accounting firms shall be instructed by the
parties to agree upon a third independent certified public accounting firm that
will be instructed to resolve the differences of the parties and their
respective accountants with respect to the Omitted Liabilities and the
determination of the third accounting firm will be binding and conclusive on the
parties for all purposes of this Agreement. The cost of the third accounting
firm will be divided equally between Buyer and Sellers. The Closing Date will be
extended to the extent necessary to resolve differences with respect to the
calculation of the Omitted Liabilities. Notwithstanding the foregoing, if Buyer
retains the same accounting firm (with the same engagement partner) as prepared
the Income and Expense Statements, then the determination by such accounting
firm shall be binding and conclusive upon Buyer and Seller with respect to the
existence of and calculation of Omitted Liabilities.
6.2.6.3 COST OF OMITTED LIABILITIES. In the event the
aggregate amount of all Omitted Liabilities exceeds the sum of $450,000, then
and only then the Cost of Omitted Liabilities will be included in the
calculation of the Deficiency Amount for the purposes of determining the amount,
if any, of the Purchase Price Adjustment pursuant to Section 3.4 hereof and the
right of Seller's to elect to terminate this Agreement as provided in Section
3.5 hereof. For the purposes of this Agreement, the "Cost of Omitted
Liabilities" shall be equal to $3,000,000 plus the quotient obtained by dividing
(i) the aggregate amount of all Omitted Liabilities (as finally determined in
accordance with the provisions of Section 6.2.6.2) exceeding $450,000, by, (ii)
a capitalization rate of 12%. In the event the Omitted Liabilities are equal to
or less than $450,000, then there shall be absolutely no Purchase Price
Adjustment on account of any Omitted Liabilities.
6.2.6.4. RECIPROCAL ADJUSTMENT. To the extent the Income and
Expense Statements for the Philadelphia and Fort Lauderdale Hotels are
determined through the dispute
41
<PAGE> 42
resolution process of Section 6.2.6.2 to understate the net operating income of
those Hotels and the result thereof is that the net operating income of the
Hotels is understated, then the calculation of the Cost of Omitted Liabilities
will be reduced (but not below zero) following as closely as possible reciprocal
calculations to those set forth in Section 6.2.6.3.
6.3 WAIVER OF BREACH. If Buyer obtains actual knowledge of any
breach of any of the warranties and representations of Sellers in Section 6.2
hereof prior to the Closing Date, but proceeds to consummate the Closing
pursuant to the terms of this Agreement, Buyer will be deemed to have waived any
such breach and will have no rights or remedies with respect thereto after
Closing.
6.4 REMEDY FOR BREACH. With respect to any breach of a
warranty or representation in Section 6.2 of which Buyer becomes aware only
after Closing, Buyer shall have only such rights and remedies in respect thereof
as shall be specifically provided in the Mutual Indemnity and Buyer hereby
waives and releases any other claim or right in respect of such breach.
6.5 SURVIVAL AND LIMITATION DATE. Buyer and Sellers hereby
agree that, notwithstanding any provision of this Agreement or any provision of
law to the contrary, any action which may be brought by Buyer against Sellers
for breach of this Agreement or any representations or warranties under this
Agreement or arising out of or in connection with this Transaction will be
forever barred unless Buyer (a) delivers to Sellers, no later than one year
after the Closing Date (or such longer period as may be specified in any express
warranty hereunder), a written notice of its claim setting forth in reasonable
detail the factual basis for such claim and Buyer's good faith estimate of darn
ages arising out of such claim, and (b) files a complaint or petition against
Sellers alleging such claim in an appropriate Federal District Court no later
than one year after the Closing Date ("Limitation Date"). All of Buyer's
warranties and representations and all indemnities by Buyer and Sellers which
indemnities are specifically stated to survive the Closing, will survive both
the Closing and the Limitation Date and will not merge into the Deeds, and will
be enforceable at any time by Sellers or the indemnified party, as applicable.
ARTICLE VII
PRE-CLOSING COVENANTS
7.1 SELLERS' COVENANTS PRIOR TO EXPIRATION OF FULL INSPECTION PERIOD.
Sellers hereby covenant with and for the benefit of Buyer that from and after
the Effective Date up to and including the Closing Date (or the sooner
termination of this Agreement):
7.1.1 OBLIGATIONS. Each and every material undertaking and
obligation of Sellers under this Agreement shall be performed in all material
respects by Sellers when due.
42
<PAGE> 43
7.1.2 COMPLIANCE WITH LAWS. Sellers will use commercially
reasonable good faith efforts to cause the Managers to comply in all material
respects at all times with all Legal Requirements pertaining to the ownership,
use or occupation of the Real Property or operation of the Hotels.
7.1.3 INSURANCE. Sellers shall keep the Hotels insured against
all usual risks pursuant to existing insurance policies maintained in the
Ordinary Course of Business.
7.1.4 OPERATION AND CONDITION PENDING CLOSING. Sellers shall
use its reasonable efforts to preserve, protect and maintain the Hotels in
substantially the same condition as exists on the Effective Date, will operate
the Hotels as going concerns consistent with the Ordinary Course of Business,
and will continue to enforce the Sellers' rights under the Third Party
Agreements and the Management Agreements in accordance with Sellers' presently
existing business practices, and Sellers will not, individually or in the
aggregate, nor direct any Managers to, engage in any action or enter into any
transaction outside the Ordinary Course of Business, except as may be authorized
or required pursuant to this Agreement and except for casualty or other events
contemplated by Article XII hereof.
7.1.5 COOPERATION. Sellers will act in a commercially
reasonable good faith manner to cooperate with Buyer in connection with the
Transaction, including, without limitation, cooperating with Buyer's accountants
in developing audited or auditable financial information for inclusion in any
filings with the Securities and Exchange Commission. Sellers will provide to
Buyer copies of all documents reasonably requested by Buyer, including, without
limitation, the documents described on the schedules attached hereto.
7.1.6 INCOME AND EXPENSES. Sellers shall cause, at Sellers'
expense, Sellers' Accountants to certify to Buyer the audited financial
statements which had been previously certified to Sellers for 1995.
7.2 SELLERS' COVENANTS AFTER EXPIRATION OF FULL INSPECTION PERIOD. In
addition to the foregoing, and without limiting the generality thereof, from and
after the expiration of the Full Inspection Period and provided Buyer has not
elected to terminate this Agreement pursuant to Section 5.6, except for
transactions expressly approved in writing by Buyer, Sellers shall:
7.2.1 INVENTORIES. Use commercially reasonable good faith
efforts to cause the Managers to maintain inventories of Consumables
substantially at current levels, except for sales in the Ordinary Course of
Business.
7.2.2 INSURANCE. Use commercially reasonable good faith
efforts to cause the Managers to keep in full force and effect all insurance for
the benefit of employees of the Hotels, all liability insurance, and all bonds
on personnel presently carried.
43
<PAGE> 44
7.2.3 AGREEMENTS. Not enter into or agree to enter into any
lease, contract, purchase or sale order, or other obligation or commitment
regarding the Hotels which involves an expenditure, obligation, purchase or sale
unless such obligation or commitment is entered into in the Ordinary Course of
Business or can be fully performed or terminated without a substantial premium
or penalty upon not more than sixty (60) days prior written notice.
7.2.4 LIENS. Not incur any liens with respect to any of the
Real Property or the Hotels, other than any such liens which will be removed or
otherwise satisfied or cured at the Closing as provided herein.
7.2.5 OBLIGATIONS. Pay when due all bills for labor or
services for work performed on or with respect to the Real Property or the
Hotels, not breach in any material respect or violate in any material respect
the terms of any covenants) restrictions, easements or agreements, affecting the
Real Property or the Hotels, and otherwise substantially perform all of the
material obligations of Sellers to be performed pursuant to the terms of the
Third Party Agreements and the Management Agreements.
7.2.6 TITLE EXCEPTIONS. Not agree to or consent to any new
restrictions, covenants, conditions, easements, encroachments or similar matters
affecting any of the Real Property or Hotels or any part thereof if such matter
would cause a Failure of Title.
7.2.7 ZONING. Not seek or consent to any new zoning, platting,
replatting, subdivision or other change affecting the use or administrative
classification of any of the Real Property.
7.2.8 IMPROVEMENTS. Not extend or add to any existing
improvements or construct additional improvements on any of the Real Property
except pursuant to existing budgeted improvements or in the Ordinary Course of
Business.
7.2.9 GOODWILL. Use reasonable efforts to cause the Managers
preserve the goodwill of the Hotels' guests and suppliers.
7.2.10 TAXES. Use commercially reasonable good faith efforts
to assure that Managers pay all sales taxes and employee withholding taxes when
due and payable.
7.2.11 CAPITAL EXPENDITURES. Continue Sellers' existing
program of Capital Expenditures at the Hotels in accordance with the capital
improvement plan more particularly described on Schedule 7.2.11.
7.2.12 READILY ACHIEVABLE ADA WORK. Perform all Readily
Achievable ADA Work as described on Schedule 7.2.12 hereof.
44
<PAGE> 45
7.3 INTERIM LIQUOR LICENSES. Sellers will be cooperative with Buyer's
efforts to obtain a Liquor License for each Hotel to the extent that Sellers can
do so without incurring expense or liability. Notwithstanding the foregoing,
Buyer is solely responsible for obtaining a liquor license with respect to the
Hotels. If, despite Buyer's commercially reasonable efforts, Buyer is unable to
obtain a Liquor License for any of the Hotels by the Closing Date, then, to the
extent allowable under applicable law, Sellers shall designate Buyer as its
nominee to operate under Sellers' Liquor License or enter into such other
interim arrangement as shall be customary in the jurisdiction in which the Hotel
is located for a period to expire on the earlier of ninety (90) days after the
Closing Date, or the date on which Buyer obtains a Liquor License for the Hotel,
subject to the conditions that (i) Buyer shall execute a full and complete
indemnity of Sellers and related parties, in form and substance satisfactory to
Sellers relating to Buyer's use of the Liquor License after Closing, (ii) Buyer
shall continue to proceed with due diligence to obtain a Liquor License for the
Property, (iii) Buyer shall operate under the Liquor License at all times in
accordance with applicable laws and regulations, and (iv) Buyer shall maintain
dram shop and commercial general liability insurance naming Buyer and Sellers as
beneficiaries, in such amounts as shall be reasonably required by Sellers and
including contractual liability coverage insuring the obligations of Buyer under
the indemnification contained in this Section 7.3. Buyer hereby agrees to
indemnify Sellers and to hold Sellers, and Sellers' agents and employees,
harmless from and against any and all losses, costs, damages, claims or
liabilities, including, but not limited to, reasonable attorneys' fees, arising
out of or in connection with Buyer's, or its employees' or agents' activities at
the Hotel in connection with a Liquor License or the sale or serving of
alcoholic beverages. Buyer agrees that it shall use commercially reasonable good
faith efforts to obtain a Liquor License for each Hotel, including, without
limitation, prompt submission of all required applications and supporting
information and diligent prosecution of the application process.
7.4 EXCLUSIVITY. Sellers agree that during the Exclusivity Period,
Sellers will not offer to sell any of the Hotels to any person or entity other
than Buyer, will not solicit or accept offers to purchase any of the Hotels from
any other person or entity other than Buyer, and will not otherwise seek to
enter into or negotiate any agreement with any other person or entity with
respect to the purchase and sale of the Hotels. The term "Exclusivity Period"
means the period commencing on the Effective Date and ending on the earlier to
occur of; (i) the commencement of litigation by Buyer against any of Sellers, or
(ii) if the Transaction fails to close on the Closing Date, the fifth day after
delivery by Sellers to Buyers of a notice stating that Sellers have elected to
terminate the Exclusivity Period.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 BUYER'S CONDITIONS. The obligation of Buyer to purchase the Hotels
from Sellers is subject to satisfaction on or before Closing of the following
conditions (the "Buyer's Conditions"), any of which may be waived in whole or in
part by Buyer, but only in writing at or
45
<PAGE> 46
prior to Closing. A failure to discover, or a waiver of, any circumstances made
a condition under this Section 8.1 shall not constitute a waiver of any
warranties and representations provided for elsewhere in this Agreement, unless
any such waiver specifically so states, and Buyer's sole remedies in the event
any such conditions are not satisfied or waived shall be as set forth in
Section 11.2 hereof.
8.1.1 TITLE. There shall not have occurred a Failure of Title.
8.1.2 SELLERS' PROCEEDINGS. All proceedings to be taken by Sellers in
connection with the transactions contemplated by this Agreement shall have been
completed in all material respects.
8.1.3 SELLERS' PERFORMANCE. All covenants, actions and agreements made
by the Sellers which are to be performed or completed on or before the Closing,
shall have been performed or completed in all material respects.
8.1.4 NO MATERIAL MISREPRESENTATION. There shall not be any material
error, misstatements or omission in the representations or warranties made by
Buyer in this Agreement.
8.2 SELLERS' CONDITIONS. The obligation of Sellers to sell the Hotels
to Buyer is subject to satisfaction on or before Closing of the following
conditions (the "Sellers' Conditions") (any of which may be waived in whole or
in part by any of the Sellers, but only in writing at or prior to the Closing).
A failure to discover, or a waiver of, any circumstances made a condition under
this Section 8.2 shall not constitute a waiver of any warranties and
representations provided for elsewhere in this Agreement unless any such waiver
specifically so states:
8.2.1 BUYER'S PROCEEDINGS. All proceedings to be taken by the
Buyer in connection with the transactions contemplated by this Agreement shall
have been completed in all material respects.
8.2.2 BUYER'S PERFORMANCE. All covenants, actions and
agreements made by Buyer which are to be performed or completed on or before the
Closing shall have been performed or completed in all material respects.
8.2.3 NO MATERIAL MISREPRESENTATION. There shall not be any
material error, misstatements or omission in the representations or warranties
made by Buyer in this Agreement.
ARTICLE IX
CLOSING
9.1 CLOSING DATE. The Transaction will close (the "Closing")
on the Closing Date. The Closing will take place at 9:00 a.m. Eastern Time in
the offices of Kirkland & Ellis, 153 E.
46
<PAGE> 47
53rd Street, Suite 3900, New York, NY, or at such other place or in such other
manner as agreed 10 by Buyer and Sellers, and Buyer and Sellers will conduct a
"preclosing" on the last business day prior to the Closing Date with title
transfer and payment of the Purchase Price to be completed on the Closing Date
as set forth in Section 9.2 hereof. Notwithstanding the foregoing, Buyer will
have the right to extend the Closing Date until August 15, 1996, upon notice to
Seller on or before July 10, 1996.
9.2 TITLE TRANSFER AND PAYMENT OF PURCHASE PRICE. Sellers agree to
convey title (or, in the case of the LAX Real Property, transfer and assign the
LAX Ground Lease) to the Real Property to Buyer by execution and delivery of the
Deeds and the LAX Assignment of Lessee's Interest in Lease, subject in each case
only to the Permitted Exceptions, and upon confirmation of receipt of the
Purchase Price by the Title Company. Effective upon the delivery of the Deeds
and the LAX Assignment of Lessee's Interest, actual and exclusive possession
(subject to the Management Agreements, Third Party Agreements, Fort Lauderdale
License Agreement, Bloomington Sponsorship Agreement, and Permitted Exceptions)
will pass, from Sellers to Buyer. Buyer's acceptance of the Deeds, the LAX
Assignment of Lessee's Interest, and the other documents Sellers deliver to
Buyer at Closing will be deemed to be the full performance and discharge of any
and all of Sellers' and Buyer's obligations hereunder, except (a) those
expressly set forth in Section 6.5 hereof to survive until the Limitation Date,
and (b) those indemnities and agreements specifically stated to survive the
Closing. At Closing, Buyer agrees to deliver the Purchase Price in accordance
with the provisions of Section 3.1 hereof and subject to the adjustment thereto
made pursuant to this Article IX. If Sellers are unable to confirm receipt of
the funds by the Title Company by the time specified in Section 3.1, then at
Sellers' option this Agreement will terminate unless Buyer is able to evidence
to Sellers' satisfaction that Buyer has deposited and transferred funds to the
Title Company in the amount of the full Purchase Price (e.g., by providing
Sellers with a verified federal bank wire confirmation number showing that the
funds were in fact timely wired to the Title Company in accordance with the
requirements of this Agreement), in which event Buyer will pay to Sellers one
(1) day's interest on the unpaid funds at the then current Federal Funds Rate
for each and every day that the funds are not timely received as set forth above
up to a maximum period of two (2) business days, after which, If funds have
still not been received by the Title Company, Buyer will be in material default
hereunder and Sellers may terminate the Agreement and retain the Earnest Money
Deposit as liquidated damages. Buyer and Sellers agree that Sellers' actual
damages due to Buyer's failure timely to deliver such funds are difficult, if
not impossible, to ascertain and the Earnest Money Deposit represents a
reasonable pre-estimate of such damages.
9.3 ADJUSTMENTS AND PRORATIONS. The following adjustments and
prorations will be made at Closing:
9.3.1 LEASE RENTALS, SECURITY DEPOSITS AND HOTEL RESTAURANT
AND BAR REVENUES. Sellers will be entitled to all revenues and rents (including
any percentage rent and any accrued tax and operating expense escalations,
subject to the provisions of Section 9.3.14 hereof) and all other revenue of any
kind attributable to any period under the Leases, all food service, bar,
47
<PAGE> 48
beverage and liquor revenues and charges and all revenues and charges from
restaurant operations, hotel banquet and conference facility operations, and
other revenue of any kind attributable to the same to but not after 12:01 a.m.
Eastern Time on the Closing Date. Buyer shall be entitled to all rents
(including any percentage rent and any accrued tax and operating expense
escalations, subject to the provisions of Section 9.3.14 hereof) and all other
revenue of any kind attributable to any period under the Leases, all food
service, bar, beverage and liquor revenues and charges and all revenues and
charges from restaurant operations, hotel banquet and conference facility
operations, and all other revenue of any kind attributable to any of the same on
and after 12:01 a.m. Eastern Time on the Closing Date. Rents and expense
escalations or other reimbursements due landlord under the Leases collected
prior to the Closing Date and attributable to both Sellers' and Buyer's period
of ownership will be prorated as of the Closing Date. Uncollected rents and
expense escalations or other reimbursements or payments due landlord under the
Leases for the month in which the Closing Date occurs and which are past due as
of the Closing Date will be prorated at Closing and Buyer shall accept the risk
of collection of same. All such payments due under any of the Leases for any
period prior to the month in which the Closing Date occurs shall not be prorated
and Sellers shall retain the right to receive payment therefor; provided,
however, that any such amounts as may be received by Buyers may be applied by
Buyers first to cure any delinquency under the Lease in question relating to the
period commencing on the Closing Date with the balance to be promptly paid to
Sellers or at their direction. Buyer will receive a credit against the Purchase
Price for: (i) all security or other deposits of any kind, excluding any
certificates of deposit or letters of credit held as security under any of the
Leases (which will be assigned to Buyer at Closing); provided that if at Closing
any such letters of credit or certificates of deposit held as security deposits
under the Leases are not otherwise assignable to Buyer, Sellers will obtain new
documents which can be assigned to Buyer; and (ii) prepaid rentals held by
Sellers under the Leases. This provision will survive the Limitation Date.
9.3.2 HOTEL ACCOUNTS RECEIVABLE AND PETTY' CASH. At Closing,
Sellers will receive a credit for and be entitled to all receivables relating to
the letting of hotel rooms within the Hotels through check out time for the
hotel on the calendar day immediately preceding the Closing Date. Buyer will
receive and be entitled to all such receivables from and after check out time
for the Hotels on the Closing Date. From check out time on the calendar day
immediately preceding the Closing Date through and including check out time on
the Closing Date, Buyer and Sellers will each be entitled to one-half (1/2) or
fifty percent (50%) of such receivables for such twenty-four (24) hour period.
At Closing, Buyer will purchase at face value the following items: (i) Seller's
share of the receivables for the period ending at check out time on the Closing
Date, and (ii) all petty cash funds in the hands of the Hotels (or its manager)
in connection with the hotel guest operations at the Hotels. In addition, Buyer
will purchase from Sellers the outstanding "city ledger" accounts receivables on
the following basis: accounts receivable that have been outstanding for 90 days
or less will be purchased at 95% of face value; accounts receivable that have
been outstanding for more than 90 days but less than 120 days will be purchased
at 75% of face value; and any accounts receivable that have been outstanding for
more than 120 days will be transferred at no additional charge to Buyer. The
purchase price for such
48
<PAGE> 49
guest receivables, petty cash funds and city ledger receivables, as determined
above, will be paid to Sellers at Closing by a credit to Sellers on the Closing
Statement and then paid as part of the total net Purchase Price for the Hotels,
the same to be paid by Buyer based on the net debit or credit to the Purchase
Price resulting from such computations. Except for the petty cash funds to be
sold to Buyer, all cash, checks and other funds pertaining to or arising from
the Hotels (whether held in hand at the Hotels or in deposits with banks or
other financial institutions) as of the Closing Date will remain the sole
property of Sellers and are not included in the purchase and sale of the Hotels
under this Agreement; and except for said receivables purchased by Buyer at
Closing, all other accounts receivable pertaining to or arising from the Hotels
as of the Closing Date (whether rents due, notes or other security), unless
otherwise expressly provided in this Article IX, will remain the sole property
of Sellers and are not included in the purchase and sale of the Hotels under
this Agreement. Expenses for the operation of the Hotels will be prorated
between Buyer and Sellers as provided under Section 9.3.7 hereof as part of the
proration of expenses for the Hotels.
9.3.3 FOOD AND BEVERAGE INVENTORY. Sellers will sell to Buyer,
and Buyer will purchase from Sellers, in addition to the Purchase Price for the
Hotels, all of the food and beverage inventory of the Hotels free and clear of
all liens, claims and other encumbrances, the same to be sold at Sellers' actual
cost as disclosed by Sellers' books; provided, however, if no cost is
ascertainable with respect to particular components of the food and beverage
inventory on Sellers' books, the first in, first out method of valuation will be
used. The purchase price of the food and beverage inventory will be determined
by an actual inventory of all usable items of food and beverages taken the day
preceding the Closing Date (or such other date as the parties hereto may
reasonably agree upon) and will be paid to Sellers at Closing in a credit to
Sellers on Buyer's closing statement in the computation of adjustments and
prorations on the Closing Date. The closing inventory will be conducted jointly
by representatives of Buyer and Sellers. Buyer will pay for (i) all unopened
cases, boxes or other containers of food and beverages, (ii) all unopened
individual items of food and beverages which are a part of an opened case, box
or other container whether or not the same has been stocked in the guest rooms
of the Hotels, and (iii) to the extent permitted by applicable Legal
Requirements, all other food and beverages and similar unused perishables usable
in the ordinary course of the operation of the Hotels.
9.3.4 TRADE PAYABLES. Sellers agree to pay all Trade Payables
for their respective Hotels arising on or prior to 12:01 a.m. Eastern Time on
the Closing Date and will and hereby do indemnify and hold Buyer harmless from
payment of the same. Buyer agrees to pay all trade payables from the Hotels
arising after 12:01 a.m. Eastern Time on the Closing Date (including payment for
services or supplies ordered but not delivered as of the Closing Date) and will
and hereby does indemnify and hold Sellers harmless from payment of the same.
The indemnities contained or provided for in this Section will survive Closing
and shall be included in the Mutual Indemnity.
9.3.5 ADVANCE DEPOSITS. Buyer will receive a credit against
the Purchase Price for all prepaid deposits for reservations, banquets and other
functions scheduled for after the
49
<PAGE> 50
Closing Date in accordance with the terms of this Agreement. Sellers will
indemnify and hold Buyer harmless from and against any liability for the return
of any such prepaid deposits which Sellers fail to disclose to Buyer and such
indemnity shall be included in the Mutual Indemnity.
9.3.6 REAL ESTATE AND PERSONAL PROPERTY TAXES. Real estate and
personal property taxes and assessments will be prorated as of the Closing Date.
Sellers will pay all real estate and personal property taxes and assessments
(including the full amount of any being paid in installments) attributable to
the Hotels to but not including the Closing Date. If the real estate and/or
personal property tax rate and assessments have not been set for the year in
which the Closing occurs, then the proration of such taxes will be based upon
the rate and assessments for the preceding tax year, and such proration will be
adjusted in cash between Sellers and Buyer upon presentation of written evidence
that the actual taxes paid for the year in which the Closing occurs differ from
the amounts used at Closing and in accordance with the provisions of Section
9.3.15 hereof. Notwithstanding the foregoing, to the extent Buyer is entitled to
recover an increase in taxes prorated and paid by Sellers from the tenants under
the Leases, Buyer will use its best efforts in good faith to collect all such
taxes prorated and paid by Sellers for which such reimbursement by tenants is
due under the Leases and will promptly tender all such sums to Sellers upon
collection. All future taxes imposed due to a change of use of the Hotels after
the Closing Date shall be paid by Buyer, including any such taxes relating to
any period prior to the Closing Date. Any refunds or reductions in taxes made
after the Closing Date pertaining to periods prior to the Closing Date will be
prorated as of the Closing Date, Buyer paying to Sellers the entire amount of
any refunds due for tax years prior to 1996 and Sellers' pro rata share of tax
year 1996, based upon the Closing Date.
9.3.7 HOTELS OPERATING EXPENSES. Operating expenses for the
Hotels will be prorated as of the Closing Date. Sellers will pay all utility
charges and other operating expenses attributable to the Hotels to but not
including the Closing Date (except for those utility charges and operating
expenses payable by tenants in accordance with the Leases). Buyer will pay all
Hotels operating expenses on and after the Closing Date. Sellers will cooperate
with Buyer in transferring or continuing any existing utility accounts for the
Hotels. Sellers will receive a credit at the Closing for any deposits actually
paid by Sellers in connection with any such accounts. Sellers will request that
the respective Managers arrange for meter readings necessary to make the
adjustments contemplated hereby.
9.3.8 EXCISE AND GROSS RECEIPTS TAXES. Buyer will pay all
excise and gross receipts taxes (if any) and all recording fees, mortgage taxes
(if any) imposed with respect to the Transaction and will indemnify and hold
Sellers harmless from the payment of such taxes.
9.3.9 OPERATIONAL PAYMENTS. Buyer will receive a credit at
Closing for any management fees and other sums owing to Managers pursuant to the
Management Agreements through and including the day preceding the Closing Date.
Except to the extent, if any, provided in the Conveyance Documents and the
Mutual Indemnity, Sellers will have absolutely no other liabilities or
obligations with respect to the Managers, Employees or others working at the
Hotels
50
<PAGE> 51
for any period on or after the Closing Date. Buyer will be responsible for all
Employees and all costs, expenses, health coverage, benefits, sick leave,
vacation time, wages, salaries, unemployment coverage and any and all other
matters relating to the Hotels commencing as of the Closing Date; provided,
however, all such amounts which are payable after the Closing Date but arose,
accrued, or are attributable to any period prior to the Closing Date will be
proportionately allocated to and paid by Sellers or credited to Buyers at
closing.
9.3.10 OPERATING AGREEMENTS, EQUIPMENT LEASES. Any amounts
prepaid or (payable) under any Operating Agreements or Equipment Leases or any
other prepaid items (or amounts payable) pertaining to the Hotels will be
prorated at the Closing as of the Closing Date with the respective Sellers
entitled to (or responsible for) all sums pertaining to the period prior to
12:01 a.m. on the Closing Date and Buyer entitled to (or responsible for) all
sums pertaining to the period after 12:01 a.m. on the Closing Date.
9.3.11 LAX GROUND LEASE RENTALS. All ground rents and other
payments due and payable by the lessee under the LAX Ground Lease will be
prorated as of the Closing Date.
9.3.12 CLOSING COSTS. Sellers will pay the cost of Sellers'
counsel, one-half of the total transfer taxes payable with respect to the
transfer of ownership of the Philadelphia Hotel, all other transfer taxes,
one-half of all escrow costs and expenses under the Earnest Money Escrow
Agreement, and the other costs and expenses to be paid by Sellers as set forth
herein. Buyer will pay for costs of Buyer's counsel, the Surveys, Title
Commitments, Title Policies, and one-half of the total transfer taxes payable
with respect to the transfer of ownership of the Philadelphia Hotel, any gross
receipts tax otherwise payable by Sellers on the sale of the FF & E and
Consumables, one-half of all escrow costs and expenses under the Earnest Money
Escrow Agreement, and all other expenses incurred by Buyer.
9.3.13 INSURANCE. Unless otherwise agreed in writing by the
parties prior to the Closing Date, Sellers will cancel all insurance coverage
for the Hotels as of the Closing Date and Buyer will bear the risk of obtaining
insurance coverage for the Hotels on the Closing Date and for all risk of loss
thereafter. Risk of loss prior to the Closing Date will be borne by Sellers.
9.3.14 CAPITAL EXPENDITURE ADJUSTMENT. At Closing, Buyer will
pay Sellers an additional amount equal to the Capital Expenditure Excess, if
any, and Buyer will be entitled to a credit for the Capital Expenditure
Deficiency, if any.
9.3.15 LEASING COMMISSIONS AND EXPENSE CREDIT. Sellers will
receive a credit for any amounts that Buyer is obligated to reimburse to Sellers
pursuant to Section 10.1 hereof.
9.3.16 EARNEST MONEY CREDIT. At Closing, the entire principal
amount of the Earnest Money Deposits will be credited against the Purchase
Price, together with one half of the interest earned on the Preliminary Earnest
Money Deposits and the Additional Earnest Money Deposit. The remaining interest
on such Earnest Money Deposits shall be paid to Seller.
51
<PAGE> 52
9.3.17 COST OF DEFECTS REFUND AGREEMENT. In the event Buyer is
entitled to a Purchase Price Adjustment as provided in Section 3.4 hereof, then
to the extent the Purchase Price Adjustment is attributable to any Cost of
Defects, then Buyer and Sellers will enter into a Cost of Defects Refund
Agreement at Closing substantially in the form of the Cost of Defects Refund
Agreement attached hereto as Exhibit N, whereby at the expiration of one year
after the Closing Date (subject to extension for force majeure as therein
provided), Buyer will be obligated to provide Sellers with a certificate stating
the amount of all expenditures made by Buyer to repair or otherwise cure Major
Defects and to the extent the amount expended by Buyer is less than the amount
of the Purchase Price Adjustment attributable to any Cost of Defects, Seller
will be entitled to a refund of the deficiency.
9.3.18 CAPITAL LEASE OBLIGATIONS. Unless satisfied and
discharged by Sellers prior to Closing, Buyer shall be entitled, at Closing, to
a credit equal to the present value of the lessee's liability under all of the
Capital Lease Obligations from and after the Closing Date through the end of the
lease term of each of the capital Lease Obligations. The annual discount rate to
be applied in calculating the present value of the remaining liability will be
9%.
9.3.19 TAXES. At closing, Buyer shall be entitled to a credit
equal to the amount, if any, of all sales and employee withholding taxes the
liability for which accrued prior to the Closing Date, but which have not been
paid by Seller or Managers, but only to the extent Buyer would otherwise bear
the economic burden of such taxes.
9.3.20 DELAYED ADJUSTMENT. If at any time following the
Closing Date the amount of an item listed in any subsection of Section 9.3
hereof proves to be incorrect, the party in whose favor the error was made will
promptly pay to the other party the sum necessary to correct such error upon
receipt of proof of such error, provided that such proof is delivered to the
party from whom payment is requested on or before one (1) year after Closing.
9.4 COMMISSIONS. Buyer and Sellers acknowledge and agree that no broker
has been engaged by either party with respect to the Transaction. Sellers agree
to indemnify Buyer and hold Buyer harmless from any loss, liability, damage,
cost or expense (including, without limitation, court costs and reasonable
attorneys' fees) paid or incurred by Buyer by reason of any claim to any
broker's, finder's, or other fee in connection with the transaction by any party
claiming by, through or under Sellers. Buyer agrees to indemnify Sellers and
hold Sellers harmless from any loss, liability, damage, cost or expense
(including, without limitation, court costs and reasonable attorneys' fees) paid
or incurred by Sellers by reason of any claim to any broker's, finder's, or
other fee in connection with the transaction by any party claiming by, through
or under Buyer. The indemnities contained herein will survive Closing, and shall
be included in the Mutual Indemnity.
9.5 SELLERS' CLOSING DOCUMENTS. At the Closing, Sellers will deliver or
cause to be delivered to Buyer the following documents:
52
<PAGE> 53
9.5.1 DEEDS. Each of the Atlanta Seller, the Fort Lauderdale
Seller, the Bloomington Seller, the San Diego Seller, the Kansas City Seller,
the LAX Seller, the Philadelphia Seller, and the Waltham Seller will execute and
deliver the appropriate Deeds in the forms attached hereto as Exhibits B-1
through B-7 conveying to Buyer all of their respective rights, titles and
interests in and to the Real Property, subject only to the Permitted Exceptions.
9.5.2 LAX ASSIGNMENT OF LESSEE'S INTEREST. The LAX Seller will
execute and deliver the LAX Assignment of Lessee's Interest in Lease in the form
attached hereto as Exhibit C conveying to Buyer all of the right, title and
interest of the LAX Seller in and to the LAX Ground Lease. Under the terms of
the Assignment of Lessee's Interest, Buyer shall (i) accept, ratify and assume
all obligations imposed upon the lessee under the LAX Ground Lease arising or
accruing on or after the Closing Date, and (ii) agree to indemnify, defend, and
hold harmless the LAX Seller from and against all losses, costs (including
reasonable attorneys' fees), liabilities, expenses and demands of whatever
nature arising or accruing under the LAX Ground Lease and from and after the
Closing Date.
9.5.3 BILLS OF SALE AND ASSIGNMENT. Each of the Sellers will
execute and deliver a bill of sale, in the form attached hereto as Exhibit D,
conveying to Buyer all of their respective rights, titles and interests in and
to all of the Intangibles, FF & E, Consumables and the Liquor Licenses with
respect to the Hotel and by each of them.
9.5.4 ASSIGNMENT OF MANAGEMENT AGREEMENTS, LICENSE AGREEMENT
AND BLOOMINGTON SPONSORSHIP AGREEMENT. Each of the Sellers will execute and
deliver an Assignment of Management Agreement in the form attached hereto as
Exhibit E (the "Assignment of Management Agreement") assigning and transferring
all of their respective interests in the Management Agreements. In each
Assignment of Management Agreement, Buyer will expressly (i) assume all
obligations imposed upon the owner of the Hotel identified in the Assignment of
Management Agreement first arising or accruing on or after the Closing Date, and
(ii) agree to indemnify, defend, and hold harmless Sellers from and against all
losses, costs (including reasonable attorneys' fees), liabilities, expenses, and
demands of whatever nature first arising or accruing under the Management
Agreements on or after the Closing Date. The Fort Lauderdale Seller will execute
and deliver and Assignment of Fort Lauderdale License Agreement assigning and
transferring all of its interests in the Fort Lauderdale License Agreement. In
the Assignment of Fort Lauderdale License Agreement, Buyer will expressly (i)
assume all obligations imposed upon the Fort Lauderdale Seller first arising or
accruing on or after the Closing Date, including, without limitation, any fees,
charges, liquidated damages, and other amounts which may be incurred in the
event of a termination of the Fort Lauderdale License Agreement, and (ii) agree
to indemnify, defend, and hold harmless Fort Lauderdale Seller from and against
all losses, costs (including reasonable attorneys' fees), liabilities, expenses,
and demands of whatever nature first arising or accruing under the Fort
Lauderdale License Agreement on or after the Closing Date. The Bloomington
Seller will execute and deliver an Assignment of Bloomington Sponsorship
Agreement assigning and transferring all of its interest in the Bloomington
Sponsorship Agreement. In the Assignment of Bloomington Sponsorship Agreement,
Buyer will expressly (i)
53
<PAGE> 54
assume all obligations imposed upon the Bloomington Seller first arising or
accruing on or after the Closing Date, and (ii) agree to indemnify, defend, and
hold harmless Bloomington Seller from and against all losses, costs (including
reasonable attorneys' fees), liabilities, expenses, and demands of whatever
nature first arising or accruing under the Bloomington Sponsorship Agreement on
or after the Closing Date.
9.5.5 ASSIGNMENT OF TENANT LEASES, EQUIPMENT LEASES, AND
OPERATING AGREEMENTS. Each of the Sellers will execute and deliver an assignment
of the Third Party Agreements in the form attached hereto as Exhibit F (the
"Assignment of Third Party Agreements") assigning and transferring all of their
respective interests in the Third Party Agreements. Sellers will not assign any
contracts or policies of insurance for the Hotels. In the Assignment of Third
Party Agreements, Buyer will expressly (i) assume (a) the obligation to pay any
and all leasing commissions payable (pursuant to written lease commission
agreements or the Leases) on the Leases after the expiration of the current
terms of the Leases and (b) all other liabilities and obligations of Sellers
under the Third Party Agreements first arising or accruing on or after the
Closing Date and (ii) agree to indemnify, defend and hold harmless Sellers from
and against all losses, costs (including reasonable attorneys' fees),
liabilities, expenses, and demands of whatever nature first arising or accruing
under the Third Party Agreements on or after the Closing Date. In connection
with such assignment, Buyer will post letters of credit or other security as may
be required to release any letters of credit or security posted by any Sellers.
9.5.6 ASSIGNMENT OF INTANGIBLES. Each of the Sellers will
execute and deliver an Assignment of Intangibles, in the form attached hereto as
Exhibit G assigning to Buyer the Intangibles pertaining to the Hotels, to the
extent any warranties and guarantees forming a part of such Intangibles are
assignable by Sellers to Buyer (without expense to Sellers).
9.5.7 NON-FOREIGN STATUS AFFIDAVIT. Each of the Sellers will
execute and deliver a non-foreign status affidavit in substantially the form
attached hereto as Exhibit H, as required by Section 1445 of the Internal
Revenue Code and Section 18662 of the California Revenue and Taxation Code, and
the regulations thereunder.
9.5.8 NOTICE TO TENANTS. Each of the Sellers will execute and
deliver to Buyer letters to each tenant under the Leases notifying them of the
sale of the Hotels to Buyer and advising them that all future payments of rent
and other payments due under the Leases are to be made to Buyer at an address
designated by Buyer.
9.5.9 NO LIEN CERTIFICATES. Each of the Sellers will execute
and deliver certificates in form and content as reasonably required by the Title
Company reciting that there are no mechanics', materialmen's or laborers' liens
against the Real Property and that the Real Property is free of all liens,
encumbrances and charges, and claims of parties in possession, except for the
Permitted Exceptions.
54
<PAGE> 55
9.5.10 EVIDENCE OF AUTHORITY. Each of the Sellers will provide
satisfactory evidence from Sellers authorizing the execution and delivery by
Sellers of this Agreement and such other documents as may be necessary or
advisable to consummate the Transaction.
9.5.11 ORIGINAL DOCUMENTS. To the extent available to Sellers,
each of the Sellers will deliver originals of all the Third Party Agreements to
be assumed by Buyer in accordance with the terms hereof
9.5.12 PERMITS. To the extent available to Sellers, each of
the Sellers will deliver originals of all certificates of occupancy and permits
affecting the Hotels.
9.5.13 TELEPHONE NUMBERS; POST OFFICE BOX. Subject to any
required approval by the Managers (or licensee under the Fort Lauderdale License
Agreement or sponsor under the Bloomington Sponsorship Agreement), each of the
Sellers will execute and deliver a written instrument conveying and transferring
to Buyer (without representation or warranty of control) to the extent
authorized by the telephone company and post office, all of the Sellers' right,
title and interest in any telephone numbers relating to the Hotels, and, if
Sellers maintain a post office box, conveying to the Buyer all of its interest
in and to such post office box and the number associated therewith, so as to
assure continuity in operation and communication. Any fees or charges associated
with the transfer will be paid by Buyer.
9.5.14 EMPLOYEE MATTERS. Each of the Sellers will use
reasonable good faith efforts to provide executed affidavits from an authorized
officer or manager of each Hotel, setting forth the date to which all Employees
of the Hotel covered by the affidavit have been paid.
9.5.15 GUEST INFORMATION. Each of the Sellers will direct the
respective Managers to make available to Buyer complete sets of all guest
registration cards, guest transcripts, guest histories, and all other guest
information at the Hotels.
9.5.16 SCHEDULE OF EMPLOYEES. Each of Sellers will use
reasonable good faith efforts to provide updated schedules of Employees of their
respective Hotels, showing salaries, with statements of the length of service of
each Employee, brought current to a date not more than forty-eight (48) hours
prior to the Closing.
9.5.17 ROOM RESERVATIONS; FUNCTION RESERVATIONS. Each of
Sellers will provide complete lists of all advance room reservations, functions
and the like, in reasonable detail so as to enable Buyer to honor Sellers'
commitments with respect to reservations and advance sales at each of the
Hotels.
9.5.18 MAINTENANCE RECORDS. Each of Sellers will provide all
maintenance records for their respective Hotels, to the extent in possession of
Sellers, Manager or their Affiliates.
55
<PAGE> 56
9.5.19 CLOSING STATEMENT. Each of the Sellers shall execute
and deliver six (6) originals of a closing statement (the "Closing Statement")
setting forth the prorations described in Section 6.3 above, the allocation of
the Purchase Price to each of the Hotels, the allocation and proration of all
Closing costs and expenses in accordance with the terms of this Agreement, and
otherwise accounting for all funds required to effect Closing.
9.5.20 OTHER DOCUMENTS. Each of the Sellers shall execute and
deliver such other documents as may be reasonably required by the Title Company
or as may reasonably be agreed upon by Sellers and Buyer to consummate the
Transaction.
9.6 BUYER'S CLOSING DOCUMENTS. At the Closing, Buyer will deliver or
cause to be delivered to Sellers:
9.6.1 ASSIGNMENTS. Buyer shall execute and deliver the LAX
Assignment of Lease, the Assignment of Management Agreements, and the Assignment
of Intangibles.
9.6.2 EVIDENCE OF AUTHORITY. Buyer shall deliver satisfactory
evidence from Buyer authorizing the execution and delivery by Buyer of this
Agreement and such other documents executed and delivered by Buyer in connection
with the Transaction.
9.6.3 CERTIFICATE AND RELEASE. Buyer shall deliver the Certificate and
Release in the form attached hereto as Exhibit A.
9.6.4 Acknowledgment & Assumption. If Buyer make the election
contemplated under Section 2.10 hereof Buyer's designees shall each execute and
deliver the Acknowledgment and Assumption Agreement in the form attached hereto
as Exhibit K as provided in Section 2.10 hereof.
9.6.5 Closing Statement. Buyer shall execute and deliver six
(6) fully executed originals of the Closing Statement.
9.6.6 LAX Ground Lease Information. Buyer shall provide the
LAX Seller with such information as may be requested by the LAX Seller to
provide the landlord under the LAX Ground Lease with information concerning
Buyer's net worth and ability to pay the rents and other amounts required to be
paid by the tenant under the LAX Ground Lease, and such other information
concerning Buyer's financial standing, responsibility and experience in the
operation of hotels as the LAX Seller shall reasonably request in connection
with the LAX Sellers' desire to be released from liability under the LAX Ground
Lease as contemplated in Section 17 thereof provided, however, that Sellers'
obligations with respect to Required Consents in Section 8.1.4 are not subject
to the LAX Sellers' release from liability under the LAX Ground Lease.
56
56
<PAGE> 57
9.6.7 Other Documents. Buyer shall execute and deliver such
other documents as may reasonably be required by the Title Company or as may be
reasonably required by Sellers to consummate the Transaction.
9.7 Other Deliveries. At the Closing, the following additional acts
will occur:
9.7.1 Keys and Original Documents. To the extent reasonably
practicable, Sellers will deliver, or cause Managers to deliver, either to the
Hotels or to Buyer keys to all locks on or in the Hotels and, if in the
possession of Sellers or Managers, originals of the Third Party Agreements.
9.7.2 Mutual Indemnities. Each of the Sellers and Buyer shall
execute a Mutual Indemnity in the form attached hereto as Exhibit J under the
terms of which Buyer will agree that it will indemnify and hold Sellers, and
their Affiliates, parent corporations, officers, directors, shareholders,
employees, agents and contractors harmless from and against all actions, claims,
penalties, damages and expenses, including reasonable attorneys' fees, based
upon or arising out of: (i) the failure by Buyer to honor any room reservations,
banquet reservations, or other arrangements and obligations for the use of the
Hotels made prior to, on or after the Closing Date to be honored after the
Closing Date; (ii) any claim for personal injury or property damage based on an
event occurring in or about the Hotels after the date immediately preceding the
Closing Date; (iii) any matter for which Buyer has agreed to indemnify Sellers
under the provisions of Article IX or any of the Conveyance Documents. Under the
Mutual Indemnity, Sellers will agree that they will indemnify and hold Buyer and
its Affiliates, parent corporation, officers, directors, shareholders,
employees, agents and contractors harmless from and against all costs, claims,
penalties, damages and expenses including reasonable attorneys' fees, based upon
or arising out of (i) the failure by Sellers to honor any room reservations,
banquet reservations, or other arrangements and obligations for the use of the
Hotels for periods prior to the Closing Date, and (ii) any claim for personal
injury or property damage based upon an event occurring in or about the Hotels
prior to the Closing Date, and (iii) any other matters set forth in the Mutual
Indemnity Agreement. Sellers hereby agree to indemnify and hold Buyer harmless
from the payment of any and all gross receipts and lodgers' taxes due in
connection with the operation of the Hotels on or prior to the Closing Date, and
in connection therewith each of the Sellers will execute and deliver the Gross
Receipts Tax Mutual Indemnity in the form attached hereto as Exhibit I under
which Sellers agree to indemnify Buyer for all required gross receipts and
lodgers' taxes due on rentals or operations of the Hotels and state unemployment
compensation contributions required of it as an employer with respect to the
Hotels through the date immediately preceding the Closing Date. Buyers agree to
indemnify and hold Sellers harmless from the payment of any and all gross
receipts and lodgers' taxes due in connection with the operation of the Hotels
from and after the Closing Date, and in connection therewith Buyer shall execute
and deliver the Gross Receipts Tax Mutual Indemnity in the form attached hereto
as Exhibit I under which Buyer agrees to indemnify Sellers for all required
gross receipts and lodgers' taxes due on rentals or operations of the Hotels and
state unemployment compensation
57
57
<PAGE> 58
contributions required of it as an employer with respect to the Hotels from and
after the Closing Date. The indemnities contained in this Section will survive
Closing.
