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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AS AMENDED)
/x/ JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to __________
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Commission File Number: 1-6828 Commission File Number: 1-7959
STARWOOD LODGING STARWOOD LODGING
TRUST 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.)
11845 W. Olympic Blvd., Suite 550
Los Angeles, California 90064 11845 W. Olympic Blvd., Suite 560
(Address of principal executive Los Angeles, California 90064
offices, including zip code) (Address of principal executive
offices, including zip code)
(310) 575-3900
(Registrant's telephone number, (310) 575-3900
including area code) (Registrant's telephone number,
including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Shares of Beneficial Interest, $0.01 par value,
of Starwood Lodging Trust ("Trust Shares")
paired with New York Stock Exchange
Shares of Common Stock, $0.01 par value,
of Starwood Lodging Corporation ("Corporation Shares")
1986 Warrants to purchase Trust Shares
paired with American Stock Exchange
1986 Warrants to purchase Corporation Shares
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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 .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of each Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K /X/.
As of March 24, 1995, the aggregate market value of the Registrants' voting
stock held by non-affiliates(1) was $34,063,000.
As of March 24, 1995, the Registrants had outstanding 12,132,948 Trust
Shares and 12,132,948 Corporation Shares.
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(1)For purposes of this Joint Annual Report only, includes all voting shares
other than those held by the Registrants' Trustees or Directors and executive
officers or by persons known to either Registrant to hold of record or
beneficially 5% or more of such Registrant's voting shares.
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TABLE OF CONTENTS
Item
Number
in Form
10-K PART I Page
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1. Business.................................................................... 1
2. Properties.................................................................. 8
3. Legal Proceedings........................................................... 25
4. Submission of Matters to a Vote of Security Holders......................... 26
PART II
5. Market for Registrants' Common Equity and Related Stockholder Matters......
28
6. Selected Financial Data..................................................... 30
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................. 31
8. Financial Statements and Supplementary Data................................. 39
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................. 39
PART III
10. Trustees, Directors and Executive Officers of the Registrants............... 39
11. Executive Compensation ..................................................... 43
12. Security Ownership of Certain Beneficial Owners and Management.............. 48
13. Certain Relationships and Related Transactions.............................. 50
PART IV
14. Exhibits, Financial Statements, Financial Statement Schedules and Reports on
Form 8-K.................................................................... 54
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PART I
ITEM 1. BUSINESS.
Starwood Lodging Trust, formerly Hotel Investors Trust (the "Trust"),
was organized in 1969 as a Maryland real estate investment trust, and has
invested in fee, ground leasehold and mortgage loan interests in hotel
properties located throughout the United States.
In order for the Trust to qualify for favorable tax status as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986 (the
"Code"), the Trust has leased its properties to third party operators. In 1980,
Starwood Lodging Corporation, formerly Hotel Investors Corporation (the
"Corporation" and, together with the Trust, "Starwood Lodging"), was organized
as a Maryland corporation and has leased hotel properties from the Trust since
that date.
Since 1980, the shares of beneficial interest of the Trust ("Trust
Shares") and the shares of common stock of the Corporation ("Corporation
Shares") have been "paired" on a one-for-one basis and may only be held or
transferred in units consisting of one Trust Share and one Corporation Share
("Paired Shares"). The Code has prohibited the "pairing" of shares between a
REIT and a management company since 1983. This rule does not apply to the Trust
because its Paired Share structure has existed since 1980.
At December 31, 1994, the Trust owned equity interests in twenty-four
hotel properties, including two hotel/casinos. Eighteen of such properties were
owned in fee, five were held pursuant to long-term leases and one was owned
through a 5% general partnership interest in a joint venture. At such date,
twenty of the Trust's hotels (including the two hotel/casinos) were leased to
the Corporation or its subsidiaries, and five of those hotels were being managed
by third-party operators. For information as to such interests and properties,
see Item 2 of this Joint Annual Report.
THE REORGANIZATION
On January 31, 1995 (the "Closing Date"), the Trust and the Corporation
consummated a previously announced reorganization (the "Reorganization") with
Starwood Capital Group, L.P. ("Starwood Capital") and certain affiliates of
Starwood Capital (the "Starwood Partners") effective January 1, 1995.
The Reorganization involved a number of related transactions that
occurred simultaneously on the Closing Date. Such transactions included (i) the
contribution by the Trust to SLT Realty Limited Partnership (the "Realty
Partnership") of all of the properties and assets of the Trust, subject to
substantially all of the liabilities of the Trust (including the senior debt
(the "Senior Debt") of the Trust), in exchange for an approximate 28.3% interest
as a general partner in the Realty Partnership, (ii) the contribution by the
Starwood Partners to the Realty Partnership of approximately $12,600,000 in cash
and certain hotel properties and first mortgage notes, in exchange for limited
partnership units representing the remaining approximate 71.7% interest in the
Realty Partnership, (iii) the contribution by the Corporation and its
subsidiaries to SLC Operating Limited Partnership (the "Operating Partnership")
of all of their properties and
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operating assets (except for their gaming assets, which are to be contributed
upon approval by Nevada gaming authorities), subject to substantially all of
their liabilities, in exchange for an approximate 28.3% interest as a general
partner in the Operating Partnership, and (iv) the contribution by the Starwood
Partners to the Operating Partnership of approximately $1,400,000 in cash and
furnishings and equipment of the hotel properties, in exchange for limited
partnership units representing the remaining approximate 71.7% interest in the
Operating Partnership. In addition, on March 24, 1995 a Starwood Partner
exchanged $12,000,000 of Senior Debt for additional limited partnership units of
the Realty Partnership and the Operating Partnership.
After giving effect to the Reorganization and the subsequent exchange
of Senior Debt, the Trust has an approximate 25.4% interest in the Realty
Partnership and the Corporation has an approximate 25.4% interest in the
Operating Partnership, and the Starwood Partners hold limited partnership
interests representing the remaining approximate 74.6% interest in each of the
Realty Partnership and the Operating Partnership. As of the date of this Joint
Annual Report, the structure of Starwood Lodging is as follows:
[GRAPHIC]
The limited partnership units of the Realty Partnership and the
Operating Partnership held by the Starwood Partners are (subject to the
ownership limit provisions of the Trust and the Corporation) exchangeable by the
Starwood Partners, for, at the option of the Trust and the Corporation, either
cash, Paired Shares of the Trust and the Corporation representing up to
approximately 74.6% of the Paired Shares after such exchange, or a combination
of cash and such Paired Shares. The ownership limit provisions of the Trust and
the Corporation are designed to preserve the status of the Trust as a REIT for
tax purposes by providing that in general no shareholder may own, directly or
indirectly, more than 8.0% of the outstanding Paired Shares.
Since the Reorganization, the Trust has conducted all of its business
and operations through the Realty Partnership. As of the closing of the
Reorganization, the Realty
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Partnership held fee interests, ground leaseholds and mortgage loan interests in
43 hotel properties containing over 8,500 rooms located in 19 states throughout
the United States. The Trust controls the Realty Partnership as the sole general
partner of the Realty Partnership.
After the Reorganization, the Corporation (together with its
wholly-owned subsidiaries) has conducted all of its business and operations
(other than its gaming operations) through the Operating Partnership. As of the
closing of the Reorganization, the Operating Partnership leased from the Realty
Partnership all but three of the hotel properties owned in fee or held pursuant
to long-term leases by the Realty Partnership. Upon receipt of Nevada gaming
regulatory approvals, the Corporation will control the Operating Partnership as
its managing general partner. Prior to the receipt of such approvals, the
Operating Partnership is being managed by a management committee, the members of
which are identical to the members of the Board of Directors of the Corporation
that will hold office upon receipt of Nevada gaming regulatory approvals.
Regulatory approvals are expected to be received by the end of 1997. See
Item 10 of this Joint Annual Report.
Prior to the receipt of Nevada gaming regulatory approvals, the gaming
operations (which consist of two hotel/casinos located in Las Vegas, Nevada) are
being operated through a wholly owned subsidiary of the Corporation. Upon
receipt of such approvals (or such time as such approvals are no longer
required) all of the assets and liabilities of such subsidiary (or, if those
assets have been disposed of, the net proceeds of such disposition) will be
transferred to a limited partnership owned 99% by the Operating Partnership, as
limited partner, and 1% by such subsidiary, as general partner.
1995 DEBT REFINANCING
On March 24, 1995, the Realty Partnership and the Trust entered into an
Amended and Restated Credit Agreement (the "New Credit Agreement") pursuant to
which the Realty Partnership borrowed $131.75 million (the "Loan") which was
used primarily to refinance all outstanding Senior Debt (after taking into
account the exchange by a Starwood Partner of $12 million of Senior Debt for
units of the Realty Partnership and the Operating Partnership described above)
and approximately $27 million of first mortgage debt. The Loan matures on April
1, 1997 (subject to the Realty Partnership's option to extend such maturity for
12 months subject to a principal payment of $10 million and on certain
conditions) and bears interest at a rate based on LIBOR plus 3%.
Prior to maturity there are no mandatory principal payments on the
Loan, except that (i) if the Realty Partnership sells or refinances a hotel
property or mortgage note (other than certain notes contributed by the Starwood
Partners aggregating $53 million ("the Harvey notes")), it must reduce the
principal of the Loan by at least 125% of the portion of the Loan allocated to
such property or note and (ii) the net proceeds of any public offering (or
private offerings to the extent the net proceeds thereof exceed $60 million) of
equity interests in the Trust, the Corporation, the Realty Partnership or the
Operating Partnership must be used to reduce the principal of the Loan until
such principal is equal to or less than 50% of the fair market value of the
assets which secure the Loan.
The Loan is secured by liens on substantially all of the
assets of the Realty Partnership, other than the Harvey notes. Up to $58 million
of the obligations under the Loan
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was guaranteed by the Operating Partnership, in consideration for the
cancellation by the Realty Partnership of intercompany indebtedness. Such
guaranty is secured by first priority liens on substantially all of the assets
of the Operating Partnership. Each of the Trust and the Corporation, as general
partner, is secondarily liable for the obligations under the Loan of the Realty
Partnership and the Operating Partnership, respectively. Approximately $46.1
million of mortgage notes payable are senior to the Loan (see Note 7, "Mortgage
and Other Notes Payable").
The New Credit Agreement contains covenants that are similar to, but in
general less restrictive than, those contained in the Prior Credit Agreement
described below, including (i) a requirement that the Realty Partnership and the
Operating Partnership maintain a combined net worth at least equal to (a) $40
million, plus (b) 75% of the net proceeds of equity contributed to the Realty
Partnership (unless used within six months to acquire hotel assets or that
constitute equity in hotel assets, each of which will be governed by clause (c)
below), plus (c) 50% of the net equity book value of hotel assets contributed to
or acquired by the Realty Partnership during the term of the Loan; (ii)
restrictions on the ability of the Realty Partnership to incur other
indebtedness; and (iii) a right of the Realty Partnership and the Operating
Partnership to pay distributions to its partners up to certain specific amounts
and a right of the Trust and the Corporation to pay distributions, to their
shareholders. See Item 5, "Distributions" of this Joint Annual Report. The
Realty Partnership also has the right to acquire certain additional hotels that
meet certain cash flow tests.
The Realty Partnership may, prior to January 1, 1996, borrow up to an
additional $75 million to finance the acquisition of hotel properties and to
refinance debt that is senior to the Loan. Each such acquisition loan will be in
an amount equal to the lesser of (i) 60% of the purchase price (in the case of
an acquisition) and (ii) 70% of the property's value (as determined by the
lender), will be made on the same terms as the Loan and will be secured by a
lien on the related hotel property.
ACQUISITION STRATEGY
Starwood Lodging intends to focus its acquisition strategy on full
service and upper-end and limited service hotels. The Trust and the Corporation
believe that hotels in those segments can be purchased at prices below
replacement cost and offer better yields than hotels in other segments, and thus
represent more stable long-term investments. Starwood Lodging will generally
seek investments in hotels where management believes that such hotels' profits
can be increased by the introduction of more professional and efficient
management techniques or the injection of capital to cure deferred maintenance.
Properties will be targeted throughout the United States, but Starwood Lodging
will generally focus on markets located near other properties owned and operated
by Starwood Lodging, markets with significant barriers to entry or markets with
stable demand generators such as universities, government agencies or large
companies.
As of March 31, 1995, Starwood Lodging is evaluating numerous hotel
properties for acquisition, and has made offers on ten properties in the
aggregate amount of approximately $180 million. In addition, Starwood Lodging
has entered into a definitive agreement to purchase the 172-room Omni Hotel
located in Chapel Hill, North Carolina. Such transaction is expected to close
on or before April 10, 1995. See Item 2, "Pending Hotel Acquisition" of this
Joint Annual Report.
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The Trust and the Corporation intend that the Operating Partnership
lease and operate all hotels owned by the Realty Partnership. Accordingly, the
Operating Partnership will seek to manage those hotels which are currently owned
by the Realty Partnership and operated on behalf of the Operating Partnership by
third-party management companies. The Operating Partnership generally intends
that the management contracts with such third-party operators will be terminated
and that all of such properties will be managed by the Operating Partnership by
the end of 1995.
PRIOR DEBT RESTRUCTURING
Pursuant to a Credit Agreement dated as of January 28, 1993 (the "Prior
Credit Agreement"), the Trust restructured approximately $128 million of Senior
Debt as a term loan and revolving credit facility. The Senior Debt was assumed
by the Realty Partnership as of the Closing Date. The Prior Credit Agreement
required that the debt restructuring take place in three closings, the first two
of which were completed in 1993. At the first two closings, among other things,
the Trust and the Corporation granted liens and security interests on
substantially all of the assets of the Trust and the Corporation and the Trust
and the Corporation entered into a warrant agreement (the "Warrant Agreement")
pursuant to which the Trust and the Corporation were to have issued ten-year
warrants (the "Lender Warrants") to purchase a number of Paired Shares equal to
9.9% of the then outstanding Paired Shares, at an exercise price of $.625 per
Paired Share.
On February 28, 1994, the Prior Credit Agreement was amended to, among
other things, collaterally assign to the lenders under the Prior Credit
Agreement liens and security interests on substantially all of the intercompany
leases between the Trust and the Corporation, and the Warrant Agreement was
amended to provide for the issuance at such time of Lender Warrants for the
aggregate of 1,333,143 Paired Shares at an exercise price of $.625 per Paired
Share.
On August 31, 1994, one-third of the Lender Warrants were canceled as a
result of the Trust's cumulative principal payments in excess of $13,000,000.
The Trust and the holders of the Senior Debt agreed to successive extensions of
the maturity of the Senior Debt and of the date for the third closing under the
Prior Credit Agreement to May 31, 1995. At the third closing, among other
things, the Trust and the Corporation were to have merged.
In connection with the New Credit Agreement, the remaining Lender
Warrants may be canceled upon the payment to a Starwood Partner of a $786,000
cancellation fee.
TAX STATUS OF THE TRUST
The Trust intends to elect to be taxed as a REIT, commencing with its
taxable year ending December 31, 1995. The Trust was taxed as a REIT beginning
in 1969 through and including its taxable year ended December 31, 1990. During
1994, the Trust discovered that it may not have qualified as a REIT in 1991
through 1994 due to its failure to comply with certain procedural requirements
of the Code. The Trust requested and received a letter from the Internal Revenue
Service providing that the Trust's election to be taxed as a REIT terminated
beginning with the Trust's taxable year ended December 31, 1991 and permitting
the Trust to re-elect to be
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taxed as a REIT commencing with its taxable year ending December 31, 1995.
Because the Trust had net losses for tax purposes for its 1991 through 1994
taxable years, the Trust does not owe any federal income tax for such years.
OTHER INFORMATION
For information as to the sale of hotel assets by the Trust and the
Corporation in 1994, see Item 2 of this Joint Annual Report.
Seasonality; Competition. The hotel industry is seasonal in nature.
Generally, hotel revenues are greater in the second and third quarters than in
the first and fourth quarters. This seasonality can be expected to cause
quarterly fluctuations in the revenues of the Trust and the Corporation.
The hotel industry is highly competitive. The properties of the Trust
and the Corporation compete with other hotel properties in their geographic
markets. Many of the competitors of the Trust and the Corporation may have
substantially greater marketing and financial resources than Starwood Lodging.
The Trust and the Corporation may compete for acquisition opportunities
with entities which have substantially greater financial resources than the
Trust and the Corporation. These entities may generally be able to accept more
risk than the Trust and the Corporation can prudently manage. Competition may
generally reduce the number of suitable investment opportunities and increase
the bargaining power of property owners seeking to sell. Further, management of
the Trust believes that it will face competition for acquisition opportunities
from entities organized for purposes substantially similar to the objectives of
the Trust.
Environmental Matters. In the latter part of 1991, the Trust and the
Corporation obtained preliminary or "Phase I" environmental site assessments
with respect to the Trust's hotel properties and the Milwaukee Marriott Hotel.
These assessments covered all of the fee interests now held by the Realty
Partnership (excluding interests acquired from the Starwood Partners), as well
as hotels securing mortgage interests held by the Trust, other than Dallas
Viscount, Modesto Vagabond and Jefferson City Ramada Inn.
The potential for environmental impairment was assessed as moderate to
high only at the Embassy Suites Hotel in Phoenix, Arizona. According to the
assessment of that property, petroleum hydrocarbons are present in the land
beneath this hotel; however, the Trust could not determine without further
investigation the extent of the potential contamination or whether this
contamination resulted from the underground storage tanks placed on the property
by the property's former owner or from similar tanks located on land adjacent to
the property, which tanks are known to have suffered leakage. A magnetic survey
conducted on the property did not detect the continuing existence of the
underground storage tanks on the property, and the environmental consultant did
not recommend that any further action be taken. Phoenix municipal authorities
have indicated an awareness of possible ground water contamination in the area,
but to date have taken no action.
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A tank leak test conducted at the Bourbon Street Hotel in early 1992
revealed no evidence of leakage. A release of petroleum from an underground
storage tank at the Bay Valley Hotel and Resort was reported to the appropriate
state agency in 1992. After the tank and surrounding soils were removed,
additional soils and groundwater testing was performed, which revealed
environmental contamination in a localized area. Environmental testing has been
performed to identify the vertical and horizontal extent of the contamination
released from the tank. The consultant has proposed to remedy the contamination
through installation of a groundwater pump and treatment system to capture and
treat impacted groundwater and excavation of about 390 cubic yards of impacted
soil. Amendments to the relevant environmental clean-up laws, which have
recently been introduced in the Michigan Legislature, may reduce the extent or
magnitude of the clean-up that may be required at the site. The consultant's
recommendations were made upon the basis of existing law, and did not take into
account the proposed legislative amendments. After the Realty Partnership and
the Operating Partnership assess the impact of any amendments that may be
enacted to the relevant statutes, the Trust and the Corporation will perform
whatever remediation is required by law. Any further remediation costs that are
incurred may be reimbursed by a Michigan environmental fund, although there can
be no assurance that the fund will have sufficient resources to pay all claims
made against it. If the Realty Partnership and the Operating Partnership do not
receive reimbursement for future remediation costs, the Realty Partnership will
bear those costs.
"Phase I" environmental site assessments were performed between 1992
and 1994 in connection with the mortgage assets contributed to the Realty
Partnership by certain of the Starwood Partners. In addition, the Starwood
Partners contributed to the Realty Partnership fee interests in four hotels for
which "Phase I" environmental site assessments were performed between 1993 and
1994. The potential for environmental impairment was assessed as low to moderate
at each of the four hotels.
Neither the Trust, the Corporation, the Realty Partnership nor the
Operating Partnership has been identified by the U.S. Environmental Protection
Agency or any similar state agency as a responsible or potentially responsible
party for, nor have they been the subject of any governmental proceeding with
respect to, any hazardous waste contamination. If the Trust, the Corporation,
the Realty Partnership or the Operating Partnership were to be identified as a
responsible party, they would in most circumstances be strictly liable, jointly
and severally with other responsible parties, for environmental investigation
and clean-up costs incurred by the government and, to a more limited extent, by
private persons.
Based upon the environmental reports described above, the Trust
believes that a substantial number of its hotels incorporate potentially
asbestos-containing materials. Under applicable current Federal, state and local
laws, asbestos need not be removed from or encapsulated in a hotel unless and
until the hotel is renovated or remodeled.
Based upon the above-described environmental reports and testing and
facts known to the managements of the Trust and the Corporation, future
remediation costs are not expected to have a material adverse effect on the
results of operations, financial position or cash flows of the Trust or the
Corporation and compliance with environmental laws has not had and is not
expected to have a material effect on the capital expenditures, earnings or
competitive position of the Trust or the Corporation.
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Regulation and Licensing. The ownership and operation of the casino
gaming facilities of the Corporation in Nevada are subject to extensive
licensing and regulatory control by the Nevada Gaming Commission, the Nevada
Sate Gaming Control Board and the Clark County Liquor and Gaming Licensing
Board. See Item 2, "Regulation and Licensing" of this Joint Annual Report.
Employees. As of December 31, 1994, the Trust had four employees and
the Corporation had 1,881 employees.
The Trust's executive offices are located at 11845 West Olympic
Boulevard, Suite 550, Los Angeles, California 90064 (telephone (310) 575-3900)
and the Corporation's executive offices are located at 11845 West Olympic
Boulevard, Suite 560, Los Angeles, California 90064 (telephone (310) 575-3900).
Financial information with respect to the two segments of the
hospitality industry (hotels and gaming) in which the Corporation operates is
included in Note 11 of the Notes to Financial Statements included in Item 8 of
this Joint Annual Report.
ITEM 2. PROPERTIES.
At December 31, 1994, the Trust owned and the Corporation operated and
managed, a portfolio of hotel assets, including fee, ground leasehold and first
mortgage interests. At such date, all but three of the Trust's fee and ground
leasehold hotels were leased to the Corporation or its subsidiaries pursuant
to leases between the Trust and the Corporation (the "Intercompany Leases").
As described in Item 1 of this Joint Annual Report, upon the closing of
the Reorganization, substantially all of the properties and assets of the Trust
were contributed to the Realty Partnership and substantially all of the
properties and assets of the Corporation and its subsidiaries (except for their
gaming assets, which are to be contributed upon approval by Nevada gaming
authorities) were contributed to the Operating Partnership.
Accordingly, since the Reorganization the Trust has conducted all of
its business and operations through the Realty Partnership and the Corporation
has conducted all of its business and operations (other than its gaming
operations) through the Operating Partnership. As of March 27, 1995, the Trust
had an approximate 25.4% interest in the Realty Partnership and the Corporation
had an approximate 25.4% interest in the Operating Partnership.
Set forth below is information as to the assets and properties of the
Trust prior to the Reorganization which (along with certain assets and
properties described herein) were contributed to the Realty Partnership pursuant
to the Reorganization and as to the assets and properties of the Corporation
prior to the Reorganization which (along with certain assets and properties
contributed by the Starwood Partners) were contributed to the Operating
Partnership pursuant to the Reorganization.
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THE TRUST AND THE REALTY PARTNERSHIP
Equity Investments. As of December 31, 1994, the Trust had equity
investments in twenty-four properties (including two hotel/casinos) containing a
total of approximately 4,137 guest rooms. As of that date, the Trust owned fee
interests in eighteen hotels and two hotel/casinos, and held five hotels
pursuant to long-term ground leases. The Trust also had a 5% equity interest in,
and was the general partner of, a limited partnership that owns the Omaha
Marriott Hotel which contains approximately 303 guestrooms. Of the hotels in
which the Trust has an equity interest, 15 operate under one of the following
nationally recognized names: Holiday Inn(R), Days Inn(R), Best Western(R),
Vagabond Inn(R), Marriott(R), Embassy Suites(R), Radisson Inn(R) and Residence
Inn(R).
Each of the Intercompany Leases provides for the lessee's payment of
annual minimum rent in a specified amount plus additional rent based on a
percentage of the gross revenues (or items thereof) of the leased property. The
Intercompany Leases were amended and restated in December 1992 and have an
average term of seven years. The Intercompany Leases are "triple-net" - i.e.,
the lessee is generally responsible for paying all operating expenses of the
hotel property, including maintenance and repair costs, insurance premiums and
real estate and personal property taxes, and for making all rental and other
payments required pursuant to any underlying ground leases. As lessee, the
Operating Partnership retains all of the profits, net of rents and other
expenses, and bears all risk of losses, generated by the hotel property's
operations.
In addition to the Intercompany Leases, the three Vagabond Inns are
leased to a third party. The leases expire in 2001, 2007 and 2008. The lease
expiring in 2001 has options to extend the term of the lease for two additional
five year periods. Each of these leases provides for the payment of percentage
rent equal to 26% of room revenues against specified minimum rents. The leases
are "triple net."
The following table sets forth the 1994, 1993 and 1992 average
occupancy and room rates, and certain other information concerning the hotels
owned by the Trust as of December 31, 1994 (which were subsequently
contributed to the Realty Partnership at the closing of the Reorganization),
and the hotels contributed to the Realty Partnership by the Starwood Partners
at the closing of the Reorganization:
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Year Constructed/
Property Year Acquired (1) Property Description
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Properties owned by the Trust as of December 31, 1994:
ARIZONA
Embassy Suites 1981/1983 227 suites, restaurant, lounge and
Phoenix, Arizona meeting facilities
Plaza Hotel 1971/1983 149 guest rooms, restaurant, lounge and
Tucson, Arizona (2) meeting facilities
CALIFORNIA
Vagabond Inn 1974/1974 102 guest rooms and restaurant
Rosemead, California (3)
Vagabond Inn 1975/1975 108 guest rooms and restaurant
Sacramento, California (3)
Vagabond Inn 1973/1973 101 guest rooms and restaurant
Woodland Hills, California (3)
FLORIDA
Radisson Hotel 1974/1986 195 guest rooms, restaurant, lounge and
Gainesville, Florida (4) meeting facilities
GEORGIA
Holiday Inn 1989/1989 151 guest rooms, restaurant, lounge and
Albany, Georgia (5) meeting facilities
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<TABLE>
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Years Ended December 31,
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Property 1994 1993 1992 1994 1993 1992 1994 1993 1992
-------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Average Occupancy Average Room Revenue per
Rate Rate Available Room
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Properties owned by the Trust as of
December 31, 1994:
ARIZONA
Embassy Suites 76% 72% 68% $80.23 $74.04 $70.62 $60.63 $53.30 $48.02
Phoenix, Arizona
Plaza Hotel 77% 74% 64% $46.12 $45.05 $47.22 $35.58 $33.34 $30.22
Tucson, Arizona (2)
CALIFORNIA
Vagabond Inn 39% 44% 52% $37.47 $38.14 $37.06 $14.54 $16.78 $19.27
Rosemead, California (3)
Vagabond Inn 63% 60% 67% $55.89 $52.18 $51.48 $34.93 $31.31 $34.49
Sacramento, California (3)
Vagabond Inn 69% 61% 69% $46.72 $43.70 $42.15 $32.24 $26.66 $29.08
Woodland Hills, California (3)
FLORIDA
Radisson Hotel 59% 62% 55% $59.89 $56.63 $57.07 $35.57 $35.11 $31.39
Gainesville, Florida (4)
GEORGIA
Holiday Inn 79% 74% 74% $56.06 $56.96 $54.99 $44.23 $42.15 $40.69
Albany, Georgia (5)
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
Year Constructed/
Property Year Acquired (1) Property Description
-------- ----------------- --------------------
<S> <C> <C>
Best Western Riverfront Inn 1971/1986 142 guest rooms, restaurant, lounge and
Savannah, Georgia (5) meeting facilities
MICHIGAN
Bay Valley Hotel & Resort 1973/1984 151 guest rooms, restaurant, lounge and
Bay City, Michigan meeting facilities; 18-hole golf course
and tennis club
NEBRASKA
Omaha Marriott Hotel 1982/1982 303 guest rooms, restaurant, lounge and
Omaha, Nebraska (6) meeting facilities
NEVADA
Bourbon Street 1975/1988 150 guest rooms, restaurant, lounge and
Las Vegas, Nevada casino
King 8 Hotel and Gambling Hall 1974/1988 300 guest rooms, restaurant, lounge and
Las Vegas, Nevada casino
NEW MEXICO
Best Western Airport Inn 1980/1984 120 guest rooms and leased restaurant
Albuquerque, New Mexico (7) adjacent to property
Best Western Mesilla Valley Inn 1974/1982 166 guest rooms, restaurant, lounge and
Las Cruces, New Mexico meeting facilities
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------
Property 1994 1993 1992 1994 1993 1992 1994 1993 1992
-------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Average Occupancy Average Room Revenue per
Rate Rate Available Room
-------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Best Western Riverfront Inn 57% 55% 55% $47.27 $46.21 $43.40 $26.92 $25.42 $23.87
Savannah, Georgia (5)
MICHIGAN
Bay Valley Hotel & Resort 64% 52% 54% $62.22 $66.39 $65.32 $39.54 $34.52 $35.27
Bay City, Michigan
NEBRASKA
Omaha Marriott Hotel 76% 76% 71% $87.21 $82.56 $82.57 $66.45 $62.75 $58.62
Omaha, Nebraska (6)
NEVADA
Bourbon Street 90% 92% 86% $32.08 $30.65 $30.24 $28.90 $28.20 $26.01
Las Vegas, Nevada
King 8 Hotel and Gambling Hall 82% 83% 75% $31.66 $27.71 $25.23 $25.83 $23.00 $18.92
Las Vegas, Nevada
NEW MEXICO
Best Western Airport Inn 86% 80% 76% $54.45 $52.38 $50.90 $47.02 $41.90 $38.68
Albuquerque, New Mexico (7)
Best Western Mesilla Valley Inn 71% 71% 58% $42.74 $41.67 $40.40 $30.42 $29.59 $23.43
Las Cruces, New Mexico
</TABLE>
11
<PAGE> 15
<TABLE>
<CAPTION>
Year Constructed/
Property Year Acquired (1) Property Description
-------- ----------------- --------------------
<S> <C> <C>
OHIO
Best Western North 1974/1992 180 guest rooms, restaurant, lounge and
Columbus, Ohio (5) meeting facilities and sports club
OREGON
Days Inn City Center 1962/1984 173 guest rooms, restaurant, lounge and
Portland, Oregon meeting facilities
Riverside Inn 1964/1984 137 guest rooms, restaurant, lounge and
Portland, Oregon meeting facilities
TEXAS
Park Central Hotel 1972/1972 445 guest rooms, restaurant, lounge and
Dallas, Texas (8) meeting facilities
Best Western Airport Inn 1974/1985 175 guest rooms and leased restaurant
El Paso, Texas adjacent to property
VIRGINIA
The Residence Inn 1984/1984 96 suites with full kitchens and
Tysons Corner, Virginia fireplaces
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------------
Property 1994 1993 1992 1994 1993 1992 1994 1993 1992
-------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Average Occupancy Average Room Revenue per
Rate Rate Available Room
-------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OHIO
Best Western North 70% 66% 72% $42.34 $42.12 $41.61 $29.76 $27.80 $29.96
Columbus, Ohio (5)
OREGON
Days Inn City Center 71% 63% 60% $53.12 $57.50 $60.31 $37.51 $36.23 $36.19
Portland, Oregon
Riverside Inn 78% 79% 79% $64.57 $63.76 $62.16 $50.40 $50.37 $49.11
Portland, Oregon
TEXAS
Park Central Hotel 42% 63% 59% $59.97 $62.52 $62.29 $25.38 $39.39 $36.75
Dallas, Texas (8)
Best Western Airport Inn 80% 70% 74% $34.76 $35.56 $34.67 $27.96 $24.89 $25.66
El Paso, Texas
VIRGINIA
The Residence Inn 83% 78% 84% $99.47 $102.87 $97.51 $82.54 $80.24 $81.91
Tysons Corner, Virginia
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
Year Constructed/
Property Year Acquired (1) Property Description
-------- ----------------- --------------------
<S> <C> <C>
WASHINGTON
Days Inn Town Center 1957/1984 90 guest rooms, restaurant and lounge
Seattle, Washington (9)
Meany Tower Hotel 1932/1984 155 guest rooms, restaurant, lounge and
Seattle, Washington meeting facilities, including ballroom
Sixth Avenue Inn 1959/1984 166 guest rooms, restaurant, lounge and
Seattle, Washington (10) meeting facilities
Tyee Motor Inn 1961/1987 155 guest rooms, restaurant, lounge and
Tumwater, Washington meeting facilities
Properties contributed to the Realty Partnership by the
Starwood Partners at the closing of the Reorganization:
CALIFORNIA
Doubletree Hotel 1988/1995 209 guest rooms, restaurant, lounge and
Rancho Bernardo, California meeting facilities
DISTRICT OF COLUMBIA
Capitol Hill Suites 1955/1995 152 guest rooms
Washington, D.C.
KANSAS
Harvey Wichita 1974/1995 259 guest rooms, restaurant, lounge and
Wichita, Kansas meeting facilities
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Property 1994 1993 1992 1994 1993 1992 1994 1993 1992
-------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Average Occupancy Average Room Revenue per
Rate Rate Available Room
------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WASHINGTON
Days Inn Town Center 79% 75% 71% $60.99 $60.71 $60.81 $48.41 $45.53 $43.18
Seattle, Washington (9)
Meany Tower Hotel 71% 62% 59% $70.40 $76.29 $81.04 $50.09 $47.30 $47.81
Seattle, Washington
Sixth Avenue Inn 75% 62% 57% $69.93 $72.20 $72.85 $52.49 $44.76 $41.52
Seattle, Washington (10)
Tyee Motor Inn 57% 62% 67% $60.63 $56.28 $54.78 $34.79 $34.89 $36.70
Tumwater, Washington
Properties contributed to the Realty Partnership by the
Starwood Partners at the closing of the Reorganization:
CALIFORNIA
Doubletree Hotel 66% 61% 60% $65.68 $63.62 $63.77 $43.09 $38.20 $38.26
Rancho Bernardo, California
DISTRICT OF COLUMBIA
Capitol Hill Suites 64% 63% 53% $91.93 $89.60 $84.93 $58.93 $56.71 $45.01
Washington, D.C.
KANSAS
Harvey Wichita 58% 59% 54% $50.62 $43.92 $57.10 $29.20 $25.70 $30.83
Wichita, Kansas
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
Year Constructed/
Property Year Acquired (1) Property Description
- -------- ----------------- --------------------
<S> <C> <C>
KENTUCKY
French Quarter Suites 1989/1995 155 guest rooms, restaurant, lounge,
Lexington, Kentucky meeting facilities, retail and office space
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------------------------
Property 1994 1993 1992 1994 1993 1992 1994 1993 1992
- -------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Average Occupancy Average Room Revenue per
Rate Rate Available Room
-------------------- ---------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KENTUCKY
French Quarter Suites 69% 72% 51% $84.40 $81.64 $77.07 $58.57 $57.98 $39.31
Lexington, Kentucky
</TABLE>
14
<PAGE> 18
- ---------------------------
(1) "Year constructed" represents the calendar year in which construction
of the property was completed; "Year acquired" represents the calendar
year in which the Trust (or a predecessor) made its initial investment
in the property.
(2) Property is held subject to ground leases expiring in (assuming that
renewal options are exercised) 2019.
(3) Property is leased to Imperial Hotel Corporation.
(4) Property is managed by Landcom Hospitality Management, Inc. See "The
Corporation and the Operating Partnership" below.
(5) Property is managed by Davidson Management Company. See "The
Corporation and the Operating Partnership" below.
(6) The Trust is the general partner of, and owns a 5% equity interest in,
the limited partnership which owns the property.
(7) Property is held subject to a ground lease expiring in 2029.
(8) Property is held subject to a ground lease expiring in September 2020
and was managed by Marriott Corporation. The Marriott management
agreement and the Marriott franchise agreement expired in March 1994.
The property is managed by Sage Mountain View, Inc. and is operated as
an independent hotel (the Park Central Hotel).
(9) Property is subject to a ground lease expiring in October 2007, which
is terminable by the ground lessor after September 1, 1999 upon six
months' notice under certain circumstances.
(10) Property is subject to a ground lease expiring in September 2008, but
that is terminable by the ground lessor after September 1, 1999 upon
six months' notice under certain circumstances.
For information with respect to the six mortgage notes payable
that as of December 31, 1994 were secured by seven of the Trust's hotels, see
Note 7 of the Notes to Financial Statements included in Item 8 of this Joint
Annual Report. As part of the Reorganization, the Realty Partnership assumed
certain other mortgage notes payable, the terms of which are summarized as
follows:
A $39,013,000 note issued in connection with the acquisition of the
Harvey mortgage notes receivable under the terms of a Loan Agreement
with a third party dated October 15, 1993. The note is nonrecourse and
matures on January 31, 2003 and bears interest on a monthly basis at
variable rates based on the London Interbank Offer Rate ("LIBOR")
Eurodollar rate plus 3%.
A $2,122,000 construction loan funded in 1994 and used to renovate the
Harvey Wichita Hotel. The note bears interest at 7.5%. Principal and
interest is payable monthly and the notes matures in 2000.
In addition, as part of the Reorganization, the Realty Partnership
assumed other mortgage notes payable in the aggregate principal amount
of $17,750,000, which notes were refinanced with the proceeds of the
Loan pursuant to the New Credit Agreement.
Mortgage and Other Loans.
As of December 31, 1994, the Trust held nine promissory notes executed
by third-party purchasers of its hotels, all of which are secured by mortgages
(including deeds of trust) on ten hotels. Eight of the notes ($13,915,000 in
aggregate principal amount at December 31, 1994) are secured by first mortgages;
one note ($234,000 in principal amount as of December 31, 1994) is secured by a
second mortgage. The notes have fixed interest rates that currently range from
8.0%
15
<PAGE> 19
to 11.0% per annum, and two of the notes also provide for contingent interest
based on a percentage of the gross revenues of the property securing such notes.
The maturity dates of the notes range from 1996 to 2017.
For additional information with respect to certain of the third-party
promissory notes and the two promissory notes issued to the Trust by a
partnership affiliated with the Corporation in connection with the Milwaukee
Marriott Hotel, see Notes 4 and 5 of Notes to Financial Statements included in
Item 8 of this Joint Annual Report.
In December 1987, in connection with the Corporation's acquisition of
the leasehold interest in the Trust's two Atlanta, Georgia area hotels (since
sold) from an affiliated partnership, John F. Rothman, former president and
chief executive officer of the Trust and general partner of the partnership,
assumed certain obligations of such partnership, which obligations are evidenced
by an unsecured promissory note to the Trust in the principal amount of
$800,000. Interest on the outstanding principal amount of this note accrues
interest at an annual rate of 10% and is payable annually; the entire principal
amount of the note is due in December 1999.
All of the mortgage notes described above were contributed by the Trust
to the Realty Partnership in connection with the Reorganization.
As of the effective date of the Reorganization, the Starwood Partners
contributed to the Realty Partnership three mortgage notes from affiliated
third-party borrowers collateralized by three full service hotels (aggregating
1,230 rooms) in the Dallas, Texas area. Those mortgage notes, together with two
other mortgage notes contributed by the Starwood Partners to the Realty
Partnership, had cost bases and outstanding principal balances at December 31,
1994 as follows:
<TABLE>
<CAPTION>
Outstanding
Principal
Balance Cost Basis Reference
----------- ----------- ----------
<S> <C> <C> <C>
COLLATERAL:
Harvey Hotel Addison .................... $10,403,000 $7,226,000 (a)
Harvey Hotel Bristol .................... 16,645,000 11,550,000 (a)
Harvey Hotel DFW ........................ 25,892,000 17,967,000 (a)
----------- -----------
$52,940,000 $36,743,000
OTHER MORTGAGE NOTES:
Atlantic City Quality Inn ............... $11,411,000 $4,365,000 (b)
Seacaucus, New Jersey Ramada ............ 12,458,000 7,752,000 (b)
----------- -----------
$76,809,000 $48,860,000
=========== ===========
</TABLE>
- ------------------
(a) Represents a first mortgage note bearing interest at 8% (which was
purchased at a discount which reflects a 16.1% effective rate) payable
quarterly in arrears. The mortgage note has a 15-year amortization
period and a balloon payment at maturity. The mortgage notes mature on
December 31, 2002 and are cross collateralized.
16
<PAGE> 20
(b) The mortgage notes bear interest at various rates (which were purchased
at a discount which reflected a 19.1% aggregate effective rate) and are
payable monthly in arrears, except that for the months of November 1994
through April 1995, debt service for the Atlantic City Quality Inn is
to accrue and be payable from excess cash flow. Commencing May 1, 1995
fixed payments of debt service is to be required to be resumed. The
mortgages mature between 1996 and 2010.
THE CORPORATION AND THE OPERATING PARTNERSHIP
At December 31, 1994, fifteen of the twenty hotel properties
leased by the Trust to the Corporation were operated directly by the
Corporation, and the remaining five were managed by three independent hotel
companies. After the Reorganization, fifteen of the twenty-four hotel properties
leased by the Realty Partnership to the Operating Partnership are operated
directly by the Operating Partnership, and the remaining nine are managed by
seven independent hotel management companies. The Operating Partnership, the
general partner of the partnership that owns the Milwaukee Marriott, also
operates the Milwaukee Marriott.
The following table sets forth the 1994, 1993 and 1992
average occupancy and room rates, and certain other information concerning the
hotel owned by the Corporation (the Milwaukee Marriott Hotel) as of
December 31, 1994.
<TABLE>
<CAPTION>
Year Constructed/
Property Year Acquired Property Description
- -------- ----------------- --------------------
<S> <C> <C>
Milwaukee Marriott, 1972/1990 393 guest rooms, restaurant, lounge
Milwaukee, WI and meeting facilities
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------------
Property 1994 1993 1992 1994 1993 1992 1994 1993 1992
- -------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Average Occupancy Average Room Revenue per
Rate Rate Available Room
---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Milwaukee Marriott, 70% 55% 58% $67.91 $71.99 $69.63 $47.54 $39.39 $40.39
Milwaukee, WI
</TABLE>
Management Agreements. Each management agreement with a third
party provides that the management company has the exclusive right to direct the
operations of the hotel subject to that agreement. The management company is
responsible for maintaining and making all necessary repairs to the managed
hotel, hiring, training and supervising all hotel employees, and performing all
hotel bookkeeping and other administrative duties.
Each management company is required to submit to the Operating
Partnership for its approval an annual budget that includes proposed capital
expenditures, and the management company makes only those capital expenditures
that are approved by the Operating Partnership. The Realty Partnership is
required to make available to each management company sufficient working capital
to permit that company to operate the managed property.
For their services in managing the hotels, each third party
management company receives a management fee that equals a specified percentage
(generally 2% - 2-1/2%) of the gross revenues of the managed hotel, plus
additional incentive fees based upon the hotel's operating profits. Two
management agreements may be terminated upon 30 days notice; two management
agreements expire in December 1995; and the third expires in October 1996. The
agreements expiring in 1995 and 1996 may be canceled by the Operating
Partnership prior to expiration if, among other things, the managed hotel is
sold or fails to make a specified operating profit.
The four management agreements relating to the properties
contributed by the Starwood Partners will expire in February 1995, December
1998, April 1999 and January 2003. The management agreement expiring in 1998 and
1999 can be terminated upon sixty days notice.
Franchise Agreements. All but nine of the hotel properties are
currently operated pursuant to franchise or license agreements ("Franchise
Agreements"). The Franchise Agreements generally require the payment of a
monthly royalty fee based on gross sales and various other marketing fees
associated with certain marketing or advertising and centralized reservation
service funds, usually based on gross sales. Such fees may vary between
individual
17
<PAGE> 21
hotels within a franchise system based on the type of marks, restaurants or
other aspects of the franchise system used.
The Franchise Agreements generally contain specific standards
for, and restrictions and limitations on, the operation and maintenance of the
hotels which are established by the franchisors to maintain uniformity in the
system created by each such franchisor. Such standards generally regulate the
hours of operation, maintenance, appearance and cleanliness, quality and type of
goods and services offered, signage, and protection of marks. Compliance with
such standards could require significant expenditures for capital improvements.
Ongoing training costs, requirements to purchase only from
approved suppliers, financial reporting requirements, insurance requirements and
various covenants not to compete imposed upon the franchisee are other common
terms in the Franchise Agreements. Such financial reporting requirements often
stipulate the maintenance of books and records, the monthly reporting of sales
and other operating data, quarterly or semi-annual unaudited financial
statements and, in some cases, annual financial statements audited by an
independent certified public accountant. Required insurance usually must cover
both the franchisor and franchisee with respect to certain specified
liabilities, must fall within certain approved coverage limits and be written by
an approved insurance company.
The Franchise Agreements generally require the consent of the
franchisor to a transfer of an interest in the applicable franchise, and both
the consent of the franchisor and the execution of a new franchise agreement in
the event of a transfer of all or controlling portion of the franchisee under
the relevant Franchise Agreement. In addition, some franchise agreements may
require payment of an initial fee upon establishment of a franchise
relationship.
Certain Property Sales and Other Transactions
During the year ended December 31, 1994, the Trust and the
Corporation sold their interests in the following five hotel assets:
Best Western South-Austin, Texas. In April 1994, the Best
Western South Hotel in Austin, Texas was sold pursuant to eminent domain
proceedings for $3,594,000 in cash.
Holiday Inn-Brunswick, Georgia and Sheraton Inn-New Port
Richey, Florida. In August 1994, the Holiday Inn located in Brunswick, Georgia,
and the Sheraton Inn located in New Port Richey, Florida were sold for
$4,306,000, consisting of cash proceeds of $1,236,000 and the balance by
delivery to the Trust of a $3,070,000 promissory note, secured by a first
mortgage on the hotels. The principal balance of the note bears interest at an
annual rate of 8% during the first twelve months and at a 9.25% annual rate
thereafter; principal and interest are payable monthly based upon a 25-year
amortization schedule, with all unpaid principal and interest due in 2001.
Holiday Inn-Jacksonville, Florida. In November 1994, the
Holiday Inn located in Jacksonville, Florida was sold for $3,200,000 consisting
of cash proceeds of $900,000 and the balance by delivery to the Trust of a
$2,300,000 promissory note, secured by a first mortgage on the hotel. The
principal balance of the note bears interest at an annual rate of 9%; principal
and
18
<PAGE> 22
interest are payable in equal monthly installments based upon a 30-year
amortization schedule, with all unpaid principal and interest due in 2001.
Ramada Inn-Fayetteville, North Carolina. In November 1994, the
Ramada Inn located in Fayetteville, North Carolina was sold for $1,000,000,
consisting of cash proceeds of $200,000 and the balance by delivery to the Trust
of a $800,000 promissory note, secured by a first mortgage on the hotel. The
principal balance of the note bears interest at an annual rate of 9%; principal
and interest are payable in equal monthly installments based upon a 12-year
amortization schedule, with all unpaid principal and interest due in 2006.
Mortgage Notes Payable Maturing During 1995
As of December 31, 1994, two mortgage notes payable secured by
three of the hotels owned by the Trust were scheduled to mature during 1995. The
amount outstanding under the notes was $5,930,000 at December 31, 1994 and the
net book value of the properties securing the two notes was $17,004,000 at
December 31, 1994. One of the notes, in the principal amount of $4,075,000 was
paid in full by the Trust in January 1995. Management of the Trust is currently
negotiating the refinancing of the remaining note.
Marriott Park Central Hotel
At December 31, 1993, the Marriott Park Central Hotel was
managed by Marriott Corporation. In March 1994, the Marriott's management
agreement and the Marriott franchise agreement expired. The property is now
managed by Sage Mountain View, Inc. and is now operated as an independent hotel
(the Park Central Hotel).
Hotel Acquisition
Subsequent to December 31, 1994 the Realty Partnership entered
into a purchase commitment for the Omni Hotel, a 172-room full service hotel
located in Chapel Hill, North Carolina for $10.5 million. Upon closing of the
purchase, the Realty Partnership will lease the property to the Operating
Partnership and the Operating Partnership will operate the hotel.
Regulation and Licensing
The ownership and operation of the casino gaming facilities of
Starwood Lodging in Nevada are subject to extensive licensing and regulatory
control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada
State Gaming Control Board (the "Nevada Board") and the Clark County Liquor and
Gaming Licensing Board (the "Clark County Board" and, together with the Nevada
Commission and the Nevada Board, the "Nevada Gaming Authorities").
The gaming laws, regulations and supervisory procedures of
Nevada seek to (i) prevent unsavory or unsuitable persons from having any direct
or indirect involvement with gaming at any time or in any capacity; (ii)
establish and maintain responsible accounting practices and procedures; (iii)
maintain effective control over the financial practices of licensees, including
establishing minimum procedures for internal fiscal affairs and the safeguarding
of assets and
19
<PAGE> 23
revenues, providing reliable record keeping and making periodic reports to the
Nevada Gaming Authorities; (iv) prevent cheating and fraudulent practices; and
(v) provide a source of state and local revenues through taxation and licensing
fees. Changes in these laws, regulations and procedures could have an adverse
effect on the Corporation's gaming operations.
The Corporation is registered with the Nevada Commission as a
publicly traded corporation and has been found suitable as a holding company by
the Nevada Gaming Authorities to own all of the outstanding capital stock of
Hotel Investors Corporation of Nevada, Inc. ("HICN"). HICN which operates two
hotel/casinos, the King 8 Hotel, Gambling Hall & Truck Plaza (the "King 8") and
the Bourbon Street Hotel & Casino ("Bourbon Street") must be licensed by the
Nevada Gaming Authorities. The Corporation and HICN have obtained from the
Nevada Gaming Authorities the various registrations, approvals, permits and
licenses required in order to engage in gaming activities in Nevada. The Trust
was likewise found suitable by the Nevada Gaming Authorities to be the landlord
of the King 8 and Bourbon Street. No person may become a stockholder of, or
receive any percentage of profits from, HICN without first obtaining licenses
and approvals from the Nevada Gaming Authorities. Prior approval of the Nevada
Commission is required for the sale, assignment, transfer, pledge or other
disposition of any security issued by HICN.
The licenses and approvals held by HICN are not transferable
and must be renewed periodically upon the payment of appropriate taxes and
license fees. The licensing authorities have broad discretion with regard to the
renewal of the licenses. The issuing agency may at any time revoke, suspend,
condition, limit or restrict a license or approval to own stock in a corporate
licensee for any cause deemed reasonable by the issuing agency. Substantial
fines for each violation of gaming laws or regulations may be levied against
HICN, the Corporation and the individuals involved. A violation under any one of
the licenses held by HICN may be deemed a violation of one or more other
licenses or approvals held by HICN. If HICN's licenses are revoked or suspended
or are not renewed, the Nevada Commission may petition a Nevada district court
to appoint a supervisor to operate the affected property until it is sold. When
sold, the net proceeds would be paid to the Trust. The Trust could, however,
under certain circumstances, receive only the reasonable rental value of any
property earnings under the supervisor's management with any excess in earnings
over the reasonable rental value of the property being forfeited to the State of
Nevada. Suspension or revocation of the license of HICN, disapproval of the
Corporation to own the stock of HICN or court appointment of a supervisor over
operations of the King 8 or Bourbon Street would have a material adverse effect
upon the Trust and the Corporation.
Directors, officers and certain key employees of HICN must
file license applications with the Nevada Gaming Authorities. Certain officers,
directors and key employees of HICN are licensed by the Nevada Gaming
Authorities, and any required license applications of the remaining officers,
directors or key employees have been filed with the Nevada Board. An application
for licensing may be denied for any cause deemed reasonable by the issuing
agency. Changes in corporate management or executive positions must be reported
to the Nevada Gaming Authorities. In addition to its authority to deny an
application for a license, the Nevada Commission has jurisdiction to disapprove
a change in a management or executive position with a regulated corporation. If
the Nevada Gaming Authorities were to find a director, officer or key employee
unsuitable for relicensing or unsuitable to continue having a relationship with
HICN or
20
<PAGE> 24
the Corporation, the Corporation and HICN would have to sever all
relationships with that person. The Corporation and HICN would have similar
obligations with regard to any person who refused to file appropriate
applications. Determinations of suitability or of questions pertaining to
licensing are not subject to judicial review in Nevada. Each gaming employee
must obtain, and periodically renew, a work permit, which may be revoked upon
the occurrence of certain specified events.
HICN periodically must submit detailed financial and operating
reports to the Nevada Commission, which are subject to routine audit by the
Nevada Board. Substantially all loans, leases, sales of securities and similar
financing transactions entered into by HICN must be reported to or approved by
the Nevada Commission. The fiscal stability of HICN must be adequate to satisfy
gaming financial obligations such as state and local government taxes and fees,
and the payment of winning wagers to patrons. Failure to satisfy these gaming
financial obligations is grounds for the Nevada Gaming Authorities to limit,
condition, restrict, suspend or revoke the gaming licenses and approvals of HICN
and the registration and approvals of the Corporation, or to impose
administrative fines against HICN or the Corporation.
As a registered publicly traded holding company found suitable
as the sole stockholder of HICN, the Corporation is required periodically to
submit detailed financial and operating reports to the Nevada Commission and to
furnish any other information that the Nevada Commission or Nevada Board may
require. The Corporation's directors, officers and key employees who are
actively and directly engaged in the administration or supervision of gaming are
subject to licensing and findings of suitability by the Nevada Commission.
Certain of the Corporation's officers and directors have been licensed by the
Nevada Commission. The finding of suitability is comparable to licensing, and
both require submission of detailed personal background and personal financial
information followed by a thorough investigation, and payment by the applicant
of all investigative costs and charges. Any individual who is found to have a
material relationship to or material involvement with the Corporation also may
be required to be found suitable or be licensed and may be investigated. Key
employees, controlling persons or others who exercise significant influence upon
the management or affairs of the Corporation, or are actively engaged in the
administration or supervision of gaming activities, may be deemed to have this
type of a relationship or involvement.
Any beneficial holder of the Corporation's voting securities,
regardless of the number of shares owned, may be required to file an
application, be investigated, and have his suitability as a beneficial holder of
the Corporation's voting securities determined if the Nevada Commission has
reason to believe that such ownership would otherwise be inconsistent with the
declared policies of the state of Nevada. The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in conducting any such
investigation.
Any person who acquires more than 5% of any class of voting
securities of the Corporation must report the acquisition to the Nevada
Commission. Beneficial owners of more than 10% of any class of the Corporation's
voting securities must apply to be found suitable by the Nevada Commission
within thirty days after the Chairman of the Nevada Board mails the written
notice requiring such filing, and any beneficial owner of the Corporation's
voting securities, whether or not such person is a controlling stockholder, may
be required to be found suitable if the Nevada Commission has reason to believe
that such ownership would be inconsistent with the
21
<PAGE> 25
declared policy of the state of Nevada that licensed gaming be conducted
honestly and competitively and that the gaming industry be free from criminal
and corruptive elements.
An "institutional investor" (as defined by the Regulations of
the Nevada Commission) holding at least 10%, and in certain circumstances up to
15%, of the voting securities of the Corporation may apply for and hold a waiver
of the mandatory suitability determination requirement prescribed by the Nevada
Gaming Control Act. To qualify as an "institutional investor," a person or
entity must satisfy one of several alternative criteria under the federal
Securities Exchange Act of 1934, the Investment Company Act of 1940, or state
and federal pension and retirement laws, as well as acquire and hold the voting
securities for investment purposes in the ordinary course of business and not
for the purpose of effecting any change of control in or the management or
policies of the registered holding company or its gaming affiliates. Activities
which are not deemed to be inconsistent with holding voting securities for
investment purposes only include: (i) voting on all matters voted on by
stockholders; (ii) making financial and other inquiries of management of the
type normally made by securities analysts for informational purposes and not to
cause a change in its management, policies or operations; and (iii) such other
activities as the Nevada Commission may determine to be consistent with such
investment intent.
A change in investment intent of an institutional investor
must be reported to the Chairman of the Nevada Board within two business days of
such change of intent. The Chairman of the Nevada Board may require an
institutional investor to apply for a finding of suitability upon receipt of
notice of change in investment intent, or at any time deemed necessary to
protect the public interest. An aggrieved institutional investor may apply for
Nevada Commission review of the decision of the Chairman of the Nevada Board
ordering the filing of a suitability determination application. The Corporation
or HICN must promptly report to the Nevada Commission any information that
materially affects the institutional investor's eligibility to hold a waiver.
If the stockholder who must be found suitable is a
corporation, partnership or trust, that stockholder must submit detailed
business and financial information including a list of beneficial owners. In
addition, the Clark County Board has taken the position that it has the
authority to approve all persons owning or controlling more than two percent of
the stock of a gaming licensee or of any corporation controlling a gaming
licensee. The applicant is required to pay all costs of investigation.
Any stockholder found unsuitable by the Nevada Commission who
directly or indirectly holds any beneficial or ownership interest in the
Corporation's Common Stock beyond whatever period of time may be prescribed by
the Nevada Commission may be guilty of a criminal offense. Any person who fails
or refuses to apply for a finding of suitability or a license within 30 days
after being ordered to do so by the Nevada Commission or Chairman of the Nevada
Board may be found unsuitable. The same restrictions that apply to a
securityholder who is found unsuitable may be held to apply to a beneficial
owner of the Corporation's securities if the record owner, after request, fails
to identify the beneficial owner. The Corporation is subject to disciplinary
action if, after receiving notice that a person is unsuitable to be a
stockholder or to have any other relations with the Corporation or its gaming
subsidiaries, the Corporation (i) pays the unsuitable person any dividend or
interest upon any voting securities of the Corporation or makes any other
unpermitted payment or distribution of any kind whatsoever; (ii) recognizes the
22
<PAGE> 26
exercise, directly or indirectly, of any voting rights in the Corporation's
securities by the unsuitable person; (iii) pays the unsuitable person any
remuneration in any form for services rendered or otherwise, except in certain
limited and specific circumstances; or (iv) fails to pursue all lawful efforts
to require the unsuitable person to divest himself of his voting securities,
including, if necessary, the immediate purchase by the Corporation of the voting
securities for cash at fair market value. In addition, Nevada law requires that
any holder or owner of a voting security who is found unsuitable by the Nevada
Commission immediately offer those securities to the Corporation for purchase,
which securities would be purchased by the Corporation for cash at fair market
value within 10 days from the date the securities are offered.
The Nevada Commission may, in its discretion, require the
holder of any debt security of a corporation registered under the Nevada Gaming
Control Act to file applications, be investigated and be found suitable to own
the debt security of a registered corporation. If the Nevada Commission
determines that a person is unsuitable to own such debt security, then pursuant
to the Regulations of the Nevada Commission, the registered corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission it (i) pays to the unsuitable person any dividend,
interest or other distribution whatsoever; (ii) recognizes any voting right of
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.
The Corporation is required to maintain a current and
comprehensive stock ledger in the state of Nevada, which ledger may be examined
by the Nevada Gaming Authorities at all reasonable times, but without notice. If
any securities are held in trust, by an agent or by a nominee, the owner of
record of those securities may be required to disclose the identity of the
beneficial owner to the Nevada Gaming Authorities. A failure to make this
disclosure may be grounds for finding the owner of record unsuitable. The
Corporation must render maximum assistance to the Nevada Gaming Authorities in
determining the identity of the beneficial owner.
The Nevada Commission has the power at any time to require
that the Corporation's stock certificates bear a legend to the general effect
that the securities of the Corporation are subject to the Nevada Gaming Control
Act and the regulations of the Nevada Commission. However, to date, the Nevada
Commission has not imposed such a requirement on the Corporation. The Clark
County Board also claims jurisdiction to approve or disapprove holders of the
Corporation's securities. The Nevada Gaming Authorities, through the power to
regulate licensees and otherwise by Nevada law, have the power to impose
additional restrictions on the holders of the Corporation's securities at any
time.
The Regulations of the Nevada Commission provide that changes
in the control of the Corporation or HICN through a merger, consolidation,
acquisition of assets, management or consulting agreements or any form of
takeover cannot occur without the prior approval of the Nevada Commission.
Entities seeking to acquire control of the Corporation must satisfy the Nevada
Board and Nevada Commission in a variety of stringent standards prior to
assuming control of the Corporation. The Nevada Commission may also require
controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity
23
<PAGE> 27
proposing to acquire control, to be investigated and licensed as part of the
approval process relating to the transaction.
The Nevada Legislature has declared that some corporate
acquisitions opposed by management, repurchases of securities and corporate
defense tactics affecting corporate gaming licensees in Nevada, and publicly
traded corporations affiliated with those licensees may be injurious to stable
and productive corporate gaming operations. The Nevada Commission has
established a regulatory scheme to ameliorate the potential adverse effects of
these business practices upon Nevada's gaming industry and to advance Nevada's
policy to (i) assure the financial stability of corporate gaming operators and
their affiliates; (ii) preserve the beneficial aspects of conducting business in
the corporate form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs. Approvals may be required from the Nevada
Commission before the Corporation may make exceptional repurchases of securities
above current market price (commonly referred to as "greenmail"), and before a
corporate acquisition opposed by management can be consummated. Nevada's gaming
regulations also require prior approval of the Nevada Commission in the event of
a Corporation plan of recapitalization proposed by the board of directors in
opposition to a tender offer made directly to shareholders for the purpose of
acquiring control of the Corporation.
Nevada law prohibits the Corporation from making a public
offering of its securities without the approval of the Nevada Commission if any
part of the proceeds of the offering is to be used to finance the construction,
acquisition or operation of gaming facilities in Nevada, or to retire or extend
obligations incurred for one or more such purposes. Approval of the public
offering will not constitute a finding by the Nevada Commission as to the
accuracy, adequacy or investment merit of the securities offered to the public.
Any representation to the contrary is unlawful.
The gaming regulatory requirements discussed above apply to
certain aspects of the Reorganization. The contribution by HICN of the Gaming
Assets (and the transfer of certain liabilities to be retained by HICN) to the
Operating Partnership will occur on receipt of certain licenses or approvals by
the Nevada Gaming Authorities. Likewise, the December 15, 1994, election of the
new Board of Directors of the Corporation will be effective upon receipt of
certain licenses or approvals by the Nevada Commission. In conjunction with
applying for and obtaining such licenses and approvals, the Corporation has
developed various policies and procedures subject to review, approval and
oversight by the Nevada Board. The purpose of these corporate policies and
procedures is to ensure compliance with the regulatory requirement that prior
approval of the Nevada Commission is obtained for any transaction that would
result in either Starwood Capital or Starwood Partners acquiring control of the
Corporation or its Nevada gaming operations. The Corporation expects that these
policies and procedures will be eliminated upon receipt of certain licenses and
approvals from the Nevada Commission. If the required licenses or approvals of
the Nevada Gaming Authorities are not received on or before December 31, 1995,
then on such date HICN has agreed to contribute to the Operating Partnership
cash equal to the fair value of the Gaming Assets on such date.
License fees and taxes, computed in various ways depending on
the type of gaming involved, are payable to the State of Nevada and to the
County of Clark where HICN's gaming operations are conducted. Depending upon the
particular fee or tax involved, these assessments
24
<PAGE> 28
are payable either monthly, quarterly, or annually and are based upon either
(i) a percentage of the gross gaming revenues received by the casino operations;
(ii) the number of slot machines or other gaming devices operated by the casino;
or (iii) the number of table games operated by the casino. A casino
entertainment tax is also paid by the licensees where entertainment is furnished
in connection with the selling of food or refreshments.
The sale of alcoholic beverages by HICN is subject to
licensing, control and regulation by the Clark County Board. Such liquor
licenses are revocable and are not transferable. The Clark County Board has full
power to limit, condition, suspend or revoke any liquor license, and any
disciplinary action of this nature or license revocation would have a material
adverse effect on HICN's gaming operations.
ITEM 3. LEGAL PROCEEDINGS.
During the year ended December 31, 1994, 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
attorney's 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 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 will pay $400,000 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 an aggregate of 1,199,000 Paired 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.
25
<PAGE> 29
In connection with the settlement of the Shareholder Actions, Messrs.
Young and Rothman and certain of their affiliated partnerships terminated the
management agreements that existed between those partnerships and the
Corporation's subsidiary, Western Host, Inc. (the "Management Contracts"), and
Western Host has agreed not to dispute such action and has withdrawn as a
general partner of two additional affiliated partnerships. In satisfaction of
any damages that the Trust and the Corporation may incur as a result of the
termination of the Management Contracts, Messrs. Rothman and Young have provided
to the Trust and the Corporation an irrevocable letter of credit having a
one-year term in the amount of $800,000.
Upon final court approval of the settlement of the Shareholder Actions,
the proceeds from the letter of credit would be paid to the Trust and the
Corporation, and the parties to the Management Contracts, Messrs. Rothman and
Young and the Trust and the Corporation will release all of their respective
claims related to the termination of the Management Contracts.
Mr. Leonard Ross and his affiliates (collectively "Ross"), who as of
December 31, 1994 held approximately 9.8% of the outstanding Paired Shares of
the Trust and Corporation, opted out of the settlement of the Shareholder
Actions. Ross threatened to bring a separate action alleging similar causes of
action as those alleged in the Shareholder Actions as well as other alleged
causes of action. Ross has assigned to Starwood Capital all of his claims
against the Trust and Corporation. Starwood Capital has agreed to purchase all
of Ross's Paired Shares at Ross's election during a 60-day period beginning in
December 1995, at a price of $5.625 per Paired Share. Starwood Capital may also
elect to purchase Ross's Paired Shares at the same time and on the same terms.
Starwood Capital, as the assignee of Ross's claims against the Trust and the
Corporation, has agreed that the maximum amount Starwood Capital may recover
under such claims will not exceed an aggregate of $1.8 million and the Trust and
the Corporation have agreed to toll the statute of limitations respecting such
claims until January 31, 1996. The Trust and Corporation have also agreed that
under certain circumstances they may be obligated severally to 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On December 15, 1994, the Trust held a special meeting of
shareholders of the Trust (the "Trust Meeting") and the Corporation held a
special meeting of stockholders of the Corporation (the "Corporation Meeting")
to, among other things, approve the Reorganization and to elect new Boards of
the Trust and the Corporation.
At the Trust Meeting, shareholders of the Trust voted upon and
approved (i) the Reorganization, (ii) the creation of a classified Board of
Trustees, (iii) the elimination of the cumulative voting provisions of the
Declaration of Trust of the Trust, (iv) the election as Trustees of the Trust of
the following nominees: Mr. Madison F. Grose, Mr. Earle F. Jones, Mr. Jeffrey C.
Lapin, Mr. Jonathan Eilian and Mr. Barry S. Sternlicht and (v) the ratification
of Deloitte & Touche LLP as the independent public accountants of the Trust for
the Trust's 1994 fiscal year.
26
<PAGE> 30
The following sets forth, with respect to each matter voted
upon at the Trust Meeting, the number of votes cast for, the number of votes
cast against, and the number of votes abstaining (or, with respect to the
election of Trustees, the number of votes withheld) with respect to the such
matter:
<TABLE>
<CAPTION>
Votes Votes Votes
For Against Abstentions Withheld
---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Approval of
Reorganization 8,526,145 71,544 28,003 0
Creation of Classified
Board 7,851,616 236,667 531,505 0
Elimination of
Cumulative Voting 6,744,845 1,321,667 553,076 0
Election of Trustees:
Madison F. Grose 10,977,824 0 0 107,111
Earle F. Jones 10,978,374 0 0 106,561
Jeffrey C. Lapin 10,978,524 0 0 106,411
Jonathan Eilian 10,977,324 0 0 107,611
Barry S. Sternlicht 10,977,324 0 0 107,611
Ratification of
Accountants 10,928,974 67,619 36,862 0
</TABLE>
There were no broker non-votes with respect to any such
matter.
At the Corporation Meeting, stockholders of the Corporation
voted upon and approved (i) the Reorganization, (ii) the creation of a
classified Board of Directors, (iii) the removal of Directors only for cause,
(iv) the elimination of the cumulative voting provisions of the Articles of
Incorporation of the Corporation, (v) the election as Directors of the
Corporation of the following nominees: Mr. Bruce M. Ford, Mr. Steven Robert
Goldman and Mr. Barry S. Sternlicht (such Directors to take office upon receipt
of Gaming Approvals), and (vi) the ratification of Deloitte & Touche LLP as the
independent public accountants for the Corporation's 1994 fiscal year.
The following sets forth, with respect to each matter voted
upon at the Corporation Meeting, the number of votes cast for, the number of
votes cast against, and the number of votes abstaining (or, with respect to the
election of Directors, the number of votes withheld) with respect to such
matter:
27
<PAGE> 31
<TABLE>
<CAPTION>
Votes Votes Votes
For Against Abstentions Withheld
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Approval of
Reorganization 8,497,026 94,136 36,594 0
Creation of Classified
Board 7,835,418 239,775 543,606 0
Removal of Directors
Only for Cause 8,126,923 411,531 82,345 0
Elimination of
Cumulative Voting 6,731,734 1,331,753 555,248 0
Election of Directors:
Bruce M. Ford 11,008,173 0 0 76,762
Steve Robert Goldman 11,008,173 0 0 76,762
Barry S. Sternlicht 11,006,973 0 0 77,962
Ratification of
Accountants 10,984,196 43,642 56,031 0
</TABLE>
There were no broker non-votes with respect to any such
matter.
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Market Information
The Paired Shares are traded principally on the New York Stock
Exchange (the "NYSE") under the symbol "HOT".
The following table sets forth, for the fiscal periods
indicated, the high and low sales prices per Paired Share on the NYSE Composite
Tape.
<TABLE>
<CAPTION>
1994 High Low
- ---- ----- ------
<S> <C> <C>
First quarter...................................... $2.50 $1.875
Second quarter..................................... $3.00 $1.625
Third quarter...................................... $3.375 $2.875
Fourth quarter..................................... $3.375 $2.625
1993
- ----
First quarter...................................... $1.75 $1.00
Second quarter..................................... $2.50 $1.25
Third quarter...................................... $3.125 $1.625
Fourth quarter..................................... $3.375 $2.00
</TABLE>
28
<PAGE> 32
Holders
As of March 24, 1995, there were approximately 2,089 holders
of record of Paired Shares.
Distributions
No distributions were made by the Trust during 1994 or 1993.
The Prior Credit Agreement prohibited the Trust from making distributions to its
shareholders. The Corporation has not paid any cash dividend since its
organization. Under the terms of the New Credit Agreement, the Realty
Partnership and the Operating Partnership are generally permitted to distribute
to their partners on an annual basis an amount equal to the greatest of (1) 30%
of the combined net income of the Realty Partnership and the Operating
Partnership; (2) for the Realty Partnership only, an amount such that the
Trust's proportionate share would be sufficient for the Trust to make
distributions to its shareholders sufficient to maintain the Trust's tax status
as a real estate investment trust; (3) 85% of the sum of (i) the combined
taxable income of the partnerships plus (ii) an amount equal to the aggregate of
all depreciation deducted in determining combined taxable income; or (4)
$3,000,000, unless as a result of such distribution an event of default under
the New Credit Agreement would occur. Amounts distributed to the Trust or the
Corporation pursuant to the foregoing are generally permitted to be distributed
to their shareholders.
29
<PAGE> 33
ITEM 6 SELECTED FINANCIAL DATA.
The following data sets forth certain financial information
for the Trust, the Corporation, and the Trust and the Corporation on a combined
basis. This information is based on and should be read in conjunction with the
financial statements and the notes thereto appearing elsewhere in this Joint
Annual Report.
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
December 31,
-----------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating Data
Revenue:
Trust ...................................................... $ 21,671 $ 20,342 $ 26,784 $ 29,550 $ 32,866
Corporation ................................................ 110,962 114,828 116,172 110,361 112,555
Combined (1) ............................................... 113,997 117,155 117,656 113,436 117,024
Net Income (Loss):
Trust (2) .................................................. (3,465) (3,889) (9,818) (10,952) (13,362)
Corporation (2) ............................................ (1,198) (3,143) (9,925) (11,132) (14,224)
Combined ................................................... (4,663) (7,032) (19,743) (22,084) (27,586)
Net Income (Loss) Per Share:
Trust ...................................................... $ (0.28) $ (0.32) $ (0.81) $ (0.90) $ (1.10)
Corporation ................................................ (0.10) (0.26) (0.82) (0.92) (1.17)
--------- --------- --------- --------- ---------
Combined ................................................... $ (0.38) $ (0.58) $ (1.63) $ (1.82) $ (2.27)
========= ========= ========= ========= =========
Balance Sheet Data
Total Assets:
Trust ...................................................... $ 162,245 $ 232,845 $ 245,540 $ 246,498 $ 266,487
Corporation ................................................ 48,626 49,993 53,611 55,807 31,946
Combined (1) ............................................... 183,955 195,352 210,945 221,917 240,998
Total Debt:
Trust ...................................................... 146,734 156,526 157,541 158,295 165,730
Corporation ................................................ 40,664 101,846 100,246 66,873 44,960
Combined (1) ............................................... 160,482 170,886 170,297 171,271 166,591
Shareholders' Equity (Deficit):
Trust ...................................................... 10,450 72,205 76,371 86,188 97,087
Corporation ................................................ (1,742) (58,879) (55,752) (45,828) (34,696)
Combined ................................................... 8,708 13,326 20,351 40,083 62,104
Shares outstanding at end of period .......................... 12,133 12,133 12,133 12,133 12,133
Cash Flow and Dividend Data
Net cash provided by (used in) operating activities:
Trust ...................................................... $ 4,455 $ 3,136 $ 2,773 $ (8,812) $ 8,921
Corporation ................................................ 4,438 2,396 1,917 2,654 (2,659)
Combined ................................................... 8,893 5,532 4,690 (6,158) 6,262
</TABLE>
30
<PAGE> 34
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) investing activities:
Trust ...................................................... $ 8,239 $ 2,474 $ (161) $ 12,889 $(17,621)
Corporation ................................................ 215 (4,426) (942) 472 10,731
Combined (1) ............................................... 4,489 (3,645) (1,514) 12,159 (7,058)
Net cash provided by (used in) financing activities:
Trust ...................................................... (13,357) (7,307) (850) (7,507) 6,583
Corporation ................................................ (4,577) (1,138) (816) (834) (309)
Combined (1) ............................................... (13,969) (6,752) (1,255) (7,139) 6,442
Dividends to shareholders
- Trust (3) ................................................. $ 0 $ 0 $ 0 $ 0 $ 7,644
Dividends per share
- - Trust (3) .................................................. $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.63
</TABLE>
(1) Trust and Corporation amounts do not add to Combined amounts due to
accounting elimination entries.
(2) For the Trust, includes gains (losses) on sales of $432,000, ($53,000),
($791,000), and $390,000, for the years ended December 31, 1994, 1993,
1992 and 1991, respectively, and provisions for investment losses of
$759,000, $2,369,000, $3,419,000, $8,867,000, and $15,100,000 in the
years ended December 31, 1994, 1993, 1992, 1991, and 1990,
respectively. For the Corporation, includes gains on sales of $24,000,
$74,000, $4,000 and $1,208,000 for the years ended December 31, 1994,
1993, 1992, and 1991, respectively, and provisions for investment
losses of $713,000 and $3,047,000 in the years ended December 31, 1991
and 1990, respectively.
(3) Presented only for the Trust, as the Corporation did not pay dividends
for the periods presented.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
As discussed in Item 1 of this Joint Annual Report under the caption
"The Reorganization", the Trust and the Corporation consummated the
Reorganization on the Closing Date effective as of January 1, 1995. Since the
Reorganization, the Trust has conducted all of its business and operations
through the Realty Partnership and the Corporation has conducted all of its
business and operations (other than its gaming operations) through the Operating
Partnership. The Trust controls the Realty Partnership as its sole general
partner. The Corporation controls the Operating Partnership as its managing
general partner, although prior to the receipt of gaming approvals, a management
committee of the Operating Partnership will manage the Operating Partnership.
As discussed in Item 1 of this Joint Annual Report under the caption
"Debt Restructuring", on January 28, 1993, the Trust entered into the Prior
Credit Agreement which restructured its previously unsecured notes payable to
the holders of the Senior Debt.
As discussed in Item 1 of this Joint Annual Report under the caption
"1995 Debt Refinancing", on March 24, 1995 the Realty Partnership entered into
the New Credit Agreement and borrowed $131.75 million which was used to
refinance the Senior Debt and approximately $27 million of first mortgage debt.
31
<PAGE> 35
Results of Operations for the Years Ended December 31, 1994 and 1993
The Trust. Rents from Corporation totaled $16,906,000 and
$16,481,000 for the years ended December 31, 1994 and 1993, respectively. The
increase was due to higher hotel revenues for the hotels leased by the
Corporation from the Trust (which resulted in higher percentage rents) offset by
a decrease in rental income of $802,000 resulting from the sale of hotels in
Tucker, Georgia (June 1993), St. Louis, Missouri (December 1993), Austin, Texas
(April 1994), New Port Richey, Florida (August 1994), Brunswick, Georgia (August
1994), Fayetteville, North Carolina (November 1994) and Jacksonville, Florida
(November 1994).
Interest from the Corporation increased to $1,730,000 from
$1,534,000 for the years ended December 31, 1994 and 1993, respectively. The
increase in interest income was a result of the higher amounts outstanding under
the Milwaukee notes, which increased from $15,186,000 at December 31, 1993 to
$16,916,000 at December 31, 1994. (For information pertaining to such notes see
Notes 4 and 5 of Notes to Financial Statements.) For additional information with
respect to Rents and Interest from the Corporation in future periods, see
"Liquidity and Capital Resources" below.
Interest from mortgage and other notes receivable increased by
$224,000 for the year ended December 31, 1994 as compared to 1993. The increase
resulted from the higher balances outstanding from the additional notes received
upon sales of the hotel properties discussed above and the receipt of the final
payment which was due from Northview Corporation, the interest on such note
having been previously deferred.
The Trust and the Corporation periodically estimate the value of their
hotel assets and compare these values to the net book values of the hotel
assets. For hotel assets not held for sale, the undiscounted future cash flows
of the assets (generally over a five-year period) on a hotel-by-hotel basis, are
compared to the net book value of the assets; and if the undiscounted future
cash flows are less than the net book value of the assets, the excess of the net
book values over the estimated fair values is charged to current earnings. When
it is the opinion of management that the fair value of a hotel that has been
identified for sale is less than the net book value of the hotel, a reserve for
losses is established. Fair value is determined based upon the discounted cash
flow of the properties at rates (generally ranging from 11.0% to 14.5%) deemed
reasonable for the type of property and prevailing market conditions, and, if
appropriate, then current net proceeds of sale from pending offers. In
determining whether to accept an offer for the sale of a property, management
considers the fairness of the offer in comparison to the value of the property,
the terms of the offer, and whether the offer is all cash or includes seller
financing. Gains on sales of hotel assets for the year ended December 31, 1994
totaling $432,000 reflected the sales of hotels discussed above and $208,000
related to the in substance foreclosure and subsequent all cash sale of the
underlying property collateralizing the Trust's mortgage note receivable on the
Ramada Inn in Merrimack, New Hampshire. For additional information regarding the
terms of such sales of hotels see "Certain Property Sales and Related
Transactions" included in Items 1 and 2 of this Joint Annual Report.
Interest expense totaled $16,265,000 and $14,020,000 for the
years ended December 31, 1994 and 1993, respectively, an increase of $2,245,000.
The increase was
32
<PAGE> 36
primarily due to an increase in the average interest rate under the Prior Credit
Agreement, such rate varying with the prime rate charged by one of the Senior
Lenders.
The sales of the properties discussed above and an increase in
the provision for investment losses are the primary reasons for the decline in
depreciation and amortization expense of $425,000 between 1994 and 1993.
Administrative and operating expenses totaled $1,583,000 and
$1,948,000 for the years ended December 31, 1994 and 1993, respectively, a
decrease of $365,000. The decrease was primarily the result of lower insurance
expense and professional fees unrelated to the debt restructuring.
During 1994 a provision for investment losses (a non-cash
charge to operations) totaling $759,000 was recorded. The provision included
$439,000 which was recorded as a result of the acceptance of offers to sell the
Jacksonville and Fayetteville properties, which had previously been identified
for sale at amounts lower than the then current net book values. The provision
also included $320,000 which was established based upon an analysis of the net
realizable value of the underlying property collateralizing the Trust's mortgage
note receivable on the Ramada Inn in Merrimack, New Hampshire.
See Part I, Item 3, Legal Proceedings, of this Joint Annual
Report for a description of an agreement between Leonard M. Ross and his
affiliates ("Ross") and Starwood Capital with respect to certain claims of Ross
purchased by Starwood Capital and an agreement by Starwood Capital in the future
to purchase the Paired Shares of the Trust and Corporation owned by Ross at a
price of $5.625 per Paired Share. Starwood Capital may also elect to purchase
such Paired Shares at the same time and on the same terms. During 1994, the
Trust and the Corporation recorded a charge to shareholder litigation expense of
$1,324,000 and $1,324,000, respectively, the estimated fair market value of the
agreement, as determined by an investment banker using an option pricing model.
No distributions were made by the Trust for the years ended
December 31, 1994 or 1993. For information with respect to restrictions on
distributions imposed by the Prior Credit Agreement and the New Credit Agreement
see "Distributions - The Trust" included in Item 5 of this Joint Annual Report.
The Trust's net loss totaled $(3,465,000), or $(0.28) per
share, and $(3,889,000), or $(0.32) per share, for the years ended December 31,
1994 and 1993, respectively.
The Corporation. Hotel revenues totaled $82,669,000 and $86,903,000 for
the years ended December 31, 1994 and 1993, respectively, representing a
decrease of $4,234,000. The hotel sales described under the caption "The Trust"
above resulted in decreased revenue of $5,342,000. In March 1994, the franchise
agreement and management agreement with Marriott Corporation for the Dallas
property were terminated. The property is now being managed for the Corporation
by Sage Hospitality, and is being operated as the Dallas Park Central Hotel.
Revenues at the Dallas property decreased by $3,776,000. The decrease from
property sales and the Dallas property were offset by increased revenues of
$4,884,000 at the properties which continued to be leased from the Trust by the
Corporation, including an increase of $1,516,000 at
33
<PAGE> 37
the Milwaukee Marriott, which was renovated during 1993. The following table
summarizes average occupancy and average room rates for properties which were
operated by the Corporation under lease from the Trust at December 31, 1994:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
Including Dallas Park Central: 1994 1993
- ------------------------------ ------ ------
<S> <C> <C>
Occupancy Rate 68.03% 65.32%
Average Room Rate $59.85 $60.30
Excluding Dallas Park Central:
- ------------------------------
Occupancy Rate 71.76% 65.75%
Average Room Rate $59.84 $59.88
</TABLE>
Management of the Corporation believes that the increases in the average
occupancy rate resulted primarily from more favorable economic conditions which
have created increased business and pleasure travel throughout the United States
and improved operational systems.
Gaming revenues totaled $27,981,000 and $27,505,000 for the
years ended December 31, 1994 and 1993, respectively.
For information regarding the carrying value of properties
held for sale, see the Trust above. Gain on sales of hotel assets totaled
$24,000 and $74,000 for the years ended December 31, 1994 and 1993,
respectively, reflecting the property sales described above.
Hotel expenses totaled $60,829,000 and $68,132,000, or 73.6%
and 78.4% of hotel revenues, for the years ended December 31, 1994 and 1993,
respectively. The decreases in hotel expenses as a percentage of hotel revenue
are primarily due to the lower cost of operating the Dallas property (see
discussion of hotel revenues above) where operating expenses have historically
been higher than at other hotel properties, the improved operating margin
resulting from the renovation of the Milwaukee Marriott discussed above and the
effect of the sale of the properties having higher operating costs as a
percentage of revenues than properties that continue to be operated by the
Corporation.
Gaming expenses totaled $24,454,000 and $24,055,000, or 87.4%
and 87.5% of gaming revenues, for the years ended December 31, 1994 and 1993,
respectively.
For information with respect to rent and interest to the Trust
during the years ended December 31, 1994 and 1993, see "The Trust - Results of
Operations for the Years Ended December 31, 1994 and 1993" above and "Liquidity
and Capital Resources" below.
Administrative and operating expenses decreased by $161,000,
or 6%, for the year ended December 31, 1994 as compared to 1993. The decrease
was primarily the result of a reduction in the level of corporate staff.
The Corporation's net loss totaled $(1,198,000), or $(0.10)
per share, in 1994, as compared to $(3,143,000), or $(0.26) per share, for 1993.
34
<PAGE> 38
Results of Operations for the Years Ended December 31, 1993 and 1992
The Trust. Rents from Corporation totaled $16,481,000 and
$21,177,000 for the years ended December 31, 1993 and 1992, respectively.
Approximately $1,106,000 of the decrease in rents resulted from the sale of
hotels in Irving, Texas (March 1992), Merrimack, New Hampshire (July 1992),
Spartanburg, South Carolina (September 1992), Smyrna, Georgia (January 1993),
Tucker, Georgia (June 1993), and St. Louis, Missouri (December 1993). The
remaining decrease was primarily due to the amendment of eighteen of the leases
with the Corporation effective January 1, 1993, which reduced the fixed and
percentage rents payable by the Corporation. For additional information
regarding the lease amendments, see "Equity Investments" included in Part I,
Item 2 of this Joint Annual Report.
Interest from the Corporation decreased to $1,534,000 from
$4,123,000 for the years ended December 31, 1993 and 1992, respectively. The
decrease in interest income was a result of the January 1, 1993 restructuring of
intercompany borrowings and advances made to the Corporation, with the exception
of the Milwaukee notes, into non-interest bearing demand notes for calendar
years 1993 and 1994, with interest prime plus 2% payable monthly thereafter.
For additional information with respect to Interest from the
Corporation in future periods, see "Liquidity and Capital Resources" below.
Interest from mortgage and other notes receivable increased by
$187,000 for the year ended December 31, 1993 as compared to 1992. The increase
resulted from the additional interest income related to the mortgage notes
delivered to the Trust in connection with the sales of the hotel properties
located in Irving, Texas, Merrimack, New Hampshire, Spartanburg, South Carolina,
and Tucker, Georgia, having original principal balances of $1,650,000,
$1,440,000, $775,000, and $1,985,000, respectively.
As described above, effective January 28, 1993, the Trust
restructured its debt. Management concluded that this debt restructuring
represented a "troubled debt restructuring" as defined under generally accepted
accounting principles, and accordingly, upon execution of the definitive
agreement, accrued all known current or future identifiable debt restructuring
costs as of December 31, 1992. No additional loan restructuring costs were
incurred during the year ended December 31, 1993.
Interest expense totaled $14,020,000 and $12,959,000 for the
years ended December 31, 1993 and 1992, respectively, an increase of $1,061,000.
The increase was primarily due to an increase in the average interest rate and
an increase in the borrowings outstanding under the Term Loan and Revolving Line
of Credit.
The sales of the properties discussed above and an increase in
the provision for investment losses are the primary reasons for the decline in
depreciation and amortization expense of $1,164,000 between 1993 and 1992.
35
<PAGE> 39
Administrative and operating expenses totaled $1,948,000 and
$2,350,000 for the years ended December 31, 1993 and 1992, respectively, a
decrease of $402,000. The decrease was primarily the result of lower legal and
professional fees unrelated to the debt restructuring.
During 1993 a provision for investment losses (a non-cash
charge to operations) totaling $2,369,000 was recorded primarily as a result of
the acceptance of all cash offers to sell hotels previously identified for sale
at amounts lower than the then current net book values, (which cash was used to
meet the next principal payment due under the terms of the Credit Agreement) and
the continuing deterioration of hotel values in the Southeast.
No distributions were made by the Trust for the years ended
December 31, 1993 or 1992. For information with respect to restrictions on
distributions imposed by the Prior Credit Agreement see "Distributions - The
Trust" included in Part I, Item 5 of this Joint Annual Report.
The Trust's net loss totaled $(3,889,000), or $(0.32) per
share, and $(9,818,000), or $(.081) per share, for the years ended December 31,
1993 and 1992, respectively.
The Corporation. Hotel revenues totaled $86,903,000 and
$88,812,000 for the years ended December 31, 1993 and 1992, respectively,
representing a decrease of $1,909,000. The hotel sales described under the
caption "The Trust" above resulted in decreased revenue of $2,373,000, which was
partially offset by increased revenues of $835,000 resulting from increased
average occupancy and average room rates for properties which continue to be
operated by the Corporation and leased from the Trust.
The following table summarizes average occupancy and average
room rates for properties which were operated by the Corporation under lease
from the Trust at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1993 1992
------ ------
<S> <C> <C>
Occupancy Rate 63% 59%
Average Room Rate $56.59 $53.18
</TABLE>
Management of the Corporation believes that the improved
national economic trends experienced during 1993 resulted in increased business
and pleasure travel and related increases in average occupancy rates and average
room rates.
Gaming revenues totaled $27,505,000 and $26,150,000 for the
years ended December 31, 1993 and 1992, respectively. Management believes the
increased revenue of $1,355,000 at the two gaming facilities is a result of
increased customer travel to the Las Vegas area, and in particular, increased
customer traffic due to the close proximity of the King 8 Hotel and Casino to
several large hotel/casinos completed during 1993.
Management fees and other income decreased by $737,000 to
$222,000 for the year ended December 31, 1993 as compared to 1992. The decreases
were primarily a result of the subcontracting of the management obligations of
Western Host with respect to seven hotels
36
<PAGE> 40
not owned by the Trust, to Westland Hotel Corporation. For additional
information pertaining to the subcontracts, see Note 10 of the Notes to
Financial Statements and Item 13 of this Joint Annual Report.
For information regarding the carrying value of properties
held for sale, see the Trust above. Gain on sales of hotel assets totaled
$74,000 and $4,000 for the years ended December 31, 1993 and 1992, respectively,
reflecting the property sales described above.
Hotel expenses totaled $68,132,000 and $68,620,000, or 78% and
77% of hotel revenues, for the years ended December 31, 1993 and 1992,
respectively. The increase in hotel expenses as a percentage of hotel revenues
is principally attributable to the payment of management fees to third party
operators under the 11 management contracts entered into in December 1992 and
increased revenues and expenses at the Dallas Marriott Park Central where
operating expenses are typically higher as a percentage of revenues than at
other hotel properties operated by or for the Corporation.
Gaming expenses totaled $24,055,000 and $23,699,000, or 87%
and 91% of gaming revenues, for the years ended December 31, 1993 and 1992,
respectively. Increased gaming revenues, coupled with improved casino win
percentages, resulted in the decreases in gaming expenses as a percentage of
gaming revenues.
For information with respect to rent and interest to the Trust
during the years ended December 31, 1993 and 1992, see "The Trust - Results of
Operations for the Years Ended December 31, 1993 and 1992" above and "Liquidity
and Capital Resources" below.
Administrative and operating expenses decreased by $1,046,000,
or 27%, for the year ended December 31, 1993 as compared to 1992. The decrease
is primarily the result of a reduction in the level of corporate staff.
Shareholder litigation expenses include an accrual of $219,000
at December 31, 1993 in connection with the settlement of the Shareholder
Actions (see "Legal Proceedings" included in Part I, Item 3 of this Joint Annual
Report).
The Corporation's net loss totaled $(3,143,000), or $(0.26)
per share, in 1993, as compared to $(9,925,000), or $(0.82) per share, for 1992.
Liquidity and Capital Resources
The Trust - Prior to the Reorganization, the primary sources
of liquidity for the Trust were cash generated from operations (i.e., its rents)
and net proceeds from the sale of hotels. The primary demands on the Trust's
capital resources were debt service payments, the funding of capital
improvements to the Trust's properties, the making of additional loans and
advances to the Corporation and the Trust's general and administrative expenses.
Since the Reorganization, the Trust has conducted all of its business and
operations through the Realty Partnership and its only source of liquidity will
be cash distributions from the Realty Partnership.
37
<PAGE> 41
Prior to December 31, 1994, it was necessary for the Trust to sell
properties in order to comply with the principal payment requirements of the
Prior Credit Agreement (see Note 3, "Hotel Sales and Reserves for Losses" on
pages F-19 and F-20). As discussed in Item 1 of this Joint Annual Report under
the caption "1995 Debt Refinancing" on March 24, 1995 the Realty Partnership
entered into the New Credit Agreement and borrowed $131.75 million. The proceeds
were used to refinance the Senior Debt and approximately $27 million of first
mortgage debt. The Loan matures on April 1, 1997 and under certain conditions
may be extended for an additional twelve months. The loan bears interest at a
rate based on LIBOR plus 3%.
In December 1994, the Trust canceled $58,335,000 of the notes
receivable which were payable to the Trust by the Corporation and its
subsidiaries. As part of the Reorganization, effective January 1, 1995, the
Trust contributed the remaining notes to the Realty Partnership and the payment
obligation was assumed by the Operating Partnership. Effective January 1, 1995,
notes in the amount of $10,000,000, (excluding the MHLP notes, see Note 5 of
Notes to Financial Statements) are due on demand and bear interest at prime plus
2% with interest payable monthly.
As of January 1, 1995, the aggregate principal payments due during 1995
on the outstanding mortgage notes payable of the Realty Partnership amounted to
$34,249,000, including four mortgage notes in the amount of $23,679,000 which
mature during 1995. On January 31, 1995, upon closing of the Reorganization, a
mortgage note in the amount of $4,075,000 which was due in 1995 was paid in
full. On March 24, 1995, upon closing of the New Credit Agreement, mortgage
notes in the amount of $17,750,000 which were due in 1995 were paid in full.
Management of the Trust is in the process of negotiating an extension on the
remaining mortgage note that matures during 1995 which had an outstanding
principal balance of $1,854,000 as of December 31, 1994.
The Realty Partnership intends to make during 1995, improvements that
are necessary to maintain the properties in good condition, that are required by
franchisors or applicable health and safety and other laws or to improve the
competitive position of certain properties. Management believes that the
necessary funds, expected to be provided primarily from cash flows from
operating activities, are available and that the cost of such improvements
to existing properties will amount to approximately $6,483,000 during 1995.
Management believes that there will be sufficient cash available from
operations to meet the obligations of the Realty Partnership in the twelve
months following December 31, 1994.
The Corporation. Prior to the Reorganization, the primary source of
liquidity for the Corporation was cash generated from operations, i.e., from
sales of rooms, food and beverages at the hotels and hotel/casinos the
Corporation leased from the Trust and gaming revenues at the two Nevada
properties. The primary demands on the Corporation's capital resources were the
payment of rents and interest due to the Trust and the Corporation's general and
administrative expenses. Since the Reorganization, the Corporation has conducted
all of its business and operations, other than the gaming operations, through
the Operating Partnership and its only source of liquidity will be cash
distributions from the Operating Partnership.
For information regarding the cancellation of notes payable by the
Corporation to the Trust in December 1994, see the Trust above.
38
<PAGE> 42
Management believes that there will be sufficient cash available from
operations to meet the obligations of the Operating Partnership in the twelve
months following December 31, 1994.
Management believes that its hotels are adequately insured. For
information with respect to potential hazardous waste contamination and the
presence of asbestos at certain of the Realty Partnership's hotels and the
possible impact thereof on the Trust's, the Realty Partnership's, the
Corporation's and the Operating Partnership's financial position, see "Other
Information - Certain Environmental Matters" included in Item 1 of this Joint
Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by
this Item are included in Item 14 of this Joint Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. TRUSTEES, DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.
Trustees and Executive Officers of the Trust
The following table sets forth, for each of the current members of the
Trust's Board of Trustees as the date of this Joint Annual Report, the class of
Trustees to which such Trustee has been elected, the name and age of such
Trustee, the principal occupation or employment of such Trustee during the past
five years and the principal business of such Trustee's employer, other
directorships held by such Trustee and the year in which such Trustee first
became a Trustee of the Trust.
39
<PAGE> 43
Trustees Whose Terms Expire in 1995
Madison F. Grose (41)........ Trustee since December 1994. Executive Vice
President and General Counsel of Starwood
Capital (and its predecessor entity) since
July 1992. From November 1983 through June
1992, Partner of the law firm of Pircher,
Nichols & Meeks.