9.7.3 Personal Property; Inventory. The parties will arrange
for hotel guests to sign new deposit box or other appropriate receipts on the
day before the Closing Date with respect to baggage, personal property, laundry,
valet packages and other property of hotel guests checked or left in the care of
Sellers by transient hotel guests or tenants and, to the extent such receipts
are not obtained, such property shall be sealed, listed in an inventory prepared
and signed jointly by the parties as of the Closing Date and Buyer will be
responsible from and after the Closing Date for all such property listed in said
inventory.
9.8 Indemnity Fund Agreement. At Closing, Buyer and Sellers will enter
into an Indemnity Fund Agreement in the form attached hereto as Exhibit M, under
the terms of which Sellers will deliver to one of them, as the designee and
agent of all of the Sellers, the sum of $4,000,000, which shall be held by the
designee and agent in a segregated bank account and will not be pledged,
hypothecated, or otherwise disposed of or subjected to any claims of any other
persons or entities (referred to as the "Indemnity Fund"). In the event Buyer
makes a claim under any of the indemnity agreements set forth in this Agreement
or in any of the agreements to be executed and delivered among the parties at
Closing, and if the indemnifying party is ultimately determined by a court of
competent jurisdiction or otherwise in a mutually acceptable dispute resolution
forum to have liability on the claim for indemnity, then if the indemnifying
party fails to pay the claim on demand, then Buyer will have the right to notify
the designee agent of the indemnifying party's failure to pay the claim and
promptly upon receipt of such notice, the designee agent will pay the claim in
full, not to exceed, however, the balance then remaining in the Indemnity Fund
after taking into account all previous claims by Buyer, if any. The Indemnity
Fund Agreement will expire one year after Closing and all funds then held by the
designee agent under the Indemnity Fund Agreement will be paid by the designee
and agent to Sellers; unless prior to the expiration of such one year period
Buyer shall have either commenced litigation to enforce the terms and conditions
thereof, or provided notice to Sellers setting forth in reasonable detail the
facts and circumstances of any claim made by a third party pursuant to which
Buyer is entitled to indemnification hereunder, in which case the term of the
Indemnity Trust Agreement will be extended until the final resolution of such
litigation without any appeal pending; provided, however, an amount equal to the
greater of $500,000 or the balance remaining in the Indemnity Fund on the date
the Indemnity Fund Agreement would otherwise expire shall remain on deposit
under the terms and conditions of the Indemnity Fund Agreement for an additional
one-year period, subject to extension as provided above.
Article X
Leases
10.1 Lease Expense Reimbursement. If the Transaction is consummated,
Buyer will (i) reimburse Sellers on the Closing Date for any and all fees paid,
expenses incurred (including,
58
58
<PAGE> 59
without limitation, tenant concessions and tenant improvement costs) and leasing
commissions arising out of or in connection with (a) any extensions, renewals or
expansions under the Leases, and (b) any new leases within the Hotels, which in
each case were disclosed to and approved by Sellers and Buyer on or after the
execution of this Agreement by Sellers and Buyer and paid by Sellers prior to
Closing, and (ii) indemnify and hold Sellers harm:less from and against any and
all claims for any such expenses which remain unpaid for any reason at the time
of Closing If Sellers desire to execute a renewal, amendment, extension or
expansion of a Lease or a new lease with a potential tenant for space in any
Hotel after the date hereof but prior to Closing, Sellers will promptly provide
Buyer with a copy of the proposed document for its review. Buyer will advise
Sellers, in writing, whether or not it approves or rejects such proposed
document within ten (10) business days after receipt of the proposed document.
If Buyer fails to notify Sellers within such time period, Buyer will be deemed
to have rejected the proposed document. If Buyer rejects the proposed document,
Sellers nevertheless retain full right, power and authority to execute such
proposed lease, and Sellers will promptly advise Buyer of same. Buyer will
advise Sellers, in writing, whether or not it elects to terminate this Agreement
with respect to the Hotel affected by such document within ten (10) business
days after receipt of Sellers' notice that Sellers have executed the proposed
document over Buyer objection. Upon such termination, the Purchase Price shall
be reduced by the amount allocated to such Hotel in the Allocation Schedule. If
Buyer fails to notify Sellers within such time period, Buyer will be deemed to
have fully waived any rights to terminate this Agreement pursuant to this
Section 10.1.
Article XI
Earnest Money, Default and Remedies
11.1 Duties of Escrow Agent. The duties of Escrow Agent will be as
provided in the Earnest Money Escrow Agreement and shall include:
11.1.1 Earnest Money Deposits. During the term of this
Agreement, Escrow Agent will hold, deposit, invest and deliver the Earnest Money
Deposits in accordance with the terms and provisions of this Agreement.
11.1.2 Disputes. If this Agreement is terminated by the mutual
written agreement of Sellers and Buyer, or if Escrow Agent is unable to
determine at any time to whom any of the Earnest Money Deposits should be
delivered, or if a dispute develops between Sellers and Buyer concerning to whom
the Earnest Money Deposits should be delivered, then in any such event, Escrow
Agent will request joint written instructions from Sellers and Buyer and will
deliver the Earnest Money Deposits in accordance with such joint written
instructions. In the event that such written instructions are not received by
Escrow Agent within ten (10) days after Escrow Agent has served a written
request for instructions upon Sellers and Buyer, Escrow Agent will have the
night to pay the Earnest Money Deposits into a court of competent jurisdiction
and interplead Sellers and Buyer in respect thereof, and thereafter Escrow Agent
will be discharged of any obligations in connection with this Agreement.
59
59
<PAGE> 60
11.13 Costs. If costs or expenses are incurred by Escrow Agent
because of litigation or a dispute between Sellers and Buyer arising out of the
holding of the Earnest Money Deposits in escrow, Sellers and Buyer will each pay
Escrow Agent one-half of such reasonable and direct costs and expenses. Except
for such costs and expenses, no fee or charge will be due or payable to Escrow
Agent for its services as escrow holder other than its usual and customary
investment fees, if any.
11.1.4 Limited Duties. By joining in the Earnest Money Escrow
Agreement, Escrow Agent undertakes only to perform the duties and obligations
imposed upon it under the terms of the Earnest Money Escrow Agreement and
expressly does not undertake to perform any of the other covenants, terms and
provisions incumbent upon Sellers and Buyer hereunder.
11.1.5 Liability. Buyer and Sellers hereby agree and
acknowledge that Escrow Agent assumes no liability in connection herewith except
for gross negligence or willful misconduct; that Escrow Agent will never be
responsible for the validity, correctness or genuineness of any document or
notice referred to under this contract; and that Escrow Agent may seek advice
from its own counsel and will be fully protected in any action taken by it in
good faith in accordance with the opinion of its counsel.
11.2 Sellers' Default. If Sellers, or any one of them, fail to perform
any of their obligations or agreements contained herein and if Buyer is not then
in default of any of its obligations and agreements contained herein (a "Sellers
Default"), then as its sole and exclusive remedy Buyer may either (i) terminate
this Agreement by giving written notice of termination and the reasons therefor
to Sellers, in which event neither Sellers nor Buyer will have any further
obligations or liabilities one to the other hereunder (except for any indemnity
of one party by the other which expressly survives Closing or termination of
this Agreement), Buyer will promptly return the Documents to Sellers and Seller
and Escrow Agent will thereafter return the entire amount of all Earnest Money
Deposits to Buyer, together with all of the interest earned thereon (with
interest on the Signing Deposit calculated at the rate of 4.5% per annum); or
(ii) waive all other actions, rights or claims for damages, and may bring an
equitable action for specific performance of the terms of this Agreement for
conveyance of the Hotels in accordance with this Agreement.
11.3 Buyer's Default. If Buyer fails to close the Transaction (except
for permitted terminations set forth herein) and Sellers are not then in default
of any of their material obligations or agreements contained herein, then
Sellers' sole option hereunder will be to terminate this Agreement, whereupon
Escrow Agent will pay the Earnest Money Deposits together with all of the
interest earned thereon to Sellers as liquidated damages, and Buyer will return
the Documents to Sellers and thereafter Sellers and Buyer will have no further
obligations or liabilities one to the other hereunder (except for any indemnity
or liability of Buyer pursuant to Section 5.2 hereof). Sellers' election to
receive the Earnest Money Deposits as liquidated damages is agreed to due to the
difficulty, inconvenience, and uncertainty of ascertaining actual damages for
such breach by Buyer and Buyer agrees that the same is a reasonable and fair
estimate of such damages Buyer
60
60
<PAGE> 61
waives and releases any night to (and covenants that it will not) sue Sellers or
seek or claim a refund of all or any portion of the Earnest Money Deposit on the
grounds that it is unreasonable in amount and exceeds Sellers' actual damages or
that its retention by Sellers constitutes a penalty.
Article XII
Casualty and Condemnation
12.1 Casualty. If one or more of the Hotels is damaged by any casualty
prior to Closing, the Sellers of such damaged Hotel will immediately notify
Buyer in writing of the same (a "Casualty Notice"). The Casualty Notice will
include a reasonably detailed description of the property damage and such
Sellers' best estimate of the cost and time required to repair such damage.
12.1.1 Minor Casualty. If the cost of repairing such damage is
estimated by an architect or other qualified consultant retained by Sellers to
be equal to or less than $1,000,000, then the affected Sellers will repair such
damage and restore the damaged property as promptly as is reasonably possible
and in any event within 60 days after the date of such damage to at least as
good a condition as existed immediately prior to such casualty and in such event
Closing will be deferred until such repair and restoration is substantially
completed.
12.1.2 Sellers' Election. If the cost of repairing such damage
to any one Hotel is estimated by an architect or other qualified consultant
retained by Sellers to be greater than $1,000,000, but less than $7,500,000,
then the affected Sellers may proceed in accordance with Section 12.1.1 or elect
to not repair any one such damaged Hotel and (i) proceed with the Transaction
without one such Hotel (but not more than one), with a reduction in the Purchase
Price based on the Allocation Schedule, or (ii) proceed with the Transaction
with such Hotel, with Buyer to receive an assignment of Sellers' rights in any
insurance proceeds which remain unpaid to Sellers in connection with such
casualty and a credit against the Purchase Price in the amount of the deductible
under Sellers' property casualty insurance coverage for the damaged Hotel plus
any amounts previously paid to Sellers as insurance proceeds in connection with
such casualty and not expended by Sellers in connection with restoration of the
Hotel plus any inadequacy of the insurance proceeds to cover the cost of
repairing the damaged Hotel.
12.1.3 Buyer's Election. If the cost of repairing such damage
is estimated by an architect or other qualified consultant retained by Sellers
to be greater than $7,500,000, or if more than one Hotel is affected then Buyer
must elect (as its sole and exclusive remedy) (i) to terminate this Agreement by
giving notice to such effect to Sellers and returning the Documents to Sellers
not later than the latest to occur of the last business day prior to Closing or
fifteen (15) business days after receipt of the Casualty Notice or (ii) to
proceed with Closing as set forth herein without such damaged Hotel, with a
reduction in the Purchase Price based upon the Allocation Schedule, or (iii)
proceed with Closing as set forth herein with such damaged Hotel (but not more
than one),
61
61
<PAGE> 62
and receive an assignment of Sellers' rights in any insurance proceeds which
remain unpaid to Sellers in connection with such casualty and a credit against
the Purchase Price in the amount of the deductible under Sellers' property
casualty insurance coverage for the Hotels plus any amounts previously paid to
Sellers as insurance proceeds in connection with such casualty and not expended
by Sellers in connection with restoration of the Hotels. Buyer's failure to give
timely notice under this Section 12.1.3 will be deemed to be an election under
clause (ii) of this Section 12.1.3.
12.2 Eminent Domain. In the event that a portion of one or more of the
Hotels is taken by eminent domain or becomes subject to a taking by eminent
domain or a deed in lieu of condemnation prior to Closing, the affected Sellers
of such Hotel will immediately notify Buyer in writing of the same (a "Eminent
Domain Notice"); and
12.2.1 Sellers' Election. If the value of the portion of the
Hotels taken is equal to or more than $1,000,000 but less than $7,500,000.00,
then the affected Sellers may elect to not repair or restore such Hotel and
either (i) proceed with the Transaction without such Hotel, with a reduction in
the Purchase Price based on the Allocation Schedule, or (ii) proceed with the
Transaction with such Hotel, with Buyer to receive an assignment of Sellers'
rights in any condemnation proceeds which remain unpaid to Sellers in connection
with such taking and a credit against the Purchase Price in the amount of the
condemnation proceeds received by Sellers plus any amounts paid to Sellers as
condemnation proceeds in connection with such taking and not expended by Sellers
in connection with restoration of the Hotel.
12.2.2 Buyer's Election. If the value of the portion of the
Hotel taken is greater than $7,500,000 or if more than one Hotel is so taken,
then any election by Sellers pursuant to clause (i) or (ii) of Section 12.2.1
shall be disregarded and Buyer must elect (as its sole and exclusive remedy) (i)
to terminate this Agreement by giving notice to such effect to Sellers and
returning the Documents to Sellers not later than the latest to occur of the
last business day prior to Closing or fifteen (15) business days after receipt
of the Casualty Notice or (ii) to proceed with Closing as set forth herein
without such taken Hotel, with a reduction in the Purchase Price based upon the
Allocation Schedule, or (iii) proceed with Closing as set forth herein with such
taken Hotel, and to receive an assignment of Sellers' rights in any condemnation
proceeds which remain unpaid to Sellers in connection with such taking and a
credit against the Purchase Price in the amount of the condemnation proceeds
received by Sellers plus any amounts paid to Sellers as condemnation proceeds in
connection with such taking and not expended by Sellers in connection with
restoration of the Hotel. Buyer's failure to give timely notice under this
Section 12.2.2 will be deemed to be an election under clause (ii) hereof.
12.2.3 Refund of Earnest Money Deposits. In the event this
Agreement is terminated as provided in Section 12.1 or 12.2 hereof, then the
entire amount of all Earnest Money Deposits, together with all interest earned
thereon, will be refunded to Buyer, except that Sellers will be entitled to
retain the entire amount of the Signing Deposit, together with all interest
earned thereon.
62
62
<PAGE> 63
Article XIII
Miscellaneous
13.1 Notices. Any notice, request, demand, instruction or other
communication to be given to either party hereunder (except those required to be
delivered at Closing) will be in writing, and will be deemed to be delivered
upon the earlier to occur of (i) actual receipt if delivered by hand or by
commercial courier or by registered or certified United States Postal Service
mail, return receipt requested, postage prepaid, to the address indicated or
(ii) upon confirmation of receipt if by facsimile transmission addressed as
follows:
If to Buyer:
Starwood Capital Group, L.P.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attn: Mr. Jonathan D. Eilian
Fax No.: (203) 861-2101
With a copy to:
Starwood Lodging Trust
11845 W. Olympic Blvd.
Suite 560
Los Angeles, California 90064
Attn: Steven Goldman
Fax No.: (310) 575-9143
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Stephen G. Tomlinson
Fax No.: (312) 861-2200
and
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Attn: Mark J. Eagan
Fax No.: (212) 446-4900
63
63
<PAGE> 64
If to Atlanta Seller:
730 Georgia Hotel Properties I, Inc.
730 Third Avenue
New York, New York 10017
Attention: Joseph W. Luik, Executive Vice President
Fax No.: (212) 916-5993
If to Bloomington Seller:
730 Minn Hotel Properties I, Inc.
730 Third Avenue
New York, New York 10017
Attention: Joseph W. Luik, Executive Vice President
Fax No.: (212) 916-5993
If to Fort Lauderdale Seller:
MRC Properties, Inc.
730 Third Avenue
New York, New York 10017
Attention: Joseph W. Luik, Executive Vice President
Fax No.: (212) 916-5993
If to Kansas City Seller:
730 Mo Hotel Properties I, Inc.
730 Third Avenue
New York, New York 10017
Attention: Joseph W. Luik, Executive Vice President
Fax No.: (212) 916-5993
If to LAX Seller:
730 Cal Hotel Properties II, Inc.
730 Third Avenue
New York, New York 10017
Attention: Joseph W. Luik, Executive Vice President
Fax No.: (212) 916-5993
64
64
<PAGE> 65
If to Philadelphia Seller
730 Penn. Hotel Properties I, Inc.
730 Third Avenue
New York, New York 10017
Attention: Joseph W. Luik, Executive Vice President
Fax No.: (212) 916-5993
If to San Diego Seller:
Cal Hotel Properties I Associates
730 Third Avenue
New York, New York 10017
Attention: Joseph W. Luik, Executive Vice President
Fax No.: (212) 916-5993
If to Waltham Seller:
730 Mass Hotel Properties I, Inc.
730 Third Avenue
New York, New York 10017
Attention: Joseph W. Luik, Executive Vice President
Fax No.: (212) 916-5993
In the case of all Sellers, with a copy to:
730 Properties, Inc.
730 Third Avenue
New York, New York 10017
Attention: Anthony Grimaldi, Vice President
Fax No.: (212) 953-9879
and a further copy to:
Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Attn: H. Edward Hales, Jr.
Fax No.: (404) 853-8806
The addresses and facsimile numbers for the purpose of this Section may be
changed by either party by giving written notice of such change to the other
party in the manner provided herein.
65
65
<PAGE> 66
13.2 Attorneys' Fees. In the event it becomes necessary for either
Buyer or Sellers to file a suit to enforce this Agreement or any provisions
contained herein, the prevailing party in such suit will be entitled to recover,
in addition to all other remedies or damages, reasonable attorneys fees and
costs of court incurred in connection with such suit.
13.3 Entire Agreement and Modification. This Agreement constitutes the
entire agreement between Buyer and Sellers and supersedes all prior agreements
and understandings (if any) relating to the subject matter hereof This Agreement
cannot be amended, modified or altered except by an agreement in writing
executed by both Buyer and Sellers.
13.4 Binding Effect. This Agreement will be binding upon and shall
inure to the benefit of the parties hereto, and their respective successors,
permitted assigns and legal representatives.
13.5 Effective Date. This Agreement has been executed by the parties on
the dates set forth below their respective signatures and will be effective as
of the later of such dates.
13.6 Assignment. Except as provided in Section 2.10, this Agreement
cannot be assigned by Buyer in whole or in part without the prior written
consent of Sellers, which consent may be withheld by Sellers for any reason
whatsoever.
13.7 Incorporation of Exhibits and Schedules. All exhibits and
schedules referred to in this Agreement and attached hereto are hereby made a
part of this Agreement by this reference.
13.8 Governing Law. The substantive laws of the states in which each of
the Hotels is located and the applicable federal laws of the United States of
America will govern the validity, construction, enforcement and interpretation
of this Agreement.
13.9 Confidentiality. The parties hereto agree not to disclose any of
the material terms of this Agreement (except to the extent as may be required by
law or as required by the Title Company or to the advisors, agents, officers,
directors, partners and employees of the parties hereto in the ordinary course
of business) without the prior written consent of the other party.
13.10 Full Execution. This Agreement will be deemed fully executed and
binding upon Buyer and Sellers on the Effective Date.
13.11 ERISA Compliance. Buyer has informed Sellers and Buyer hereby
represents and warrants to Sellers that Buyer is not a "plan" nor a plan
"fiduciary" (as those terms are defined under ERISA) and is acquiring the Hotels
for Buyer's own personal account and not as part of any investment for any plan
or plan assets subject to ERISA and the Hotels shall not constitute plan assets
subject to ERISA upon conveyance of the Hotels by Sellers and the closing of
this Agreement between Buyer and Sellers. Sellers shall not have any obligation
to close the
66
66
<PAGE> 67
Transaction if the Transaction for any reason constitutes a prohibited
transaction under ERISA or if Buyer's representation is found to be false or
misleading in any respect.
13.12 Work Product. In the event this Agreement is terminated for any
reason whatsoever, Buyer will promptly thereafter return to Sellers all
Information Documents and other materials provided to Buyer by Sellers.
13.13 No Joint and Several Liability. The obligations and liabilities
of Sellers hereunder are several and independent, not joint. Without limitation
of the foregoing and notwithstanding any other provision contained in this
Agreement to the contrary, (i) all representations, warranties, covenants,
agreements and obligations contained herein which relate to the Atlanta Hotel
are made, and shall be performed, as the case may be, solely by the Atlanta
Seller, and none of the other Sellers shall have any liability or obligations
whatsoever with respect thereto; (ii) all representations, warranties,
covenants, agreements and obligations contained herein which relate to the Fort
Lauderdale Hotel are made, and shall be performed, as the case may be, solely by
the Fort Lauderdale Seller, and none of the other Sellers shall have any
liability or obligations whatsoever with respect thereto; (iii) all
representations, warranties, covenants, agreements and obligations contained
herein which relate to the Bloomington Hotel are made, and shall be performed,
as the case may be, solely by the Bloomington Seller, and none of the other
Sellers shall have any liability or obligations whatsoever with respect thereto;
(iv) all representations, warranties, covenants, agreements and obligations
contained herein which relate to the San Diego Hotel are made, and shall be
performed, as the case may be, solely by the San Diego Seller, and none of the
other Sellers shall have any liability or obligations whatsoever with respect
thereto; (v) all representations, warranties, covenants, agreements and
obligations contained herein which relate to the Kansas City Hotel are made, and
shall be performed, as the case may be, solely by the Kansas City Seller, and
none of the other Sellers shall have any liability or obligations whatsoever
with respect thereto; (vi) all representations, warranties, covenants,
agreements and obligations contained herein which relate to the LAX Hotel are
made, and shall be performed, as the case may be, solely by the LAX Hotel
Seller, and none of the other Sellers shall have any liability or obligations
whatsoever with respect thereto; (vii) all representations, warranties,
covenants, agreements and obligations contained herein which relate to the
Philadelphia Hotel are made, and shall be performed, as the case may be, solely
by the Philadelphia Seller, and none of the other Sellers shall have any
liability or obligations whatsoever with respect thereto; and (viii) all
representations, warranties, covenants, agreements and obligations contained
herein which relate to the Waltham Hotel are made, and shall be performed, as
the case may be, solely by the Waltham Seller, and none of the other Sellers
shall have any liability or obligations whatsoever with respect thereto.
13.14 Publicity. Subject to the provisions of Section 13.9 hereof,
either party may disclose this Agreement or the Transaction only with the prior
consent of the other, and Buyer and Sellers agree to act cooperatively regarding
any press release concerning this Agreement or the Transaction. In releasing any
information regarding this Agreement or the Transaction, neither party will
violate the Confidentiality Agreement.
67
67
<PAGE> 68
13.15 Limitation of Liability. No advisor, trustee, director, officer,
partner, employee, beneficiary, shareholder, participant or agent or in either
Buyer or Sellers shall have any personal liability, directly or indirectly,
under or in connection with this Agreement, including but not limited to any
representation, warranty or indemnity contained herein or) except as may be
expressly provided therein to the contrary, under or in connection with any
agreement made or entered into under or pursuant to the provisions of this
Agreement, or any amendment or amendments to any of the foregoing made at any
time or times, and each party and their respective successors and assigns, and
without limitation, all other persons and entities, shall look solely to the
assets of the subject party for the payment of any claim or for any performance,
and both Buyer and Sellers hereby waive any and all such personal liability. The
limitations of liability provided in this Section 11.17 are in addition to, and
not in limitation of any limitation on liability applicable to either Sellers or
Buyer provided by law or by any other contract, agreement or instrument.
13.16 Radon Gas Statement. The Florida Seller hereby makes the
following statement pursuant to Florida Statutes Section 404.056(6):
"RADON GAS: Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit."
13.17 Sellers' Knowledge. All references in this Agreement to the
"actual knowledge" or "knowledge" of Sellers or similar references will refer
only to the current (i.e. upon execution of this Agreement and at Closing)
actual knowledge of the Designated Personnel (as hereinafter defined) of Sellers
and will not be construed to refer to the knowledge of any other office,
officer, agent or employee of Sellers or any affiliate thereof but will not
include any implied or constructive knowledge. For purposes of this Agreement,
the term "Designated Employees" will refer to Joseph W. Luik, Rick Rogovin,
Jonathan Kurnit, Joseph Romano, and Mary Jo Dimino.
13.18 Trustees' Exculpation. Each of the parties hereto acknowledge and
agree that the name "Starwood Lodging Trust" is a designation of such Trust and
its Trustees (as Trustees but not personally) under a Declaration of Trust dated
August 25, 1969, as amended and restated, and all persons dealing with such
Trust shall look solely to such Trust's assets for the enforcement of any claims
against such Trust and the Trustees, officers, agents and security holders of
such Trust assume no personal liability for obligations entered into on behalf
of such Trust, and their respective individual assets shall not be subject to
the claims of any person relating to such obligations.
68
68
<PAGE> 69
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto in multiple counterparts and is effective as of the date of Sellers'
execution hereof as set forth below.
SELLERS:
Date of Execution by MRC PROPERTIES, INC.
all Sellers:
By: /s/ Jonathan D. Kurnit
May 3, 1996 _______________________
Jonathan D. Kurnit
Title: Vice President
730 CAL HOTEL PROPERTIES II, INC.
By: /s/ Jonathan D. Kurnit
_______________________
Jonathan D. Kurnit
Title: Vice President
730 GEORGIA HOTEL PROPERTIES I, INC.
By: /s/ Jonathan D. Kurnit
_______________________
Jonathan D. Kurnit
Title: Vice President
730 MASS HOTEL PROPERTIES I, INC.
By: /s/ Jonathan D. Kurnit
_______________________
Jonathan D. Kurnit
Title: Vice President
730 MO HOTEL PROPERTIES I, INC.
By: /s/ Jonathan D. Kurnit
_______________________
Jonathan D. Kurnit
Title: Vice President
[Signatures Continued on Next Page]
69
<PAGE> 70
[Signatures Continued from Previous Page]
730 MINN HOTEL PROPERTIES I, INC.
By: /s/ Jonathan D. Kurnit
_______________________
Jonathan D. Kurnit
Title: Vice President
730 PENN. HOTEL PROPERTIES I, INC.
By: /s/ Jonathan D. Kurnit
_______________________
Jonathan D. Kurnit
Title: Vice President
CAL HOTEL PROPERTIES I ASSOCIATES
By: 730 CAL. HOTEL PROPERTIES I, INC.
Its: General Partner
By: /s/ Jonathan D. Kurnit
__________________________
Jonathan D. Kurnit
Title: Vice President
[Signatures Continued on Next Page]
70
<PAGE> 71
[Signatures Continued From Previous Page]
BUYER:
Date of Execution SLT REALTY LIMITED PARTNERSHIP,
by Buyer: a Delaware Limited Partnership
May 3, 1996 By: STARWOOD LODGING TRUST, a Maryland
real estate investment trust, General
Partner
By: /s/ Ronald C. Brown
--------------------------------
Title: VP & CFO
-----------------------------
SLC OPERATING LIMITED PARTNERSHIP, a
Delaware Limited Partnership
By: STARWOOD LODGING CORPORATION, a Maryland
corporation
By: /s/ Steven R. Goldman
--------------------------------
Title: Senior Vice President
-----------------------------
71
<PAGE> 1
EXECUTION COUNTERPART
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
HOTELS OF DISTINCTION, INC.,
AS SELLER
AND
SLT REALTY LIMITED PARTNERSHIP,
AS BUYER
DATED AS OF MARCH __, 1996
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") made as of the latest
date of execution hereof (the "EFFECTIVE DATE"), by and between HOTELS OF
DISTINCTION, INC., a Florida corporation, with a principal place of business at
380 South County Road, Palm Beach, FL 33480 ("SELLER"), and SLT REALTY LIMITED
PARTNERSHIP, a Delaware limited partnership, having an address c/o Starwood
Lodging Trust, 11835 Olympic Boulevard, Suite 675, Los Angeles, CA 90064
("BUYER"). Seller and Buyer are sometimes collectively referred to as the
"PARTIES" or individually as a "PARTY".
PRELIMINARY STATEMENT
A. Seller is a hotel management company that has owned, operated and
managed numerous first-class hotels, including such properties as the Copley
Plaza in Boston, the Cotton Bay Club on the Island of Eluethera in the Bahamas,
and the Hyatt Hotel in Montreal. Seller was formed in 1974 by Alan Tremain and
Jean- Claude Mathot, both hotel operators with many years of worldwide
experience in hotel management.
Over the past two decades, Seller has developed effective managerial systems,
considerable marketing tools and expertise, and sophisticated financial
controls. It has developed many innovative new restaurant concepts for its hotel
properties, including "Boodles" (which was originally developed for the Back Bay
Hilton Hotel in 1984), "The Ranchers' Club" (which was originally developed for
the Albuquerque Hilton in 1985), "Trophies" (which was originally developed for
the Hotel Park Tucson in 1988), and "The Dirtwater Fox" (which was originally
developed for the Marque of Winston-Salem in 1991). For the past decade, Seller
has also provided its properties with access to Market Byte, a computerized
database of pre-qualified sales contacts, including meeting planners, travel
agents, and other providers of group business to hotels.
Seller currently manages nine (9) hotels throughout the United States (each, a
"HOTEL" and, collectively, the "HOTELS"), all as more particularly identified on
Schedule A, pursuant to agreements more particularly described on Schedule B
(each, a "MANAGEMENT AGREEMENT" and, collectively, the "MANAGEMENT AGREEMENTS")
with the owners of each Hotel (each, a "HOTEL OWNER"
and, collectively, the "HOTEL OWNERS"). In addition, Seller is the owner of
certain Intellectual Property used in connection with the Hotels, including
Market Byte.
-1-
<PAGE> 3
B. Seller desires to sell, assign, and transfer to Buyer, and Buyer
desires to purchase and acquire all of Seller's right, title and interest in and
to the Assets for a Purchase Price of One Million Dollars ($1,000,000) (subject
to adjustment as set forth herein), and to secure the Termination Agreements and
the Non-Competition Agreements from Seller's Principals, all as subject to the
terms and conditions set forth in this Agreement.
C. The Parties acknowledge that Buyer and SLC Operating Limited
Partnership, a Delaware limited partnership (the "OPERATING PARTNERSHIP")
(collectively the "HOTEL ASSETS BUYER"), and Hotels of Distinction Ventures,
Inc. ("HODV"), a Delaware corporation, and certain of its directly and
indirectly, wholly-owned affiliates (together with HODV collectively, referred
to as the "HOTEL ASSETS SELLERS") have simultaneously herewith entered into that
certain Asset Purchase Agreement (the "HOTEL ASSETS PURCHASE AGREEMENT") with
respect to the acquisition of all of the assets owned by the Hotel Assets
Sellers and which comprise the Hotels. The Hotel Assets Purchase Agreement is
attached hereto as Schedule C.
ARTICLE 1
DEFINITIONS/PURCHASE AND SALE OF ASSETS
1.1 DEFINITIONS. The capitalized terms in this Agreement shall have
the meanings set forth in Article 13, unless the context otherwise requires.
1.2 PURCHASE AND SALE OF ASSETS. Pursuant to the provisions of this
Agreement, at Closing, Seller shall sell, transfer, grant, assign, deliver and
convey to Buyer, and Buyer shall purchase, acquire, accept and assume from
Seller, all right, title and interest of Seller in and to the following:
1.2.1 PERSONAL PROPERTY. Certain tangible personal property
used by Seller in the day-to-day operations of Seller's business, as set forth
on Schedule 1.2.1 (collectively, the "PERSONAL PROPERTY"), including, as part of
the Personal Property, Seller's right, title and interest in and to the computer
software, certain computer hardware and data comprising Seller's computerized
sales data base known as "Market Byte" and Seller's rights in the trade name
"Market Byte" (collectively "MARKET BYTE");
1.2.2 TERMINATION OF THE MANAGEMENT AGREEMENTS. Termination
Agreements with respect to the Management Agreements,
-2-
<PAGE> 4
in the form set forth on Schedule E annexed hereto and made a part hereof (the
"TERMINATION AGREEMENTS");
1.2.3 INTELLECTUAL PROPERTY RIGHTS. All trademarks, registered
trademarks, trade names, registered trade names, service marks, logos, phrases
and other identifications used by Seller and/or the Hotel Assets Sellers in the
day-to-day operations of Seller's business and the Hotels, including, without
limitation, registrations and applications therefor, and the trade names:
"The Marque"
"The Marque of Winston-Salem"
"The Marque of Atlanta"
"The Hotel Park Tucson"
"Boodles"
"The Rancher's Club"
"Trophies"
"The Dirtwater Fox"
"Agent to Agent"
"Preferred Partners Program"
"100% Meeting Services Guarantee"
"Meetings in a Minute"
and all goodwill associated therewith, as set forth on Schedule
1.2.3 (collectively, the "INTELLECTUAL PROPERTY"); and
1.2.4 NON-COMPETITION AGREEMENTS. The Non-Competition
Agreements.
The Personal Property, Market Byte, the Termination Agreements, the Intellectual
Property and the Non-Competition Agreements are hereinafter referred to
collectively as the "ASSETS".
ARTICLE 2
PURCHASE PRICE
2.1 PURCHASE PRICE. Seller agrees to sell and Buyer agrees to purchase
the Assets for One Million Dollars ($1,000,000) (the "PURCHASE PRICE"), subject
to adjustment pursuant to the terms of Section 2.2 hereof and to the other terms
and conditions set forth in this Agreement. On the Closing Date, Buyer shall pay
the Purchase Price (as adjusted by all adjustments and offsets provided for in
this Agreement) by wire transfer of immediately
available federal funds in New York, New York, actually received and
unconditionally available for distribution to Seller prior to 3:00 p.m. (New
York time) on the Closing Date.
-3-
<PAGE> 5
2.2 ADJUSTMENTS TO PURCHASE PRICE.
2.2.1 ELIMINATED HOTELS. The Parties acknowledge that the Hotel
Assets Purchase Agreement provides that under certain circumstances one (1) or
more of the Hotels may be eliminated from the terms, provisions, covenants and
conditions of the Hotel Assets Purchase Agreement. In the event one (1) or more
Hotels are eliminated from the asset sale contemplated under the Hotel Assets
Purchase Agreement, the Purchase Price shall be decreased in an amount equal to
the product obtained by multiplying One Million Dollars ($1,000,000) by a
fraction, the numerator of which shall be the "Allocated Purchase Price" (as
defined in the Hotel Assets Purchase Agreement) of such eliminated Hotel, and
the denominator of which shall be One Hundred Thirty-Four Million Dollars
($134,000,000).
2.2.2 MULTIPLE CLOSINGS. The Parties acknowledge that the Hotel
Assets Purchase Agreement provides that under certain circumstances there may me
more than one (1) closing with respect to the assets to be sold, transferred,
assigned and conveyed thereunder. In the event there is more than one (1)
closing under the Hotel Assets Purchase Agreement, the Parties agree that the
Purchase Price shall be paid in installments. At each such closing, Buyer shall
pay an amount equal to the allocable portion of the Purchase Price with respect
to each of the Hotels being sold, transferred, assigned and conveyed at such
closing pursuant to the formula set forth at Section 2.2.1.
2.3 ALLOCATION OF THE PURCHASE PRICE. The Purchase Price shall be
allocated among the Assets being conveyed, as follows:
(i) Market Byte. The allocation attributed to Market Byte has
been arrived at by multiplying an amount of 10,000 (estimated) active
pre-qualified sales contacts by Seventy- Seven Dollars ($77) per
contact to arrive at an allocated price of Seven Hundred Seventy
Thousand Dollars ($770,000).
(ii) Covenants Not to Compete. In the Non-Competition Agreements
being executed by Alan Tremain and Jean-Claude Mathot, each of them is
agreeing that, for a period of two (2) years following the Closing,
neither of them will own, operate or manage a competing full-service
hotel property within ten (10) miles of any of the nine (9) Hotels
being sold pursuant to the Hotel Assets Purchase Agreement (each
of the nine (9) covenants not to compete being referred to hereafter as
a "COVENANT NOT TO COMPETE"). For the purposes of this allocation, a
value of Twenty Thousand Dollars ($20,000) has been assigned to each
Covenant Not to Compete
-4-
<PAGE> 6
for a total allocated value of One Hundred Eighty Thousand Dollars
($180,000).
(iii) Trademarks and Trade Names. Understanding that these
trademarks and trade Names were conceived by Seller for their potential
as franchise sales opportunities, a value of Ten Thousand Dollars
($10,000) has been attributed to each of the trade names "Boodles" and
"The Ranchers' Club". No value has been attributed to the trade names
"Trophies" and "The Dirtwater Fox". A value of Ten Thousand Dollars
($10,000) has been attributed to the trade name "The Marque", and no
value has been attributed to the trade names "The Marque of
Winston-Salem", "The Marque of Atlanta", and "The Hotel Park Tucson". A
value of Five Thousand Dollars ($5,000) has been attributed to each of
the trade names "Meetings in a Minute", "100% Meeting Services
Guarantee", "Preferred Partners Program", and "Agent to Agent". Any
value for the trade name "Market Byte" has been included in Paragraph
2.3(i) above. Thus, the total value attributed to the trade names being
assigned by Seller to Buyer is Fifty Thousand Dollars ($50,000).
(iv) Termination of the Management Contracts. No value has been
attributed to the termination of the nine (9) Management Agreements for
the purposes of this allocation.
The Parties agree that the allocation of the Purchase Price has been arrived at
by a process of arm's-length negotiations, including the Parties' best judgment
as to the fair market value of each of the Hotels, and the Parties specifically
agree to the above allocation as final and binding (as between the Parties), and
each Party will consistently reflect those allocations on their respective
federal, state and local tax returns. The terms of this Section 2.3 shall
survive the Closing in accordance with Section 4.3 hereof.
ARTICLE 3
BUYER'S DUE DILIGENCE TERMINATION RIGHT
3.1 BUYER'S DUE DILIGENCE TERMINATION RIGHT. In the event that Hotel
Assets Buyer exercises its termination right under Section 3.2.1 of the Hotel
Assets Purchase Agreement, this Agreement shall automatically terminate and be
of no further force and effect. In such event the Parties shall have no further
rights or obligations arising hereunder. The Parties agree that the notice given
to Hotel Assets Sellers under the Hotel Assets Purchase Agreement shall
constitute notice hereunder of the termination of this Agreement and that no
additional notice shall be required hereunder.
-5-
<PAGE> 7
ARTICLE 4
SELLER'S REPRESENTATIONS AND WARRANTIES
4.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby covenants,
represents and warrants to Buyer as of the Effective Date and as of the Closing
Date, as follows:
4.1.1 GOOD STANDING. Seller is a corporation duly organized and
in good standing under the laws of the State of Florida;
4.1.2 DUE AUTHORITY. This Agreement has been duly authorized,
executed and delivered by Seller and in conformance with Seller's organizational
charter and by-laws and pursuant to a validly existing vote of Seller's Board of
Directors, duly constituted. All documents that are to be executed by Seller and
delivered to Seller on the Closing have been or, on the Closing Date, will be
duly executed, authorized and delivered by Seller. This Agreement and all such
documents are and, on the Closing Date, will be legal, valid and binding
obligations of Seller, enforceable in accordance with their terms (subject to
customary bankruptcy exceptions) and do not and, at the time of Closing, will
not violate any provisions of any agreement or judicial or administrative order
to which Seller is a party or to which Seller is subject;
4.1.3 CONSENTS. No consent, right of first refusal, approval,
order or authorization of any Person not a party to this Agreement, and no
consent, approval, declaration or filing with any governmental authority on the
part of Seller is required in connection with the execution and delivery of this
Agreement or the performance of the transactions contemplated herein, except
such governmental and other consents as may be required by law or otherwise as
are specifically set forth on Schedule 4.1.3 (collectively the "CONSENTS");
4.1.4 NO DEFAULT. Assuming all Consents are obtained, neither the
execution and delivery of this Agreement by Seller, nor the consummation by
Seller of the transactions contemplated hereby (i) has constituted or resulted
in, or with the passage of time, will constitute or result in a breach of, or
constitute a default under any contract, agreement or understanding (including
any Management Agreements) whether written or oral by and between Seller and any
other Party, (ii) has violated, or with the passage of time, will violate any
court order, judgment, law, ordinance, regulation, or restriction to which
Seller is a party or by which Seller, or any of Seller's assets, may be bound,
the result of which could have a material adverse effect on one (1) or more of
the Assets or on Seller's financial condition;
-6-
<PAGE> 8
4.1.5 LITIGATION. Schedule 4.1.5 sets forth a list of all
litigations, governmental or administrative proceedings or arbitrations
presently pending against Seller. Except as set forth on Schedule 4.1.5, there
are no litigations, governmental or administrative proceedings or arbitrations
presently pending or, to Seller's Actual Knowledge, threatened (i) against
Seller which would have a material adverse effect on any of the Hotels or on
Seller's financial condition, or (ii) with respect to the Assets, except for
actions fully covered by insurance (subject to commercially reasonable
deductibles) and those set forth on Schedule 4.1.5 annexed hereto. For the
purposes of this Section 4.1.5, the term "material" shall mean any litigation,
proceeding or arbitration which could result in a judgment or award in excess of
$10,000;
4.1.6 PERSONAL PROPERTY. The Personal Property (including,
without limitation, Market Byte) has been fully paid for and is owned by Seller
free and clear of all liens, mortgages, chattel mortgages, security interests,
attachments, claims or other encumbrances, whether or not of record. Seller
shall, at Closing, sell, transfer, grant and convey to Buyer all right, title
and interest of Seller in and to the Personal Property by a warranty Bill of
Sale, in the form set forth as Exhibit 7.2.1;
4.1.7 MANAGEMENT AGREEMENTS. Other than as identified on Schedule
B, Seller is not a party to any other contracts or agreements with respect to
the management, use, ownership, operation and/or maintenance of the Hotels. Each
Management Agreement referenced on Schedule B, a copy of which has been (or will
be) provided to Buyer, is (i) a true and accurate copy, including all
amendments, (ii) the entire agreement between Seller and the applicable Hotel
Assets Seller named therein, (iii) in good standing and in full force and
effect, and is fully enforceable against the parties thereto in accordance with
their respective terms, and (iv) not in default in any material respect by any
party, nor has Seller received any written or oral notice or other communication
of any alleged breach or default thereunder by Seller, nor does there exist any
event, which, with notice or lapse of time or both, would constitute a default
thereunder. Seller shall, at Closing, terminate the Management Agreements
pursuant to the Termination Agreements;
4.1.8 INTELLECTUAL PROPERTY. Other than the Intellectual Property
being conveyed to Buyer hereunder, there is no other Intellectual Property owned
by Seller or used by Seller with respect to the existence, use, ownership,
occupancy, operation and/or maintenance of the Hotels or the operation of the
Seller's hotel management business. Except as set forth on Schedule 1.2.3, the
registrations and applications for all such Intellectual Property are in full
force and effect and are standing in the name of Seller as of record and are
valid and enforceable. Certain of Seller's respective names have been registered
on the Principal Register maintained by the
-7-
<PAGE> 9
U.S. Patent and Trademark Office or comparable state trademark offices, all as
set forth on Schedule 4.1.8. To Seller's Actual Knowledge, all affidavits,
proofs or other documents to be submitted or action to be taken by Seller in
order to avoid the cancellation of such registration prior thereto have been
timely submitted or taken by Seller. Except as set forth on Schedule 1.2.3, to
Seller's Actual Knowledge (i) Seller is the sole and exclusive owner of all
rights to the Intellectual Property, the same are fully assignable, and Seller
has the right to use the same without the payment of any license fee, royalty or
similar charge, (ii) there is no claim of any other Person, firm or corporation
or any proceeding pending or threatened which relates to any of the Intellectual
Property, and (iii) the Intellectual Property includes all of the intellectual
property used in the operation of Seller's business or in the conduct of the
Hotels. Seller shall, at Closing, assign and transfer the Intellectual Property
to Buyer pursuant to the Assignment of Intellectual Property in the form set
forth as Exhibit 7.2.3;
4.1.9 BROKERS, FINDERS, ETC. The Parties hereto confirm that all
negotiations relating to this Agreement and the transactions contemplated hereby
have been carried on without the intervention of any Person acting on behalf of
Seller, in such manner as to give rise to any valid claim against Seller or
Buyer for any brokerage or finder's commission, fee or similar compensation.
Seller and/or Hotel Assets Sellers shall be fully responsible for and shall
assume and pay any and all fees or brokerage commissions due (or claimed to be
due) to HOD Realty, Inc. with respect to the transactions contemplated (i) in
the Hotel Assets Purchase Agreement or (ii) herein, and Seller shall indemnify
and hold Buyer harmless therefrom;
4.1.10 MATERIAL FACTS. No statement by Seller in this Agreement
contains any untrue statement of a material fact or, considered in the context
of which presented, knowingly omits a material fact necessary to make the
statement contained therein not misleading. All documents delivered by Seller to
Buyer are true and complete originals or copies thereof and have not been
modified or terminated in any way other than as indicated on the documents
furnished to Buyer.
4.2 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer hereby covenants,
represents and warrants to Seller as of the Effective Date and as of the Closing
Date as follows:
4.2.1 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer hereby
covenants, represents and warrants to Seller as of the Effective Date and as of
the Closing Date that Buyer is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware. Buyer has
full power and authority to make, execute, deliver and perform this Agreement,
and neither the execution and delivery of this Agreement nor the consummation of
any of the
-8-
<PAGE> 10
transactions contemplated herein will violate or contravene the provisions of
any agreement, order, judgment or directive to which it may be a party or by
which it may be bound. The person executing this Agreement on behalf of Starwood
Lodging Trust, a Maryland real estate investment trust, the general partner of
Buyer, has been duly authorized to do so. The consummation of the transactions
contemplated by this Agreement will not render Buyer insolvent;
4.2.2 CONSENTS. No Consents on the part of Buyer are required in
connection with the execution and delivery of this Agreement or the performance
of the transactions contemplated herein, except as are specifically set forth on
Schedule 4.1.3;
4.2.3 NO DEFAULT. Assuming all Consents are obtained, neither the
execution and delivery of this Agreement by Buyer, nor the consummation by Buyer
of the transactions contemplated hereby (i) has constituted or resulted in, or
with the passage of time, will constitute or result in a breach of, or
constitute a default under any contract, agreement or understanding (including
any Management Agreements) whether written or oral by and between Buyer and any
other Party, (ii) has violated, or with the passage of time, will violate any
court order, judgment, law, ordinance, regulation, or restriction to which Buyer
is a party or by which Buyer, or any of Buyer's assets, may be bound;
4.2.4 MATERIAL FACTS. No statement by Buyer in this Agreement
contains any untrue statement of a material fact or, considered in the context
of which presented, knowingly omits a material fact necessary to make the
statement contained therein not misleading. Any documents delivered by Buyer to
Seller are true and complete originals or copies thereof and have not been
modified or terminated in any way other than as indicated on the documents
furnished to Seller.