Earle F. Jones (68).......... Director since 1985 and Chairman of the
Board of Directors of the Corporation since
February 1989. Co-Chairman since 1988 of MMI
Hotel Group, a hotel company. President from
1967 to 1968 of the International
Association of Holiday Inns and served two
terms as a director. Trustee and Chairman of
Communications Improvement Trust, whose
beneficiaries are public broadcasting and
Tougaloo College, Member of the Board of
Trustees for Millsaps College and the
Catholic Foundation and Co-Chairman of the
Mississippi Olympic Committee.
Trustees Whose Terms Expire in 1996
Jeffrey C. Lapin (38)........ Trustee since September 1992. President and
Chief Operating Officer of the Trust since
December 1994. President and Chief Executive
Officer of the Trust from May 1991 to
December 1994. Prior to that time, Vice
President (from January 1988) and Secretary
(from September 1986) of the Trust. Prior to
1986 Mr. Lapin was a real estate attorney at
Mitchell, Silberberg & Knupp in Los Angeles.
Jonathan Eilian (27)......... Trustee since December 1994. Senior Vice
President of Starwood Capital specializing
in hotel acquisitions and multiple asset
pool bids, since October 1991.
40
<PAGE> 44
Trustee Whose Term Expires in 1997
Barry S. Sternlicht (34)..... Trustee, Chairman of the Board and Chief
Executive Officer of the Trust and Director
of the Corporation since December 1994.
President and CEO of Starwood Capital (and
its predecessor entity) since September
1991. Prior to that time, Vice President and
then Senior Vice President (from 1989 to
1991) of JMB Realty Corporation, a real
estate investment firm. Currently, a Trustee
of each of Equity Residential Properties
Trust, a multi-family real estate investment
trust, and Angeles Participating Mortgage
Trust, a real estate investment trust.
The following table includes certain information with respect to each
of the Trust's current executive officers other than Messrs. Sternlicht and
Lapin:
<TABLE>
<CAPTION>
Name Age Position(s) with the Trust
---- --- --------------------------
<S> <C> <C>
Michael W. Mooney ....................... 48 Vice President and Chief Financial Officer
Sherwin L. Samuels ...................... 59 Secretary and General Counsel
</TABLE>
Michael W. Mooney. Mr. Mooney has been Vice President and Chief
Financial Officer since July 1992. From March 1992 to July 1992 he was Director
of Finance of RELCO Industries, a real estate development company. From August
1990 to March 1992, he was Director of Finance of Dorn-Platz, Inc., a real
estate brokerage company. From July 1989 to August 1990, Mr. Mooney was an
independent real estate consultant. Prior to that time, he was Executive Vice
President and Chief Financial Officer of Gibraltar Savings.
Sherwin L. Samuels. Mr. Samuels has been an officer and General Counsel
since January 1987 and was a Trustee from April 1987 to December 1994. Since
September 1992, he has been a Partner (through a professional corporation) of
the law firm of Sidley & Austin. Prior to that time, he was a Partner (through a
professional corporation) of the law firm of Mitchell, Silberberg & Knupp.
The executive officers of the Trust serve at the pleasure of the Board
of Trustees, subject in the case of Messrs. Lapin and Mooney to the provisions
of their respective employment agreements with the Trust. (See "Employment
Agreements with Executive Officers" included in Item 11 of this Joint Annual
Report.) There is no family relationship among any of the Trustees or executive
officers of the Trust.
Directors and Executive Officers of the Corporation
The current Board of Directors of the Corporation consists of Mr. Earle
F. Jones, Mr. Bruce M. Ford, and Mr. Graeme W. Henderson. At the special meeting
of stockholders of the Corporation held on December 15, 1994, the stockholders
elected Messrs. Sternlicht, Ford
41
<PAGE> 45
and Goldman as directors of the Corporation, such directors to take office upon
the receipt of necessary regulatory approvals from the Nevada Gaming Authorities
("Gaming Approval").
Pending receipt of Gaming Approval, the current Directors of the
Corporation will continue as such and the Operating Partnership will be managed
by a management committee consisting of Messrs. Sternlicht, Ford and Goldman.
While awaiting Gaming Approval, the Corporation's existing management and Board
of Directors will be responsible for the operation and control of the gaming
assets of the Corporation, and the management committee which is comprised of
the newly elected directors will be prohibited from any influence or control of
the gaming assets.
The following table sets forth, for each of the current members of the
Corporation's Board of Directors (other than Mr. Jones) as of the date of this
Joint Annual Report, the name and age of such Director, the principal occupation
or employment of such Director during the past five years and the principal
business of such Director's employer, other directorships held by such Director
and the year in which such Director first became a Director of the Corporation.
<TABLE>
<CAPTION>
Name and Age Principal Occupation and Business Experience
------------ --------------------------------------------
<S> <C>
Bruce M. Ford (54).............. Director since 1983. President and
Managing Partner of F.K.B. Management
Corporation, a restaurant management
company, since January 1988. President
of Ford Management Corporation, a
hotel/motel management and development
company, since June 1988. Prior to that
time, Mr. Ford was Senior Vice President
of Operations of Ramada Inns.
Graeme W. Henderson (61) ....... Director of the Corporation since March
1990. Chairman of the Trust from July
1989 to December 1994 and Trustee of the
Trust from September 1986 to December
1994. Independent financial consultant
since January 1990. Prior to January
1990, President of Henderson Consulting,
Inc., a private financial consulting
firm. President of Capstan, Inc.
(Formerly Seymour, Inc.), a manufacturer
of machine tool controls, since 1982.
Director of Capital Southwest
Corporation.
</TABLE>
The following table sets forth, for each of the current members of the
management committee who will become the Board of Directors of the Corporation
upon receipt of Gaming Approval (other than Mr. Sternlicht whose term will
expire in 1997 and Mr. Ford whose term will expire in 1995) the name and age of
such Director, the principal occupation or employment of such Director during
the past five years and the principal business of such Director's employer,
other directorships held by such Director and the year in which such Director
first became a Director of the Corporation.
42
<PAGE> 46
Director Whose Term Expires in 1996
Steven Robert Goldman (33) .. Director and Senior Vice President of the
Corporation since December 1994. Vice
President of Starwood Capital, specializing
in hotel acquisitions and hotel asset
management, since August 1993. From 1990 to
1993, Senior Development Manager of Disney
Development Company, the real estate
investment, development and management
division of The Walt Disney Company. From
1986 to 1990, Director of Development of the
Hyatt Development Corporation.
The following table includes certain information with respect to each
of the Corporation's current executive officers other than Mr. Goldman:
<TABLE>
<CAPTION>
Name Age Position(s) with the Corporation
---- --- --------------------------------
<S> <C> <C>
Kevin E. Mallory .......................... 35 Executive Vice President
Kenneth J. Biehl .......................... 40 Vice President and Controller
</TABLE>
Kevin E. Mallory. Mr. Mallory has been Executive Vice President since
July 1992. From December 1991 to July 1992 he was President of Merit Hotel
Group, a hotel development and consulting company. From September 1989 to
November 1991, he was Development Director, Westin Hotels & Resorts, a hotel
management company. Prior to that time he was Assistant Vice President and Asset
Manager, VMS Realty Partners, a real estate syndicator.
Kenneth J. Biehl. Mr. Biehl has been Vice President since December 1994
and Controller since April 1994. From January 1992 to April 1994 he was Senior
Accountant with Kenneth Leventhal & Co., a public accounting firm. Prior to that
time, he was Treasurer and Chief Financial Officer of Electronic Clearing House,
Inc., a credit card services company.
The executive officers of the Corporation serve at the pleasure of the
Board of Directors, subject in the case of Mr. Mallory to the provisions of his
employment agreement with the Corporation. (See "Employment Agreements with
Executive Officers" included in Item 11 of this Joint Annual Report.) There is
no family relationship among any of the Directors or executive officers of the
Corporation.
ITEM 11. EXECUTIVE COMPENSATION.
Summary of Cash and Certain Other Compensation
The Trust. The following table provides certain summary
information concerning the compensation paid for the fiscal years ended December
31, 1994, 1993 and 1992 to the Trust's President and Chief Executive Officer and
each other executive officer of the Trust whose
43
<PAGE> 47
total compensation for 1994 exceeded $100,000 for services rendered in all
capacities to the Trust.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term All Other
Annual Compensation Compensation Compensation($)
-------------------------------- ------------- ---------------
Securities
Name and Underlying
Principal Options/
Position Year Salary($) Bonus($) SARs (#)
- --------------------- ---- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Jeffrey C. Lapin 1994 190,000 75,000 12,000(1)
President and Chief 1993 170,834 20,000
Executive Officer 1992 150,792 50,000(1) 23,585(2)
Michael W. Mooney 1994 150,000 20,000 9,000(1)
Vice President and 1993 140,416 11,667
Chief Financial 1992 61,026 25,000(1)
Officer
</TABLE>
- ----------------------
(1) For information with respect to these options, see "Option Exercises
and Holdings" below.
(2) Amount shown reflects cash paid for unused vacation.
The Corporation. The following table provides certain summary
information concerning the compensation paid for the fiscal years ended December
31, 1994, 1993 and 1992 to each executive officer of the Corporation whose total
compensation for 1994 exceeded $100,000 for services rendered in all capacities
to the Corporation.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Long Term
Annual Compensation Compensation
------------------------------ ------------
Securities
Name and Underlying
Principal Options/
Position Year Salary($) Bonus($) SARs (#)
- --------------------- ---- --------- -------- -----------
<S> <C> <C> <C> <C>
Kevin E. Mallory 1994 150,000 37,500 9,000(1)
Executive Vice 1993 140,416 11,667
President 1992 63,718 25,000(1)
</TABLE>
- ---------------------
(1) For information with respect to these options, see "Option Exercises
and Holdings" below.
44
<PAGE> 48
Option Grants
The following table shows, as to the executive officers of the
Trust and the executive officer of the Corporation named in the Summary
Compensation Tables above, information concerning the option granted to that
officer during the year ended December 31, 1994.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/
Underlying SARs
Options/ Granted to Potential Realizable Value at
SARs Employees Exercise Assumed Annual Rates of
Granted in Fiscal Price Expiration Stock Price Appreciation for
Name (#) Year ($/Sh) Date Option Term
- ---------- ---------- ---------- -------- ---------------- -----------------------------
5% ($) 10% ($)
------- -------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey C. Lapin 12,000(1) 12.1 $2.75(2) January 31, 2000 42,120 53,150
Michael W. Mooney 9,000(1) 9.1 $2.75(2) January 31, 2000 31,590 39,860
Kevin E. Mallory 9,000(1) 9.1 $2.75(2) January 31, 2000 31,590 39,860
- -----------------------------
</TABLE>
(1) Options became exercisable as to one-third of the amount granted on
January 31, 1995, and will become exercisable as to an additional
one-third of the amount granted on January 31, 1996 and as to the
remaining amount granted on January 31, 1997.
(2) The $2.75 per Paired Share exercise price is equal to the fair market
value of a Paired Share on the day the option was granted.
Option Exercises and Holdings
The following table provides information with respect to the
options held as of December 31, 1994 by the executive officers of the Trust and
the executive officer of the Corporation named in the Summary Compensation
Tables above. No options were exercised by any of those executive officers
during 1994.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN 1994
AND DECEMBER 31, 1994 OPTION VALUES
- -----------------------------------------------------------------------------------------------------------
Number of Shares Underlying
Unexercised Value of Unexercised In-the-
Options/SARs at Fiscal Money Options/SARs
Year-End (#) at Fiscal Year-End ($) (1)
-------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jeffrey C. Lapin 80,000 12,000 109,500 2,280
Michael W. Mooney 25,000 9,000 54,750 1,710
Kevin E. Mallory 25,000 9,000 54,750 1,710
</TABLE>
45
<PAGE> 49
- -----------------
(1) Value is defined as the market price of the Paired Shares at December
31, 1994 less the exercise price of the option. The average of the
high and low market prices of the Paired Shares at December 31, 1994
was $2.94.
Compensation of Trustees/Directors
Each Trustee or Director who is not also an officer of the
Trust or the Corporation receives annual Trustee's or Director's fees of $12,000
and is reimbursed for any out-of-pocket expenses incurred in attending meetings
of the Board of Trustees or the Board of Directors. The Chairman of each Board
receives an additional fee of $2,500 per year. In addition, each non-officer
Trustee or Director receives a fee $750 for each meeting in which he
participates (or, in the case of telephonic meetings, $500) and a fee of $500
for each committee meeting in which he participates ($1,000 per meeting for
committee chairman).
Share Purchase Agreements
Prior to December 1989, the Trust and the Corporation
maintained share purchase plans pursuant to which Trustees, Directors, officers
and employees of the Trust or the Corporation were granted rights to purchase
Paired Shares from the Trust and the Corporation at prices based upon the then
fair market value of the Paired Shares. A purchaser of Paired Shares under a
share purchase plan made a cash down payment equal to 10% of the purchase price
and executed a promissory note in favor of the Trust or the Corporation for the
balance. Certificates evidencing Paired Shares purchased under a share purchase
plan were pledged to the Trust or the Corporation as collateral to secure
payment of the promissory note. Prior to the satisfaction of the obligations
represented by the note, the purchaser was entitled to vote the Paired Shares
held in pledge, but not to transfer the purchaser's interest in those shares.
During 1994, the only share purchase agreements remaining in
effect were those between the Trust and each of Mr. Henderson, a former trustee
of the Trust and director of the Corporation, and Mr. Samuels, and between the
Corporation and each of Messrs. Jones and Ford. During 1994, the share purchase
agreements with Messrs. Henderson, Samuels and Ford were terminated and the
non-recourse indebtedness thereunder was canceled (an aggregate of $56,250 with
respect to Mr. Henderson, $82,391 with respect to Mr. Samuels, and $108,784 with
respect to Mr. Ford). In addition, the Paired Shares pledged in respect of such
indebtedness were either released from such pledge, to the extent that such
Paired Shares had been paid for (an aggregate of 1,341 Paired Shares for which
$20,625 was paid with respect to Mr. Henderson, 2,141 Paired Shares for which
$32,922 was paid with respect to Mr. Samuels, and 2,793 Paired Shares for which
$45,279 was paid with respect to Mr. Ford) or were forfeited by the individual,
to the extent such Paired Shares had not been paid for.
Employment Agreements with Executive Officers
On January 31, 1995, the Trust entered into a 24-month
employment agreement with Mr. Lapin for his services to the Trust as its
President and Chief Operating Officer. The employment agreement provides for an
annual salary of $200,000 in 1995 and $225,000 in 1996, annual bonuses to be
determined by the Board of Trustees (not less than $75,000 per year), the
46
<PAGE> 50
grant under the option plans of the Trust and the Corporation of options to
purchase 250,000 Paired Shares which are exercisable at $2.75 per Paired Share
(fair market value on the date of grant) and which vest at a rate no longer than
the most rapid rate of vesting of options granted to any other executive during
the term of the employment agreement. The employment agreement provides that Mr.
Lapin may terminate his employment for "Good Reason", as defined in the
employment agreement and including an assignment of duties which are in any
significant respect inconsistent with his position, a substantial alteration in
his responsibilities, a breach of the agreement by the Trust, removal from
office without cause (as defined), relocation of the Trust's principal executive
offices, a change in the composition of 51% of the Trustees, a decision by the
Board that the Trust shall merge, sell or dispose of all or substantially all of
its assets, dissolve or liquidate, or the failure of Mr. Lapin to be a member of
the Board of Trustees, other than for cause (as defined). If Mr. Lapin so
terminates his employment, he will be entitled to receive a lump sum payment
equal to the base salary and bonuses that would have been payable had he
continued to be employed for the remainder of the term of the agreement, and all
fringe benefits to which he would have been entitled through the remainder of
the term of the agreement (other than stock options or stock loans not granted
prior to the date of termination).
In July 1992, the Trust entered into a 12-month agreement with Mr.
Mooney providing for Mr. Mooney to render services to the Trust as its Chief
Financial Officer. In December 1993, the term of the employment agreement with
Mr. Mooney was extended until June 1995. The employment agreement with Mr.
Mooney provides that he will receive an annual salary of $150,000 and such
annual bonus, if any, as the Trust's Board of Trustees may determine, and will
be eligible to participate in all employee benefit plans and fringe benefits, if
any, that the Trust makes available to its other executive officers. Mr.
Mooney's employment pursuant to the employment agreement may be terminated by
the Trust at any time; provided, however, that if his employment is terminated
without cause (as defined), Mr. Mooney will be entitled to receive the lesser of
his salary for the then remaining term of the employment agreement or $75,000.
In July 1992, the Corporation entered into a 12-month
employment agreement with Mr. Mallory providing for Mr. Mallory to render
services to the Corporation as a senior executive officer. In December 1993, the
term of the employment agreement with Mr. Mallory was extended until June 1995.
The employment agreement with Mr. Mallory provides that he will receive an
annual salary of $150,000 and such annual bonus, if any, as the Corporation's
Board of Directors may determine, and will be eligible to participate in all
employee benefit plans and fringe benefits, if any, that the Corporation makes
available to its other executive officers. Mr. Mallory's employment pursuant to
the employment agreement may be terminated by the Corporation at any time;
provided, however, that if his employment is terminated without cause (as
defined), Mr. Mallory will be entitled to receive the lesser of his salary for
the then remaining term of the employment agreement or $75,000.
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1994, the Board of Directors of the
Corporation and the Board of Trustees of the Trust made decisions with respect
to executive compensation of the executive officers of the Trust and the
Corporation, respectively. Mr. Lapin, who is an executive officer of the Trust
and is on the Board of Trustees of the Trust, participated in decisions related
to the
47
<PAGE> 51
compensation of Mr. Mooney; and Mr. Samuels, who is an officer of the Trust and
was a Trustee of the Trust, and Mr. Henderson, who is a director of the
Corporation and was a Trustee of the Trust, participated in decisions related to
the compensation of Messrs. Lapin and Mooney.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
Certain Beneficial Owners. To the knowledge of the Trust and
the Corporation, no person owns beneficially 5% or more of the Paired Shares,
except as follows:
<TABLE>
<CAPTION>
Name and Address Amount Percent of
of Beneficial Owner Beneficially Owned Class (1)
------------------- ------------------ ----------
<S> <C> <C>
U.S. Bancorp 996,000 (2) 8.2%
111 S.W. Fifth Avenue
Portland, OR 97204
Leonard M. Ross 991,400 (3) 8.2%
1011-1/2 North Beverly Drive
Beverly Hills, CA 90210
Starwood Capital Group, L.P. and 1,055,039 (4) 8.0%
affiliated entities
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Edward J. Okay and 750,000 (5) 6.2%
Dorothy P. Okay, as joint tenants
111 Quayside Drive
Jupiter, FL 33477
</TABLE>
- ---------------------------
(1) Based on the number of Paired Shares outstanding on March 27, 1995.
(2) Based on information contained in Schedule 13G dated February 10, 1995,
the securities are held by Qualivest Capital Management, Inc. (a wholly
owned subsidiary of U.S. Bancorp) and the Trust Group of the United
States Bank of Oregon in the amount of 479,700 and 516,300 shares,
respectively. U.S. Bancorp has sole dispositive power with respect to
925,500 shares and voting power with respect to all of these shares.
(3) Based on information contained in Amendment No. 10 to Schedule 13D
dated February 22, 1991. Mr. Ross has sole voting and dispositive power
with respect to all of these shares; however, 909,800 of these shares
are pledged to the Pacific Bank, along with other securities, as
collateral for a previously unsecured loan. See Part I, Item 3, Legal
Proceedings, for a description of an agreement between Ross and
Starwood Capital pursuant to which Starwood Capital has agreed to
purchase Ross' Paired Shares at Ross' election during a 60-day period
beginning in December 1995, at a price of $5.625 per Paired Share.
Starwood Capital may also elect to purchase Ross' Paired Shares at the
same time on the same terms.
(4) Based on information contained in a Schedule 13D dated January 31, 1995
filed by Starwood Capital, Barry S. Sternlicht and the following
Starwood Partners: Starwood Opportunity Fund II, L.P.("SOFI II"),
Firebird Consolidated Partners, L.P., Woodstar Partners, I, L.P.,
Starwood-Huntington Partners, L.P., Starwood/Wichita Investors, L.P.,
Starwood-Nomura Hotel Investors, L. P., Starwood-Apollo Hotel
48
<PAGE> 52
Partners IX, L.P., Starwood Apollo Hotel Partners VIII, L.P. and Berl
Holdings, L.P. Such Schedule 13D reports that SOFI II owns 299,600
Paired Shares and that SOFI II and Mr. Sternlicht have the power to
vote and dispose of such shares and that the Starwood Partners hold
units in the Realty Partnership and the Operating Partnership which
are, subject to the 8.0% Paired Share ownership limit, exchangeable for
an aggregate of 35,661,254 Paired Shares (approximately 74.6% of the
outstanding Paired Shares after such exchange). Such units were
acquired in the Reorganization described in Part I, Item 1 of this
Joint Annual Report. Such Schedule 13D reports that because of the 8.0%
ownership limit, the Starwood Partners cannot beneficially own more
than 8.0% of the outstanding Paired Shares. The amount beneficially
owned and the percent of class assumes that Starwood Partners exchange
units for Paired Shares to the maximum extent permitted within the
ownership limit provision.
(5) Based on information contained in Schedule 13D dated January 4, 1995.
Edward J. Okay has sole voting power and shares dispositive power with
Dorothy P. Okay with respect to all of these shares.
Trustees and Officers of the Trust. The following table sets
forth the beneficial ownership of the Paired Shares as of March 27, 1995 by each
Trustee and each executive officer of the Trust named in the Summary Cash
Compensation Table included in Item 11 hereof who owns Paired Shares and by all
Trustees and executive officers of the Trust as a group. Except as otherwise
provided below, each beneficial owner has sole voting and investment power with
respect to all shares beneficially owned.
<TABLE>
<CAPTION>
Amount
Name of Beneficially Percent of
Beneficial Owner Owned Class (1)
---------------- ------------ ----------
<S> <C> <C>
Jeffrey C. Lapin 85,750 (3) (2)
Michael W. Mooney 25,000 (4) (2)
Sherwin L. Samuels 93,461 (5) (2)
Earle F. Jones 6,500 (6) (2)
Barry M. Sternlicht 1,055,039 (7) 8.0%
All Trustees and officers as a group 1,215,750 (8) 9.6%
</TABLE>
- ---------------------
(1) Based on the number of paired shares outstanding on March 27, 1995,
including the exchange of units for Paired Shares as discussed in note
(7) below.
(2) Less than 1%.
(3) Includes 80,000 shares subject to presently exercisable options and
5,000 shares owned in a pension plan of which Mr. Lapin is sole trustee
and beneficiary.
(4) Includes 25,000 shares subject to presently exercisable options.
(5) Includes 14,320 shares held in a segregated account for the benefit of
Mr. Samuels by a pension plan trust and 56,000 shares subject to
presently exercisable options and 1,000 shares issuable upon exercise
of paired warrants issued by the Trust and the Corporation. Does not
include 359 shares owned by Mr. Samuels's son (of which shares Mr.
Samuels disclaims beneficial ownership).
(6) Includes 500 shares issuable upon exercise of paired warrants issued by
the Trust and the Corporation.
(7) Mr. Sternlicht and SOFI II have the power to vote and dispose of
299,600 Paired Shares held by SOFI II. The remaining shares reported
above are issuable upon exchange of units of the Realty Partnership and
the Operating Partnership. Because of the 8.0% Paired Share ownership
limit, the shares reported above do not include the remainder of the
35,661,254 Paired Shares (approximately 74.6% of the outstanding Paired
Shares) issuable upon exchange of all of the units issued to the
Starwood Partners in the aggregate. Such units were acquired in the
Reorganization described in Part I, Item 1 of this Joint Annual Report.
See Notes (3) and (4) under "Certain Beneficial Owners" above.
(8) Includes 161,000 shares that may be acquired upon the exercise of
presently exercisable options 1,500 shares issuable upon exercise of
paired warrants issued by the Trust and the Corporation and 755,439
49
<PAGE> 53
shares issuable upon exchange of units of the Realty Partnership and
the Operating Partnership (see note (7) above). Does not include shares
owned by Mr. Samuels' son (see note (5) above).
Directors and Officers of the Corporation. The following table
sets forth the beneficial ownership of paired shares as of March 27, 1994 by
each Director and each executive officer of the Corporation named in the Summary
Cash Compensation Table included in Item 11 hereof who owns paired shares and by
all Directors and executive officers of the Corporation as a group. Except as
otherwise provided below, each beneficial owner has sole voting and investment
power with respect to all shares beneficially owned.
<TABLE>
<CAPTION>
Name of Number of Shares
Beneficial Owner Beneficially Owned Percent of
---------------- ------------------
Class (1)
----------
<S> <C> <C>
Kevin E. Mallory 25,650 (3) (2)
Bruce M. Ford 4,414 (4) (2)
Earle F. Jones 6,500 (5) (2)
Graeme W. Henderson 47,841 (6) (2)
Barry M. Sternlicht 1,055,039 (7) 8.0%
All Directors and officers as a group 1,139,444 (8) 8.6%(2)
- -------------------------
(1) Based on the number of shares outstanding on March 27, 1994, including
the exchange of units as described in note (7) below.
(2) Less than 1%.
(3) Includes 25,000 shares subject to presently exercisable options.
(4) Includes 2,422 shares issuable upon exercise of paired warrants issued
by the Trust and the Corporation, 172 of which are owned by Mr. Ford's
wife.
(5) Includes 500 shares issuable upon exercise of paired warrants issued by
the Trust and the Corporation.
(6) Includes 300 shares owned in a Keogh Plan and 16,000 shares issuable
upon exercise of paired warrants issued by the Trust and the
Corporation.
(7) Mr. Sternlicht and SOFI II have the power to vote and dispose of
299,600 Paired Shares held by SOFI II. The remaining shares reported
above are issuable upon exchange of units of the Realty Partnership and
the Operating Partnership. Because of the 8.0% Paired Share ownership
limit, the shares reported above do not include the remainder of the
35,661,254 Paired Shares (approximately 74.6% of the outstanding Paired
Shares) issuable upon exchange of all of the units issued to the
Starwood Partners in the aggregate. Such units were acquired in the
Reorganization described in Part I, Item 1 of this Joint Annual Report.
See Notes (3) and (4) under "Certain Beneficial Owners" above.
(8) Includes 25,000 shares that may be acquired upon the exercise of
presently exercisable options, 2,422 shares issuable upon exercise of
paired warrants issued by the Trust and the Corporation and 755,439
shares issuable upon exchange of units of the Realty Partnership and
the Operating Partnership (see note (7) above).
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Management Obligations of Western Host
General. Prior to December 31, 1992, Western Host, Inc., a
wholly owned subsidiary of the Corporation, managed six hotels owned by limited
partnerships of which Messrs. John F. Rothman and Ronald A. Young are general
partners, one hotel owned by a general
50
<PAGE> 54
partnership whose sole partners are Messrs. Young and Rothman, and one hotel
owned by a partnership of which Western Host is the sole general partner and
whose limited partners are affiliates of Messrs. Young and Rothman. Mr. Rothman
was a Trustee of the Trust and a Director of the Corporation, and the Trust's
President and Chief Executive Officer, from September 1986 until March 1990; Mr.
Young was the Corporation's President and Chief Executive Officer, from December
1986 through December 1992, a Director of the Corporation from December 1986
until February 1994 and a Trustee of the Trust from June 1988 until February
1994.
For its services as manager of these eight hotels described
above (the "Western Host Hotels"), Western Host in each case received a
management fee that generally was based upon the gross revenues, cash flows
and/or operating profits of the hotel or the partnership that owned that
property. For supervisory services rendered by Western Host in connection with
any refurbishment or remodeling program or any construction of additional hotel
guest rooms or other facilities at a Western Host Hotel, Western Host received a
supervisory fee equal to 5% of the direct cost of those refurbishments,
remodeling or construction. Western Host also acted as the purchasing agent with
respect to certain furniture, fixtures and equipment and certain operating
supplies required by a Western Host Hotel. To the extent these services were
rendered other than in connection with a refurbishment, remodeling and/or
construction program for which Western Host was entitled to a supervisory fee,
Western Host was entitled to charge a fee ranging from 5% to 10% of the actual
cost of the items purchased as the estimated cost incurred by Western Host in
providing those services.
In lieu of the partnerships that owned the Western Host Hotels
(the "Western Host Partnerships") employing full-time bookkeepers at the
partnership's respective properties, Western Host provided bookkeeping services
and received a bookkeeping service fee. The fee was computed by adding together
all direct labor costs incurred by Western Host in providing those services to
all hotels that Western Host manages and allocating to each Western Host Hotel a
pro rata portion of those costs, based on the number of rooms in that hotel as
compared with the number of rooms in all hotels managed by Western Host.
Since January 1, 1993, Western Host's day-to-day management
obligations with respect to the Western Host Hotels have been performed on
Western Host's behalf by Westland Hotel Corporation ("Westland"), a company
owned by Mr. Young and of which he is president and chief executive officer.
Management Fees Paid to Western Host; Certain Borrowings.
Western Host is one of the general partners, together with Messrs. Young and
Rothman, of Western Host Pasadena Partners (which owns a hotel in Pasadena,
California) and Western Host San Francisco Partners (which owns a hotel in San
Francisco, California). Western Host was the sole general partner of Western
Host Santa Maria Partners, which prior to July 1993 owned a hotel in Santa
Maria, California.
Pursuant to the applicable partnership agreement, Western Host
was entitled to receive for its management services (i) with respect to the
Pasadena property, a minimum management fee equal to 5% of the hotel's gross
receipts, plus an incentive management fee equal to 30% of the hotel's cash
flow, subordinated to an annual preferred return to limited partners of
51
<PAGE> 55
that partnership, and (ii) with respect to the San Francisco property, a
management fee equal to all distributions made to limited partners of Western
Host San Francisco Partners in excess of a specified preferred annual return on
investment to those limited partners. As a general partner of these Western Host
Partnerships, Western Host is contingently liable for the liabilities and
obligations of each partnership and its hotel.
Western Host was responsible, pursuant to management agreements, for
the management of one hotel located in Stockton, California owned by a general
partnership of which Messrs. Young and Rothman are the general partners and four
hotels owned by limited Partnerships of which Messrs Young and Rothman are the
general partners. These partnerships are Western Host Bakersfield Partners
(which owns a hotel in Bakersfield, California), Western Host Fresno Partners
(which owns a hotel in Fresno, California), Western Host Monterey Partners
(which owns a hotel in Monterey, California), and Western Host Properties (which
owns a hotel in Modesto, California).
For its services as manager of the property in Stockton,
Western Host was entitled to a management fee equal to 4% of the hotel's gross
receipts; for its services as manager of the properties in Bakersfield, Fresno,
Monterey, and Modesto, Western Host is entitled to a minimum management fee
equal to 4% of the hotel's revenues, plus an incentive management fee based on
the profits and cash flows of each hotel.
For the year ended December 31, 1993, all of the management
fees and other compensation payable to Western Host by the Western Host
Partnerships was collected by Westland on Western Host's behalf. For Westland's
services in managing the day-to-day operations of the Western Host Hotels,
Westland is entitled to retain from the amounts paid by the Western Host
partnerships a submanagement fee equal to 3% of each Western Host Hotel's
operating revenues.
For the year ended December 31, 1993, management fees and
other compensation paid or payable to Western Host by the Western Host
Partnerships and/or Westland after payment of Westland's submanagement fee
totaled $308,000. At December 31, 1993, $242,000 of such compensation remained
outstanding and had not been received. In connection with the settlement of
litigation, $120,000 was paid in full settlement of the $242,000 amount.
As of December 31, 1993, the Western Host Partnerships and/or
Westland owed to Western Host and the Corporation, costs of refurbishments and
amounts advanced for the expenses of the managed Western Host hotels totaling
$100,000, which was included in Inventories, prepaid expenses and other assets
at December 31, 1993.
Restrictions on Competition; Term of Management Arrangements.
The management agreements for the hotels located in Modesto and Monterey provide
that Western Host may not own or manage another hotel within a 25-mile radius of
each hotel. Similar provisions (with a five-mile radius) are contained in the
management agreements for the hotels in Fresno and Bakersfield and in the
partnership agreement pursuant to which Western Host manages the Pasadena
property.
52
<PAGE> 56
Each of Western Host's management agreements with a Western
Host Partnership (other than the management agreement for the Stockton hotel)
originally provided for the right of that partnership to terminate the agreement
at any time on 60 days' prior notice. The management agreement for the hotel in
Stockton states that such agreement is month-to-month and may be terminated by
either Western Host or Messrs. Rothman and Young at any time.
Western Host had the right and obligation to manage the hotels
owned by each of Western Host San Francisco Partners and Western Host Pasadena
Partners as long as Western Host remains a general partner of that Partnership.
However, the partnership agreement for Western Host San Francisco Partners
provides that certain transfers of voting securities of Western Host will
terminate Western Host's right to manage the hotel owned by that partnership and
to receive future management fees unless, either prior or subsequent to the
transfer, a majority-in-interest of the limited partners of the partnership
consent to the transfer. Although the Corporation's December 1986 acquisition of
Western Host may have constituted such a transfer, the consent of the limited
partners of Western Host San Francisco Partners with respect to that transfer
was not solicited.
Each of the management agreements between Western Host and
Westland could be canceled by Western Host at any time upon 30 days' notice.
In connection with the settlement of shareholder litigation
(see Item 3 - "Legal Proceeding"), Messrs. Rothman and Young caused each of the
Western Host Partnerships (other than Western Host Santa Maria Partners) to
terminate Western Host's management obligations with respect to that
partnership's hotel, indemnified the Corporation and Western Host against all
claims that might be made against Western Host in connection with its status as
a general partner of Western Host Santa Maria Partners, Western Host Pasadena
Partners and Western Host San Francisco Partners or in connection with any fact
or circumstance occurring since January 1, 1993 with respect to any of the
Western Host Hotels, and delivered to the Corporation an irrevocable letter of
credit in the amount of $800,000. If final settlement of the shareholder
litigation is achieved within one year from the date the letter of credit was
delivered to the Corporation, Western Host will agree to accept the termination
of its management obligations with respect to the Western Host Hotels and will
be entitled to draw on the letter of credit. If final settlement of the
shareholder litigation is not consummated within the one-year period the letter
of credit would be returned to Messrs. Rothman and Young, and the Corporation
and Western Host would be free to pursue all claims, if any, they might have
against Messrs Rothman and Young and the Western Host Partnerships in connection
with the termination of Western Host's management obligations. In addition,
$120,000 of the management fees and all costs and amounts advanced to the
partnerships which were payable to Western Host were paid in full settlement of
such amounts due at December 31, 1993.
Other Relationships
Sherwin L. Samuels, the General Counsel and Secretary of the
Trust, is a partner through a professional corporation of the law firm of Sidley
& Austin. Sidley & Austin provides legal services to the Trust, the Corporation
and Western Host.
53
<PAGE> 57
As part of the consideration to Starwood Capital in
connection with the Reorganization, the Partnerships agreed to pay an amount to
Starwood Capital only if the Trust and the Corporation consummated a public
offering of Paired Shares prior to June 30, 1996, which offering results in the
receipt by the Trust and the Corporation of gross proceeds of not less than
$150 million. In connection with the Offering consummated on July 6, 1995,
Starwood Lodging paid to Starwood Capital approximately $3.7 million. Such
payment was made from proceeds of the Offering and was treated as a public
offering cost.
On March 24, 1995, the Realty Partnership and the Trust
entered into an Amended and Restated Credit Agreement (the "New Credit
Agreement") pursuant to which the Realty Partnership borrowed approximately
$132 million (the "Loan") which was used primarily to refinance all
outstanding Senior Debt (after the exchange by a Starwood Partner of
$12 million of Senior Debt for units of the Realty Partnership and the
Operating Partnership and approximately $27 million of first mortgage debt).
In connection with the refinancing, the Realty Partnership paid $514,000 to
one of the Senior Lenders and a portion of the lender warrants issued in
connection with the prior Credit Agreement (the "Lender Warrants") were
canceled. In connection with the New Credit Agreement, the remaining Lender
Warrants could be canceled upon the payment to a Starwood Partner of a
$786,000 cancellation fee. Effective March 31, 1995 the Realty Partnership
issued an unsecured note payable to the Starwood Partner in the amount of
$786,000 and the remaining Lender Warrants were canceled. The transactions
relating to the cancellation of Lender Warrants were recorded as a reduction
to paid-in capital.
For information with respect to the Share Purchase
Agreements of Messrs. Henderson, Samuels, Jones and Ford see "Share
Purchase Agreements" contained in Item 11 of this Joint Annual Report.
For information with respect to the employment agreements of
Messrs. Lapin, Mooney and Mallory see "Employment Agreements with Executive
Officers" contained in Item 11 of this Joint Annual Report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed.
Financial Statements and Financial Statement Schedules
The financial statements and financial statements schedules
listed in the Index to Financial Statements and Financial Statements Schedules
following the signature pages hereof are filed as part of this Joint Annual
Report.
<TABLE>
<CAPTION>
Exhibits
--------
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
2.1 Formation Agreement dated as of November 11, 1994 among the
Trust, the Corporation, Starwood Capital and the Starwood
Partners (incorporated by reference to Exhibit 2 to the
Trust's and the Corporation's Joint Current Report on Form 8-K
dated November 16, 1994).(1)
3.1 Amended and Restated Declaration of Trust of the Trust dated
June 6, 1988, as amended (incorporated by reference to Exhibit
3A to the Trust's and the Corporation's Joint Current Report
on Form 8-K dated January 31, 1995)
3.2 Amendment and Restatement of Articles of Incorporation of the
Corporation (incorporated by reference to Exhibit 3B to the
Trust's and the Corporation's Joint Current Report on Form 8-K
dated January 31, 1995)
3.3 Trustees' Regulations of the Trust, as amended.
3.4 By-laws of the Corporation, as amended.
</TABLE>
(1) The Securities and Exchange Commission file numbers of all filings made
pursuant to the Securities Act of 1934, as amended, and referenced
herein are: 1-6828 (Starwood Lodging Trust) and 1-7959 (Starwood Lodging
Corporation).
54
<PAGE> 58
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
4.1 Pairing Agreement dated June 25, 1986, between the Trust and
the Corporation, as amended.
4.2 Form of Warrant Agreement dated as of September 16, 1986,
between the Trust and City National Bank ("CNB") (incorporated
by reference to Exhibit 4.3 to the Trust's and the
Corporation's Registration Statement on Form S-4 (the "S-4
Registration Statement") filed with the Securities and
Exchange Commission (the "SEC") on August 1, 1986
(Registration No. 33-7694)).
4.3 Form of Warrant Agreement dated as of September 16, 1986,
between the Corporation and CNB (incorporated by reference to
Exhibit 4.3A to the S-4 Registration Statement).
4.4 Form of Warrant Agreement dated as of January 28, 1993, among
the Trust and the Corporation, on the one hand, and John
Hancock Mutual Life Insurance Company, John Hancock Variable
Life Insurance Company, Connecticut Mutual Life Insurance
Company, The First National Bank of Boston and Wells Fargo
Bank, N.A. (collectively the "Lenders"), on the other hand
(Exhibit N to the Credit Agreement listed as Exhibit 10.23
below) (incorporated by reference to Exhibit 10.33 to the
Trust's and the Corporation's Joint Annual Report on Form 10-K
for the year ended December 31, 1992 (the "1992 Form 10-K")).
4.5 First Amendment to Warrant Agreement dated as of February 28,
1994, among the Trust, the Corporation and the Lenders
(incorporated by reference to Exhibit 4.5 to the Trust's
and the Corporation's Joint Annual Report on Form 10-K for
the year ended December 31, 1993 (the "1993 Form 10-K")).
10.1 Incentive and Non-Qualified Share Option Plan (1986) of the
Trust (incorporated by reference to Exhibit 10.8 to the Trust
and the Corporation's Joint Annual Report on Form 10-K for the
year ended August 31, 1986 (the "1986 Form 10-K")).(2)
10.2 Corporation Stock Non-Qualified Stock Option Plan (1986) of
the Trust (incorporated by reference to Exhibit 10.9 to the
1986 Form 10-K).(2)
10.3 Stock Option Plan (1986) of the Corporation (incorporated by
reference to Exhibit 10.10 to the 1986 Form 10-K).(2)
10.4 Trust Shares Option Plan (1986) of the Corporation
(incorporated by reference to Exhibit 10.11 to the 1986 Form
10-K).(2)
</TABLE>
- -----------------------
(2) Management contract or compensatory plan or arrangement required to be
filed as an exhibit hereto pursuant to Item 14(c) of Form 10-K.
55
<PAGE> 59
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
10.5 Form of Share Purchase and Pledge Agreement and related
Promissory Note entered into pursuant to the Share Purchase
Plan (1987) of the Trust, together with forms of Amendments
Nos. 1 and 2 thereto (incorporated by reference to Exhibit
10.10 to the Trust's and the Corporation's Joint Annual Report
on Form 10-K for the year ended December 31, 1990 (the "1990
Form 10-K")).(2)
10.6 Form(s) of Amendment No. 3 to Share Purchase and Pledge
Agreement(s) and related Promissory Note(s) entered into
pursuant to the Share Purchase Plan (1987) of the Trust
(incorporated by reference to Exhibit 10.11 to the Trust's and
the Corporation's Joint Annual Report on Form 10-K for the
year ended December 31, 1991 (the "1991 Form 10-K")).(2)
10.7 Form of Share Purchase and Pledge Agreement and related
Promissory Note entered into pursuant to the Share Purchase
Plan (1987) of the Corporation, together with forms of
Amendments Nos. 1 and 2 thereto (incorporated by reference to
Exhibit 10.11 to the 1990 Form 10-K.)(2)
10.8 Form of Amendment No. 3 to Share Purchase and Pledge
Agreement(s) and related Promissory Note(s) entered into
pursuant to the Share Purchase Plan (1987) of the Corporation
(incorporated by reference to Exhibit 10.13 to the 1991 Form
10-K).(2)
10.9 Amendment No. 1 to Share Purchase Agreement and Note dated as
of March 25, 1992, between the Corporation and Bruce M. Ford
(incorporated by reference to the Exhibit 10.5 to the 1991
Form 10-K).(2)
10.10 Form of Indemnification Agreement dated as of February 3,
1992, between the Trust and each of Messrs. Ronald A. Young,
John D. Morrissey, Graeme W. Henderson, Sherwin L. Samuels and
Jeffrey C. Lapin (incorporated by reference to Exhibit 10.29
to the 1991 Form 10-K).(2)
10.11 Form of Indemnification Agreement dated as of February 3,
1992, between the Corporation and each of Messrs. Ronald A.
Young, Graeme W. Henderson, Bruce M. Ford, Earle M. Jones and
William H. Ling (incorporated by reference to Exhibit 10.30 to
the 1991 Form 10-K).(2)
10.12 Executive Employment Agreement dated as of January 31, 1995,
between the Trust and Jeffrey C. Lapin.(2)
10.13 Executive Employment Agreement dated as of July 19, 1992,
between the Trust and Michael W. Mooney (incorporated by
reference to Exhibit 10.4 to the Trust's and the Corporation's
Joint Current Report on Form 8-K dated September 25, 1992 (the
"September 1992 Form 8-K")).(2)
</TABLE>
56
<PAGE> 60
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
10.14 First Amendment to executive Employment Agreement dated as of
March 18, 1993, between the Trust and Michael W. Mooney
(incorporated by reference to Exhibit 10.16 to the 1993 Form
10-K).(2)
10.15 Amendment No. 2 to Executive Employment Agreement dated as of
December 15, 1993, between the Trust and Michael W. Mooney
(incorporated by reference to Exhibit 10.17 to the 1993 Form
10-K).(2)
10.16 Executive Employment Agreement dated as of July 19, 1992,
between the Corporation and Kevin E. Mallory (incorporated by
reference to Exhibit 10.5 to the September 1992 Form 8-K).(2)
10.17 First Amendment to executive Employment Agreement dated as of
March 18, 1993, between the Trust and Kevin E. Mallory
(incorporated by reference to Exhibit 10.19 to the 1993 Form
10-K).(2)
10.18 Amendment No. 2 to Executive Employment Agreement dated as of
December 15, 1993, between the Trust and Kevin E. Mallory
(incorporated by reference to Exhibit 10.20 to the 1993 Form
10-K).(2)
10.19 Form of Amended and Restated Lease Agreement entered into as
of January 1, 1993, between the Trust as Lessor and the
Corporation (or a subsidiary) as Lessee (incorporated by
reference to Exhibit 10.19 to the 1992 Form 10-K).
10.20 Exchange Rights Agreement dated as of January 1, 1995 among
the Trust, the Corporation, the Realty Partnership, the
Operating Partnership and the Starwood Partners (incorporated
by reference to Exhibit 2B to the Trust's and the
Corporation's Joint Current Report on Form 8-K dated January
31, 1995).
10.21 Registration Rights Agreement dated as of January 1, 1995
among the Trust, the Corporation and Starwood Capital
(incorporated by reference to Exhibit 2C to the Trust's and
the Corporation's Joint Current Report on Form 8-K dated
January 31, 1995).
10.22 Limited Partnership Agreement for the Realty Partnership among
the Trust and the Starwood Partners dated as of December 15,
1994 (incorporated by reference to Exhibit 2D to the Trust's
and the Corporation's Joint Current Report on Form 8-K dated
January 31, 1995).
10.23 Limited Partnership Agreement for the Operating Partnership
among the Corporation and the Starwood Partners dated as of
December 15, 1994 (incorporated by reference to Exhibit 2E to
the Trust's and the Corporation's Joint Current Report on Form
8-K dated January 31, 1995).
</TABLE>
57
<PAGE> 61
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
10.24 Amended and Restated Credit Agreement dated as of March 24,
1995 among the Trust and the Realty Partnership on the one
hand, and Bankers Trust Company as successor Collateral Agent
to Wells Fargo Bank, National Association and Merrill Lynch
Mortgage Capital, Inc., as assignee of John Hancock Mutual
Life Insurance Company, John Hancock Variable Life Insurance
Company, Connecticut Mutual Life Insurance Company, The First
National Bank of Boston and Wells Fargo Bank, National
Association.
21. Subsidiaries of the Corporation.
Hotel Investors of Arizona, Inc.
Hotel Investors of Nebraska, Inc.
Hotel Investors of Michigan, Inc.
Hotel Investors of Missouri, Inc.
Hotel Investors Corporation of Nevada
Hotel Investors of Virginia, Inc.
Columbus Operators, Inc.
Lyntex Properties, Inc.
Western Host, Inc.
23. Consent of Independent Accountants.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
During the fourth quarter of 1994, the Trust and the
Corporation filed a Joint Current Report on Form 8-K dated
November 16, 1994 reporting the completion of definitive
agreements providing for the Reorganization.