4.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties herein or in any Schedule, Exhibit, Certificate or Financial
Statement delivered by Seller to Buyer incident to the transactions contemplated
hereby shall be deemed to have been relied upon by Buyer and shall survive the
Closing (regardless of any investigation made by or on behalf of Buyer) for a
period of one hundred eighty (180) days after the Closing Date (or if the
closing with respect to any individual Hotel(s) is adjourned, until one hundred
eighty (180) days after the closing with respect to such Hotels (any such
adjourned closing date being referred to as a "POSTPONED CLOSING DATE"), and in
no event shall any claim or action be brought by either Party for breach of any
representation or warranty after the expiration of such period; except that
there shall be no limitation (other than the applicable statute of limitations)
in respect of any claim brought by Buyer hereunder for fraud by Seller or
-9-
<PAGE> 11
any of Seller's officers, employees or agents in connection with any
representation or warranty made by Seller herein or the transactions
contemplated hereby.
ARTICLE 5
OBLIGATIONS OF THE PARTIES UNTIL CLOSING
5.1 OBLIGATIONS OF THE PARTIES UNTIL THE CLOSING. Seller and Buyer
agree that between the date hereof and the Closing Date, the Parties shall
undertake the following:
5.1.1 OPERATION OF THE HOTELS. Subject only to conditions beyond
Seller's reasonable control, Seller shall continue to operate Seller's hotel
management business in the usual and customary manner, and shall not, among
other things, and subject to Buyer's prior written consent, which consent may be
withheld in Buyer's sole discretion, amend any of the Management Agreements or
enter into any new management agreements; provided, however, that Buyer's
consent shall not be required, if the new management agreement or any such
renewal will by its terms terminate on or prior to the Closing Date; and
5.1.2 INSURANCE. Seller will maintain the insurance set forth on
Schedule 5.1.2 in full force and effect and will not decrease the amount thereof
without Buyer's prior written consent. Seller shall comply with any notice or
request from any such insurance company received prior to the Closing Date.
5.1.3 DUE DILIGENCE ACTIVITIES. Seller will give to Buyer, its
attorneys, accountants, engineers and other representatives, during normal
business hours and as often as may be requested, full access to all books,
records and files relating to (i) Seller's business, (ii) the Assets or (iii)
the Hotels. Seller will furnish to Buyer all information concerning the Assets
and/or the Hotels which Buyer, its attorneys, accountants, engineers or other
representatives shall reasonably request or which Buyer reasonably believes is
material or could result in a material adverse change in the business operations
or financial condition of Seller or any Hotel. Buyer may, during the hours of
9:00 a.m. to 5:00 p.m., and upon reasonable advance notice, at Buyer's sole
expense, undertake a review and physical count of the Personal Property. Such
review and inspections shall in any material respect be conducted in a manner
and at such times as shall not interfere with the Seller's operations.
5.1.4 NO BREACH OF REPRESENTATIONS AND WARRANTIES. Seller will
not take any action which would cause or constitute a breach of any of the
representations or warranties set forth herein, nor will Seller fail to take any
action, the omission of which would cause
-10-
<PAGE> 12
or constitute a breach of any of the representations or warranties set forth
herein.
5.1.5 NOTICE OF BREACH OF REPRESENTATIONS AND WARRANTIES.
Promptly after becoming aware of any event which could cause or constitute a
breach, or, if it occurred prior to the date of this Agreement, would have
caused or constituted a breach, of any of the representations and warranties set
forth herein. Seller will notify Buyer of such event and will use its best
efforts to promptly remedy or to prevent such breach.
5.1.6 NO LIENS; NO NEW AGREEMENTS. Seller will not make, grant or
suffer any mortgage, lien, pledge, chattel mortgage, charge, restriction or
other encumbrance on or with respect to the Assets, nor will Seller enter into
any other agreements, contracts or commitments with respect to the Assets except
in the ordinary course of business and as otherwise permitted herein.
5.1.7 COMPLIANCE WITH LAW. Seller will comply in all material
respects with all material federal, state and municipal laws, ordinances,
directives, orders, regulations and requirements which apply to the Assets, and
will promptly remedy any violation thereof of which notice shall have been given
by any governmental authority having jurisdiction so that the Assets shall be
conveyed free of the same.
5.1.8 TAXES.
(i) Seller will pay, as and when due and payable, all taxes and
assessments imposed on or against Seller or the Assets or due in
connection with the operation of Seller's hotel management business,
all payments due to vendors, purveyors and other trade creditors, and
all other debts and obligations relating to the Assets or the operation
of Seller's hotel management business.
(ii) In the State of Florida and in each other state in which
one (1) or more of the Hotels is located, Seller shall comply with the
applicable state taxing authorities', commissions' and agencies' rules,
regulations and procedures which exist to determine that Seller has
paid all state income taxes, employment taxes (including but not
limited to FICA, unemployment insurance and workers' compensation) and
all sales, use and other state taxes relating to Seller or Seller's
hotel management business (collectively, "MISCELLANEOUS TAXES"). Seller
shall apply to such state taxing authorities, commissions or agencies
sufficiently far in advance of the Closing Date to ensure that Buyer
shall have "comfort" and "safe harbor" on a date not more than five (5)
Business Days before the Closing Date that all applicable Miscellaneous
Taxes have been paid. In the event that any state taxing authority,
commission or agency
-11-
<PAGE> 13
notifies Seller that any amounts are (or shall become) due and payable
with respect to any Miscellaneous Taxes, Seller shall pay such amounts
to the applicable state taxing authority, commission or agency (by
certified check) on or prior to the Closing Date. Buyer shall have the
right to make such applications on Seller's behalf as Buyer shall deem
necessary to confirm that all such Miscellaneous Taxes have been (or
shall be) paid.
5.1.9 PERMITS; LIQUOR LICENSES. There are no licenses (including
any liquor licenses with respect to the ownership, use or maintenance of any
Hotel), in Seller's name.
5.1.10 CONSENTS. Seller shall promptly request, and shall use
Seller's best efforts to obtain, the Consents. Upon written request from Seller,
Buyer shall cooperate reasonably to obtain such Consents.
5.1.11 MISCELLANEOUS TAXES. Seller shall comply with any
pre-closing requirements and deliver any necessary notifications with respect to
any Miscellaneous Taxes which may be payable by Seller, including any
Miscellaneous Taxes arising in connection with the transactions contemplated
herein.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 BUYER'S CONDITIONS TO CLOSING. Satisfaction of each of the
following conditions, any of which may be waived in writing by Buyer, shall be
deemed a condition to Buyer's obligation to close hereunder:
6.1.1 STATUS OF TITLE TO THE ASSETS; DELIVERY OF REQUIRED
DOCUMENTS. Seller shall be able to deliver title to the Asset free and clear of
all liens and encumbrances and shall be able to deliver each of the documents
referred to in Section 7.2, including any consents or approvals required of
third parties;
6.1.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller set forth herein shall be true and correct in all material
respects as of the Closing Date, with the exception of Exhibits which must be
updated at the Closing Date to reflect changes permitted under the terms of this
Agreement (to the extent such changes are acceptable to Buyer in its sole
discretion);
6.1.3 PERFORMANCE OF PRE-CLOSING OBLIGATIONS. Seller shall have
performed, observed and complied with all of the pre-Closing covenants,
agreements and conditions required by this Agreement to be performed, observed
and complied with by Seller prior to or as of the
-12-
<PAGE> 14
Closing, including but not limited to each of the covenants set forth in Article
5 hereof;
6.1.4 NO BANKRUPTCY. Seller shall not have made an assignment for
the benefit of creditors or admitted in writing its inability to pay its debts
as they mature or have been adjudicated as bankrupt or have filed a petition in
voluntary bankruptcy or a petition or answer seeking reorganization or an
arrangement with creditors under the Federal bankruptcy law or any other similar
law or statute of the United States or any State, and no such petition shall
have been filed against it;
6.1.5 CONSUMMATION OF CLOSING UNDER HOTEL ASSETS PURCHASE
AGREEMENT. The Closing shall have occurred (or shall be occurring
simultaneously) under the Hotel Assets Purchase Agreement. It shall be a default
of Seller hereunder in the event that Hotel Assets Seller default under the
Hotel Assets Purchase Agreement and such default is not cured within any
applicable notice and/or cure period;
6.1.6 NON-COMPETITION AGREEMENTS. Seller's Principals shall have
entered into (or shall simultaneously with the Closing enter into) the
Non-Competition Agreements between Buyer and Seller's Principals, in the form
set forth on Schedule D attached hereto and made a part hereof (collectively,
the "NON- COMPETITION AGREEMENTS"); and
6.1.7 TERMINATION OF MANAGEMENT AGREEMENTS. Seller shall have
entered into (or simultaneously with the Closing enter into) the Termination
Agreements between Hotel Owners and Seller terminating the Management
Agreements, in the form set forth on Schedule E attached hereto and made a part
hereof for all purposes (the "TERMINATION AGREEMENTS").
6.2 SELLER'S CONDITIONS TO CLOSING. Satisfaction of each of the
following conditions, any of which may be waived in writing by Seller, shall be
deemed a condition to Seller's obligation to close hereunder:
6.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth herein shall be true and correct in all material
respects as of the Closing Date, with the exception of Exhibits which must be
updated at the Closing Date to reflect changes permitted under the terms of this
Agreement.
6.2.2 PERFORMANCE OF PRE-CLOSING OBLIGATIONS. Buyer shall have
performed, observed and complied with all of the pre-Closing covenants,
agreements and conditions required by this Agreement to be performed, observed
and complied with by Buyer prior to or as of the Closing, including but not
limited to, each of the covenants set forth in Article 5 hereof.
-13-
<PAGE> 15
6.2.3 CONSUMMATION OF CLOSING UNDER HOTEL ASSETS PURCHASE
AGREEMENT. The Closing shall have occurred (or shall be occurring
simultaneously) under the Hotel Assets Purchase Agreement. It shall be a default
of Buyer hereunder in the event that Hotel Asset Buyer defaults under the Hotel
Assets Purchase Agreement and such default is not cured within any applicable
notice and/or cure period.
ARTICLE 7
CLOSING
7.1 CLOSING. The consummation of the transaction contemplated in this
Agreement (the "CLOSING") shall occur simultaneously on the date (the "CLOSING
DATE") and in the same location as the closing of the Hotel Assets Purchase
Agreement. The Parties agree that the Closing hereunder shall occur if and only
if the closing contemplated in the Hotel Assets Purchase Agreement occurs.
7.2 SELLER'S CLOSING DOCUMENTS. At Closing, Seller shall deliver or
cause to be delivered to Buyer the following:
7.2.1 BILL OF SALE. A warranty bill of sale (the "BILL OF SALE")
covering the Personal Property, executed and acknowledged by Seller, in the form
set forth on Exhibit 7.2.1 attached hereto and made a part hereof for all
purposes;
7.2.2 TERMINATION AGREEMENTS. The Termination Agreements
executed, acknowledged by Seller and Hotel Owners and delivered by Seller to
Buyer;
7.2.3 ASSIGNMENT OF INTELLECTUAL PROPERTY. An Assignment of
Intellectual Property (the "ASSIGNMENT OF INTELLECTUAL PROPERTY"), executed,
acknowledged and delivered by Seller to Buyer, and executed, acknowledged and
assumed by Buyer, in the form set forth on Exhibit 7.2.3 attached hereto and
made a part hereof for all purposes;
7.2.4 ORIGINAL DOCUMENTS. To the extent the same are in Seller's
possession, the originals of all documents associated with the Assets;
7.2.5 SELLER'S AUTHORIZATION. Secretary's Certificates certifying
that Seller's Board of Directors has duly adopted resolutions authorizing the
within transaction and executed and acknowledged Incumbency Certificates
certifying to the authority of the officers of Seller executing the documents to
be delivered by Seller on the Closing Date;
-14-
<PAGE> 16
7.2.6 CONSENTS. The Consents set forth on Schedule 4.1.3 in form
and substance acceptable to Buyer in its reasonable discretion;
7.2.7 GOOD STANDING CERTIFICATES. Certificates of good standing
for Seller from all relevant jurisdictions;
7.2.8 NON-COMPETITION AGREEMENTS. The Non- Competition
Agreements, executed and delivered by Seller's Principals; and
7.2.9 ADDITIONAL DOCUMENTS. Any and all other documents
reasonably required by Buyer to consummate the Closing, duly executed, sworn to,
and/or acknowledged (when the form of the document so provides) by Seller.
7.3 BUYER'S CLOSING DOCUMENTS. At Closing, Buyer shall execute, swear
to, acknowledge (when the form of the document so provides), and/or deliver to
Seller the following:
7.3.1 PURCHASE PRICE. The Purchase Price, after all adjustments
provided for herein;
7.3.2 SECRETARY'S CERTIFICATE. A duly executed Secretary's
Certificate certifying that the Board of Directors of Starwood Lodging Trust, as
general partner of Buyer, has duly adopted resolutions authorizing the within
transaction and executed and acknowledged Incumbency Certificates certifying to
the authority of the officers of Starwood Lodging Trust executing the documents
on behalf of Buyer to be delivered by Buyer on the Closing Date;
7.3.3 GOOD STANDING CERTIFICATES. A Certificate of good standing
for Buyer from the State of Delaware; and
7.3.4 ADDITIONAL DOCUMENTS. Any and all other documents
reasonably required by Seller to consummate the Closing, duly executed, sworn to
and/or acknowledged (when the form of document so provides), by Buyer.
7.4 BUYER'S CLOSING COSTS. Buyer shall pay the following at Closing:
7.4.1 BUYER'S ATTORNEYS' FEES. Buyer's attorneys' fees incurred
in connection with the transactions contemplated herein;
7.4.2 BUYER'S DUE DILIGENCE COSTS. All costs incurred by Buyer in
performing Buyer's due diligence review and inspection of the Assets; and
-15-
<PAGE> 17
7.4.3 RECORDING FEES. One-half (1/2) the cost of any and all
filing and/or recording fees required by law or requested by Buyer to be filed
or recorded.
7.5 SELLER'S CLOSING COSTS. Seller shall pay each and all of the
following Closing costs:
7.5.1 SELLER'S ATTORNEYS' FEES. Seller's attorneys' fees incurred
in drafting and negotiating this Agreement and in Closing the transactions
contemplated in this Agreement;
7.5.2 TRANSFER TAXES; SALES AND USE TAXES. At Closing, except as
set forth in Section 7.4.3 hereof, Seller shall pay (i) any and all transfer
taxes, conveyance taxes, "gains" taxes, sales taxes and other taxes or charges
due under local or state law as a result of the transactions contemplated
hereby, including the sale of the Assets, and (ii) any and all sales and use
taxes due under local or state law as a result of the transactions contemplated
hereby, including the sale of the Personal Property; and
7.5.3 RECORDING FEES. One-half (1/2) the cost of any and all
filing and/or recording fees required by law or requested by Buyer to be filed
or recorded.
ARTICLE 8
INTENTIONALLY OMITTED
ARTICLE 9
POST-CLOSING COVENANTS
9.1 POST-CLOSING COVENANTS. Seller and Buyer agree that from and
after the Closing Date:
9.1.1 BUSINESS RECORDS. Seller will make all books and records
retained by Seller which pertain to the Assets or Seller's hotel management
business available for inspection by Buyer and its representatives during
business hours on reasonable advance notice. For a period of five (5) years
after the Closing Date, Buyer will make all Business Records transferred to
Buyer available for inspection by Seller and its representatives during business
hours on reasonable advance notice for the purpose of responding to tax
authorities and/or governmental inquiries arising out of Seller's hotel
management business and the ownership and operation of the Assets prior to the
Closing Date.
-16-
<PAGE> 18
9.1.2 TAX FILINGS. Seller and Buyer shall cooperate in timely
making any filing required pursuant to Section 1060 of the Code or any
regulations promulgated thereunder.
9.1.3 GUARANTEES AND WARRANTIES. Seller shall cooperate with
Buyer, at Buyer's sole expense, in enforcing any rights under any unexpired
guarantees or warranties given by Persons other than Seller in connection with
any of the Assets.
9.1.4 INTELLECTUAL PROPERTY. Neither Seller nor any of Seller's
affiliates, officers, directors or employees, or any of their respective
affiliates shall use any of the Intellectual Property in connection with any
property or business owned or operated by them, or in connection with any
property or business in which they have an interest, direct or indirect.
9.1.5 SALES, USE AND/OR HOTEL/MOTEL LICENSES. Sellers shall
pay any and all Miscellaneous Taxes relating to (i) the period prior to the
Closing Date (or the Postponed Closing Date, as the case may be) or (ii) the
consummation of the sale, transfer and conveyance of the Assets.
9.1.6 NAMES FOLLOWING THE CLOSING. Seller agrees that, Seller
shall not adopt or use any name which includes any trademark or trade name being
assigned and conveyed to Buyer hereunder and will not otherwise infringe upon
the Intellectual Property or any portion thereof, or hold itself out as the
successors to the business of Seller or the Hotel Assets Sellers.
ARTICLE 10
NOTICES
10.1 NOTICES. All notices, consents, approvals and other communications
provided for herein or given in connection herewith shall be validly given,
made, delivered or served if in writing and delivered personally against
receipt, or sent by registered, certified mail, receipted overnight service,
postage prepaid to:
SELLER AT: HOTELS OF DISTINCTION, INC.
380 South County Road
Palm Beach, FL 33480
Attention: Alan Tremain, Chairman
Telephone: (407) 835-9500
-17-
<PAGE> 19
WITH A COPY TO: Andrew C. Culbert, Esquire
MASTERMAN, CULBERT & TULLY
One Lewis Wharf
Boston, MA 02110
Telephone: (617) 227-8010
BUYER AT: SLT REALTY LIMITED PARTNERSHIP
c/o Starwood Lodging Trust
11835 Olympic Boulevard, Suite 675
Los Angeles, CA 90064
Attention: Ronald C. Brown, Vice President
Telephone: (310) 575-3900
WITH COPIES TO: STARWOOD CAPITAL GROUP, L.P.
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attention: Michael C. Mueller
Telephone: (203) 861-2100
AND: Alan S. Weil, Esquire
SIDLEY & AUSTIN
875 Third Avenue
New York, NY 10022
Telephone: (212) 906-2315
or to such other addresses as either Party hereto may from time to time
designate in writing and deliver to the other Party in a like manner. Notices,
consents, approvals and communications given by mail or delivery service shall
be deemed delivered as of the date of postmark or deposit with an overnight
delivery service.
ARTICLE 11
DEFAULT/REMEDIES
11.1 SPECIFIC CONTINGENCY. The Parties specifically agree and
acknowledge that Buyer's and Seller's obligation to close and consummate the
transaction contemplated in this Agreement is contingent upon the closing and
consummation of the transactions contemplated in the Hotel Assets Purchase
Agreement. Either Party's default of its obligation to close and consummate the
Hotel Assets Purchase Agreement in accordance with the terms thereof, shall be
deemed a default by such Party under this Agreement.
11.2 BUYER'S DEFAULT. If the conditions to Buyer's obligations set
forth in Section 6.1 hereof have been satisfied, Seller is not in default
hereunder and Buyer shall default in any obligation hereunder to consummate the
purchase of the Assets, Seller's sole and exclusive remedy shall be that the
Hotel Assets Sellers shall be entitled to exercise the remedies provided in
Section 15.1 of the Hotel Assets
-18-
<PAGE> 20
Purchase Agreement. Seller hereby agrees that the foregoing remedy shall be the
sole remedy of Seller hereunder in the event the Closing does not occur by
reason of a breach of this Agreement by Buyer. In no event shall Buyer become
liable to pay any damages of any kind whatsoever to Seller in connection with
any default by Buyer hereunder. Upon the exercising by Hotel Assets Sellers of
the foregoing remedy, this Agreement shall become null and void and neither
Party hereto shall have any further rights or obligations hereunder.
11.3 SELLER'S DEFAULT. If the conditions to Seller's obligations set
forth in Section 6.2 hereof have been satisfied, Buyer is not in default
hereunder and Seller shall default in any obligation hereunder or shall
wrongfully fail to consummate the sale of the Assets for any reason, such
default (i) shall constitute a default under the Hotel Assets Purchase Agreement
entitling the Hotel Assets Buyer to exercise its remedies thereunder and (ii)
shall entitle Buyer to pursue any and all legal or equitable remedies available
to it hereunder, including but not limited to the right to seek specific
performance against Seller.
11.4 ATTORNEYS' FEES. In the event either Party hereto finds it
necessary to bring an action at law or other proceeding against the other Party
to enforce or interpret any of the terms, covenants or conditions hereof or any
instrument executed pursuant to this Agreement or by reason of any breach or
default hereunder or thereunder, the Party prevailing in any such action or
proceeding shall be paid all costs, including reasonable attorneys' fees.
11.5 NO WAIVER. No delay in exercising any right or remedy shall
constitute a waiver thereof, and no waiver by Seller or Buyer of the breach of
any covenant of this Agreement shall be construed as a waiver of any preceding
or succeeding breach of the same or any other covenant or condition of this
Agreement. No extension of time for performance of any obligation or act shall
be deemed an extension of the time for performance of any other obligation or
act.
ARTICLE 12
MISCELLANEOUS
12.1 ENTIRE AGREEMENT. This Agreement and the Hotel Assets Purchase
Agreement contain the entire agreement between the Parties concerning the
Assets. This Agreement supersedes all prior and contemporaneous oral and written
representations, warranties, covenants and agreements by or between the Parties
with respect to the Assets.
-19-
<PAGE> 21
12.2 SATURDAY, SUNDAY, AND LEGAL HOLIDAYS; TIMES. If any date for the
performance of any matter under this Agreement (including the date for the
giving of Notice and the date on which any Notice is deemed to have been
received, pursuant to Article 10 hereof) falls on a day other than a Business
Day, then such date shall be extended to the next Business Day. All references
herein to a particular time on a particular date refer to the local time
(daylight or standard) in New York City.
12.3 PRESUMPTION CONCERNING INTERPRETATION AND CONSTRUCTION. There
shall be no presumption in favor of either Party with respect to the
interpretation or construction hereof.
12.4 ASSIGNMENT. This Agreement may be assigned by Buyer to any Person
which controls, is controlled by or is under common control with Hotel Assets
Buyer without the prior written consent of Seller. In the event of any such
assignment, any references in this Agreement to Buyer shall be construed to mean
the assignee to which Buyer named herein shall have assigned its rights under
this Agreement and which shall have assumed all obligations of Buyer under this
Agreement. For the purposes of this provision, the term "CONTROL" shall mean the
ownership (or right to control, by contract or otherwise, the voting rights)
with respect to thirty-five percent (35%) or more of the outstanding voting
interests in the applicable Person.
12.5 ARTICLES/SECTION HEADINGS. The headings of the various Sections in
this Agreement are for the convenience of the Parties and do not alter, modify,
or limit the provisions thereof and shall not be used in construing or
interpreting the provisions thereof.
12.6 NON-RECORDATION. Buyer shall not file or record this Agreement
or any evidence or memorandum of this Agreement in any public records. A
violation of this provision shall constitute a default by Buyer hereunder.
12.7 WAIVERS; MODIFICATIONS. No delay on the part of a Party in
exercising any rights or remedies hereunder shall operate as a waiver thereof,
nor shall any specific waiver by a Party of any right or remedy hereunder
operate or be construed as a waiver of any other right or remedy hereunder nor
shall any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof, or the exercise of any other right or
remedy hereunder (unless the provisions of this Agreement which establish any
such right or remedy provide otherwise). No waiver of any right or remedy
hereunder shall be valid or enforceable unless in writing and signed by the
Party against whom such waiver is sought to be enforced. No modification of this
Agreement shall be effective unless in writing, signed by the Parties.
-20-
<PAGE> 22
12.8 GOVERNING LAW; VENUE. This Agreement and the rights and
obligations of the Parties shall be governed by and construed in accordance with
the internal laws of the State of New York without application of conflict of
law principles. The Parties agree that any legal action or proceeding with
respect to this Agreement shall be brought in the courts of the State of New
York or the United States District Court for the Southern District of the State
of New York, sitting in New York, New York, and by execution and delivery of
this Agreement, the Parties accept for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The Parties irrevocably consent to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing or
delivery of copies thereof as provided in Article 10 (Notices), such service to
become effective thirty (30) days after such mailing. Nothing herein shall
affect the right to serve process in any other manner permitted by law. Except
to the extent prohibited by law which cannot be waived, each Party hereto waives
trial by jury in connection with any action or proceeding of any nature
whatsoever arising under, out of, or in connection with this Agreement and in
connection with any claim, counterclaim, offset or defense arising in connection
with such action or proceeding, whether arising under statute (including any
federal or state constitution) or under the law of contract, tort or otherwise
and including, without limitation, any challenge to the legality, validity,
binding effect or enforceability of this Section 12.8 or this Agreement.
12.9 DUE AUTHORITY. The individuals signing below represent that they
have the requisite authority to bind the entities on whose behalf they are
signing.
12.10 FURTHER ASSURANCES. Each Party shall, at the request of any other
Party, at any time and from time to time following the Closing, promptly execute
and deliver, or cause to be executed and delivered, to such requesting Party all
such further instruments and take all such further action as may be reasonably
necessary or appropriate to more effectively transfer, assign, convey, grant and
confirm to Buyer, or to perfect or record Buyer's title to or interest in, or to
enable Buyer to possess and use, the Assets or otherwise to confirm or carry out
the provisions and intents of this Agreement, and of the instruments delivered
pursuant to this Agreement.
12.11 SECTIONS, EXHIBITS AND SCHEDULES. All references herein to
Sections, Exhibits and Schedules, unless otherwise identified, are to Sections
of, Exhibits to, and Schedules to this Agreement. All Exhibits and all Schedules
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth herein.
-21-
<PAGE> 23
12.12 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the Closing occurs, each Party shall pay its own
expenses incidental to the preparation of this Agreement, the carrying out of
the provisions hereof and the consummation of the transactions contemplated
herein.
12.13 RELATIONSHIP OF PARTIES. Nothing contained in this Agreement
shall be deemed or construed by any Party, Person, or entity as creating any
relationship of principal and agent, of partnership, of joint venture, or of any
association whatsoever between the Parties. No provision of this Agreement and
no act or failure to act of the Parties shall be deemed to create any
relationship between the Parties other than the relationship of a vendor and a
vendee.
12.14 NUMBER OF GENDER OF WORDS. Whenever any number (singular or
plural) is used herein, the same includes and applies to any one or more
thereof, and to each thereof, jointly and severally, and words of any gender
include each other gender.
12.15 COUNTERPARTS. This Agreement is executed in multiple
counterparts, each of which is an original, but all of which constitute but one
and the same document. The signatures of each of the Parties and the Broker may
appear on multiple separate signature pages.
12.16 TERMINATION; CONFIDENTIALITY. Simultaneously with any termination
of this Agreement, regardless of which Party terminates this Agreement or of the
cause of such termination, Buyer shall deliver to Seller all documents received
from Seller pursuant to the terms of this Agreement.
12.17 PUBLICITY. Other than as required by law, prior to the Closing,
neither Party will divulge, disclose, publish, publicize, or announce to any
Person or entity whatsoever, including, without limitation, any print, radio,
television, or other media representatives, any of the tenants, or any real
estate broker or salesperson, the existence of this Agreement or any of the
provisions of this Agreement; provided, however, that the Parties may disclose
this Agreement and the transactions contemplated herein to their respective
employees, agents and consultants.
12.18 DELIVERY OF SCHEDULES AND EXHIBITS. The Parties acknowledge that
this Agreement is being executed and delivered before the Parties have completed
the preparation of the Schedules and Exhibits to be attached hereto. Buyer
agrees to prepare and deliver to Sellers the forms of the Bill of Sale, the
Termination Agreements, the Assignment of Intellectual Property and the
Non-Competition Agreements, and Sellers agree to prepare and deliver to Buyer
all other Schedules and Exhibits, in each case on or before the date that
-22-
<PAGE> 24
is fifteen (15) days from the Effective Date. The Parties agree to cooperate
with one another to prepare a draft set of Schedules and Exhibits not later than
the date that is fifteen (15) days after the Effective Date, or if such date is
not a Business Day, on the next succeeding Business Day. At such time as the
Parties agree upon such Schedules and Exhibits, the Parties shall execute a
confirmation agreement to which such approved Schedules and Exhibits shall be
attached. In the event that the Parties, after all good faith efforts, cannot
agree upon the Schedules and Exhibits to be annexed hereto on or before the date
that is thirty (30) days after the Effective Date, or if such date is not a
Business Day, on the next succeeding Business Day, either Party may, by delivery
of written notice to the other Party, terminate this Agreement, whereupon this
Agreement shall terminate and be of no further force and effect, and neither
Party shall have any further rights or obligations hereunder.
ARTICLE 13
DEFINITIONS
AGREEMENT means this Asset Purchase Agreement dated as of the Effective
Date by and between Seller and Buyer.
ASSETS has the meaning given in Section 1.2.4.
ASSIGNMENT OF INTELLECTUAL PROPERTY has the meaning given in Section
7.2.3.
BILL OF SALE has the meaning given in Section 7.2.1.
BUSINESS DAY shall have the meaning provided in the Hotel Assets
Purchase Agreement.
BUSINESS RECORDS means, collectively, those items of Personal Property,
including all documents, records and data, including computerized records,
maintained by Seller (or other third parties at Seller's direction or under
Seller's control), in regard to the existence, use, ownership, occupancy,
operation, marketing and/or maintenance of the Assets, or the operation of
Seller's hotel management business, including, without limitation, all books of
account, tax returns, purchase records, sales and invoice records,
correspondence, equipment maintenance data, operating manuals, employee and
personnel files, inventory records, sales and promotional data, customer lists,
cost and pricing information, supplier lists, business plans, advertising
materials, warranties and guaranties of any nature, stationery and other
imprinted materials, office supplies, training manuals, materials,
correspondence, all computer programs and data files, reference catalogs and all
other records, data, documents and information maintained in connection with the
existence,
-23-
<PAGE> 25
use, ownership, occupancy, operation and/or maintenance of the Assets or the
operation of Seller's hotel management business.
BUYER means SLT Realty Limited Partnership, a Delaware limited
partnership.
CLOSING DATE/CLOSING has the meaning given in Section 7.1.
CODE means the Internal Revenue Code of 1986, as the same may be
amended from time to time, and as interpreted in Treasury Regulations adopted or
promulgated thereunder.
CONSENTS has the meaning given in Section 4.1.3.
EFFECTIVE DATE means the latest date of execution of this Agreement by
the Parties as set forth opposite each Party's signature.
HODV means Hotels of Distinction Ventures, Inc., a Delaware
corporation.
HOTEL/HOTELS means the Hotels identified on Schedule A annexed hereto
and made a part hereof.
HOTEL ASSETS BUYER means the buyer under the Hotel Assets Purchase
Agreement.
HOTEL ASSETS PURCHASE AGREEMENT means that certain Asset Purchase
Agreement of even date herewith between Hotel Assets Sellers, as seller, and
Hotel Assets Buyer, as buyer, with respect to the Hotels.
HOTEL ASSETS SELLERS means, collectively, the sellers under the Hotel
Assets Purchase Agreement.
HOTEL OWNERS means the owners of the Hotels.
INTELLECTUAL PROPERTY has the meaning given in Section 1.2.3.
MANAGEMENT AGREEMENTS means those certain management agreements set
forth on Schedule B annexed hereto and made a part hereof.
MARKET BYTE has the meaning given in Section 1.2.1.
MISCELLANEOUS TAXES has the meaning given in Section 5.1.8(ii).
NON-COMPETITION AGREEMENT means the Non-Competition Agreement in the
form set forth on Exhibit D annexed hereto and made a part hereof.
OPERATING PARTNERSHIP shall mean SLC Operating Limited Partnership, a
Delaware limited partnership.
-24-
<PAGE> 26
PARTY/PARTIES means, individually, Seller or Buyer, and collectively,
Seller and Buyer.
PERSON means a natural person, partnership, limited partnership,
corporation, trust, estate, association, unincorporated association or other
entity.
PERSONAL PROPERTY means, collectively, all tangible personal property
of owned by Seller as identified on Schedule 1.2.1.
POSTPONED CLOSING DATE has the meaning given in Section 4.3.
PURCHASE PRICE has the meaning given in Section 2.1.
SELLER means Hotels of Distinction, Inc., a Florida corporation.
SELLER'S ACTUAL KNOWLEDGE means the actual current knowledge of any of
the following: Alan Tremain, William H. Lanting, Jean- Claude Mathot, Cindy
Niebur and the general managers of each of the Hotels.
SELLER'S PRINCIPALS means Alan Tremain and Jean-Claude Mathot.
TERMINATION AGREEMENTS the meaning given in Section 1.2.2.
-25-
<PAGE> 27
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the Effective Date.
SELLER:
HOTELS OF DISTINCTION, INC.
Dated: March __, 1996 By:___________________________
Alan Tremain,
Chairman of the Board
hereunto duly authorized
BUYER:
SLT REALTY LIMITED PARTNERSHIP
By: STARWOOD LODGING TRUST,
General Partner
Dated: March __, 1996 By:_______________________
Name:
Title:
hereunto duly authorized
The undersigned have executed this Agreement for the purpose of
agreeing to execute, at or before the Closing Date, the Non- Competition
Agreements.
__________________________
Alan Tremian
__________________________
Jean-Claude Mathot
-26-
<PAGE> 28
Broker has executed this Agreement solely for the purpose of evidencing
Broker's agreement to and acceptance of the provisions of Section 4.1.9 and to
confirm to Buyer that in no event whatsoever shall Buyer be liable to pay any
commission, fee or other compensation to Broker, regardless of whether or not
the transactions contemplated herein or in the Hotel Assets Purchase Agreement
close.
BROKER:
HOD Realty, Inc.
By:_____________________________
Name:
Title:
hereunto duly authorized
-27-
<PAGE> 1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
HOTELS OF DISTINCTION VENTURES, INC.
AND THE SUBSIDIARY ENTITIES DESCRIBED HEREIN,
COLLECTIVELY, AS SELLER
AND
SLT REALTY LIMITED PARTNERSHIP
AND
SLC OPERATING LIMITED PARTNERSHIP,
COLLECTIVELY, AS BUYER
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
PRELIMINARY STATEMENT...........................................................................................-1-
ARTICLE 1
DEFINITIONS/PURCHASE AND SALE OF ASSETS...................................-3-
1.1 Definitions......................................................................................-3-
1.2 Purchase and Sale of Assets......................................................................-3-
1.2.1 Real Properties.......................................................................-3-
1.2.2 Real Property Leases..................................................................-3-
1.2.3 Improvements..........................................................................-3-
1.2.4 Personal Property.....................................................................-3-
1.2.5 Personal Property Leases..............................................................-5-
1.2.6 Prepaid Accounts......................................................................-5-
1.2.7 Spaces Leases/Rents/Hotel Deposits....................................................-5-
1.2.8 Contracts.............................................................................-6-
1.2.9 Permits/Liquor License................................................................-6-
1.2.10 Intellectual Property Rights.........................................................-7-
1.2.11 Franchise Agreements.................................................................-7-
1.3 Excluded Assets..................................................................................-7-
ARTICLE 2
PURCHASE PRICE/ESCROW AGENT.........................................-8-
2.1 Purchase Price...................................................................................-8-
2.1.1 Aggregate Purchase Price...............................................................-8-
2.1.2 Allocation of Purchase Price...........................................................-8-
2.2 Terms of Payment..................................................................................-8-
2.2.1 Initial Deposit........................................................................-8-
2.2.2 Additional Deposit.....................................................................-8-
2.2.3 Balance of Purchase Price..............................................................-9-
2.2.4 Assumption of Existing IDA Debt........................................................-9-
2.3 Escrow Agent/Instructions.....................................................................-9-
2.3.1 Interest-Bearing Account...............................................................-9-
2.3.2 Delivery Upon Closing of Sale..........................................................-9-
2.3.3 Termination of Agreement...............................................................-9-
2.3.4 Duties of Escrow Agent.................................................................-9-
2.3.5 Disputes as to Disposition of the Deposit.............................................-10-
2.3.6 Execution of This Agreement...........................................................-11-
2.3.7 Right to Represent Sellers............................................................-11-
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C>
2.3.8 Procedure to Release Deposit Upon Default.............................................-11-
ARTICLE 3
BUYER'S DUE DILIGENCE...........................................-12-
3.1 Inspection Period...............................................................................-12-
3.1.1 Title Commitment......................................................................-12-
3.1.2 Survey................................................................................-12-
3.1.3 Buyer's Title Objections..............................................................-13-
3.1.4 Future Encumbrances...................................................................-14-
3.2 Buyer's Discretionary Termination...............................................................-14-
3.2.1 Buyer's Absolute Right to Terminate This
Agreement...........................................................................-14-
3.2.2 Major Deficiencies....................................................................-15-
ARTICLE 4
CONDITION OF THE ASSETS..........................................-16-
4.1 Condition of the Assets; No Warranty; Buyer's
Assumption of Risk...........................................................................-16-
4.1.1 Physical Condition of the Assets.....................................................-16-
4.1.2 Development Potential of the Assets..................................................-16-
4.1.3 Legal Compliance of Assets...........................................................-17-
4.1.4 Matters Disclosed in the Scheduled
Documents...........................................................................-17-
4.1.5 Insurance............................................................................-17-
4.1.6 Condition of Title...................................................................-17-
4.2 No Warranty or Representation...................................................................-17-
ARTICLE 5
REPRESENTATIONS AND WARRANTIES.......................................-19-
5.1 Sellers' Representations and Warranties..........................................................-19-
5.1.1 Good Standing.........................................................................-19-
5.1.2 Due Authority.........................................................................-19-
5.1.3 Consents..............................................................................-19-
5.1.4 No Default............................................................................-19-
5.1.5 Litigation............................................................................-20-
5.1.6 Real Property/Improvements............................................................-20-
5.1.7 Real Property Leases..................................................................-20-
5.1.8 Personal Property.....................................................................-21-
5.1.9 Personal Property Leases..............................................................-21-
5.1.10 Space Leases.........................................................................-22-
5.1.11 Contracts............................................................................-23-
5.1.12 Permits..............................................................................-23-
</TABLE>
-3-
<PAGE> 4
<TABLE>
<S> <C>
5.1.13 Liquor Licenses......................................................................-24-
5.1.14 Intellectual Property................................................................-24-
5.1.15 Franchise Agreements.................................................................-24-
5.1.16 Property Taxes.......................................................................-25-
5.1.17 Miscellaneous Taxes..................................................................-25-
5.1.18 Tax Returns..........................................................................-26-
5.1.19 Non-Compliance With Law..............................................................-26-
5.1.20 Hotel Employees/Collective Bargaining
Agreements..........................................................................-27-
5.1.22 Sellers' Environmental Representations...............................................-31-
5.1.23 Eminent Domain Taking................................................................-33-
5.1.24 Brokers, Finders, Etc................................................................-33-
5.1.25 Construction and Renovation Work; Payment
for Services........................................................................-33-
5.1.26 Insurance............................................................................-34-
5.1.27 FIRPTA...............................................................................-34-
5.1.28 Prepaid Fees and Deposits............................................................-34-
5.1.29 Trade Associations...................................................................-34-
5.1.30 Billboards/Signs.....................................................................-34-
5.1.31 Sellers' Financial Statements; Operating
Statements..........................................................................-34-
5.1.32 Physical Condition of the Assets.....................................................-35-
5.1.33 Existing IDA Debt....................................................................-35-
5.1.34 No Competing Ventures................................................................-35-
5.1.35 Rate Agreements......................................................................-35-
5.1.36 Material Facts.......................................................................-36-
5.2 Buyer's Representations and Warranties...........................................................-36-
5.2.1 Good Standing; Due Authorization.....................................................-36-
5.2.2 Material Facts........................................................................-37-
5.3 Survival of Representations and Warranties.......................................................-37-
5.4 Indemnification..................................................................................-37-
5.4.1 Sellers' Indemnification of Buyer.....................................................-37-
5.4.2 Buyer's Indemnification of Sellers....................................................-38-
5.4.3 Procedure for Claims under Indemnity
Provisions..........................................................................-38-
5.4.4 Limitations on Indemnity Claims.......................................................-39-
5.4.5 No Limitation on Claims for Fraud.....................................................-40-
5.5 Disputes to be Resolved Through Expedited
Arbitration..................................................................................-40-
5.6 No Distributions or Liquidations by Sellers..................................................-42-
ARTICLE 6
ELIMINATED HOTELS.............................................-42-
</TABLE>
-4-
<PAGE> 5
<TABLE>
<S> <C>
6.1 Eliminated Hotels................................................................................-42-
6.2 Sellers' Obligation to Close Conditional on
Minimum Number of Hotels.....................................................................-43-
6.2.1 Right to Terminate This Agreement.....................................................-43-
6.2.2 Sellers' Additional Termination Right.................................................-43-
ARTICLE 7
COVENANTS OF THE PARTIES UNTIL CLOSING...................................-44-
7.1 Covenants of the Parties Until the Closing......................................................-44-
7.1.1 Operation of the Hotels...............................................................-44-
7.1.2 Franchise Agreements..................................................................-46-
7.1.3 Existing IDA Debt.....................................................................-46-
7.1.4 Repairs, Maintenance and Capital
Improvements........................................................................-47-
7.1.5 Insurance.............................................................................-47-
7.1.6 Due Diligence Activities..............................................................-47-
7.1.7 No Breach of Representations and Warranties
...................................................................................-48-
7.1.8 Notice of Breach of Representations and
Warranties..........................................................................-48-
7.1.9 No Liens; No New Agreements...........................................................-48-
7.1.10 Compliance with Law..................................................................-48-
7.1.11 Taxes................................................................................-48-
7.1.12 Permits..............................................................................-49-
7.1.13 Consents; Estoppel Certificates......................................................-50-
7.1.14 Hart-Scott-Rodino....................................................................-50-
7.1.15 Miscellaneous Taxes..................................................................-51-
7.1.16 Bulk Sales...........................................................................-51-
7.1.17 Notification Under Collective Bargaining
Agreements..........................................................................-51-
7.1.18 Employment Matters on the Closing Date...............................................-51-
7.1.19 Sellers' "Tail" Liability Insurance Policy
...................................................................................-52-
7.1.20 Continued Health Coverage............................................................-52-
ARTICLE 8
CASUALTY LOSS/CONDEMNATION.........................................-52-
8.1 Risk of Loss....................................................................................-52-
8.2 Casualty Loss...................................................................................-52-
8.3 Non-Substantial Casualty........................................................................-53-
8.4 Substantial Casualty............................................................................-53-
8.5 Condemnation....................................................................................-54-
</TABLE>
-5-
<PAGE> 6
<TABLE>
<S> <C>
8.6 Non-Substantial Condemnation....................................................................-54-
8.7 Substantial Condemnation........................................................................-54-
ARTICLE 9
CONDITIONS TO CLOSING...........................................-55-
9.1 Buyer's Conditions to Closing....................................................................-55-
9.1.1 Status of Title; Delivery of Required
Documents...........................................................................-55-
9.1.2 Representations and Warranties........................................................-55-
9.1.3 Franchise Agreements..................................................................-55-
9.1.4 Existing IDA Debt.....................................................................-56-
9.1.5 Performance of Pre-Closing Covenants..................................................-56-
9.1.6 No Bankruptcy.........................................................................-56-
9.1.7 All Required Terminations Obtained....................................................-56-
9.1.8 Consummation of Closing Under Management
Company Purchase Agreement..........................................................-56-
9.1.9 Dismissal of Hotel Employees..........................................................-57-
9.2 Sellers' Conditions to Closing...................................................................-57-
9.2.1 Representations and Warranties........................................................-57-
9.2.2 Assumption of Assumed Liabilities.....................................................-57-
9.2.3 Consummation of Closing Under Management
Company Purchase Agreement..........................................................-57-
9.2.4 Performance of Pre-Closing Covenants..................................................-57-
ARTICLE 10
CLOSING..................................................-57-
10.1 Closing........................................................................................-57-
10.2 Sellers' Closing Documents and Deliveries......................................................-58-
10.2.1 Deeds...............................................................................-58-
10.2.2 Bill of Sale........................................................................-58-
10.2.3 Assignment and Assumption of Space Leases
...................................................................................-58-
10.2.4 Assignment and Assumption of
Contracts/Permits...................................................................-58-
10.2.5 Assignment and Assumption of Personal
Property Leases.....................................................................-59-
10.2.6 Assignment and Assumption of Real
Property Leases.....................................................................-59-
10.2.7 Assignment and Assumption of Intellectual
Property............................................................................-59-
10.2.8 Motor Vehicles......................................................................-59-
10.2.9 Original Documents..................................................................-59-
</TABLE>
-6-
<PAGE> 7
<TABLE>
<S> <C>
10.2.10 Plans and Specifications............................................................-59-
10.2.11 Liquor Licenses and Permits.........................................................-59-
10.2.12 Warranties and Guarantees...........................................................-59-
10.2.13 Reservation Deposits................................................................-60-
10.2.14 Evidence of Due Authorization.......................................................-60-
10.2.15 Required Title Insurance Documents..................................................-60-
10.2.16 Certificates of Occupancy; Permits and
Authorizations......................................................................-60-
10.2.17 Real Property Lease Estoppel Certificates
...................................................................................-60-
10.2.18 Consents............................................................................-61-
10.2.19 Space Lease Tenant Estoppel Certificates............................................-61-
10.2.20 Franchise Agreements................................................................-61-
10.2.21 FIRPTA Certification................................................................-61-
10.2.22 Existing IDA Debt Estoppel Certificate(s)
...................................................................................-61-
10.2.23 Keys................................................................................-61-
10.2.24 Good Standing Certificates..........................................................-61-
10.2.25 Business Records....................................................................-61-
10.2.26 Notices to Third Parties............................................................-61-
10.2.27 Sellers' "Tail" Liability Insurance
Policy..............................................................................-62-
10.2.28 Schedule of Accrued Vacation Days...................................................-62-
10.2.29 Additional Documents................................................................-62-
10.3 Buyer's Closing Documents and Deliveries.......................................................-62-
10.3.1 Purchase Price.......................................................................-62-
10.3.2 Secretary's Certificate..............................................................-62-
10.3.3 Good Standing Certificates...........................................................-62-
10.3.4 Hart-Scott Legal Opinion.............................................................-62-
10.3.5 Additional Documents.................................................................-62-
10.4 Jointly Executed Documents......................................................................-63-
10.4.1 Release of Escrow Agent..............................................................-63-
10.4.2 Continued Sale of Alcoholic Beverages................................................-63-
10.4.3 Collective Bargaining Agreements.....................................................-63-
10.5 Transaction Costs...............................................................................-63-
10.5.1 Transfer Taxes; Sales and Use Taxes..................................................-63-
10.5.2 Recording Charges and Fees...........................................................-63-
10.5.3 Title Insurance and Survey Charges...................................................-63-
10.5.4 Indemnity............................................................................-64-
10.5.5 Survival.............................................................................-64-
10.6 Buyer's Closing Costs...........................................................................-64-
10.6.1 Buyer's Attorneys' Fees..............................................................-64-
10.6.2 Buyer's Due Diligence Costs..........................................................-64-
10.6.3 Buyer's Pro Rata Share...............................................................-64-
</TABLE>
-7-
<PAGE> 8
<TABLE>
<S> <C>
10.6.4 Buyer's Miscellaneous Costs..........................................................-64-
10.7 Sellers' Closing Costs..........................................................................-64-
10.7.1 Sellers' Attorneys' Fees.............................................................-64-
10.7.2 Sellers' Pro Rata Share..............................................................-64-
10.7.3 Sellers' Miscellaneous Closing Costs.................................................-64-
10.8 Multiple Closings...............................................................................-64-
ARTICLE 11
PRORATIONS/ADJUSTMENTS...........................................-65-
11.1 Costs and Prorations............................................................................-65-
11.1.1 Property Taxes.......................................................................-65-
11.1.2 Water Charges........................................................................-65-
11.1.3 Utilities............................................................................-65-
11.1.4 Transferable Permits.................................................................-65-
11.1.5 Contracts, Real Property Leases, Personal
Property Leases and Franchise Agreements............................................-65-
11.1.6 Room Charges; Other Guest Charges....................................................-65-
11.1.7 Association Dues.....................................................................-66-
11.1.8 Travel Agents' Commissions...........................................................-66-
11.1.9 Wages, Salaries, etc.................................................................-66-
11.1.10 Space Leases........................................................................-66-
11.1.11 Consumables.........................................................................-66-
11.1.12 Existing IDA Debt...................................................................-66-
11.1.13 Insurance...........................................................................-66-
11.1.14 Prepaid Accounts....................................................................-66-
11.1.15 Laundry and Vending Machines........................................................-66-
11.2 Property Tax Apportionment......................................................................-67-
11.3 Water Meters....................................................................................-67-
11.4 Utilities.......................................................................................-67-
11.5 Room Rental Revenue/Other Revenue...............................................................-68-
11.6 Wages, Salaries, etc............................................................................-68-
11.7 Space Leases....................................................................................-69-
11.8 Accounts Receivable and Payable, Mutual
Indemnities..................................................................................-70-
11.8.1 Accounts Receivable..................................................................-70-
11.8.2 Collection of Accounts Receivable....................................................-70-
11.8.3 Sellers' Indemnity...................................................................-70-
11.8.4 Buyer's Indemnity....................................................................-71-
11.8.5 Survival.............................................................................-71-
11.9 Apportionment of Reservation Deposits...........................................................-71-
11.9.1 Reservation Deposits.................................................................-71-
11.9.2 Indemnity............................................................................-71-
11.9.3 Survival.............................................................................-72-
</TABLE>
-8-
<PAGE> 9
<TABLE>
<S> <C>
11.10 Post-Closing Reconciliation; Resolutions of
Disputes; Final Reconciliation...............................................................-72-
11.10.1 Post-Closing Reconciliation.........................................................-72-
11.10.2 Resolutions of Disputes as to
Apportionments......................................................................-72-
11.10.3 Final Reconciliation................................................................-72-
11.10.4 No Distributions or Liquidations....................................................-73-
11.11 Safes and Baggage..............................................................................-73-
11.11.1 Safe Deposit Boxes..................................................................-73-
11.11.2 Inventory of Guest Property.........................................................-74-
11.12 Collection Period..............................................................................-74-
ARTICLE 12
BROKER'S COMMISSION............................................-74-
12.1 Commission......................................................................................-74-
12.2 Indemnity.......................................................................................-74-
12.3 Release of Buyer................................................................................-75-
12.4 Survival........................................................................................-75-
ARTICLE 13
POST-CLOSING COVENANTS...........................................-75-
13.1 Post-Closing Covenants..........................................................................-75-
13.1.1 Permits..............................................................................-75-
13.1.2 Business Records.....................................................................-75-
13.1.3 Tax Filings..........................................................................-75-
13.1.4 Guarantees and Warranties............................................................-75-
13.1.5 Intellectual Property................................................................-76-
13.1.6 Liquor Licenses......................................................................-76-
13.1.7 Sales, Use and/or Hotel/Motel Licenses...............................................-76-
13.1.8 Names Following the Closing..........................................................-76-
ARTICLE 14
NOTICES..................................................-76-
14.1 Notices.........................................................................................-76-
ARTICLE 15
DEFAULT/REMEDIES..............................................-77-
15.1 Buyer's Default.................................................................................-77-
15.2 Sellers' Default................................................................................-78-
15.3 Attorneys' Fees.................................................................................-78-
</TABLE>
-9-
<PAGE> 10
<TABLE>
<S> <C>
15.4 No Waiver.......................................................................................-78-
ARTICLE 16
MISCELLANEOUS...............................................-78-
16.1 Entire Agreement...............................................................................-78-
16.2 Saturday, Sunday, and Legal Holidays; Times....................................................-78-
16.3 Presumption Concerning Interpretation and
Construction.................................................................................-79-
16.4 Assignment.....................................................................................-79-
16.5 Articles/Section Headings......................................................................-79-
16.6 Non-Recordation................................................................................-79-
16.7 Waivers; Modifications.........................................................................-79-
16.8 Governing Law; Venue...........................................................................-79-
16.9 Due Authority..................................................................................-80-
16.10 Further Assurances.............................................................................-80-
16.11 Sections, Exhibits and Schedules...............................................................-80-
16.12 Expenses.......................................................................................-81-
16.13 Relationship of Parties........................................................................-81-
16.14 Number of Gender of Words......................................................................-81-
16.15 Counterparts...................................................................................-81-
16.16 Termination; Confidentiality...................................................................-81-
16.17 Publicity......................................................................................-81-
16.18 Exculpation of Trustees of Starwood Lodging
Trust........................................................................................-81-
16.19 Exculpation of Trustees of H.O.D. Allentown
Trust........................................................................................-82-
16.20 Joint and Several Liability....................................................................-82-
16.21 Allocation of Assets...........................................................................-82-
16.22 Delivery of Schedules and Exhibits.............................................................-82-
16.23 Return of Asset Documents Upon Termination.....................................................-83-
ARTICLE 17
DEFINITIONS....................................................................................................-83-
</TABLE>
-10-
<PAGE> 11
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") made as of the latest
date of execution hereof (the "EFFECTIVE DATE") by and between H.O.D. ALLENTOWN
TRUST, a Pennsylvania Trust; H.O.D. ALLENTOWN I CORP., a Delaware corporation;
H.O.D. ALLENTOWN II CORP, a Delaware corporation; ALLENTOWN HOTEL VENTURES,
INC., a Delaware corporation; MINNEAPOLIS HOTEL VENTURES, INC., a Minnesota
corporation; PALM DESERT HOTEL VENTURES, INC., a California corporation; HOTELS
OF DISTINCTION SOUTHWEST, INC., a California corporation; WINSTON-SALEM HOTEL
VENTURES, INC., a Delaware corporation; ATLANTA HOTEL VENTURES, INC., a Delaware
corporation; NEEDHAM HOTEL VENTURES L.P., a Delaware limited partnership;
NEEDHAM HOTEL VENTURES, INC., a Delaware corporation; NEEDHAM HOTEL VENTURES II,
INC., a Delaware corporation; TUCSON HOTEL VENTURES, INC., a Delaware
corporation; ST. LOUIS HOTEL VENTURES, INC., a Delaware corporation; ARLINGTON
HEIGHTS HOTEL VENTURES, INC., a Delaware corporation (collectively the
"SUBSIDIARY ENTITIES"), and HOTELS OF DISTINCTION VENTURES, INC., a Delaware
corporation ("HOD VENTURES"), each Subsidiary Entity and HOD Ventures, having a
place of business at 380 South County Road, Palm Beach, FL 33480, collectively,
as Sellers, and SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership,
with its principal place of business at c/o Starwood Lodging Trust, 11835 West
Olympic Boulevard, Suite 695, Los Angeles, California 90064 ("REALTY
PARTNERSHIP"), and SLC OPERATING LIMITED PARTNERSHIP, a Delaware limited
partnership, with its principal place of business at c/o Starwood Lodging
Corporation, 11835 West Olympic Boulevard, Suite 675, Los Angeles, California
90064 ("OPERATING PARTNERSHIP"). Realty Partnership and Operating Partnership
are sometimes collectively referred to as "BUYER", and HOD Ventures and
Subsidiary Entities are sometimes collectively referred to as the "SELLERS".