</TABLE>
58
<PAGE> 62
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
STARWOOD LODGING TRUST
(Registrant)
Date: March 28, 1995 By: /s/ Jeffrey C. Lapin
----------------------
Jeffrey C. Lapin, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jeffrey C. Lapin President, Chief March 28, 1995
- ---------------------------- Operating Officer
and Trustee
(Principal Executive Officer)
Jeffrey C. Lapin
/s/ Michael W. Mooney Vice President and March 28, 1995
- ---------------------------- Chief Financial Officer
(Principal Financial
and Accounting Officer)
Michael W. Mooney
/s/ Jonathan Eilian Trustee March 28, 1995
- ----------------------------
Jonathan Eilian
/s/ Madison F. Grose Trustee March 28, 1995
- ----------------------------
Madison F. Grose
/s/ Earle F. Jones Trustee March 28, 1995
- ----------------------------
Earle F. Jones
/s/ Barry S. Sternlicht Trustee March 28, 1995
- ----------------------------
Barry S. Sternlicht
</TABLE>
59
<PAGE> 63
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
STARWOOD LODGING CORPORATION
(Registrant)
Date: March 28, 1995 By: /s/ Kevin E. Mallory
----------------------
Kevin E. Mallory, Executive Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Kevin E. Mallory Executive Vice President March 28, 1995
- ---------------------------- (Principal Executive Officer)
Kevin E. Mallory
/s/ Kenneth J. Biehl Vice President March 28, 1995
- ---------------------------- (Principal Accounting Officer)
Kenneth J. Biehl
/s/Earle F. Jones Director March 28, 1995
- ----------------------------
Earle F. Jones
/s/ Bruce M. Ford Director March 28, 1995
- ----------------------------
Bruce M. Ford
/s/Graeme W. Henderson Director March 28, 1995
- ----------------------------
Graeme W. Henderson
</TABLE>
60
<PAGE> 64
STARWOOD LODGING TRUST
STARWOOD LODGING CORPORATION
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
AS OF DECEMBER 31, 1994 AND 1993
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1994
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT ................................................................................ F-1
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION:
Combined Balance Sheets ............................................................................ F-2
Combined Statements of Operations .................................................................. F-3
Combined Statements of Cash Flows .................................................................. F-4
Combined Statements of Shareholders' Equity ........................................................ F-5
STARWOOD LODGING TRUST:
Balance Sheets ..................................................................................... F-6
Statements of Operations ........................................................................... F-7
Statements of Cash Flows ........................................................................... F-8
Statements of Shareholders' Equity ................................................................. F-9
STARWOOD LODGING CORPORATION:
Balance Sheets .................................................................................... F-10
Statements of Operations .......................................................................... F-11
Statements of Cash Flows .......................................................................... F-12
Statements of Shareholders' Deficit ............................................................... F-13
NOTES TO FINANCIAL STATEMENTS .............................................................................. F-14
SCHEDULES:
Schedule III- Real Estate and Accumulated Depreciation ............................................ F-35
Schedule -IV Mortgage Loans on Real Estate ........................................................ F-39
</TABLE>
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
To the Boards of Trustees and Directors and Shareholders of
Starwood Lodging Trust and Starwood Lodging Corporation:
We have audited the accompanying separate and combined financial statements of
Starwood Lodging Trust (a Maryland real estate investment trust) (the "Trust")
and Starwood Lodging Corporation (a Maryland corporation) and its subsidiaries
(the "Corporation"), collectively the "Companies", as of December 31, 1994 and
1993, and for each of the three years in the period ended December 31, 1994,
listed in the foregoing index to financial statements and financial statement
schedules. Our audits also included the financial statement schedules listed in
the foregoing index to financial statements and financial statement schedules.
These financial statements and financial statement schedules are the
responsibility of the Trust's, the Corporation's and the Companies' managements.
Our responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such separate and combined financial statements present fairly,
in all material respects, the financial position of the Companies and the
financial position of the Trust and the Corporation at December 31, 1994 and
1993, and the respective results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California
March 24, 1995
F-1
<PAGE> 66
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
------------- -------------
ASSETS
<S> <C> <C>
Hotel assets held for sale - net ............................... $ 8,585,000 $ 16,631,000
Hotel assets - net ............................................. 142,600,000 150,618,000
------------- -------------
151,185,000 167,249,000
Mortgage notes receivable - net ................................ 14,049,000 11,642,000
Investment in joint venture hotel properties ................... 262,000 281,000
------------- -------------
Total real estate investments ............................ 165,496,000 179,172,000
Cash and cash equivalents ...................................... 5,065,000 5,652,000
Accounts receivable ............................................ 4,040,000 4,360,000
Notes receivable - net ......................................... 1,627,000 1,717,000
Inventories, prepaid expenses and other assets ................. 7,727,000 4,451,000
------------- -------------
$ 183,955,000 $ 195,352,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured notes payable and revolving line of credit.............. $ 113,896,000 $ 128,802,000
Mortgage and other notes payable ............................... 46,586,000 42,084,000
Accounts payable and other liabilities ......................... 14,765,000 11,140,000
------------- -------------
175,247,000 182,026,000
------------- -------------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest,
$1.00 par value; authorized
30,000,000 shares; outstanding
12,132,948 shares .......................................... 12,133,000 12,133,000
Corporation common stock, $0.10 par
value; authorized 30,000,000 shares;
outstanding 12,132,948 shares .............................. 1,213,000 1,213,000
Additional paid-in capital ..................................... 210,251,000 210,497,000
Share purchase notes ........................................... (291,000)
Accumulated deficit ............................................ (214,889,000) (210,226,000)
------------- -------------
8,708,000 13,326,000
------------- -------------
$ 183,955,000 $ 195,352,000
============= =============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 67
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE
Hotel ......................................................... $ 82,668,000 $ 86,903,000 $ 88,812,000
Gaming ........................................................ 27,981,000 27,505,000 26,150,000
Interest from mortgage and other notes ........................ 1,554,000 1,412,000 1,348,000
Management fees and other income .............................. 411,000 475,000 1,186,000
Rents from leased hotel properties
and income from joint ventures ............................. 927,000 839,000 947,000
Gain (loss) on sales of hotel assets .......................... 456,000 21,000 (787,000)
------------ ------------ ------------
113,997,000 117,155,000 117,656,000
------------ ------------ ------------
EXPENSES
Hotel operations .............................................. 60,829,000 68,132,000 68,620,000
Gaming operations ............................................. 24,454,000 24,055,000 23,699,000
Interest ...................................................... 17,606,000 15,187,000 14,208,000
Depreciation and amortization ................................. 8,161,000 9,232,000 10,196,000
Administrative and operating .................................. 4,203,000 4,729,000 6,177,000
Loan restructuring costs ...................................... 10,892,000
Shareholder litigation ........................................ 2,648,000 483,000 188,000
Provision for losses .......................................... 759,000 2,369,000 3,419,000
------------ ------------ ------------
118,660,000 124,187,000 137,399,000
------------ ------------ ------------
NET LOSS .............. $ (4,663,000) $ (7,032,000) $(19,743,000)
============ ============ ============
NET LOSS PER PAIRED SHARE .............. $ (0.38) $ (0.58) $ (1.63)
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 68
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------
1994 1993 1992
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ......................................................... $ (4,663,000) $(7,032,000) $(19,743,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization .................................. 8,161,000 9,232,000 10,196,000
Deferred interest .............................................. 3,610,000 3,287,000
(Gain) loss on sales of hotel assets ........................... (456,000) (21,000) 787,000
Provision for investment losses ................................ 759,000 2,369,000 3,419,000
Changes in assets and liabilities:
Accounts receivable, inventories
and prepaid expenses ......................................... (86,000) 2,118,000 14,000
Accounts payable and other liabilities ......................... 1,568,000 (4,421,000) 10,017,000
------------ ----------- ------------
Net cash provided by (used in)
operating activities ...................................... 8,893,000 5,532,000 4,690,000
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets ........................................ (2,941,000) (6,577,000) (2,990,000)
Net proceeds from sales of assets ................................ 12,536,000 6,130,000 488,000
Increase in notes receivable ..................................... (6,270,000) (1,985,000)
Principal received on notes receivable ........................... 2,451,000 409,000 1,006,000
Reorganization costs ............................................. (1,287,000)
Other intangible assets .......................................... (47,000) (18,000)
Acquisition of minority interest/hotels .......................... (1,575,000)
------------ ----------- ------------
Net cash provided by (used in)
investing activities ...................................... 4,489,000 (3,645,000) (1,514,000)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and
other notes payable ............................................ (1,498,000) (1,666,000) (1,146,000)
Borrowings under mortgage and other notes ........................ 6,000,000 632,000
Principal payments on secured notes payable and
revolving line of credit ....................................... (18,516,000) (5,695,000)
Payments to minority shareholders ................................ (28,000) (111,000)
Principal received on share purchase notes ....................... 45,000 5,000 2,000
------------ ----------- ------------
Net cash provided by (used in) financing
activities ................................................ (13,969,000) (6,752,000) (1,255,000)
------------ ----------- ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ........................................... (587,000) (4,865,000) 1,921,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR ........................................... 5,652,000 10,517,000 8,596,000
------------ ----------- ------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR ................................................. $ 5,065,000 $ 5,652,000 $ 10,517,000
============ =========== ============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 69
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Trust Shares
of Corporation Additional Share Total
Beneficial Common Paid - in Purchase Accumulated Shareholders'
Interest Stock Capital Notes Deficit Equity
----------- ---------- ------------ --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1992 ............. $12,133,000 $1,213,000 $210,673,000 $(485,000) $(183,451,000) $ 40,083,000
Principal payments and reductions
of share purchase notes ...... 11,000 11,000
Net loss ........................ (19,743,000) (19,743,000)
----------- ---------- ------------ --------- ------------- ------------
Balance December 31, 1992 ........... 12,133,000 1,213,000 210,673,000 (474,000) (203,194,000) 20,351,000
Principal payments and reductions
of share purchase notes ....... (176,000) 183,000 7,000
Net loss ........................ (7,032,000) (7,032,000)
----------- ---------- ------------ --------- ------------- ------------
Balance December 31, 1993 ........... 12,133,000 1,213,000 210,497,000 (291,000) (210,226,000) 13,326,000
Principal payments and reductions
of share purchase notes ...... (246,000) 291,000 45,000
Net loss ........................ (4,663,000) (4,663,000)
----------- ---------- ------------ --------- ------------- ------------
Balance December 31, 1994 ........... $12,133,000 $1,213,000 $210,251,000 $ 0 $(214,889,000) $ 8,708,000
=========== ========== ============ ========= ============= ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 70
STARWOOD LODGING TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
------------- -------------
<S> <C> <C>
ASSETS
Hotel assets held for sale - net ........... $ 8,281,000 $ 15,699,000
Hotel assets - net ......................... 108,428,000 114,219,000
------------- -------------
116,709,000 129,918,000
Mortgage notes receivable - net ............ 14,049,000 11,642,000
Investment in joint venture hotel properties 240,000 276,000
------------- -------------
Total real estate investments ........ 130,998,000 141,836,000
Cash and cash equivalents .................. 255,000 918,000
Accounts receivable ........................ 698,000 1,011,000
Notes receivable - Corporation ............. 26,916,000 87,486,000
Notes receivable - net ..................... 1,004,000 1,025,000
Prepaid expenses and other assets .......... 2,374,000 569,000
------------- -------------
$ 162,245,000 $ 232,845,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured notes payable and revolving line of
credit ..................................... $ 113,896,000 $ 128,802,000
Mortgage and other notes payable ........... 32,838,000 27,724,000
Accounts payable and other liabilities ..... 5,061,000 4,114,000
------------- -------------
151,795,000 160,640,000
------------- -------------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest,
$1.00 par value; authorized
30,000,000 shares; outstanding
12,132,948 shares ....................... 12,133,000 12,133,000
Additional paid-in capital ................. 146,059,000 204,640,000
Share purchase notes ....................... (291,000)
Accumulated deficit ........................ (147,742,000) (144,277,000)
------------- -------------
10,450,000 72,205,000
------------- -------------
$ 162,245,000 $ 232,845,000
============= =============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 71
STARWOOD LODGING TRUST
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE
Rents from Corporation ........................ $16,906,000 $16,481,000 $21,177,000
Interest from Corporation ..................... 1,730,000 1,534,000 4,123,000
Interest from mortgage and other notes ........ 1,512,000 1,288,000 1,101,000
Rents from other leased hotel properties
and income from joint ventures ............. 927,000 839,000 947,000
Other income .................................. 164,000 253,000 227,000
Gain (loss) on sales of hotel assets .......... 432,000 (53,000) (791,000)
----------- ----------- -----------
21,671,000 20,342,000 26,784,000
----------- ----------- -----------
EXPENSES
Interest ...................................... 16,265,000 14,020,000 12,959,000
Depreciation and amortization ................. 5,205,000 5,630,000 6,794,000
Administrative and operating .................. 1,583,000 1,948,000 2,350,000
Shareholder litigation ........................ 1,324,000 264,000 188,000
Loan restructuring costs ...................... 10,892,000
Provision for losses .......................... 759,000 2,369,000 3,419,000
----------- ----------- -----------
25,136,000 24,231,000 36,602,000
----------- ----------- -----------
NET LOSS $(3,465,000) $(3,889,000) $(9,818,000)
=========== =========== ===========
NET LOSS PER SHARE $ (0.28) $ (0.32) $ (0.81)
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 72
STARWOOD LODGING TRUST
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ........................................ $ (3,465,000) $(3,889,000) $(9,818,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization ................. 5,205,000 5,630,000 6,794,000
Deferred interest ............................. 3,610,000 2,243,000
(Gain)/loss on sales of hotel assets .......... (432,000) 53,000 791,000
Provision for losses .......................... 759,000 2,369,000 3,419,000
Changes in operating assets and liabilities:
Rent and interest receivable - Corporation .... (1,730,000) (1,519,000) (8,238,000)
Accounts receivable and prepaid expenses ...... (54,000) 1,037,000 115,000
Accounts payable and other liabilities ........ 562,000 (2,788,000) 9,710,000
------------ ----------- -----------
Net cash provided by (used in)
operating activities ..................... 4,455,000 3,136,000 2,773,000
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets ....................... (2,270,000) (1,372,000) (1,700,000)
Net proceeds from sales of assets ............... 11,719,000 5,360,000 189,000
Increase in mortgage notes receivable ........... (6,270,000) (1,985,000)
Principal received on mortgage
and other notes receivable .................... 2,382,000 353,000 957,000
Reorganization costs ............................ (1,287,000)
Other intangible assets ......................... (18,000)
Net changes in notes receivable - Corporation ... 3,965,000 1,693,000 411,000
Acquisition of minority interest ................ (1,575,000)
Net cash provided by (used in)
investing activities ..................... 8,239,000 2,474,000 (161,000)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and
other notes payable ........................... (886,000) (1,594,000) (754,000)
Principal payments on secured notes payable and
revolving line of credit ...................... (18,516,000) (5,695,000)
Borrowings under mortgage and other notes payable 6,000,000
Payments to minority shareholders ............... (18,000) (97,000)
Principal received on share purchase notes ...... 45,000 1,000
------------ ----------- -----------
Net cash provided by (used in)
financing activities ..................... (13,357,000) (7,307,000) (850,000)
------------ ----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS .......................... (663,000) (1,697,000) 1,762,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR .......................... 918,000 2,615,000 853,000
------------ ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR ................................ $ 255,000 $ 918,000 $ 2,615,000
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE> 73
STARWOOD LODGING TRUST
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Shares of Additional Share Total
Beneficial Paid - in Purchase Accumulated Shareholders'
Interest Capital Notes Deficit Equity
----------- ------------ --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1992 ........................ $12,133,000 $204,816,000 $(191,000) $(130,570,000) $86,188,000
Principal payments and reductions
of share purchase notes ................. 1,000 1,000
Net loss ...................................... (9,818,000) (9,818,000)
----------- ------------ --------- ------------- -----------
Balance December 31, 1992 ...................... 12,133,000 204,816,000 (190,000) (140,388,000) 76,371,000
Principal payments, reductions and
transfer of share purchase notes
from the Corporation-net ................. (176,000) (101,000) (277,000)
Net loss ...................................... (3,889,000) (3,889,000)
----------- ------------ --------- ------------- -----------
Balance December 31, 1993 ...................... 12,133,000 204,640,000 (291,000) (144,277,000) 72,205,000
Forgiveness of intercompany debt ............ (58,335,000) (58,335,000)
Principal payments and reductions
of share purchase notes................... (246,000) 291,000 45,000
Net loss ...................................... (3,465,000) (3,465,000)
----------- ------------ --------- ------------- -----------
Balance December 31, 1994 ...................... $12,133,000 $146,059,000 $ 0 $(147,742,000) $10,450,000
=========== ============ ========= ============= ===========
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE> 74
STARWOOD LODGING CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Hotel assets held for sale - net ............... $ 304,000 $ 932,000
Hotel assets - net ............................. 34,172,000 36,399,000
------------ ------------
34,476,000 37,331,000
Investment in joint venture hotel properties ... 22,000 5,000
------------ ------------
Total real estate investments ............ 34,498,000 37,336,000
Cash and cash equivalents ...................... 4,810,000 4,734,000
Accounts receivable ............................ 3,342,000 3,349,000
Notes receivable ............................... 623,000 692,000
Inventories, prepaid expenses and other assets . 5,353,000 3,882,000
------------ ------------
$ 48,626,000 $ 49,993,000
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES
Mortgage and other notes payable ............... $ 13,748,000 $ 14,360,000
Notes payable - Trust .......................... 26,916,000 87,486,000
Accounts payable and other liabilities ......... 9,704,000 7,026,000
------------ ------------
50,368,000 108,872,000
------------ ------------
Commitments and contingencies
SHAREHOLDERS' DEFICIT
Corporation common stock, $0.10 par
value; authorized 30,000,000 shares;
outstanding 12,132,948 shares ................ 1,213,000 1,213,000
Additional paid-in capital ..................... 64,192,000 5,857,000
Accumulated deficit ............................ (67,147,000) (65,949,000)
------------ ------------
(1,742,000) (58,879,000)
------------ ------------
$ 48,626,000 $ 49,993,000
============ ============
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE> 75
STARWOOD LODGING CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
REVENUE
Hotel .......................................... $ 82,668,000 $ 86,903,000 $ 88,812,000
Gaming ......................................... 27,981,000 27,505,000 26,150,000
Interest from notes receivable ................. 42,000 124,000 247,000
Management fees and other income ............... 247,000 222,000 959,000
Gain (loss) on sales of hotel assets ........... 24,000 74,000 4,000
------------ ------------ ------------
110,962,000 114,828,000 116,172,000
------------ ------------ ------------
EXPENSES
Hotel operations ............................... 60,829,000 68,132,000 68,620,000
Gaming operations .............................. 24,454,000 24,055,000 23,699,000
Rent - Trust ................................... 16,906,000 16,481,000 21,177,000
Interest - Trust ............................... 1,730,000 1,534,000 4,123,000
Interest - other ............................... 1,341,000 1,167,000 1,249,000
Depreciation and amortization .................. 2,956,000 3,602,000 3,402,000
Administrative and operating ................... 2,620,000 2,781,000 3,827,000
Shareholder litigation ......................... 1,324,000 219,000
------------ ------------ ------------
112,160,000 117,971,000 126,097,000
------------ ------------ ------------
NET LOSS $ (1,198,000) $ (3,143,000) $ (9,925,000)
============ ============ ============
NET LOSS PER SHARE $ (0.10) $ (0.26) $ (0.82)
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE> 76
STARWOOD LODGING CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1994 1993 1992
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss .................................... $(1,198,000) $(3,143,000) $(9,925,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization ............. 2,956,000 3,602,000 3,402,000
Deferred interest ......................... 1,044,000
Gain on sales of hotel assets ............. (24,000) (74,000) (4,000)
Changes in operating assets and liabilities:
Accounts receivable, inventories
and prepaid expenses .................... (32,000) 1,081,000 (101,000)
Rent and interest payable - Trust ........ 1,730,000 1,519,000 8,238,000
Accounts payable and other liabilities .... 1,006,000 (1,633,000) 307,000
----------- ----------- -----------
Net cash provided by (used in)
operating activities ................ 4,438,000 2,396,000 1,917,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to hotel assets ................... (671,000) (5,205,000) (1,290,000)
Net proceeds from sales of hotel assets ..... 817,000 770,000 299,000
Increase in other assets .................... (47,000)
Principal received on notes receivable ...... 69,000 56,000 49,000
----------- ----------- -----------
Net cash provided by (used in)
investing activities ................ 215,000 (4,426,000) (942,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in notes payable - Trust ......... (3,965,000) (1,693,000) (411,000)
Principal payments on mortgage and
other notes payable ....................... (612,000) (72,000) (392,000)
Borrowings under mortgage and other notes ... 632,000
Payments to minority shareholders ........... (10,000) (14,000)
Principal received on share purchase notes .. 5,000 1,000
----------- ----------- -----------
Net cash provided by (used in)
financing activities ................ (4,577,000) (1,138,000) (816,000)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ...................... 76,000 (3,168,000) 159,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR ...................... 4,734,000 7,902,000 7,743,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR ............................ $ 4,810,000 $ 4,734,000 $ 7,902,000
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE> 77
STARWOOD LODGING CORPORATION
STATEMENTS OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Additional Share Total
Common Paid - in Purchase Accumulated Shareholders'
Stock Capital Notes Deficit Deficit
---------- ----------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1992 $1,213,000 $ 5,857,000 $(17,000) $(52,881,000) $(45,828,000)
Principal payments and reductions
of share purchase notes .................. 1,000 1,000
Net loss .................................... (9,925,000) (9,925,000)
---------- ----------- -------- ------------ ------------
Balance December 31, 1992 ...................... 1,213,000 5,857,000 (16,000) (62,806,000) (55,752,000)
Principal payments, reductions and
transfer of share purchase notes
to the Trust .............................. 16,000 16,000
Net loss .................................... (3,143,000) (3,143,000)
---------- ----------- -------- ------------ ------------
Balance December 31, 1993 ...................... 1,213,000 5,857,000 0 (65,949,000) (58,879,000)
Forgiveness of intercompany debt ............ 58,335,000 58,335,000
Net loss .................................... (1,198,000) (1,198,000)
---------- ----------- -------- ------------ ------------
Balance December 31, 1994 ...................... $1,213,000 $64,192,000 $ 0 $(67,147,000) $ (1,742,000)
========== =========== ======== ============ ============
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE> 78
STARWOOD LODGING TRUST
AND STARWOOD LODGING CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies.
General
The accompanying financial statements include the accounts of Starwood
Lodging Trust (the "Trust"), formerly Hotel Investors Trust, and Starwood
Lodging Corporation and its subsidiaries (the "Corporation"), formerly Hotel
Investors Corporation. The Trust was formed as a real estate investment trust
("REIT") under the Internal Revenue Code in 1969. In 1980, the Trust formed the
Corporation and made a distribution to the Trust's shareholders of one share of
common stock of the Corporation for each share of beneficial interest of the
Trust. The shares of the Trust and the shares of the Corporation are paired on a
one-for-one basis, and can only be transferred in units ("Paired Shares")
consisting of the same number of shares of the Trust and of the Corporation.
The combined financial statements include the accounts of the Trust and
the Corporation (the "Companies"). All material intercompany balances and
transactions have been eliminated in the combined and separate consolidated
financial statements. The intercompany balances and transactions which have been
eliminated in arriving at the combined balance sheets and combined statements of
operations include the elimination of notes receivable from the Corporation
recorded on the Trust's balance sheets, and the related notes payable to the
Trust recorded on the Corporation's balance sheets. Rent and interest income
recorded on the Trust's statements of operations are eliminated against the
related rent and interest expense on the Corporation's statements of operations.
The Companies own and operate hotels located throughout the United
States and two hotel/casinos in Las Vegas, Nevada. The hotels range in size from
90 to 445 rooms and offer services to both business and transient travelers.
Hotel assets
Hotel assets are stated at the lower of cost or the amounts described
below and are depreciated using straight-line and declining-balance methods over
estimated useful lives of five to forty years for buildings and improvements and
three to twelve years for furniture, fixtures and equipment. Amounts allocated
to leasehold interests are amortized using the straight-line method over lease
terms of ten to forty years.
The Trust and the Corporation estimate the fair values of each of their
hotel assets on a quarterly basis. For hotel assets not held for sale, the
expected undiscounted future cash flows of the assets (generally over a
five-year period), on a hotel-by-hotel basis, are compared to the net book
values of the assets. If the expected undiscounted future cash flows are less
than the net book value of the assets, the excess of the net book value over the
estimated fair value is charged to current earnings. When it is the opinion of
management that the fair value of a hotel which has been identified for sale is
less than the net book value of the hotel, a reserve for losses is established.
Fair value is determined based upon discounted cash flows of the properties at
rates (11.0% to 14.5%) deemed reasonable for the type of property and prevailing
market conditions, appraisals and, if appropriate, current estimated net sales
proceeds from pending offers. A gain or loss is recorded to the extent the
amounts ultimately received differ from the adjusted book values of the hotel
assets. Gains on sales of hotel assets are recognized at the time the hotel
assets are sold provided there is reasonable assurance of the collectability of
the sales price and any future activities to be performed by the Companies
relating to the hotel assets sold are insignificant. Losses on sales of hotel
assets are recognized at the time the hotel assets are sold.
F-14
<PAGE> 79
A summary of hotel assets at December 31, 1994 and 1993 is as follows
(in thousands):
<TABLE>
<CAPTION>
Trust Corporation
--------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Land and leasehold
interests in land ...... $ 41,184 $ 47,204 $ 13,796 $ 15,378
Buildings and
improvements ........... 122,300 148,460 22,315 22,545
Furniture, fixtures and
equipment .............. 25,124 28,506 15,630 16,867
Accumulated depreciation
and amortization ....... (48,699) (51,487) (16,877) (14,828)
Reserve for losses ..... (23,200) (42,765) (388) (2,631)
--------- --------- -------- --------
Hotel assets - net . $ 116,709 $ 129,918 $ 34,476 $ 37,331
========= ========= ======== ========
</TABLE>
Mortgage notes receivable
If a loan becomes delinquent or upon the occurrence of other events it
becomes known that the collectability of a specific loan is uncertain, interest
income is no longer accrued and an allowance for loss is established based upon
an analysis of the net realizable value of the underlying property
collateralizing the loan.
Provision for losses
Provision for losses for the years ended December 31, 1994, 1993 and 1992 are as
follows:
<TABLE>
<CAPTION>
Trust 1994 1993 1992
- -------------------------- --------- ----------- -----------
<S> <C> <C> <C>
Hotel assets $ 439,000 $ 2,369,000 $ 3,196,000
Mortgage notes receivable 320,000 223,000
--------- ----------- -----------
$ 759,000 $ 2,369,000 $ 3,419,000
========= =========== ===========
</TABLE>
Statements of cash flows
Cash and cash equivalents are defined as cash on hand and in banks plus
all short-term investments with a maturity, at the date of purchase, of three
months or less.
Interest paid in cash by the Trust in the years ended December 31,
1994, 1993, and 1992 was $12,736,000, $13,205,000 and $12,992,000, respectively.
Interest paid in cash by the Corporation in the years ended December
31, 1994, 1993, and 1992 was $1,342,000, $140,000 and $1,536,000, respectively.
The Corporation deferred interest of $1,730,000, $1,519,000 and
$1,667,000 on its intercompany debt with the Trust in the years ended December
31, 1994, 1993, and 1992 respectively.
In December 1993, the Corporation transferred $278,000 of share
purchase loans to the Trust and reduced notes payable - Trust.
During 1993, $4,032,000 of accrued loan restructuring costs (included
in accounts payable and other liabilities at December 31, 1992) was added to the
loan balance of the secured notes payable and revolving line of credit.
F-15
<PAGE> 80
During 1994, outstanding share purchase notes of $246,000 were canceled
and charged to additional paid-in capital. Paired Shares which secured the
portion of the principal canceled on the original notes were returned to the
Companies.
In December 1994, the Trust forgave $58,335,000 of notes payable to the
Trust by the Corporation and its subsidiaries. Because of the common ownership
of the Trust and the Corporation, the Trust charged the amount of debt forgiven
and the Corporation credited such amount to additional paid-in capital of the
Trust and Corporation, respectively.
Inventories
Inventories are stated at the lower of cost or market with cost
determined on a first-in, first-out basis.
Organization Costs
Organization costs related to the formation of each of the Partnerships
in the amount of $1,672,000 for the Trust and $1,672,000 for the Corporation are
included in inventories, prepaid expenses and other assets and will be amortized
over a five-year period beginning in January 1995. (See Note 12.)
Gaming revenue
Gaming revenue relates to the two hotel/casinos and includes the net
win from gaming activities, as well as room, food, beverage and other revenues,
net of promotional allowances.
Fair value of financial instruments
The following disclosure of estimated fair value was determined by
available market information and appropriate valuation methodologies. However,
considerable judgment is necessary to interpret market data and develop the
related estimates of fair value. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts that could be realized upon
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Cash and cash equivalents, accounts receivable and accounts payable and
other liabilities are carried at amounts which reasonably approximate their fair
value.
Fixed rate mortgage notes receivable of $14,049,000 for the Trust at
December 31, 1994 have a fair value of $13,488,000 as estimated based upon debt
with similar terms and maturities. The carrying value of fixed rate mortgage
notes receivable at December 31, 1993 approximated their fair value as their
interest rates approximated rates available for similar transactions at that
date.
The carrying value of the secured notes payable and revolving line of
credit approximate fair value as the related interest rates are variable.
Fixed rate notes payable with carrying values of $32,838,000 and
$13,748,000 for the Trust and Corporation, respectively, at December 31, 1994
have a fair value of $34,442,000 and $11,648,000 as estimated based on debt with
similar terms and maturities. Fixed rate notes payable with carrying values of
$27,724,000 and $14,360,000 for the Trust and Corporation, respectively, at
December 31, 1993 had a fair value of $28,507,000 and $13,110,000 as estimated
based on debt with similar terms and maturities
Income taxes
The Trust and the Corporation adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes", effective January 1,
1993. This Statement supersedes Accounting Principles
F-16
<PAGE> 81
Board Opinion No. 11 which the Trust and the Corporation had previously applied.
The adoption of SFAS No. 109 did not have a material effect on the financial
statements of the Trust or the Corporation.
The Trust was taxed as a REIT beginning in 1969 through and including
its taxable year ended December 31, 1990. During 1994, the Trust discovered that
it may not have qualified as a REIT in 1991 through 1994 due to its failure to
comply with certain procedural requirements of the Internal Revenue Code. The
Trust requested and received a letter from the Internal Revenue Service
providing that the Trust's election to be taxed as a REIT terminated beginning
with the Trust's taxable year ended December 31, 1991 and permitting the Trust
to re-elect to be taxed as a REIT commencing with its taxable year ending
December 31, 1995. The Trust intends to elect to be taxed as a REIT, commencing
with its taxable year ending December 31, 1995. Because the Trust had net losses
for income tax purposes in 1991 through 1994, the Trust does not owe any federal
income tax for such years.
Components of deferred income taxes as of December 31, 1994 and 1993
are as follows:
<TABLE>
<CAPTION>
1994 1993
--------------------------- ---------------------------
Trust Corporation Trust Corporation
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Deferred income tax assets:
Operating loss carryforwards .......... $ 28,910,000 $ 10,018,000 $ 19,740,000
Losses from investments in partnerships $ 2,133,000 1,659,000
Property and equipment ................ 3,041,000 6,586,000 1,224,000
Other ................................. 476,000 492,000 162,000
------------ ------------ ------------ ------------
Total deferred income tax assets ...... 32,427,000 2,625,000 16,604,000 22,785,000
------------ ------------ ------------ ------------
Valuation allowance ................... (32,427,000) (2,625,000) (16,604,000) (22,785,000)
------------ ------------ ------------ ------------
Net deferred income tax $ -- $ -- $ -- $ --
============ ============ ============ ============
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and income tax purposes and operating loss and tax credit
carryforwards. A valuation allowance is recorded if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred income tax asset will not be realized.
As of December 31, 1994, the Trust had net operating loss carryforwards
for federal income tax purposes of approximately $82,600,000 which expire in
various years beginning in 2006 through 2009.
Loan restructuring costs
Management of the Trust concluded that the debt restructuring discussed
in Note 2 represented a "troubled debt restructuring" as defined under generally
accepted accounting principles, and accordingly, all restructuring costs have
been expensed as incurred. The Trust expensed loan restructuring costs of
$10,892,000 in the year ended December 31, 1992. In 1993, upon execution of the
definitive debt restructuring agreement, $700,000 was paid by the Trust to the
certain institutional lenders and $4,032,000 was added to the loan balance under
the terms of a credit agreement for restructuring costs due the institutional
lenders for legal and other experts. Previously accrued restructuring costs of
$778,000 and $3,152,000 were paid during the years ended December 31, 1994 and
1993, respectively. At December 31, 1994, $1,895,000 of accrued loan structuring
costs are included in accounts payable and other liabilities.
Net loss per share
Net loss per share is based on the weighted average number of common
and common equivalent shares outstanding during the year which is on a Paired
Share basis for purposes of the combined financial statements. Outstanding
options and warrants are included as common equivalent shares using the treasury
stock method when the effect is dilutive. The weighted average number of shares
and Paired Shares used in determining net loss per share and per Paired Share
was 12,132,948 for the years ended December 31, 1994, 1993 and 1992.
F-17
<PAGE> 82
Reclassifications
Certain reclassifications have been made to the 1993 and 1992 financial
statements to conform with the 1994 financial statement presentation.
2. Senior Notes Payable and Revolving Line of Credit and Debt
Restructuring.
As of March 31, 1991, the Trust was in default under the Trust's line
of credit and the senior note agreements due to the Trust's failure to comply
with certain financial covenants and to collect certain rents from the
Corporation. As a result of such defaults, upon the April 30, 1991 expiration of
the revolving line of credit provided by the Trust's line of credit, the
five-year secured term loan originally contemplated by the Trust's line of
credit was not made available to the Trust, and the entire amount of borrowings
then outstanding under the Trust's line of credit was deemed due and payable.
Debt Restructuring - Effective January 28, 1993, the Trust executed a definitive
credit agreement (as subsequently amended, the "Credit Agreement") that
restructured the Trust's then outstanding borrowings from two banks (the
"Banks") and three insurance companies (together with the Banks, the
"Institutional Lenders") as a $12,500,000 revolving line of credit with one of
the Banks (the "Revolving Line of Credit") and a $115,723,000 term loan (the
"Term Loan", and together with the Revolving Line of Credit, the "Senior Debt").
The terms of the Credit Agreement required that the debt restructuring
take place in three phases, the first two of which were completed in 1993. At
the first closing (the "First Closing"), effective January 28, 1993, the
Institutional Lenders were granted or assigned for security direct and indirect
liens on and security interests in substantially all of the assets of the Trust
and the Corporation (other than the assets held by United States Equity &
Mortgage Trust, the Trust's 95%-owned subsidiary ("U.S. Equity")).
At the First Closing, the Trust and the Corporation also entered into a
warrant agreement (as amended, the "Warrant Agreement") that originally provided
that the Trust and the Corporation (or, if the merger of the Trust and the
Corporation described below (the "Merger") occurs, the surviving company) would
issue to the Institutional Lenders at the Third Closing (as defined below)
10-year warrants (the "Warrants") to purchase that number of shares equal to
9.9% (or if the Merger has occurred; 15%) of the Paired Shares then outstanding
at an exercise price of $.625 per share.
The second closing under the Credit Agreement (the "Second Closing")
was held on March 29, 1993 at which time the Trust acquired all of the assets of
U.S. Equity for $1,575,000 eliminating the minority interest of $676,000 and
increasing hotel assets by $899,000. At the Second Closing, the Institutional
Lenders were granted liens on and security interests in the five hotels and
substantially all of the other assets formerly owned by U.S. Equity and acquired
by the Trust.
At an interim closing held on February 28, 1994 (the "Interim
Closing"), the Credit Agreement was amended to, among other things, collaterally
assign to the Institutional Lenders security interests in and liens on
substantially all of the intercompany leases and the monies received by the
Corporation in connection with the operation of those hotels, and the Warrant
Agreement was amended to provide for the immediate issuance to the Institutional
Lenders of Warrants for an aggregate of 1,333,143 Paired Shares at the exercise
price originally provided for in the Warrant Agreement. On August 31, 1994,
one-third of the Warrants were canceled as a result of the Trust's cumulative
principal payments in excess of $13,000,000.
Interest on the principal amounts outstanding under the Credit
Agreement notes was originally at a stated rate of prime plus 2%. However,
because the Merger had not occurred on or prior to the 300th day after the First
Closing, the stated interest rate was increased to prime plus 3% from November
24, 1993 until the Merger takes place. The Trust has the option to pay interest
at a lesser rate, if applicable, of 8.0% per annum from September 1, 1994
through August 31, 1997, and 9.0% per annum from September 1, 1997 through April
30, 1998, with the difference between the interest accrued and the interest paid
being added monthly to the principal amount of the
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<PAGE> 83
Restructured Debt. The related weighted average interest rate on borrowings
outstanding as of December 31, 1994 and 1993 was 11.5% and 9%, respectively.
The Credit Agreement requires the Companies to maintain a specified
minimum adjusted net worth and a specified minimum ratio of cash to cash
interest plus capital expenditures, as defined. At December 31, 1994 the Trust
was in compliance with these covenants. In addition, the Credit Agreement
contains covenants that restrict, among other things, the Trust's ability to
acquire or dispose of assets, to make investments and to incur additional
indebtedness, and that prohibit the payment of distributions to shareholders.
In addition to imposing operating restrictions and reporting
requirements, the Credit Agreement establishes daily operating cash thresholds,
as defined. If these thresholds are exceeded by the Trust and the Corporation,
the excess amounts must be applied to reduce the borrowings then outstanding
under the Revolving Line of Credit, but amounts so applied are available for
future borrowings.
Subsequent to the Reorganization, (see Note 12) all amounts outstanding
under the Credit Agreement were repaid with the proceeds from the New Credit
Agreement.
3. Hotel Sales and Reserve for Losses.
During the year ended December 31, 1992, the Trust and the Corporation
sold their interests in three hotel assets, the Days Inn Texas Stadium, Irving,
Texas, the Best Western Merrimack Inn, Merrimack, New Hampshire and the Days
Inn, Spartanburg, South Carolina. The Irving property was sold in March 1992 for
$1,950,000, consisting of $172,000 in net cash proceeds and a $1,650,000
promissory note secured by the hotel. The Merrimack property was sold for
$1,800,000, consisting of $259,000 in net cash proceeds and a $1,440,000
promissory note secured by the hotel. The Spartanburg property was sold for
$875,000, consisting of $57,000 in net cash proceeds and a $775,000 promissory
note secured by the hotel. The Irving note bears interest at 9% per annum with
accrued interest and principal due monthly based on a 30-year amortization
schedule, with all unpaid principal and interest due in March 1997. The
Merrimack note, which was canceled in December 1994 (see Note 4), bore interest
at 9% per annum with accrued interest and principal due monthly based on a
30-year amortization schedule, with all unpaid principal and interest due in
July 1997. The Spartanburg note, which was paid off in May 1994, bore interest
at 9% per annum with interest and principal due monthly based on a 30-year
amortization schedule, with all unpaid principal and interest due in September
1998.
During 1992, the Trust recognized a loss of $791,000 and the
Corporation recognized a gain of $4,000 on sales of hotel assets, including a
$91,000 discount recorded by the Trust resulting from the early payoff in 1992
of the mortgage note receivable relating to the Brunswick, Georgia property sold
in 1991. In 1992, the Trust recorded a provision for investment losses of
$3,196,000 which reflected the deterioration of hotel values located in the
Southeast, and the acceptance of offers for the sale of hotels at amounts lower
than net book value.
During the year ended December 31, 1993, the Companies sold their
interests in four hotel assets, the Best Western located in Smyrna, Georgia, the
Vantage Hotel located in Tucker, Georgia, the Best Western Motor Hotel in Santa
Maria, California, and the Ramada Inn-Westport in St. Louis, Missouri. The
Smyrna property was sold for an all cash price of $1,600,000. The Tucker
property was sold for $2,485,000, consisting of approximately $500,000 in cash
and a $1,985,000 promissory note secured by the hotel. The Tucker note bears
interest at 9% per annum with accrued interest and principal due monthly based
upon a 25-year amortization schedule, with all unpaid principal and interest due
in June 1998. The Santa Maria property was sold for an all cash price of
$140,000. The St. Louis property was sold for an all cash price of $2,500,000.
For the year ended December 31, 1993, the Trust recognized a loss of
$53,000 and the Corporation recognized a gain of $74,000 on sales of hotel
assets. In 1993, the Trust recorded a provision for investment losses of
$2,369,000 primarily as a result of the acceptance of offers for the sale of
hotels at amounts lower than net book value.
During the year ended December 31, 1994, the Companies sold their
interests in five hotel assets, the Best Western South located in Austin, Texas,
the Sheraton Hotel located in New Port Richey, Florida, the Holiday Inn
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<PAGE> 84
in Brunswick, Georgia, the Holiday Inn in Jacksonville, Florida and the Ramada
Inn in Fayetteville, North Carolina. The Austin property was sold pursuant to
eminent domain proceedings for the purpose of highway construction to an agency
of the State of Texas for an all cash price of $3,594,000. The New Port Richey
and Brunswick properties were sold together for $4,306,000, consisting of
approximately $1,236,000 in cash and a $3,070,000 promissory note secured by the
hotels. The New Port Richey/Brunswick note bears interest at 8% per annum for
the first twelve months and 9.25% thereafter, with accrued interest and
principal due monthly based upon a 25-year amortization schedule, with all
unpaid principal and interest due in August 2001. The Jacksonville property was
sold for $3,200,000, consisting of approximately $900,000 in cash and a
$2,300,000 promissory note secured by the hotel. The Jacksonville note bears
interest at 9% per annum with accrued interest and principal due monthly based
upon a 30-year amortization schedule, with all unpaid principal and interest due
in December 2001. The Fayetteville property was sold for $1,000,000, consisting
of approximately $200,000 in cash and a $800,000 promissory note secured by the
hotel. The Fayetteville note bears interest at 9% per annum with accrued
interest and principal due monthly based upon a 12-year amortization schedule,
with all unpaid principal and interest due in December 2006. In connection with
the Reorganization (see Note 12), the Holiday Inn located in Albany, Georgia was
sold to Starwood Capital Group, L.P. for an all cash purchase price of
$6,000,000. The transaction was accounted for as a financing and Starwood
Capital Group, L.P. subsequently contributed the property to the Partnerships.
No gain or loss was recorded on the sale.
For the year ended December 31, 1994, the Trust recognized a gain of
$224,000 and the Corporation recognized a gain of $24,000 on sales of hotel
assets, including a $55,000 discount recorded by the Trust resulting from the
early payoff in 1994 of the mortgage note receivable related to the Spartanburg,
South Carolina property sold in 1992. In 1994, the Trust recorded a provision
for investment losses of $439,000 primarily as a result of the acceptance of
offers for the sale of hotels at amounts lower than net book value.
4. Mortgage Notes Receivable.
Columbus Best Western North
In January 1992, in settlement of various disputes between the Trust,
the Corporation as the general partner of Columbus Hotel Limited Partnership and
its limited partners, and in lieu of foreclosure by the Trust on a $6,127,000
mortgage, ownership of the Columbus Best Western North was transferred to the
Trust. The fair value of the hotel assets received by the Trust upon
cancellation of its note approximated the net carrying value of the mortgage
note receivable at December 31, 1991.
Best Western Merrimack Inn
In 1992, the Trust sold the Best Western Merrimack Inn in Merrimack,
New Hampshire to Orient Investment Limited. In connection with such sale, Orient
executed and delivered to the Trust a promissory note (the "Orient Note") in an
original principal amount of $1,440,000, secured by a first mortgage on the
property. The outstanding principal balance of the Orient Note was due August
1997, and bore interest at 9%.
During 1994, Orient defaulted on the Orient Note and the Trust
accelerated the indebtedness evidenced by the Orient Note. In September 1994,
the Trust initiated foreclosure proceedings and recorded a provision for
investment losses of $320,000, resulting in a net book value of $983,000. The
property was subsequently sold to a third party in December 1994 for net
proceeds of $1,191,000 and the Trust recorded a gain on sale of $208,000.
Other
At December 31, 1991, the Trust held a $223,000 note secured by a
second mortgage on a shopping center which was foreclosed upon by the first
mortgage holder during the year ended December 31, 1992, resulting in the
cancellation of the Trust's second mortgage and the recording of a provision for
investment losses.
At December 31, 1994, in addition to the MHLP notes discussed in Note
5, the Trust held nine promissory notes secured by mortgages. Eight notes
($13,915,000 in aggregate principal amount at December 31, 1994), representing
nine hotels, are secured by first mortgages, and one note ($234,000 in aggregate
principal amount at December 31, 1994), is secured by a second mortgage. The
notes have fixed interest rates ranging from 8% to 11%
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<PAGE> 85
per annum, and two of the notes (representing three properties) provide for
contingent interest based on a percentage of gross revenues of the properties
securing such notes. The maturity dates of the notes range from 1996 to 2017.
Aggregate principal payments under the mortgage notes receivable due within one
year of December 31, 1994 are $256,000. As of December 31, 1994 and 1993, the
reserve for investment losses for the mortgage notes receivable amounted to
$100,000 and $140,000, respectively.
5. Milwaukee Marriott Hotel.
In December 1985, the Trust sold its interest in the Milwaukee Marriott
Hotel to Milwaukee Brookfield Limited Partnership ("Brookfield"). In connection
with the sale, the Trust received a second mortgage note from Brookfield.
In July 1991, ownership and operation of the Milwaukee Marriott was
reorganized and ownership of the hotel was transferred from Brookfield to
Moorland Hotel Limited Partnership, ("MHLP"), a limited partnership in which the
Corporation has a 51% interest and is the sole general partner and Brookfield is
the sole limited partner. The operations of MHLP are consolidated into the
Corporation's financial statements from the date of reorganization and,
accordingly, the Trust has recorded the note receivable from MHLP as a note
receivable from the Corporation. The Corporation and MHLP entered into an
agreement for the Corporation to manage the property.
In addition, MHLP entered into an assignment and forbearance agreement
with Marriott Corporation ("Marriott"), the franchisor. This agreement, among
other things, required MHLP to renovate the hotel to Marriott standards. The
renovation was completed in January 1994.
During 1992, MHLP, Aetna Life Insurance Company ("Aetna"), the holder
of the first mortgage on the Milwaukee Marriott (the "Aetna Note"), Marriott,
the Trust, the Corporation, and Brookfield and various partners of Brookfield
reached agreements arranging financing for the renovation of the Milwaukee
Marriott and restructuring of debt for MHLP.
Effective December 1, 1992, Aetna agreed to defer for the period
December 1, 1992 through November 30, 1993, the monthly principal and interest
payments on its first mortgage note, which accrues interest at 11.25% per annum,
with the deferred interest added to principal monthly. Beginning December 1,
1993, the loan amortizes in equal monthly installments over a period of 17 years
at 10% interest per annum until January 1, 1996, at which time all unpaid
interest and principal are due, including appreciation interest ("Appreciation
Interest") . Appreciation Interest is defined as 50% of the aggregate principal
reduction in the Aetna mortgage from December 1, 1993 until the loan is due in
full as provided in the agreement. The amount of the Aetna Note outstanding
totaled $9,899,000 and $10,017,000 at December 31, 1994 and 1993, respectively.
Marriott agreed to loan MHLP $750,000 secured by a second deed of trust
on the hotel for the purchase of equipment from a Marriott subsidiary. The
second mortgage note bore interest at 9% per annum, payable monthly beginning
May 31, 1993 through April 30, 1994, at which time fixed monthly payments of
principal and interest of approximately $49,000 became due until December 31,
1994, at which time all unpaid interest and principal were due. In 1994,
Marriott agreed to extend the note bearing interest at 10% per annum beginning
January 1, 1995 at which time fixed monthly payments of principal and interest
of approximately $31,000 become due until June 30, 1995, at which time all
unpaid interest and principal are due.
The Trust agreed to loan MHLP $1,000,000 to be used to complete the
renovation of the Milwaukee Marriott. The loan is secured by a third deed of
trust on the hotel and bears interest at 10.5% per annum, payable monthly. Under
certain circumstances as defined in the agreement, interest is deferred and
added to the principal of the note monthly. The third mortgage note outstanding
totaled $1,225,000 and $1,102,000 as of December 31, 1994 and 1993,
respectively. The Trust may declare due and payable the principal balance and
any unpaid accrued interest thereon at any time through the maturity date of the
note of January 1, 1996.
The second mortgage note held by the Trust of $11,000,000 was modified
as of December 31, 1992 by adding deferred and previously unpaid interest of
$1,667,000 to principal due under the note and converting the
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<PAGE> 86
note to a fourth mortgage note. Further, $1,607,000 and $1,417,000 of interest
at 10.5% per annum for the years ended December 31, 1994 and 1993, respectively,
was deferred monthly and added to principal due under the loan. The fourth
mortgage note outstanding totaled $15,691,000 and $14,084,000 as of December 31,
1994 and 1993. Interest is payable monthly unless deferred under the provisions
of the loan agreement until January 1, 1996, at which time all remaining unpaid
interest and principal are due.
The Corporation agreed to defer and convert to a note up to $250,000 of
management fees due under its management agreement with MHLP for a period of up
to twelve months commencing with base management fees due after January 1, 1993.