Sellers and Buyer are sometimes collectively referred to as the "PARTIES" or
individually as a "PARTY".
PRELIMINARY STATEMENT
A. HOD Ventures is the sole shareholder of all outstanding shares of
capital stock, or owner of all the beneficial interest, as the case may be, of
each Subsidiary Entity (other than Hotels of Distinction Southwest, Inc.). Palm
Desert Hotel Ventures,
-1-
<PAGE> 12
Inc. is the sole shareholder of all outstanding shares of capital stock of
Hotels of Distinction Southwest, Inc.
B. The Subsidiary Entities own hotel properties situated on the Real
Properties (together with the other Assets used in connection with the
ownership, operation or maintenance of such hotel properties, collectively the
"HOTELS" and individually a "HOTEL") each being known and numbered as follows:
1. Allentown Hilton ("ALLENTOWN HILTON")
904 Hamilton Mall
Allentown, PA 18101
2. Minneapolis Hilton ("MINNEAPOLIS HILTON")
1330 Industrial Boulevard
Minneapolis, MN 55413
3. Palm Desert Embassy Suites ("PALM DESERT")
74-700 U.S. Highway 111
Palm Desert, CA 92260
4. The Radisson Marque of Winston-Salem
("MARQUE OF WINSTON-SALEM")
460 North Cherry Street
Winston-Salem, NC 27101
5. Sheraton Needham ("SHERATON NEEDHAM")
100 Cabot Street
Needham, MA 02194
6. The Marque of Atlanta ("MARQUE OF ATLANTA")
111 Perimeter Center West
Atlanta, GA 30346
7. St. Louis Embassy Suites
("ST. LOUIS SUITES")
901 North First Street
St. Louis, MO 63102
8. Hotel Park Tucson ("PARK TUCSON")
5151 East Grant Road
Tucson, AZ 85172
9. Arlington Park Hilton ("ARLINGTON HILTON")
3400 West Euclid Avenue
-2-
<PAGE> 13
Arlington Heights, IL 60005
C. Sellers desire to sell, assign, and transfer to Buyer, and Buyer
desires to purchase and acquire all of Sellers' right, title and interest in and
to the Assets for an aggregate Purchase Price of $134,000,000.00, subject to the
terms and conditions set forth in this Agreement.
D. The Parties acknowledge that Realty Partnership has simultaneously
entered into an Asset Purchase Agreement (the "MANAGEMENT COMPANY ASSET PURCHASE
AGREEMENT") with Hotels of Distinction, Inc., a Florida corporation (the
"MANAGEMENT COMPANY"). The Management Company manages each of the Hotels. The
Management Company Asset Purchase Agreement is attached hereto as Exhibit 1.
E. Sellers acknowledge that Sellers have received complete disclosure
regarding the agreement (the "LANTING AGREEMENT") that Buyer intends to enter
into with William H. Lanting, pursuant to which Mr. Lanting will provide
consulting services to Buyer (or one (1) of Buyer's affiliates) after the
Closing. Buyer shall provide a copy of the Lanting Agreement to Sellers upon
Sellers' request therefor.
ARTICLE
1
DEFINITIONS/PURCHASE AND SALE OF ASSETS
1.1 DEFINITIONS. The capitalized terms in this Agreement shall have the
meanings set forth in Article 17.
1.2 PURCHASE AND SALE OF ASSETS. Pursuant to the provisions of this
Agreement, at Closing, Sellers shall sell, transfer, grant, assign, deliver and
convey to Buyer, and Buyer shall purchase, acquire, accept and assume from
Sellers, all right, title and interest of Sellers in and to the following:
1.2.1 REAL PROPERTIES. The parcels of real property described
on Schedule 1.2.1, together with all right, title and interest of Sellers in and
to any and all (i) strips or gores, roads, easements, rights of way,
appurtenances, covenants, streets, and ways bordering upon such real property,
and rights of ingress and egress thereto, (ii) land within the right-of-way
-3-
<PAGE> 14
of any street, road, avenue, open or proposed, public or private, in front of or
adjacent to the above-described real property or any portion thereof, (iii)
unpaid awards for damage to the Assets or any portion thereof by reason of a
change of grade of any highway, street, road or avenue, and (iv) oil, gas and
mineral rights appurtenant to the above-described real property (collectively
the "REAL PROPERTIES");
1.2.2 REAL PROPERTY LEASES. All of the rights and incidents of
interest of Sellers in and to leases of real property (or rights to parking
spaces, as the case may be) used in connection with the ownership, use or
maintenance of the Assets, all as more particularly identified on Schedule 1.2.2
(collectively the "REAL PROPERTY LEASES");
1.2.3 IMPROVEMENTS. All improvements situated upon the Real
Properties including, without limitation, those certain buildings, structures,
fixtures, and other improvements of every kind and nature presently situated on,
in, under or hereafter erected, installed or used in or about the Real
Properties in connection with each Hotel, all as more particularly identified on
Schedule 1.2.3 (collectively the "IMPROVEMENTS");
1.2.4 PERSONAL PROPERTY. All tangible personal property set
forth on Schedule 1.2.4 and all other tangible personal property of every kind
and nature owned by Sellers as of the date hereof (and all replacements thereof
purchased prior to the Closing Date), located in or upon the Hotels, and used in
connection with the existence, use, ownership, occupancy, operation and/or
maintenance of the Assets (except as specifically set forth herein, excluding
cash, checks, charge slips and other negotiable instruments), including, without
limitation:
(a) the Motor Vehicles; and
(b) all office equipment, furniture, fixtures and furnishings
including, without limitation, all carpeting, movable partitions,
desks, chairs, sofas, filing cabinets and systems, tables, lamps and
lighting fixtures, artwork and objects, computers, printers,
typewriters, telexes, telefax equipment, two-way radio and paging-music
systems, stationery, office supplies, brochures and Business Records;
and
-4-
<PAGE> 15
(c) all operating machinery and equipment, whether or not
affixed to the Hotels or Real Properties, including, without
limitation, all electrical vaults and conduits, heating and air
conditioning facilities and equipment (including heat pumps, oil
burners, incinerators, furnaces and other fuel-burning devices), air
intake and exhaust systems, electrical generators, lighting and alarm
systems, elevators and compressor systems, laundry and dry-cleaning
facilities, all plumbing and sanitary disposal systems (including
septic or leaching systems, if any), swimming pool and spa supplies,
equipment and materials, all inventories of replacement and/or spare
parts, all maintenance, equipment, tools and machinery, and all manuals
and instructional materials associated therewith; and
(d) all telephone and telecommunication and wired cable
systems and equipment including, without limitation, all telephones,
television and radio receivers, loud speaker and paging systems,
satellite and microwave communication equipment, movie videotape, film,
slide and rear-screen projection equipment; and
(e) all case goods for the Hotel rooms, suites, function and
common areas and all furniture, fixtures, furnishings and equipment,
including, without limitation, all beds, bedding, tables, chairs,
sofas, lamps and lighting equipment, desks, artwork and objects,
carpeting, mirrors, armoires, linens, blankets, plants, all other
operational and guest supplies, wherever located, and all inventories
of replacement items; and
(f) all restaurant and kitchen furniture, fixtures,
furnishings, and equipment, whether or not affixed to the Hotels or
Real Properties, including, without limitation, all tables, chairs,
banquettes, stools, bars, lighting fixtures, bar equipment, china,
glassware, linens, silverware, artwork and objects, kitchen appliances,
refrigerators, freezers, stoves, grills, microwave ovens, dishwashing
equipment and all kitchen and food preparation equipment and utensils;
and
(g) all inventories and supplies of food and alcoholic
beverages in unopened cases and bottles and all supplies and
replacement items arising out of or in connection with the
-5-
<PAGE> 16
existence, use, ownership, occupancy, operation and/or maintenance of
the Assets, including cleaning and maintenance equipment of any kind or
nature, but excluding those items which are owned by Tenants or the
Management Company (collectively the "PERSONAL PROPERTY");
1.2.5 PERSONAL PROPERTY LEASES. All of the rights and
incidents of interest of Sellers in and to leases of Personal Property used in
connection with the ownership, use or maintenance of the Assets, all as more
particularly identified on Schedule 1.2.5 (collectively the "PERSONAL PROPERTY
LEASES"); provided, however, that Buyer, by written notice to Sellers may elect
to exclude any one (1) or more Personal Property Leases from the Personal
Property Leases to be assigned to Buyer if and to the extent that (i) such
Personal Property Leases are terminable at will by the applicable Seller and
(ii) Buyer notifies Sellers and directs Sellers to terminate such Personal
Property Leases in a sufficient time in advance of the Closing Date as will
allow Sellers at least five (5) days more than the required notice period under
such Personal Property Lease to terminate such Personal Property Lease effective
on or prior to the Closing Date;
1.2.6 PREPAID ACCOUNTS. All reservations, deposits, advance
payments, security deposits and prepaid items and other amounts, deposits or
credits paid to or received by Sellers or the Hotels prior to Closing to the
extent same are attributable to periods subsequent to the Closing (collectively
the "PREPAID ACCOUNTS");
1.2.7 SPACES LEASES/RENTS/HOTEL DEPOSITS. All of the rights
and incidents of interest of Sellers in and to (i) leases and other agreements,
whether written or oral, demising space in or providing for the use or occupancy
of all or any portion of the Real Properties or the Improvements and all
guaranties thereof (the "SPACE LEASES"), (ii) rents, if any, actually received
by Sellers which are allocable to any period of time after the Closing Date (the
"RENTS"), and (iii) security, damage, and other deposits (the "HOTEL DEPOSITS"),
if any, actually received by Sellers from existing tenants under the Space
Leases ("TENANTS"), to the extent the Hotel Deposits are refundable to Tenants
after the Closing Date and are not, in accordance with the terms of such Space
Leases, offset, charged against, or
-6-
<PAGE> 17
refunded to Tenants prior to the Closing Date, all as more particularly
identified on Schedule 1.2.7;
1.2.8 CONTRACTS. All of the rights and incidents of interest
of Sellers in and to (i) contracts and/or agreements, including, without
limitation, the Collective Bargaining Agreements, maintenance, service, supply,
purchase orders, work orders, and utility service contracts, but expressly
excluding (except as otherwise expressly agreed herein) contracts of insurance,
employment agreements, the Management Agreements, the Franchise Agreements, all
ERISA Benefit Plans, Prior Pension Plans and Non-ERISA Commitments (irrespective
of whether such ERISA Benefit Plans, Prior Pension Plans and Non-ERISA
Commitments are maintained, sponsored, contributed to or otherwise provided
pursuant to a Collective Bargaining Agreement), (ii) contracts and leases for
off-premises signs and billboards advertising one (1) or more of the Hotels,
(iii) warranties, indemnities and guaranties thereunder, and (iv) telephone
numbers and directory listings of or relating to the Hotels, all as more
particularly identified on Schedule 1.2.8 (collectively the "CONTRACTS");
provided, however, that Buyer, by written notice to Sellers may elect to exclude
any one (1) or more Contracts from the Contracts to be assigned to Buyer if and
to the extent that (x) such Contracts are terminable at will by the applicable
Seller and (y) Buyer notifies Sellers and directs Sellers to terminate such
Contracts in sufficient time in advance of the Closing Date as will allow
Sellers at least five (5) days more than the required notice period under such
Contract to terminate such Contract effective on or prior to the Closing Date;
and provided, further, that any obligations under the Collective Bargaining
Agreements to maintain, sponsor, contribute to, or provide, benefits of the
types described in Section 5.1.21(a), Section 5.1.21(b) or Section 7.1.18(ii)
shall not be assumed by, or assigned or transferred to, Buyer except with
respect to periods of employment beginning after the Closing Date with respect
to persons employed by Buyer after the Closing Date and any such obligations for
which Buyer shall have any liability shall be satisfied by Buyer.
1.2.9 PERMITS/LIQUOR LICENSE. To the extent assignable, all
alcoholic beverage licenses (the "LIQUOR LICENSES") and all other licenses,
permits, authorizations, consents, and approvals (collectively the "PERMITS") in
effect as of the date hereof (together with any renewals thereof issued
-7-
<PAGE> 18
prior to the Closing Date) and issued to Sellers or Management Company with
respect to the use or operation of the Assets, all as more particularly
identified on Schedule 1.2.9.
1.2.10 INTELLECTUAL PROPERTY RIGHTS. All trademarks, service
marks, logos, designs, brand names, phrases and other identifications,
including, without limitation, the registrations, applications and material
common law marks listed on Schedule 1.2.10 (collectively the "INTELLECTUAL
PROPERTY");
1.2.11 FRANCHISE AGREEMENTS. All of the rights and incidents
of interest of Sellers in and to the franchise agreements entered into between
Sellers and any Person (a "FRANCHISOR") with respect to the Hotels, all as more
particularly identified on Schedule 1.2.11 (collectively the "FRANCHISE
AGREEMENTS").
The Real Properties, Real Property Leases, Improvements, Personal Property,
Personal Property Leases, Prepaid Accounts, Space Leases, Rents, Hotel Deposits,
Contracts, Permits, Liquor Licenses, Intellectual Property and Franchise
Agreements are hereinafter referred to collectively as the "ASSETS".
1.3 EXCLUDED ASSETS. Notwithstanding any other provisions of this
Agreement to the contrary, the following properties, rights and interests are
excluded from the Assets and will be expressly excluded from the Conveyance
Documents (i) tax deposits, utility deposits and other deposits, except for any
transferable deposits assigned to Buyer, for which Sellers are to be reimbursed
as provided herein and except for the Prepaid Accounts, (ii) all cash and
uncollected credit card charges relating to the period prior to the Closing Date
and all cash reserves for furniture, fixtures, equipment, or for any other
purposes, whether maintained on or off the Real Properties, by or on behalf of
Sellers with respect to the Assets, (iii) all receivables due to Sellers on the
Closing Date relating to the period prior to the Closing Date, (iv) prepaid
expenses; (v) inventory, equipment and other property owned by Tenants and (vi)
those certain assets being sold, conveyed, transferred and assigned to Realty
Partnership pursuant to the Management Company Asset Purchase Agreement
including, without limitation, the management agreements (the "MANAGEMENT
AGREEMENTS") and intellectual property rights described therein (collectively
the "EXCLUDED ASSETS").
-8-
<PAGE> 19
ARTICLE 2
PURCHASE PRICE/ESCROW AGENT
2.1 PURCHASE PRICE.
2.1.1 AGGREGATE PURCHASE PRICE. Sellers agree to sell and
Buyer agrees to purchase the Assets for ONE HUNDRED THIRTY FOUR MILLION
($134,000,000.00) DOLLARS (the "PURCHASE PRICE"), subject to the terms,
conditions and adjustments set forth in this Agreement.
2.1.2 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall
be allocated among the Hotels, and the Parties agree that the Purchase Price
allocable to each Hotel (the "ALLOCATED PURCHASE PRICE") shall be further
allocated between Personal Property and Real Property, Improvements and the
other Assets relating to such applicable Hotel, as follows:
<TABLE>
<CAPTION>
Real
Allocated Property/ Personal
Hotel Purchase Price Improvements Property
----- ------------ ------------ ---------
<S> <C> <C> <C>
1. Allentown Hilton $ 7,500,000 $ 6,375,000 1,125,000
2. Minneapolis Hilton 18,000,000 15,300,000 2,700,000
3. Palm Desert Embassy 14,000,000 11,900,000 2,100,000
Suites
4. The Radisson Marque 7,500,000 6,375,000 1,125,000
of Winston-Salem
5. Sheraton Needham 20,000,000 17,000,000 3,000,000
6. Hotel Park Tucson 11,000,000 9,350,000 1,650,000
7. St. Louis Embassy 20,000,000 17,000,000 3,000,000
Suites
8. Arlington Park Hilton 13,000,000 11,050,000 1,950,000
9. The Marque of Atlanta 23,000,000 19,550,000 3,450,000
============
$134,000,000
</TABLE>
The Parties agree that this allocation has been arrived at by a process of
arm's-length negotiations, including the Parties' best judgment as to the fair
market value of each respective Asset, and the Parties specifically agree to the
allocation as final and binding (as between the Parties) and will consistently
reflect those allocations on their respective federal, state and local
-9-
<PAGE> 20
tax returns. The terms of this Section 2.1.2 shall survive the Closing in
accordance with Section 5.3 hereof.
2.2 TERMS OF PAYMENT. The Purchase Price shall be paid as follows:
2.2.1 INITIAL DEPOSIT. Within three (3) Business Days after
execution and delivery by the Parties of this Agreement, Buyer shall deposit in
escrow with Escrow Agent an earnest money deposit in the amount of ONE MILLION
($1,000,000.00) DOLLARS (together with all interest thereon, the "INITIAL
DEPOSIT");
2.2.2 ADDITIONAL DEPOSIT. Unless Buyer shall have terminated
this Agreement on or before expiration of the Inspection Period pursuant to
Article 3, Buyer shall deposit with Escrow Agent on or before expiration of the
Inspection Period the additional sum of ONE MILLION ($1,000,000.00) DOLLARS
(together with all interest thereon, the "ADDITIONAL DEPOSIT"); and
2.2.3 BALANCE OF PURCHASE PRICE. Upon the consummation of the
sale of the Assets, at Closing (i) the Initial Deposit and Additional Deposit
(collectively the "DEPOSIT"), shall be paid to Sellers and shall be credited
against the balance of the Purchase Price, and (ii) Buyer shall deliver to
Sellers, as the balance of the Purchase Price, subject to the provisions of
Section 2.2.4, the sum of ONE HUNDRED THIRTY-FOUR MILLION ($134,000,000.00)
DOLLARS, less the amount delivered to Sellers pursuant to clause (i) above, by
wire transfer of immediately available federal funds in New York, New York,
actually received and unconditionally available for distribution to Sellers
prior to 3:00 p.m. (New York time) on the Closing Date, as adjusted by all
adjustments, offsets and prorations provided for in this Agreement.
2.2.4 ASSUMPTION OF EXISTING IDA DEBT. In the event that Buyer
shall have elected pursuant to Section 7.1.3(i) hereof to purchase the Allentown
Hilton subject to the Existing IDA Debt and to assume the Existing IDA Debt, the
balance of the Purchase Price payable to Sellers pursuant to Section 2.2.3
hereof shall be reduced by an amount equal to the outstanding balance of the
Existing IDA Debt as of the Closing Date.
-10-
<PAGE> 21
2.3 ESCROW AGENT/INSTRUCTIONS. All funds deposited with Escrow Agent
pursuant hereto shall be held in escrow by Escrow Agent upon the following
terms:
2.3.1 INTEREST-BEARING ACCOUNT. If the funds deposited are in
the form of a check, Escrow Agent shall deposit such funds in its escrow account
and shall invest the proceeds in such Permitted Investments as Buyer shall
select. Escrow Agent shall keep such funds invested in Permitted Investments
selected by Buyer for so long as Escrow Agent shall hold such funds in escrow.
2.3.2 DELIVERY UPON CLOSING OF SALE. If the Closing
takes place, Escrow Agent shall deliver the Deposit to Sellers at
the Closing.
2.3.3 TERMINATION OF AGREEMENT. If this Agreement is
terminated solely by reason of the default of Buyer, the Escrow Agent shall pay
the Deposit to Sellers as liquidated damages in accordance with Section 15.1
hereof. If this Agreement is terminated for any other reason, Escrow Agent shall
pay the Deposit to Buyer.
2.3.4 DUTIES OF ESCROW AGENT. It is agreed that:
(i) the duties of Escrow Agent are only as herein
specifically provided, and are purely ministerial in nature, and Escrow
Agent shall incur no liability whatever, except for its negligence or
willful misconduct, as long as Escrow Agent has acted in good faith;
(ii) Escrow Agent shall not be liable or responsible
for the collection of the proceeds of any check delivered to Escrow
Agent;
(iii) in the performance of its duties hereunder,
Escrow Agent shall be entitled to rely upon any document, instrument or
signature reasonably believed by it to be genuine and purportedly
signed by either of the other Parties or their successors or assigns;
(iv) Escrow Agent may assume that any person
purporting to give any notice or instructions in accordance
-11-
<PAGE> 22
with the provisions hereof has been duly authorized to do so;
(v) Escrow Agent shall not be bound by any
modification, cancellation or rescission of this Agreement unless in
writing and signed by it, Sellers and Buyer;
(vi) Sellers and Buyer shall jointly and severally
reimburse and indemnify Escrow Agent for, and hold it harmless against,
any and all loss, liability, costs or expenses in connection herewith,
including reasonable attorneys' fees and disbursements, incurred by
Escrow Agent in connection with its acceptance or performance of its
duties and obligations under this Agreement, as well as the reasonable
costs and expenses of defending against any claim or liability arising
out of or relating to this Agreement; and
(vii) Sellers and Buyer each hereby release Escrow
Agent from any act done or omitted to be done by Escrow Agent in good
faith in the performance of its duties hereunder.
2.3.5 DISPUTES AS TO DISPOSITION OF THE DEPOSIT. Escrow Agent
is acting as a stakeholder only with respect to the Deposit. If there is any
dispute as to whether Escrow Agent is obligated to deliver the Deposit or any
part thereof or as to whom the Deposit, or any part thereof, is to be delivered,
Escrow Agent shall not make any delivery, but in such event Escrow Agent shall
hold the same until receipt by Escrow Agent of an authorization in writing,
signed by all of the Parties having any interest in such dispute, directing the
disposition of the Deposit, or in the absence of such authorization Escrow Agent
shall hold the Deposit until the final determination of the rights of the
Parties in an appropriate proceeding. If such written authorization is not
given, or proceedings for such determination are not begun within thirty (30)
days after the date set forth herein for the Closing (as the same may have been
changed by agreement of the Parties) and diligently continued, Escrow Agent may,
but is not required to, bring an appropriate action or proceeding for leave to
deposit the Deposit in court pending such determination. Escrow Agent shall be
reimbursed for all reasonable out-of-pocket costs and expenses of such action or
proceeding including, without limitation, reasonable attorneys'
-12-
<PAGE> 23
fees and disbursements, by the Party determined not to be entitled to the
Deposit, or if the Deposit is split between the Parties hereto, such costs of
Escrow Agent shall be split, pro rata, between Sellers and Buyer, based upon the
portion of the Deposit received by each. Upon making delivery of the Deposit in
the manner provided for in this Agreement, Escrow Agent shall have no further
liability hereunder.
2.3.6 EXECUTION OF THIS AGREEMENT. Escrow Agent has executed
this Agreement solely to confirm that Escrow Agent has received the Initial
Deposit (subject to collection, if in the form of a check) and will hold the
Initial Deposit and the Additional Deposit, if same is delivered by Buyer
pursuant to the terms hereof, in escrow, pursuant to the provisions of this
Agreement.
2.3.7 RIGHT TO REPRESENT SELLERS. Escrow Agent shall have the
right to represent Sellers in any dispute between Sellers and Buyer with respect
to the Deposit or otherwise.
2.3.8 PROCEDURE TO RELEASE DEPOSIT UPON DEFAULT. Prior to the
expiration of the Inspection Period, upon receipt by Escrow Agent of written
notice from Buyer that Buyer has terminated this Agreement pursuant to Section
3.2.1 hereof, Escrow Agent shall promptly deliver to Buyer the Initial Deposit.
From and after the expiration of the Inspection Period, upon receipt of any
written notice by Escrow Agent from Sellers or Buyer demanding the release of
the Deposit or any part thereof because of an alleged default hereunder, Escrow
Agent shall promptly deliver a copy of such demand to the other Party. If Escrow
Agent has not received a written notice of objection to such release within five
(5) Business Days after the delivery (or deemed delivery) of the copy of the
demand, Escrow Agent shall be entitled to release the Deposit or such portion
thereof as demanded, including any interest accrued on such sum being released.
If Escrow Agent has received a written notice of objection to such release
within five (5) Business Days after the delivery (or deemed delivery) of the
copy of the demand, then Escrow Agent shall follow the procedure set forth in
Section 2.3.5 hereof with respect to a dispute as to Escrow Agent's obligation
to deliver the Deposit.
-13-
<PAGE> 24
ARTICLE 3
BUYER'S DUE DILIGENCE
3.1 INSPECTION PERIOD. From the Effective Date until 5:00 p.m. on June
24, 1996 (the "INSPECTION PERIOD"), with reasonable prior notice to Sellers or
the Management Company, as the case may be, Buyer and Buyer's designated agents,
employees and independent contractors shall have the right, at Buyer's sole
risk, cost and expense, during normal business hours and with as little
disruption as reasonably possible to the operation of the Hotels, to enter upon
the Real Properties and the Improvements and the Management Company's offices
(i) to conduct engineering, environmental, operational, market, economic
feasibility, and other inspections, studies and tests of the Assets, (ii) to
review and analyze the Assets and the Condition of the Assets, and (iii)
otherwise to evaluate and assess the Assets (collectively the "DUE DILIGENCE
STUDIES"). Upon written request therefor by Sellers, Buyer shall forthwith
deliver copies to Sellers of any Phase I environmental assessments and any
architectural or engineering studies of the Hotels prepared by third parties on
behalf of Buyer. Sellers hereby acknowledge and agree that any such assessments
or studies delivered to Sellers pursuant to the immediately preceding sentence
shall be delivered without any warranty or representation whatsoever by Buyer.
In the event of any damage to the Real Properties and the Improvements caused by
Buyer or its agents, employees and independent contractors in the course of the
Due Diligence Studies, Buyer shall repair and restore (or cause to be repaired
and restored) same to substantially their condition prior to Buyer's entry
thereon. Sellers shall make available to Buyer at the Hotels all documents in
Sellers' or the Management Company's possession relating to the Assets. In
addition, upon request by Buyer, Sellers shall deliver to Buyer or Buyer's
attorneys copies of any such documents. As part of Buyer's due diligence review
of the Assets, Buyer shall:
3.1.1 TITLE COMMITMENT. Review ALTA title commitments (the
"TITLE COMMITMENTS") for owner's policies of title insurance (the "OWNER'S
POLICIES") covering the Real Properties and Improvements and setting forth the
matters which the Title Company believes affect the Real Properties and
Improvements. Sellers shall order the Title Commitments not later than five (5)
days after the Effective Date. Buyer acknowledges that title to
-14-
<PAGE> 25
the Real Properties and Improvements shall be subject to the Permitted
Encumbrances;
3.1.2 SURVEY. At Buyer's election, secure a survey or an
update of an existing survey (the "SURVEY") of the Real Properties showing the
boundaries of the Real Properties and the location on the Real Properties of all
Improvements and all recorded easements and building setback lines, accompanied
by a metes and bounds description of the Real Properties. Upon Sellers' request
therefor, Buyer shall forthwith deliver a copy of each of the Surveys to
Sellers;
3.1.3 BUYER'S TITLE OBJECTIONS. Prior to expiration of the
Inspection Period, examine the Title Commitments, copies of all items referred
to as exceptions therein, and the Surveys (collectively the "REAL PROPERTIES
DOCUMENTS"), and notify Sellers of any matters referred to in or discoverable
from any of the Real Properties Documents to which Buyer objects (the "TITLE
OBJECTIONS"). Promptly after receipt of Buyer's notice of Title Objections,
Sellers shall commence whatever action is required to eliminate all such
unacceptable exceptions. Sellers shall be obligated to eliminate all mechanics'
and materialmen's liens, regardless of amount, as well as those liens and
encumbrances affecting the Assets (other than Permitted Encumbrances to which
Buyer agrees to take subject) (i) which were created by Sellers or to which
Sellers agreed to take subject or otherwise consented to or (ii) which, if not
described in clause (i) above, may be removed, satisfied or discharged by the
payment of a liquidated sum of money not to exceed ten percent (10%) of the
Allocated Purchase Price of the Hotel affected by such Title Objection;
provided, however, in no event shall Sellers be obligated to expend in excess of
$2,500,000 in the aggregate to eliminate liens and encumbrances described in
clause (ii) above. Sellers shall use their best efforts to remove all other
Title Objections; however, Sellers shall not be obligated to commence any
litigation to remove any such Title Objections. If Sellers are unable to
eliminate such Title Objections (or any other exceptions that are subsequently
reported which Buyer is not required to accept) by the Closing Date, unless the
same are waived by Buyer, Sellers may adjourn the Closing Date as to the
Hotel(s) affected by the Title Objections for a period of time (not to exceed
forty-five (45) days) in order to attempt to eliminate such Title Objection(s).
If, after exerting their best efforts, Sellers remain unable to eliminate such
Title Objections
-15-
<PAGE> 26
(other than those exceptions which Sellers are obligated to remove) within the
time provided herein, Sellers shall so notify Buyer in writing and Buyer shall
thereafter notify Sellers in writing of its intention either (x) to accept the
Hotel affected by such Title Objection(s) without any abatement of the Purchase
Price, in which event (a) such Title Objection(s) shall no longer be objections
to title and shall be deemed to be for all purposes Permitted Encumbrances, (b)
Buyer shall close hereunder not with standing the existence of same and (c)
Sellers shall have no obligations whatsoever after the Closing with respect to
Sellers' failure to eliminate such Title Objection(s), or (y) to terminate this
Agreement as to the Hotel(s) with the Title Objection(s) by notice given to
Sellers, in which event Buyer shall be entitled to a return of the Allocable
Deposit, the Purchase Price shall be decreased by the Allocated Purchase Price
of such deleted Hotel(s), and Sellers shall reimburse Buyer for the cost of the
survey(s) prepared (or updated) in connection with the affected Hotel(s)
(collectively, "SURVEY COSTS"). Upon such return of the Allocable Deposit and
payment of the Survey Costs, this Agreement shall terminate as to the Hotels(s)
with the Title Objection(s) and neither Party hereto shall have any further
obligations hereunder as to such Hotel(s). As set forth in more detail in
Article 6 hereof, Buyer acknowledges that pursuant to the provisions of Section
6.2.2 hereof, Sellers shall have the right to terminate this Agreement in the
event that Buyer exercises the termination right in this Section 3.1.3 with
respect to more than one (1) Hotel; and
3.1.4 FUTURE ENCUMBRANCES. If, during the period between the
expiration of the Inspection Period and the Closing Date, it comes to Buyer's
attention that additional matters which are not Permitted Encumbrances and are
not specifically referred to in the Real Properties Documents adversely affect
title to the Real Properties and Improvements, the same shall constitute Title
Objections and shall be subject to the cure requirements and termination rights
in Section 3.1.3 hereof.
3.2 Buyer's Discretionary Termination.
3.2.1 BUYER'S ABSOLUTE RIGHT TO TERMINATE THIS AGREEMENT.
Except as provided in Section 3.2.2 hereof, if Buyer decides, for any reason
whatsoever, in Buyer's sole discretion, not to purchase the Assets, Buyer shall
so notify Sellers in writing prior to expiration of the Inspection Period.
-16-
<PAGE> 27
Such notification from Buyer shall constitute an absolute and final termination
of this Agreement, in which event Buyer shall receive a full refund of the
Initial Deposit, and no Party shall have any further rights or claims hereunder
or arising out of this Agreement. The Parties agree that the foregoing right of
termination shall be effective if given at any time prior to the expiration of
the Inspection Period and notwithstanding any default (or any alleged default)
by Buyer hereunder. If Buyer fails to notify Sellers prior to the expiration of
the Inspection Period of Buyer's election under this Article 3 not to purchase
the Assets, Buyer shall be deemed to have agreed to purchase the Assets, subject
to and in accordance with the terms, provisions and conditions in this
Agreement. Subject to Section 3.2.2, Buyer's payment to Sellers of the
Additional Deposit shall be deemed to acknowledge Buyer's acceptance as of the
date of such payment of the physical condition of the Assets (as described in
Section 4.1.1); provided, however, that such acknowledgment shall in no way
diminish or otherwise affect Buyer's rights under this Agreement, including,
without limitation, Buyer's rights under Articles 5 and 9 hereof, and shall in
no way release Sellers from Sellers' obligations under this Agreement,
including, without limitation, Sellers' obligations under Articles 5, 7, 8 and 9
hereof.
3.2.2 MAJOR DEFICIENCIES. In the event that prior to the
expiration of the Inspection Period Buyer discovers any deficiencies, defects or
other problems associated with any of the Hotels, and the cost, individually or
in the aggregate with respect to any Hotel, to remediate any such deficiencies,
defects or other problems would in Buyer's reasonable judgment exceed an amount
equal to five percent (5%) of the Allocated Purchase Price of the applicable
Hotel (a "MAJOR DEFICIENCY"), Buyer shall have the right, exercisable in writing
by notice given any time prior to the Closing Date, to terminate this Agreement
as it relates to the Assets relating to such Hotel. Any such notice shall
specify whether in Buyer's reasonable judgment the deficiencies, defects or
other problems are of a nature (i.e., the location of a Hotel within a flood
plain, violations of zoning laws or ordinances or other material zoning
deficiencies, violations of Environmental Laws or such other significant
environmental contamination (or an environmental contamination anticipated in
Buyer's reasonable judgment) or structural deficiencies the cure of which would
cost, in the reasonable judgment of Buyer, in excess of five percent (5%) of the
Allocated Purchase Price of the applicable
-17-
<PAGE> 28
Hotel), which deficiencies, defects or other problems would, even if cured or
ameliorated, materially adversely affect Buyer's ability to obtain financing for
such Hotel from an institutional lender (collectively, "UNCURABLE DEFECTS"). In
the event Buyer exercises such termination right as to a Hotel, provided such
Major Deficiency is not an Uncurable Defect, Sellers, within ten (10) days after
delivery of such termination notice, may request an adjournment (not to exceed
forty-five (45) days) of the Closing with respect to the affected Hotel in which
to cure such Major Deficiency. In such event, the Parties shall close the sale
of the remaining Hotels as contemplated herein on the Closing Date. Prior to
commencing to cure any such Major Deficiency that is not an Uncurable Defect,
Sellers shall consult with Buyer as to the specific actions to be undertaken by
Sellers to cure such Major Deficiency, and Sellers shall not commence any such
cure unless it is acceptable to Buyer in its reasonable discretion. In the event
that Buyer approves of the actions to be taken by Sellers, Sellers shall
promptly commence and diligently pursue such cure, and if Sellers cure each of
the matters itemized by Buyer in its notice citing a Major Deficiency (in a
manner acceptable to Buyer in its reasonable discretion) on or before such
adjourned closing date, then Buyer shall acquire such Hotel on a date mutually
acceptable to the Parties not later than ten (10) Business Days after the end of
the adjournment period. If Buyer's notice alleges that the Major Deficiency is
an Uncurable Defect, or if Sellers fail either to elect to adjourn the Closing
as to the affected Hotel or to cure such Major Deficiency prior to the
expiration of such forty-five (45) day adjournment period, Escrow Agent shall
return to Buyer the Allocable Deposit with respect to the applicable Hotel, this
Agreement will continue in full force and effect, except it will be deemed to
have terminated as to the Hotel with the Major Deficiency, and no Party shall
have any further rights or claims hereunder or arising out of this Agreement
which relate to the applicable Hotel and the Assets relating thereto. Buyer
agrees that deficiencies, defects and other problems identified in a
Franchisor's property improvement plan shall not constitute a Major Deficiency
merely because of their inclusion in any such Franchisor's property improvement
plan; provided, however, that Buyer shall not be restricted from raising any
such issue(s) raised in any such Franchisor's property improvement plan as
constituting or contributing to any Major Deficiency. As set forth in more
detail in Article 6 hereof, Buyer agrees that Buyer shall not be permitted to
exercise the termination right
-18-
<PAGE> 29
described in this Section 3.2.2 on account of a Major Deficiency with respect to
more than one (1) Hotel.
ARTICLE 4
CONDITION OF THE ASSETS
4.1 CONDITION OF THE ASSETS; NO WARRANTY; BUYER'S
ASSUMPTION OF RISK. The term "Condition of the Assets" means the
following:
4.1.1 PHYSICAL CONDITION OF THE ASSETS. The quality, nature
and adequacy of the physical condition of the Assets, including, without
limitation, the quality of the design, labor and materials used to construct the
Improvements; the condition of structural elements, foundations, roofs, glass,
mechanical, plumbing, electrical, HVAC, sewage, and utility components and
systems; the capacity or availability of sewer, water, or other utilities; the
geology, flora, fauna, soils, subsurface conditions, groundwater, landscaping,
and irrigation of or with respect to the Real Properties; the location of the
Assets in or near any special taxing district, flood hazard zone, wetlands area,
protected habitat, geological fault or subsidence zone, hazardous waste disposal
or clean-up site, or other special area, the existence, location, or condition
of ingress, egress, access, and parking; the condition of the Personal Property
and any fixtures; and the presence of any asbestos or other Hazardous Materials,
dangerous, or toxic substance, material or waste in, on, under or about the Real
Properties and Improvements;
4.1.2 DEVELOPMENT POTENTIAL OF THE ASSETS. The development
potential, economic feasibility, cash flow and expenses of the Assets; the
habitability, merchantability, fitness, suitability and adequacy of the Assets
for any particular use or purpose;
4.1.3 LEGAL COMPLIANCE OF ASSETS. The compliance or
non-compliance of Sellers or any other Person or entity or the operation of the
Assets or any part thereof in accordance with, and the contents of (i) all
codes, laws, ordinances, regulations, agreements, licenses, permits, approvals
and applications of or with any governmental authorities asserting jurisdiction
over the Assets, including, without limitation, those relating to zoning,
building, public works, parking, fire and police access, handicap
-19-
<PAGE> 30
access, life safety, subdivision and subdivision sales, and Hazardous Materials,
dangerous, and toxic substances, materials, conditions or waste, including,
without limitation, the presence of Hazardous Materials in, on, under or about
the Assets that would cause state or federal agencies to order a clean up of the
Assets under any Environmental Laws, and (ii) all agreements, covenants,
conditions, restrictions (public or private), condominium plans, development
agreements, site plans, building permits, building rules, and other instruments
and documents governing the use, management, and operation of the Assets.