The deferred fees bear interest at 9% per annum, which were added to the
principal balance of the note through December 1, 1993. Thereafter, the note is
due in twelve equal monthly installments of principal and interest commencing on
January 1, 1994 at 12% interest per annum. All unpaid interest and principal was
due and paid December 1, 1994.
The $600,000 original loan made by GSI Acquisition Company, L.P., a
limited partner of Brookfield, ("GSI"), was modified as of December 31, 1992, by
converting deferred and previously unpaid interest of approximately $86,000 to
principal. For the years ending December 31, 1994 and 1993 interest at 10.5% per
annum was deferred monthly and added to the principal balance, which balance
totals $849,000 and $762,000 at December 31, 1994 and 1993, respectively.
Thereafter, interest is payable monthly unless deferred under the provisions of
the agreement until January 1, 1996, at which time all remaining unpaid interest
and principal are due.
The Trust evaluates the collectability of the notes receivable secured
by the Milwaukee Marriott Hotel at the end of each quarter. Factors considered
by the Trust in performing the evaluations included the discounted estimated
future cash flow (at 11.0%) over a five-year period. The Corporation evaluates
the recoverability of the net book value of the property at the end of each
quarter. Factors considered by the Corporation in performing the evaluation
included the undiscounted estimated future cash flow of the property over a
five-year period. Based upon the evaluations no provision for losses was
required.
6. Real Estate Investments and Intercompany Transactions.
At December 31, 1994, the Trust owned equity interests in twenty-four
hotels, including two hotel/casinos. Of that number, eighteen properties were
owned in fee, five were held pursuant to long-term leases and one was owned
through a 5% general partnership interest in a joint venture that owns the Omaha
Marriott Hotel.
Twenty-one of the Trust's hotels (including the two hotel/casinos) are
leased to the Corporation or its subsidiaries. Three hotels have been leased to
and are operated by Imperial Hotel Corporation, formerly Vagabond Inns, Inc. The
Omaha Marriott Hotel has been leased to an affiliate of the Corporation, and is
managed by Marriott pursuant to a long-term management agreement. As of December
31, 1994, five of the hotels leased by the Corporation from the Trust are being
managed by third-party operators. The third-party management agreements are
generally for three-year terms expiring in 1995, subject to certain cancellation
provisions. Base management fees range from 2% to 2-1/2% of gross revenues with
incentive management fees based upon hotel profitability.
The leases are generally long-term and generally provide for annual
base, or minimum rents, plus contingent, or percentage rents based on the gross
revenues of the properties and are accounted for as operating leases. The leases
are "triple-net" in that the lessee is generally responsible for paying all
operating expenses of the properties, including maintenance, insurance and real
property taxes. The lessee is also generally responsible for any payments
required pursuant to underlying ground leases. Most leases provide for
cancellation by the Trust in the event that the Trust does not earn a specified
rent, or by the lessee (including the Corporation) in the event the lessee does
not earn a specified net operating profit.
As of December 31, 1994 and 1993, the Corporation was indebted to the
Trust for an aggregate of $26,916,000 and $87,486,000, respectively, (including
the MHLP mortgage notes of $16,916,000 and $15,186,000 as of December 31, 1994
and December 31, 1993, respectively - see Note 5). The debt to the Trust bore
interest at
F-22
<PAGE> 87
various rates ranging from 6.5% to 12% at December 31, 1992. Effective January
1, 1993, the Trust and Corporation modified the leases between the Trust and the
Corporation to, among other things, adjust the rents payable by the Corporation,
and restructured the Corporation's existing borrowings from the Trust to include
all outstanding borrowings plus accrued but unpaid rent of $448,000 and interest
as of December 31, 1992. The borrowings, were non-interest bearing for the years
ended December 31, 1994 and 1993.
In December 1994, the Trust forgave $58,335,000 of notes receivable
payable to the Trust by the Corporation and its subsidiaries. Effective January
1, 1995 the remaining notes, which are due on demand, bear interest at prime
plus 2% with interest payable monthly.
Rents accrued by the Trust from leased hotel properties are summarized
as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Corporation:
Minimum $ 14,373 $ 14,184 $ 18,136
Contingent 2,533 2,297 3,041
-------- -------- --------
16,906 16,481 21,177
-------- -------- --------
Other:
Minimum 437 437 437
Contingent 490 402 510
-------- -------- --------
927 839 947
-------- -------- --------
Total $17,833 $17,320 $22,124
======== ======== ========
</TABLE>
Minimum future rents at December 31, 1994 due under non-cancelable
operating leases for the years ending December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 Thereafter
-------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Corporation ..... $ 12,982 $ 10,342 $ 10,342 $ 10,342 $ 10,342 $ 27,385
Other ........... 437 437 437 426 178 105
-------- -------- -------- -------- -------- ----------
Total ........... $ 13,419 $ 10,779 $ 10,779 $ 10,768 $ 10,520 $ 27,490
======== ======== ======== ======== ======== ==========
</TABLE>
The Corporation is committed under its leases with the Trust to pay the
rents payable with respect to seven ground leases which expire in 1997 through
2029, including renewal options. The leases generally provide for a minimum rent
plus a percentage of gross revenues of the properties in excess of the minimum
rent. Future minimum lease payments under the leases are approximately $319,000
per year through 1999, and $6,960,000 thereafter. The Trust is the primary
obligor under the leases; however, the Corporation as lessee/operator of the
hotels makes payments under these leases directly to the lessors. Rent expense
incurred by the Corporation as a lessee/operator under these leases was
$879,000, $854,000 and $787,000, in the years ended December 31, 1994, 1993 and
1992, respectively.
In addition, the Trust is committed under an office lease. Future
minimum lease payments under the office lease are $85,000 in 1995.
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<PAGE> 88
7. Mortgage and Other Notes Payable.
At December 31, 1994, the Trust had outstanding six mortgage notes
payable which are secured by seven of the Trust's hotels, with a net book value
at December 31, 1994 of $55,027,000. At December 31, 1994 and 1993, the Trust
had the following outstanding debt obligations:
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Mortgage Notes:
11.75% first mortgage note, due in 2015, callable
by lender in 1995, 2000, 2005, or 2010 $ 6,349,000 $ 6,417,000
12.875% first mortgage note, due in 1997 9,173,000 9,478,000
12.625% first mortgage note, due in 1995 4,075,000 4,195,000
9.25% first mortgage note, due in 1995 1,854,000 2,010,000
10.25% first mortgage note, due in 2001 5,148,000 5,447,000
9.0% first mortgage note, due in 1997 139,000 177,000
------------ ------------
Total mortgage notes payable 26,738,000 27,724,000
Advance from Starwood Capital Group, L.P. 6,000,000
Other 100,000
------------ ------------
Total mortgage and other notes payable $ 32,838,000 $ 27,724,000
============ ============
</TABLE>
As described in Note 3, in August 1994 Starwood Capital Group, L.P.
acquired the Trust's Albany, Georgia property for $6,000,000. Interest expense
($313,000 in 1994) related to the advance is the greater of the net cash flow of
the property or 10% until such time as the property is contributed to the
Partnerships (see Note 12).
Aggregate principal payments, excluding the advance from Starwood
Capital Group, L.P. due for the years ending December 31 are $14,499,000 in
1995, $2,290,000 in 1996, $5,994,000 in 1997, $447,000 in 1998, $493,000 in
1999, and $3,115,000 thereafter.
At December 31, 1994 and 1993, the Corporation had the following
outstanding debt obligations:
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Secured by Milwaukee Marriott Hotel:
10.0% first mortgage note, due 1996 $ 9,899,000 $10,017,000
9.0% second mortgage note, due 1995 358,000 754,000
10.5% fifth mortgage note, interest only, due 1996 849,000 762,000
12.0% sixth mortgage note, interest only (to the extent
of available cash flow), due 1996 2,000,000 2,000,000
9-10% notes payable, due 1995-1996 164,000 297,000
----------- -----------
13,270,000 13,830,000
Other:
9.75% first mortgage note, due 1997 403,000 438,000
Obligations under capital leases 75,000 92,000
----------- -----------
Total mortgage and other notes payable $13,748,000 $14,360,000
=========== ===========
</TABLE>
At December 31, 1994, the Milwaukee Marriott Hotel had a net book value
of $22,951,000.
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<PAGE> 89
Minimum lease and principal payments on the Corporation's indebtedness
for the years ending December 31 are due as follows:
<TABLE>
<CAPTION>
Minimum Future Principal Payments
Year Lease Payments Due Under Notes
---- -------------- ------------------
<S> <C> <C>
1995 $ 47,000 $ 792,000
1996 21,000 12,557,000
1997 6,000 324,000
1998 9,000
-------- -----------
Total 83,000 $13,673,000
Amount representing interest 8,000 ===========
--------
Future minimum lease payments $ 75,000
========
</TABLE>
At December 31, 1994 and 1993 the Corporation had $175,000 and
$1,222,000, respectively, in assets (less $117,000, and $828,000, respectively,
in accumulated amortization) recorded under capital leases. Such amounts are
included in furniture, fixtures and equipment.
8. Shareholders' Equity.
Warrants to purchase Paired Shares
At December 31, 1994, there were outstanding 1,659,974 warrants to
purchase Paired Shares at an exercise price of $16.95 per Paired Share through
September 1996. Additional warrants were issued to the Institutional Lenders
under the terms of the Credit Agreement (See Note 2).
Share option plans
The Trust and the Corporation each have Incentive and Non-Qualified
Share Option Plans which provide for the purchase of up to an aggregate of
700,000 Paired Shares by Trustees, Directors, officers and employees pursuant to
option grants. During the year ended December 31, 1994, the Trust and the
Corporation granted options to purchase 99,000 Paired Shares at an excise price
of $2.75 per Paired Share. During the year ended December 31, 1993, the Trust
and the Corporation granted options to purchase 20,000 Paired Shares at an
exercise price of $2.625 per Paired Share. During the year ended December 31,
1992, the Trust and Corporation granted options to purchase 100,000 Paired
Shares at an exercise price of $.75 per Paired Share. Such options, which are
granted at fair market value on the date of grant, vest over three years. No
options have been exercised as of December 31, 1994.
At December 31, 1994, outstanding options granted under all plans of
the Trust and Corporation (including options granted to officers and directors
of a company previously acquired by the Trust) aggregated 308,500 Paired Shares.
At December 31, 1994, options for 203,667 Paired Shares are fully vested with
exercise prices ranging from $.75 to $22.68 per Paired Share.
Share purchase plans
Prior to December 1989, the Trust and the Corporation each had a Share
Purchase Plan, whereby an aggregate of 200,000 Paired Shares were available to
be purchased by Trustees, Directors, officers and employees at their fair market
value on the date of sale with monies borrowed from the Trust or Corporation.
In December 1989, the Trust's Board of Trustees and the Corporation's
Board of Directors voted to terminate the Share Purchase Plans for purposes of
prospective eligibility, and to irrevocably waive the right of the Trust and the
Corporation to accelerate the payment of a note executed by a participating
Trustee or Director upon termination of such participant's relationship with the
Companies.
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<PAGE> 90
In January 1991, the Companies entered into agreements with certain
Trustees and Directors who had agreements outstanding pursuant to the Share
Purchase Plans to which each such Board member agreed to stand for re-election
as a Trustee or Director at the next annual shareholders' meeting if requested
to do so by their respective Boards, or if the Boards did not so request, to
act, for a period of up to two years and at mutually agreed upon times and
places, as an advisor to the Trust or the Corporation on matters within such
Board member's experience and expertise, and the Trust or the Corporation agreed
that any outstanding promissory note executed by such Board member in partial
payment for Paired Shares purchased under the Share Purchase Plans would be
amended to cause such promissory note to be without recourse to the maker.
In March 1992, certain of the aforementioned notes were restructured to
bear an annual interest rate of 8% as of February 2, 1992, with such notes to be
payable interest only from February 2, 1992 until February 15, 1995, at which
time the principal and interest accrued would become payable in equal monthly
installments over a ten-year period.
The share purchase agreement between a former officer and director and
the Corporation was terminated in connection with his December 31, 1992
resignation as an officer of the Corporation, and the 10,000 Paired Shares
acquired pursuant to that agreement were assigned by him to the Corporation. The
share purchase note in the amount of $112,500, was written off at December 31,
1993. The share purchase notes of other former officers, directors and employees
aggregating $63,500 were also written off at December 31, 1993.
During 1994, the remaining outstanding share purchase notes of $246,000
were canceled.
Preferred shares
The Corporation has 10,000,000 authorized preferred shares, $1.00 par
value, none of which are issued or outstanding.
9. Commitments and Contingencies.
Litigation
In late 1991 and early 1992 three complaints were filed against the
Trust and the Corporation and certain other related persons (the "Shareholder
Actions"). As amended, two of the complaints allege that the Trust and the
Corporation, a Director and officer of the Corporation and a former
officer/Trustee of the Trust violated the Racketeer Influenced and Corrupt
Organizations Act ("RICO") and Federal and California securities laws and acted
fraudulently in connection with the Trust's and the Corporation's public
disclosures with respect to the Trust's purchase of its two hotel/casinos and
the Ramada Inn in Indian Wells, California. Both of these complaints sought
class action certification. The third complaint was filed purportedly on behalf
of the Trust and the Corporation and alleged that certain former and present
Trustees and Directors breached their fiduciary duties in connection with the
purchase of the Ramada Inn in Indian Wells and the two hotel/casinos.
On July 20, 1994, the United States District Court for the Southern
District of California entered a Final Judgment of Dismissal With Prejudice
("Final Judgment") of the two purported class actions filed in that Court.
Pursuant to the Final Judgment, the District Court, among other things,
approved the settlement set forth in stipulations of settlement ("Stipulation")
entered into among the plaintiffs and defendants in the Shareholder Actions, as
well as the insurance company that issued the Companies' directors and officers
policy applicable to the period to which Shareholder Actions relate.
Under the Final Judgment, all claims that were or might have been made
in the Shareholder Actions are deemed released as of the Effective Date (as
defined in the Stipulation), and a $3,250,000 cash settlement fund was to be
established which, after the deduction of fees and costs to plaintiffs'
counsel, will be distributed to qualified members of the certified plaintiff
classes according to an allocation formula that includes a calculation based on
certain shares that opted out of the settlement. Of the settlement fund,
$2,500,000 will be paid by the insurance company, $400,000 (which amount was
accrued as of December 31, 1993) was paid in May 1994 by the Companies, and
$350,000 will be paid by former officers of the
F-26
<PAGE> 91
Companies.
Upon completion of the claims administration process, any funds
remaining, up to a limit of $325,000, shall be returned to the parties who
contributed to the settlement fund on a pro rata basis. The parties
contributing to the settlement fund have previously established a separate
$45,000 fund to be used for purposes of notifying the classes and otherwise
administering the settlement. Legal fees and other costs incurred by the
defendants in the Shareholder Actions prior to October 12, 1993 have been paid
by the Companies; subsequent defense costs will be paid by the insurance
company. Holders of approximately 1,199,000 Paired Shares opted out of the
settlement. All amounts relating to the Shareholder Actions paid or expected to
be paid have been accrued and expensed as of December 31, 1994.
The Stipulation also 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.
In connection with the settlement of the Shareholder Actions, Messrs.
Young and Rothman and certain of their affiliated partnerships have terminated
the management agreements that existed between those partnerships and the
Corporation's subsidiary, Western Host, Inc. (the "Management Contracts"), and
Western Host, Inc. ("Western Host) has agreed to forbear from disputing such
action and has withdrawn as a general partner of two additional affiliated
partnerships. In satisfaction of any damages that the Companies may incur as a
result of the termination of the Management Contracts, Messrs. Rothman and Young
have provided to the Companies an irrevocable letter of credit in the amount of
$800,000 which has a one-year term.
Upon final Court approval of the Shareholder Actions, proceeds from the
letter of credit would be paid to the Companies, and the parties to the
Management Contracts, former officers of the Companies and the Companies, will
release all of their respective claims related to the termination of the
Management Contracts.
Ross Settlement Agreement
Subsequent to the settlement of the Shareholder Actions described
above, Leonard M. Ross and his affiliates ("Ross"), who hold 1,190,400 Paired
Shares and had opted out of the settlement, had threatened litigation against
the Trust and the Corporation.
In October 1994, Starwood Capital Group, L.P. ("Starwood Capital")
entered into an agreement with Ross to settle the threatened litigation in which
Starwood Capital agreed to purchase Ross' paired 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 $5.625. Starwood
Capital also has the right to elect to purchase such paired shares at the same
time and on the same terms. The Trust and Corporation have also agreed that
under certain circumstances they may be obligated severally to 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.
The estimated fair value of the put/call provisions of the Ross
settlement agreement at the time of the agreement was approximately $2,648,000
and was charged against the earnings of the Trust and Corporation in 1994.
Environmental matters
In connection with the Debt Restructuring (see Note 2), the Trust
obtained in the latter part of 1991 preliminary or "Phase I" environmental site
assessments with respect to the Trust's hotel properties and the Milwaukee
Marriott Hotel.
The potential for environmental impairment was assessed as moderate to
high only at the Embassy Suites Hotel in Phoenix, Arizona. According to the
assessment of that property, petroleum hydrocarbons are present in the land
beneath this hotel; however, the Trust could not determine without further
investigation the extent of the potential contamination or whether this
contamination resulted from the underground storage tanks placed on the property
by the property's former owner or from similar tanks located on land adjacent to
the property, which tanks
F-27
<PAGE> 92
are known to have suffered leakage. A magnetic survey conducted on the property
did not detect the continuing existence of the underground storage tanks on the
Companies' property, and the environmental consultant did not recommend that any
further action be taken. Phoenix municipal authorities have indicated an
awareness of possible ground water contamination in the area, but to date have
taken no action.
A tank leak test conducted at the Bourbon Street Hotel in early 1992
revealed no evidence of leakage. A release of petroleum from an underground
storage tank at the Bay Valley Hotel and Resort was reported to the appropriate
state agency in 1992. After the tank and surrounding soils were removed,
additional soils and groundwater testing was performed, which revealed
environmental contamination in a localized area. The environmental testing has
been performed to identify the extent of the contamination released from the
tank. The consultant has proposed to remedy the contamination through
installation of a groundwater pump and treatment system to capture and treat
impacted groundwater and excavation of impacted soil. Amendments to the relevant
environmental clean-ups laws, which have recently been introduced in the
Michigan Legislature, may reduce the extent or magnitude of the clean-up that
may be required at the site. The consultant's recommendations were made upon the
basis of existing law, and did not take into account the proposed legislative
amendments. After the Trust and the Corporation assess the impact of any
amendments that may be enacted to the relevant statutes, the Trust and the
Corporation will perform whatever remediation is required by law. Any further
remediation costs that are incurred may be reimbursed by a Michigan
environmental fund, although there can be no assurance that the fund will have
sufficient resources to pay all claims made against it. If the Trust and the
Corporation do not receive reimbursement for future remediation costs, the
Realty Partnership will bear those costs.
Neither the Trust nor the Corporation has been identified by the U.S.
Environmental Protection Agency or any similar state agency as a responsible or
potentially responsible party for, nor have the Companies been the subject of
any governmental proceeding with respect to, any hazardous waste contamination.
If the Companies were to be identified as a responsible party, the Trust and the
Corporation in most circumstances would be strictly liable, jointly and
severally with other responsible parties, for environmental investigation and
clean-up costs incurred by the government and, to a more limited extent by
private persons. Managements of the Trust and the Corporation expect that the
cost of any required remediation would be the responsibility of the Trust.
Based upon environmental reports, the Trust believes that a substantial
number of its hotel properties incorporate potentially asbestos-containing
materials. Under applicable current Federal, state and local laws, asbestos need
not be removed from or encapsulated in a hotel unless and until the hotel is
renovated or remodeled. The removal of asbestos from portions of the Milwaukee
Marriott Hotel required in connection with the renovation of that property has
been completed.
Based upon the above-described environmental testing and facts known to
management of the Trust and the Corporation, future remediation costs, if any,
are not expected to have a material adverse effect on the Trust's and the
Corporation's results of operations or financial position and compliance with
environmental laws has not had and is not expected to have a material effect on
the capital expenditures, earnings or competitive position of the Trust and the
Corporation.
Performance bonds and restricted cash
The Corporation is required to post performance bonds or cash
collateral as security for certain obligations. At December 31, 1994 and 1993,
the Corporation had posted performance bonds totaling approximately $747,000 and
$738,000, respectively, to cover such obligations; however, no amounts had been
drawn against such bonds.
At December 31, 1994, inventories, prepaid expenses and other assets
include $246,000 and $1,606,000 for the Trust and the Corporation, respectively,
which were restricted as to use. At December 31, 1993, inventories, prepaid
expenses and other assets include $145,000 and $2,006,000 for the Trust and the
Corporation, respectively, which were restricted as to use. Other than the
performance bonds, the restricted cash of the Corporation primarily is the cash
of MHLP (see Note 5).
F-28
<PAGE> 93
10. Related Party Transactions.
The Corporation, through its subsidiary Western Host, Inc. ("Western
Host") managed seven properties owned by partnerships of which Ronald A. Young,
former President and Chief Executive Officer and Director of the Corporation, is
a general partner (the "Western Host Partnerships"). The Corporation accrued
management fees and administrative services fees pursuant to such management
agreements of approximately $863,000 during the year ended December 31, 1992.
Termination agreement and management subcontracts - Effective December 29, 1992,
Mr. Young and the Corporation entered into a termination agreement whereby Mr.
Young tendered his resignation as President and Chief Executive Officer. Under
the terms of the agreement, Mr. Young received payment of accrued vacation pay
in the amount of $54,000 and assigned to the Corporation the ownership of the
10,000 Paired Shares which secured the non-recourse promissory note in the
amount of $121,000, including interest, which was issued in connection with the
1987 Share Purchase Plan (See Note 8). In addition, Western Host agreed to
subcontract its duties under the management contracts for six of the Western
Host Partnerships to Westland Hotel Corporation, a hotel management company
formed by Mr. Young. In connection with the settlement of the Shareholder
Actions (see Note 9), the management contracts were terminated.
As of December 31, 1993, the Western Host Partnerships and/or Westland
owed Western Host and/or the Corporation $100,000 representing amounts advanced
for the expenses of the managed Western Host hotels which was paid in 1994.
At December 31, 1994, the Trust holds an $800,000 unsecured note
receivable from John Rothman, the former President and Chief Executive Officer
of the Trust. The principal amount of the note receivable is due in 1999 and
bears interest due annually at 10%.
The Companies incurred legal fees from law firms in which a Trustee and
officer of the Trust was or currently is a partner during the years ended
December 31, 1994, 1993 and 1992 totaling $940,000, $235,000, and $955,000,
respectively.
F-29
<PAGE> 94
11. Industry Segment Information.
The Corporation operates in two segments of the hospitality industry,
hotel and gaming. The hotel segment consists of room, food and beverage and
other revenues recognized in connection with the operation of hotels owned by
the Corporation or under lease from the Trust, and income from management
contracts. The gaming segment consists of net win from casino operations, as
well as room, food and beverage and other revenues recognized in connection with
the operation of the two hotel/casinos under lease from the Trust. The following
information summarizes revenue and operating results by industry segment:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
HOTEL:
Revenue:
Room .................................................. $ 56,387,000 $ 58,917,000 $ 60,068,000
Food and beverage ..................................... 21,603,000 23,337,000 23,975,000
Other ................................................. 4,678,000 4,649,000 4,769,000
------------ ------------ ------------
Hotel revenue ......................................... 82,668,000 86,903,000 88,812,000
Management fees ....................................... 247,000 90,000 952,000
------------ ------------ ------------
Total revenue ......................................... 82,915,000 86,993,000 89,764,000
------------ ------------ ------------
Expenses:
Rooms ................................................. 25,177,000 27,633,000 29,094,000
Food and beverage ..................................... 16,364,000 15,116,000 15,256,000
Other (including undistributed
operating expenses and fixed
charges) .......................................... 19,288,000 25,383,000 24,270,000
Rent to Trust ......................................... 14,506,000 14,081,000 17,612,000
Depreciation and amortization ......................... 2,072,000 3,060,000 3,086,000
Allocated Corporate overhead .......................... 1,001,000 950,000 1,600,000
------------ ------------ ------------
Total expenses ........................................ 78,408,000 86,223,000 90,918,000
------------ ------------ ------------
Operating income (loss) .................................. $ 4,507,000 $ 770,000 $ (1,154,000)
============ ============ ============
GAMING:
Revenue:
Casino ................................................ $ 15,137,000 $ 14,861,000 $ 14,461,000
Room .................................................. 4,516,000 4,305,000 3,709,000
Food and beverage ..................................... 5,166,000 5,226,000 5,396,000
Other ................................................. 5,506,000 5,370,000 4,930,000
Less promotional allowances ........................... (2,344,000) (2,257,000) (2,346,000)
------------ ------------ ------------
Gaming revenues ....................................... 27,981,000 27,505,000 26,150,000
------------ ------------ ------------
Expenses:
Casino ................................................ 6,308,000 6,019,000 5,852,000
Rooms ................................................. 2,156,000 2,042,000 1,894,000
Food and beverage ..................................... 4,514,000 4,564,000 4,888,000
Other (including undistributed
operating expenses and fixed
charges) .......................................... 11,476,000 11,430,000 11,065,000
------------ ------------ ------------
Expenses of gaming operations ......................... 24,454,000 24,055,000 23,699,000
Rent to Trust ......................................... 2,400,000 2,400,000 3,565,000
Depreciation and amortization ......................... 382,000 477,000 262,000
------------ ------------ ------------
Total expenses ........................................ 27,236,000 26,932,000 27,526,000
------------ ------------ ------------
Operating income (loss) .................................. $ 745,000 $ 573,000 $ (1,376,000)
============ ============ ============
</TABLE>
F-30
<PAGE> 95
A reconciliation of the combined segment operating income (loss) to the net loss
of the Corporation is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
Combined operating income
(loss) ............................... $ 5,252,000 $ 1,343,000 $(2,530,000)
Interest and other income .............. 66,000 330,000 258,000
Interest expense ....................... (3,071,000) (2,701,000) (5,372,000)
Corporate expenses ..................... (3,445,000) (2,115,000) (2,281,000)
------------ ------------ ------------
Net income (loss) ................. $(1,198,000) $(3,143,000) $(9,925,000)
=========== =========== ===========
</TABLE>
Additional financial data by industry segment for the Corporation is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS:
Hotel ............................................ $40,357,000 $41,712,000 $43,620,000
Gaming ........................................... 3,710,000 3,743,000 4,059,000
Corporate and other .............................. 4,559,000 4,538,000 5,932,000
----------- ----------- -----------
Total ............................................ $48,626,000 $49,993,000 $53,611,000
=========== =========== ===========
CAPITAL EXPENDITURES:
Hotel ............................................ $ 421,000 $ 4,859,000 $ 1,160,000
Gaming ........................................... 221,000 220,000 123,000
Corporate and other .............................. 29,000 126,000 7,000
----------- ----------- -----------
Total ............................................ $ 671,000 $ 5,205,000 $ 1,290,000
=========== =========== ===========
DEPRECIATION AND
AMORTIZATION:
Hotel ............................................ $ 2,072,000 $ 3,060,000 $ 3,086,000
Gaming ........................................... 389,000 477,000 262,000
Corporate and other .............................. 495,000 65,000 54,000
----------- ----------- -----------
Total ............................................ $ 2,956,000 $ 3,602,000 $ 3,402,000
=========== =========== ===========
</TABLE>
The Trust is an owner/lessor of real property and does not "operate" in
different segments, and is therefore not subject to disclosure by segment. The
Trust's net investment (initial cost less accumulated depreciation and provision
for loss) in the two Las Vegas hotel/casinos was $21,306,000, and $22,798,000
December 31, 1994 and 1993, respectively.
12. Reorganization and Debt Refinancing.
Reorganization
Effective January 1, 1995 (the "Closing Date"), the Trust and the
Corporation consummated the previously announced reorganization (the
"Reorganization") with Starwood Capital Group, L.P. ("Starwood Capital") and
certain affiliates of Starwood Capital (the "Starwood Partners").
The Reorganization involved a number of related transactions that
occurred simultaneously on the Closing Date. Such transactions included (i) the
contribution by the Trust to SLT Realty Limited Partnership (the "Realty
Partnership") of all of the properties and assets of the Trust including
substantially all of the liabilities of the Trust (including the Senior Debt of
the Trust ), in exchange for an approximate 28.3% interest as a general partner
in the Realty Partnership, (ii) the contribution by the Starwood Partners to the
Realty Partnership of approximately $12,600,000 in cash and certain hotel
properties and first mortgage notes, in exchange for limited partnership
F-31
<PAGE> 96
units representing the remaining approximate 71.7% interest in the Realty
Partnership, (iii) the contribution by the Corporation and its subsidiaries to
SLC Operating Limited Partnership (the "Operating Partnership") of all of their
properties and operating assets (except for their gaming assets, which are to be
contributed upon approval by Nevada gaming authorities), subject to
substantially all of their liabilities, in exchange for an approximate 28.3%
interest as a general partner in the Operating Partnership, and (iv) the
contribution by the Starwood Partners to the Operating Partnership of
approximately $1,400,000 in cash and furnishings and equipment of the hotel
properties, in exchange for limited partnership units representing the remaining
approximate 71.7% interest in the Operating Partnership.
Each partner in the Partnerships (including the Trust and the
Corporation) will account for its respective investment in the Realty
Partnership and the Operating Partnership under the equity method of accounting,
in accordance with generally accepted accounting principles. For accounting
purposes, neither the Trust nor Starwood Capital unilaterally control the Realty
Partnership and neither the Corporation nor Starwood Capital unilaterally
control the Operating Partnership.
The following unaudited pro forma separate and combined condensed
financial information is presented as if the Reorganization in which the Trust
and Corporation contributed substantially all of their assets (subject to
substantially all of their liabilities) in exchange for 28.3% general
partnership interests in the Realty Partnership and the Operating Partnership
(the "Partnerships") and the Starwood Partners contributed cash and other
assets, subject to certain liabilities, in exchange for 71.7% limited
partnership interests in the Partnerships had occurred on December 31, 1994 for
balance sheet information and on January 1, 1994 for income statement
information.
<TABLE>
<CAPTION>
December 31, 1994
(in thousands)
--------------------------------------------------
STARWOOD LODGING Trust Corporation Combined
-------- ----------- --------
<S> <C> <C> <C>
Investment in Partnership ............................................ $ 10,450 $ (1,742) $ 8,708
Income from investment in Partnership ................................ 824 (742) 82
Net income per share ................................................. $ 0.07 $ (0.06) $ 0.01
SLT REALTY AND SLC OPERATING PARTNERSHIPS Realty Operating Combined
-------- ----------- --------
Hotel assets, net .................................................... $147,080 $ 38,177 $185,258
Total real estate investments ........................................ 210,299 38,199 248,428
Total assets ......................................................... 254,044 55,502 282,630
Total debt ........................................................... 200,298 40,664 214,046
Partners' capital .................................................... 49,166 4,206 53,372
Revenues ............................................................. $ 33,189 $ 127,421 $138,708
Expenses ............................................................. 30,273 130,044 138,415
Net income (loss) .................................................... 2,916 (2,623) 293
</TABLE>
In addition on March 24, 1995, a Starwood Partner exchanged $12 million of
Senior Debt for additional limited partnership units of the Realty Partnership
and the Operating Partnership.
After giving effect to the Reorganization and such subsequent exchange
of Senior Debt, the Trust has an approximate 25.4% interest in the Realty
Partnership and the Corporation has an approximate 25.4% interest in the
Operating Partnership, and the Starwood Partners hold limited partnership
interests representing the remaining approximate 74.6% interest in each of the
Realty Partnership and the Operating Partnership.
Debt Refinancing
On March 24, 1995, the Realty Partnership and the Trust entered into an
Amended and Restated Credit Agreement (the "New Credit Agreement") pursuant to
which the Realty Partnership borrowed approximately $132 million (the "Loan")
which was used primarily to refinance all outstanding Senior Debt (after the
exchange by a Starwood Partner of $12 million of Senior Debt for units of the
Realty Partnership and the
F-32
<PAGE> 97
Operating Partnership described above) and approximately $27 million of first
mortgage debt. The Loan matures on April 1, 1997 (subject to the Realty
Partnership's option to extend such maturity for 12 months subject to a
principal payment of $10 million and on certain other conditions) and bears
interest at a rate based on LIBOR plus 3%. In connection with the New Credit
Agreement, the Warrants issued in connection with the prior Credit Agreement may
be canceled upon the payment to a Starwood Partner of a $786,000 cancellation
fee.
Prior to maturity there are no mandatory principal payments on the
loan, except that (i) if the Realty Partnership sells or refinances a hotel
property or mortgage note (other than certain notes contributed by the Starwood
Partners aggregating approximately $53 million (the "Harvey Notes")), it must
reduce the principal of the Loan by at least 125% of the portion of the Loan
allocated to such property or note and (ii) the net proceeds of any public
offering (or private offerings to the extent the net proceeds thereof exceed $60
million) of equity interests in the Trust, the Corporation, the Realty
Partnership or the Operating Partnership must be used to reduce the principal of
the Loan until such principal is equal to or less than 50% of the fair market
value of the assets which secure the Loan.
The Loan is secured by first priority liens on substantially all of the
assets of the Realty Partnership, other than the Harvey Notes. Up to $58 million
of the obligations under the Loan is guaranteed by the Operating Partnership,
which guaranty is secured by first priority liens on substantially all of the
assets of the Operating Partnership. Each of the Trust and the Corporation, as
general partner, is secondarily liable for the obligations under the Loan of the
Realty Partnership and the Operating Partnership, respectively.
The New Credit Agreement contains covenants that are similar to, but in
general less restrictive than, those contained in the prior Credit Agreement,
including (i) a requirement that the Realty Partnership and the Operating
Partnership maintain a minimum combined net worth as defined ($40 million at
March 24, 1995) The New Credit Agreement also restricts the ability of the
Realty Partnership to incur other indebtedness.
The Realty Partnership may, prior to January 1, 1996, borrow up to an
additional $75 million to finance the acquisition of hotel properties and to
refinance debt that is senior to the Loan. Each such acquisition loan will be in
an amount equal to the lesser of (i) 60% of the purchase price (in the case of
an acquisition) and (ii) 70% of the property's value (as determined by the
lender), will be made on the same terms as the Loan and will be secured by a
first priority lien on the related hotel property.
F-33
<PAGE> 98
<TABLE>
<CAPTION>
13. Selected Quarterly Financial Information (Unaudited)
Combined Trust Corporation
---------------------------- --------------------------- --------------------------
1994 1993 1994 1993 1994 1993
----------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
First Quarter
- ------------------------
Revenue . . . . . . . $28,338,000 $27,831,000 $5,243,000 $5,082,000 $27,823,000 $27,253,000
Net income (loss) . . (335,000) (1,366,000) (154,000) (208,000) (181,000) (1,158,000)
Net income (loss)
per share . . . . . (0.03) (0.11) (0.01) (0.02) (0.01) (0.10)
Second Quarter
- ------------------------
Revenue . . . . . . . $29,994,000 $30,310,000 $5,953,000 $5,477,000 $28,610,000 $29,421,000
Net income (loss) . . 933,000 (204,000) 288,000 41,000 645,000 (245,000)
Net income (loss)
per share . . . . . 0.08 (0.02) 0.02 0.00 0.05 (0.02)
Third Quarter
- ------------------------
Revenue . . . . . . . $29,666,000 $30,530,000 $5,737,000 $5,198,000 $28,809,000 $29,998,000
Net income (loss) . . (2,715,000)(1) (1,268,000) (2,313,000)(1) (1,412,000) (402,000) 144,000
Net income (loss)
per share . . . . . (0.22) (0.10) (0.19) (0.12) (0.03) 0.01
Fourth Quarter
- ------------------------
Revenue . . . . . . . $25,999,000 $28,484,000 $4,738,000 $4,585,000 $25,720,000 $28,156,000
Net loss . . . . . . (2,546,000) (4,194,000) (1,286,000) (2,310,000) (1,260,000) (1,884,000)
Net loss . . . . . .
per share . . . . . (0.21) (0.35) (0.11) (0.19) (0.10) (0.16)
</TABLE>
(1) During the quarter ended September 30, 1994, the Trust recorded a
provision for investment losses of $759,000 and the Trust and the
Corporation each recorded a provision of $1,324,000 for expenses related
to the settlement of shareholder litigation (see Note 9).
(2) During the quarter ended September 30, 1993, the Trust recorded a
provision for investment losses of $1,167,000. During the quarter ended
December 31, 1993, the Trust recorded a provision for investment losses of
$1,202,000 and the Trust and the Corporation each recorded a provision of
$219,000 for expenses expected to be incurred upon settlement of
shareholder litigation. (See Note 9.)
F-34
<PAGE> 99
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Costs Gross amount
Subsequent to at which carried
Initial Cost to Company Acquisition at close of period
------------------------- ------------- ---------------------------
STARWOOD LODGING TRUST (1) (1)
Building and Building and Building and
Description Encumbrances Land Improvements Improvements Land Improvements
- ------------------------------------ ------------ ---------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
HOTEL ASSETS:
Embassy Suites - Phoenix, AZ $9,173,000 $2,889,000 $ 11,658,000 $ 564,000 $2,889,000 $ 12,223,000
Plaza Hotel - Tucson, AZ (2) 898,000 3,809,000 66,000 898,000 3,875,000
Vagabond Inn - Rosemead, CA 700,000 2,100,000 700,000 2,100,000
Vagabond Inn - Sacramento, CA 700,000 3,200,000 700,000 3,200,000
Vagabond Inn - Woodland Hills, CA 1,200,000 3,200,000 1,200,000 3,200,000
Hilton Inn - Gainesville, FL 1,002,000 3,759,000 1,582,000 1,002,000 5,341,000
Holiday Inn - Albany, GA 6,000,000 796,000 4,980,000 123,000 796,000 5,103,000
Best Western Riverfront Inn - 431,000 3,745,000 200,000 431,000 3,946,000
Savannah, GA
Bay Valley Hotel - Bay City, MI 4,075,000 2,501,000 5,472,000 1,193,000 2,501,000 6,666,000
Bourbon Street Hotel and Casino -
Las Vegas, NV 8,435,000 8,668,000 5,446,000 8,435,000 14,172,000
King 8 Hotel and Casino - Las 139,000 5,396,000 13,579,000 1,938,000 5,396,000 15,532,000
Vegas, NV
Best Western Airport Inn -
Albuquerque, NM (3) 285,000 4,880,000 12,000 285,000 4,892,000
Best Western Mesilla Valley Inn -
Las Cruces, NM 1,150,000 3,295,000 28,000 860,000 3,320,000
Columbus Best Western - Columbus, OH 854,000 2,300,000 27,000 854,000 2,327,000
Portland Inn - Portland, OR 1,854,000 1,900,000 3,768,000 239,000 2,020,000 4,008,000
Riverside Inn - Portland, OR 1,300,000 3,375,000 235,000 1,420,000 3,610,000
Marriott Park Central - Dallas, TX 5,148,000(3) 3,814,000 8,018,000 591,000 3,815,000 8,608,000
Best Western Airport Inn -
El Paso, TX 1,400,000 3,409,000 85,000 1,400,000 3,494,000
Residence Inn - Tysons Corner, VA 6,349,000 1,418,000 4,119,000 455,000 1,418,000 4,574,000
Days Inn Town Center - Seattle, WA 250,000 1,483,000 18,000 250,000 1,500,000
Meany Tower Hotel - Seattle, WA (3) 1,700,000 6,270,000 207,000 1,820,000 6,477,000
Sixth Avenue Inn - Seattle, WA 1,150,000 1,570,000 31,000 1,150,000 1,601,000
Tyee Motor Inn - Tumwater, WA (3) 1,008,000 1,562,000 969,000 944,000 2,531,000
----------- ----------- ------------ ----------- ----------- ------------
$32,738,000 $41,177,000 $108,219,000 $14,009,000 $41,184,000 $122,300,000
----------- ----------- ------------ ----------- -----------
Land 41,184,000
Furniture and Equipment 25,124,000
------------
Totel hotels and land
under lease $188,608,000(5)
============
</TABLE>
<TABLE>
<CAPTION>
(4)
Accumulated
Depreciation & Year of Date
Description Amortization Construction Acquired Life
- ------------------------------------ ------------ ------------ -------- ----
<S> <C> <C> <C> <C>
HOTEL ASSETS:
Embassy Suites - Phoenix, AZ $ 3,690,000 1981 12/13/83 35
Plaza Hotel - Tucson, AZ 1,147,000 1971 9/16/86 35
Vagabond Inn - Rosemead, CA 524,000 1974 9/16/86 35
Vagabond Inn - Sacramento, CA 754,000 1975 9/16/86 35
Vagabond Inn - Woodland Hills, CA 754,000 1973 9/16/86 35
Hilton Inn - Gainesville, FL 1,157,000 1974 11/24/86 35
Holiday Inn - Albany, GA 848,000 1989 6/9/89 35
Best Western Riverfront Inn - 1,815,000 1971 12/11/86 35
Savannah, GA
Bay Valley Hotel - Bay City, MI 2,001,000 1973 5/10/84 35
Bourbon Street Hotel and Casino -
Las Vegas, NV 13,918,000 1964/1975 2/01/88 35
King 8 Hotel and Casino - Las 8,225,000 1974/1979 2/1/88 35
Vegas, NV
Best Western Airport Inn -
Albuquerque, NM 1,212,000 1980 9/16/86 35
Best Western Mesilla Valley Inn -
Las Cruces, NM 827,000 1974 9/16/86 35
Columbus Best Western - Columbus, OH 197,000 1971 1/24/92 35
Portland Inn - Portland, OR 898,000 1962 9/16/86 35
Riverside Inn - Portland, OR 807,000 1964 9/16/86 35
Marriott Park Central - Dallas, TX 4,435,000 1972 9/09/88 35
Best Western Airport Inn -
El Paso, TX 815,000 1974 9/16/86 35
Residence Inn - Tysons Corner, VA 1,326,000 1984 7/01/84 35
Days Inn Town Center - Seattle, WA 1,305,000 1957 9/16/86 13
Meany Tower Hotel - Seattle, WA 1,489,000 1932 9/16/86 35
Sixth Avenue Inn - Seattle, WA 1,797,000 1959 9/16/86 13
Tyee Motor Inn - Tumwater, WA 528,000 1961 2/17/87 35
-----------
$50,469,000
Land
Furniture and Equipment 21,429,000
-----------
Total hotels and land under lease $71,899,000
===========
</TABLE>
(1) As of December 31, 1994, real estate and furniture and equipment
have a cost of $189,367,000 for federal tax income purposes.
(2) Land cost includes costs allocated to leasehold interest in land
of $548,000 at the Tucson property.
(3) Land costs represents costs allocated to leasehold interest in land.
(4) Includes reserve for losses discussed in Notes 1 and 3 of Notes to the
Financial Statements.
(5) Substantially all properties are encumbered by the Secured Notes Payable and
Revolving Line of Credit.
(Continued)
F-35
<PAGE> 100
SCHEDULE III (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
A reconciliation of the Trust's investment in real estate, furniture and
fixtures and related accumulated depreciation is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
REAL ESTATE AND FURNITURE
AND FIXTURES:
Balance at beginning of period $224,170,000 $246,356,000 $258,902,000
Additions during period:
Acquisitions
Improvements 2,270,000 1,372,000 9,384,000
U.S. Equity Step-up in Basis 899,000
Reclass of construction
in progress (113,000)
Deductions during period:
Sales of properties (37,832,000) (24,457,000) (21,817,000)
------------ ------------ ------------
Balance at end of Period 188,608,000 224,170,000 246,356,000
============ ============ ============
ACCUMULATED DEPRECIATION:
Balance at beginning of period $94,252,000 $105,338,000 $108,134,000
Additions - depreciation expense 5,205,000 5,630,000 6,753,000
Deductions - sales of properties (27,997,000) (19,085,000) (12,746,000)
Provision for investment losses:
St. Louis, MO 858,000 (1)(3)
Dallas, TX 459,000 (3)
Jacksonville, FL 389,000 (3) 272,000 (3) 1,050,000 (2)(3)
Savannah, GA 300,000 (3) 760,000 (2)(3)
New Port Richey, FL 200,000 (1)(3)
Brunswick, GA 150,000 (1)(3) 440,000 (2)(3)
Fayetteville, NC 50,000 (3) 100,000 (1)(3)
Cumberland, GA 697,000 (2)(3)
Northlake, GA 250,000 (2)(3)
Rosemead, CA 30,000 (3)
------------ ------------ ------------
439,000 2,369,000 3,197,000
------------ ------------ ------------
Balance at end of period $71,899,000 $94,252,000 $105,338,000
============ ============ ============
</TABLE>
(1) Provision for loss was recorded primarily as a result of all cash offers
to sell hotels, previously identified for sale, at amounts lower than
their current net book values.
(2) Provision for loss was recorded as a result of the deterioration of hotels
in the Southeast and the acceptance of offers for the sale of hotels at
amounts less than net book value.
(3) Provision for loss was recorded as a result of the difference between the
net book value of properties which had been identified for sale and their
estimated fair values.
(Continued)
F-36
<PAGE> 101
SCHEDULE III (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
DECEMBER 31, 1994 Costs Gross amount
Subsequent to at which carried
Initial Cost to Company Acquisition at close of period
------------------------- ------------- ---------------------------
HOTEL INVESTORS CORPORATION (1) (1)
(3) Building and Building and Building and
Description Encumbrances Land Improvements Improvements Land Improvements
- ------------------------------------ ------------ ----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
HOTEL ASSETS:
Embassy Suites - Phoenix, AZ $45,000 $ 45,000
Plaza Hotel - Tucson, AZ $ 595,000 $ 978,000
Hilton Inn - Gainesville, FL 39,000 39,000
Holiday Inn - Albany, GA 64,000 64,000
Bay Valley Hotel - Bay City, MI 179,000 179,000
Best Western North - Columbus, OH 61,000 4,000 62,000
Best Western Airport Inn -
Albuquerque, NM 325,000 372,000
Best Western Mesilla Valley Inn -
Las Cruces, NM 252,000
Portland Inn - Portland, OR 2,185,000 78,000 2,185,000 78,000
Riverside Inn - Portland, OR 2,123,000 87,000 26,000 2,124,000 113,000
Best Western Airport Inn -
El Paso, TX 18,000 18,000
Residence Inn - Tysons Corner, VA 33,000 33,000
Days Inn Town Center - Seattle, WA 429,000 4,000 204,000 429,000 208,000
Meany Tower Hotel - Seattle, WA 3,437,000 302,000 66,000 3,437,000 368,000
Sixth Avenue Inn - Seattle, WA 1,515,000 24,000 118,000 1,515,000 142,000
Best Western Inn - Savannah, GA 47,000 47,000
Marriott Hotel - Milwaukee, WI $13,106,000 2,500,000 17,422,000 3,499,000 2,500,000 20,920,000
----------- ----------- ----------- ---------- ----------- -----------
$13,106,000 $13,109,000 $17,839,000 $4,477,000 $13,796,000 $22,316,000
----------- ----------- ----------- ---------- -----------
Land 13,796,000
Furniture and Equipment 15,630,000
----------
Total hotels and land under
lease $51,742,000
===========
</TABLE>
<TABLE>
<CAPTION>
(2)
HOTEL INVESTORS CORPORATION Accumulated
Depreciation & Year of Date
Description Amortization Construction Acquired Life
- ------------------------------------ ------------ ------------ -------- ----
<S> <C> <C> <C> <C>
HOTEL ASSETS:
Embassy Suites - Phoenix, AZ $7,000 1981 12/13/83 35
Plaza Hotel - Tucson, AZ 182,000 1971 9/16/86 35
Hilton Inn - Gainesville, FL 11,000 1974 11/24/86 35
Holiday Inn - Albany, GA 6,000 1989 6/9/89 35
Bay Valley Hotel - Bay City, MI 25,000 1973 5/10/84 35
Best Western North - Columbus, OH 3,000
Best Western Airport Inn -
Albuquerque, NM 80,000 1980 9/16/86 35
Best Western Mesilla Valley Inn -
Las Cruces, NM 25,000 1974 9/16/86 35
Portland Inn - Portland, OR 480,000 1962 9/16/86 35
Riverside Inn - Portland, OR 507,000 1964 9/16/86 35
Best Western Airport Inn -
El Paso, TX 3,000 1974 9/16/86 35
Residence Inn - Tysons Corner, VA 7,000 1984 7/01/84 35
Days Inn Town Center - Seattle, WA 257,000 1957 9/16/86 13
Meany Tower Hotel - Seattle, WA 869,000 1932 9/16/86 35
Sixth Avenue Inn - Seattle, WA 779,000 1959 9/16/86 13
Best Western Inn - Savannah, GA 2,000 1961 2/17/87 35
Marriott Hotel - Milwaukee, WI 1,964,000
----------
$ 5,207,000
Land
Furniture and Equipment 12,058,000
-----------
Total hotels and land under lease $17,265,000
===========
</TABLE>
(1) As of December 31, 1994, real estate and furniture and equipment
have a cost of $51,339,000 for federal tax income purposes.
(2) Includes reserve for losses discussed in Notes 1 and 3 of
Notes to Financial Statements.
(3) Amount excludes $1,225,000 third trust deed note payable to the Trust
and $15,691,000 fourth trust deed note payable. See Note 5 of Notes to
Financial Statements.
(Continued)
F-37
<PAGE> 102
SCHEDULE III (Continued)
REAL ESTATE AND ACCUMULATED DEPRECIATION
A reconciliation of the Corporation's investment in real estate, furniture and
fixtures and related accumulated depreciation is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
REAL ESTATE AND FURNITURE
AND FIXTURES:
Balance at beginning of year ......... $ 54,790,000 $ 51,972,000 $ 51,199,000
Additions during period:
Improvements ...................... 671,000 5,205,000 1,290,000
Acquisitions
Deductions: Reclass .................. 388,000
Sales of properties ............... (3,720,000) (2,775,000) (517,000)
------------ ------------ ------------
Balance at end of year ............... $ 51,741,000 $ 54,790,000 $ 51,972,000
============ ============ ============
ACCUMULATED DEPRECIATION:
Balance at beginning of year ......... $ 17,459,000 $ 15,413,000 $ 12,377,000
Additions -
Depreciation expense .............. 2,956,000 3,602,000 3,373,000
Deductions -
Sales of properties ............... (3,149,000) (1,842,000) (337,000)
Reclass .............................. 286,000
------------ ------------ ------------
Balance at end of year ............... $ 17,266,000 $ 17,459,000 $ 15,413,000
============ ============ ============
</TABLE>
(Concluded)
F-38
<PAGE> 103
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Principal amount
Face Carrying of loans subject
Interest Final Periodic Amount of Amount of to delinquent
Description Rate Maturity Payment Prior Liens Mortgages Mortgages (1) principal or interest
- ------------------------------------- -------- -------- ---------------------- ----------- ------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
STARWOOD LODGING TRUST
First Mortgages:
Vagabond Inns - Stockton and
Modesto, CA 10.00% 1996 (2) no $ 1,995,000 $ 1,780,000
Ramada Inn - Jefferson City, MO 11.00% 1997 (3) no 4,500,000 1,774,000
Days Inn - Albany, GA 10.00% 1996 $12,554 (5) no 1,050,000 745,000
Days Inn - Irving, TX 9.00% 1997 13,276 (8) no 1,650,000 1,509,000
Vantage Hotel - Tucker, GA 9.00% 1998 9,000 (9) no 1,985,000 1,952,000
Sheraton - New Port Richey, FL and
Holiday Inn - Brunswick, GA 8% 2001 (6) no 3,070,000 3,060,000
Holiday Inn - Jacksonville, FL 9% 2001 (7) no 2,300,000 2,299,000
Ramada Inn - Fayetteville, NC 9% 2006 (10) no 800,000 796,000
Second Mortgages:
Viscount Hotel - Dallas, TX 8.75% 2017 1,982 (4) yes 264,000 234,000
Allowance for loan losses (100,000)
----------- ----------- ---------------------
$17,614,000 $14,049,000
=========== =========== =====================
</TABLE>
(1) As of December 31, 1994, the aggregate cost (before allowance for loan
losses) for federal income tax purposes is not significantly different
from that used for book purposes.
(2) The notes provide for monthly payments of interest plus additional annual
payments based on a percentage of the hotels' sales, a portion of which is
applied to principal.
(3) Principal and interest due monthly based on a 30-year amortization
schedule with unpaid principal of $1,750,000 due in January 1997.
(4) Plus contingent interest of 4% of room sales of the hotel.
(5) Principal and interest due monthly based on a 10-year amortization
schedule with unpaid principal of $591,000 due in November 1996.
(6) Principal and interest due monthly based on a 25-year amortization
schedule with unpaid principal of $2,490,000 due in August 2001.
(7) Principal and interest due monthly based on a 30-year amortization
schedule with unpaid principal of $2,156,000 due in December 2001.
(8) Principal and interest due monthly based on a 30-year amortization
schedule with unpaid principal of $1,450,000 due in March 1997.
(9) Principal and interest due monthly based on a 25-year amortization
schedule with unpaid principal of $1,857,000 due in June 1998.
(10) Principal and interest due monthly based on a 12-year amortization
schedule with unpaid principal of $9,000 due in December 2006.
(Continued)
F-39
<PAGE> 104
SCHEDULE IV (Continued)
RECONCILIATION OF MORTGAGE LOANS
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
December 31, December 31, December 31,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of year $11,642,000 $10,010,000 $10,669,000
Additions -
New Mortgage Loans 6,270,000 1,985,000 3,865,000
Deductions -
Principal repayments (2,382,000) (353,000) (957,000)
Amortization of discount
Allowance for loan loss (320,000) (223,000)
Discount for pre-payment (2) (55,000) (3) (90,000) (2)
Cancellation of Note (1) (3,254,000)
Proceeds from foreclosure sale (4) (1,106,000)
----------- ----------- -----------
Balance at end of year $14,049,000 $11,642,000 $10,010,000
=========== =========== ===========
</TABLE>
(1) In January 1992, in lieu of foreclosure, the Trust canceled its note and
released its mortgage on the Columbus Best Western North.
(2) In 1992, the Trust discounted the Note on the Brunswick, Georgia property
as consideration for the early pay-off of the note.
(3) In 1994, the Trust discounted the note on the Spartanburg, South Carolina
property as consideration for the early payoff of the note.
(4) In 1994, the Trust foreclosed on the Merrimack, New Hampshire property.
(Concluded)
F-40
<PAGE> 105
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
2.1 Formation Agreement dated as of November 11, 1994 among the
Trust, the Corporation, Starwood Capital and the Starwood
Partners (incorporated by reference to Exhibit 2 to the
Trust's and the Corporation's Joint Current Report on Form 8-K
dated November 16, 1994).(1)
3.1 Amended and Restated Declaration of Trust of the Trust dated
June 6, 1988, as amended (incorporated by reference to Exhibit
3A to the Trust's and the Corporation's Joint Current Report
on Form 8-K dated January 31, 1995)
3.2 Amendment and Restatement of Articles of Incorporation of the
Corporation (incorporated by reference to Exhibit 3B to the
Trust's and the Corporation's Joint Current Report on Form 8-K
dated January 31, 1995)
3.3 Trustees' Regulations of the Trust, as amended.
3.4 By-laws of the Corporation, as amended.
(1) The Securities and Exchange Commission file numbers of all filings made
pursuant to the Securities Act of 1934, as amended, and referenced
herein are: 1-6828 (Starwood Lodging Trust) and 1-7959 (Starwood Lodging
Corporation).
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
4.1 Pairing Agreement dated June 25, 1986, between the Trust and
the Corporation, as amended.
4.2 Form of Warrant Agreement dated as of September 16, 1986,
between the Trust and City National Bank ("CNB") (incorporated
by reference to Exhibit 4.3 to the Trust's and the
Corporation's Registration Statement on Form S-4 (the "S-4
Registration Statement") filed with the Securities and
Exchange Commission (the "SEC") on August 1, 1986
(Registration No. 33-7694)).
4.3 Form of Warrant Agreement dated as of September 16, 1986,
between the Corporation and CNB (incorporated by reference to
Exhibit 4.3A to the S-4 Registration Statement).
4.4 Form of Warrant Agreement dated as of January 28, 1993, among
the Trust and the Corporation, on the one hand, and John
Hancock Mutual Life Insurance Company, John Hancock Variable
Life Insurance Company, Connecticut Mutual Life Insurance
Company, The First National Bank of Boston and Wells Fargo
Bank, N.A. (collectively the "Lenders"), on the other hand
(Exhibit N to the Credit Agreement listed as Exhibit 10.23
below) (incorporated by reference to Exhibit 10.33 to the
Trust's and the Corporation's Joint Annual Report on Form 10-K
for the year ended December 31, 1992 (the "1992 Form 10-K")).
4.5 First Amendment to Warrant Agreement dated as of February 28,
1994, among the Trust, the Corporation and the Lenders.
10.1 Incentive and Non-Qualified Share Option Plan (1986) of the
Trust (incorporated by reference to Exhibit 10.8 to the Trust
and the Corporation's Joint Annual Report on Form 10-K for the
year ended August 31, 1986 (the "1986 Form 10-K")).(2)
10.2 Corporation Stock Non-Qualified Stock Option Plan (1986) of
the Trust (incorporated by reference to Exhibit 10.9 to the
1986 Form 10-K).(2)
10.3 Stock Option Plan (1986) of the Corporation (incorporated by
reference to Exhibit 10.10 to the 1986 Form 10-K).(2)
10.4 Trust Shares Option Plan (1986) of the Corporation
(incorporated by reference to Exhibit 10.11 to the 1986 Form
10-K).(2)
</TABLE>
- -----------------------
(2) Management contract or compensatory plan or arrangement required to be
filed as an exhibit hereto pursuant to Item 14(c) of Form 10-K.
<PAGE> 107
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
10.5 Form of Share Purchase and Pledge Agreement and related
Promissory Note entered into pursuant to the Share Purchase
Plan (1987) of the Trust, together with forms of Amendments
Nos. 1 and 2 thereto (incorporated by reference to Exhibit
10.10 to the Trust's and the Corporation's Joint Annual Report
on Form 10-K for the year ended December 31, 1990 (the "1990
Form 10-K")).(2)
10.6 Form(s) of Amendment No. 3 to Share Purchase and Pledge
Agreement(s) and related Promissory Note(s) entered into
pursuant to the Share Purchase Plan (1987) of the Trust
(incorporated by reference to Exhibit 10.11 to the Trust's and
the Corporation's Joint Annual Report on Form 10-K for the
year ended December 31, 1991 (the "1991 Form 10-K")).(2)
10.7 Form of Share Purchase and Pledge Agreement and related
Promissory Note entered into pursuant to the Share Purchase
Plan (1987) of the Corporation, together with forms of
Amendments Nos. 1 and 2 thereto (incorporated by reference to
Exhibit 10.11 to the 1990 Form 10-K.)(2)
10.8 Form of Amendment No. 3 to Share Purchase and Pledge
Agreement(s) and related Promissory Note(s) entered into
pursuant to the Share Purchase Plan (1987) of the Corporation
(incorporated by reference to Exhibit 10.13 to the 1991 Form
10-K).(2)
10.9 Amendment No. 1 to Share Purchase Agreement and Note dated as
of March 25, 1992, between the Corporation and Bruce M. Ford
(incorporated by reference to the Exhibit 10.5 to the 1991
Form 10-K).(2)
10.10 Form of Indemnification Agreement dated as of February 3,
1992, between the Trust and each of Messrs. Ronald A. Young,
John D. Morrissey, Graeme W. Henderson, Sherwin L. Samuels and
Jeffrey C. Lapin (incorporated by reference to Exhibit 10.29
to the 1991 Form 10-K).(2)
10.11 Form of Indemnification Agreement dated as of February 3,
1992, between the Corporation and each of Messrs. Ronald A.
Young, Graeme W. Henderson, Bruce M. Ford, Earle M. Jones and
William H. Ling (incorporated by reference to Exhibit 10.30 to
the 1991 Form 10-K).(2)
10.12 Executive Employment Agreement dated as of January 31, 1995,
between the Trust and Jeffrey C. Lapin.(2)
10.13 Executive Employment Agreement dated as of July 19, 1992,
between the Trust and Michael W. Mooney (incorporated by
reference to Exhibit 10.4 to the Trust's and the Corporation's
Joint Current Report on Form 8-K dated September 25, 1992 (the
"September 1992 Form 8-K")).(2)
</TABLE>
<PAGE> 108
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
10.14 First Amendment to executive Employment Agreement dated as of
March 18, 1993, between the Trust and Michael W. Mooney
(incorporated by reference to Exhibit 10.16 to the 1993 Form
10-K).(2)
10.15 Amendment No. 2 to Executive Employment Agreement dated as of
December 15, 1993, between the Trust and Michael W. Mooney
(incorporated by reference to Exhibit 10.17 to the 1993 Form
10-K).(2)
10.16 Executive Employment Agreement dated as of July 19, 1992,
between the Corporation and Kevin E. Mallory (incorporated by
reference to Exhibit 10.5 to the September 1992 Form 8-K).(2)
10.17 First Amendment to executive Employment Agreement dated as of
March 18, 1993, between the Trust and Kevin E. Mallory
(incorporated by reference to Exhibit 10.19 to the 1993 Form
10-K).(2)
10.18 Amendment No. 2 to Executive Employment Agreement dated as of
December 15, 1993, between the Trust and Kevin E. Mallory
(incorporated by reference to Exhibit 10.20 to the 1993 Form
10-K).(2)
10.19 Form of Amended and Restated Lease Agreement entered into as
of January 1, 1993, between the Trust as Lessor and the
Corporation (or a subsidiary) as Lessee (incorporated by
reference to Exhibit 10.19 to the 1992 Form 10-K).
10.20 Exchange Rights Agreement dated as of January 1, 1995 among
the Trust, the Corporation, the Realty Partnership, the
Operating Partnership and the Starwood Partners (incorporated
by reference to Exhibit 2B to the Trust's and the
Corporation's Joint Current Report on Form 8-K dated January
31, 1995).
10.21 Registration Rights Agreement dated as of January 1, 1995
among the Trust, the Corporation and Starwood Capital
(incorporated by reference to Exhibit 2C to the Trust's and
the Corporation's Joint Current Report on Form 8-K dated
January 31, 1995).
10.22 Limited Partnership Agreement for the Realty Partnership among
the Trust and the Starwood Partners dated as of December 15,
1994 (incorporated by reference to Exhibit 2D to the Trust's
and the Corporation's Joint Current Report on Form 8-K dated
January 31, 1995).
10.23 Limited Partnership Agreement for the Operating Partnership
among the Corporation and the Starwood Partners dated as of
December 15, 1994 (incorporated by reference to Exhibit 2E to
the Trust's and the Corporation's Joint Current Report on Form
8-K dated January 31, 1995).
</TABLE>
<PAGE> 109
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
10.24 Amended and Restated Credit Agreement dated as of March 24,
1995 among the Trust and the Realty Partnership on the one
hand, and Bankers Trust Company as successor Collateral Agent
to Wells Fargo Bank, National Association and Merrill Lynch
Mortgage Capital, Inc., as assignee of John Hancock Mutual
Life Insurance Company, John Hancock Variable Life Insurance
Company, Connecticut Mutual Life Insurance Company, The First
National Bank of Boston and Wells Fargo Bank, National
Association.
21. Subsidiaries of the Corporation.
Hotel Investors of Arizona, Inc.
Hotel Investors of Nebraska, Inc.
Hotel Investors of Michigan, Inc.
Hotel Investors of Missouri, Inc.
Hotel Investors Corporation of Nevada
Hotel Investors of Virginia, Inc.
Columbus Operators, Inc.
Lyntex Properties, Inc.
Western Host, Inc.
23. Consent of Independent Accountants.
27. Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.3
TRUSTEES' REGULATIONS
STARWOOD LODGING TRUST
ADOPTED AS OF AUGUST 15, 1969, AS AMENDED THROUGH
JANUARY 31, 1995.
<PAGE> 2
INDEX TO TRUSTEES' REGULATIONS
OF
STARWOOD LODGING TRUST
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
TRUSTEES
<S> <C>
SECTION 1. Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Qualifying Shares not Required . . . . . . . . . . . . . . . . . . 1
SECTION 3. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 4. Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 5. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 6. Place of Meeting. . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 7. Organization Meeting . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 8. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 9. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 10. Adjourned Meetings . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 11. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 12. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 13. Powers and Duties . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 14. Transactions with Interested Persons . . . . . . . . . . . . . . . 3
ARTICLE II
OFFICERS
SECTION 1. Enumeration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2. Powers and Duties of the Chairman . . . . . . . . . . . . . . . . . 7
SECTION 3. Powers and Duties of the President . . . . . . . . . . . . . . . . 7
SECTION 4. Powers and Duties of the Vice Presidents . . . . . . . . . . . . . 7
SECTION 5. Duties of the Secretary . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 6. Duties of the Treasurer . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
SHAREHOLDERS
SECTION 1. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2. Place of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4A. Nomination of Trustees . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5. Adjourned Meetings . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6. Notice of Regular or Special Meetings . . . . . . . . . . . . . . . 10
SECTION 7. Notice of Adjourned Meetings . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 8. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 9. Consent of Absentees . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 10. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 11. No Cumulative Voting . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 12. Conduct of Meetings; Inspectors of Election . . . . . . . . . . . . 12
SECTION 13. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV
MISCELLANEOUS
SECTION 1. Record Dates and Closing of Transfer Books . . . . . . . . . . . . 14
SECTION 2. Inspection of Trust Records . . . . . . . . . . . . . . . . . . . . 15
SECTION 3. Inspection of Trustees' Regulations . . . . . . . . . . . . . . . . 15
SECTION 4. Representation of Shares of Corporations . . . . . . . . . . . . . 15
ARTICLE V
SEAL
ARTICLE VI
AMENDMENTS
SECTION 1. By Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2. By Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VII
DEFINITIONS
</TABLE>
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ARTICLE I
TRUSTEES
SECTION 1. NUMBER. There shall be not less than three (3)
nor more than fifteen (15) Trustees; within such limits, the number of Trustees
may be fixed, increased or decreased from time to time by the Trustees or the
Shareholders.
SECTION 2. QUALIFYING SHARES NOT REQUIRED. Trustees need
not be Shareholders of the Trust.
SECTION 3. QUORUM. A majority of the Trustees shall
constitute a quorum.
SECTION 4. ELECTION. The Trustees shall be divided, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the 1995 Annual Meeting of Shareholders, the term of
office of the second class to expire at the 1996 Annual Meeting of Shareholders
and the term of office of the third class to expire at the 1997 Annual Meeting
of Shareholders, with each Trustee to hold office until his or her successor
shall have been duly elected and qualified. At each Annual Meeting of
Shareholders, commencing with the 1995 Annual Meeting, (i) Trustees elected to
succeed those Trustees whose terms then expire shall be elected for a term of
office to expire at the third succeeding Annual Meeting of Shareholders after
their election, with each Trustee to hold office until his or her successor
shall have been duly elected and qualified, and (ii) if authorized by a
resolution of the Board of Trustees, Trustees may be elected to fill any vacancy
on the Board of Trustees, regardless of how such vacancy shall have been
created.
SECTION 5. VACANCIES. Vacancies occurring among the
Trustees (including vacancies created by increases in number) may be filled by a
majority of the remaining Trustees, though less than a quorum, or by a sole
remaining Trustee, and the person so appointed shall hold office for a term
expiring at the Annual Meeting of Shareholders at which the term of office of
the class to which they have been appointed expires and until his successor is
elected and qualified.
SECTION 6. PLACE OF MEETING. Meetings of the Trustees
shall be held at the principal office of the Trust or at such place within or
without the State of Maryland as is fixed from time to time by resolution of the
Trustees or by written consent of all Trustees. Whenever a place other than the
principal office is fixed by resolution as the place at which future meetings
are to be held, written notice thereof shall be sent not later than the
following business day to all Trustees who were absent from the meeting at which
the resolution was adopted.
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SECTION 7. ORGANIZATION MEETING. Immediately following
each Annual Meeting of Shareholders, a regular meeting of the Trustees shall be
held for the purpose of organizing, electing officers, and transacting other
business. Notice of such meetings need not be given.
SECTION 8. REGULAR MEETINGS. Regular meetings of the
Board of Trustees need not be held.
SECTION 9. SPECIAL MEETINGS. Special meetings of the
Trustees may be called at any time by the President, and the President shall
call a special meeting at any time upon the written request of two (2) Trustees.
Written notice of the time and place of a special meeting shall be given to each
Trustee, either personally or by sending a copy thereof by mail or by telegraph,
charges prepaid, to his address appearing on the books of the Trust or
theretofore given by him to the Trust for the purpose of notice. In case of
personal service, such notice shall be so delivered at least twenty-four (24)
hours prior to the time fixed for the meeting. If such notice is mailed it shall
be deposited in the United States mail in the place in which the principal
office of the Trust is located at least seventy-two (72) hours prior to the time
fixed for the holding of the meeting. If telegraphed, it shall be delivered to
the telegraph company at least forty-eight (48) hours prior to the time fixed
for the holding of the meeting. If notice is not so given by the Secretary, it
may be given by the President, or the Trustees requesting the meeting may issue
the call and give the notice.
SECTION 10. ADJOURNED MEETINGS. A quorum of the Trustees
may adjourn any Trustees' meeting to meet again at a stated day and hour. In the
absence of a quorum a majority of the Trustees present may adjourn from time to
time to meet again at a stated day and hour prior to the time fixed for the next
regular meeting of the Trustees. The motion for adjournment shall be lodged with
the records of the Trust. Notice of the time and place of an adjourned meeting
need not be given to any Trustee if the time and place is fixed at the meeting
adjourned.
SECTION 11. WAIVER OF NOTICE. The transactions of any
meeting of the Trustees, however called and noticed or wherever held, shall be
as valid as though had at a meeting duly held after regular call and notice if a
quorum is present and if either before or after the meeting each of the Trustees
not present signs a written waiver of notice or a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents, or
approvals shall be lodged with the Trust records or made a part of the minutes
of the meeting.
SECTION 12. ACTION WITHOUT MEETING. Any action required
or permitted to be taken by the Trustees may be taken without a meeting, if a
majority of the Trustees shall
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individually or collectively consent in writing to such action. Such written
consent or consents shall be lodged with the records of the Trust. Such action
by written consent shall have the same force and effect as a vote of the
Trustees adopted at a meeting duly called and held.
SECTION 13. POWERS AND DUTIES. The powers and duties of
the Trustees, in addition to the powers and duties set forth in the Declaration,
are:
(a) Selection and Removal of Officers, Agents and Employees. To
select all the other officers, agents and employees of the Trust, to
remove them at pleasure, either with or without cause, to prescribe for
them duties consistent with the Declaration and the Trustees'
Regulations, and to fix their compensation.
(b) Authorization of Signatures. From time to time to designate
the person or persons authorized to sign or endorse checks, drafts, or
other orders for the payment of money, issued in the name of or payable
to the Trust.
(c) Fixing Principal Office and Place of Meetings. From time to
time to change the location of the principal office of the Trust and
from time to time to designate any place within or without the State of
Maryland as the place at which meetings of Trustees or of the
Shareholders shall be held.
(d) Committees. To appoint as executive committee and other
committees, and to delegate to the executive committee any of the
powers and authority of the Trustees over the business and affairs of
the Trust, except the power to declare dividends and to adopt, amend or
repeal Trustees' Regulations. It is intended that the executive
committee will review applications for loans approved by the Advisor
and suggest changes in their terms; grant final approval subject to the
stated conditions of the Board of Trustees, to applications which have
been preliminarily approved by the Trustees: modify loan commitments
when insubstantial changes are necessary; approve borrowings for terms
of less than one year; and hire and set salaries for employees of the
Trust. The Trustees shall have the power to prescribe the manner in
which proceedings of the executive committee and other committees shall
be conducted. The executive committee shall be composed of two or more
Trustees.
(e) General Powers. Generally to exercise such other powers as
are usually vested in directors of corporations organized under the
laws of the State of Maryland.
SECTION 14. TRANSACTIONS WITH INTERESTED PERSONS. (a)
Notwithstanding anything to the contrary contained in these
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Trustees' Regulations, in addition to any affirmative vote required either by
law, the Partnership Agreement, the Declaration of Trust of the Trust or these
Trustees' Regulations, any Transaction involving the Trust or any of its
subsidiaries or the Realty Partnership shall require the affirmative vote of a
majority of the Trustees ("Disinterested Members") on the Board of Trustees of
the Trust who are not employees, officers, directors, Affiliates or Associates
of the Interested Person who or which is a party to the Transaction.
(b) As used in this Section 14:
(i) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of
1934, as in effect on January 1, 1995.
(ii) A Person shall "Beneficially Own" and be the
"Beneficial Owner" of any Paired Shares or Units:
(A) which such Person or any of its Affiliates or
Associates beneficially owns, directly or indirectly,
within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as in effect on January 1, 1995; or
(B) which such Person or any of its Affiliates or
Associates has (I) the right to acquire (whether such
right is exercisable immediately or only after the passage
of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or
(II) the right to vote pursuant to any agreement,
arrangement or understanding (but neither such Person nor
any such Affiliate or Associate shall be deemed to be the
Beneficial Owner of any Paired Shares or Units solely by
reason of a revocable proxy granted for a particular
meeting of shareholders, pursuant to a public solicitation
of proxies for such meeting, and with respect to which
Paired Shares or Units neither such Person nor any such
Affiliate or Associate is otherwise deemed the Beneficial
Owner); or
(C) which are beneficially owned, directly or
indirectly, within the meaning of the Rule 13d-3 under the
Securities Exchange Act of 1934, as in effect on January
1, 1995, by any other Person with which such Person or any
of its Affiliates or Associates has any agreement,
arrangement or
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understanding for the purpose of acquiring, holding,
voting (other than solely by reason of a revocable proxy
as described in subparagraph (B) above) or disposing of
any Paired Shares or Units.
(iii) "Corporation" shall mean Starwood Lodging
Corporation (formerly Hotel Investors Corporation), a Maryland
corporation.
(iv) "Interested Person" shall mean any Person who or
which is the Beneficial Owner, directly or indirectly, of 5% or
more of the outstanding Paired Shares or the outstanding Units
or who or which is an Affiliate or Associate of the Trust, the
Corporation or either of the Partnerships. For the purposes of
determining whether a Person is an Interested Person, the
number of Paired Shares or Units deemed to be outstanding shall
include Paired Shares or Units deemed owned through application
of paragraphs (A), (B) and (C) of paragraph (ii) above but
shall not include any other unissued Paired Shares or Units
which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants
or options, or otherwise.
(v) "Paired Shares" shall mean the shares of common stock
of the Corporation and the shares of beneficial interest of the
Trust which are paired pursuant to the Pairing Agreement dated
June 25, 1980 between the Trust and the Corporation, as it may
be amended from time to time.
(vi) "Partnership Agreement" shall mean the Limited
Partnership Agreement of the Realty Partnership, as it may be
amended from time to time.
(vii) "Partnerships" shall mean the Realty Partnership and
SLC Operating Limited Partnership, a Delaware limited
partnership.
(viii) "Person" shall mean any individual, limited
partnership, general partnership, corporation, limited
liability company or any other firm or entity.
(ix) "Realty Partnership" shall mean SLT Realty Limited
Partnership, a Delaware limited partnership.
(x) "Transaction" shall mean any contract, sale, lease,
exchange, mortgage, transfer or disposition to or with, or any
other transaction with, any Interested Person, including,
without limitation, any election with respect to the method of
payment for an exchange of Units for Paired Shares, or any
action to be taken
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by the Trust, the Corporation or the Partnership with respect
to the senior debt of the Realty Partnership.
(xi) "Units" shall have the meaning set forth in the
Partnership Agreement.
(d) A majority of the Disinterested Members shall have the
power and duty to determine, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine compliance
with this Section 14, including, without limitation, (i) whether a
Person is an Interested Person, (ii) the number of Paired Shares or
Units that any Person Beneficially Owns, and (iii) whether a Person is
an Affiliate or Associate of another. A majority of the Disinterested
Members shall have the right to demand that any Person who is
reasonably believed to be an Interested Person (or who holds of record
Paired Shares or Units that any Interested Person Beneficially Owns)
supply the Corporation with complete information as to (i) the record
owner(s) of all Paired Shares or Units that such Person who is
reasonably believed to be an Interested Person Beneficially Owns, (ii)
the number of, and class or series of, Paired Shares or Units that such
Person who is reasonably believed to be an Interested Person
Beneficially Owns and the number(s) of the certificate(s), if any,
evidencing such Paired Shares or Units and (iii) any other factual
matter relating to the applicability or effect of this Section 14, as
may be reasonably requested of such Person, and such Person shall
furnish such information within 10 days after receipt of such demand.
(e) Nothing contained in this Section 14 shall be construed to
relieve any Interested Person from any fiduciary obligation imposed by
law.
(f) Notwithstanding anything to the contrary contained in these
Trustees' Regulations this Section 14 may be amended or repealed only
by a majority of Trustees on the Board of Trustees of the Trust who are
not employees, officers, Affiliates or Associates of the Trust, the
Corporation, the Partnerships or any Interested Person.
ARTICLE II
OFFICERS
SECTION 1. ENUMERATION. The officers of the Trust shall
be a Chairman, a President, one or more Vice-Presidents, a Secretary, a
Treasurer, and such other officers as are elected by the Trustees. Officers
shall be elected by and shall hold office
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at the pleasure of the Trustees. Any two or more offices, except those of
Chairman and President, President and Secretary, or President and Assistant
Secretary, may be held by the same person.
SECTION 2. POWERS AND DUTIES OF THE CHAIRMAN. The
Chairman shall, if present, preside at all meetings of the Trustees and of the
Shareholders and exercise and perform such other powers and duties as may be
from time to time assigned to him by the Trustees. The Chairman shall have the
power and authority to execute all written instruments on behalf of the Trust of
every nature whatsoever. He shall be, ex officio, a member of all standing
committees.
SECTION 3. POWERS AND DUTIES OF THE PRESIDENT. The
President shall be the chief executive officer of the Trust and, subject to the
control of the Trustees, shall have general supervision, direction and control
of the business of the Trust and its employees and shall have such other powers
and duties as are usually vested in the office of president and chief executive
officer of a corporation. The President shall have the power and authority to
execute all written instruments on behalf of the Trust of every nature
whatsoever. In the absence of the Chairman, he shall preside at all meetings of
the Trustees and of the Shareholders. He shall be, ex officio, a member of all
standing committees.
SECTION 4. POWERS AND DUTIES OF THE VICE PRESIDENTS. In
the absence or disability of the President, the Vice-Presidents in order of
their rank as fixed by the Trustees or, if not ranked, the Vice-President
designated by the Trustees, shall perform all of the duties of the President and
when so acting shall have all the powers of and be subject to all of the
restrictions upon the President. The Vice-Presidents shall have the power and
authority to execute on behalf of the Trust all written instruments of every
nature whatsoever. The Vice-Presidents shall have such other powers and perform
such other duties as are prescribed for them from time to time by the Trustees.
SECTION 5. DUTIES OF THE SECRETARY. The Secretary shall
(a) Minutes. Keep full and complete minutes of the meetings of
the Trustees and of the meetings of the Shareholders and give notice,
as required, of all such meetings;
(b) Trust Seal. Keep the seal of the Trust and affix the same
to all instruments executed by the Trust which require it;
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(c) Records. Maintain custody of and keep the records of the
Trust except such as are in the custody of the Treasurer;
(d) General Duties. Generally, perform all duties which pertain
to his office and which are required by the Trustees.
SECTION 6. DUTIES OF THE TREASURER. The Treasurer shall
(a) Books of Account. Maintain custody of and keep the books of
account of the Trust;
(b) Receipt, Deposit and Disbursement of Funds. Receive,
deposit and disburse funds belonging to the Trust;
(c) General Duties. Generally, perform all duties which pertain
to his office and which are required by the Trustees.
ARTICLE III
SHAREHOLDERS
SECTION 1. QUORUM. The presence in person or by proxy of
Persons entitled to vote a majority of the voting shares at any meeting of
Shareholders shall constitute a quorum. The Shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment notwithstanding the withdrawal of enough Shareholders to leave
less than a quorum.
SECTION 2. PLACE OF MEETING. Meetings of the
Shareholders shall be held at the principal office of the Trust or at another
convenient location within or without the State of Maryland as is designated by
the Trustees or by the written consent of all Shareholders entitled to vote
thereat, given either before or after the meeting and filed with the Secretary
of the Trust.
SECTION 3. ANNUAL MEETING. A regular annual meeting of
the Shareholders shall be held subsequent to the delivery to all Shareholders
entitled to vote thereat of the annual report for the preceding fiscal year. The
annual meeting shall be held no later than the expiration of six calendar months
following the end of each preceding fiscal year beginning with the first full
fiscal year on such business day and at such time as shall be designated by the
Trustees.
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SECTION 4. SPECIAL MEETINGS. Special meetings of the
Shareholders may be held at any time for any purpose or purposes. Such special
meetings may be called at any time by the President or by the Trustees or by any
two or more Trustees, or by one or more Shareholders holding not less than 25%
of the outstanding Shares of the Trust.
SECTION 4A. NOMINATION OF TRUSTEES. Nominations of
Persons for election as Trustees at an annual meeting of the Shareholders may
be made at such meeting only by or at the direction of the Trustees, by any
nominating committee or person(s) appointed by the Trustees, or by any
Shareholder entitled to vote for the election of Trustees at the meeting who
complies with the notice procedures set forth in this Section 4A.
Any Shareholder entitled to vote for the election of Trustees
may nominate one or more Persons for election as Trustee at a meeting of
Shareholders only if written notice of such Shareholder's intent to make such
nomination or nominations has been delivered personally to the Secretary at, or
been mailed to the Secretary and received at, the principal executive offices of
the Trust not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event that less than 60 days' notice or prior
public disclosure of the date of meeting is given or made to Shareholders,
notice by the Shareholder to be timely must be so delivered or received not
later than the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever first
occurs. Such Shareholder's notice to the Secretary shall set forth: (i) the name
and address of the Shareholder who intends to make the nominations(s) and of the
Person or Persons to be nominated; (ii) the class and number of Shares that are
held of record, beneficially owned and represented by proxy by such Shareholder
as of the record date for the meeting (if such date then shall have been made
publicly available) and as of the date of such notice; (iii) a representation
that such Shareholder intends to appear in person or by proxy at the meeting to
nominate the Person or Persons specified in the notice; (iv) a description of
any contract, arrangement or understanding between such Shareholder and each
nominee and any other Person or Persons (naming such Person or Persons) pursuant
to which the nomination or nominations are to be made by such Shareholder; (v)
such other information regarding each nominee proposed by such Shareholder as
would be required to be disclosed in a proxy statement used in a solicitation of
proxies for the election of directors which solicitation was subject to the
rules and regulations of the Securities and Exchange Commission (the "SEC")
under Section 14 of the Securities Exchange Act of 1934 (the "Exchange Act"), as
from time to time amended; and (vi) the consent of each nominee to serve as a
Trustee if so elected.
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No Person shall be eligible for election as a Trustee unless as
nominated in accordance with the procedures set forth herein.
SECTION 5. ADJOURNED MEETINGS. Any meeting of
Shareholders, whether or not a quorum is present, may be adjourned from day to
day or from time to time by the vote of a majority of the Shares the holders of
which are either present at the meeting or represented by proxy. The motion for
adjournment shall be lodged with the records of the Trust.
SECTION 6. NOTICE OF REGULAR OR SPECIAL MEETINGS. Written
notice specifying the place, day and hour of any regular or special meeting, the
general nature of the business to be transacted thereof, to the extent required
by law, and all other matters required by law shall be given to each Shareholder
of record entitled to vote, either personally or by sending a copy thereof by
mail or telegraph to his address appearing on the books of the Trust or
theretofore given by him to the Trust for the purpose of notice or, if no
address appears or has been given, addressed to the place where the principal
office of the Trust is situated. It shall be the duty of the Secretary to give
notice of each Annual Meeting of the Shareholders at least ten (10) days and not
more than forty (40) days before the date on which it is to be held. If notice
is not so given by the Secretary, it may be given by any other officer.
Within twenty (20) days after the Trust receives a Shareholder
request for the calling of a special meeting, the Trustees shall designate the
date on which such meeting is to be held and the Secretary shall give notice of
such meeting. Any such special meeting shall be held on a date not earlier than
the twentieth (20th) day, and not later than the ninetieth (90th) day, following
the date on which such notice is given. If the date of such special meeting is
not so fixed and notice thereof given within seven (7) days after the date such
Shareholder request is received by the Trust, the date of such meeting may be
fixed by the Person or Persons requesting the meeting, in which event notice of
such meeting shall be given by such Person or Persons not less than seven (7),
nor more than sixty (60), days before the date on which the meeting is to be
held.
Notwithstanding the foregoing, if as of the date a Shareholder
request for a special meeting is received or within twenty (20) days thereafter,
the Trustees have called or call a meeting of Shareholders (whether annual or
special) for a purpose or purposes other than the purpose(s) stated in the
Shareholder request, the Trustees need not call, and the Secretary need not give
notice of, a separate and additional meeting of Shareholders for the purpose(s)
stated in the Shareholder request if (i) the Trustees determine in good faith
that calling such a separate and additional meeting would require the Trust to
incur undue cost and expense, and (ii) the Secretary notifies both the
requesting
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Shareholder(s) and all other Shareholders entitled to vote, within twenty (20)
days after the Trust receives the Shareholder request, that the matter(s)
proposed by the requesting Shareholder(s) to be considered at a special meeting
may be proposed and considered at the meeting otherwise called by the Trustees.
In addition, if not later than the thirtieth (30th) day prior to the date on
which any special meeting called by the Trustees pursuant to a Shareholder
request is to be held, the Trustees determine in good faith to present for
consideration by the Shareholders of the Trust one or more matters other than
those proposed by the requesting Shareholder(s) to be considered, the Trustees
may postpone the previously called special meeting for a period of up to sixty
(60) days following the date of which notice of such postponement is given.
Notice of such postponement and of the additional matter(s) to be considered at
such meeting shall be given by the Secretary to all Shareholders entitled to
vote at the meeting not later than the thirtieth (30th) day prior to the
originally scheduled meeting date.
For purposes of this Section 6, a Shareholder request shall be
deemed received by the Trust when delivered to an officer of the Trust in person
or on the date on which such request is mailed to the Trust, duly addressed to
its principal office.
SECTION 7. NOTICE OF ADJOURNED MEETINGS. It shall not be
necessary to give any notice of the time and place of any adjourned meeting or
of the business to be transacted thereat other than by announcement at the
meeting at which such adjournment is taken.
SECTION 8. PROXIES. The appointment of a proxy or
proxies shall be made by an instrument in writing executed by the Shareholder
or his duly authorized agent and filed with the Secretary of the Trust. No
proxy shall be valid after the expiration of eleven (11) months from the date
of its execution unless the Shareholder executing it specifies therein the
length of time for which it is to continue in force, which is no case shall
exceed seven (7) years from the date of its execution. At a meeting of
Shareholders all questions concerning the qualification of voters, the validity
of proxies, and the acceptance or rejection of votes, shall be decided by the
secretary of the meeting unless inspectors of election are appointed pursuant
to Section 11 of this Article III, in which event such inspectors shall pass
upon all questions and shall have all other duties specified in said section.
SECTION 9. CONSENT OF ABSENTEES. The transactions of any
meeting of Shareholders, either annual, special, or adjourned, however called
and noticed, shall be as valid as though had at a meeting duly held after the
regular call and notice if a quorum is present and, if either before or after
the meeting, each Shareholder entitled to vote, not present in person
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or by proxy, signs a written waiver of notice or a consent to the holding of
such meeting or an approval of the minutes thereof. All such waivers, consents
or approvals shall be lodged with the Trust records or made a part of the
minutes of the meeting.
SECTION 10. VOTING RIGHTS. If no future date is fixed
for the determination of the Shareholders entitled to vote at any meeting of
Shareholders, only Persons in whose names Shares entitled to vote stand on the
stock records of the Trust on the day of any meeting of Shareholders shall be
entitled to vote at such meeting
SECTION 11. NO CUMULATIVE VOTING. Shareholders shall
not be entitled to cumulate votes in any elections of Trustees of the Trust.
SECTION 12. CONDUCT OF MEETINGS; INSPECTORS OF ELECTION.
The presiding officer at a meeting of the Shareholders shall have all power and
authority vested in a presiding officer by law or practice, including, without
limitation, the authority to determine whether the nomination of any person is
made in compliance with applicable provisions of these Trustees' Regulations
(and to refuse to acknowledge the nomination of any Person not made in such
compliance); to determine whether any item of business proposed to be brought
before the meeting has been properly brought (and to declare that any business
not so brought shall be disregarded and not transacted); to establish rules
pertaining to reasonable time limits and the amount of time that may be taken up
in remarks by any Shareholder or group of Shareholders and otherwise pertaining
to the conduct of the meeting; and to otherwise decide all matters relating to
the conduct of the meeting. The presiding officer may appoint a parliamentarian
and one presiding officer may appoint a parliamentarian and one or more
sergeants-at-arms. The parliamentarian may advise the presiding officer upon
matters relating to the conduct of the meeting. The sergeant- or
sergeants-at-arms shall have authority to take any and all actions that such
Persons deem necessary or appropriate to assure that the meeting is conducted
with decorum and in an orderly manner, including, without limitation, authority
to expel or cause the expulsion of any Person who the presiding officer
determines is failing to comply with the rules concerning the conduct of, or is
otherwise disrupting, the meeting.
In advance of any meeting of the Shareholders, the Trustees may
appoint any one or more Persons (other than nominees for office) to act as
inspectors of election at the meeting or any adjournment thereof. If no
inspector of election is so appointed, the presiding officer of the meeting may,
and on the request of any Shareholder or his proxy shall, appoint one or more
such inspectors of election. The number of inspectors shall be either one (1) or
three (3), as determined by the presiding officer; provided, however, that if
such inspector(s) is or are
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to be appointed at the meeting on the request of one or more Shareholders or
proxies, the holders of a majority of Shares present (in person or by duly
executed proxy) shall determine whether one (1) or three (3) inspectors are to
be appointed. If the Person appointed as inspector or election fails to appear
at the meeting or fails or refuses to act as inspector, the presiding officer of
the meeting may, and upon the request of any Shareholder or his proxy shall,
appoint a Person to fill that vacancy. The inspectors of election shall:
(a) Determine the number of Shares outstanding and the voting
power of each, the Shares represented at the meeting, the existence of
a quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Count and tabulate all vote or consents;
(d) Determine and report to the Trust the results of the
voting; and
(e) Do any other acts that may be proper to conduct the
election or vote with fairness to all Shareholders.
On the request of the presiding officer of the meeting or of
any Shareholder or his proxy, the inspector(s) of election shall make a report
in writing of any question or other matter determined by him or them and execute
a certificate of any facts found by him or them.
If there are three (3) inspectors of election, the decision,
act, report or certificate of a majority shall be effective in all respects as
the decision, act, report or certificate of the inspectors."
SECTION 13. BUSINESS. Except as may be otherwise
provided by applicable law, the only business that shall be conducted at any
meeting of the Shareholders (other than matters incident to the conduct of the
meeting) shall be business brought before the meeting by or at the direction
of the Trustees or by a Shareholder who complies with the procedures set forth
in this Section 13.
Except as otherwise provided by Section 4A of Article I of
these Trustees' Regulations or by applicable law, the only business that shall
be conducted at any meeting of the Shareholders shall (i) have been specified in
the notice of the meeting (or any supplement thereto) given by or at the
direction of the Trustees, (ii) otherwise be brought before such meeting by or
at the direction of the Trustees or the presiding officer of the meeting, or
(iii) be otherwise properly brought before the
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meeting by or on behalf of a Shareholder who shall have been a Shareholder of
record on the record date for such meeting, who shall continue to be entitled to
vote thereat, and who shall have complied with the procedures set forth in the
remainder of this Section 13. In addition to any and all other applicable
requirements, for business to be properly brought before a meeting of the
Shareholders by a Shareholder, the Shareholder must have given timely notice
thereof in writing to the Secretary. To be timely, a Shareholder's notice must
be delivered personally or mailed to and received at, the principal executive
offices of the Trust not less than 50 days nor any more than 75 days prior to
the meeting of Shareholders at which such business is to be conducted; provided,
however, that in the event that less than 60 days' notice or prior public
disclosure of the date of the meeting is given or made to Shareholders, notice
by the Shareholder to be timely must be so delivered or received not later than
the 10th day following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made, whichever first occurs.
A Shareholder's notice to the Secretary shall set forth (i) a
description of each item of business the Shareholder proposes to bring before
the meeting and the wording of the proposal, if any, to be submitted for a vote
of the Shareholders with respect thereto; (ii) the name and address of the
Shareholder; (iii) the class and number of Shares held of record, owned
beneficially and represented by proxy by such Shareholder as of the record date
for the meeting (if such date shall then have been publicly disclosed) and as of
the date of such notice; and (iv) all other information that would be required
to be included in a proxy statement filed with the SEC if, with respect to any
such item of business, such Shareholder were a participant in a solicitation
subject to Section 14 of the Exchange Act.
ARTICLE IV
MISCELLANEOUS
SECTION 1. RECORD DATES AND CLOSING OF TRANSFER BOOKS.
From time to time the Trustees may fix a future date, not exceeding fifty (50)
days preceding the date of any meeting of Shareholders or the date fixed for the
payment of any dividend or distribution or for the allotment of rights or when
any change or conversion or exchange of Shares is to go into effect, as the
record date for the determination of the Shareholders entitled to notice of and
to vote at any such meeting or to receive any such dividend or distribution or
any allotment of rights or to exercise the rights with respect to any such
change, conversion or exchange of Shares. If a time is so fixed only
Shareholders of record on the date so fixed shall be entitled to notice of and
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to vote at such meeting or to receive such dividend or distribution or allotment
of rights or to exercise such rights, as the case may be, notwithstanding any
transfer of Shares on the books of the Trust after the record date so fixed.
SECTION 2. INSPECTION OF TRUST RECORDS. The share
register or duplicate share register, the books of account, and the minutes of
the proceedings of the Shareholders and Trustees shall be open to inspection
upon the written demand of any Shareholder to the same extent as is permitted by
the laws of Maryland for the inspection of corporate records by corporate
shareholders. Such inspection may be made in person or by an agent or attorney
and shall include the right to make extracts. Demand of inspection shall be made
in writing upon the President, Secretary or Assistant Secretary of the Trust.
SECTION 3. INSPECTION OF TRUSTEES' REGULATIONS. The
Trustees shall keep at the principal office for the transaction of business of
the Trust the original or a copy of the Trustees' Regulations as amended or
otherwise altered to date, certified by the Secretary, which shall be open to
inspection by the Shareholders at all reasonable times during office hours.
SECTION 4. REPRESENTATION OF SHARES OF CORPORATIONS. The
Chairman, the President or any Vice-President and the Secretary or Assistant
Secretary of the Trust, acting either in person or by a proxy or proxies
designated in a written instrument duly executed by said officers, are
authorized to vote, represent, and exercise on behalf of the Trust all rights
incident to any shares of any corporation standing in the name of the Trust.
ARTICLE V
SEAL
The Trust shall have a seal containing the words: "Starwood
Lodging Trust, Maryland, 1969."
ARTICLE VI
AMENDMENTS
SECTION 1. BY SHAREHOLDERS. Except for any change for
which a larger vote is required, these Trustees' Regulations may be amended or
repealed or new or additional Trustees'
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Regulations may be adopted by the vote or written consent of Shareholders
entitled to exercise a majority of the voting power of the Trust.
SECTION 2. BY TRUSTEES. These Trustees' Regulations may
be amended or repealed or new or additional Trustees' Regulations may be adopted
by the vote or written consent of the Trustees. The power hereby delegated may
be revoked by the vote or written consent of Shareholders entitled to exercise a
majority of the voting power of the Trust.