"ENVIRONMENTAL LAWS" shall mean and include the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq., Resource
Conservation and Recovery Act, 42 U.S.C. 6901, et seq. and all other and similar
existing and future federal, state and municipal statutes, rules, regulations,
ordinances governing the environment or the generation, disposal or storage of
any Hazardous Materials, all as amended from time to time, and all rules and
regulations promulgated thereunder;
4.1.4 MATTERS DISCLOSED IN THE SCHEDULED DOCUMENTS. Those
matters referred to in this Agreement and the documents listed on the Schedules
attached hereto (to the extent true and correct copies thereof have been
provided by Sellers to Buyer).
4.1.5 INSURANCE. The availability, cost, terms and coverage of
liability, hazard, comprehensive and any other insurance of or with respect to
the Assets; and
4.1.6 CONDITION OF TITLE. The condition of title to the
Assets, including, without limitation, vesting, legal description, matters
affecting title, title defects, liens, encumbrances, boundaries, encroachments,
mineral rights, options, easements, and access; violations of restrictive
covenants, zoning ordinances, setback lines, or development agreements; the
availability, cost, and coverage of title insurance; leases, rental agreements,
occupancy agreements, rights of parties in possession of, using, or occupying
any of the Assets; and standby fees, taxes, bonds and assessments.
4.2 NO WARRANTY OR REPRESENTATION. Buyer acknowledges that, other than
as expressly set forth in this Agreement, Sellers make no representations or
warranties whatsoever, express, implied, or arising by operation of law, with
respect to the Assets or the Condition of the Assets. Buyer hereby
-20-
<PAGE> 31
represents and warrants to Sellers that Buyer has not entered into this
Agreement based upon any representation, warranty, agreement, statement, or
expression of opinion by Sellers, the Management Company or the Broker, or any
other Person or entity acting, or allegedly acting, for or on behalf of Sellers
with respect to Sellers, the Assets, or the Condition of the Assets (other than
the representations and warranties of Sellers and Management Company expressly
set forth in this Agreement). Other than as expressly set forth in this
Agreement, Buyer agrees that the Assets will be sold and conveyed to (and
accepted by) Buyer at the Closing in the then condition of the Assets, AS IS,
WHERE IS, WITH ALL FAULTS, AND WITHOUT ANY WRITTEN OR ORAL REPRESENTATIONS OR
WARRANTIES WHATSOEVER, EXPRESS, IMPLIED, OR ARISING BY OPERATION OF LAW, other
than (i) the representations and warranties of Sellers and Management Company
expressly set forth in this Agreement, and (ii) the Bill of Sale and the limited
special warranty of title in the Deeds. Without limiting the generality of the
foregoing, except for (a) the representations and warranties of Sellers and
Management Company expressly set forth in this Agreement, and (b) the Bill of
Sale and the limited special warranty of title in the Deeds, the transactions
contemplated by this Agreement are without any statutory, express, or implied
warranty, representation, agreement, statement, or expression of opinion of or
with respect to (i) the Condition of the Assets or any aspect thereof,
including, without limitation, any and all statutory, express, or implied
representations or warranties related to suitability for habitation,
merchantability, or fitness for a particular use or purpose, (ii) the nature or
quality of construction, structural design, or engineering of the improvements,
(iii) the quality of the labor or materials included in the Improvements, (iv)
the soil conditions, drainage, topographical features, flora, fauna, or other
conditions of or which affect the Assets, (v) any conditions at or which affect
the Assets with respect to any particular use, purpose, development potential,
or otherwise, (vi) area, size, shape, configuration, location, access, capacity,
quantity, quality, cash flow, expenses, value, condition, make, model,
composition, accuracy, completeness, applicability, assignability,
enforceability, exclusivity, usefulness, authenticity, or amount, (vii) any
statutory, express, or implied representations or warranties created by any
affirmation of fact or promise, by any description of the Assets, or by
operation of law, (viii) any environmental, botanical, zoological, hydrological,
geological, meteorological, structural,
-21-
<PAGE> 32
or other condition or hazard or the absence thereof heretofore, now, or
hereafter affecting in any manner any of the Assets, and (ix) all other
statutory, express, or implied representations and warranties by Sellers
whatsoever. Buyer acknowledges that Buyer has knowledge and expertise in
financial and business matters that enable Buyer to evaluate the merits and
risks of the transactions contemplated by this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 SELLERS' REPRESENTATIONS AND WARRANTIES. Sellers and
Management Company hereby covenant, represent and warrant to
Buyer as of the Effective Date and as of the Closing Date as
follows:
5.1.1 GOOD STANDING. Sellers are duly organized,
validly existing and in good standing, and each Subsidiary Entity
is licensed to do business in the State wherein each Hotel,
applicable to such Subsidiary Entity, is located;
5.1.2 DUE AUTHORITY. This Agreement has been duly authorized,
executed and delivered by Sellers in conformance with (i) Sellers'
organizational documents, and (ii) the charter and by-laws and pursuant to a
validly existing vote of the Board of Directors duly constituted, with respect
to each Subsidiary Entity which is a corporation. All documents that are to be
executed by Sellers and delivered to Buyer on the Closing have been, or on the
Closing Date will be, duly executed, authorized and delivered by Sellers. This
Agreement and all such documents are, and on the Closing Date, will be legal,
valid and binding obligations of Sellers, enforceable in accordance with their
terms (subject to customary bankruptcy exceptions) and do not, and at the time
of Closing will not, violate any provisions of any agreement or judicial or
administrative order to which Sellers are a party or to which Sellers or the
Assets are subject;
5.1.3 CONSENTS. No consent, right of first refusal, approval,
order or authorization of any Person not a party to this Agreement, and no
consent, approval, declaration or filing with any governmental authority on the
part of Sellers is required in connection with the execution and delivery of
this
-22-
<PAGE> 33
Agreement or the performance of the transactions contemplated herein, except for
(i) the Hart-Scott filing, and (ii) such other governmental and other consents
as may be required by law or otherwise as are specifically set forth on Schedule
5.1.3 (collectively the "CONSENTS");
5.1.4 NO DEFAULT. Assuming all Consents are obtained, neither
the execution and delivery of this Agreement by Sellers, nor the consummation by
Sellers of the transactions contemplated hereby (i) has constituted or resulted
in, or with the passage of time, will constitute or result in a breach of, or
constitute a default under any contract, agreement or understanding (including
any Contracts) whether written or oral by and between Sellers and any other
party, (ii) has violated, or with the passage of time, will violate any court
order, judgment, law, ordinance, regulation, or restriction to which any Seller
is a party or by which Sellers, or any of Sellers' assets, may be bound, the
result of which could have a material adverse effect on any one (1) or more of
the Assets or on the financial condition of any Person comprising Sellers;
5.1.5 LITIGATION. Schedule 5.1.5 sets forth a list of all
litigations, governmental or administrative proceedings or arbitrations
presently pending against any Person comprising Sellers. There are no
litigations, governmental or administrative proceedings or arbitrations
presently pending or, to Sellers' Actual Knowledge, threatened (i) against
Sellers which would have a material adverse effect on any of the Hotels, or (ii)
with respect to the Hotels, except for personal injury or other actions fully
covered by insurance (subject to commercially reasonable deductibles) and those
set forth on Schedule 5.1.5 annexed hereto. For the purposes of this Section
5.1.5, the term "material" shall mean any litigation, proceeding or arbitration
which could result in a judgment or award in excess of $10,000;
5.1.6 REAL PROPERTY/IMPROVEMENTS. Schedule 1.2.1 and Schedule
1.2.3 set forth a complete description of all Real Properties and Improvements,
and such Real Properties and Improvements constitute all of the real property
and improvements owned by (or subject to the terms of an installment contract of
sale in favor of) Sellers. Sellers own fee simple title to the Real Properties
and Improvements (other than the Real Property and Improvements relating to the
Allentown Hilton which are subject to an installment contract of sale in favor
of H.O.D.
-23-
<PAGE> 34
Allentown Trust, successor-by-assignment to Hamilton at Ninth Associates), and
to Sellers' Actual Knowledge, there are no liens, encumbrances or other matters
affecting Sellers' title other than the Permitted Encumbrances, and the Real
Properties are not subject to any outstanding contracts of sale (other than with
respect to the Existing IDA Debt) or purchase options in favor of any Person;
5.1.7 REAL PROPERTY LEASES. Except as may be set forth in
Schedule 1.2.2, Sellers hereby represent as to each Real Property Lease: (i) the
applicable Seller (listed on Schedule 1.2.2 is the owner of a valid and
subsisting interest as tenant under the Real Property Lease, (ii) the Real
Property Lease is in full force and effect, unmodified and not supplemented by
any writing or otherwise, and true, correct and complete copies thereof have
been (or will be) delivered to Buyer, (iii) all rent, additional rent and other
charges reserved therein have been paid to the extent they are due and payable
on the date hereof, (iv) the applicable Seller(s) enjoys the quiet and peaceful
possession of the estate demises thereby, subject to any Space Lease at such
Hotel, (v) the applicable Seller(s) is not in default under any of the terms
thereof, and there are no circumstances which, with the passage of time or the
giving of notice or both, would constitute an event of default thereunder, (vi)
to Sellers' Actual Knowledge the lessor under the Real Property Lease is not in
default under any of the terms or provisions thereof on the part of the lessor
to be observed or performed, (vii) the lessor under the Real Property Lease has
satisfied all of its repair or construction obligations, if any, to the date
pursuant to the terms of the Real Property Lease, (viii) the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby do not require the consent (other than those consents which
have been obtained and are in full force and effect) under, and will not
contravene any provision of or cause a default under, the Real Property Lease,
(ix) Schedule 1.2.2 lists all Real Property Leases and all amendments and
modifications thereto to which any Person comprising Sellers is a party and (x)
the lessor indicated on Schedule 1.2.2 for each Real Property Lease is the
current lessor under such Real Property Lease. Seller shall, at Closing, assign
and transfer the Real Property Leases to Buyer pursuant to the Assignment and
Assumption of Real Property Leases in the form set forth as Exhibit 10.2.6;
-24-
<PAGE> 35
5.1.8 PERSONAL PROPERTY. The Personal Property has been fully
paid for and is owned by Sellers free and clear of all liens and encumbrances,
except for the Permitted Encumbrances. Each Hotel is furnished, equipped and
stocked in a manner, consistent with Sellers' prior practice. Buyer acknowledges
that the Personal Property will fluctuate from time to time in the ordinary
course of Sellers' business. The Personal Property shall include on the Closing
Date sufficient quantities of operating supplies for the normal day-to-day
operation of the Hotels in accordance with Sellers' prior practice. The Personal
Property shall include, without limitation, bedroom sheets, pillowcases, towels
and washcloths and sufficient dining room linens, china, glassware and silver in
amounts consistent with Sellers' prior practice. Sellers shall, at Closing,
sell, transfer, grant and convey to Buyer all right, title and interest of
Sellers in and to the Personal Property by a warranty Bill of Sale, in the form
set forth as Exhibit 10.2.2;
5.1.9 PERSONAL PROPERTY LEASES. Other than each Personal
Property Lease summarized by rent, term and security deposit on Schedule 1.2.5,
there are no other Personal Property Leases affecting the existence, use,
ownership, occupancy, operation and/or maintenance of the Personal Property or
otherwise relating to the Real Properties and the Improvements. Each Personal
Property Lease described on Schedule 1.2.5, a copy of which has been (or will
be) provided to Buyer, is (i) a true and accurate copy, including all
amendments, (ii) the entire agreement between Sellers and the Person named
therein, (iii) in good standing and in full force and effect, and is fully
enforceable against the parties thereto in accordance with its terms, and (iv)
except as set forth on said Schedule 1.2.5, not in default in any material
respect by any party, nor, to Sellers' Actual Knowledge, have Sellers received
any written or oral notice or other communication of any alleged breach or
default thereunder by Sellers, nor does there exist any event, which, with
notice or lapse of time or both, would constitute a default thereunder. Seller
shall, at Closing, assign and transfer the Personal Property Leases to Buyer
pursuant to the Assignment and Assumption of Personal Property Leases in the
form set forth as Exhibit 10.2.5;
5.1.10 SPACE LEASES. Other than each Space Lease summarized by
rent, term and security deposit on Schedule 1.2.7, there are no other Space
Leases affecting the existence, use,
-25-
<PAGE> 36
ownership, occupancy, operation and/or maintenance of the Real Property and the
Improvements, nor are there any other tenants or occupants with rights to occupy
space within the Hotel. Each Space Lease referenced on Schedule 1.2.7, a copy of
which has been (or will be) provided to Buyer, is (i) a true and accurate copy,
including all amendments, (ii) the entire agreement between Sellers and the
Person named therein, (iii) in good standing and in full force and effect, and
is fully enforceable against the parties thereto in accordance with its terms,
and (iv) except as set forth on said Schedule 1.2.7, not in default in any
material respect by any party, nor, to Sellers' Actual Knowledge, have Sellers
received any written or oral notice or other communication of any alleged breach
or default thereunder by Sellers, nor does there exist any event, which, with
notice or lapse of time or both, would constitute a default thereunder. There
are no security deposits or advance payments of rent being held by Sellers
pursuant to any of the Space Leases except as set forth on Schedule 1.2.7. All
of the Tenants named in the Space Leases are in possession of the premises
leased to them and conducting business in the ordinary course. To Sellers'
Actual Knowledge, no Space Lease has been assigned, pledged or encumbered by the
Tenant thereunder. No brokerage or leasing commission, fee or other compensation
is or will be due from Sellers or Management Company as of the Closing Date or
thereafter in connection with any Space Lease or any renewal or extension
thereof. All decorating, installation, alteration and repair work which the
landlord was or may be obligated to perform for any Tenant prior to the Closing
Date has been performed or will be performed prior thereto at the cost of
Sellers. There are no obligations on the part of the landlord under the Space
Leases to provide any concessions or inducements to any Tenant under any Space
Lease, and the landlords under the Space Leases are not subject to any offset
rights, nor are they obligated to make any payments with respect to any
"so-called" take-over agreements relating to space previously occupied by the
Tenant(s) under any Space Lease(s). There is no breach or violation of any
provision of any Space Lease granting "exclusive" uses or prohibiting or
restricting competing or similar uses, and no Space Lease allows the space
demised to be used for any purpose which is prohibited by a restrictive covenant
or the terms of any other Space Lease. No representation, covenant or promise
has been made by Sellers or, to Sellers' Actual Knowledge, by any of Sellers'
predecessors, to any of the Tenants, except as may be contained in the Space
Leases. Seller shall, at Closing, assign
-26-
<PAGE> 37
and transfer the Space Leases to Buyer pursuant to the Assignment and Assumption
of Space Leases in the form set forth as Exhibit 10.2.3;
5.1.11 CONTRACTS. Other than as identified on Schedule 1.2.8
(and excepting each Space Lease, Personal Property Lease, Real Property Lease
and Franchise Agreement), there are no other contracts or agreements affecting
the existence, use, ownership, occupancy, operation and/or maintenance of the
Assets. Each Contract referenced on Schedule 1.2.8, a copy of which has been (or
will be) provided to Buyer, is (i) a true and accurate copy, including all
amendments, (ii) the entire agreement between Sellers and the Person named
therein, (iii) in good standing and in full force and effect, and is fully
enforceable against the parties thereto in accordance with these terms, and (iv)
not in default in any material respect by any party, nor, to Sellers' Actual
Knowledge, have Sellers received any written or oral notice or other
communication of any alleged breach or default thereunder by Sellers, nor does
there exist any event, which, with notice or lapse of time or both, would
constitute a default thereunder. Except as set forth on Schedule 1.2.8, none of
the Contracts require payments in excess of $10,000 per year by any Person
comprising Sellers. Seller shall, at Closing, assign and transfer the Contracts
to Buyer pursuant to the Assignment and Assumption of Contracts/Permits in the
form set forth as Exhibit 10.2.4;
5.1.12 PERMITS. Other than as identified on Schedule 1.2.9,
there are no other Permits affecting the existence, use, ownership, occupancy,
operation and/or maintenance of the Assets. Each Permit referenced on Schedule
1.2.9, a copy of which has been (or will be) provided to Buyer, is, to Sellers'
Actual Knowledge (i) a true and accurate copy, including all amendments, and
(ii) in good standing and in full force and effect. Sellers have not received
any written notice that any default has occurred in the due observance of any
condition to any Permit, nor, to Sellers' Actual Knowledge, is there lacking any
license, permit or certificate needed in connection with the ownership or
operation of the Hotels or the operation of their business. Valid permanent
certificates of occupancy have been issued for each of the Improvements and
remain in full force and effect. True, correct and complete copies of the
certificates of occupancy have been (or will be) delivered to Buyer. Seller
shall, at Closing, assign and
-27-
<PAGE> 38
transfer the Permits, to the extent assignable, to Buyer pursuant to the
Assignment and Assumption of Contracts/Permits in the form set forth as Exhibit
10.2.4;
5.1.13 LIQUOR LICENSES. Each Liquor License is referenced on
Schedule 1.2.9, a copy of which has been (or will be) provided to Buyer. Sellers
hold all licenses required under applicable laws relating to the sale and
service of alcoholic beverages at the Hotels, and all of such Liquor Licenses
are in full force and effect. To Sellers' Actual Knowledge, and except as set
forth in Schedule 1.2.9, the sale and service of alcoholic beverages at the
Hotels has been in compliance with all applicable laws and regulations, and
Sellers have not received any written notification of any violation or alleged
violation of any such laws or regulations during their respective periods of
ownership which are outstanding and have not been cured;
5.1.14 INTELLECTUAL PROPERTY. Other than as identified on
Schedule 1.2.10, there is no other Intellectual Property used by Sellers with
respect to the existence, use, ownership, occupancy, operation and/or
maintenance of the Assets. Except as set forth on Schedule 1.2.10, the
registrations and applications for all such Intellectual Property are in full
force and effect and are standing in the name of Sellers as of record and are
valid and enforceable. None of Sellers' respective names have been registered on
the Principal Register maintained by the U.S. Patent and Trademark office.
Except as set forth on Schedule 1.2.10, to Sellers' Actual Knowledge (i) Sellers
are the sole and exclusive owners of all rights to the Intellectual Property,
the same are fully assignable and Sellers have the right to use the same without
the payment of any license fee, royalty or similar charge, (ii) there is no
claim of any other Person, firm or corporation or any proceeding pending or
threatened which relates to any of the Intellectual Property, and (iii) the
Intellectual Property includes all of the intellectual property used in the
conduct of the Hotels. Sellers shall, at Closing, assign and transfer the
Intellectual Property to Buyer pursuant to the Assignment and Assumption of
Intellectual Property in the form set forth as Exhibit 10.2.7;
5.1.15 FRANCHISE AGREEMENTS. Each Franchise Agreement, a copy
of which has been (or will be) provided to Buyer, is, other than as provided on
Schedule 1.2.11, (i) a true and accurate copy, together with all amendments,
(ii) the entire
-28-
<PAGE> 39
agreement between Sellers and Franchisor, and (iii) except as set forth below,
in good standing and in full force and effect, and is fully enforceable against
the parties thereto in accordance with its terms. Except with respect to the
Franchise Agreement affecting St. Louis Suites and as set forth on Schedule
1.2.11, Sellers have not received any written or oral notice or other
communication of an alleged breach or default under the Franchise Agreements by
Sellers, nor to Sellers' Actual Knowledge does there exist any event, which,
with notice or lapse of time or both, would constitute a default thereunder.
True, correct and complete copies of all franchise inspection or compliance
reports or property improvement plans within the last two (2) years have been
delivered to Buyer and are identified on Schedule 1.2.11. Except with respect to
the Franchise Agreement affecting St. Louis Suites, each Hotel meets all
standards for acceptance as a licensed facility pursuant to the Franchise
Agreement relating to such Hotel; provided, however, that the Parties
acknowledge that the Franchisor inspection reports refer to certain
improvements, upgrades and betterments which are suggested or required by the
various Franchisors. Notwithstanding the fact that such items appear in the
existing Franchisor inspection reports, the Parties agree that Sellers shall be
obligated to complete only those items set forth on Schedule 5.1.15, and Sellers
shall commence such work only after Buyer has approved Sellers' intended course
of action, which approval shall not be unreasonably withheld. The Hotels are not
and at the Closing will not be subject to the burdens or obligations of any
management, operating or franchise agreement, except for the Real Property
Leases, the Contracts, the Personal Property Leases, the Management Agreements
and the Franchise Agreements. Buyer acknowledges that Sellers are presently in
default under the Franchise Agreement applicable to St. Louis Suites;
5.1.16 PROPERTY TAXES. Sellers have paid, or by the Closing
Date will pay, all Property Taxes due and owing by the Closing Date of every
kind and nature. True and complete copies of bills for such Property Taxes for
the past two (2) years are annexed hereto on Schedule 5.1.16. Except as set
forth on Schedule 5.1.16, to Sellers' Actual Knowledge, Sellers (i) are not a
party to any action or proceeding to abate any Property Tax, nor aware of any
proceeding by any governmental authority for assessment or collection of
Property Taxes, and (ii) have not granted any waiver of any statute of
limitation with respect to,
-29-
<PAGE> 40
or any extension of a period for the assessment of Property Taxes;
5.1.17 MISCELLANEOUS TAXES. All state income taxes, employment
taxes (including but not limited to FICA, unemployment insurance and workers'
compensation) and all sales, use and hotel/motel occupancy taxes, if any, due
and payable in connection with the ownership and operation of the Real
Properties and the operation of the hotel businesses thereon (collectively,
"MISCELLANEOUS TAXES"), have been paid in full through the most recent period
for which they were due and payable. Except as set forth on Schedule 5.1.17,
Sellers (i) are not a party to any action or proceeding to abate any
Miscellaneous Tax nor aware of any proceeding by any governmental authority for
collection of Miscellaneous Taxes, and (ii) have not granted any waiver of any
statute of limitation with respect to, or any extension of a period for the
assessment of Miscellaneous Taxes;
5.1.18 TAX RETURNS. Sellers have filed or will file all
federal, state and local tax returns for all Property Taxes and Miscellaneous
Taxes required by law and have fully paid or, by the Closing Date, will have
fully paid all Property Taxes and Miscellaneous Taxes and penalties due and
payable. To Sellers' Actual Knowledge, Sellers have not received written or oral
notice or other communication, and are unaware of any dispute or claim by any
taxing authority regarding any Property Taxes or Miscellaneous Taxes of any
nature due and payable by Sellers, which if not paid could become a lien against
the Assets;
5.1.19 NON-COMPLIANCE WITH LAW. Except as set forth in
Schedule 5.1.19, to Sellers' Actual Knowledge, Sellers have received no notice
of any violation of law or municipal ordinance, order or requirement noted in or
issued by any governmental entity asserting jurisdiction against or affecting
Sellers or any of the Hotels. Sellers agree to cause any violations mentioned in
Schedule 5.1.19 and any other violations of law of which Sellers receive notice
between the Effective Date and the Closing Date, to be removed and cured at
Sellers' sole cost and expense prior to the Closing; provided, however, that
Sellers shall not be obligated to cure any written notice of violation received
by Sellers after the Effective Date which cites a violation of the Americans
with Disabilities Act of 1992 ("ADA") and with respect to any one (1) Hotel
would cost in
-30-
<PAGE> 41
excess of $250,000 to cure (a "MAJOR ADA VIOLATION"). In the event Sellers elect
not to cure a Major ADA Violation, then Buyer may elect either (i) to acquire
the affected Hotel subject to the Major ADA Violation, or (ii) to terminate this
Agreement as it relates to the applicable Hotel whereupon (a) this Agreement
shall remain in full force and effect as to the remaining Hotels, (b) the
Allocable Deposit with respect to the affected Hotel shall immediately be
returned to Buyer, (c) the Purchase Price shall be decreased by the Allocated
Purchase Price of such deleted Hotel and (d) this Agreement shall be deemed null
and void as to the deleted Hotel. Except as set forth in Schedule 5.1.19, to
Sellers' Actual Knowledge, (i) the Hotels and the businesses conducted thereon
are in compliance in all material respects with all applicable federal, state
and local laws and regulations, including zoning laws, and (ii) all necessary
permits and licenses for the lawful conduct of such business have been obtained
and are in full force and effect. To Sellers' Actual Knowledge, except as set
forth on Schedule 5.1.19, no variance or conditional permit has been granted
with respect to any of the Hotels. The present use and occupancy of the
Improvements complies with the existing certificates of occupancy issued
therefor; provided, however, that Buyer acknowledges that the use referred to on
the certificate of occupancy for the Marque of Atlanta is different from the
present use and occupancy of such Hotel. Sellers represent that the present use
at such Hotel is in compliance with law. Except as set forth in Schedule 5.1.19,
Sellers have not received any written notice from any insurance company, Board
of Fire Underwriters, any governmental or quasi-governmental agency or any of
the Persons that are parties to the Loan Documents, requiring any repairs or
work to be done at the Hotels or pertaining to the maintenance of the Hotels,
employment of labor or working conditions;
5.1.20 HOTEL EMPLOYEES/COLLECTIVE BARGAINING AGREEMENTS. All
employees working at the Hotels are listed on Schedule 5.1.20 (the "HOTEL
EMPLOYEES"), which includes for each employee his or her (i) name, (ii) job
description, (iii) salary (iv) date of employment, and (v) the Hotel at which he
or she is employed. Except as additionally described on Schedule 5.1.20 or on
Schedule 5.1.21(a) or Schedule 5.1.21(b), no Hotel Employee is covered by a
union contract, collective bargaining agreement, employment agreement, deferred
compensation agreement or other agreement of any kind. Schedule 5.1.20 also sets
forth a list of the documents and employee manuals which describe Sellers'
-31-
<PAGE> 42
existing employment policies and practices with respect to vacations, sick days,
personal days, bonuses, raises, promotions, discharges, overtime, work
responsibilities, benefits, retirement, severance pay and other relevant
matters. Except as set forth on Schedule 5.1.20, there is no strike, lockout,
picketing, work stoppage or other labor dispute pending or threatened, nor is
there any pending grievance or arbitration proceeding, charge or complaint
before the NLRB, the various civil rights agencies, federal or state departments
of labor or the various occupational health and safety agencies, with respect to
any of the Hotels. To Sellers' Actual Knowledge, (a) Sellers have received no
written notice of violation with the Immigration Reform and Control Act of 1986
("IRCA"), and (b) all United States Department of Justice Immigration and
Naturalization I-9 forms required to be completed and maintained by Sellers have
been properly filled out and are maintained in Seller's personnel files. To
Sellers' Actual Knowledge, except as set forth on Schedule 5.1.20, there are no
discrimination charges pending against Sellers arising under the
anti-discriminatory provisions of IRCA. Sellers agree to be fully responsible
for payments of any kind to all Hotel Employees for any period prior to the
Closing Date and for services rendered through the Closing Date, including any
severance payments or other benefits arising due to the transactions
contemplated by this Agreement except for Buyer's obligations under Section
7.1.18(ii) and Section 7.1.19 hereof. Arlington Heights Hotel Ventures, Inc. and
St. Louis Hotel Ventures, Inc. are the only parties to any collective bargaining
agreements described on Schedule 5.1.21(b) and those agreements are the only
collective bargaining agreements with respect to Hotel Employees (the
"COLLECTIVE BARGAINING AGREEMENTS"). Other than the Collective Bargaining
Agreements, there are no other collective bargaining agreements, nor are there
any other agreements regarding labor unions or other organized labor
organizations or associations with respect to the Hotels. Sellers have delivered
true, correct and complete copies of each Collective Bargaining Agreement
(including any amendments thereto), and each Collective Bargaining Agreement (i)
constitutes the entire agreement between Sellers and the Person named therein,
(ii) is in good standing and in full force and effect, and is fully enforceable
against the parties thereto in accordance with these terms, and (iii) is not in
default in any material respect by any party thereto, nor, to Sellers' Actual
Knowledge, have Sellers received any written or oral notice or other
communication of any alleged breach or default thereunder
-32-
<PAGE> 43
by Sellers, nor does there exist any event, which, with notice or lapse of time
or both, would constitute a default thereunder. Sellers shall, at Closing,
subject to Section 1.2.8, assign and transfer the Collective Bargaining
Agreements to Buyer pursuant to the Assignment and Assumption of
Contracts/Permits in the form set forth as Exhibit 10.2.4;
5.1.21 EMPLOYEE BENEFIT PLANS. (a) Set forth in Schedule
5.1.21(a) is a true and complete list of each "employee pension benefit plan"
(as such term is defined in Section 3(2) of ERISA) currently maintained by a
Seller or an ERISA Affiliate, or with respect to which a Seller or an ERISA
Affiliate is or will be required to make any payment, or which provides or will
provide benefits to present or prior employees of a Seller or an ERISA Affiliate
due to such employment (the "PENSION PLANS"). All of the Pension Plans are
"multiemployer plans" (as such term is defined in Section 3(37) of ERISA). Set
forth in Schedule 5.1.21(a) is a true and complete list of each "employee
welfare benefit plan" (as such term is defined in Section 3(1) of ERISA)
currently maintained by a Seller, or with respect to which a Seller is or will
be required to make any payment, or which provides or will provide benefits to
present or prior employees of a Seller due to such employment (the "WELFARE
PLANS") (the Pension Plans and Welfare Plans being the "ERISA BENEFIT PLANS").
In addition, set forth in Schedule 5.1.21(a) is a true and complete list of each
other "employee pension benefit plan" (as such term is defined in Section 3(2)
of ERISA) ever subject to Section 302 of ERISA and (i) maintained by a Seller or
an ERISA Affiliate at any time during the six-year period prior to the Closing
Date, or (ii) with respect to which a Seller or an ERISA Affiliate was required
to make any payment at any time during such period (the "PRIOR PENSION PLANS").
All of the Prior Pension Plans, if any, are "multiemployer plans" (as such term
is defined in Section 3(37) of ERISA).
(b) For the purposes hereof, "Non-ERISA Commitments" shall
mean each of the following to which any Person comprising Sellers is a party, or
with respect to which any Person comprising Sellers is or will be required to
make any payment, and which is not an ERISA Benefit Plan:
-33-
<PAGE> 44
(i) each retirement, savings, profit sharing, deferred
compensation, severance, stock ownership, stock purchase, stock option,
performance, bonus, incentive, vacation or holiday pay, hospitalization
or other medical, disability, life or other insurance, or other
welfare, benefit or fringe benefit plan, policy, trust, contract or
agreement of any kind, whether written or oral;
(ii) each employee Collective Bargaining
Agreement; and
(iii) each understanding, arrangement, contract or agreement
of any kind, whether written or oral, with or for the benefit of any
present or prior officer, director, employee or consultant (including,
without limitation, each employment, compensation, deferred
compensation, severance or consulting agreement or arrangement and any
agreement and arrangement associated with a change in ownership of a
Seller).
Set forth in Schedule 5.1.21(b) hereof is a true and correct list of each of the
items described in clauses (i) and (ii) above (other than those items already
listed in Schedule 5.1.21(a)). The Sellers have delivered to Buyer correct and
complete copies of (x) all written Non-ERISA Commitments referred to in clauses
(i) and (ii) above and (y) all insurance and annuity policies and contracts and
other documents relevant to any Non-ERISA Commitment. Schedule 5.1.21(b)
contains a complete and accurate description of (1) all oral Non-ERISA
Commitments referred to in clause (i) of the first (1st) sentence of this
Section 5.1.21(b), and (2) all Non-ERISA Commitments with regard to health
insurance or coverage.
(c) Sellers have delivered (or will deliver) to Buyer with
respect to each Welfare Plan, other than any Welfare Plan which is a
"multiemployer plan" (as such term is defined in Section 3(37) of ERISA),
correct and complete copies, where applicable, of (A) all plan documents and
amendments thereto, trust agreements and amendments thereto and insurance and
annuity contracts and policies, (B) the current summary plan description, (C)
the Annual Report (Form 5500 series) and accompanying schedules, as filed, for
the most recently completed plan year for which such report has been filed, (D)
the financial
-34-
<PAGE> 45
statements for the most recently completed plan year for which such statements
have been prepared, (E) the actuarial report for the most recently begun plan
year for which such reports exist, and (F) all correspondence with the IRS and
Department of Labor concerning any controversy. With respect to each Pension
Plan that is a "multiemployer plan" (the "MULTIEMPLOYER PLANS"), (i) Sellers
have delivered (or will use Sellers' best efforts to secure and deliver as soon
as reasonably possible) to Buyer correct and complete copies of all plan
documents and amendments thereto and trust agreements and amendments thereto,
the items described in clauses (B), (C) and (E) of the preceding sentence, and
all correspondence and other information in a Seller or any ERISA Affiliate's
possession relating to any anticipated increases in contribution rates with
respect to such plan, and (ii) set forth in Schedule 5.1.21(c) is a true and
complete list of the amounts which each of the Sellers and each ERISA Affiliate
paid to such plan with respect to each of the calendar years 1993 through 1995.
Sellers have delivered (or will deliver) to Buyer with respect to each of the
Multiemployer Plans and with respect to each of the Prior Pension Plans which is
a "multiemployer plan" (the "PRIOR MULTIEMPLOYER PLANS") correct and complete
copies of all correspondence and other information in the Seller or any ERISA
Affiliate's possession relating to the amount for which a Seller or any ERISA
Affiliate is or could be liable under Title IV of ERISA for a total or partial
withdrawal as of any date or for any other reason.
(d) Except as to Multiemployer Plans (as to which this
representation is made only to Sellers' Actual Knowledge), there is no pending
claim or, to Sellers' Actual Knowledge, threatened claim in respect of any of
the ERISA Benefit Plans other than claims for benefits in the ordinary course of
business. Except as set forth in Schedule 5.1.21(d), to Sellers' Actual
Knowledge, each of the ERISA Benefit Plans other than any Multiemployer Plans
(i) has been administered in accordance with its terms and (ii) complies in
form, and has been administered in accordance, with the requirements of ERISA
and, where applicable, the Code. Except as specifically identified and explained
in Schedule 5.1.21(d), Sellers and each ERISA Affiliate has complied with the
health care continuation requirements of Part 6 of Title I of ERISA. Except as
provided in Schedule 5.1.21(d), Sellers have no obligation under any ERISA
Benefit Plans or otherwise to provide health or other welfare benefits to any
prior employees or any other person, except as required by Part 6 of Title I of
ERISA.
-35-
<PAGE> 46
Immediately after the Closing and at all times thereafter, no Seller or
any ERISA Affiliate except for any Eliminated Hotel will continue to provide a
group health plan to employees within the meaning of Section 4980B(g)(2) of the
Code. The consummation of the transaction contemplated by this Agreement will
not result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any compensation or benefits
payable to or in respect of any participant. Sellers are in compliance with the
requirements of the Workers Adjustment and Retraining Notification Act of 1988
(the "WARN ACT") and have no liabilities pursuant to WARN, except to the extent
Buyer breaches its representation in Section 7.1.18(ii) hereof.
(e) To Sellers' Actual Knowledge, no proceeding has been
initiated to terminate any Multiemployer Plan, and there has been no "reportable
event" (as such term is defined in Section 4043(b) of ERISA) with respect to any
such plan. To Sellers' Actual Knowledge, no Multiemployer Plan is in
reorganization as described in Section 4241 of ERISA or insolvent as described
in Section 4245 of ERISA. Except as described in Schedule 5.1.21(e), neither any
of Sellers nor any ERISA Affiliate has failed to make a required or disputed
contribution to any Multiemployer Plan or any Prior Multiemployer Plan. Except
as described in Schedule 5.1.21(e), (i) neither any of Sellers nor any ERISA
Affiliate has incurred any liability on account of a "partial withdrawal" or a
"complete withdrawal" (within the meaning of Sections 4205 and 4203,
respectively, of ERISA) from any multiemployer plan (as such term is defined in
Section 3(37) of ERISA) and no such liability has been asserted, and (ii)
neither any of Sellers nor any ERISA Affiliate is bound by a contract or
agreement or has any obligation or liability described in Section 4204 of ERISA.
(f) Except as to Multiemployer Plans (as to which this
representation and warranty is made only to Sellers' Actual Knowledge), neither
the Sellers nor, to Sellers' Actual Knowledge, any other "disqualified person"
(within the meaning of Section 4975 of the Code) or "party in interest" (within
the meaning of Section 3(14) of ERISA) has taken any action with respect to any
ERISA Benefit Plan which could subject any such plan (or its related trust) or
Sellers or any officer, director or employee of any of the foregoing to the
penalty or tax under Section 502(i) or Section 502(l) of ERISA or Section 4975
of the Code.
-36-
<PAGE> 47
(g) To Sellers' Actual Knowledge, Sellers have no potential
liability, whether direct or indirect, contingent or otherwise, under Section
4212(c) of ERISA and with regard to the transactions contemplated herein, there
is no liability under such sections of ERISA.
(h) For purposes of this Agreement, "ERISA AFFILIATE" means
(i) any corporation which at any time on or during the last six years before the
Closing Date is or was a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as a Seller; (ii) any
partnership, trade or business (whether or not incorporated) which at any time
on or during the last six years before the Closing Date is or was under common
control (within meaning of section 414(c) of the Code) with a Seller; and (iii)
any entity which at any time on or during the last six years before the Closing
Date is or was a member of the same affiliated service group (within the meaning
of Section 414(m) of the Code) as either a Seller, any corporation described in
clause (i) or any partnership, trade or business described in clause (ii);
5.1.22 SELLERS' ENVIRONMENTAL REPRESENTATIONS. Sellers have
delivered to Buyer true, correct and complete copies of all written
environmental site assessments, reports and summaries, asbestos surveys, and
operations and maintenance plans described on Schedule 5.1.22 (collectively, the
"ENVIRONMENTAL REPORTS"). To Sellers' Actual Knowledge, the Environmental
Reports are the only reports in Sellers' possession regarding environmental
matters and Hazardous Materials at or near the Hotels. Except as set forth on
Schedule 5.1.22, Sellers have not received any written or, to Sellers' Actual
Knowledge, any oral notice or other communication concerning (i) any violation
or alleged violation of the Environmental Laws, or (ii) any alleged liability
for environmental damages in connection with the existence, use, ownership,
occupancy, operation and/or maintenance of the Real Property and the
Improvements. No writ, injunction, decree, order or judgment relating to the
foregoing is outstanding. There is no pending law suit, claim, proceeding,
citation, directive, summons or, to Sellers' Actual Knowledge, any investigation
pending relating to the existence, use, ownership, occupancy, operation and/or
maintenance of the Real Property and the Improvements, by any Person relating to
any alleged violation of any Environmental Laws or the suspected presence of any
Hazardous Materials thereon. Except as may be
-37-
<PAGE> 48
set forth in the Environmental Reports, no Hazardous Materials are located at
the Hotels, except for such Hazardous Materials as are used in the ordinary
course of Sellers' business and are stored, used and disposed of in compliance
with law. To Sellers' Actual Knowledge, the Real Properties have never been used
for manufacturing, storage or as a dump site for Hazardous Materials, nor are
the Real Properties affected by any Hazardous Materials Contamination. To
Sellers' Actual Knowledge, no real property adjoining the Real Properties has
ever been used as a manufacturing, storage or dump site for Hazardous Materials,
nor is any such adjoining real property affected by Hazardous Materials
Contamination. As used herein, the term "HAZARDOUS MATERIALS" shall mean any
material or substance (i) which is defined as a "hazardous waste" under the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sections 6901 et
seq.), as amended from time to time, and regulations promulgated thereunder;
(ii) which is defined as a "hazardous substance" under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
Sections 9601 et seq.), as amended from time to time, and regulations
promulgated thereunder ("CERCLA"); (iii) which is defined as a hazardous or
toxic substance or waste in any statute, regulation or ordinance adopted by the
State in which any of the Real Properties are located or its agencies or
political subdivisions; (iv) which is petroleum; (v) which is asbestos; (vi)
which is designated as a "hazardous substance" pursuant to Section 311 of the
Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1321) or
listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317);
or (vii) the presence of which on the Real Property is prohibited by any legal
requirement of any governmental authority or which may give rise to a lien for
the benefit of a governmental authority; and which, under the circumstances and
quantities in which any of the foregoing may be found, requires remediation.
"HAZARDOUS MATERIALS CONTAMINATION" shall mean the contamination (whether
presently existing or hereafter occurring) of any of the Real Properties and
Improvements, facilities, soil, ground water, air or other elements on, or of,
the Real Properties by Hazardous Materials, or the contamination of the
Improvements, facilities, soil, ground water, air or other elements on, or of,
any other property as a result of Hazardous Materials at any time emanating from
any of the Real Properties. Except as may be set forth in the Environmental
Reports, to Sellers' Actual Knowledge, there are no underground gasoline, oil or
other storage tanks at any of the Real Properties;
-38-
<PAGE> 49
5.1.23 EMINENT DOMAIN TAKING. To Sellers' Actual Knowledge,
there is no federal, state, county, municipal or other governmental plans to
change the highway or road system in the vicinity of the Real Properties, nor
have Sellers received oral or written notice or other communication from any
governmental authority or officer thereof having the power of eminent domain, of
any pending, proposed or actual eminent domain taking relating to or affecting
all or any portion of any Real Property or of any improvement liens or special
assessments to be made against any of the Assets by any governmental authority;
5.1.24 BROKERS, FINDERS, ETC. Other than Broker, all
negotiations relating to this Agreement and the transactions contemplated hereby
have been carried on without the intervention of any Person acting on behalf of
Sellers, in such manner as to give rise to any valid claim against Sellers or
Buyer for any brokerage or finder's commission, fee or similar compensation.
Sellers shall be fully responsible for and shall assume and pay any and all fees
or brokerage commissions due Broker, and Sellers shall indemnify and hold Buyer
harmless therefrom;
5.1.25 CONSTRUCTION AND RENOVATION WORK; PAYMENT FOR SERVICES.
Except as set forth on Schedule 5.1.25, there is no construction or renovation
work which is incomplete on the date hereof. Any previous construction or
renovation work has been or will be paid for in full by Sellers (except as
indicated to the contrary on Schedule 5.1.25) and, to Sellers' Actual Knowledge,
has been completed in accordance with all applicable governmental regulations.
The remaining work described on Schedule 5.1.25, if any, shall be completed by
Sellers at Sellers' sole cost and expense (except as indicated to the contrary
on said Schedule 5.1.25), shall be performed in a good workmanlike manner in
accordance with all applicable governmental regulations and shall be completed
by the date(s) set forth on Schedule 5.1.25. No services, materials or work have
been supplied to any Hotel for which payment has not been made in full, and no
dispute or claim exists in regard to any such services, materials or work which
could result in any mechanic's or other lien, charge or order for payment of
money being filed against the Assets or the owner of any Hotel. Sellers will, on
or before the Closing Date, pay for all services, materials or work supplied to
the Hotels on or before the Closing Date with respect to the items listed on
Schedule 5.1.25;
-39-
<PAGE> 50
5.1.26 INSURANCE. The insurance covering Sellers and the
Assets is listed in the insurance schedule annexed hereto as Schedule 5.1.26.