ARTICLE VII
DEFINITIONS
All terms defined in the Declaration of Trust of Starwood
Lodging Trust dated as of August 15, 1969 as amended from time to time shall
have the same meaning when used in these Trustees' Regulations.
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EXHIBIT 3.4
BY-LAWS OF
STARWOOD LODGING CORPORATION
(AS AMENDED THROUGH JANUARY 31, 1995)
ARTICLE I
OFFICES
In addition to the required principal office, the Corporation may have such
offices at such places, both within and without the State of Maryland, as the
Board of Directors from time to time determines or as the business of the
Corporation from time to time requires.
ARTICLE II
MEETINGS OF THE STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of the stockholders shall be
held on such date and at such time during the period from September 1 to
September 30 of each year and at such place in the United States (within or
without the State of Maryland) as is designated from time to time by the Board
of Directors and stated in the notice of the meeting. At each annual meeting the
stockholders shall elect a Board of Directors and shall transact such other
business as may properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Unless otherwise prescribed by law, the
Articles of Incorporation or these By-Laws, special meetings of the stockholders
for any purpose or purposes may be called by the Board of Directors, the
President or any two or more Directors, or by the Secretary upon the written
request of stockholders owning not less than twenty-five percent (25%) of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote at any such meeting. Special meetings shall be held at such place in the
United States (within or without the State of Maryland) as is designated by the
Board of Directors and stated in the notice of the meeting. Requests for special
meetings shall state the purpose or purposes of the proposed meeting. Unless
requested by stockholders
<PAGE> 2
entitled to cast a majority of all votes entitled to be cast at the meeting, a
special meeting need not be called to consider any matter which is substantially
the same as a matter voted on at any special meeting of the stockholders held
during the preceding twelve (12) months.
Within twenty (20) days after the Corporation receives a stockholder
request for the calling of a special meeting, the Board of Directors shall
designate the date on which such meeting is to be held and the Secretary shall
give notice of such meeting. Any such special meeting shall be held on a date
not earlier than the twentieth (20th) day, and not later than the ninetieth
(90th) day, following the date on which such notice is given.
Notwithstanding the foregoing, if as of the date a stockholder request for
a special meeting is received or within twenty (20) days thereafter, the Board
of Directors has called or calls a meeting of stockholders (whether annual or
special) for a purpose or purposes other than the purpose(s) stated in the
stockholder request, the Board of Directors need not call, and the Secretary
need not give notice of, a separate and additional meeting of stockholders if
(i) the Board of Directors determines in good faith that calling such a separate
and additional meeting would require the Corporation to incur undue cost and
expense, and (ii) the Secretary notifies both the requesting stockholder(s) and
all other stockholders entitled to vote, within twenty (20) days after the
Corporation receives the stockholder request, that the matter(s) proposed by the
requesting stockholder(s) to be considered at a special meeting may be proposed
and considered at the meeting otherwise called by the Board of Directors. In
addition, if not later than the thirtieth (30th) day prior to the date on which
any special meeting called by the Board of Directors pursuant to a stockholder
request is to be held, the Board of Directors determines in good faith to
present for consideration by the stockholders of the Corporation one or more
matters other than those proposed by the requesting stockholder(s) to be so
considered, the Board of Directors may postpone the previously called special
meeting for a period of up to sixty (60) days following the date on which notice
of such postponement is given. Notice of such postponement and of the additional
matter(s) to be considered at such meeting shall be given by the Secretary not
later than the thirtieth (30th) day prior to the originally scheduled meeting
date.
SECTION 3. PRESIDING OFFICERS. Meetings of the stockholders shall be
presided over by the Chairman of the Board, or, if the Chairman is not present,
by the President, or, if the President is not present, by a Vice President, or,
if a Vice President is not present, such person who is chosen by the Board of
Directors, or, if none, by a person to be chosen at the meeting by stockholders
present in person or by proxy who own a
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<PAGE> 3
majority of the shares of capital stock of the Corporation entitled to vote and
be represented at such meeting. The secretary of meetings shall be the Secretary
of the Corporation, or, if the Secretary is not present, an Assistant Secretary,
or, if an Assistant Secretary is not present, such person as may be chosen by
the Board of Directors, or, if none, such person who is chosen by the chairman
of the meeting.
The presiding officer at a meeting of the stockholders shall have all power
and authority vested in a presiding officer by law or practice, including,
without limitation, the authority to determine whether the nomination of any
person is made in compliance with applicable provisions of these By-Laws (and to
refuse to acknowledge the nomination of any person not made in such compliance);
to determine whether any item of business proposed to be brought before the
meeting has been properly brought (and to declare that any business not so
brought shall be disregarded and not transacted); to establish rules pertaining
to reasonable time limits and the amount of time that may be taken up in remarks
by any stockholder or group of stockholders and otherwise pertaining to the
conduct of the meeting; and to otherwise decide all matters relating to the
conduct of the meeting. The presiding officer may appoint a parliamentarian and
one or more sergeants-at-arms. The parliamentarian may advise the presiding
officer upon matters relating to the conduct of the stockholders' meeting. The
sergeant- or sergeants-at-arms shall have authority to take any and all actions
that such persons deem necessary or appropriate to assure that the meeting is
conducted with decorum and in an orderly manner, including, without limitation,
authority to expel or cause the expulsion of any person who the presiding
officer determines is failing to comply with the rules concerning the conduct
of, or is otherwise disrupting, the meeting.
SECTION 4. ADJOURNMENTS. Whether or not a quorum is present at any meeting
of the stockholders, the stockholders entitled to vote thereat present in person
or by proxy shall have the power to adjourn the meeting from time to time,
without notice of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. Any business which
might have been transacted at a meeting as originally called may be transacted
at any meeting held after adjournment as provided in this Section 4, if a quorum
is present in person or by proxy at such reconvened meeting.
SECTION 5. PROXIES. Whenever the vote or consent of stockholders is
required or permitted, such vote or consent may be given by a stockholder in
person or by proxy. The appointment of a proxy or proxies shall be made by an
instrument in writing executed by the stockholder or his duly authorized agent
and filed with the Secretary of the Corporation. No proxy shall be valid after
the expiration of eleven (11) months from the date of its execution unless the
stockholder executing it specifies
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therein the length of time for which it is to continue in force. At a meeting of
stockholders all questions concerning the qualification of voters, the validity
of proxies, and the acceptance or rejection of votes, shall be decided by the
secretary of the meeting unless inspectors of election are appointed pursuant to
Section 6 of this Article II, in which event such inspectors shall pass upon all
questions and shall have all other duties specified in said section.
SECTION 6. INSPECTORS OF ELECTION. In advance of any meeting of the
stockholders, the Board of Directors may appoint any one or more persons (other
than nominees for office) to act as inspectors of election at the meeting or any
adjournment thereof. If no inspector of election is so appointed, the presiding
officer of the meeting may, and on the request of any stockholder or his proxy
shall, appoint one or more such inspectors of election. The number of inspectors
shall be either one (1) or three (3), as determined by the presiding officer;
provided, however, that if such inspector(s) is or are to be appointed at the
meeting on the request of one or more stockholders or proxies, the holders of a
majority of the total number of shares represented at the meeting (in person or
by duly executed proxy) shall determine whether one (1) or three (3) inspectors
are to be appointed. If any person appointed as inspector of election fails to
appear at the meeting or fails or refuses to act as inspector, the presiding
officer of the meeting may, and upon the request of any stockholder or his proxy
shall, appoint a person to fill that vacancy. The inspectors of election shall:
(a) Determine the number of shares of capital stock outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Count and tabulate all votes or consents;
(d) Determine and report to the Corporation the results of the voting; and
(e) Do any other acts that may be proper to conduct the election or vote
with fairness to all stockholders.
On request of the presiding officer of the meeting or of any stockholder or
his proxy, the inspector(s) of election shall make a report in writing of any
question or other matter determined by him or them and execute a certificate of
any facts found by him or them.
If there are three (3) inspectors of election, the decision, act, report or
certificate of a majority shall be
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effective in all respects as the decision, act, report or certificate of the
inspectors.
SECTION 7. BUSINESS. Except as may be otherwise provided by applicable law,
the only business that shall be conducted at any meeting of the stockholders
(other than matters incident to the conduct of the meeting) shall be business
brought before the meeting by or at the direction of the Board of Directors or
by a stockholder who complies with the procedures set forth in this Section 7.
Except as otherwise provided by Section 1A of Article III of these By-Laws
or by applicable law, the only business that shall be conducted at any meeting
of the stockholders shall (i) have been specified in the notice of the meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) otherwise be brought before such meeting by or at the direction
of the Board of Directors or the presiding officer of the meeting, or (iii) be
otherwise properly brought before the meeting by or on behalf of a stockholder
who shall have been a stockholder of record on the record date for such meeting,
who shall continue to be entitled to vote thereat, and who shall have complied
with the procedures set forth in the remainder of this Section 7. In addition to
any and all other applicable requirements, for business to be properly brought
before a meeting of the stockholders by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary. To be timely, a
stockholder's notice must be delivered personally or mailed to the received at,
the principal executive offices of the Corporation not less than 50 days nor
more than 75 days prior to the meeting of stockholders at which such business is
to be conducted; provided, however, that in the event that less than 60 days'
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so delivered or
received not later than the 10th day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made, whichever
first occurs.
A stockholder's notice to the Secretary shall set forth (i) a description
of each item of business the stockholder proposes to bring before the meeting
and the wording of the proposal, if any, to be submitted for a vote of the
stockholders with respect thereto; (ii) the name and address of the stockholder;
(iii) the class and number of shares of stock of the Corporation held of record,
owned beneficially and represented by proxy by such stockholder as of the record
date for the meeting (if such date shall then have been publicly disclosed) and
as of the date of such notice; and (iv) all other information that would be
required to be included in a proxy statement filed with the Securities and
Exchange Commission (the "SEC") if, with respect to any such item of business,
such stockholder were a participant in a solicitation subject to Section 14 of
the
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Securities Exchange Act of 1934 (the "Exchange Act"), as from time to time
amended.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER; TENURE. The number of directors of the Corporation shall
be not less than three (3) nor more than fifteen (15), and, within these limits,
may be fixed, increased or decreased from time to time by a majority of the
entire Board of Directors, or by the stockholders, but no such action may affect
the tenure of office of any director.
The directors shall be divided, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
reasonably possible, with the term of office of the first class to expire at the
1995 annual meeting of stockholders, the term of office of the second class to
expire at the 1996 annual meeting of stockholders, and the term of office of the
third class to expire at the 1997 annual meeting of stockholders, with each
director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, commencing with the 1995
annual meeting, (i) directors elected to succeed the class of directors whose
terms then expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election, with each
director of the class to hold office until his or her successor shall have been
duly elected and qualified and (ii) except as otherwise required by law, if
authorized by a resolution of the Board of Directors, directors may be elected
to fill any vacancy on the Board of Directors, regardless of how such vacancy
shall have been created.
SECTION 1A. NOMINATION OF DIRECTORS. Nominations of persons for election to
the Board of Directors at an annual meeting of the stockholders may be made at
such meeting only by or at the direction of the Board of Directors, by any
nominating committee or person(s) appointed by the Board of Directors, or by any
stockholder entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Section 1A.
Any stockholder entitled to vote for the election of Directors may nominate
one or more persons for election to the Board of Directors at a meeting only if
written notice of such stockholder's intent to make such nomination or
nominations has been delivered personally to the Secretary at, or been mailed to
the Secretary and received at, the principal executive offices of the
Corporation not less than 50 days nor more than 75 days prior
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to the meeting; provided, however, that in the event that less
than 60 days' notice or prior public disclosure of the date of meeting is given
or made to stockholders, notice by the stockholder to be timely must be so
delivered or received not later than the 10th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever first occurs. Such stockholder's notice to the Secretary shall
set forth: (i) the name and address of the stockholder who intends to make the
nomination(s) and of the person or persons to be nominated; (ii) the class and
number of shares of stock of the Corporation that are held of record,
beneficially owned and represented by proxy by such stockholder as of the record
date for the meeting (if such date then shall have been made publicly available)
and as of the date of such notice; (iii) a representation that such stockholder
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (iv) a description of any contract, arrangement
or understanding between such stockholder and each nominee and any other person
or persons (naming such person or person) pursuant to which the nomination or
nominations are to be made by such stockholder; (v) such other information
regarding each nominee proposed by such stockholder as would be required to be
disclosed in a proxy statement used in a solicitation of proxies for the
election of directors which solicitation was subject to the rules and
regulations of the SEC under Section 14 of the Exchange Act; and (vi) the
consent of each nominee to serve as a Director of the Corporation if so elected.
No person shall be eligible for election as a Director of the Corporation
unless nominated in accordance with the procedures set forth herein.
SECTION 2. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be chosen
by the vote of a majority of the entire Board of Directors. The Chairman of the
Board, if present, shall preside at all meetings of the stockholders and all
meetings of the Board of Directors. The Chairman of the Board shall be, ex
officio, a member of all standing committees, but shall not be an officer of the
Corporation.
SECTION 3. VACANCIES. Except as otherwise required by law, unless the Board
of Directors otherwise determines, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies on the Board
of Directors resulting from any cause shall be filled only by a majority vote of
the directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires
and until such director's successor shall have been duly elected and qualified.
No decrease in the numbers of authorized
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<PAGE> 8
directors constituting the entire Board of Directors shall shorten the term of
any incumbent director.
SECTION 4. RESIGNATION. Any director may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board, the
Present, or the Secretary of the Corporation. Unless otherwise specified in such
written notice, a resignation shall take effect upon delivery thereof. A
resignation need not be accepted in order for it to be effective.
SECTION 5. PLACE OF MEETINGS. The Board of Directors may hold both regular
and special meetings either within or without the State of Maryland, at such
place as the Board of Directors from time to time deems advisable.
SECTION 6. ANNUAL MEETING. The annual meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
stockholders, for the purpose of electing officers and transacting other
business. No notice to the newly elected directors of such meeting shall be
necessary for such meeting to be lawful, provided a quorum is present.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directors
need not be held.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called at any time by the President, and the President shall call a special
meeting at any time upon the written request of two (2) directors. Written
notice of the time and place of a special meeting shall be given to each
director, either personally or by sending a copy thereof by mail or by
telegraph, charges prepaid, to his address appearing on the books of the
Corporation or theretofore given by him to the Corporation for the purpose of
notice. In case of personal service, such notice shall be so delivered at least
twenty-four (24) hours prior to the time fixed for the meeting. If such notice
is mailed it shall be deposited in the United States mail in the place in which
the principal office of the Corporation is located at least seventy-two (72)
hours prior to the time fixed for the holding of the meeting. If telegraphed, it
shall be delivered to the telegraph company at least forty-eight (48) hours
prior to the time fixed for the holding of the meeting. If notice is not so
given by the Secretary, it may be given by the President, or the directors
requesting the meeting may issue the call and give the notice.
SECTION 9. ADJOURNMENTS. A quorum of the directors may adjourn any meeting
of the Board of Directors to meet again at a stated day and hour. In the absence
of a quorum a majority of the directors present may adjourn from time to time to
meet again at a stated day and hour prior to the time fixed for the next regular
meeting of the Board of Directors. Notice of the
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time and place of an adjourned meeting need not be given to any director of the
time and place is fixed at the meeting adjourned.
SECTION 10. COMPENSATION. Directors shall be entitled to such compensation
for their services as directors as from time to time may be fixed by the Board
of Directors. No director who receives compensation as a director shall be
barred from serving the Corporation in any other capacity or from receiving
compensation and reimbursement of reasonable expenses for any or all such other
services.
SECTION 11. ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of the Board of Directors may be taken without a meeting and
without prior notice if a written consent in lieu of such meeting which sets
forth the action so taken is signed either before or after such action by all
directors. All written consents shall be filed with the minutes of the Board's
proceedings.
SECTION 12. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS. The Board of
Directors may participate in meetings by means of conference telephone or
similar communications equipment, whereby all directors participating in the
meeting can hear each other at the same time, and participation in any such
meeting shall constitute presence in person at such meeting. A written record
shall be made of all actions taken at any meeting conducted by a means of a
conference telephone or similar communications equipment.
SECTION 13. TRANSACTIONS WITH INTERESTED PERSONS. (a) Notwithstanding
anything to the contrary contained in these By-Laws, in addition to any
affirmative vote required either by law, the Partnership Agreement, the Articles
of Incorporation of the Corporation or these By-Laws, any Transaction involving
the Corporation or these By-Laws, any Transaction involving the Corporation or
any of its subsidiaries or the Operating Partnership shall require the
affirmative vote of a majority of the directors ("Disinterested Members") on the
Board of Directors of the Corporation who are not employees, officers,
directors, Affiliates or Associates of the Interested Person who or which is a
party to the Transaction.
(b) As used in this Section 13:
(i) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on January 1, 1995.
(ii) A Person shall " Beneficially Own" and be the "Beneficial Owner" of
any Paired Shares or Units:
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(A) which such Person or any of its Affiliates or Associates or
Associates beneficially owns, directly or indirectly, within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on
January 1, 1995; or
(B) which such Person or any of its Affiliates or Associates has (I)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (II) the right to vote pursuant to
any agreement, arrangement or understanding (but neither such Person nor
any such Affiliate or Associate shall be deemed to be the Beneficial Owner
of any Paired Shares of Units solely by reason of a revocable proxy granted
for a particular meeting of stockholders, pursuant to a public solicitation
of proxies for such meeting, and with respect to which Paired Shares or
Units neither such Person not any such Affiliate or Associate is otherwise
deemed the Beneficial Owner); or
(C) which are beneficially owned, directly or indirectly, within the
meaning of the Rule 13d-3 under the Securities Exchange Act of 1934, as in
effect on January 1, 1995, by any other Person with which such Person or
any of its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting (other than
solely by reason of a revocable proxy as described in subparagraph (B)
above) or disposing of any Paired Shares or Units.
(iii) "Interested Person" shall mean any Person who or which is the
Beneficial Owner, directly or indirectly, of 5% or more the outstanding Paired
Shares or the outstanding Units or who or which is an Affiliate or Associate of
the Trust, the Corporation or either of the Partnerships. for the purposes of
determining whether a Person is an Interested Person, the number of Paired
Shares or Units deemed to be outstanding shall include Paired Shares or Units
deemed owned through application of paragraphs (A), (B) and (C) of paragraph
(ii) above but shall not include any other unissued Paired Shares or Units which
may be issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
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(iv) "Operating Partnership" shall mean SLC Operating Limited
Partnership, a Delaware limited partnership.
(v) "Paired Shares" shall mean the shares of common stock of the
Corporation and the shares of beneficial interest of the Trust which are
paired pursuant to the Pairing Agreement dated June 25, 1980 between the
Trust and the Corporation, as it may be amended from time to time.
(vi) "Partnership Agreement" shall mean the Limited Partnership
Agreement of the Operating Partnership, as it may be amended from time to
time.
(vii) "Partnerships" shall mean the Operating Partnership and SLT
Realty Limited Partnership, a Delaware limited partnership.
(viii) " Person" shall mean any individual, limited partnership,
general partnership, corporation, limited liability company or any other
firm or entity.
(ix) "Transaction" shall mean any contract, sale, lease, exchange,
mortgage, transfer or disposition to or with, or any other transaction
with, any Interested Person, including, without limitation, any election
with respect to the method of payment for an exchange of Units for Paired
Shares or any action to be taken by the Corporation, the Trust or the
Partnerships with respect to the senior debt of SLT Realty Limited
Partnership.
(x) "Trust" shall mean Starwood Lodging Trust (formerly Hotel
Investors Trust), a Maryland real estate investment trust.
(xi) "Units" shall have the meaning set forth in the Partnership
Agreement.
(d) A majority of the Disinterested Members shall have the power and
duty to determine, on the basis of information known to them after reasonable
inquiry, all facts necessary to determine compliance with this Section 13,
including, without limitation, (i) whether a Person is an Interested Person,
(ii) the number of Paired Shares or Units that any Person Beneficially Owns, and
(iii) whether a Person is an Affiliate or Associate of another. A majority of
the Disinterested Members shall have the right to demand that any Person who is
reasonably believed to be an Interested Person (or who holds of record Paired
Shares or Units that any Interested Person Beneficially Owns) supply the
Corporation with complete information as to (i) the record owner(s) of all
Paired Shares or Units that such Person who is reasonably believed to be an
Interested Person Beneficially Owns, (ii) the number of, and class or series of,
Paired Shares or Units that such Person who is reasonably believed to be an
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Interested Person Beneficially Owns and the number(s) of the certificate(s), if
any, evidencing such Paired Shares or Units and (iii) any other factual matter
relating to the applicability or effect of this Section 13, as may be reasonably
requested of such Person, and such Person shall furnish such information within
10 days after receipt of such demand.
(e) Nothing contained in this Section 13 shall be construed to relieve
any Interested Person from any fiduciary obligation imposed by law.
(f) Notwithstanding anything to the contrary contained in these
By-Laws, this Section 13 may be amended or repealed only by a majority of
directors on the Board of Directors of the Corporation who are not employees,
officers, Affiliates or Associates of the Trust, the Corporation, the
Partnerships or any Interested Person.
ARTICLE IV
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. (a) The Board of Directors may appoint
two or more directors to constitute an Executive Committee. One of such
directors shall be designated as Chairman of the Executive Committee. The
Executive Committee shall have and may exercise all of the rights, powers and
authority of the Board of Directors, except as expressly limited by the Maryland
General Corporation Law, as amended from time to time.
(b) The Executive Committee shall fix its own rules of procedure and
shall meet at such times and at such place or places as it may determine. The
Chairman of the Executive Committee, or, in the absence of a Chairman, a member
of the Executive Committee chosen by a majority of the members present, shall
preside at meetings of the Executive Committee, and another member thereof
chosen by the Executive Committee shall act as secretary. A majority of the
Executive Committee shall constitute a quorum for the transaction of business,
and the affirmative vote of a majority of the members present at a meeting shall
be required for any action of the Executive Committee.
SECTION 2. OTHER COMMITTEES. The Board of Directors may appoint such
other committees as it shall deem advisable and with such authority as the Board
of Directors shall from time to time determine.
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SECTION 3. OTHER PROVISIONS REGARDING COMMITTEES. (a) The Board of
Directors shall have the power at any time to fill vacancies in, change the
membership of, or discharge any committee.
(b) Members of any committee shall be entitled to such compensation
for their services as from time to time may be fixed by the Board of Directors.
No committee member who receives compensation as a member of any one or more
committees shall be barred from serving the Corporation in any other capacity or
from receiving compensation and reimbursement of reasonable expenses for any or
all such other services.
(c) Unless prohibited by law, the provisions of Section 11 and Section
12 of Article III shall apply to all committees from time to time created by the
Board of Directors.
ARTICLE V
OFFICERS
SECTION 1. POSITIONS. The officers of the Corporation shall be chosen
by the Board of Directors and shall consist of a President, one or more Vice
Presidents, a Secretary and a Treasurer. The Board of Directors also may choose
one or more Assistant Secretaries and Assistant Treasurers and such other
officers and agents at the Board from time to time deems necessary or
appropriate. The Board of Directors may delegate to the President of the
Corporation the authority to appoint any officer or agent of the Corporation and
to fill a vacancy other than the President, Secretary or Treasurer. The election
or appointment of any officer of the Corporation in itself shall not create
contract rights for any such officer. All officers of the Corporation shall
exercise such powers and perform such duties as from time to time shall be
determined by the Board of Directors. Any two or more offices may be held by the
same person except the offices of President and Vice President, President and
Secretary, or President and Assistant Secretary.
SECTION 2. TERM OF OFFICE; REMOVAL. Each officer of the Corporation
shall hold office at the pleasure of the Board of Directors and any officer may
be removed, with or without cause, at any time by the affirmative vote of a
majority of the directors then in office, provided that any officer appointed by
the President pursuant to authority delegated to the President by the Board of
Directors may be removed, with or without cause, at any time whenever the
President in his or her absolute discretion shall consider that the best
interests of the Corporation shall be served by such removal. Vacancies (however
caused) in any office may be filled for the unexpired portion of the term by the
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Board of Directors (or by the President in the case of a vacancy occurring in an
office to which the President has been delegated the authority to make
appointments).
SECTION 3. COMPENSATION. The salaries of all officers of the
Corporation shall be fixed from time to time by the Board of Directors, and no
officer shall be prevented from receiving a salary by reason of the fact that he
also receives from the Corporation compensation in any other capacity.
SECTION 4. PRESIDENT. The President shall be the chief executive
officer of the Corporation and, subject to the direction of the Board of
Directors, shall have general charge of the business, affairs and property of
the Corporation and general supervision over its other officers and agents. In
general, the President shall perform all duties incident to the office of
President of a stock corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. The President shall have the
power and authority to execute all written instruments, of every nature, on
behalf of the Corporation, and shall be, ex officio, a member of all standing
committees. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the Board of Directors and of the stockholders.
SECTION 5. VICE PRESIDENTS. In the absence or disability of the
President, the Vice President (or in the event there is more than one, the Vice
Presidents in order of their rank as fixed by the Board of Directors or, if not
ranked, the Vice President designated by the Board of Directors), shall perform
the duties and exercise the powers of the President. The Vice Presidents shall
have the power and authority to execute on behalf of the Corporation all written
instruments of every nature. A Vice President also generally shall assist the
President and shall perform such other duties and have such other powers as from
time to time may be prescribed by the Board of Directors.
SECTION 6. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and of the stockholders and shall record all votes and the
proceedings of all meetings in a book to be kept for such purposes. The
Secretary also shall perform like duties for the Executive Committee or other
committees, if required by any such committee. The Secretary shall give (or
cause to be given) notice of all meetings of the stockholders and all special
meetings of the Board of Directors and shall perform such other duties as from
time to time may be prescribed by the Board of Directors, the Chairman of the
Board or the President. The Secretary shall have custody of the seal of the
Corporation, shall have authority (as shall any Assistant Secretary) to affix
the same to any instrument requiring it, and to attest the seal by his or her
signature. The Board of Directors may give general authority to officers other
than the
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Secretary or any Assistant Secretary to affix the seal of the Corporation and to
attest the affixing thereof by his or her signature.
SECTION 7. ASSISTANT SECRETARY. The Assistant Secretary, if any (or in
the event there is more than one, the Assistant Secretaries in the order
designated or, in the absence of any designation, the order of their election or
appointment), in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary. An Assistant Secretary shall
perform such other duties and have such other powers as from time to time may be
prescribed by the Board of Directors.
SECTION 8. TREASURER. The Treasurer shall have the custody of the
corporate funds, securities, other similar valuable effects, and evidences of
indebtedness, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation. The
Treasurer shall disburse the funds of the Corporation in such manner as may be
ordered by the Board of Directors from time to time and shall render to the
Chairman of the Board, the President and the Board of Directors, at regular
meetings of the Board or whenever any of them may so require, an account of all
transactions and of the financial condition of the Corporation.
SECTION 9. ASSISTANT TREASURER. The Assistant Treasurer, if any (or in
the event there is more than one, the Assistant Treasurers in the order
designated or, in the absence of any designation, in the order of their election
or appointment), in the absence or disability of the Treasurer, shall perform
the duties and exercise the powers of the Treasurer. An Assistant Treasurer
shall perform such other duties and have such other powers as form time to time
may be prescribed by the Board of Directors.
ARTICLE VI
NOTICES
Except as otherwise specifically provided in these By-Laws, any notice
required or permitted to be given to any director, officer, stockholder or
committee member shall be given in writing, either personally or by first-class
mail with postage prepaid, in either case addressed to the recipient at his or
her address as it appears in the records of the Corporation. Personally
delivered notices shall be deemed to be given at the time they are delivered at
the address of the named recipient as
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it appears in the records of the Corporation, and mailed notices shall be deemed
to be given at the time they are deposited in the United States mail.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any Vice President and the Secretary or Assistant Secretary of the
Corporation shall have full power and authority to attend, act and vote at any
meeting of security holders of other corporations in which the Corporation may
hold securities, and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such securities which the
Corporation possesses and has the power to exercise.
SECTION 2. DIVIDENDS. Subject to the Maryland General Corporation Law,
dividends upon the outstanding capital stock of the Corporation or other
distributions may be declared by the Board of Directors at any annual, regular
or special meeting and may be paid in cash, in property or in shares of the
Corporation's capital stock. Stockholders shall have no right to any dividend or
distribution unless and until declared by the Board of Directors.
SECTION 3. REGISTERED STOCKHOLDERS. Except as otherwise provided by
law, the Corporation shall be entitled to recognize the exclusive right of a
person who is registered on its books as the owner of shares of its capital
stock to receive dividends or other distributions (to the extent otherwise
distributable or distributed) and to vote (in the case of voting stock) as such
owner. The Corporation shall not be bound to recognize any equitable or legal
claim to or interest in such shares on the part of any other person. The
Corporation (or its transfer agent) shall not be required to send notices or
dividends to a name or address other than the name or address of the
stockholders appearing on the stock ledger maintained by the Corporation (or by
the transfer agent or registrar, if any), unless any such stockholder shall have
notified the Corporation (or the transfer agent or registrar, if any), in
writing, of another name or address at least ten (10) days prior to the mailing
of such notice or dividend. Nothing in these By-Laws shall be deemed to preclude
the Corporation from inquiring as to the actual ownership of any shares of its
capital stock, nor impose upon the Corporation or its transfer agent a duty, nor
limit their rights to inquire into adverse claims.
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SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATE. The Board of
Directors may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing such
issue of a new certificate, the Board of Directors, in its discretion, may
require as a condition precedent to issuance that the owner of such lost, stolen
or destroyed certificate, or his or her legal representative, advertise the same
in such manner as the Board of Directors shall require and to deliver to the
Corporation a bond in such sum, or other security in such form, as the Board of
Directors may direct, as indemnity against any claim that may be made against
the Corporation with respect to the certificate claimed to have been lost,
stolen or destroyed.
SECTION 5. RESERVES. The Board of Directors, in its sole discretion,
may fix a sum which may be set aside or reserved over and above the paid-in
capital of the Corporation as a reserve for any proper purpose, and from time to
time may increase, diminish or vary such reserves.
SECTION 6. FISCAL YEAR. The fiscal year of the Corporation shall be as
determined from time to time by the Board of Directors.
SECTION 7. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "State of Maryland."
SECTION 8. AMENDMENT OF THE BYLAWS. To the extent not prohibited by
law, the Board of Directors shall have the power to adopt, alter and repeal
these ByLaws, and to adopt new bylaws. The stockholders of the Corporation shall
also have the power to alter and repeal these ByLaws, and to adopt new bylaws.
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EXHIBIT 4.1
COMPOSITE COPY, AS AMENDED
PAIRING AGREEMENT
Agreement dated June 25, 1980, as amended as of February 1, 1995,
between Starwood Lodging Trust, a Maryland real estate investment trust
("Trust"), and Starwood Lodging Corporation, a Maryland corporation ("Company").
WHEREAS, the Trust will acquire all the issued and outstanding shares
of the Company and immediately declare a distribution in kind to the holders of
shares of the Trust, consisting of one share of common stock of the Company for
each issued share of beneficial interest of the Trust; and
WHEREAS, the Trust and the Company wish to cause their shares to be
paired, so that shares of beneficial interest of the Trust with a par value of
$.01 per share ("Shares") are transferable only with an equal number of shares
of common stock of the Company and vice versa:
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree:
1. On and after the close of business on June 25, 1980 ("Effective
Date"):
(a) the Shares of the Trust and the shares of common stock of the
Company shall not be transferable, and shall not be transferred on the
respective books of either entity, unless in connection with a transfer the
transferee acquires the same number of Shares of the Trust and shares of
common stock of the Company;
(b) upon presentation to the Trust's transfer agent of any certificate
evidencing ownership of Shares of the Trust issued prior to the Effective
Date duly endorsed for transfer or accompanied by a duly executed stock
power, there shall be issued to the transferee a certificate or
certificates evidencing both the number of Shares of the Trust so
transferred and the same number of shares of common stock of the Company,
and there shall be issued a certificate or certificates evidencing both any
Shares of the Trust not transferred and the same number of shares of common
stock of the Company; and
(c) neither the Trust nor the Company shall issue or transfer or agree
to issue or transfer any Shares of the Trust or shares of common stock of
the Company unless
<PAGE> 2
effective provision is made for the issuance or transfer to the same person
of the same number of Shares of the Trust and shares of common stock of the
Company and unless the Trust and the Company agree on the manner and basis
of allocating the consideration to be received between the Trust and the
Company or on the payment by one entity to the other of cash or other
consideration in lieu of a portion of such consideration.
2. Each certificate issued after the Effective Date evidencing Shares
of the Trust shall have printed on its reverse side a certificate evidencing the
same number of shares of common stock of the Company and shall be in a form
satisfactory to the American Stock Exchange. A legend shall be placed on the
face or reverse side of each certificate evidencing ownership of Shares of the
Trust and the shares of common stock of the Company issued on or after the
Effective Date referring to the restrictions on transfer of the Shares of the
Trust and the shares of common stock of the Company.
3. Promptly after the Effective Date, the Trust shall cause a Letter
of Transmittal to be sent to each holder of record of Shares of the Trust at the
Effective Date for use in forwarding the holder's certificate or certificates.
Upon receipt from any such holder of a properly completed Letter of Transmittal
accompanied by the appropriate certificate or certificates evidencing a number
of Shares of the Trust, the Trust shall cause to be delivered promptly to such
holder in substitution therefor a certificate or certificates registered in such
holder's name evidencing both the same number of Shares of the Trust and the
same number of shares of common stock of the Company. Until so surrendered, each
certificate evidencing Shares of the Trust outstanding prior to the Effective
Date shall be deemed, for all purposes to evidence ownership, in addition, of an
equal number of shares of common stock of the Company provided, however, that
the Trust and the Company may elect to refrain from paying a holder dividends or
other distributions declared with respect to either the Shares of the Trust or
shares of common stock of the Company until such holder surrenders his
certificate, at which time the holder shall be paid the amount of the
distributions, without interest, which theretofore became payable with respect
to the number of Shares of the Trust and shares of common stock of the Company
evidenced by such certificate.
4. Upon the exercise of any share option or conversion of any
security, which, prior to the Effective Date, was issued by the Trust, the
Company agrees that it will simultaneously issue a number of shares of common
stock of the Company to the exercising optionee or converting security holder
equal to the number of Shares of the Trust issued to the exercising optionee or
converting security holder pursuant to such exercise or conversion, and the
Trust agrees to make a payment to the Company
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or cause payment to be made to the Company, based on the relative fair value, at
the time of the exercise or conversion, of a Share of the Trust and a share of
common stock of the Company.
5. After the Effective Date, neither the Trust nor the Company shall
declare or pay any distribution consisting in whole or in part of Shares of the
Trust or shares of common stock of the Company, issue any securities convertible
into such Shares or shares or issue rights or warrants to purchase such Shares
or shares, or subdivide, combine or otherwise reclassify such Shares or shares,
unless both the Trust and the Company take the action to the end that the
outstanding Shares of the Trust and shares of common stock of the Company will
be paired on a one-to-one basis as contemplated herein.
6. After the Effective Date, neither the Trust nor the Company will be
a party to any merger, consolidation, sale of assets, liquidation or other form
of reorganization pursuant to with either the Shares of the Trust or the shares
of common stock of the Company are converted, redeemed or otherwise changed
unless the other entity is also a party to such transaction.
7. The Trust and the Company agree to appoint the same banks or trust
companies as transfer agents and the same banks or trust companies as registrars
for the Shares of the Trust and shares of common stock of the Company.
8. The Company agrees to cause its shares of common stock to be
promptly registered pursuant to Section 12 of the Securities Exchange Act of
1934.
9. The Trust and the Company shall use their best efforts to effect
the listing of the shares of common stock of the Company on the American Stock
Exchange.
10. This Agreement and the pairing contemplated herein may be
terminated upon the affirmative vote of the holders of a majority of the
outstanding Shares of the Trust and shares of common stock of the Company. In
the event of termination, the parties agree to cooperate to effect a separation
of the paired securities to permit the separate issuance and transfer thereof
and, in that connection, appropriate provision shall be made to honor any
outstanding commitments to issue additional Shares of the Trust and shares of
common stock of the Company.
11. This Agreement may be amended by action of the Trustees of the
Trust and the Board of Directors of the Company, provided that any such action
must be approved by a majority of the outstanding Shares of the Trust and the
shares of common stock of the Company if such amendment would permit a
separation of the paired Shares of the Trust and shares of common stock of the
Company.
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12. (a) In the event that (x) the Trust issues Excess Trust Shares,
par value $.01 per share, of the Trust ("Excess Trust Shares") or the Company
issues shares of Excess Common Stock, par value $.01 per share, of the Company
("Excess Common Shares"), and (y) the Shares and the shares of common stock of
the Company which were converted into such Excess Trust Shares and such Excess
Common Shares, respectively, were paired pursuant to this Agreement, then in
addition to, and not in any respect in limitation of, the provisions of the
Declaration of Trust of the Trust and the Amended and Restated Articles of
Incorporation of the Company (as each may be amended from time to time):
(i) such Excess Trust Shares and such Excess Common Shares shall not
be transferable, and shall not be transferred on the respective books of
either the Trust or the Company, unless in connection with a transfer the
transferor transfers and the transferee acquires the same number of Excess
Trust Shares and Excess Common Shares;
(ii) neither the Trust nor the Company shall issue or transfer or
agree to issue or transfer any Excess Trust Shares or Excess Common Shares
unless effective provision is made for the issuance or transfer to the same
person of the same number of Excess Trust Shares and Excess Common Shares;
and
(iii) each certificate evidencing Excess Trust Shares shall have
printed on its reverse side a certificate evidencing the same number of
Excess Common Shares. A legend shall be placed on the face or reverse side
of each certificate evidencing ownership of Excess Trust Shares and Excess
Common Shares referring to the restrictions on transfer of the Excess Trust
Shares and Excess Common Shares.
(b) In the event that (x) the Trust issues Excess Preferred Shares,
par value $.01 per share, of the Trust ("Excess Preferred Shares") or the
Company issues shares of Excess Preferred Stock, par value $.01 per shares, of
the Company ("Excess Preferred Stock"), and (y) the shares of beneficial
interest of the Trust and the shares of preferred stock of the Company which
were converted into such Excess Preferred Shares and such Excess Preferred
Stock, respectively, were paired pursuant to this Agreement, then in addition
to, and not in any respect in limitation of, the provisions of the Declaration
of Trust of the Trust and the Amended and Restated Articles of Incorporation of
the Company (as each may be amended from time to time):
(i) such Excess Preferred Shares and such Excess Preferred Stock shall
not be transferable, and shall not be transferred on the respective books
of either the Trust or the Company, unless in connection with a transfer
the
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transferor transfers and the transferee acquires the same number of Excess
Preferred Shares and Excess Preferred Stock;
(ii) neither the Trust nor the Company shall issue or transfer or
agree to issue or transfer any Excess Preferred Shares or Excess Preferred
Stock unless effective provision is made for the issuance or transfer to
the same person of the same number of Excess Preferred Shares and Excess
Preferred Stock; and
(iii) each certificate evidencing Excess Preferred Shares shall have
printed on its reverse side a certificate evidencing the same number of
Excess Preferred Stock. A legend shall be placed on the face or reverse
side of each certificate evidencing ownership of Excess Preferred Shares
and Excess Preferred Stock referring to the restrictions on transfer of the
Excess Preferred Shares and Excess Preferred Stock.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
STARWOOD LODGING TRUST
By:
---------------------------
STARWOOD LODGING CORPORATION
By:
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EXHIBIT 10.12
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") dated
November ___, 1994 is entered into by and between Jeffrey C. Lapin ("Executive")
and Hotel Investors Trust, a Maryland real estate investment trust ("the
Company"). This Agreement is effective as of the Closing Date ("the Closing
Date") set forth in Section 1.2 of that certain Formation Agreement dated
November 11, 1994 by and between the Company, Hotel Investors Corporation
("HIC"), Starwood Capital Group, L.P. and others.
The Company desires the continued services of the Executive in
the capacity described below, on the terms and conditions and subject to the
rights of termination hereinafter set forth, and the Executive is willing to
accept such employment on such terms and conditions.
In consideration of the mutual agreements hereinafter set
forth, the Executive and the Company agree as follows:
ARTICLE I
Capacity and Services
1.1 The Company hereby employs the Executive as President
and Chief Operating Officer of the Company to perform such executive and
managerial duties commensurate with such office as he shall reasonably be
directed by the Chief Executive Officer, if that position is held by Barry S.
Sternlicht ("Sternlicht"), and otherwise by the Board of Trustees of the Company
(the "Board of Trustees"). During the term of the Executive's employment
hereunder, he shall devote his full business time and efforts to the business
and affairs of the Company, shall use his best efforts to supply his skill and
experience to perform his duties and to promote the interests of the Company and
shall have no other employment without the prior approval of the Board of
Trustees.
1.2 The principal office of the Company shall be located
in Los Angeles, California at all times prior to December 31, 1995.
1.3 The Executive's duties and authority hereunder shall
be commensurate with the title and status afforded him hereunder, taking into
account the expected participation of Sternlicht in the management of the
Company. During the term of the Executive's employment hereunder, the Company
shall not hire or fire any officer of the Company without either a determination
by the Board of Trustees or (except for the hiring or firing of the Chief
Executive Officer) the prior consent of Executive.
Execution Copy
<PAGE> 2
1.4 The Executive hereby accepts such employment and
agrees to render to the Company the services specified in this Article I and to
be bound by the terms and conditions of this Agreement.
ARTICLE II
Term
2.1 The term of the Executive's employment hereunder shall
commence on the Closing Date and expire on the second anniversary of the Closing
Date (the "Termination Date") unless sooner terminated pursuant to Article VI
hereof.
ARTICLE III
Compensation and Expenses
3.1 Base Salary. As compensation for the Executive's
services during the term of the Executive's employment hereunder, the Company
shall pay the Executive a base salary at the annual rate of $200,000 through the
first anniversary of the Closing Date and $225,000 thereafter (the "Base
Salary") payable in equal monthly installments or at such other times as the
Executive and the Company shall agree. The Base Salary shall be reviewed at
least annually by the Board of Trustees and may be increased as determined by
the Board of Trustees if, and to the extent that, the Board of Trustees
determines that the Executive's contribution to the Company warrant such
increase. Executive's Base Salary shall not be decreased at any time during the
term of his employment hereunder from the Base Salary then in effect.
3.2 Incentive Compensation. In addition to the Base
Salary, the Company shall pay the Executive during the term of his employment
hereunder an annual incentive bonus (the "Bonus"), in a lump-sum payment within
30 days of the end of each calendar year (excluding 1994) in an amount (no less
than $75,000 respecting each of 1995 and 1996) determined in the discretion of
the Board of Trustees based on the performance of the Executive and his
contribution to the Company during such calendar year.
3.3 Expenses. The Company shall reimburse the Executive
for all reasonable and necessary business expenses incurred by him in connection
with the performance by him of his duties hereunder.
3.4 Vacation. The Executive shall be entitled to such
number of vacation days in each calendar year as determined by the Company from
time to time for its senior executives but not less than four weeks in each
calendar year which may be accumulated or used by the Executive; provided,
however, up to 8
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weeks of unused vacation time may be accumulated by Executive and at his option
be compensated for upon termination of his employment (at the rate of Base
Salary then in effect).
3.5 Indemnification; Officers and Directors Insurance. As
a trustee and officer of the Company, the Executive shall be entitled to the
benefits of those provisions of the Declaration of Trust of the Company, as
amended, which provide for indemnification of officers and trustees of the
Company, and of the bylaws or the equivalent regulations of the Company. No such
provision shall be amended to any way limit or reduce the extent of
indemnification available to Executive as an officer or trustee of the Company.
In addition, to the fullest extent permitted by law, the
Company shall indemnify and save and hold harmless the Executive from and
against any and all claims, demands, liabilities, costs and expenses, including
judgments, fines or amounts paid on account thereof (whether in settlement or
otherwise), and reasonable expenses, including attorneys fees actually and
reasonably incurred (except only if and to the extent that such amounts shall be
finally adjudged to have been caused by Executive's willful breach of the
express provisions of this Agreement) to the extent that the Executive is made a
party to or witness in any action, suit or proceeding or if a claim or liability
is asserted against Executive (whether or not in the right of the Company), by
reason of the fact that he was or is a trustee or officer or acted in such
capacity on behalf of the Company, or by reason of or arising out of or
resulting from entering into this Agreement or the rendering of services by the
Executive pursuant to this Agreement, whether or not the same shall proceed to
judgment or be settled or otherwise be brought to a conclusion. The Company
shall advance to Executive on demand all reasonable expenses incurred by
Executive in connection with the defense or settlement or any such claim,
action, suit or proceeding, and Executive hereby undertakes to repay such
amounts only if and to the extent that it shall be finally adjudged that the
Executive is not entitled to be indemnified by the Company under this Agreement
or under the Declaration of Trust or the bylaws or equivalent regulations of the
Company as of the date hereof which govern indemnification of officers or
trustees of the Company (but also giving effect only to future amendments which
broaden or expand any such indemnification and obligations or right more
favorably to Executive). Executive shall also be entitled to recover any cost of
enforcing his rights under this Section (including without limitations
reasonable attorneys fees and disbursements) in the event any amount payable
hereunder is not paid within 30 days of written request therefor by Executive.
The rights of Executive under this Section shall survive the termination of this
Agreement and be applicable for so long as Executive may be subject to any
claim, demand, liability, cost or expense against which this Section is intended
to protect and indemnify him.
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Notwithstanding anything contained in this Agreement to the
contrary (including the provisions of Article VI hereof), the Company shall, at
no cost to the Executive, use its best efforts to at all times include the
Executive during the term of the Executive's employment hereunder and for a
period of not less than four years thereafter, as an insured under any directors
and officers liability insurance policy maintained by the Company, which policy
shall provide such coverage in such amounts as the Board of Trustees shall deem
appropriate for coverage of all trustees and officers of the Company.
3.6 Other Employee Benefits. During the term of this
Agreement, the Company shall pay the premium (not to exceed $9,000 annually) for
the Executive to purchase and maintain a disability insurance policy, which
policy shall guarantee to Executive the payment to him of amounts and benefits
no less than those described in the attached letter dated October 27, 1994 from
Mark L. Jacobson to Madison Grose, Esq., for the period of such disability.
During the term of this Agreement, Executive shall also be entitled to
participate in any benefit programs adopted from time to time by the Company for
the benefit of any executive employee, and Executive shall be entitled to
receive such other fringe benefits as may be granted to him from time to time by
the Company's Board of Trustees. During the term of this Agreement, the
Executive shall also be entitled to participate in any benefit plans relating to
stock options, stock purchases, pension, thrift, profit sharing, life insurance,
medical coverage for Executive and members of his family, education, or other
retirement or employee benefits similar or dissimilar to the foregoing,
available to any other executive employee of the Company, subject to any
restrictions (including waiting periods) specified in such plans.
Notwithstanding the foregoing, Executive shall participate in and receive the
benefit of any and all fringe benefits made available to any other executive
employee of the Company to at least the same extent and at least the same
benefit as any other executive employee (this provision being intended to afford
Executive "most favored nation" treatment with respect to any and all fringe
benefits (all benefits other than cash salary, bonus, stock options and stock
loans) granted to any executive employee of the Company). "Most favored nation
treatment" for Executive shall not extend to stock options or stock loans, the
minimal provisions for which are as set forth in this Agreement, or to salaries
and bonuses; as to all such items, the Company reserves the right to award
greater benefits to other executives without affording such greater benefits to
Executive. Further, the Company agrees to adopt benefits and programs at least
as beneficial for its executives as HIC adopts for its executives.