Each of said policies is in full force and effect. No notice has been received
by Sellers from the insurance company which issued any of such policies stating
that any of such policies is not in full force and effect, will not be renewed
or will be renewed only at a higher premium rate than is presently payable
therefor. True and correct copies of each insurance policy have been (or will
be) furnished to Buyer. Since the dates on which Sellers purchased each of the
Hotels, all liability insurance policies maintained by Sellers with respect to
the Hotels for each year that Sellers have owned the respective Hotels
(collectively, "SELLERS' PRIOR LIABILITY INSURANCE POLICIES") have been, except
as provided in Schedule 5.1.26, written on an "occurrence" basis, and copies of
Sellers' Prior Liability Insurance Policies (or certificates or other
documentation acceptable to Buyer in its reasonable discretion to evidence such
"occurrence" basis coverage was in effect during all periods of ownership) have
been (or will be) delivered to Buyer;
5.1.27 FIRPTA. Each Person comprising "Sellers" represents and
warrants that it is not a "foreign person" or a "U.S. real property holding
corporation" for purposes of Section 1445 of the Internal Revenue code or any
applicable regulations promulgated thereunder;
5.1.28 PREPAID FEES AND DEPOSITS. Annexed hereto as Schedule
5.1.28 is a list of all prepaid fees and deposits relating to the Hotels;
5.1.29 TRADE ASSOCIATIONS. Annexed hereto as Schedule 5.1.29
is a list of all trade associations to which Sellers or any of the Hotels belong
and the respective dues and fees therefor;
5.1.30 BILLBOARDS/SIGNS. All billboards or signs located off
the Real Property which are used to advertise the Hotels, and the contracts or
leases therefor, are identified on Schedule 5.1.30 (collectively, the "BILLBOARD
LEASES"). The Billboard Leases are in full force and effect and there are no
defaults thereunder by either party thereto. True and complete copies of the
Billboard Leases have been delivered to Buyer;
-40-
<PAGE> 51
5.1.31 SELLERS' FINANCIAL STATEMENTS; OPERATING STATEMENTS.
Sellers have furnished to Buyer true, correct and complete copies of the
following (collectively, the "FINANCIAL STATEMENTS"): (i) annual audited
consolidated financial statements of HOD Ventures for the past three (3) years,
prepared in accordance with GAAP by Coopers & Lybrand, (ii) the financial
statements for each of the Subsidiary Entities for the past three (3) years,
prepared in accordance with GAAP, to the extent same have been prepared, (iii)
monthly and annual financial statements and detailed operating statements
(prepared in accordance with GAAP) for each Hotel for the past three (3) years),
(iv) annual operating and capital budgets for 1994, 1995 and 1996 for each of
the Hotels, including cash flow projections for the upcoming year, presented on
a monthly basis. The information contained in the Financial Statements is true,
correct and complete in all material respects, and there is no material
liability (contingent or otherwise) of HOD Ventures or any Subsidiary Entity not
reflected in such Financial Statements or in the notes thereto. No event, act or
condition has occurred which has had (or could result in) a material adverse
change in the financial condition of any of the Persons constituting Sellers or
in the financial operations of any of the Hotels since the date of the most
recent Financial Statements delivered to Buyer;
5.1.32 PHYSICAL CONDITION OF THE ASSETS. Sellers have
delivered to Buyer true, correct and complete copies of all written
architectural and engineering surveys, assessments, reviews, report and
summaries described on Schedule 5.1.32 (collectively, the "ARCHITECTURAL AND
ENGINEERING REPORTS"). The Architectural and Engineering Reports are the only
reports in Sellers' possession regarding architectural, engineering, structural
matters at the Hotels and the structural soundness thereof;
5.1.33 EXISTING IDA DEBT. Annexed hereto as Schedule 5.1.33 is
a list of all of the documents evidencing or otherwise related to the Existing
IDA Debt (the "LOAN DOCUMENTS"), and there have been no modifications or
amendments thereto except as set forth in said Schedule 5.1.33. True and
complete copies of each of the Loan Documents have been (or will be) delivered
to Buyer. The loans constituting the Existing IDA Debt are all in good standing,
and the applicable Seller(s) are not in default thereunder, nor, to Sellers'
Actual Knowledge, has any event occurred which with the passage of time or the
giving of notice
-41-
<PAGE> 52
or both would constitute a default under the Loan Documents. The Loan Documents
permit the sale of the Hotels subject to the Existing IDA Debt without the
consent of the holder(s) thereof, or, if such consent is required, Sellers will
use Sellers' best efforts to obtain such consent on or prior to the Closing
Date. As of February 29, 1996, the outstanding principal balance of the Existing
IDA Debt is $5,508,154.58;
5.1.34 NO COMPETING VENTURES. Neither Sellers nor any
affiliate of Sellers owns, leases or operates any lodging or restaurant
facility, or any other real property (including, but not limited to, vacant
land), within a two (2) mile radius of any of the Hotels. Neither Sellers nor
any affiliate of Sellers has entered into an option or contract to acquire any
such facility or other real property within that area;
5.1.35 RATE AGREEMENTS/RESERVATIONS. Neither Sellers nor any
affiliate, agent or employee of Sellers has entered into any written agreement
or commitment to make rooms or any portion of any of the Hotels available at any
time after the Closing Date or quoting or guaranteeing certain rates or fees,
except for the agreements described in Exhibit 5.1.35 (the "RATE AGREEMENTS")
and reservations entered into by Sellers in the ordinary course of Sellers'
business at rates consistent with Sellers' past practices. True and complete
copies of each of the Rate Agreements have been (or will be) delivered to Buyer.
During the Inspection Period, Sellers shall provide Buyer and its agents free
access to Sellers' reservations, records and files and immediately after the
expiration of the Inspection Period, Sellers will deliver to Buyer (from time to
time) copies of all schedules of advance bookings with respect to the period
after the Closing Date;
5.1.36 MATERIAL FACTS. No statement by Sellers in this
Agreement contains any untrue statement of a material fact or, considered in the
context of which presented, knowingly omits a material fact necessary to make
the statement contained therein not misleading. All documents delivered by
Sellers to Buyer are true and complete originals or copies thereof and have not
been modified or terminated in any way other than as indicated on the documents
furnished to Buyer.
-42-
<PAGE> 53
5.2 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer hereby covenants,
represents and warrants to Sellers as of the Effective Date and as of the
Closing Date as follows:
5.2.1 GOOD STANDING; DUE AUTHORIZATION.
(i) REALTY PARTNERSHIP. Realty Partnership is
a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware. Realty Partnership
has full power and authority to make, execute, deliver and perform this
Agreement, and neither the execution and delivery of this Agreement nor
the consummation of any of the transactions contemplated herein will
violate or contravene the provisions of any agreement, order, judgment
or directive to which it may be a party or by which it may be bound.
The person executing this Agreement on behalf of Starwood Lodging
Trust, a Maryland real estate investment trust, the general partner of
Realty Partnership, has been duly authorized to do so. The consummation
of the transactions contemplated by this Agreement will not render
Realty Partnership insolvent;
(ii) OPERATING PARTNERSHIP. Operating
Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware. Operating
Partnership has full power and authority to make, execute, deliver and
perform this Agreement, and neither the execution and delivery of this
Agreement nor the consummation of any of the transactions contemplated
herein will violate or contravene the provisions of any agreement,
order, judgment or directive to which it may be a party or by which it
may be bound. The person executing this Agreement on behalf of Starwood
Lodging Corporation, a Maryland corporation, the general partner of
Operating Partnership, has been duly authorized to do so. The
consummation of the transactions contemplated by this Agreement will
not render Operating Partnership insolvent; and
5.2.2 MATERIAL FACTS. No statement by Buyer in this Agreement
contains any untrue statement of a material fact or, considered in the context
of which presented, knowingly omits a material fact necessary to make the
statement contained therein not misleading. Any documents delivered by Buyer to
Sellers are
-43-
<PAGE> 54
true and complete originals or copies thereof and have not been modified or
terminated in any way other than as indicated on the documents furnished to
Sellers.
5.3 SURVIVAL PERIOD - PARTIES' OBLIGATIONS. Any and all
representations, warranties, agreements, covenants, obligations and undertakings
of any kind or nature, made by, or to be performed or undertaken by any Party or
the Management Company, as the case may be, whether prior to or after the
Closing Date, as set forth herein, or in any Schedule, Exhibit, Certificate or
Financial Statement delivered by any Party and/or the Management Company
incident to the transactions contemplated hereby (collectively, the "PARTIES'
OBLIGATIONS") shall be deemed to have been relied upon by the receiving Party
and shall survive the Closing Date (regardless of any investigation made by or
on behalf of any Party or the Management Company) for a period of one hundred
eighty (180) days after the Closing Date; provided, however, that if the Closing
with respect to any individual Hotel(s) is adjourned, as to such Hotel(s), the
Parties' Obligations shall survive until one hundred eighty (180) days after the
Closing with respect to such Hotel(s) (any such adjourned closing date, a
"POSTPONED CLOSING DATE"), and in no event shall any claim be made or action be
brought by any Party for breach of any Parties' Obligations after the expiration
of the applicable one hundred eighty (180) day period; except that there shall
be no limitation (other than the applicable statute of limitations) in respect
of any claim brought by any Party for fraud by any other Party and/or Management
Company, or any Party's and/or Management Company's respective officers,
employees or agents in connection with any of the Parties' Obligations made by
any Party and/or Management Company, as the case may be, or the transactions
contemplated hereby.
5.4 INDEMNIFICATION.
5.4.1 SELLERS' INDEMNIFICATION OF BUYER. Sellers shall jointly
and severally indemnify and hold Buyer harmless against all claims, suits,
obligations, liabilities, damages, losses, costs, and expenses, including,
without limitation, reasonable attorneys' fees and disbursements, based upon,
arising out of, or resulting from: (i) any breach of any of the representations
or warranties of Sellers and/or Management Company set forth herein; (ii) any of
the Excluded Assets; (iii) any actual or alleged failure by Sellers to comply
with any
-44-
<PAGE> 55
applicable bulk sales or fraudulent conveyance act or other applicable law
requiring the giving of notice prior to transfer of all or substantially all of
a corporation's assets or a substantial portion of any business operated by it;
(iv) any actual or alleged liability under CERCLA, any successor statute, or any
analogous state law arising with respect to any of the Hotels and relating to
the period prior to the Closing Date, or any Postponed Closing Date, as the case
may be; (v) any liability arising from or connected with the improper storage,
handling or disposal by Sellers of any Hazardous Material prior to the Closing
Date, or any Postponed Closing Date, as the case may be; (vi) the ERISA Benefit
Plans, the Prior Pension Plans, the Non-ERISA Commitments, except to the extent
expressly assumed by Buyer hereunder, multiemployer plan withdrawal liability
resulting from Sellers' withdrawal from any multiemployer plan, Sellers'
liability under Section 4204 of ERISA, and violations existing as of the Closing
Date under Part 6 of Title I of ERISA; and (vii) except to the extent prorated
pursuant to the provisions hereof or expressly assumed by Buyer, any and all
liability relating to the Hotels or otherwise relating to Sellers' business,
other than the items described in clauses (i) through (vi) above, inclusive,
with respect to the period prior to the Closing Date or the Postponed Closing
Date, as the case may be, with respect to a particular Hotel; and (viii)
obligations of Sellers pursuant to Section 7.1.19 hereof.
5.4.2 BUYER'S INDEMNIFICATION OF SELLERS. Buyer shall
indemnify and hold Sellers harmless against all claims, suits, obligations,
liabilities, and damages, including, without limitation, reasonable attorneys'
fees and disbursements, based upon, arising out of, or resulting from: (i) any
breach of any of the representations or warranties of Buyer set forth herein;
(ii) any of the Assumed Liabilities; (iii) any liability under the WARN Act, and
any similar state statute applicable to the Hotel Employees, except any such
liability with respect to which Sellers have breached a representation set forth
in the last sentence of Section 5.1.21(d) hereof and except with respect to
Hotel Employees of Eliminated Hotels; (iv) any actual or alleged liability under
CERCLA, any successor statute, or any analogous state law arising with respect
to any of the Hotels and relating to the period from and after the Closing Date,
or
-45-
<PAGE> 56
any Postponed Closing Date, as the case may be; (v) any liability arising from
or connected with the improper storage, handling or disposal by Buyer of any
Hazardous Material on or after the Closing Date, or any Postponed Closing Date,
as the case may be; (vi) except to the extent prorated pursuant to the
provisions hereof or expressly assumed by Sellers or expressly not assumed by
Buyer, any and all liability relating to the Hotels, other than the items
described in clauses (i) through (v) above, inclusive, with respect to the
period from and after the Closing Date or the Postponed Closing Date, as the
case may be, with respect to a particular Hotel, and (vii) obligations of Buyer
pursuant to Section 7.1.18(ii) or Section 7.1.19 hereof.
5.4.3 PROCEDURE FOR CLAIMS UNDER INDEMNITY PROVISIONS. Any
claim for indemnification under this Agreement shall be asserted by written
notice from the Party seeking indemnification (the "INDEMNITEE") to the other
Party (the "INDEMNITOR"), describing in reasonable detail the nature and amount
of such claim. Claims for indemnification hereunder that are not related to any
action or claim filed or made against the Indemnitee by a third party shall be
resolved in accordance with Section 5.5 hereof. In the event of any claims for
indemnification hereunder that are based upon an action or claim filed or made
against the Indemnitee by a third party, then the Indemnitor shall have the
right to negotiate a settlement of such action or claim or to defend any such
action or claim at its sole cost and expense, but subject to the consent of the
Indemnitee, which consent shall not be unreasonably withheld, conditioned or
delayed. If the amount in controversy in connection with any such third party
claim exceeds Fifty Thousand Dollars ($50,000.00), then such claim will be
defended by counsel approved by the Indemnitee, which approval shall not be
unreasonably withheld, conditioned or delayed. In calculating the loss or damage
which an Indemnitee is entitled to recover hereunder (i) no loss or damage shall
be deemed to have been sustained by such Party to the extent of any proceeds
received by such Party from any insurance policies with respect thereto and (ii)
the amount of such loss or damage shall take into account any beneficial tax
effect of such loss or damage to the Indemnitee.
5.4.4 LIMITATIONS ON INDEMNITY CLAIMS. Notwithstanding
anything to the contrary contained herein and except as otherwise provided in
Section 5.4.5 hereof:
(i) Buyer shall not assert any claims under Section 5.4.1(i),
Section 5.4.1(iv) or Section 5.4.1(v) hereof, and Seller shall not
assert any claims under Section 5.4.2(i),
-46-
<PAGE> 57
Section 5.4.2(iv) or Section 5.4.2(v) hereof, as the case may be,
unless and until the aggregate of such Party's claims thereunder
exceeds Two Hundred Fifty Thousand Dollars ($250,000) (the
"INDEMNIFICATION THRESHOLD"), and Buyer and Sellers shall each bear the
amount of such claims up to the Indemnification Threshold; provided,
however, that in the event that the aggregate amount of any claim(s)
asserted by a Party exceeds the Indemnification Threshold, then subject
to the procedures set forth in Section 5.4.3 hereof, the Indemnitor
shall be liable to pay the entire amount of all such claims (including
the portion of such claims constituting the Indemnification Threshold)
up to the Initial Maximum Indemnity Amount or the Subsequent Maximum
Indemnity Amount, as the case may be;
(ii) the aggregate liability of either Buyer or Sellers for
breach of any representation, warranty, agreement or covenant in this
Agreement shall not exceed Five Million Dollars ($5,000,000) (the
"INITIAL MAXIMUM INDEMNITY AMOUNT") with respect to claims made on or
prior to the ninetieth (90th) day after the latest to occur of the
Closing Date or the last Postponed Closing Date, as the case may be
(such date, the "FIRST INDEMNITY REDUCTION DATE"); provided, however,
that the aggregate liability of either Buyer or Sellers for breach of
any representation, warranty, agreement or covenant in this Agreement
shall be reduced to Two Million Five Hundred Thousand Dollars
($2,500,000) (the "SUBSEQUENT MAXIMUM INDEMNITY AMOUNT") from and after
the ninety-first (91st) day after the latest to occur of (a) the
Closing Date or (b) the last Postponed Closing Date, as the case may be
(such date, the "SECOND INDEMNITY REDUCTION DATE"), if and to the
extent that the other Party hereto shall not have made claims in the
aggregate amount of at least $2,500,000 prior to such ninety-first
(91st) day; and
(iii) no claim for indemnification under this Section 5.4
shall be made or asserted after the expiration of the survival period
specified in Section 5.3 hereof; provided, however, that any claim made
under Section 5.4 hereof for which notice has been delivered prior to
the expiration of such survival period shall be deemed to have been
made and asserted in a timely manner and shall be prosecuted to
completion, regardless of whether such survival period expires prior to
the resolution thereof.
-47-
<PAGE> 58
5.4.5 NO LIMITATION ON CLAIMS FOR FRAUD. None of the
limitations contained in Section 5.4.4 hereof shall apply to any claim based on
any fraud by Sellers, Management Company or any of their respective officers,
employees, or agents in connection with any representation or warranty made by
Sellers and/or Management Company herein or the transactions contemplated by
this Agreement and the Conveyance Documents.
5.5 DISPUTES TO BE RESOLVED THROUGH EXPEDITED ARBITRATION. The Parties
hereto agree that any claims for indemnification hereunder that are not related
to any action or claim filed or made against the Indemnitee by a third party
shall be resolved under the expedited arbitration procedure set forth below.
5.5.1 In any circumstance for which arbitration is
specifically provided hereunder, the Party desiring arbitration shall give
notice to that effect to the other Party meeting the requirements of the New
York Civil Practice Law and Rules ("CPLR") Section 7503(c), or any successor
statute, and shall in such notice appoint a person as arbitrator on its behalf.
Within ten (10) days after receipt of such notice, the other Party by notice to
the original Party shall appoint a second person as arbitrator on its behalf.
The arbitrators thus appointed shall appoint a third person, and such three (3)
arbitrators shall as promptly as possible determine such matter, provided,
however, that:
(i) If the second arbitrator shall not have been
appointed within the ten (10) day period as aforesaid, the
first arbitrator shall proceed to determine such matter and
shall render his decision and award in writing within thirty
(30) days after the expiration of said ten (10) day period;
and
(ii) If the two (2) arbitrators are appointed by the
parties and shall be unable to agree, within ten (10) days
after the appointment of the second arbitrator, upon the
appointment of a third arbitrator, they shall give written
notice to the Parties of such failure to agree, and, if the
Parties fail to agree upon the selection of such third
arbitrator within ten (10) days after the arbitrators
appointed by the Parties give notice as aforesaid, then within
five (5) days thereafter either of the Parties upon notice to
-48-
<PAGE> 59
the other Party may request such appointment by the New York
City Office of the American Arbitration Association or any
successor organization (the "AAA"), or in its absence,
refusal, failure or inability to act, may apply to the
presiding Justice of the Appellate Division of the Supreme
Court of the State of New York (First Department) (the
"COURT"), for the appointment of such arbitrator, and the
other Party shall not raise any question as to the Court's
full power and jurisdiction to entertain the application and
make the appointment.
5.5.2 Each arbitrator shall be a qualified and impartial
person who shall have had at least ten (10) years' experience in a calling
connected with the matter of the dispute.
5.5.3 The arbitration shall be conducted, to the extent
consistent with this Section, in accordance with the then prevailing rules of
the AAA. The arbitrators, if more than one, shall render their decision and
award in writing, upon the concurrence of at least two of their number, within
thirty (30) days after the appointment of the third arbitrator. Such decision
and award or the decision and award of the single arbitrator as provided in
Section 5.5.1(i) hereof, shall be binding and conclusive on the Parties, shall
constitute an "award" by the arbitrator within the meaning of the AAA rules and
applicable law, and counterpart copies thereof shall be delivered to each of the
Parties. In rendering such decision and award, the arbitrators shall not add to,
subtract from or otherwise modify the provisions of this Agreement. Judgment may
be had on the decision and award of the arbitrators so rendered in any court of
competent jurisdiction.
5.5.4 Each Party shall pay the fees and expenses of the one of
the two original arbitrators appointed by or for such Party, and the fees and
expenses of the third arbitrator and all other expenses of the arbitration
(other than the fees and disbursements of attorneys or witnesses for each Party)
shall be borne by the Parties equally.
5.6 NO DISTRIBUTIONS OR LIQUIDATIONS BY SELLERS. Each of HOD Ventures
and the Subsidiary Entities hereby agrees that for the period prior to the First
Indemnity Reduction Date such entities shall reserve and shall retain
possession, dominion and control over at least Five Million Dollars ($5,000,000)
in liquid assets and, for the period commencing on the First Indemnity Reduction
Date and ending on the Second Indemnity Reduction Date, such entities shall
reserve and shall retain possession, dominion and
-49-
<PAGE> 60
control over at least Two Million Five Hundred Thousand Dollars (2,500,000) and,
during such periods (collectively, the "RESTRICTED PERIOD"), shall not
distribute (by dividend, loan, in liquidation or otherwise) to their respective
equityholders, creditors, shareholders, officers, directors or any other party
whatsoever any of the proceeds of the sale of the Assets which would leave
Sellers with less than the aforementioned minimum amounts in liquid assets. On
or before the expiration of the Restricted Period, Buyer may notify Sellers in
writing (each, an "ADJUSTMENT CLAIM") that Buyer has one (1) or more claims with
respect to, arising from, or relating to (i) a readjustment of any of the
Closing prorations and apportionments under Article 11 hereof, (ii) any claim
under the indemnification provisions set forth in this Agreement, (iii) any
breach of any representation, warranty or agreement set forth herein or (iv) any
of Sellers' obligations under this Agreement. Any such Adjustment Claim shall
set forth the maximum possible aggregate amount of such claim(s) (the "MAXIMUM
RESERVE AMOUNT"), as determined by Buyer in its reasonable discretion, subject
to the Initial Maximum Indemnity Amount or the Subsequent Maximum Indemnity
Amount, as applicable, in accordance with Section 5.4.4(ii) hereof. In the event
that Sellers have received an Adjustment Claim on or before the end of the
Restricted Period, then Sellers shall deposit with Escrow Agent a sum equal to
the Maximum Reserve Amount not later than two (2) Business Days after the
expiration of the Restricted Period. Escrow Agent shall hold such amounts
pursuant to Section 2.3 hereof (except that such funds shall be invested in
Permitted Investments selected by Sellers) until such time as all Adjustment
Claim(s) have been resolved in accordance with this Agreement and such
resolution has been confirmed in a written instrument executed by the Parties or
by the arbitrator(s), whereupon Escrow Agent shall disburse the funds in
accordance with the Parties' joint instructions or the arbitrators'
instructions.
-50-
<PAGE> 61
ARTICLE 6
ELIMINATED HOTELS
6.1 ELIMINATED HOTELS. This Agreement contemplates the sale, transfer,
assignment and conveyance of all nine (9) of the Hotels; however, under certain
contingencies set forth in Section 3.1.3 (Title Objections), Section 3.2.2
(Major Deficiencies), Section 5.1.19 (Non-Compliance with Laws), Section 9.1.3
(Franchise Agreements [St. Louis Suites]), Section 8.4 (Substantial Casualty)
and Section 8.7 (Substantial Condemnation), this Agreement provides for either
or both of the Parties, as the case may be, to elect to exclude one (1) or more
of the Hotels from the terms, provisions, covenants and conditions of this
Agreement and to terminate this Agreement as to such excluded Hotel (any such
Hotel which is eliminated from the terms, provisions, covenants and conditions
of this Agreement is hereinafter sometimes referred to, individually, as an
"ELIMINATED HOTEL," or, collectively, with any other Hotels which have been so
eliminated, the "ELIMINATED HOTELS"). Buyer acknowledges that pursuant to
Section 3.2.2 hereof, no more than one (1) of the Hotels may become an
Eliminated Hotel as a result of a Major Deficiency, and the Parties agree that
Sellers failure under Section 9.1.3 to cure the existing defaults presently
affecting St. Louis Suites shall not be included within the definition of "Major
Deficiency."
6.2 SELLERS' OBLIGATION TO CLOSE CONDITIONAL ON MINIMUM NUMBER OF
HOTELS.
6.2.1 RIGHT TO TERMINATE THIS AGREEMENT. Buyer and Sellers
acknowledge that, in the event that Buyer for any reason whatsoever does not
acquire (or is not obligated to acquire) an aggregate of at least five (5) of
the Hotels, or if this Agreement has been terminated with respect to more than
three (3) Eliminated Hotels, either Party may, by written notice to Escrow Agent
and to the other Party, direct Escrow Agent to return the Deposit to Buyer, and
upon the delivery of the Deposit to Buyer, this Agreement shall be null and
void, and neither Party shall have any further rights against, or obligations
to, the other Party. For the purposes of this Section 6.1.2, the Parties confirm
that in the event St. Louis Suites is eliminated from the scope of this
Agreement in accordance with Section 9.1.3 hereof, St. Louis Suites shall not be
considered an Eliminated Hotel for
-51-
<PAGE> 62
the purposes of determining whether there are three (3) Eliminated Hotels.
6.2.2 SELLERS' ADDITIONAL TERMINATION RIGHT. Sellers shall
have the right to terminate this Agreement by written notice to Escrow Agent and
Buyer in the event that either (i) there is more than one (1) Eliminated Hotel
which was eliminated from the terms, provisions, covenants and conditions of
this Agreement under Section 3.1.3 (Title Objections), (ii) if there is more
than one (1) Eliminated Hotel which was eliminated from the terms, provisions,
covenants and conditions of this Agreement under Section 3.2.2 (Major
Deficiency), (iii) if there is more than one (1) Eliminated Hotel which was
eliminated from the terms, provisions, covenants and conditions of this
Agreement under Section 5.1.19 (Major ADA Violation) or (iv) if there is more
than one (1) Eliminated Hotel which was eliminated from the terms, provisions,
covenants and conditions of this Agreement under the provisions of either or
both of Section 8.4 (Substantial Casualty) or Section 8.7 (Substantial
Condemnation). For the purposes of this Section 6.2.2, Sellers acknowledge that
they shall have no rights to terminate this Agreement with respect to the
elimination of St. Louis Suites under the provisions of Section 9.1.3 hereof.
Upon receipt of such termination notice, Escrow Agent shall return the Deposit
to Buyer, and upon the delivery of the Deposit to Buyer, this Agreement shall be
null and void, and neither Party shall have any further rights or obligations
hereunder.
ARTICLE 7
COVENANTS OF THE PARTIES UNTIL CLOSING
7.1 COVENANTS OF THE PARTIES UNTIL THE CLOSING. The Sellers and Buyer
agree that between the date hereof and the Closing Date, the Parties shall
undertake the following:
7.1.1 OPERATION OF THE HOTELS. Subject only to conditions
beyond Sellers' reasonable control, Sellers shall continue to operate and
maintain the Hotels in the usual and customary manner, and shall, among other
things:
(i) BOOKINGS; RESERVATIONS. Accept cancellations of
Reservations and return Reservation Deposits, and make new Reservations
and accept new Reservation Deposits, and enter
-52-
<PAGE> 63
into new rate agreements, all in accordance with Sellers' prior
practices; provided, however, that Sellers shall not enter into any
contract rate agreement(s), unless Buyer has approved such contract
rate agreement(s), in writing;
(ii) PERSONAL PROPERTY; Inventory. Order and purchase Personal
Property in quantities sufficient to satisfy the representations and
warranties contained in Article 5 hereof, and Sellers agree that
Sellers shall not place any order for Personal Property or inventory in
excess of $10,000 without Buyer's prior written consent which shall not
be unreasonably withheld, conditioned or delayed;
(iii) EMPLOYEE MATTERS PRIOR TO CLOSING. Hire and discharge
Hotel Employees consistent with Sellers' prior practices, except that
no General Manager or Assistant General Manager shall be hired or fired
(except for cause), and no union contract or other employment agreement
of any kind shall be entered into, without, in each such instance,
Buyer's prior written consent, which consent may be granted or withheld
in Buyer's sole discretion; provided, however, that the foregoing
restrictions shall not be deemed to restrict Sellers' ability to
transfer any General Manager or Assistant General Manager from one (1)
Hotel to another Hotel. Sellers shall continue making all payments
required under any and all Benefit Plans;
(iv) REAL PROPERTY LEASES, CONTRACTS, SPACE LEASES, PERSONAL
PROPERTY LEASES, BILLBOARD LEASES. Subject to Buyer's prior written
consent, which consent shall not be unreasonably withheld or delayed,
renew any of the existing Real Property Leases, Contracts, Personal
Property Leases, Billboard Leases or Space Leases or enter into new
Real Property Leases, Contracts, Personal Property Leases, Billboard
Leases or Space Leases, all in the ordinary course of Sellers' business
and consistent with Sellers' prior practices. No consent shall be
required if the renewal or new Contract, Personal Property Lease,
Billboard Lease or Space Lease is terminable upon thirty (30) days
notice at Buyer's option commencing on the Closing Date. Buyer's
withholding of consent to any renewal or new Space Lease shall not be
deemed unreasonable if the proposed Space Lease either (w) is to an
affiliate of Seller or to a party with little or no retail experience
or who would otherwise be
-53-
<PAGE> 64
financially or morally unacceptable to a reasonably prudent landlord,
or (x) provides for a rental below the rental currently being charged
for the space, or (y) is for a term in excess of one (1) year, or (z)
contains other terms which are not customary in a lease of this nature.
If Buyer objects to the renewal of an existing Space Lease or to the
execution of a new Space Lease, notwithstanding that such objection
might otherwise be deemed "unreasonable," Sellers shall nevertheless
refrain from entering into the proposed Space Lease, provided Buyer
agrees to pay to Sellers an amount equal to the rental which would have
been paid to Sellers under the proposed Space Lease during the period
prior to the Closing, as and when such rent would have been due and
payable; and
(v) TAX PROCEEDINGS; TAX REFUNDS. Sellers may institute and/or
continue any proceeding or proceedings for the reduction of the
assessed valuation of the Real Properties, the Improvements or any
portion thereof for real estate taxes, or of any rate applicable
thereto. The net amount of any tax refunds or credits (after deduction
of all costs and expenses thereof, including legal fees) with respect
to any portion of a Real Property and the related Improvements for a
tax period in which the Apportionment Date occurs, subject to Section
11.11.3, shall be apportioned between Sellers and Buyer as of the
Apportionment Date and promptly paid. The provisions of this Section
7.1.1(v) shall survive the Closing Date in accordance with Section 5.3
hereof.
7.1.2 FRANCHISE AGREEMENTS. Sellers shall not cancel, renew,
modify or enter into any new Franchise Agreement without Buyer's prior written
approval, which approval may be granted or withheld by Buyer for any reason or
no reason in Buyer's sole discretion. Sellers shall use their best efforts to
obtain any necessary consents of the Franchisors under the Franchise Agreements.
Buyer acknowledges that the Franchise Agreements may not be assignable by
Sellers to Buyer, and in such event, Buyer shall apply for and use Buyer's
reasonable efforts to obtain the applicable Franchisor's consent.
7.1.3 EXISTING IDA DEBT.
-54-
<PAGE> 65
(i) BUYER'S OPTION TO ASSUME THE EXISTING IDA DEBT. On or
before the date which is thirty (30) days after the Effective Date,
Buyer shall notify Sellers whether Buyer desires to assume Sellers'
obligations under the Loan Documents and purchase the Allentown Hilton
subject to the Existing IDA Debt. Until such time as Buyer has notified
Sellers whether Buyer will elect to assume the Sellers' obligations
under the Loan Documents, Sellers shall not cancel, renew or modify the
Loan Agreements, nor shall Sellers prepay any amounts payable
thereunder. In the event Buyer does not elect to assume the Existing
IDA Debt, then Sellers shall prepay the amounts outstanding under the
Loan Documents and shall exercise its rights to acquire the fee simple
interest in and to the Allentown Hilton, and Sellers shall be obligated
to cause the Lehigh County Industrial Development Authority to sell,
transfer and convey to Buyer the Allentown Hilton free and clear of the
Loan Documents or any other exception to title relating to the Existing
IDA Debt and subject only to the Permitted Encumbrances. Sellers shall
pay any fees, charges or other costs incurred in connection with any
such prepayment; provided, however, that Buyer and Sellers shall each
pay one-half (1/2) of any state or local real property transfer taxes
imposed in connection with the conveyance of the Allentown Hilton by
the Lehigh County Industrial Development Authority to Buyer (or its
affiliated designee, in accordance with the terms of this Agreement).
(ii) BUYER'S ELECTION TO ASSUME THE EXISTING IDA DEBT. In the
event that Buyer elects to assume Sellers' obligations under the Loan
Documents, Sellers shall not cancel, renew or modify any document
evidencing or securing the Existing IDA Debt or any part thereof
without Buyer's prior written approval, which approval may be granted
or withheld by Buyer for any reason or no reason in Buyer's sole
discretion. Sellers shall continue to make all regularly scheduled
payments due on the Existing IDA Debt in a timely manner, and shall not
voluntarily prepay any portion of the Existing IDA Debt without Buyer's
prior written consent, which consent may be granted or withheld in
Buyer's sole discretion. Sellers shall use Sellers' reasonable efforts
to obtain consent of parties to the Existing IDA Debt documents, to the
extent such consent is required in connection with the sale, subject to
the
-55-
<PAGE> 66
Existing IDA Debt, of the Allentown Hilton, and upon request by
Sellers, Buyer agrees to cooperate reasonably with Sellers in obtaining
such consent. Buyer shall pay the assumption fee which may be imposed
by the Lehigh County Industrial Development Authority in connection
with Buyer's assumption of the Loan Documents.
7.1.4 REPAIRS, MAINTENANCE AND CAPITAL IMPROVEMENTS. Sellers,
at Sellers' sole cost and expense, shall continue to make all repairs and
replacements, structural and non-structural, ordinary and extraordinary,
required with respect to any portion of the Hotels, which a prudent owner and
operator would make in the ordinary course in a manner consistent with Sellers'
prior practice.
7.1.5 INSURANCE. Sellers will maintain the insurance set forth
on Schedule 5.1.26 in full force and effect and will not decrease the amount
thereof without Buyer's prior written consent. Sellers shall comply with any
notice or request from any such insurance company received prior to the Closing
Date.
7.1.6 DUE DILIGENCE ACTIVITIES. Sellers will give to Buyer,
its attorneys, accountants, engineers and other representatives, during normal
business hours and as often as may be requested, full access to any and all
parts of the Assets and to all books, records, reservation records and
information and files relating to the Assets. Sellers will furnish to Buyer all
information concerning the Assets which Buyer, its attorneys, accountants,
engineers or other representatives shall reasonably request or which Sellers
reasonably believe is material or could result in a material adverse change in
the business operations or financial condition of any Person comprising Sellers
or any Hotel. Buyer may, during the hours 9 A.M. to 5 P.M., and upon reasonable
advance notice, at Buyer's sole expense, (i) cause the Hotels and any part
thereof to be inspected by such engineers, architects and others acting on
behalf of Buyer, as Buyer may designate, and (ii) cause a full or partial
physical count of the Personal Property to be made. Such inspections and counts
shall in all material respects be conducted in a manner and at such times as
shall not interfere (in other than a de minimus amount) with the use and
enjoyment of the Hotels by any guests, tenants, employees or occupants thereof
or thereat.
-56-
<PAGE> 67
7.1.7 NO BREACH OF REPRESENTATIONS AND WARRANTIES. Sellers
will not take any action which would cause or constitute a breach of any of the
representations or warranties set forth herein, nor will Sellers fail to take
any action, the omission of which would cause or constitute a breach of any of
the representations or warranties set forth herein.
7.1.8 NOTICE OF BREACH OF REPRESENTATIONS AND WARRANTIES.
Promptly after becoming aware of any event which could cause or constitute a
breach, or, if it occurred prior to the date of this Agreement, would have
caused or constituted a breach, of any of the representations and warranties set
forth herein, Sellers will notify Buyer of such event and will use its best
efforts to promptly remedy or to prevent such breach.
7.1.9 NO LIENS; NO NEW AGREEMENTS. Sellers will not make,
grant or suffer any mortgage, lien, pledge, charge, easement, right-of-way,
covenant, restriction or other encumbrance on or with respect to the Assets,
except for Permitted Encumbrances, nor will they enter into any other
agreements, contracts or commitments with respect to the Assets except in the
ordinary course of business and as otherwise permitted herein.
7.1.10 COMPLIANCE WITH LAW. Sellers will comply in all
material respects with all material federal, state and municipal laws,
ordinances, directives, orders, regulations and requirements which apply to the
Assets, and (except as expressly set forth to the contrary in Section 5.1.19
with respect to Major ADA Violations) will promptly remedy any violation thereof
of which notice shall have been given by any governmental authority having
jurisdiction so that the Assets shall be conveyed free of the same.
7.1.11 TAXES.
(i) Sellers will pay, as and when due and payable, all taxes
and assessments imposed on or against the Assets or due in connection
with the operation of the Assets or the hotel businesses thereon, all
payments due to vendors, purveyors and other trade creditors, and all
other debts and obligations relating to the Assets or the operation of
the hotel businesses thereon.
-57-
<PAGE> 68
(ii) In each state in which one (1) or more of the Hotels is
located, Sellers shall comply with the applicable state taxing
authorities', commissions' and agencies' rules, regulations and
procedures which exist to determine that Sellers have paid all
Miscellaneous Taxes relating to Sellers', Sellers' hotel businesses
and/or the operation of the Hotels. Sellers shall apply to such state
taxing authorities, commissions or agencies sufficiently far in advance
of the Closing Date to ensure that Buyer shall have "comfort" and "safe
harbor" on a date not more than five (5) Business Days before the
Closing Date that all applicable Miscellaneous Taxes have been paid. In
the event that any state taxing authority, commission or agency
notifies Sellers that any amounts are (or shall become) due and payable
with respect to any Miscellaneous Taxes, Sellers shall pay such amounts
to the applicable State taxing authority, commission or agency (by
certified check) on or prior to the Closing Date. Buyer shall have the
right to make such applications on Sellers' behalf as Buyer shall deem
necessary to confirm that all such Miscellaneous Taxes have been (or
shall be) paid.
7.1.12 PERMITS; LIQUOR LICENSES.
(i) PERMITS. Sellers shall cooperate with Buyer and Buyer's
representatives to enable and assist Buyer to procure and maintain, at
Buyer's sole expense, all licenses, permits and authorizations
necessary for Buyer's ownership and operation of the Assets and the
hotel businesses thereon. Buyer shall promptly apply for and use all
reasonable efforts to obtain all such requisite licenses, permits and
authorizations. Notwithstanding the foregoing, Sellers shall remain
obligated to procure, maintain and renew, at Sellers' sole expense, any
and all licenses, permits and authorizations necessary for its
continued ownership and operation of the Hotels and the hotel
businesses thereon pending the Closing (including any license, permit
or authorization required for the sale and service of alcoholic
beverages). If valid permanent certificates of occupancy (or similar
permit or authorization from the appropriate local authorities
permitting occupancy of any Improvement) have not been issued for all
of the Improvements, Sellers shall obtain, at Sellers' sole cost and
expense, either (i) all such missing
-58-
<PAGE> 69
certificates of occupancy or (ii) letters from the appropriate local
authorities stating that at the time the applicable Improvements were
constructed such certificates of occupancy were not issued and are not
required now for the continued occupancy and use of such Improvements.
(ii) LIQUOR LICENSES. Prior to the Closing Date, Buyer shall
seek to have all existing Liquor Licenses at the Hotels transferred to
Buyer or to an entity designated by Buyer, or shall seek to have new
liquor licenses issued in the name of Buyer or an entity designated by
Buyer, whichever shall be in compliance with local law. Buyer
acknowledges that the Liquor Licenses may not be assignable by Sellers
to Buyer, and in such event Buyer shall apply for such Liquor Licenses.
Buyer shall use all reasonable efforts at Buyer's sole expense to
obtain the approval of the applicable state and local authorities for
such transfer or issuance. Sellers shall cooperate with Buyer and
Buyer's representatives to assist Buyer to procure and maintain all
Liquor Licenses necessary and required for the sale and service of
alcoholic beverages at the Hotels. In the event that such transfer or
issuance has not been approved prior to the Closing Date, and provided
that Buyer, in Buyer's sole discretion, shall desire to proceed with
the Closing notwithstanding the lack of such approval, Sellers shall
cooperate with Buyer to permit the continued sale of alcoholic
beverages at the Hotels after the Closing in accordance with all
applicable laws, notwithstanding the sale of the Hotels to Buyer, until
such approval has been obtained. Sellers agree to execute such leases,
management agreements and other documents as are legal and customary in
the respective jurisdictions to permit the continued sale of alcoholic
beverages after the Closing pending such approval. Buyer agrees to
maintain liquor liability insurance in amounts no less than those
previously maintained by Sellers naming Sellers as an additional
insured, and further agrees to indemnify, defend and hold Sellers
harmless from and against any liability, cost or expense arising out of
Sellers' cooperation with Buyer during this interim period, exclusive
of any gross negligence or willful misconduct by Sellers or Sellers'
employees.
-59-
<PAGE> 70
7.1.13 CONSENTS; ESTOPPEL CERTIFICATES. Sellers shall promptly
request and shall use Sellers' best efforts to obtain the Consents and the
estoppel certificates referred to in Articles 9 and 10 hereof. Upon written
request from Sellers, Buyer shall cooperate reasonably to obtain such Consents
and estoppel certificates.
7.1.14 HART-SCOTT-RODINO. Sellers and Buyer each shall, on or
before the day that is thirty-five (35) days before the Closing Date, make all
filings which are required of such Party under the Hart-Scott-Rodino Anti-Trust
Improvement Act of 1976, as amended ("HART-SCOTT"), and shall proceed with all
due diligence to supply any additional information required by the Federal Trade
Commission in connection therewith. Each Party shall furnish to the other such
necessary information and reasonable assistance as the Parties may request in
connection with the preparation of necessary filings or submissions to any
governmental agency including, without limitation, any filings necessary under
the provisions of Hart-Scott. All filings required to be made under Hart-Scott
shall have been made, and the waiting period thereunder shall have expired or
earlier terminated, on or before the Closing Date. In lieu of the foregoing, if
Buyer believes that neither it nor this transaction is subject to the provisions
of Hart-Scott, it may proceed to Closing notwithstanding its failure to comply
with the requirements described above, provided Buyer delivers to Sellers at or
prior to the Closing an opinion from an attorney or law firm reasonably
acceptable to Sellers, stating that compliance with Hart-Scott is not required.
7.1.15 MISCELLANEOUS TAXES. Sellers shall comply with any
pre-closing requirements and deliver any necessary notifications with respect to
any Miscellaneous Taxes which may be payable by Sellers, including any
Miscellaneous Taxes arising in connection with the transactions contemplated
herein.
7.1.16 BULK SALES. The Parties agree to waive compliance with
the provisions of the Uniform Commercial Code Bulk Sales Act as adopted in the
States wherein the Hotels are located. Sellers shall remain liable for and will
promptly pay when due and discharge all of Sellers' liabilities and obligations
of every kind and nature accrued or occurring up to and including the Closing
Date. Sellers shall and hereby agree to indemnify, hold harmless and defend
Buyer for any loss,
-60-
<PAGE> 71
damage, liability, claim or expense (including, without limitation, reasonable
attorneys' fees and expenses) on account of claims of Sellers' creditors arising
from Sellers' failure to comply with any applicable bulk transfers laws. The
aforesaid indemnity shall survive the Closing Date in accordance with Section
5.3 hereof.
7.1.17 NOTIFICATION UNDER COLLECTIVE BARGAINING
AGREEMENTS. Sellers shall deliver any pre-closing notification
or other requirements under any union contract or Collective
Bargaining Agreement noted on Schedule 5.1.20.
7.1.18 EMPLOYMENT MATTERS ON THE CLOSING DATE.
(i) SELLERS' OBLIGATIONS. On the Closing Date, Sellers shall
terminate the employment of all Hotel Employees (including the Hotel
Employees at Hotels subject to the Collective Bargaining Agreements),
except for Hotel Employees of an Eliminated Hotel. Such termination
shall be effective on the Closing Date, and Sellers agree to coordinate
Sellers' termination of such Hotel Employees with Buyer's obligations
with respect to offering employment to certain of the Hotel Employees,
as more particularly set forth in clause (ii) below; and
(ii) BUYER'S OBLIGATIONS. Promptly after Sellers dismiss Hotel
Employees of Hotels other than Eliminated Hotels as required under
Section 9.1.9, Buyer shall offer employment to a sufficient number of
such employees necessary to avoid a successful claim being made under
the WARN Act with respect to Hotels other than Eliminated Hotels and
any similar State statute applicable to such Hotel Employees. At
Closing, Buyer shall, subject to Section 1.2.8, assume the Collective
Bargaining Agreements with respect to Hotel Employees of Hotels other
than Eliminated Hotels and the contribution obligations (excluding any
withdrawal liability of Sellers under ERISA) to the Multiemployer Plans
with respect to such Hotel Employees for the period after the Closing
Date and Buyer's obligations with respect to such Hotel Employees under
Section 11.6 hereof. Buyer shall indemnify Seller from and against any
liability arising under any of such Collective Bargaining Agreements
with respect to any such Hotel Employee covered thereby who is not
offered employment by Buyer.
-61-
<PAGE> 72
7.1.19 CONTINUED HEALTH COVERAGE. Prior to the Closing,
Sellers shall provide Buyer with accurate and complete information (including
lists of appropriate persons) and provide notices deemed satisfactory to Buyer
so that effective as of the Closing Buyer shall be able to (and Buyer hereby
covenants and agrees to) provide continued health coverage as may be required by
Part 6 of Title I of ERISA to Hotel Employees (whether such Hotel Employees are
or are not subsequently employed by Buyer), the spouses and dependent children
of Hotel Employees, persons who prior to the Closing Date are already receiving
or entitled to receive as, or with respect to, a Hotel Employee or a prior
employee of a Hotel such continued health coverage under a group health plan of
Sellers, and persons who may after the Closing Date become entitled to receive
such continued health coverage as a result of having been a spouse or dependent
child of a Hotel Employee or other person who was prior to Closing an employee
of a Hotel. For the purposes of the preceding sentence, the term "Hotel
Employees" shall be deemed to exclude those Hotel Employees who are employed by
an Eliminated Hotel (until such time as the Eliminated Hotel is no longer an
Eliminated Hotel), and to include those individuals who are listed on Schedule
7.1.19, only if such individuals are employed on or before March 31, 1996 by a
Person comprising Sellers (and not by Hotels of Distinction, Inc.) from whom
Buyer is purchasing a Hotel (i.e. excluding Eliminated Hotels) and is not
employed by an Eliminated Hotel, and provided, further, that such individuals
remain so employed by such Person(s) (and not by Hotels of Distinction, Inc.) on
the Closing Date (or the Postponed Closing Date, as the case may be) with
respect to the applicable Hotel(s). For purposes of the second preceding
sentence, the terms "a prior employee of a Hotel" and "an employee of a Hotel"
shall not include such employees of an Eliminated Hotel. Management Company
covenants that it shall transfer the employment of the individuals listed on
Schedule 7.1.19 to the applicable Person(s) comprising Sellers on or prior to
March 31, 1996, and shall not rehire any of such individuals, if at all, prior
to the Closing Date (or the Postponed Closing Date, as the case may be) with
respect to the applicable Hotel(s). Sellers covenant and agree to provide
continued health coverage as may be required by Part 6 of Title I of ERISA to
all other persons entitled to such coverage as, or with respect to, any other
employee or prior employee of Sellers or any ERISA Affiliate. If, after the
Closing, any Seller continues to own an Eliminated Hotel, and if such Seller
provides a group health plan for its employees, such
-62-
<PAGE> 73
Seller covenants and agrees to offer continued health coverage to all
individuals described in the first sentence of this Section 7.1.19, so that each
such indivisual shall be permitted to choose continued health coverage under
Buyer's group health plan or under the Eliminated Hotel's group health plan.
Buyer covenants and agrees to cooperate with Sellers in providing appropriate
notices to affected individuals. If Buyer subsequently purchases any Eliminated
Hotel, then the provisions of this Section 7.1.19 shall apply again as of the
closing date for the purchase of such Eliminated Hotel, but at such time, the
term "Hotel Employee" or "employee of a Hotel" or "prior employee of a Hotel"
shall refer only to employees of the purchased Eliminated Hotel.
ARTICLE 8
CASUALTY LOSS/CONDEMNATION
8.1 RISK OF LOSS. Sellers shall bear the risk of loss or damage to the
Improvements and the Personal Property until the Closing, and thereafter, Buyer
shall bear the risk of loss.