3.7 Stock Options. Executive shall be entitled to
receive options to purchase 250,000 paired shares of the Company and HIC, as
presently constituted, at a purchase price equal to market value on the date of
grant (which shall be the Closing
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Date), exercisable for a period of 10 years, exercisable after termination of
employment or expiration of the term of this Agreement for no less than one
year. The aforesaid options for 250,000 paired shares shall be adjusted for any
split or reverse split (i.e., reduced proportionately for any reverse split and
increased proportionately for any split). The aforesaid options shall vest at a
rate which is no longer than the most rapid rate of vesting of options granted
to any other executive during the term of this Agreement. In the event such
vesting period shall extend beyond the term of this Agreement, such options
shall nonetheless continue to vest on behalf of Executive even after expiration
or termination of this Agreement, except as provided in Article VI hereof, and
shall in all events be exercisable for a period of at least one year following
complete vesting of such options; and the foregoing provisions with respect to
vesting and exercisability of options shall be applicable notwithstanding any
provision or provisions to the contrary in any plan or agreement pursuant to
which such options may be granted, these provisions accordingly for such purpose
constituting an amendment to any such plan or agreement of the Company. However,
options shall not vest to the extent that, at any time prior to the applicable
vesting date, this Agreement shall have been terminated by the Company for
"cause" (as hereinafter defined) or if and to the extent it shall be finally
adjudged prior to a vesting date that Executive has materially breached his
Article IV covenants following the termination of this Agreement. Stock options
shall be subject to such other customary terms and provisions as are generally
contained in option agreements received by other executives or Trustees of the
Company.
3.8 Loan to Purchase Shares. At the first public offering
by the Company occurring during the term of this Agreement, Executive shall have
the right to purchase up to $250,000 of paired shares (at the offering price)
and to receive a loan from the Company to purchase such shares (the "Stock
Loan") in an amount equal to 100% of the purchase price for such shares. The
Stock Loan: (i) shall be secured by a first lien pledge of the shares purchased
with such Stock Loan, (ii) shall be evidenced by a note executed by Executive
and such other documentation as the Company may reasonably require; (iii) shall
be a recourse loan to Executive to the extent of 50% of the principal amount
thereof from time to time and 50% of all interest thereon and all collection
costs accruing from time to time; (iv) shall not exceed a principal amount of
$250,000; (v) shall have a term of 10 years; (vi) shall bear interest at a rate
equal to the lowest applicable federal rate (as defined in Section 1274(d) of
the Internal Revenue Code of 1986, as amended) from time to time, with said
interest to be paid quarterly in arrears; (vii) shall be prepayable in whole or
in part at any time and from time to time without prepayment premium or penalty;
(vii) shall be due on sale or other transfer at any time or from time to time of
the collateral therefor (in a ratable amount of principal based on the number of
paired shares so sold or
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transferred); and (viii) shall provide for delinquency charges and collection
costs as are customary in loans of this nature; and (ix) shall provide that all
dividends paid on the pledged shares in excess of the then maximum marginal tax
rate (federal and state combined) on the taxable portions of such dividends will
be used to pay interest and principal on the loan. In lieu of making the loan
itself, the Company may cause a third party to make such loan.
ARTICLE IV
Restrictive Covenants
4.1 Other Business Ventures. In addition to the
restriction from having other employment provided in Section 1.1 hereof, during
the term of the Executive's employment hereunder the Executive shall not,
without the prior approval of the Board of Trustees, 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, or from being a passive investor owning up to
10% of any other person, firm or corporation engaged in any business whatever.
4.2 Confidential Information. Except (i) in the course of
his employment with the Company, (ii) as he may be required pursuant to any law
or court order or similar process, or (iii) in connection with any claim by
Executive against the Company, Executive shall not at any time during or after
the term of Executive's employment hereunder, directly or indirectly disclose or
use any confidential information or proprietary data with respect to the
Company, HIC or 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,
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.
4.3 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 of Trustees, in any way directly or indirectly induce or attempt to induce
or otherwise counsel, advise or encourage any person to leave the employment of
the Company. In addition, in the event that the Executive's employment hereunder
shall be terminated pursuant to any of
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Section 6.1 or Section 6.3 hereof, the Executive shall not, with respect to any
person or persons (other than his assistant, Jayne Gordon) who, to the
Executive's best knowledge, was employed by the Company, HIC or their respective
subsidiaries or SLT Realty Limited Partnership or SLC Operating Limited
Partnership at any time during the period commencing six months prior to the
date such termination becomes effective pursuant to Section 6.5 hereof ("Company
Employee"):
(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 approval of the Board of Trustees;
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, HIC or their respective subsidiaries or SLT
Realty Limited Partnership or SLC Operating Limited Partnership,
without the prior approval of the Board of Trustees.
4.4 (Intentionally Omitted)
4.5 Default in Payment; Failure to Exercise.
Notwithstanding anything contained in this Agreement to the contrary in the
event that the Company shall have failed to make any required payment pursuant
to Article VI hereof, and such failure to pay shall have continued for a period
of 20 days after the date on which written notice specifying such failure and
requiring the Company to remedy the same shall have been given to the Company by
the Executive, then, without waiving any other rights the Executive may
otherwise have with respect thereto, the Executive shall not be obligated to
comply with any of the provisions of Section 4.3 hereof.
ARTICLE V
Representations and Warranties of Executive
5.1. The Executive hereby represents and warrants to the
Company that the Executive is not aware of any presently existing fact,
circumstance or event (including, without limitation, any health condition)
which would preclude or restrict him from providing to the Company the services
provided for in 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 pursuant to Section 6.1 hereof.
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ARTICLE VI
Termination
6.1 Termination of Employment for Cause. The Company
shall have the right during the term of this Agreement to terminate this
Agreement and the Executive's employment hereunder for cause if, and only if,
the Board of Trustees shall give notice to the Executive of such termination
pursuant to Section 6.5 hereof. "Cause," as used in this Agreement, shall mean
the Executive's:
(i) material breach of this Agreement, consisting of
(x) any repeated gross or willful refusal, failure or neglect by the
Executive fully and faithfully to perform his duties and fulfill his
obligations under this Agreement (which shall include, without
limitation, any such refusal, failure or neglect resulting from the
Executive's excessive absenteeism not related to physical or mental
illness), and (y) any material breach of the Executive's fiduciary
duties under Maryland law as an officer or trustee of the Company; or
(ii) conviction of a felony.
In the event that the Executive's employment hereunder is terminated by the
Company for cause in accordance with this Section 6.1, all of the Company's
obligations under this Agreement shall forthwith cease and terminate on the date
such termination shall become effective pursuant to Section 6.5 hereof,
including, without limitation, any obligation to pay any compensation or provide
any other benefit pursuant to Article III hereof; provided, however, that the
Executive shall be entitled to receive (i) payment for any unpaid portion of the
Base Salary then in effect pursuant to Section 3.1 hereof, prorated to the
effective date of such termination, and (ii) payment or reimbursement of any
expenses pursuant to Section 3.3 hereof which he would otherwise have been
entitled to receive as of the effective date of such termination.
6.2 Death. In the event that the Executive shall die
during the term of this Agreement, all of the Company's obligations under this
Agreement shall terminate on the date of such death, except that the Executive's
estate shall be entitled to receive (i) the Basic Benefits, and (ii) any Bonus
with respect to any prior fiscal year which the Executive was entitled to
receive as of the date of his death pursuant to Section 3.2 hereof but which the
Company had not yet paid to the Executive as of such date, and (iii) payment or
reimbursement of any expenses pursuant to Section 3.3 hereof which he would
otherwise have been entitled to receive as of the effective date of such
termination.
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6.3 Disability. In the event of the Executive's Disability
during the term of this Agreement for any period (the "Disability Period") of at
least six consecutive months, all of the Company's obligations under this
Agreement shall forthwith cease and terminate if, and only if, the Company shall
give the notice provided for in Section 6.5 hereof, in which case such
termination shall become effective on the date set forth in such Section 6.5,
except that the Executive shall be entitled to receive (i) the Basic Benefits,
(ii) any Bonus with respect to any prior fiscal year which the Executive was
entitled to receive pursuant to Section 3.2 hereof but which the Company had not
yet paid to Executive, (iii) disability payments from the Company at the rate of
$225,000 per annum, payable in equal monthly installments, until the earlier of
ninety days after such effective date of termination or the date on which the
Executive is entitled to begin receiving payments under the policy provided for
in Section 3.6 hereof, and (iv) the Fringe Benefits.
The term "Disability" as used in this Section 6.3 shall mean the inability of
the Executive to perform his employment services hereunder by reason of physical
or mental illness or incapacity, whether voluntary or involuntary and whether
arising out of sickness, accident or otherwise.
6.4 Termination By Executive for Good Reason. Executive
may terminate this Agreement for "Good Reason". For purposes of this Agreement,
"Good Reason" shall mean the occurrence, without the Executive's express written
consent, of any one or more of the following events:
(i) The assignment of any duties which are in any
significant respect inconsistent with Executive's status as Chief Operating
Officer of the Company or a substantial alteration (including and without
limitation any material diminution) in the nature or status of Executive's
responsibilities involving the Company from those in effect at the Closing Date,
which inconsistent assignment or substantial alteration is not remedied or cured
forthwith following Executive's notification to the Company.
(ii) Any 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 forthwith following Executive's notification to
the Company.
(iii) Any other breach of the terms of this Agreement by the
Company, which is not cured forthwith following Executive's notification to the
Company.
(iv) The removal or suspension from office without "cause"
of the Executive as President and Chief Operating Officer of the Company or the
failure without "cause" to elect or appoint the Executive as either the
President and Chief Operating Officer
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or as the Chief Executive Officer, of the Company throughout the term of this
Agreement.
(v) The relocation of Company's principal executive
offices to a location more than 25 miles from its location as of the Closing
Date (unless the Executive shall not have given notice of termination under this
clause (v) within 30 days subsequent to his receipt from the Company of formal
notification that the Company's principal executive offices will be so
relocated), or the Company's requiring Executive at any time to be based
anywhere other than the Company's principal executive offices, except for
required travel on the Company's business to an extent substantially consistent
with Executive's present business travel obligations.
(vi) If individuals who as of the date of the Closing Date
constitute the Board of Trustees of the Company, cease for any reason to
constitute at least 51% of such Board.
(vii) A decision by the Board of Trustees after the Closing
Date to the effect that the Company shall merge or consolidate, or sell,
transfer or otherwise dispose of all or substantially all of its assets, or
dissolve or liquidate.
(viii) The failure of Executive for any reason other than
"cause" to be a member of the Board of Trustees of the Company.
In the event of any such termination, which shall become
effective on the date set forth in Section 6.5 hereof, the Executive shall be
entitled to receive the following (which, so long as Madison Grose, Esq. is a
Trustee of the Company and is employed by and acts as Counsel to Starwood
Capital Group, L.P. and Sternlicht, and otherwise in the absence of bad faith or
willful breach by the Company, shall be Executive's sole and exclusive monetary
remedy by reason of such termination due to the occurrence of such "Good Reason"
event, it being agreed that, as actual damages would be difficult to measure or
quantify and it would be impracticable to determine same, the following shall,
so long as Madison Grose, Esq. is a Trustee of the Company and is employed by
and acts as Counsel to Starwood Capital Group, L.P. and Sternlicht, and
otherwise in the absence of bad faith or willful breach by the Company
constitute liquidated damages for Executive by reason of such termination due to
the occurrence of such "Good Reason" event):
(i) The Basic Benefits
(ii) The Lump Sum Payment
(iii) The Fringe Benefits
(b) As used in Article VI:
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(i) "Basic Benefits" shall mean (y) any unpaid portion of
the Base Salary in effect as of the date termination of employment is effective,
prorated to such effective date, (z) any Bonus for the then current fiscal year
of the Company, prorated to such effective date.
(ii) "Lump-Sum Payment" shall mean a single payment to be
paid to the Executive by the Company, within five days from the date of
termination, in an amount equal to the sum of (x) an amount equal to all Base
Salary that would have been payable to Executive pursuant to this Agreement had
the Executive continued to be employed for the remaining unexpired term of this
Agreement and (y) an amount equal to all Bonuses that would have been payable to
Executive respecting the remaining unexpired term of this Agreement as his
annual Bonus for each year(s) or portion thereof of such remaining unexpired
term, being equal, as to any year or fraction thereof of such remaining
unexpired term, to (A) the greater of $6,250 or one-twelfth of Executive's Bonus
for the most recently concluded fiscal year of the Company prior to the fiscal
year of the Company in which the termination occurs, multiplied by (B) the
number of whole and partial calendar months remaining in the unexpired term of
this Agreement.
(iii) "Fringe Benefits" shall mean all fringe benefits set
forth in Sections 3.5 through 3.8 throughout the remaining unexpired term of the
Agreement, as if the Executive's employment under the Agreement had not been
terminated. If, as a result of termination of Executive's employment, Executive
or his otherwise eligible dependents or beneficiaries shall become ineligible
for benefits in any one or more of the Company's benefit plans, then throughout
such remaining unexpired term of the Agreement, as if Executive's employment
under the Agreement had not been terminated, the Company shall continue to
provide the Executive and his eligible dependents or beneficiaries with benefits
at a level at least equivalent to the level of benefits for which the Executive
and his dependents and beneficiaries were eligible under such plans immediately
prior to the termination date.
"Fringe Benefits" shall also include, notwithstanding any
provision of any applicable Company benefit plan or agreements (including but
not limited to those relating to stock options, stock appreciation rights,
restricted stock awards, stock purchases, pensions, thrift, profit sharing or
other retirement or employee benefits) to the contrary, all rights to such
benefits previously granted to Executive, which shall as of the termination date
become immediately fully vested and exercisable by the Executive and shall
remain exercisable for a period of not less than one year. These provisions of
Section 6.4 shall be applicable, notwithstanding any provisions to the contrary
in any such plans or agreements of the Company referred to above as of the date
of termination. Notwithstanding the foregoing and in clarification thereof,
Fringe Benefits shall not include the right to receive any stock options or
stock loans
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which have not been granted to Executive prior to the date of termination.
6.4.1 Executive shall not be required in any way to
mitigate the amount of any payment provided for in this Section 6.4, including
but not limited to seeking other employment, nor shall the amount of any payment
provided for in this Section 6.4 be reduced by any compensation or other income
earned or received by Executive as the result of employment with another
employer or otherwise after the date of termination of his employment hereunder.
6.5 Notice of Termination. The Company shall give notice
to the Executive of any termination by the Company pursuant to any of Section
6.1 or Section 6.3 hereof, as the case may be, and such termination shall become
effective (i) with respect to termination pursuant to Section 6.1 hereof, only
if such notice is given within 30 days after the Chief Executive Officer or the
Board of Trustees becomes aware of the occurrence of the "cause" referred to in
Section 6.1, and if such notice is so given, on the date such notice is given,
(ii) with respect to termination pursuant to Section 6.3 hereof, only if such
notice is given within 30 days of the end of the Disability Period referred to
in such Section 6.3 hereof, and if such notice is so given, on the thirtieth day
after such notice is given. Termination pursuant to Section.6.2 hereof shall
become effective immediately on the date of the Executive's death and no notice
shall be required with respect to such termination. Termination by the Executive
under Section 6.4 shall become effective 30 days after notice from Executive to
Company.
6.6 Disputed Termination. If the Executive resigns his
employment with the Company alleging in good faith as the basis for such
resignation any of the grounds specified in Section 6.4 and if the Company then
disputes Executive's rights to the payment of benefits under Section 6.4, the
Company shall nonetheless continue to pay Executive the full compensation
(including but not limited to his Base Salary, Bonus and Fringe Benefits) in
effect on the date Executive provided notice of such resignation, and the
Company shall continue the Executive as a participant in all compensation
benefits and insurance plans in which the Executive was then a participant,
until the earlier of the Termination Date or the date the dispute is finally
resolved, either by mutual written agreement of the parties or by decree of a
court of competent jurisdiction that is not appealable or with respect to which
the time for appeal has expired and no appeal has been perfected. For purposes
of this Section, there shall be a rebuttable presumption that an event occurred
constituting "Good Reason" under Section 6.4 and that the Executive alleged such
grounds in good faith.
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Article VIII
Definitions
In addition to the terms defined elsewhere in this Agreement, the
following terns shall have the following meanings for purposes of this
Agreement:
8.1. Affiliate. "Affiliate" shall mean, with respect to
any specified individual or entity, any individual or entity that directly, or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, the individual or entity specified.
8.2. Closing Date. The "Closing Date" shall mean, the
date of the closing to be held pursuant to the terms and conditions of the
Formation Agreement.
Article IX
General
9.1 Governing Law. This Agreement shall be governed by,
and construed, interpreted and enforced in accordance with, the internal laws of
the State of California without reference to principles of conflict of laws.
9.2 Captions. The Article and Section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
9.3 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, between the parties hereto. Upon the Closing
Date this Agreement shall supersede in its entirety all prior employment
agreements between Executive and the Company.
9.4 No Other Representations. 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.
9.5 Assignability. This Agreement is personal in its
nature. Accordingly, this Agreement and the rights and obligations of the
parties hereunder may not be assigned or delegated by either party, except to
the extent, if any, that the Company's acting as general partner of SLT Realty
Limited Partnership may be deemed an assignment by the Company.
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9.6 Amendments; Waivers. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended and the terms or covenants
hereof may be waived, but only by a written instrument executed by Executive and
the Company, or, in the case of a waiver, by the party waiving compliance. The
failure of either party at any time or times to require performance of any
provision hereof shall in no manner affect such party's right at a later time to
enforce the same. No waiver by either party of the breach of any term or
covenant contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
9.7 Termination of Agreement. Notwithstanding anything in
this Agreement to the contrary, if the Closing to be held pursuant to the
Formation Agreement shall not have taken place on or prior to February 28, 1995,
this Agreement and all of the rights and obligations of the parties hereunder
shall terminate and be null and void and of no force, and effect and neither of
the parties hereto shall have any liability or obligation to the other.
9.8 Legal Expenses. Whether or not the Closing under the
Formation Agreement shall take place, the Company shall pay or reimburse the
Executive for all reasonable fees and disbursements of the Executive's counsel.
In the event any arbitration or judicial determination becomes necessary of any
dispute arising as to the parties' rights and obligations hereunder, the Company
shall bear the reasonable attorneys fees and costs of Executive's counsel,
except if and to the extent it shall be finally adjudged that such dispute was
caused by Executive's willful breach of the express provisions of this
Agreement.
9.9 Approval of the Board of Trustees. Whenever approval
of the Board of Trustees shall be required to be obtained pursuant to this
Agreement, such approval shall not be unreasonably withheld and shall be deemed
to have been obtained if (i) evidenced by a resolution duly adopted by the Board
of Trustees, (ii) otherwise set forth in any duly recorded minutes of any
meeting of the Board of Trustees, or (iii) evidenced by any written instrument
signed by any trustee (other than the Executive) on behalf of the Board of
Trustees.
9.10 Severability. Any term or provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating or affecting any other term or provision
hereof, and any such prohibition or unenforceability in any jurisdiction
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shall not invalidate or render unenforceable such term or provision in any other
jurisdiction.
9.11 Notices. All notices and other communications
required or provided for under this Agreement shall be in writing and shall be
personally delivered or sent by registered or certified mail, postage prepaid,
with return receipt requested, or sent by telegram, telex, telecopy or similar
form of telecommunication, and shall be deemed to have been given when
received. Any such notice or communication shall be addressed, (a) if to the
Company or the Board of Trustees, to the office or residence of the Chief
Executive Officer and any Trustee of the Company who shall not be an officer or
employee of the Company, or to such other address and/or to the attention of
such other person as the Board of Trustees shall have furnished to the
Executive in writing, or (b) if to the Executive, to 1317 Palisades Drive,
Pacific Palisades, California 90272, or to such other address as the Executive
shall have furnished to the Compensation Committee in writing.
9.12 Beneficiaries. Whenever this Agreement provides for
any payment to the Executives estate, such payment may be made instead to such
beneficiary or beneficiaries as the Executive may have designated in writing and
filed with the Company. The Executive shall have the right to revoke any such
designation from time to time and to redesignate any beneficiary or
beneficiaries by written notice to the Company.
9.13 Disclaimer. The name "Hotel Investors Trust" is a
designation of a Maryland real estate investment trust and its trustees (as
trustees but not personally) under a Declaration of Trust dated as of August 15,
1969, as amended, and all persons dealing with such trust must look solely to
such trust property for enforcement of any claims against such trust, a the
trustees officers, agents and security holders of such trust assume no personal
liability for obligations entered into on behalf of such trust and the
respective property shall not be subject to the claims of any person relating to
any such obligations.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
The Company:
HOTEL INVESTORS TRUST
By: _____________________________________
Senior Vice President and Trustee
-15- Execution Copy
<PAGE> 16
The Executive:
_________________________________________
Jeffrey C. Lapin
-16- Execution Copy
<PAGE> 1
EXHIBIT 10.24
AMENDED AND RESTATED
CREDIT AGREEMENT
among
STARWOOD LODGING TRUST
(formerly known as
Hotel Investors Trust)
and
SLT REALTY LIMITED PARTNERSHIP
and
BANKERS TRUST COMPANY
as successor Collateral Agent to
Wells Fargo Bank, National Association
and
MERRILL LYNCH MORTGAGE CAPITAL INC.,
as assignee of
John Hancock Mutual Life Insurance Company,
John Hancock Variable Life Insurance Company,
Connecticut Mutual Life Insurance Company
The First National Bank of Boston
and
Wells Fargo Bank, National Association
______________________________
Dated as of March 24, 1995
______________________________
<PAGE> 2
TABLE OF CONTENTS
DEFINITIONS
ARTICLE 1.
Amount and Terms of the Credit
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1.1 Restructuring of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
1.2 Assignment and Assumption; Third Closing Loans . . . . . . . . . . . . . . . . . . . . . . 26
1.3 Dating and Registration of Notes; Transfer of Third Closing Loans . . . . . . . . . . . . 27
1.4 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.5 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Stated Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Notice by Collateral Agent . . . . . . . . . . . . . . . . . . . 28
1.6 Additional Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.7 Acquisition Credit Facility; Severance of Loans . . . . . . . . . . . . . . . . . . . . . 28
1.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Extension Fee . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Service Charges . . . . . . . . . . . . . . . . . . . . . . . . 29
1.9 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Optional Prepayment . . . . . . . . . . . . . . . . . . . . . . 29
(b) Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . 30
(c) Notices of Prepayments . . . . . . . . . . . . . . . . . . . . . 31
(d) Formula for Application of Prepayments . . . . . . . . . . . . . 31
1.10 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1.11 Form and Terms of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
1.12 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.13 Increased Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
1.14 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
ARTICLE 2.
Use of Proceeds
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ARTICLE 3.
Representations and Warranties
3.1 Organization, Standing, etc. of the Borrower and the Other Companies; Authorization . . . 33
(a) Realty Partnership . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Operating Partnership. . . . . . . . . . . . . . . . . . . . . . 34
3.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.3 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.4 Financial Information; Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.5 Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.6 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.7 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.8 Indebtedness, Liens and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.9 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.10 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.11 Authorization; Compliance with Other Instruments . . . . . . . . . . . . . . . . . . . . . 37
3.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.13 Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.14 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.15 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.16 Employee Retirement Income Security Act of 1974 . . . . . . . . . . . . . . . . . . . . . 39
3.17 Ownership of Borrower and SLT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(a) Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) SLT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.19 Trademarks, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.20 Burdensome Court Orders, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.21 Fire, Explosion, Labor Disputes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.22 Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.23 Lien Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.24 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.25 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.26 All Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.27 Certain Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
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ARTICLE 4.
Gaming Partnership
4.1 Consent to Transfer of Assets of HICN to Gaming Partnership . . . . . . . . . . . . . . . 42
(a) Security Documents . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Operating Partnership Guaranty . . . . . . . . . . . . . . . . . 42
(c) Solvency Certificate . . . . . . . . . . . . . . . . . . . . . . 43
(d) Officer's Certificate . . . . . . . . . . . . . . . . . . . . . 43
(e) Local Counsel Opinion . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 5.
Affirmative Covenants
5.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(a) Annual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(b) Quarterly . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) Monthly . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(d) Projections and Capital Expenditures Budget . . . . . . . . . . 46
(e) Auditors' Letters . . . . . . . . . . . . . . . . . . . . . . . 47
(f) Management Company Reports . . . . . . . . . . . . . . . . . . . 47
5.2 Other Information and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(a) Communications With Shareholders . . . . . . . . . . . . . . . . 47
(b) Notices of Default on Other Documents . . . . . . . . . . . . . 48
(c) Notice of Litigation or Other Material
Development . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.3 Legal Existence: Franchises: Compliance with Laws . . . . . . . . . . . . . . . . . . . . 50
5.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.5 Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.6 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.7 Payment of Other Indebtedness. etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(b) Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . . . 56
(c) Additional Collateral . . . . . . . . . . . . . . . . . . . . . 56
(d) Management Contracts . . . . . . . . . . . . . . . . . . . . . . 57
5.9 Cash Management System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.10 Action Under Hazardous Materials Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.11 Asbestos Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.12 Appraisals and Marketing Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.13 Termination of Material Licenses and Material Agreements . . . . . . . . . . . . . . . . . 59
5.14 Covenant regarding Second Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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ARTICLE 6.
Negative Covenants
6.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.3 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.4 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.5 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.6 Intercompany Loans and Leases, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.7 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.8 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.9 Mergers and Consolidations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.10 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.11 Issuance of Additional Shares. etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.13 Prohibition on Sale of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.14 Modification of Certain Documents, Agreements and Instruments . . . . . . . . . . . . . . 77
6.15 Employment and Compensation Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
6.16 Cash and Cash Equivalents Held by Other Companies . . . . . . . . . . . . . . . . . . . . 77
6.17 Management Companies and Management Contracts . . . . . . . . . . . . . . . . . . . . . . 78
6.18 Compliance with ERISA, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
6.19 No Additional Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE 7.
Financial Covenants
7.1 Minimum Adjusted Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.2 Available Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.3 Illustrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE 8.
Defaults; Remedies
8.1 Events of Default: Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.2 Remedies on Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE 9.
Setoff
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ARTICLE 10.
Expenses: Indemnification
10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
10.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.3 Residual Indemnity Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE 11.
Amendments and Waivers, etc.
11.1 Waivers in Writing, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
ARTICLE 12.
Nature of the Senior Lender's Obligations
ARTICLE 13.
Limitation of Liability
ARTICLE 14.
Miscellaneous
14.1 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
14.2 Extensions of Time: Calculations. etc . . . . . . . . . . . . . . . . . . . . . . . . . . 88
(a) [OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
(b) Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . 88
14.3 Successors and Assigns; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . 89
14.4 Counterparts, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
14.5 Entire Agreement. etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
14.6 Construction of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
14.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
14.8 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
</TABLE>
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14.9 Choice of Law and Waiver of Jury . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
(a) Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . 93
(b) Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 94
14.10 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
14.11 Cross References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
</TABLE>
EXHIBITS
A-3A Form of Third Closing Residual Note
A-3B Form of Third Closing State Note
F-3 Form of Gaming Partnership Solvency Certificate
K-3 Form of Operating Partnership Guaranty from Gaming Partnership
O Form of Management Subordination Agreement
V Form of Deviation Report
W Form of Capital Expenditures Budget
X Cash Management Memorandum
Y Form of Management Contract
vi
<PAGE> 8
SCHEDULES
1.7 Terms of Acquisition Credit Facility
1.9 Aggregate Asset Value
3.1 Organization, Standing, etc. of Borrower
3.2 Subsidiaries
3.3 Qualifications
3.4 Financial Statements
3.5(a) Gaming Licenses and Alcohol Beverage Licenses
3.5(b) Exceptions to Material Licenses
3.6(a) Material Agreements
3.6(b) Exceptions to Material Agreements
3.7 Tax Returns and Payments
3.8(a) Indebtedness
3.8(b) Liens
3.8(c) Investments
3.8(d) Contingent Obligations
3.10 Litigation
3.11 Compliance with Other Instruments
3.14(c) Consents - General
3.16 Employee Benefit Plans
3.17(a) Capital Structure of Borrower
3.17(b) Capital Structure of SLT
3.18 Environmental Matters
3.19 Trademarks, etc.
3.21 Fire, Explosion, Labor Disputes, etc.
3.23 Lien Validity
3.24 Solvency
3.25 Accounts
3.26 Assets
4.2(q) Restructuring Plan
6.10 Minimum Release Prices
7 Illustrations of Calculation of Financial Covenants
14.11 Cross-Reference Table
ATTACHMENTS
I Address for Payments of Notes; Allocation of Payments on the Notes
vii
<PAGE> 9
AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"), dated as of
March 24, 1995, among Starwood Lodging Trust (formerly known as Hotel Investors
Trust) ("SLT"), SLT Realty Limited Partnership (the "Realty Partnership"),
Bankers Trust Company in its capacity as the collateral agent, its successors
and assigns ("Collateral Agent") and Merrill Lynch Mortgage Capital Inc.
("Merrill" or the "Senior Lender") as assignee of and successor to The First
National Bank of Boston, National Association, John Hancock Mutual Life
Insurance Company, John Hancock Variable Life Insurance Company, Connecticut
Mutual Life Insurance Company and Wells Fargo Bank, National Association. This
Agreement amends and restates the terms and conditions of the Prior Credit
Agreement (as hereinafter defined).
Preliminary Statement
SLT, Merrill (by way of its predecessors in interest) and the
predecessor to the Collateral Agent entered into a Credit Agreement dated as of
January 28, 1993, as amended (the "Prior Credit Agreement") pursuant to which
the First Closing Loans and the Second Closing Loans were made to SLT. The
Third Closing (as defined therein) was to have occurred on or before the date
that was one hundred fifty (150) days after the date of the First Closing,
which period was subject to extension as provided in the Prior Credit
Agreement.
As set forth in detail in the Formation Agreement, dated November 11,
1994, among SLT, Starwood Lodging Corporation ("SLC"), Starwood Capital Group,
L.P. ("Starwood") and certain affiliates of Starwood, including any and all
amendments or other modifications, supplements, extensions or renewals thereto
or thereof that have been approved by the Senior Lender in writing, and
together with the letter agreement, dated November 11, 1994, among SLT, SLC and
Starwood (the "Formation Agreement"), SLT, SLC and Starwood have engaged in a
transaction (the "Starwood Reorganization") which, in general, involved the
transfer to the Realty Partnership of all or substantially all of the assets
and liabilities of SLT, the transfer to SLC Operating Limited Partnership (the
"Operating Partnership," and together with the Realty Partnership, the
"Partnerships") of all or substantially all of the assets and liabilities of
SLC other than HICN (as hereinafter defined) and each subsidiary of SLC, and
the transfer of certain additional assets, subject to certain liabilities, of
the Starwood Partners to the Realty Partnership and the Operating Partnership.
The Starwood Reorganization was substantially completed pursuant to the
Formation Agreement effective as of January 1, 1995.
The transfer of certain of the assets (the "Gaming Assets") of one of
the subsidiaries of SLC, Hotel Investors Corporation of Nevada ("HICN"), is
subject to prior approval (such approvals collectively the "Nevada Gaming
Approvals") by various Nevada regulatory authorities (collectively, the "Nevada
Gaming Authorities"), which approvals have not been obtained as the date
hereof. As part of the Starwood Reorganization, all of the assets, including
the Gaming Assets, and liabilities of HICN have been retained by HICN until the
Nevada Gaming Approvals have been received or are no longer necessary, at which
time such Assets and liabilities will be transferred to a limited partnership
(the "Gaming Partnership"), the partners of which will be the Operating
Partnership and HICN.
Pursuant to the Second Amendment to the Prior Credit Agreement, the
Senior Lender has given its written consent to the Starwood Reorganization, the
transfer of substantially all of
<PAGE> 10
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the assets and liabilities of SLT, SLC and each Subsidiary of SLC other than
HICN to the Partnerships, subject to the terms of this Agreement, the transfer
of all of the assets and liabilities of HICN to the Gaming Partnership, and the
modification of certain terms of the Prior Credit Agreement and of the other
Loan Documents and Intercompany Loan Documents executed in connection
therewith.
The Senior Lender and the Borrower desire to amend and restate the
Prior Credit Agreement in its entirety and to provide for, among other things,
an additional advance to the Borrower in the amount of $13,436,672.08, the
pledge of certain of the Starwood Assets, as defined herein, as additional
security for the Loans, and the $75,000,000 Acquisition Credit Facility, as
defined herein.
The terms and conditions set forth herein and in the other Loan
Documents and Intercompany Loan Documents being executed and delivered in
connection herewith expressly provide for the continuation of all of the
Required Liens and Intercompany Liens in all of the Assets, other than Excluded
Assets and Excluded Intercompany Assets, of SLT, SLC and each SLC Subsidiary,
whether such Assets were or are transferred to either of the Partnerships or
the Gaming Partnership or retained by SLT, SLC or any SLC Subsidiary.
In consideration hereof the parties hereto hereby agree as follows:
DEFINITIONS
As used herein, the following terms have the following respective
meanings:
"ACM" has the meaning set forth in Section 5.11.
"ACM Requirements" means all Hazardous Materials Laws relating to the
presence of ACM on any Hotel Property, and comparable state laws, rules and
regulations, if any, to the extent relating to the presence of ACM on any Hotel
Property, and the Occupational Safety and Health Act of 1970, as amended from
time to time, and regulations thereunder and comparable state laws, rules and
regulations, if any.
"Acquisition Credit Facility" means the credit facility made available
hereunder pursuant to the terms, conditions and consents set forth in Section
1.7 and Schedule 1.7.
"Acquisition Loan" has the meaning set forth in subsection 1.7(a).
"Adjusted London Interbank Offered Rate" means as to any Interest
Period a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to 1/100 of 1%) by dividing (i) the applicable London Interbank
Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
"Adjusted Net Worth" means the combined partners' equity of the
Borrower and of the Operating Partnership, determined in accordance with GAAP.
<PAGE> 11
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"Affiliate" means, at any time, any Person that satisfies any one or
more of the following criteria: (a)(i) any Person known to the Borrower to
hold, of record or beneficially, five percent (5.00%) or more of the shares of
beneficial interest or the shares of capital stock of SLT or SLC then
outstanding, (ii) any Person then occupying the position of trustee or director
of any of the Companies, (iii) any Person then occupying the position of
officer of any of the Companies, or (iv) any Person then known to the Borrower
to be controlled by or under direct or indirect common control with the
Borrower or any other Company or controlled by any Person described in clauses
(ii) or (iii) above (including Moorland Hotel Limited Partnership); (b) any
general partner, limited partner or other holder of any of the Partnership
Interests in the Borrower and/or the Operating Partnership and any Affiliate of
any general partner, limited partner or holder of any of the Partnership
Interests in the Borrower and/or the Operating Partnership, and (c) any Person
then known to the Borrower to be controlled by or under direct or indirect
common control with Starwood. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), means the possession, directly or indirectly, of the
power to direct or to cause the direction of the management and policy of that
Person, whether through the ownership of Voting Stock, a partnership interest
or interests, by contract or otherwise.
"Aggregate Asset Value" means as of any date of determination the
combined total value of all the Assets then held by the Senior Lender as
collateral for the Loans as each such value is set forth on Schedule 1.9. If
the Borrower or any Company shall acquire a Hotel Property or Mortgage Note
after the date hereof, pursuant to Article 6, the value of such Asset and all
Assets acquired in connection therewith shall be determined by the Senior
Lender. Schedule 1.9 shall be amended to include such value, provided the
Senior Lender shall have a Required Lien encumbering such Asset.
"Applicable Amount" has the meaning set forth in Section 6.7.
"Appraisal" means an appraisal of a Hotel Property or an Indirect
Hotel Property prepared by PKF Consulting who shall be M.A.I. approved and with
appropriate state licenses (or such other Person as may be reasonably
satisfactory to the Senior Lender) and that otherwise satisfies the
requirements of all applicable statutes and regulations, if any, applicable at
the time in question to the Senior Lender.
"Asset" means any property or other asset of any kind that a Person
owns, leases or otherwise has the right to possess or use, whether real,
personal or mixed real and personal, whether tangible or intangible and whether
such ownership or other interest exists on the date of this Agreement or is
hereafter acquired.
"Asset Sale" has the meaning set forth in Section 6.10. However, the
granting of a security interest in, or the placing of a mortgage, deed of
trust, deed to secure debt or other encumbrance on, an Asset shall in no event
constitute an Asset Sale.
"Available Cash" means for any period the Companies' consolidated net
income or loss for such period, determined in accordance with GAAP, after
restoring thereto amounts
<PAGE> 12
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deducted for provision for investment losses, provision for income taxes,
depreciation and amortization, losses on sales of hotel and hotel/casino
Assets, interest paid or accrued with respect to the Loans and interest paid or
accrued with respect to the other Indebtedness of SLT or the Realty Partnership
for such period, other costs incurred by the Companies in connection with the
execution and delivery hereof and performance of the Companies' obligations
hereunder, costs incurred by the Companies in connection with the Starwood
Reorganization, litigation and settlement costs and other extraordinary costs
paid or accrued during or for such period and after subtracting therefrom
amounts included for gain on sales of hotel and hotel/casino Assets and income
tax benefits.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978 (11 U.S.C.
Sections 101-1330), as amended or supplemented from time to time, and any
successor statute, and all of the rules issued or promulgated in connection
therewith.
"Borrower" means the Realty Partnership. However, SLT, the primary
obligor with respect to the Loans prior to the Starwood Reorganization, shall
remain fully liable for the payment and performance of the Realty Partnership's
obligations under this Agreement, the Third Closing Notes and the other Loan
Documents and Intercompany Loan Documents to the extent provided herein and
therein.
"Borrower's Residual General Intangibles" has the meaning set forth in
the Mortgage Note Assignment.
"Business Day" means (i) for all purposes, any day, excluding Saturday
and Sunday and excluding any other day that shall be in New York, New York a
legal holiday or a day on which banking institutions are authorized or required
by law to close, and (ii) with respect to all notices and determinations in
connection with, and payment of principal and interest on, the Loans, any day
that is a Business Day described in (i) above and that is a day for trading by
and between banks for U.S. dollar deposits in the interbank euro-dollar market.
"Capital Expenditure" means any payment made directly or indirectly
for the purpose of acquiring or constructing or restoring fixed assets, real
property or equipment, which in accordance with GAAP, would be added as a debit
to the fixed asset account of the Person making such expenditure, including
amounts paid or payable as principal under any conditional sale or other title
retention agreement or under any lease or other periodic payment arrangement
which is of such a nature that payment obligations of the lessee or obligor
thereunder would be required by GAAP to be capitalized and shown as liabilities
on the balance sheet of such lessee or obligor. However, no payment pursuant to
any ground lease, or hotel operating lease or Capital Lease shall be considered
a Capital Expenditure.
"Capital Expenditures Budget" has the meaning set forth in subsection
5.1(d).
"Capital Lease" means any lease or other periodic payment arrangement
in respect of property (real, personal or mixed) which, in accordance with
GAAP, should be capitalized on
<PAGE> 13
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the lessee's balance sheet or for which the amount of the asset and liability
thereunder as if so capitalized should be disclosed in a note to such balance
sheet.
"Cash and Cash Equivalents" means all cash and/or cash equivalents
derived from any source whatsoever, including all "instruments" (as defined in
Section 9105 of the California Uniform Commercial Code), "checks" (as defined
under Section 3104(2)(b) of the California Uniform Commercial Code), "drafts"
(as defined pursuant to Section 3104(a) of the California Uniform Commercial
Code), credit card or charge card receipts or other forms of payments for the
provision of goods or services from any of the Hotel Properties or from other
activities of any of the Companies, the collection or payment of which is
normally accomplished through the deposit or delivery of such items with a
commercial bank or other financial institution for payment and collection.
However, Cash and Cash Equivalents of the Companies shall not include any
amount or amounts paid to or on behalf of any Company pursuant to any policy of
directors' (or trustees') and officers' insurance if and to the extent that
such Cash and Cash Equivalents are required by the issuer or issuers of such
policy to be, and such Cash and Cash Equivalents are, paid on behalf of insured
trustees, directors or officers pursuant to one or more claims made pursuant to
such policy (or if payment of such claim has already been advanced by such
trustee, director or officer, reimbursed to such Person).
"Cash Interest" means having the amount of interest required to be
paid by the Borrower to the Senior Lender or paid or accrued to other holders
of Indebtedness of the Companies during such period.
"Cash Management Accounts" has the meaning set forth in the Cash
Management Memorandum.
"Cash Management Memorandum" means the memorandum attached hereto as
Exhibit X describing the system agreed upon by SLT, the Realty Partnership and
the Senior Lender to administer the Borrower's (and the other Companies') Cash
and Cash Equivalents, including any and all amendments or other modifications
or supplements thereto or thereof.
"Cash Management System" has the meaning set forth in the Cash
Management Memorandum.
"Cash Threshold" means $10,000,000 in the aggregate in (a) Cash and
Cash Equivalents (other than Excluded Cash) held in the aggregate by all
Companies and deposited in the Cash Management Accounts, and (b) Liquid
Investments held by the Companies or any of them. Nothing in this definition
shall be construed as requiring any specific level of cash reserves or as
requiring that amounts in excess of the Cash Threshold be applied to amortize
the Loans.
"Change of Control" means any of the following events, unless the
Senior Lender by its consent deems any such event not to constitute a Change of
Control : (i) the removal or replacement for any reason of SLT as the general
partner of the Realty Partnership, (ii) the removal or replacement for any
reason of SLC as the managing general partner of the
<PAGE> 14
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Operating Partnership, (iii) the failure of a nominee of Starwood to be elected
to, or at any time for any reason to serve as, a member of SLT's Board of
Trustees, SLC's Board of Directors after receipt of the Nevada Gaming Approvals
and, prior to receipt of the Nevada Gaming Approvals, the management committee
of the Operating Partnership entrusted with control over decisions of the
Operating Partnership other than with respect to the Gaming Assets or (iii)
Starwood Partners' ceasing to own or control at least fifteen percent (15%) of
the issued and outstanding units of limited partnership interests in the Realty
Partnership, unless its ownership or control of such interests falls below such
percentage as a result of (1) a public offering of equity securities by SLT,
SLC or the Partnerships, (2) a merger permitted by Section 6.9 or (3)
distribution of OP units with respect to the Partnerships by Starwood Partners
pursuant to contracts entered into prior to the date hereof; provided, however,
with respect to this clause (3) the fifteen percent (15%) requirement shall not
be reduced below ten percent (10%).
"Closing" means any of the First Closing, the Second Closing or the
Third Closing.
"Closing Date" means the date on which a Closing actually occurs.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all Assets now owned or hereafter acquired by the
Borrower in which or upon which a Lien is granted, or for which an assignment
for security is made, under the Security Documents.
"Collateral Accounts" has the meaning set forth in the Cash Management
Memorandum.
"Collateral Agent" means Bankers Trust Company in its capacity as
collateral agent for the Senior Lender hereunder and pursuant to a separate
agreement, if any, as the same may be amended from time to time and any
successor collateral agent selected by the Senior Lender in accordance with the
terms of any such separate agreement. The Senior Lender may delegate any and
all of the Senior Lender's rights, remedies and responsibilities under this
Agreement to the Collateral Agent and the Borrower and the other Companies may
rely on the statements and actions of the Collateral Agent in connection with
the Loans as having the full and complete authority of the Senior Lender.
"Company" means any of SLT, SLC, the Realty Partnership, the Operating
Partnership and each Subsidiary of SLT, SLC, the Realty Partnership or the
Operating Partnership.
"Companies" means, collectively, SLT, SLC, the Partnerships and their
respective Subsidiaries.
"Condemnation" has the meaning set forth in subsection 5.5(a).
<PAGE> 15
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"Confirmation of Position Agreement" means that certain Confirmation
of Position Agreement dated as of January 28, 1993, among SLT, SLC and each of
their respective Subsidiaries.
"Consents" has the meaning set forth in Section 3.14.
"Contingent Obligation" means as to any Person and without duplication
of amounts, any obligation of such Person guaranteeing or intended to guarantee
(whether guaranteed, endorsed, co-made, discounted or sold with recourse to
such Person) any indebtedness, lease, dividend, reimbursement obligation
relating to letters of credit, or other obligation ("primary obligation") of
any other Person ("primary obligor") in any manner, whether directly or
indirectly, including any obligation of such Person, irrespective of whether
contingent, (a) to purchase any such primary obligation, (b) to advance or
supply funds (whether in the form of a loan, advance, stock purchase, capital
contribution or otherwise) (i) for the purchase, repurchase or payment of any
such primary obligation or any Asset constituting direct or indirect security
therefor, or (ii) to maintain working capital or equity capital of the primary
obligor, or otherwise to maintain the net worth, solvency or other financial
condition of the primary obligor, (c) to purchase or make payment for any
Asset, securities, services or lease if such obligation is primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) to
otherwise assure or hold harmless the owner of such primary obligation against
loss in respect thereof. However, the Contingent Obligations of any Person
shall not include (i) trade payables or accrued liabilities of such Person
incurred in the ordinary course of business of such Person, (ii) endorsements
of instruments for deposit or collection in the ordinary course of such
Person's business, or (iii) indemnities arising in the ordinary course of such
Person's business, including indemnities arising in connection with the sale or
other disposition of Assets or in connection with the incurring of
indebtedness.
"Daily Cash Worksheet" has the meaning set forth in the Cash
Management Memorandum.
"Damage" has the meaning set forth in subsection 5.5(a).
"Debt Service" means for any period all amounts payable by any of the
Companies in respect of interest and scheduled amortization with respect to
that Company's Indebtedness.
"Default" means any event, breach, occurrence or failure of condition
that, with the giving of notice or the expiration of any applicable grace
period or both, would constitute an Event of Default.
"Direct Note Collateral" has the meaning set forth in the Mortgage
Note Assignment.
"Earnings Projection" has the meaning set forth in paragraph (i)(B) of
subsection 6.5(f).
<PAGE> 16
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"Environmental Indemnity" means that certain Environmental Indemnity
dated as of January 28, 1993, and executed by SLT in favor of the Senior
Lender, including any and all amendments or other modifications, supplements,
extensions or renewals thereto or thereof.
"Environmental Situation" has the meaning set forth in Section 5.10.
"ERISA" has the meaning set forth in Section 3.16.
"ERISA Affiliates" means (i) any corporation that is a member of a
"controlled group" of corporations (within the meaning of Section 414(b) of the
Code) of which any Company is a member, (ii) any trade or business (whether or
not incorporated) that is a member of a group of trades or businesses under
"common control" (within the meaning of Section 414(c) of the Code) of which
that Company is a member, and (iii) any member of an "affiliated service group"
(within the meaning of Sections 414(m) and (o) of the Code) of which any
Company, any corporation described in clause (i) of this paragraph or any trade
or business described in clause (ii) of this paragraph is a member.
"Euro-Dollar Margin" means 300 basis points.
"Euro-Dollar Reference Bank" means a leading bank, as designated by
the Collateral Agent, engaged in transactions in Euro- Dollar deposits in the
international Eurocurrency market having an established place of business in
London. Initially, the Euro- Dollar Reference Bank shall be any of the Bank of
Tokyo, Ltd., Barclays Bank, plc, National Westminster Bank, plc and Bankers
Trust Company. If any Euro-Dollar Reference Bank should be removed from the
Telerate Service or in any other way fails to meet the qualifications of a
Euro-Dollar Reference Bank, the Collateral Agent, in its sole discretion, may
designate another bank meeting the criteria specified in above.
"Euro-Dollar Reserve Percentage" means, for any day, the percentage
(expressed as a decimal) that is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City in respect of "Eurocurrency liabilities" (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on the Third Closing Loans is determined
or any category of extensions of credit or other assets which includes loans by
a non-United States office of any bank to United States residents). The
Adjusted London Interbank Offered Rate shall be adjusted automatically on and
as of the effective date of any change in the Euro-Dollar Reserve Percentage.
The parties acknowledge that the Euro-Dollar Reserve Percentage on the Third
Closing Date is -0-%.
"Event of Default" has the meaning set forth in Section 8.1.
"Excluded Asset" means (a) any Asset of SLT or the Borrower listed on
Schedule 3.26; (b) any gaming license, liquor license or other governmental
license or permit or deposit (including any extensions, renewals or
replacements) as to which any applicable statute, rule,
<PAGE> 17
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regulation, decision or other law precludes SLT or the Borrower from granting
to the Collateral