8.2 CASUALTY LOSS. Any loss, damage, or destruction to the Improvements
or the Personal Property after the Effective Date and prior to the Closing Date
shall be a "CASUALTY". Sellers shall notify Buyer of any Casualty not later than
three (3) days after the occurrence thereof. Thereafter, Sellers and Buyer shall
determine in good faith and in their reasonable discretion whether a Casualty is
"substantial" within ten (10) days after Buyer's receipt of such notice. In the
event the Parties cannot agree within such period, either Party may submit the
matter to arbitration in accordance with Section 11.10.2, except that the
arbitrator shall be an engineer living within fifty (50) miles of the affected
Hotel. A Casualty shall be deemed "substantial" if the cost of restoring,
replacing, and/or repairing such Improvements and/or Personal Property exceeds
One Hundred Thousand ($100,000.00) Dollars or if such Casualty materially
adversely affects the access to a Hotel or the business operations of a Hotel
and such access or business operations are reasonably expected to be interfered
with for longer than two (2) weeks.
8.3 NON-SUBSTANTIAL CASUALTY. In the event of a Casualty which is not
"substantial", at Sellers' sole option and without notice to Buyer except as set
forth in this Section 8.3.
-63-
<PAGE> 74
with respect to postponing the Closing Date, Sellers may (i) before or after the
Closing (at Sellers' sole option), repair the Casualty, in which event Sellers
shall cause the Improvements and/or Personal Property to be restored to
substantially the condition in which they existed immediately prior to the
Casualty, and Sellers shall be entitled, but not obligated, in Sellers' sole
discretion, to postpone the Closing Date as to such Hotel for up to thirty (30)
days upon notice of such postponement to Buyer, which notice shall specify a new
Closing Date for such Hotel (and thereafter all references in this Agreement to
"Closing" and "Closing Date" as to such Hotel shall refer to the date set forth
in Sellers' notice to Buyer), whereupon the sale and conveyance of the remaining
Assets shall be consummated on the Closing Date; or (ii) without repairing the
Casualty, without recourse or warranty on Sellers, quitclaim to Buyer at the
Closing all of Sellers' right, title, and interest, if any, in and to all hazard
insurance proceeds payable with respect to the Casualty, and pay Buyer the
amount of the deductible (or the self-insured retainage) under Sellers'
insurance policy, whereupon the Closing as to such affected Hotel shall take
place as if no Casualty had occurred and without any reduction in the Purchase
Price.
8.4 SUBSTANTIAL CASUALTY. In the event of a "substantial" Casualty,
within fifteen (15) days after such Casualty is "substantial," Buyer shall elect
with respect to the affected Hotel either (i) to terminate this Agreement as it
relates to such Hotel, whereupon the Allocable Deposit with respect to such
Hotel, shall be forthwith returned to Buyer and this Agreement shall continue in
full force and effect, except it shall be deemed null and void and without
recourse to either Party hereto as to the Hotel which sustained the
"substantial" Casualty, or (ii) to purchase the affected Hotel on the Closing
Date in its then current condition, without any reduction in the Purchase Price,
and accept a quitclaim, without recourse or warranty on Sellers, of all of
Sellers' right, title, and interest, if any, in and to all hazard insurance
proceeds payable with respect to such Casualty, and pay Buyer the amount of the
deductible (or the self-insured ) under Sellers' insurance policy. Buyer agrees
that Buyer may not exercise the termination option set forth in clause (i) above
with respect to more than one (1) Hotel.
8.5 CONDEMNATION. After the Effective Date and prior to the Closing,
the institution of any proceeding seeking the taking of all or any portion of or
interest in the Assets shall
-64-
<PAGE> 75
constitute a "TAKING". Sellers shall notify Buyer of the institution of any such
proceedings not later than three (3) days after the commencement thereof, and
the Parties shall determine within ten (10) days after Buyer's receipt of such
notice whether in good faith and in the Parties' reasonable discretion such
Taking is "substantial." In the event the Parties cannot agree within such
period, either Party may submit the matter to arbitration in accordance with
Section 11.10.2, except that the arbitrator shall be an engineer living within
fifty (50) miles of the affected Hotel. A Taking shall be deemed "substantial"
if the value of the Assets which is the subject of the Taking exceeds a value of
One Hundred Thousand ($100,000.00) Dollars or if such Taking materially
adversely affects access to the affected Hotel or the business operations
thereof.
8.6 NON-SUBSTANTIAL CONDEMNATION. In the event of a Taking which is not
"substantial", Buyer shall have no right to terminate this Agreement as to such
Hotel or to receive any reduction in the Purchase Price, and the Closing shall
occur as if no Taking had occurred except, at the Closing, Sellers shall
quitclaim to Buyer, without recourse or warranty on Sellers, all of Sellers'
right, title, and interest, if any, in and to all awards, damages, and
compensation payable to Sellers on account of such Taking.
8.7 SUBSTANTIAL CONDEMNATION. In the event of a Taking which is
"substantial", within fifteen (15) days after the determination by Sellers that
such Taking is "substantial," Buyer shall elect with respect to the affected
Hotel (i) to terminate this Agreement to the extent same relates to the affected
Hotel, whereupon the Allocable Deposit with respect to such Hotel shall be
forthwith returned to Buyer and this Agreement shall continue in full force and
effect, except it shall be deemed null and void and without recourse to either
Party hereto as to the Hotel subject to the "substantial" Taking, or (ii) to
purchase the affected Hotel on the Closing Date subject to the Taking in its
then current condition, without any reduction in the Purchase Price, and accept
a quitclaim, without recourse or warranty on Sellers, of all of Sellers' right,
title, and interest, if any, in and to all awards, damages, and compensation
payable to Sellers on account of such Taking. Buyer agrees that Buyer may not
exercise the termination option set forth in clause (i) above with respect to
more than one (1) Hotel.
-65-
<PAGE> 76
ARTICLE 9
CONDITIONS TO CLOSING
9.1 BUYER'S CONDITIONS TO CLOSING. Satisfaction of each of the
following conditions, any of which may be waived in writing by Buyer, shall be
deemed a condition to Buyer's obligation to close hereunder:
9.1.1 STATUS OF TITLE; DELIVERY OF REQUIRED DOCUMENTS. Sellers
shall be able to deliver fee title to the Real Properties and Improvements (or,
if Buyer shall have elected to assume the Loan Documents under Section 7.1.3(i)
hereof, the contract-vendee's interest under the Loan Agreements affecting the
Allentown Hilton), subject only to the Permitted Encumbrances and shall be able
to deliver each of the documents referred to in Section 10.2, including any
estoppels, consents or approvals required of third parties.
9.1.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Sellers set forth herein shall be true and correct in all material
respects as of the Closing Date, with the exception of Exhibits which must be
updated at the Closing Date to reflect changes permitted under the terms of this
Agreement (to the extent such changes are acceptable to Buyer in its sole
discretion).
9.1.3 FRANCHISE AGREEMENTS. The Franchise Agreements shall all
be in good standing with no violations or defaults thereunder, and each Hotel
shall be in compliance with and satisfy all requirements and standards set forth
in the applicable Franchise Agreement, other than as set forth in any inspection
report or property improvement plan (as more particularly described below).
Buyer agrees that Sellers shall not be obligated to comply with any matters set
forth in any property improvement plans issued by the Franchisors to Buyer as a
condition to obtaining such Franchisor's consent to the sale transaction
described herein. Sellers shall be required to complete all work referred to on
Schedule 5.1.15 and will also be required to perform all "mandatory" or
"required" work items which appear on any inspection report(s) received by
Seller after the Effective Date, if the failure to cure such items could
constitute an imminent default under the applicable Franchise Agreement. All of
the Franchisors under the Franchise Agreements
-66-
<PAGE> 77
shall have consented in writing to the assignment of the Franchise Agreements or
to the execution of new franchise agreements with Buyer on terms acceptable to
Buyer, and all of the Franchisors shall have delivered estoppel certificates in
form acceptable to Buyer in its reasonable discretion. In the event that the
Franchisor with respect to St. Louis Suites refuses either to consent to the
assignment of the Franchise Agreement affecting such Hotel or to enter into a
new franchise agreement with Buyer, Buyer may elect to terminate this Agreement
as it relates to St. Louis Suites, whereupon the Allocable Deposit with respect
to St. Louis Suites shall immediately be returned to Buyer, the Purchase Price
shall be reduced by the Allocated Purchase Price with respect to St. Louis
Suites and neither Party shall have any additional rights hereunder with respect
to St. Louis Suites.
9.1.4 EXISTING IDA DEBT. If Buyer shall have elected to assume
the Loan Documents under Section 7.1.3(i) hereof, the Existing IDA Debt shall be
in full force and effect with no defaults thereunder. The other Persons that are
party to the Loan Documents shall have consented in writing to the sale of the
Hotel(s) subject thereto without any modification of the terms thereof. If Buyer
shall not have elected to assume the Loan Documents, Sellers shall have arranged
to terminate the Loan Documents and to have the fee simple estate in the
Allentown Hilton conveyed by the Lehigh County Industrial Development Authority
to Buyer (or its permitted designee hereunder), subject only to the Permitted
Encumbrances.
9.1.5 PERFORMANCE OF PRE-CLOSING COVENANTS. Sellers shall have
performed, observed and complied with all of the preclosing covenants,
agreements and conditions required by this Agreement to be performed, observed
and complied with by Sellers prior to or as of the Closing, including but not
limited to each of the covenants set forth in Article 7 hereof.
9.1.6 NO BANKRUPTCY. None of Sellers shall have made an
assignment for the benefit of creditors or admitted in writing its inability to
pay its debts as they mature or have been adjudicated as bankrupt or have filed
a petition in voluntary bankruptcy or a petition or answer seeking
reorganization or an arrangement with creditors under the Federal bankruptcy law
or any other similar law or statute of the United States or any State, and no
such petition shall have been filed against it.
-67-
<PAGE> 78
9.1.7 ALL REQUIRED TERMINATIONS OBTAINED. Sellers shall have
terminated any Contracts or Personal Property Leases identified by Buyer under
Section 1.2.5 or Section 1.2.8 hereof, and such termination shall be effective
on or prior to the Closing Date.
9.1.8 CONSUMMATION OF CLOSING UNDER MANAGEMENT COMPANY
PURCHASE AGREEMENT. The Closing shall have occurred (or shall be occurring
simultaneously) under the Management Company Purchase Agreement. It shall be a
default of Sellers hereunder in the event that Management Company defaults under
the Management Company Purchase Agreement and such default is not cured within
any applicable notice and/or cure period.
9.1.9 DISMISSAL OF HOTEL EMPLOYEES. Sellers shall have
terminated the employment of all Hotel Employees of Hotels other than Eliminated
Hotels. Such termination shall be effective on the Closing Date.
9.2 SELLERS' CONDITIONS TO CLOSING. Satisfaction of each of the
following conditions, any of which may be waived in writing by Sellers, shall be
deemed a condition to Sellers' obligation to close hereunder:
9.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth herein shall be true and correct in all material
respects as of the Closing Date, with the exception of Exhibits which must be
updated at the Closing Date to reflect changes permitted under the terms of this
Agreement.
9.2.2 ASSUMPTION OF ASSUMED LIABILITIES. Buyer shall
have assumed all of the Assumed Liabilities with respect to the
Assets to be sold, transferred, assigned and conveyed on the
Closing Date.
9.2.3 CONSUMMATION OF CLOSING UNDER MANAGEMENT COMPANY
PURCHASE AGREEMENT. The Closing shall have occurred (or shall be occurring
simultaneously) under the Management Company Purchase Agreement. It shall be a
default of Buyer hereunder in the event that Realty Partnership defaults under
the Management Company Purchase Agreement and such default is not cured within
any applicable notice and/or cure period.
-68-
<PAGE> 79
9.2.4 PERFORMANCE OF PRE-CLOSING COVENANTS. Buyer shall have
performed, observed and complied with all of the preclosing covenants,
agreements and conditions required by this Agreement to be performed, observed
and complied with by Buyer prior to or as of the Closing, including but not
limited to, each of the covenants set forth in Article 7 hereof.
ARTICLE 10
CLOSING
10.1 CLOSING. The consummation of the transaction contemplated in this
Agreement (the "CLOSING") shall occur at 10:00 a.m., on a date mutually agreed
upon by the Parties and not later than July 11, 1996 (the "CLOSING DATE"), in
the offices of Sidley & Austin, 875 Third Avenue, New York, New York 10022. If
through no fault of either Party the transactions contemplated herein have not
been consummated on or before the date that is eighty (80) days after the
expiration of the Inspection Period (other than with respect to adjournments
contemplated by the express terms hereof or otherwise agreed to in writing by
the Parties), and provided that neither Party has at such time commenced an
action or other legal proceeding against the other Party hereto in connection
with this Agreement, then either Party hereto may, upon written notice to the
other Party and Escrow Agent, elect to terminate this Agreement. In the event
that either Party exercises the aforesaid termination right, then, not earlier
than fifteen (15) days after Escrow Agent's receipt (or deemed receipt) of the
termination notice, unless the other Party shall have commenced an action or
other legal proceeding against the other Party hereto with respect to this
Agreement, Escrow Agent shall return the Deposit to Buyer, this Agreement shall
terminate and be null and void and neither Party shall have any further rights
or obligations hereunder.
10.2 SELLERS' CLOSING DOCUMENTS AND DELIVERIES. At Closing, Sellers
shall execute, swear to, acknowledge (when the form of the document so provides)
and/or deliver or cause to be delivered to Buyer the following:
10.2.1 DEEDS. Special warranty deeds (or the local equivalent)
(the "DEEDS") covering the Real Properties and the Improvements, executed and
acknowledged by Sellers, in the form
-69-
<PAGE> 80
set forth on Exhibit 10.2.1 attached hereto and made a part hereof for all
purposes;
10.2.2 BILL OF SALE. A warranty bill of sale (the "BILL OF
SALE") covering the Personal Property, executed and acknowledged by Sellers, in
the form set forth on Exhibit 10.2.2 attached hereto and made a part hereof for
all purposes;
10.2.3 ASSIGNMENT AND ASSUMPTION OF SPACE LEASES. An
Assignment and Assumption of Space Leases (the "ASSIGNMENT AND ASSUMPTION OF
SPACE LEASES") assigning the Space Leases, the Rents and the Hotel Deposits, to
be executed, acknowledged and delivered by Sellers to Buyer, and executed,
acknowledged and assumed by Buyer, in the form set forth on Exhibit 10.2.3
attached hereto and made a part hereof for all purposes;
10.2.4 ASSIGNMENT AND ASSUMPTION OF CONTRACTS/PERMITS. An
Assignment and Assumption of all Contracts (and all assignable Permits) (the
"ASSIGNMENT AND ASSUMPTION OF CONTRACTS/PERMITS"), to be assigned to Buyer
pursuant to Section 1.2.8 hereof, to be executed, acknowledged and delivered by
Sellers to Buyer, and executed, acknowledged and assumed by Buyer, in the form
set forth on Exhibit 10.2.4 attached hereto and made a part hereof for all
purposes;
10.2.5 ASSIGNMENT AND ASSUMPTION OF PERSONAL PROPERTY LEASES.
An Assignment and Assumption of Personal Property Leases (the "ASSIGNMENT AND
ASSUMPTION OF PERSONAL PROPERTY LEASES"), to be assigned to Buyer pursuant to
Section 1.2.5 hereof, to be executed, acknowledged and delivered by Sellers to
Buyer, and executed, acknowledged and assumed by Buyer, in the form set forth on
Exhibit 10.2.5 attached hereto and made a part hereof for all purposes;
10.2.6 ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASES. An
Assignment and Assumption of Real Property Leases (the "ASSIGNMENT AND
ASSUMPTION OF REAL PROPERTY LEASES") to be executed, acknowledged and delivered
by Sellers to Buyer, and executed, acknowledged and assumed by Buyer, in the
form set forth on Exhibit 10.2.6 attached hereto and made a part hereof for all
purposes;
10.2.7 ASSIGNMENT AND ASSUMPTION OF INTELLECTUAL PROPERTY. An
Assignment and Assumption of Intellectual Property
-70-
<PAGE> 81
(the "ASSIGNMENT AND ASSUMPTION OF INTELLECTUAL PROPERTY"), to be assigned to
Buyer pursuant to Section 1.2.10 hereof, to be executed, acknowledged and
delivered by Sellers to Buyer, and executed, acknowledged and assumed by Buyer,
in the form set forth on Exhibit 10.2.7 attached hereto and made a part hereof
for all purposes;
10.2.8 MOTOR VEHICLES. Certificates of title to all Motor
Vehicles identified on Schedule 10.2.8;
10.2.9 ORIGINAL DOCUMENTS. To the extent the same are in
Sellers' or Management Company's possession, the originals of all Asset
Documents;
10.2.10 PLANS AND SPECIFICATIONS. Plans and specifications,
technical manuals and similar material, for the Improvements, if any, in
Sellers' possession or control;
10.2.11 LIQUOR LICENSES AND PERMITS. If assignable, any liquor
licenses or permits, or copies thereof, in Sellers' possession pertaining to the
operation and maintenance of the Hotels, together with a duly executed
assignment thereof to Buyer and any documents or other instruments required in
connection with the assignment and transfer of any existing liquor license or
the issuance of a new liquor license, including any documents or instruments
required for an interim arrangement pending the approval of such transfer or
issuance;
10.2.12 WARRANTIES AND GUARANTEES. If assignable, any
unexpired warranties and guarantees, or copies thereof, in Sellers' possession
which Sellers have received (i) in connection with the Improvements and any work
or services performed with respect to, or equipment installed in, the Hotels, or
(ii) from any prior owners of the Hotels, together with individual or omnibus
assignments thereof to Buyer. If any such warranties or guarantees are not
assignable, Sellers agree to cooperate with Buyer after the closing to the
extent required to enforce any rights under such warranties or guarantees, at
Buyer's expense;
10.2.13 RESERVATION DEPOSITS. An assignment of the Reservation
Deposits and Buyer's receipt therefor;
10.2.14 EVIDENCE OF DUE AUTHORIZATION. Secretary's
Certificates certifying that the Boards of Directors of each
-71-
<PAGE> 82
Person comprising Sellers have duly adopted resolutions authorizing the within
transaction and executed and acknowledged Incumbency Certificates certifying to
the authority of the officers of each Person comprising Sellers executing the
documents to be delivered by Sellers on the Closing Date;
10.2.15 REQUIRED TITLE INSURANCE DOCUMENTS. Such other
instruments and documents as may reasonably be required by the Title Company to
issue an owner's title insurance policy (in the forms set forth in the next
succeeding sentence) insuring the Real Property against all title defects or
encumbrances other than the Permitted Encumbrances, or as may be required to
effectuate the transactions contemplated hereunder, including but not limited to
such title affidavits, indemnifies and proofs as may be required by the Title
Company to eliminate exceptions for unfiled mechanics' or materialmen's liens,
for the insolvency of Sellers, for the occupancy of any party other than tenants
under the Space Leases (as tenants only) and transient lodging guests and to
enable the Title Company to insure the "gap" between Closing and recordation of
the Deeds. The owner's title insurance policies shall be written on the
following forms: (i) with respect to the Real Property situated in North
Carolina, Minnesota, Massachusetts or Illinois, the title insurance policies
shall be written on ALTA Form 1970, (ii) with respect to the Real Property
situated in Pennsylvania, Georgia, Missouri or Arizona, the title insurance
policies shall be written on ALTA Form 1970 (as amended in 1984), and (iii) with
respect to the Real Property situated in California, the title insurance
policies shall be written on CLTA Form 1992 (to be amended by endorsement to
delete from the terms, provisions and conditions thereof the creditors' rights
exception); provided, however, in the event that Sellers will incur any
additional cost in causing the Title Company to issue one (1) or more of its
policies on the forms set forth above (rather than on a different form
customarily used in such State(s)), then Buyer, at Buyer's option, may elect
either (a) to pay such extra cost incurred to issue the title insurance policies
on the forms set forth above, or (b) to waive the requirement that Sellers
deliver such title insurance policies on the forms set forth above with respect
to the applicable Hotel(s) for which such extra cost will be incurred, whereupon
Sellers shall obtain owner's title insurance policies on the ALTA (or CLTA) form
then customarily used in the applicable State(s). Sellers shall deliver
originals or certified copies of any resolutions, partnership agreements,
-72-
<PAGE> 83
trust indentures, agency agreements, powers of attorney, consents and other
documentation, and shall execute such affidavits and indemnities, as may be
required by the Title Company, with respect to the authority of Sellers or of
the Person(s) signing on behalf of Sellers;
10.2.16 CERTIFICATES OF OCCUPANCY; PERMITS AND AUTHORIZATIONS.
An original or a true copy of the certificates of occupancy or such other
permits or authorizations, if any, as are customarily issued in the
jurisdictions permitting the use and occupancy of each of the Improvements;
10.2.17 REAL PROPERTY LEASE ESTOPPEL CERTIFICATES. An estoppel
certificate signed by each landlord under the Real Property Leases, which
estoppel certificates shall be in the form annexed hereto as Exhibit 10.2.17;
10.2.18 CONSENTS. The Consents set forth on Schedule 5.1.3 in
form and substance acceptable to Buyer in its reasonable discretion;
10.2.19 SPACE LEASE TENANT ESTOPPEL CERTIFICATES. An estoppel
certificate signed by each tenant or occupant under any Space Leases identified
by Buyer at least thirty-five (35) days before the Closing Date, which estoppel
certificates shall be in the form annexed hereto as Exhibit 10.2.19;
10.2.20 FRANCHISE AGREEMENTS. An assignment of the Franchise
Agreements together with Sellers' executed counterparts thereof, or if a
Franchisor insists that Buyer enter into a new franchise agreement with such
Franchisor, a new franchise agreement. The assignment of the Franchise
Agreements shall contain Buyer's indemnity of Sellers against any liability for
obligations under the Franchise Agreements from and after the Closing Date and
Sellers' indemnity of Buyer against any liability for such obligations relating
to periods prior to the Closing Date. Sellers shall also deliver the written
estoppel and consent of each Franchisor to such assignment, in the form
customarily used by each Franchisor and otherwise in form satisfactory to Buyer
in its reasonable discretion;
10.2.21 FIRPTA CERTIFICATION. An affidavit of an officer of
each party comprising Sellers stating that none of
-73-
<PAGE> 84
such parties are a "foreign person" within the meaning of Section 1445 of the
Internal Revenue Code of 1954, as amended;
10.2.22 EXISTING IDA DEBT ESTOPPEL CERTIFICATE(S). If Buyer
shall have elected to assume the Loan Documents under Section 7.1.3(i) hereof,
an estoppel and consent from the Persons that are parties to the Loan Documents,
in the form annexed hereto as Exhibit 10.2.22;
10.2.23 KEYS. All keys and master keys to all locks located at
the Hotels;
10.2.24 GOOD STANDING CERTIFICATES. Certificates of good
standing for each Person comprising Sellers from all relevant jurisdictions;
10.2.25 BUSINESS RECORDS. All original Business Records;
10.2.26 NOTICES TO THIRD PARTIES. Written notices addressed to
the tenants under the Space Leases, the parties under the Contracts, the lessors
under the Personal Property leases, the lessors under the Billboard Leases, the
franchisors under the Franchise Agreements, the Persons that are parties to the
Loan Documents, that Buyer is the new party under the applicable agreement (in
substitution for the applicable Seller) and that from and after the Closing Date
Buyer has assumed all duties and obligations of Sellers under the applicable
agreement;
10.2.27 SELLERS' PRIOR LIABILITY INSURANCE POLICIES. Sellers
shall deliver to Buyer an endorsement to Sellers' Prior Liability Insurance
Policies, naming Buyer as an additional named insured thereunder;
10.2.28 SCHEDULE OF ACCRUED EMPLOYEE BENEFITS. A statement
certified by Sellers as true and correct setting forth the number of accrued
vacation days for each Hotel Employee through the Closing Date; and
10.2.29 TERMINATION AGREEMENTS. The Termination Agreements
with respect to the Management Agreements (in the form annexed as an exhibit to
the Management Company Asset Purchase Agreement).
<PAGE> 85
10.2.30 ADDITIONAL DOCUMENTS. Any and all other documents
reasonably required by Buyer to consummate the Closing, duly executed, sworn to,
and/or acknowledged (when the form of the document so provides), by Sellers.
10.3 BUYER'S CLOSING DOCUMENTS AND DELIVERIES. At Closing, Buyer shall
execute, swear to, acknowledge (when the form of the document so provides),
and/or deliver to Sellers the Conveyance Documents and the following:
10.3.1 PURCHASE PRICE. Cash in the amount of the
balance of the Purchase Price, after all adjustments and
prorations provided for herein;
10.3.2 SECRETARY'S CERTIFICATE. A duly executed Secretary's
Certificate certifying that the Board of Directors of Starwood Lodging Trust, as
general partner of Realty Partnership, and Starwood Lodging Corporation, as
general partner of Operating Partnership, have each duly adopted resolutions
authorizing the within transaction and executed and acknowledged Incumbency
Certificates certifying to the authority of the officers of Starwood Lodging
Trust and Starwood Lodging Corporation executing the documents on behalf of
Realty Partnership and Operating Partnership, as the case may be, to be
delivered by Buyer on the Closing Date;
10.3.3 GOOD STANDING CERTIFICATES. Certificates of good
standing for Realty Partnership and Operating Partnership from all relevant
jurisdictions;
10.3.4 HART-SCOTT LEGAL OPINION. The Hart-Scott legal opinion,
if Buyer elects to deliver same in accordance with Section 7.1.14.; and
10.3.5 ADDITIONAL DOCUMENTS. Any and all other documents
reasonably required by Sellers or the Title Company to consummate the Closing,
duly executed, sworn to and/or acknowledged (when the form of document so
provides), by Buyer.
10.4 JOINTLY EXECUTED DOCUMENTS. Sellers and Buyer shall each execute
or cause to be executed the following documents and deliver same as indicated:
-75-
<PAGE> 86
10.4.1 RELEASE OF ESCROW AGENT. A release of Escrow Agent by
Sellers and Buyer to be delivered to Escrow Agent.
10.4.2 CONTINUED SALE OF ALCOHOLIC BEVERAGES. All documents
required to permit the continued sale of alcoholic beverages at the Hotels.
10.4.3 COLLECTIVE BARGAINING AGREEMENTS. Any documents
required under any of the agreements identified in Schedule 5.1.21, such as an
assignment and assumption (if required).
10.5 TRANSACTION COSTS.
10.5.1 TRANSFER TAXES; SALES AND USE TAXES. At Closing, except
as set forth in Section 10.5.2 hereof, Sellers shall pay (i) any and all
transfer taxes, deed stamps, conveyance taxes, "gains" taxes, documentary stamp
taxes and other taxes or charges due under local or state law as a result of the
trans actions contemplated hereby, including the sale of the Real Properties,
and (ii) any and all sales and use taxes due under local or state law as a
result of the transactions contemplated hereby, including the sale of the
Personal Property.
10.5.2 RECORDING CHARGES AND FEES. At Closing, Sellers and
Buyer shall each pay an amount equal to one-half (1/2) of any and all recording
charges and fees due under state or local law as a result of the recordation of
the Deeds and the other documents contemplated herein.
10.5.3 TITLE INSURANCE AND SURVEY CHARGES. Sellers shall pay
all title insurance premiums and other charges associated therewith for Buyer's
owner's reports and policies covering the Real Properties, the Real Property
Leases and the Improvements, and Buyer shall pay the cost of obtaining current
surveys (or survey updates) of the Hotels. Buyer shall pay the cost of any
endorsements to the title insurance policies; provided, however, that Sellers
shall pay the cost, if any, for Buyer to obtain a so-called "extended coverage"
endorsement and for any endorsement required to remove any exception to title
which Buyer is not required to accept hereunder.
10.5.4 INDEMNITY. Each Party shall indemnify the other and its
respective successors and assigns from and against
-76-
<PAGE> 87
any and all loss, damage, cost, charge, liability or expense (including court
costs and reasonable attorneys' fees) which such other Party may sustain or
incur as a result of the failure of either Party to timely pay any of the
aforementioned taxes, fees or other charges for which it has assumed
responsibility under this Section 10.5.
10.5.5 SURVIVAL. The provisions of this Section 10.5 shall
survive the Closing Date in accordance with Section 5.3 hereof.
10.6 BUYER'S CLOSING COSTS. Buyer shall pay in Cash at the
Closing each and all of the following Closing costs:
10.6.1 BUYER'S ATTORNEYS' FEES. Buyer's attorneys'
fees incurred in drafting and negotiating this Agreement and in
Closing the transaction contemplated in this Agreement;
10.6.2 BUYER'S DUE DILIGENCE COSTS. All costs
incurred by Buyer in performing Buyer's due diligence review and
inspection of the Assets and the Condition of the Assets;
10.6.3 BUYER'S PRO RATA SHARE. Buyer's proportionate
share of the items prorated pursuant to Article 11 hereof; and
10.6.4 BUYER'S MISCELLANEOUS COSTS. Unless otherwise expressly
provided herein, all other fees, costs, and expenses customarily paid by a
purchaser of improved Real Properties in the counties where the Hotels are
located.
10.7 SELLERS' CLOSING COSTS. Sellers shall pay in Cash at
the Closing each and all of the following Closing costs:
10.7.1 SELLERS' ATTORNEYS' FEES. Sellers' attorneys'
fees incurred in drafting and negotiating this Agreement and in
Closing the transaction contemplated in this Agreement;
10.7.2 SELLERS' PRO RATA SHARE. Sellers' propor
tionate share of the items prorated pursuant to Article 11
hereof; and
10.7.3 SELLERS' MISCELLANEOUS CLOSING COSTS. Unless otherwise
expressly provided herein, all other fees, costs, and
-77-
<PAGE> 88
expenses customarily paid by Sellers of improved Real Properties in the counties
where the Hotels are located.
10.8 MULTIPLE CLOSINGS. In the event that the Closing with respect to
one (1) or more of the Hotels has been adjourned pursuant to the express
provisions of this Agreement or as otherwise agreed in writing by the Parties,
the Closing shall nonetheless take place as to the other Hotels on the Closing
Date; provided, however, that upon such Closing, Sellers shall be entitled to
receive only the Allocable Deposits and Buyer shall be obligated to pay only the
Allocated Purchase Price with respect to the Hotels being conveyed on such date,
and Escrow Agent shall continue to hold the Allocable Deposits with respect to
those Hotels not being conveyed on such date in accordance with the terms of
this Agreement.
ARTICLE 11
PRORATIONS/ADJUSTMENTS
11.1 COSTS AND PRORATIONS. All items customarily prorated and adjusted
in the sale of hotels shall be computed and certified to the Parties by Coopers
& Lybrand (the "Coopers & Lybrand Certification"). Such apportionment between
Sellers and Buyer shall be performed as of 11:59 P.M. on the day immediately
preceding the Closing Date (the "Apportionment Date"):
11.1.1 PROPERTY TAXES. Property Taxes (other than water
charges) and any Tax Savings or Tax Refunds referred to in Section 7.1.1.(v), on
the basis of the respective periods for which each is assessed or imposed, to be
apportioned in accordance with Section 11.2 hereof;
11.1.2 WATER CHARGES. Water charges to be apportioned in
accordance with Section 11.3 hereof;
11.1.3 UTILITIES. Charges for electricity, telephone,
television, cable television, steam, gas and any other utilities (collectively,
"UTILITIES") made by the utility companies servicing the Hotels to be
apportioned in accordance with Section 11.4 hereof, and transferable utility
deposits, if any, for which Sellers shall be reimbursed if same be assigned, but
all amounts refundable under unassigned or unassignable utility arrangements
shall remain the property of Sellers;
-78-
<PAGE> 89
11.1.4 TRANSFERABLE PERMITS. Prepaid fees or other
charges for transferable licenses, permits, and other items, if
any, but all amounts refundable under unassigned or unassignable
licenses and permits shall remain the property of Sellers;
11.1.5 CONTRACTS, REAL PROPERTY LEASES, PERSONAL PROPERTY
LEASES AND FRANCHISE AGREEMENTS. Amounts paid or payable under the Contracts
(provided that amounts paid or payable under the Collective Bargaining
Agreements to be apportioned in a manner consistent with Section 1.2.8), Real
Property Leases, Personal Property Leases, Billboard Leases, and Franchise
Agreements;
11.1.6 ROOM CHARGES; OTHER GUEST CHARGES. Room
charges and other guest charges incurred on or before the
Apportionment Date to be apportioned and collected in accordance
with Sections 11.5 hereof;
11.1.7 ASSOCIATION DUES. Fees or dues paid or payable
for local trade, merchant or business associations listed on
Schedule 5.1.29 hereof;
11.1.8 TRAVEL AGENTS' COMMISSIONS. Travel agents'
commissions, if any, to be apportioned consistent with the
allocation of room revenues referable to each such travel agent;
11.1.9 WAGES, SALARIES, ETC. All wages, salaries, bonuses,
employment taxes, vacation days, sick days and personal days, if any, and any
and all payments due under or in accordance with any Collective Bargaining
Agreement, accrued through the Apportionment Date for all employees of Sellers
or their affiliates working at the Hotels, to be apportioned in accordance with
Section 11.6;
11.1.10 SPACE LEASES. Rent and all other charges due
under the Space Leases, to be apportioned in accordance with
Section 11.7;
11.1.11 CONSUMABLES. There will be no apportionment
or adjustment for new and used Personal Property, including
inventory and consumables, all of which shall be included in the
sale contemplated herein;
-79-
<PAGE> 90
11.1.12 EXISTING IDA DEBT. If Buyer shall have elected to
assume the Loan Documents under Section 7.1.3(i), any amounts payable thereunder
shall be apportioned as of the Apportionment Date;
11.1.13 INSURANCE. Buyer shall obtain its own insurance and no
adjustment shall be made for any premiums which may have been paid by Sellers
for any period following the Closing Date. Any refunds for prepaid premiums made
to Sellers shall belong to Sellers;
11.1.14 PREPAID ACCOUNTS. Prepaid Accounts (including
advance payments in the form of gift certificates) for use of the
Hotels' facilities after the Closing Date shall be the property
of Buyer (and delivered to Buyer on the Closing Date) and not
subject to adjustment; and
11.1.15 LAUNDRY AND VENDING MACHINES. Charges and washing
machine and/or vending machine contracts, which Buyer is to assume hereunder,
shall be adjusted as of midnight the evening prior to the Closing. Laundry and
vending equipment owned or leased by Sellers shall have their coins removed for
the account of the Sellers the day prior to the Closing.
11.2 PROPERTY TAX APPORTIONMENT. Property Taxes shall be apportioned on
the basis of the fiscal period for which assessed; the Parties agree, however,
that Property Taxes with respect to the Minneapolis Hilton shall be apportioned
based upon the fiscal year in which the Closing occurs (notwithstanding the fact
that such Property Taxes are based upon assessments from earlier years). If the
Closing Date shall occur either before an assessment is made or a tax rate is
fixed for the tax period in which the Closing occurs, the apportionment of such
Property Taxes shall be calculated on the basis of the prior year's Property
Taxes, but, after the assessment and tax rate for the current year are fixed,
the apportionment thereof shall be recalculated and Sellers or Buyer, as the
case may be, shall make an appropriate payment to the other based on such
recalculation. If, on the Closing Date, the Real Properties or any part thereof
shall be or shall have been affected by a betterment or special assessments for
local or regional improvements which were levied or became a lien prior to the
Closing and which are payable in installments, all unpaid installments of any
such assessments which are to become due and payable after the Closing Date
shall
-80-
<PAGE> 91
be assumed by and paid by Buyer when due. In the event that Buyer receives
any Tax Savings or a Tax Refund during the ninety (90) day period after the
Closing Date, such amounts shall be for the account of Sellers. In the event
that Buyer receives any Tax Savings or a Tax Refund after the expiration of such
ninety (90) day period, such amounts shall be for the account of the Buyer,
regardless of whether or not such amounts relate to the period prior to the
Closing Date.
11.3 WATER METERS. If there are water meters at the Hotels, Sellers
shall endeavor to have the water company servicing each Hotel read the meters on
or immediately prior to the Apportionment Date. Buyer shall be responsible for
all charges based on such final reading for which Buyer shall receive a credit
at the Closing, and Buyer shall be responsible for all charges thereafter. If
such readings are not obtainable, then, until such time as such readings are
obtained, water charges shall be prorated as of the Apportionment Date based
upon the per diem rate obtained by using the last period and bills for such
charges that are available. Upon the taking of a subsequent actual reading, such
apportionment shall be readjusted and Sellers or Buyer, as the case may be,
promptly will deliver to the other the amount determined to be so due upon such
readjustment. All unpaid water bills in Sellers' possession shall be turned over
to Buyer at the Closing and shall be paid by Buyer, for which Buyer shall
receive a credit at the Closing equal to the amount of any such bill plus any
interest or penalties due thereon as of the Closing Date.
11.4 UTILITIES. The Utilities shall be apportioned (i) by having the
utility company servicing each Hotel make a final meter reading on the
Apportionment Date, the payment of which shall be Buyer's responsibility and for
which Buyer shall receive a credit at the Closing, or (ii) if such readings
cannot be obtained, on the basis of the most recent bills that are available. If
the apportionment is not based on actual current readings, then, upon the taking
of a subsequent actual reading, such apportionment shall be readjusted and
Sellers or Buyer, as the case may be, promptly shall deliver to the other the
amount determined to be due upon such readjustment. All unpaid Utility bills in
Sellers' possession shall be turned over to Buyer at the Closing and shall be
paid by Buyer, for which Buyer shall receive a credit at the Closing equal to
the amount of any such bill plus any interest or penalties due thereon as of the
Closing Date.
-81-
<PAGE> 92
Any Utility bills received by Sellers after the Closing shall be promptly
forwarded to Buyer together with the amount, if any, owed by Sellers therefor
pursuant to the provisions hereof.
11.5 ROOM RENTAL REVENUE/OTHER REVENUE. Income from the rental of rooms
shall belong to Sellers to the extent attributable to any period through the
Apportionment Date. Room charges for the night commencing on the Apportionment
Date and ending on the morning of the Closing Date shall be equally divided
between Sellers and Buyer. Income from food and beverage and other sales or
services through midnight of the Apportionment Date shall belong to Sellers.
Income from food and beverage and other sales or services on the Closing Date
shall belong to Buyer. No cash adjustment shall be made at the Closing on
account of such income. Any such income belonging to Sellers shall be collected
as provided in Section 11.1.2 above.
11.6 WAGES, SALARIES, ETC. With respect to wages and benefits of all
Hotel Employees of Sellers or their respective affiliates working at any of the
Hotels (other than Eliminated Hotels), it is understood and agreed that the only
items to be apportioned on the Apportionment Date are wages, salaries, bonuses,
employment taxes, and all accrued vacation days, sick days and personal days,
for which Buyer shall be paid or shall receive a credit against the cash portion
of the Purchase Price at the Closing. Buyer shall not be liable to any Hotel
Employee for any wages, salaries, bonuses, vacation days, sick days or personal
days in which said employees may have acquired an accrued or vested right by
virtue of their employment by Sellers, except with respect to accrued vacation
pay, bonuses, sick pay, and personal days (hereinafter collectively referred to
as "Employee Benefits"), and then only to the extent that Buyer has been paid or
has received a credit against amounts payable hereunder for any such item with
respect to any particular Hotel Employee, and to that extent Buyer shall and
hereby agrees to indemnify and save Sellers harmless from and against any
liability therefor. Sellers shall and hereby agree to indemnify and save Buyer
harmless from and against any liability for wages, salaries, bonuses, accrued
vacation days, sick days and personal days to be paid to employees on account of
services rendered prior to Closing, except to the extent Buyer has been paid or
has received a credit therefor. There shall be no apportionment or proration of
ERISA Benefit Plans or Non-ERISA Commitments other than Employee Benefits (to
the extent provided above), and
-82-
<PAGE> 93
Sellers shall remain liable for and hereby agree to indemnify and save Buyer
harmless from and against all Employee Benefits due to Hotel Employees and all
payments due on the plans providing such benefits. Sellers shall also remain
responsible for and hereby agree to indemnify and save Buyer harmless from any
severance pay which may become due to any of the Hotel Employees as a result of
this transaction, whether due to Sellers' employment policies or as a matter of
law.
11.7 SPACE LEASES. Prepaid minimum rents and other fixed charges
payable under the Space Leases for the month in which the Closing occurs shall
be apportioned. If any Tenant is in arrears in the payment of rent or other
fixed charges due for months prior to the month in which the Closing occurs, any
payments on account of rent or such other fixed charges received by Buyer from
such tenant after the Closing shall be applied first to rent and other charges
due for the month in which such payments are received and then to preceding
months for which there are arrearages (always to the most recent first). If any
payments of rent or other fixed charges received by Sellers or Buyer after the
Closing are payable to the other Party by reason of this allocation, the
appropriate sum (less a proportionate share of any reasonable attorneys' fees,
costs and other expenses incurred in the collection thereof) shall be promptly
paid to the other Party. At the Closing, Sellers shall furnish to Buyer a
complete and correct schedule of all minimum rents and other fixed charges which
are then due and payable but which have not been paid. Percentage rents and
other variable charges under the Space Leases, such as payments for real estate
taxes and other expenses, which are not fixed in amount, shall be adjusted when
and as received based upon the number of days in the payment period that each
party owned the Hotel. Buyer shall use reasonable efforts to collect any tenant
arrearages, but shall be under no obligation to commence any actions or
proceedings with respect thereto. After the Closing, Sellers may commence an
action or proceeding to collect, or may compromise, any arrearages relating
solely to its period of ownership. Any security deposits or advance payments of
rent held by Sellers under the Space Leases shall be paid over to Buyer at the
Closing or credited against the cash portion of the Purchase Price.
-83-
<PAGE> 94
11.8 ACCOUNTS RECEIVABLE AND PAYABLE, MUTUAL INDEMNITIES.
11.8.1 ACCOUNTS RECEIVABLE. As described in Section 11.5, the
within sale does not include any accounts receivable of Sellers for room, food
and beverage and other guest charges incurred at the Hotels for the period
through the Apportionment Date, exclusive of room charges for the night
commencing on the Apportionment Date (the "Accounts Receivable"). Sellers shall
have the sole right to receive, collect, discharge and compromise all Accounts
Receivable, except those due from guests on the "Guest Ledger" as of the Closing
Date (those guests in occupancy on the night commencing on the Apportionment
Date and who do not check out until the closing Date or thereafter), which shall
be collected by Buyer in accordance with Section 11.8.2 below.
11.8.2 COLLECTION OF ACCOUNTS RECEIVABLE. Buyer agrees that
any moneys received by Buyer after the Closing from any party owing any portion
of the Accounts Receivable (including credit card sales when payment thereon is
received by Buyer), net of any reasonable collection costs, credit card service
fees or travel agent's commissions which may be owed in connection therewith,
shall be held in trust by Buyer on account and for payment of such Accounts
Receivable. Buyer shall remit to Sellers any such moneys collected by Buyer at
least once every thirty (30) days. Buyer shall use due diligence and make all
reasonable efforts (short of litigation) to collect all Accounts Receivable.
Sellers may, at reasonable times during the hours 9 A.M. to 5 P.M. and upon
reasonable requests therefor, examine the books and records of Buyer for the
limited purpose of confirming the Accounts Receivable.
11.8.3 SELLERS' INDEMNITY. Sellers agree to indemnify Buyer,
its successors and assigns from and against any and all loss, damage, cost,
charge, liability or expense (including court costs and reasonable attorneys'
fees) for any accounts payable for goods supplied or services performed prior to
the Closing Date to or for either Sellers or any of the Hotels, and for any
sales taxes and/or hotel/motel occupancy taxes, if any, due in connection with
the rental of rooms, the sale of goods or the performance of services prior to
the Closing Date, except to the extent Buyer has received a credit therefor
against the Purchase Price pursuant to Sections 11.1.12 or 11.5, and to that
extent Buyer agrees to indemnify Sellers, their
-84-
<PAGE> 95
successors and assigns, from and against any and all loss, damage, cost, charge,
liability or expense (including court costs and reasonable attorneys' fees)
relating to the payable or tax for which it has received a credit. Except as
expressly provided in this Agreement or in any agreement executed and/or
delivered at the Closing, Buyer shall not and does not assume or undertake any
responsibility for any liability or obligation of Sellers, fixed or contingent,
disclosed or undisclosed, and assumes no liability for any claims, debts,
defaults, duties, taxes, obligations or liabilities of Sellers of any kind or
nature, whether known or unknown, contingent or fixed, all of which shall be
retained by Seller. Buyer shall not be liable for any claim arising out of any
act, event or transactions occurring prior to the Closing Date in connection
with the ownership or operation of any Property, and Sellers shall and hereby
agree to defend, indemnify and hold Buyer harmless from and against any and all
costs, expenses, losses or liabilities, including reasonable attorneys' fees,
suffered or incurred by Buyer arising out of any such liability or obligation,
including, without limitation, any transferee liability, except to the extent
Buyer has expressly assumed or indemnified Sellers against any such liability or
obligation.
11.8.4 BUYER'S INDEMNITY. Buyer shall and hereby agrees to
indemnify and hold Sellers harmless from and against any and all costs,
expenses, losses or liabilities, including reasonable attorneys' fees, suffered
or incurred by Sellers arising out of any liability or obligation (i) expressly
assumed by Buyer hereunder or in any agreement executed and/or delivered at the
Closing, (ii) for which Buyer has indemnified Sellers, or (iii) in connection
with the ownership and operation of the Hotels from and after the Closing.
11.8.5 SURVIVAL. The provisions of this Section 11.8 shall
survive the Closing Date in accordance with Section 5.3 hereof.
11.9 APPORTIONMENT OF RESERVATION DEPOSITS.
11.9.1 RESERVATION DEPOSITS. On the Closing Date the aggregate
amount of any deposits ("RESERVATION DEPOSITS") received by Sellers (whether
paid in cash or by credit card) as a down payment for reservations
("RESERVATIONS") made for rooms, banquets, meals or other services to be
supplied from and/or
-85-
<PAGE> 96
after the Closing Date shall be credited against the cash portion of the
Purchase Price due at the Closing.
11.9.2 INDEMNITY. Sellers hereby agree to indemnify and hold
Buyer harmless from and against all claims by and liabilities to any Person
resulting from Sellers' failure to pay over or credit to Buyer any Reservation
Deposits allegedly paid to Sellers for the period from and after the Closing
Date. Buyer hereby agrees to indemnify and holds Sellers harmless from and
against all claims by and liabilities to any person resulting from Buyer's
failure to honor or return any Reservation Deposit paid or credited to Buyer.
11.9.3 SURVIVAL. The provisions of this Section 11.9 shall
survive the Closing Date in accordance with Section 5.3 hereof.
11.10 POST-CLOSING RECONCILIATION; RESOLUTIONS OF DISPUTES;
FINAL RECONCILIATION.
11.10.1 POST-CLOSING RECONCILIATION. The Parties hereby
covenant and agree to correct any errors or omissions committed in computing
apportionments at Closing. Such corrections shall be made promptly after the
Party which discovers such error or omission notifies the other Party that such
error or omission occurred.
11.10.2 RESOLUTIONS OF DISPUTES AS TO APPORTIONMENTS. In the
event either Party objects to all or any portion of the Coopers & Lybrand
Certification (an "Objection"), such Party shall notify the other Party in
writing within sixty (60) days following the Closing Date (or the Postponed
Closing Date, as the case may be), whereupon the Parties, together with
representatives of Coopers & Lybrand, shall use diligent efforts to resolve any
such Objection(s). In the event the Parties are unable to resolve such
Objection(s) within ninety (90) days following the Closing Date (or the
Postponed Closing Date, as the case may be), either Party may, within such
ninety (90) day period, submit the matter to final and binding arbitration
before a single arbitrator (who shall be a certified public accountant),
appointed by the AAA in New York, New York. In the event Buyer believes that any
sums are payable to Buyer under this Section , Buyer shall be entitled to file
an Adjustment Claim under Section 5.6 hereof. The arbitrator shall, pursuant to
the Association's
-86-
<PAGE> 97
then Rules of Commercial Arbitration, hear the Parties and representatives of
Coopers & Lybrand, if either Party determines that testimony of Coopers &
Lybrand is relevant, and render a decision within thirty (30) days after the
conclusion of such hearing and the submission of all evidence in connection
therewith. The determination by the arbitrator shall be final and binding upon
the Parties. The fees and expenses of the arbitrator shall be divided equally
between the Parties, unless the arbitrator specifically rules otherwise.
11.10.3 FINAL RECONCILIATION. Except for the prorations
specifically provided for in this Agreement which shall be paid at Closing, the
Parties agree that no other estimates of Closing prorations shall be made, but
rather Buyer's manager shall make all payments required under any assumed
Contracts, and Buyer shall use reasonable efforts to collect all amounts
receivable with respect to the Assets, and shall, within fifteen (15) days
following the end of the month after the month in which the Closing occurs and
within fifteen (15) days after the end of each month thereafter until final
reconciliation occurs, prepare and submit to the Parties a statement of all
amounts paid and all accounts collected (less costs of collection, if any) which
are attributable to any date prior to the Closing Date and to any proration to
be made pursuant to the preceding paragraphs. Subject to Section 11.10.2 hereof,
a final reconciliation of all prorations to be made with respect to the Assets,
including those specifically addressed elsewhere in this Article 11, shall be
made not later than sixty (60) days following the Closing Date. Such final
reconciliation shall include, without limitation, an audit by Coopers & Lybrand
to confirm that Sellers have paid all Miscellaneous Taxes, including any
Miscellaneous Taxes arising as a result of the consummation of the sale,
conveyance and transfer of the Assets. The Parties shall each pay one-half (1/2)
of the fees charged by Coppers & Lybrand in connection with any such
post-closing audit. In the event the Buyer believes that any sums are payable to
Buyer under this Section , Buyer shall be entitled to file an Adjustment Claim
under Section 5.6 hereof. In the event that a dispute regarding the final
reconciliation shall arise which cannot be settled by the Parties, such dispute
may be referred to arbitration in the manner provided in Section 11.10.2, except
that the decision of the arbitrator shall be rendered within thirty (30) days
after submission. The foregoing obligations of the Parties shall survive the
Closing in accordance with Section 5.3 hereof.
-87-
<PAGE> 98
11.10.4 NO DISTRIBUTIONS OR LIQUIDATIONS. In the event that
Buyer files an Adjustment Claim with respect to this Section 11.10, Sellers
agree not to distribute any of the proceeds of the sale contemplated hereby
except in accordance with the terms of Section 5.6 hereof.
11.11 SAFES AND BAGGAGE.
11.11.1 SAFE DEPOSIT BOXES. On the Closing Date, Sellers shall
cause the delivery to Buyer of all of Sellers' keys to all safes and safe
deposit boxes (collectively, the "safes") at the Hotels. On or prior to the
Closing Date, Sellers shall give written notices to those Persons who have
deposited items in such safes, advising them of the sale of the applicable Hotel
to Buyer and requesting the removal or verification of their contents in the
safes on the Closing Date. All such removals or verifications on the Closing
Date shall be under the supervision of Sellers' and Buyer's respective
representatives. All contents which are to remain in the safes shall be
recorded. Safes containing items belonging to guests who have not responded to
such written notice by so removing or verifying their safe contents by the end
of the day and which cannot be opened without the key in the possession of such
guest shall be sealed until such time as the guest appears, at which time the
safe shall be opened and the contents recorded in the presence of the respective
representatives. Until that time, Buyer shall indemnify, defend and hold Sellers
harmless from and against any liability for loss or theft of such contents and
Sellers shall assign to Buyer their rights to any insurance proceeds covering
such safes. Any such contents so verified or recorded and thereafter remaining
in the hands of Buyer shall be the responsibility of Buyer and Buyer hereby
agrees to indemnify, defend and hold Sellers harmless from any liability
therefor.
11.11.2 INVENTORY OF GUEST PROPERTY. On the Closing Date,
representatives of Buyer and Sellers shall take an inventory of all baggage,
valises and trunks checked or left in the care of Sellers at the Hotels. From
and after the Closing Date, Buyer be responsible for all baggage listed in said
inventory, and Buyer hereby agrees to indemnify and to hold Sellers harmless
from any liability therefor. Sellers shall remain liable for any negligence or
malfeasance with respect to such baggage which occurred prior to the Closing
Date as well as for claimed omissions from said inventory, and Sellers hereby
-88-
<PAGE> 99
agree to indemnify and to hold Buyer harmless from any liability therefor.
11.11.3 The provisions of this Section 11.12 shall survive the
Closing Date in accordance with Section 5.3 hereof.
11.12 COLLECTION PERIOD. For a period of ninety (90) days following the
Closing Date, Buyer's manager shall remit any monies due Sellers as they are
collected (less costs of collection). Buyer shall cooperate with Sellers, at no
cost or expense to Buyer, in collecting any amounts due Sellers. With respect to
Accounts Receivable attributable to sums to which Sellers shall be entitled
hereunder, Buyer agrees that it will not waive, settle nor compromise any claim
with respect to such receivables without the prior written consent of Sellers.
ARTICLE 12
BROKER'S COMMISSION
12.1 COMMISSION. Sellers and Buyer each warrant and represent to the
other that it has not dealt or negotiated with any broker in connection with
this transaction other than Broker. Sellers hereby agree to pay Broker a
commission pursuant to a separate brokerage agreement.
12.2 INDEMNITY. Sellers and Buyer each hereby agree to indemnify and
hold the other harmless from and against any and all claims, demands, causes of
action, losses, costs and expenses (including reasonable attorneys' fees and
expenses) or other liability arising from or pertaining to any brokerage
commissions, fees, or other compensation, which may be due to any brokers or
other Persons (other than Broker) claiming to have dealt with the indemnifying
Party in connection with the transactions contemplated herein.
12.3 RELEASE OF BUYER. By its execution at the end of this Agreement,
Broker hereby irrevocably and absolutely releases Buyer from any and all
liability whatsoever with respect to any payment of any fee, commission or other
amount in connection with any services Broker may render with respect to the
transactions contemplated herein regardless of whether or not the Closing
occurs.
-89-
<PAGE> 100
12.4 SURVIVAL. The provisions of this Article 12 shall survive the
Closing Date in accordance with Section 5.3 hereof.
ARTICLE 13
POST-CLOSING COVENANTS
13.1 POST-CLOSING COVENANTS. Sellers and Buyer agree that from and
after the Closing Date and for so long as Sellers shall remain in existence
(which period, Sellers covenant shall extend at least ninety (90) days after the
Closing Date or the latest Postponed Closing Date, as the case may be):
13.1.1 PERMITS. Sellers will continue to cooperate with Buyer
at Buyer's sole expense to facilitate the acquisition by Buyer of all
nonassignable licenses and permits required for the use and operation of the
Real Property and the hotel businesses thereon.
13.1.2 BUSINESS RECORDS. Sellers will make all books and
records retained by Sellers which pertain to the Assets available for inspection
by Buyer and its representatives during business hours on reasonable advance
notice. For a period of five (5) years after the Closing Date, Buyer will make
all Business Records transferred to Buyer available for inspection by Sellers
and their representatives during business hours on reasonable advance notice for
the purpose of responding to tax authorities and/or governmental inquiries
arising out of Sellers' ownership and operation of the Assets prior to the
Closing Date.
13.1.3 TAX FILINGS. Sellers and Buyer shall cooperate
in timely making any filing required pursuant to Section 1060 of
the Internal Revenue Code or any regulations promulgated
thereunder.
13.1.4 GUARANTEES AND WARRANTIES. Sellers shall cooperate with
Buyer, at Buyer's sole expense, in enforcing any rights under any unexpired
guarantees or warranties given by Persons other than Sellers in connection with
any of the Hotels.
13.1.5 INTELLECTUAL PROPERTY. Neither Sellers nor any
affiliate of Sellers shall hereafter use the names Hotels of Distinction in
connection with any property or business owned or
-90-
<PAGE> 101
operated by them, or in connection with any property or business in which they
have an interest, direct or indirect.
13.1.6 LIQUOR LICENSES. Sellers shall take such
actions as are reasonably requested by Buyer to permit the
continued and uninterrupted sale of alcoholic beverages at the
Hotels.
13.1.7 SALES, USE AND/OR HOTEL/MOTEL LICENSES. Sellers shall
pay any and all Miscellaneous Taxes relating to (i) the period prior to the
Closing Date (or the Postponed Closing Date, as the case may be) or (ii) the
consummation of the sale, transfer and conveyance of the Assets.
13.1.8 NAMES FOLLOWING THE CLOSING. Sellers agree that,
following the Closing, Sellers will not adopt any name which includes any
trademark or trade name being assigned and conveyed hereunder or pursuant to
Realty Partnership under the Management Company Asset Purchase Agreement and
will not otherwise infringe upon the Intellectual Property (or the intellectual
property being assigned and conveyed under the Management Company Asset Purchase
Agreement), nor will Sellers hold themselves out as the successors to the
business of Sellers or the Management Company.
ARTICLE 14
NOTICES
14.1 NOTICES. All notices, consents, approvals and other communications
provided for herein or given in connection herewith shall be validly given,
made, delivered or served if in writing and delivered personally against
receipt, or sent by registered, certified mail, receipted overnight delivery
service, postage prepaid to:
SELLERS AT: HOTELS OF DISTINCTION VENTURES, INC.
380 South County Road
Palm Beach, FL 33480
Attention: Alan Tremain, President
Telephone: (407) 835-9500
-91-
<PAGE> 102
WITH A COPY TO: Andrew C. Culbert, Esquire
MASTERMAN, CULBERT & TULLY
One Lewis Wharf
Boston, MA 02110
Telephone: (617) 227-8010
BUYER AT: SLC OPERATING LIMITED PARTNERSHIP
c/o Starwood Lodging Corporation
11835 West Olympic Boulevard, Suite 675
Los Angeles, CA 90064
Attention: Michael C. Mueller
Telephone: (310) 575-3900
and
SLT REALTY LIMITED PARTNERSHIP
c/o Starwood Lodging Trust
11835 West Olympic Boulevard
Los Angeles, CA 90064, Suite 695
Attention: Ronald C. Brown, Vice President
Telephone: (310) 575-3900
WITH A COPY TO: Alan S. Weil, Esquire
SIDLEY & AUSTIN
875 Third Avenue
New York, NY 10022
Telephone: (212) 906-2315
ESCROW AGENT AT: Andrew C. Culbert, Esq.
MASTERMAN, CULBERT & TULLY
One Lewis Wharf
Boston, MA 02110
Telephone: (617) 227-8010
or to such other addresses as either Party hereto may from time to time
designate in writing and deliver to the other Party in a like manner. Notices,
consents, approvals and communications given by mail or overnight delivery
service shall be deemed delivered as of the date of postmark or deposit with an
overnight delivery service.
-92-
<PAGE> 103
ARTICLE 15
DEFAULT/REMEDIES
15.1 BUYER'S DEFAULT. If the conditions to Buyer's obligations set
forth in Section 9.1 hereof have been satisfied, Sellers are not in default
hereunder and Buyer shall default in any obligation hereunder to consummate the
purchase of the Assets, Sellers shall have the right, as Sellers' sole and
exclusive remedy, to receive, draw upon and keep the Deposit, as and for
liquidated damages and further consideration for entering into this Agreement,
and, thereupon, this Agreement shall become null and void and neither Party to
this Agreement shall have any further rights or obligations hereunder, it being
the understanding and agreement of the Parties hereto that the actual damages,
costs and expenses sustained by Sellers in the event of Buyer's default are
difficult, if not impossible, to ascertain.
15.2 SELLERS' DEFAULT. If the conditions to Sellers' obligations set
forth in Section 9.2 hereof have been satisfied, Buyer is not in default
hereunder and Sellers shall default in any obligation hereunder or shall
wrongfully fail to consummate the sale of the Assets for any reason, the Deposit
shall be immediately returned by Escrow Agent to Buyer and Buyer shall be
entitled to pursue any and all legal or equitable remedies available to it,
including but not limited to the right to seek specific performance.
15.3 ATTORNEYS' FEES. In the event either Party hereto finds it
necessary to bring an action at law or other proceeding against the other Party
to enforce or interpret any of the terms, covenants or conditions hereof or any
instrument executed pursuant to this Agreement or by reason of any breach or
default hereunder or thereunder, the Party prevailing in any such action or
proceeding shall be paid all costs, including reasonable attorneys' fees.
15.4 NO WAIVER. No delay in exercising any right or remedy shall
constitute a waiver thereof, and no waiver by Sellers or Buyer of the breach of
any covenant of this Agreement shall be construed as a waiver of any preceding
or succeeding breach of the same or any other covenant or condition of this
Agreement. No extension of time for performance of any obligation or act shall
be deemed an extension of the time for performance of any other obligation or
act.
-93-
<PAGE> 104
ARTICLE 16
MISCELLANEOUS
16.1 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Parties concerning the Assets. This Agreement supersedes all prior
and contemporaneous oral and written representations, warranties, covenants and
agreements by or between the Parties with respect to the Assets.
16.2 SATURDAY, SUNDAY, AND LEGAL HOLIDAYS; TIMES. If any date for the
performance of any matter under this Agreement (including the date for the
giving of Notice and the date on which any Notice is deemed to have been
received, pursuant to Article 14 hereof) falls on a day other than a Business
Day, then such date shall be extended to the next Business Day. All references
herein to a particular time on a particular date refer to the local time
(daylight or standard) in New York City.
16.3 PRESUMPTION CONCERNING INTERPRETATION AND CONSTRUCTION. There
shall be no presumption in favor of either Party with respect to the
interpretation or construction hereof.
16.4 ASSIGNMENT. This Agreement may be assigned by Buyer to any Person
which controls, is controlled by or is under common control with any Person
comprising Buyer without the prior written consent of Sellers. In the event of
any such assignment, any references in this Agreement to Buyer shall be
construed to mean the assignee to which Buyer named herein shall have assigned
its rights under this Agreement and which shall have assumed all obligations of
Buyer under this Agreement. For the purposes of this provision, the term
"control" shall mean the ownership (or right to control, by contract or
otherwise, the voting rights) with respect to thirty-five percent (35%) or more
of the outstanding voting interests in the applicable Person.
16.5 ARTICLES/SECTION HEADINGS. The headings of the various Sections in
this Agreement are for the convenience of the Parties and do not alter, modify,
or limit the provisions thereof and shall not be used in construing or
interpreting the provisions thereof.
-94-
<PAGE> 105
16.6 NON-RECORDATION. Buyer shall not file or record this Agreement or
any evidence or memorandum of this Agreement in any public records. A violation
of this provision shall constitute a default by Buyer hereunder.
16.7 WAIVERS; MODIFICATIONS. No delay on the part of a Party in
exercising any rights or remedies hereunder shall operate as a waiver thereof,
nor shall any specific waiver by a Party of any right or remedy hereunder
operate or be construed as a waiver of any other right or remedy hereunder nor
shall any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof, or the exercise of any other right or
remedy hereunder (unless the provisions of this Agreement which establish any
such right or remedy provide otherwise). No waiver of any right or remedy
hereunder shall be valid or enforceable unless in writing and signed by the
Party against whom such waiver is sought to be enforced. No modification of this
Agreement shall be effective unless in writing, signed by the Parties.
16.8 GOVERNING LAW; VENUE. This Agreement and the rights and
obligations of the Parties shall be governed by and construed in accordance with
the internal laws of the State of New York without application of conflict of
law principles. The Parties agree that other than with respect to the provisions
of Section 5.4.6 and Section 11.10 hereof, that any legal action or proceeding
with respect to this Agreement shall be brought in the courts of the State of
New York or the United States District Court for the Southern District of the
State of New York, sitting in New York, New York, and by execution and delivery
of this Agreement, the Parties accept for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The Parties irrevocably consent to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing or
delivery of copies thereof as provided in Section 14.1 (Notices), such service
to become effective thirty (30) days after such mailing. Nothing herein shall
affect the right to serve process in any other manner permitted by law. Except
to the extent prohibited by law which cannot be waived, each Party hereto waives
trial by jury in connection with any action or proceeding of any nature
whatsoever arising under, out of, or in connection with this Agreement and in
connection with any claim, counterclaim, offset or defense arising in connection
with such action or proceeding, whether
-95-
<PAGE> 106
arising under statute (including any federal or state constitution) or under the
law of contract, tort or otherwise and including, without limitation, any
challenge to the legality, validity, binding effect or enforceability of this
Section 16.8 or this Agreement.
16.9 DUE AUTHORITY. The individuals signing below represent that they
have the requisite authority to bind the entities on whose behalf they are
signing.
16.10 FURTHER ASSURANCES. Each Party shall, at the request of any other
Party, at any time and from time to time following the Closing, promptly execute
and deliver, or cause to be executed and delivered, to such requesting Party all
such further instruments and take all such further action as may be reasonably
necessary or appropriate to more effectively transfer, assign, convey, grant and
confirm to Buyer, or to perfect or record Buyer's title to or interest in, or to
enable Buyer to possess and use, the Assets or otherwise to confirm or carry out
the provisions and intents of this Agreement, and of the instruments delivered
pursuant to this Agreement.
16.11 SECTIONS, EXHIBITS AND SCHEDULES. All references herein to
Sections, Exhibits and Schedules, unless otherwise identified, are to Sections
of, Exhibits to, and Schedules to this Agreement. All Exhibits and all Schedules
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth herein.
16.12 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the Closing occurs, each Party shall pay its own
expenses incidental to the preparation of this Agreement, the carrying out of
the provisions hereof and the consummation of the transactions contemplated.
16.13 RELATIONSHIP OF PARTIES. Nothing contained in this Agreement
shall be deemed or construed by any Party, Person, or entity as creating any
relationship of principal and agent, of partnership, of joint venture, or of any
association whatsoever between the Parties. No provision of this Agreement and
no act or failure to act of the Parties shall be deemed to create any
relationship between the Parties other than the relationship of a vendor and a
vendee.
-96-
<PAGE> 107
16.14 NUMBER OF GENDER OF WORDS. Whenever any number (singular or
plural) is used herein, the same includes and applies to any one or more
thereof, and to each thereof, jointly and severally, and words of any gender
include each other gender.
16.15 COUNTERPARTS. This Agreement is executed in multiple
counterparts, each of which is an original, but all of which constitute but one
and the same document. The signatures of each of the Parties and Escrow Agent,
Management Company and the Broker may appear on multiple separate signature
pages.
16.16 TERMINATION; CONFIDENTIALITY. Simultaneously with any termination
of this Agreement, regardless of which Party terminates this Agreement or of the
cause of such termination, Buyer shall deliver to Sellers all documents received
from Sellers pursuant to the terms of this Agreement.
16.17 PUBLICITY. Other than as required by law, prior to the Closing,
neither Party will divulge, disclose, publish, publicize, or announce to any
Person or entity whatsoever, including, without limitation, any print, radio,
television, or other media representatives, any of the tenants, or any real
estate broker or salesperson, the existence of this Agreement or any of the
provisions of this Agreement; provided, however, that the Parties may disclose
this Agreement and the transactions contemplated herein to their respective
employees, agents and consultants.
16.18 EXCULPATION OF TRUSTEES OF STARWOOD LODGING TRUST.
Notwithstanding anything herein to the contrary, Buyer's obligations hereunder
shall be satisfied, if at all, out of the assets, properties or funds of Realty
Partnership, Operating Partnership and Starwood Lodging Trust (the "Trust"), a
Maryland real estate investment trust. The name "Starwood Lodging Trust" is a
designation of Starwood Lodging Trust 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, as further amended on February 1, 1995 and on June
19, 1995 and as the same may be further amended from time to time, and Sellers
shall look solely to the Trust's assets for the enforcement of any claims
against the Trust, as the Trustees, officers, agents and security holders of the
Trust assume no personal liability for obligations entered into on behalf of the
Trust, and their respective individual assets shall not be subject to the claims
-97-
<PAGE> 108
of any Person relating to such obligations. The foregoing shall govern all
direct and indirect obligations of the Trust under this Agreement.
16.19 EXCULPATION OF TRUSTEES OF H.O.D. ALLENTOWN TRUST.
Notwithstanding anything herein to the contrary, the obligations of H.O.D.
Allentown Trust hereunder shall be satisfied, if at all, out of the assets,
properties or funds of H.O.D. Allentown Trust, a Pennsylvania trust ("Allentown
Trust"). The name "H.O.D. Allentown Trust" is a designation of H.O.D. Allentown
Trust and its Trustees (as Trustees but not personally) under an Indenture of
Trust dated October 23, 1990, as the same may be further amended from time to
time, and Buyer shall look solely to Allentown Trust's assets for the
enforcement of any claims against Allentown Trust, as the Trustees, officers,
agents and security holders of Allentown Trust assume no personal liability for
obligations entered into on behalf of Allentown Trust, and their respective
individual assets shall not be subject to the claims of any Person relating to
such obligations. The foregoing shall govern all direct and indirect obligations
of Allentown Trust under this Agreement.
16.20 JOINT AND SEVERAL LIABILITY. To the extent that any Party
consists of more than one (1) Person, each constituent Person of such Party
shall be jointly and severally liable for the performance or satisfaction of
such Party's obligations under this Agreement.
16.21 ALLOCATION OF ASSETS. The Parties acknowledge and agree that the
Persons constituting Buyer may agree between themselves as to the allocation
between such Persons (and their respective affiliates) of the Assets, and
Sellers agree to convey the Assets to such constituent Persons as directed by
Buyer.
16.22 DELIVERY OF SCHEDULES AND EXHIBITS. The Parties acknowledge that
this Agreement is being executed and delivered before the Parties have completed
the preparation of the Schedules and Exhibits to be attached hereto. Buyer
agrees to prepare and deliver to Sellers the forms of Conveyance Documents
and Sellers agree to prepare and deliver to Buyer all other Schedules and
Exhibits, in each case on or before the date that is fifteen (15) days after
the Effective Date. The Parties agree to cooperate with one another to prepare a
draft set of Schedules and Exhibits not later than the date that is fifteen (15)
days
-98-
<PAGE> 109
after the Effective Date, or if such date is not a Business Day, on the next
succeeding Business Day. At such time as the Parties agree upon such Schedules
and Exhibits, the Parties shall execute a confirmation agreement to which such
approved Schedules and Exhibits shall be attached. In the event that the
Parties, after all good faith efforts, cannot agree upon the Schedules and
Exhibits to be annexed hereto on or before the date which is thirty (30) days
after the Effective Date, or if such date is not a Business Day, on the next
succeeding Business Day, either Party may, by delivery of written notice to the
other Party and Escrow Agent, terminate this Agreement, whereupon Escrow Agent
shall immediately return the Initial Deposit to Buyer, and neither Party shall
have any further rights or obligations hereunder.
16.23 RETURN OF ASSET DOCUMENTS UPON TERMINATION. Upon the termination
of this Agreement pursuant to the provisions hereof, Buyer shall promptly return
to Sellers any Asset Documents then in Buyer's possession and shall destroy any
and all other confidential information (including, without limitation, any work
notes or other analyses) then in Buyer's possession relating to the Assets. Upon
the termination of this Agreement as to an Eliminated Hotel(s), Buyer shall
promptly return to Sellers any Asset Documents then in Buyer's possession which
relate to the Eliminated Hotel(s) and shall destroy any and all other
confidential information (including, without limitation, any work notes or other
analyses) then in Buyer's possession relating to the Eliminated Hotel(s).
ARTICLE 17
DEFINITIONS
17.1 DEFINITIONS. The following terms used herein shall have the
definitions set forth below:
AAA has the meaning given in Section 5.5.1.
ADA has the meaning given in Section 5.1.19.
ACCOUNTS RECEIVABLE has the meaning given in Section 11.8.1.
ADDITIONAL DEPOSIT has the meaning given in Section 2.2.2.
ADJUSTMENT CLAIM has the meaning given in Section 5.6.
-99-
<PAGE> 110
AGREEMENT. This Asset Purchase Agreement dated as of the Effective Date
by and between Sellers and Buyer.
ALLENTOWN HILTON has the meaning given in the Preliminary Statement.
ALLOCABLE DEPOSIT shall mean, as to each Hotel, an amount equal to (i)
the amount then being held in escrow by Escrow Agent pursuant to Section 2.2.1
or Section 2.2.2 hereof multiplied by (ii) a fraction, the numerator of which is
the Allocated Purchase Price of the Hotel in question and the denominator of
which is the sum of the Allocated Purchase Prices of the Hotels subject to this
Agreement at such time.
ALLOCATED PURCHASE PRICE has the meaning given in Section 2.1.2.
APPORTIONMENT DATE has the meaning given in Section 11.1.
ARCHITECTURAL AND ENGINEERING REPORTS has the meaning given in Section
5.1.32.
ARLINGTON HILTON has the meaning given in the Preliminary Statement.
ASSETS has the meaning given in Section 1.2.11.
ASSET DOCUMENTS means those documents which relate to the Assets and
have been (or will be prior to the end of the Inspection Period and with
sufficient time remaining in the Inspecting Period for Buyer to perform its due
diligence) provided to Buyer by Sellers or the Management Company, including, by
way of illustration only, but not limited to, the Real Property Leases, Personal
Property Leases, Space Leases, Contracts, Permits, Liquor Licenses, Franchise
Agreements, Real Properties Documents, the Business Records, real and personal
property tax statements, Tenants' correspondence, operating statements for the
Assets, certificates, permits, licenses, drawings, plans, specifications, soils,
roof, inspection, engineering, and environmental reports, cost estimates of
repairs of the Assets, and written notices of non-compliance with any of the
matters described in Section 4.1.3 hereof; excluding, however, from the term
"Asset Documents" (except to the extent actually made available by Sellers to
Buyer), appraisals,
-100-
<PAGE> 111
financial analyses, business plans, marketing plans and contracts, cost
estimates, budgets, privileged materials, and calculations prepared in
connection with Sellers' determination of the terms under which Sellers are
willing to sell the Assets.
ASSIGNMENT AND ASSUMPTION OF CONTRACTS/PERMITS has the meaning given in
Section 10.2.4.
ASSIGNMENT AND ASSUMPTION OF INTELLECTUAL PROPERTY has the meaning
given in Section 10.2.7.
ASSIGNMENT AND ASSUMPTION OF PERSONAL PROPERTY LEASES has the meaning
given in Section 10.2.5.
ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASES has the meaning given
in Section 10.2.6.
ASSIGNMENT AND ASSUMPTION OF SPACE LEASES has the meaning given in
Section 10.2.3.
ASSUMED LIABILITIES means all liabilities with respect to the Assets
that arise and relate to transactions or periods that occur on and after the
Closing Date under the terms of any Contract, Collective Bargaining Agreement,
Real Property Lease, Personal Property Lease, Franchise Agreement, Liquor
License, Permit, Intellectual Property, agreement, license, sales order,
purchase order or other commitment that is assigned to and assumed by Buyer
pursuant to this Agreement, and expressly excluding any withdrawal liability
under ERISA and all other liabilities with respect to ERISA Benefit Plans, Prior
Pension Plans and Non-ERISA Commitments, except with respect to Buyer's
obligations pursuant to Section 7.1.18 (ii) and Section 7.1.19 hereof (except to
the extent Sellers have breached a representation set forth in the last sentence
of Section 5.1.21(d) hereof).
BILL OF SALE has the meaning given in Section 10.2.2.
BILLBOARD LEASES has the meaning given is Section 5.1.30.
BROKER means HOD Realty, Inc., a Florida corporation.
BUSINESS DAY means any day other than a Saturday, Sunday or legal
holiday observed by national banks in New York.
-101-
<PAGE> 112
BUSINESS RECORDS means, collectively, those items of Personal Property,
including all documents, records and data, including computerized records,
maintained by Sellers (or other third parties at Sellers's direction or under
Sellers's control), in regard to the existence, use, ownership, occupancy,
operation, marketing and/or maintenance of the Assets, including, without
limitation, all books of account, tax returns, purchase records, sales and
invoice records, correspondence, equipment maintenance data, operating manuals,
employee and personnel files, inventory records, sales and promotional data,
customer lists, cost and pricing information, supplier lists, business plans,
advertising materials, warranties and guaranties of any nature, stationery and
other imprinted materials, office supplies, training manuals, materials,
correspondence, all computer programs and data files, reference catalogs and all
other records, data, documents and information maintained in connection with the
existence, use, ownership, occupancy, operation and/or maintenance of the
Assets.
BUYER means Realty Partnership and Operating Partnership, collectively,
their successors or assigns.
CERCLA has the meaning given in Section 5.1.22.
CPLR has the meaning given in Section 5.1.5.
CASUALTY has the meaning given in Section 8.2.
CLOSING DATE/CLOSING has the meaning given in Section 10.1.
CODE means the Internal Revenue Code of 1986, as the same may be
amended from time to time, and as interpreted in Treasury Regulations adopted or
promulgated thereunder.
COLLECTIVE BARGAINING AGREEMENTS has the meaning given in Section
5.1.20.
CONDITION OF THE ASSETS has the meaning given in Section 4.1.
CONSENTS has the meaning given in Section 5.1.3.
CONTRACTS has the meaning given in Section 1.2.8.
-102-
<PAGE> 113
CONVEYANCE DOCUMENTS shall mean, collectively, the Bill of Sale, the
Assignment and Assumption of Space Leases, the Assignment and Assumption of
Contracts/Permits, the Assignment and Assumption of Personal Property Leases,
the Assignment and Assumption of Real Property Leases and the Assignment and
Assumption of Intellectual Property.
COOPERS & LYBRAND CERTIFICATION has the meaning given in Section 11.1.
COURT has the meaning given in Section 5.5.1.
DEEDS has the meaning given in Section 10.2.1.
DEPOSIT has the meaning given in Section 2.2.3.
DUE DILIGENCE STUDIES has the meaning given in Section 3.1.
EFFECTIVE DATE means the latest date of execution of this Agreement by
the Parties as set forth opposite each Party's signature.
ELIMINATED HOTEL has the meaning given in Section 6.1.
EMPLOYEE BENEFITS has the meaning given in Section 11.6.
ENVIRONMENTAL LAWS has the meaning given in Section 4.1.3.
ENVIRONMENTAL REPORTS has the meaning given in Section 5.1.22.
ERISA has the meaning given in Section 5.1.21.
ERISA AFFILIATE has the meaning given in Section 5.1.21.
ERISA BENEFIT PLANS has the meaning given in Section 5.1.21.
ESCROW AGENT means Masterman, Culbert & Tully.
EXCLUDED ASSETS has the meaning given in Section 1.3.
EXISTING IDA DEBT means all principal, interest and other sums of any
nature whatsoever outstanding from time to time under
-103-
<PAGE> 114
the Loan Documents relating to the Industrial Development Authority financing
with respect to the Allentown Hilton.
FINANCIAL STATEMENTS has the meaning given in Section 5.1.31.
FRANCHISE AGREEMENTS has the meaning given in Section 1.2.11.
FRANCHISOR has the meaning given in Section 1.2.11.
HOD VENTURES means Hotels of Distinction Ventures, Inc., a Delaware
corporation.
HAZARDOUS MATERIALS has the meaning given in Section 5.1.22.
HAZARDOUS MATERIALS CONTAMINATION has the meaning given in Section
5.1.22.
HOTEL has the meaning given in the Preliminary Statement.
HOTEL DEPOSITS has the meaning given in Section 1.2.7.
HOTEL EMPLOYEES has the meaning given in Section 5.1.20.
IRCA has the meaning given in Section 5.1.20.
IMPROVEMENTS has the meaning given in Section 1.2.3.
INDEMNITEE has the meaning given in Section 5.4.3.
INDEMNITOR has the meaning given in Section 5.4.3.
INDEMNIFICATION THRESHOLD has the meaning given in Section 5.4.4.
INITIAL DEPOSIT has the meaning given in Section 2.2.1.
INITIAL MAXIMUM INDEMNITY AMOUNT has the meaning given in Section
5.4.4.
INSPECTION PERIOD has the meaning given in Section 3.1.
-104-
<PAGE> 115
INTELLECTUAL PROPERTY has the meaning given in Section 1.2.10.
IRCA has the meaning given in Section 5.1.20.
LANTING AGREEMENT has the meaning given in the Preliminary Statement.
LEASES has the meaning given in Section 1.2.5.
LIQUOR LICENSE means all alcoholic beverage license(s) issued and
outstanding for the Hotels.
LOAN DOCUMENTS has the meaning given in Section 5.1.33.
MAJOR ADA VIOLATION has the meaning given in Section 5.1.19.
MAJOR DEFICIENCY has the meaning given in Section 3.2.2.
MANAGEMENT COMPANY ASSET PURCHASE AGREEMENT has the meaning
given in the Preliminary Statement.
MANAGEMENT AGREEMENTS has the meaning given in Section 1.3.
MANAGEMENT COMPANY has the meaning given in the Preliminary Statement.
MARQUE OF ATLANTA has the meaning given in the Preliminary Statement.
MARQUE OF WINSTON-SALEM has the meaning given in the Preliminary
Statement.
MAXIMUM RESERVE AMOUNT has the meaning given in Section 5.6.
MINNEAPOLIS HILTON has the meaning given in the Preliminary Statement.
MISCELLANEOUS TAXES has the meaning given in Section 5.1.17.
MOTOR VEHICLES means, collectively, the Motor Vehicles identified as
part of the Personal Property and as specifically identified on Schedule 10.2.8,
to be sold and transferred by
-105-
<PAGE> 116
Sellers to Buyer or assigned to Buyer by assignment of motor vehicle lease, as
the case may be.
MULTIEMPLOYER PLAN has the meaning given in Section 5.1.21.
NON-ERISA COMMITMENTS has the meaning given in Section 5.1.21.
OBJECTION has the meaning given in Section 11.10.2.
OWNER'S POLICIES has the meaning given in Section 3.1.1.
PALM DESERT has the meaning given in the Preliminary Statement.
PARK TUCSON has the meaning given in the Preliminary Statement.
PARTY means, individually Sellers or Buyer or collectively, as the
Parties.
PENSION PLANS has the meaning given in Section 5.1.21.
PERMITS has the meaning given in Section 1.2.9.
PERMITTED ENCUMBRANCES. Collectively, the following matters affecting
or otherwise encumbering the Assets:
(a) Provisions of existing building and zoning laws, provided that (i)
the same do not prohibit the use of the Assets as the same are now constituted
and are not violated by the existing use and operation of the Assets, and (ii)
the present use and operation of the Assets does not constitute a non-conforming
use.
(b) Such Property Taxes as are not due and payable on the Closing Date
(subject to apportionment as provided in Article 11 hereof); and
(c) Easements, restrictions and agreements of record set forth on
Schedule 17 hereto; and
(d) the occupancy rights of existing transient guests of the Hotels;
and
-106-
<PAGE> 117
(e) the rights of tenants under Space Leases as tenants only; and
(f) any other matter or thing affecting any of the Assets which Buyer
may expressly agree in writing to take subject to or to waive pursuant to the
provisions of this Agreement;
provided, however, that "Permitted Encumbrances" shall not include any liens
arising under the Code or ERISA with respect to any ERISA Benefit Plan, Prior
Pension Plan or Non-ERISA Commitment.
PERMITTED INVESTMENTS shall mean:
(a) United States Treasury Obligations having maturities of one (1)
year or less;
(b) Certificates of Deposit issued by commercial banks of recognized
standing, the senior debt obligations of which banks are then rated "A" (or the
equivalent thereof) or higher by Standard & Poor's Corporation;
(c) Commercial paper rated at least A-1 (or the equivalent thereof) or
higher by Standard & Poor's Corporation;
(d) Money market funds of commercial banks of recognized standing, the
senior debt obligations of which banks are then rated "A" (or the equivalent
thereof) or higher by Standard & Poor's Corporation; and
(e) Eurodollar Time Deposits of commercial banks of recognized
standing, or branches thereof located outside the United States, the senior debt
obligations of which banks are then rated "A" (or the equivalent thereof) or
higher by Standard & Poor's Corporation.
PERSON means a natural person, partnership, limited partnership,
corporation, trust, estate, association, unincorporated association or other
entity.
PERSONAL PROPERTY shall have the meaning given in Section 1.2.4.
-107-
<PAGE> 118
PERSONAL PROPERTY LEASES has the meaning given in Section 1.2.5.
POSTPONED CLOSING DATE shall have the meaning given in Section 5.3.
PREPAID ACCOUNTS has the meaning given in Section 1.2.6.
PRIOR MULTIEMPLOYER PLAN has the meaning given in Section 5.1.21.
PRIOR PENSION PLAN has the meaning given in Section 5.1.21.
PROPERTY TAXES means, collectively, all taxes, assessments, charges and
liens by any federal, state, local or municipal authority, municipality, board
or agency with the power to tax, assess, lien or charge against the Real
Properties or any portion thereof, or against Sellers, the default in payment of
which may result in a lien against the Real Properties or any portion thereof or
against the owner of the Assets, including, without limitation, water and sewer
taxes and municipal assessments and betterments, taxed, assessed or levied
against all or any portion of the Real Properties.
PURCHASE PRICE has the meaning given in Section 2.1.
RATE AGREEMENTS has the meaning given in Section 5.1.35.
REAL PROPERTIES has the meaning given in Section 1.2.1.
REAL PROPERTIES DOCUMENTS has the meaning given in Section 3.1.3.
REAL PROPERTIES LEASES has the meaning given in Section 1.2.2.
RENTS has the meaning given in Section 1.2.7.
RESERVATIONS has the meaning given in Section 11.9.1.
RESERVATION DEPOSITS has the meaning given in Section 11.9.1.
RESTRICTED PERIOD has the meaning given in Section 5.6.
-108-
<PAGE> 119
SELLERS means collectively HOTELS OF DISTINCTION VENTURES, INC., a
Delaware corporation H.O.D. ALLENTOWN TRUST, a Pennsylvania Trust; H.O.D.
ALLENTOWN I CORP., a Delaware corporation; H.O.D. ALLENTOWN II CORP, a Delaware
corporation; ALLENTOWN HOTEL VENTURES, INC., a Delaware corporation; MINNEAPOLIS
HOTEL VENTURES, INC., a Minnesota corporation; PALM DESERT HOTEL VENTURES, INC.,
a California corporation; HOTELS OF DISTINCTION SOUTHWEST, INC., a California
corporation; WINSTON- SALEM HOTEL VENTURES, INC., a Delaware corporation;
ATLANTA HOTEL VENTURES, INC., a Delaware corporation; NEEDHAM HOTEL VENTURES
L.P., a Massachusetts limited partnership; NEEDHAM HOTEL VENTURES, INC., a
Delaware corporation; NEEDHAM HOTEL VENTURES II, INC., a Delaware corporation;
TUCSON HOTEL VENTURES, INC., a Delaware corporation; ST. LOUIS HOTEL VENTURES,
INC., a Delaware corporation; ARLINGTON HEIGHTS HOTEL VENTURES, INC., a Delaware
corporation.
SELLERS' ACTUAL KNOWLEDGE means the actual current knowledge of any of
the following: Alan Tremain, William H. Lanting, Jean- Claude Mathot, Cindy
Niebur and the general managers of each of the Hotels.
SELLERS' PRIOR LIABILITY INSURANCE POLICIES has the meaning given in
Section 5.1.26.
SHERATON NEEDHAM has the meaning given in the Preliminary Statement.
SPACE LEASES has the meaning given in Section 1.2.7.
ST. LOUIS SUITES has the meaning given in the Preliminary Statement.
SUBSEQUENT MAXIMUM INDEMNITY AMOUNT has the meaning given in Section
5.4.4.
SUBSIDIARY ENTITIES has the meaning given in the first paragraph.
SURVEY has the meaning given in Section 3.1.2.
SURVEY COSTS has the meaning given in Section 3.1.3.
TAKING has the meaning given in Section 8.5.
-109-
<PAGE> 120
TENANTS has the meaning given in Section 1.2.7.
TITLE COMMITMENTS has the meaning given in Section 3.1.1.
TITLE COMPANY means any reputable title insurance company selected by
Buyer.
TITLE OBJECTIONS has the meaning given in Section 3.1.3.
TRUST means Starwood Lodging Trust, a Maryland real estate investment
trust.
UNCURABLE DEFECT has the meaning given in Section 3.2.2.
UTILITIES has the meaning given in Section 11.1.3.
WARN ACT has the meaning given in Section 5.1.21.
WELFARE PLANS has the meaning given in Section 5.1.21.
-110-
<PAGE> 121
IN WITNESS WHEREOF the Parties have caused this Agreement to be duly
executed as of the Effective Date.
Date: March __, 1996 SELLERS:
HOTELS OF DISTINCTION VENTURES,INC.
__________________________
By:_______________________
Alan Tremain, Chairman of the Board
hereunto duly authorized
__________________________
Trustee and not individually,
H.O.D. ALLENTOWN TRUST
ALLENTOWN HOTEL VENTURES, INC.
By:_______________________
President
hereunto duly authorized,
MINNEAPOLIS HOTEL VENTURES, INC.
By:_______________________
President
hereunto duly authorized,
PALM DESERT HOTEL VENTURES, INC.
By:______________________
-111-
<PAGE> 122
President
hereunto duly authorized
WINSTON-SALEM HOTEL VENTURES, INC.
By:______________________
President
hereunto duly authorized
ATLANTA HOTEL VENTURES, INC.
By:______________________
President
hereunto duly authorized
NEEDHAM HOTEL VENTURES L.P.
By:______________________
President
hereunto duly authorized
NEEDHAM HOTEL VENTURES, INC.
By:______________________
President
hereunto duly authorized
NEEDHAM HOTEL VENTURES II, INC.
By:______________________
President
-112-
<PAGE> 123
hereunto duly authorized
TUCSON HOTEL VENTURES, INC.
By:______________________
President
hereunto duly authorized
ST. LOUIS HOTEL VENTURES, INC.
By:______________________
President
hereunto duly authorized
ARLINGTON HEIGHTS HOTEL VENTURES, INC.
By:______________________
President
hereunto duly authorized
Date: March __, 1996 BUYER:
SLT REALTY LIMITED PARTNERSHIP
By: STARWOOD LODGING TRUST,
General Partner
By:__________________________
Name:
Title:
-113-
<PAGE> 124
SLC OPERATING LIMITED PARTNERSHIP
By: STARWOOD LODGING CORPORATION,
General Partner
By:__________________________
Name:
Title:
-114-
<PAGE> 125
Escrow Agent hereby agrees to hold and disburse the Initial Deposit and
Additional Deposit and all other funds received by Escrow Agent in accordance
with the provisions of this Agreement.
ESCROW AGENT:
MASTERSON, CULBERT & TULLY
By:______________________________
Partner
Broker has executed this Agreement solely for the purpose of evidencing
Broker's agreement to and acceptance of the provisions of Article 12.3.
BROKER:
HOD Realty, Inc.
By: _____________________________
hereunto duly authorized
Management Company has executed this Agreement solely for the purpose
of (i) evidencing Management Company's agreement to allow Buyer access to
Management Company's office(s) to perform its due diligence pursuant to Section
3.1 hereof, (ii) confirming the representations and warranties set forth in
Article 5 hereof and (iii) agreeing to the covenants set forth in Section 7.1.19
hereof.
MANAGEMENT COMPANY:
HOTELS OF DISTINCTION, INC.
By: _____________________________
hereunto duly authorized
-i-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ON THE JOINT ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<CIK>0000048595
<NAME>STARWOOD LODGING TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 7,340,000
<SECURITIES> 0
<RECEIVABLES> 16,727,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,992,000
<PP&E> 594,756,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 638,815,000
<CURRENT-LIABILITIES> 15,188,000
<BONDS> 0
0
0
<COMMON> 158,000
<OTHER-SE> 254,284,000
<TOTAL-LIABILITY-AND-EQUITY> 638,815,000
<SALES> 0
<TOTAL-REVENUES> 17,051,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,034,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,271,000
<INCOME-PRETAX> 5,600,000
<INCOME-TAX> 5,600,000
<INCOME-CONTINUING> 5,600,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,600,000
<EPS-PRIMARY> .36
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ON THE JOINT ANNUAL REPORT ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<CIK>0000316206
<NAME>STARWOOD LODGING CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 10,538,000
<SECURITIES> 0
<RECEIVABLES> 15,975,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,431,000
<PP&E> 109,950,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 145,894,000
<CURRENT-LIABILITIES> 23,021,000
<BONDS> 0
0
0
<COMMON> 158,000
<OTHER-SE> 14,347,000
<TOTAL-LIABILITY-AND-EQUITY> 145,894,000
<SALES> 66,355,000
<TOTAL-REVENUES> 68,116,000
<CGS> 0
<TOTAL-COSTS> 45,960,000
<OTHER-EXPENSES> 15,500,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,047,000
<INCOME-PRETAX> 3,998,000
<INCOME-TAX> 3,998,000
<INCOME-CONTINUING> 3,998,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,998,000
<EPS-PRIMARY> .26
<EPS-DILUTED> 0
</TABLE>
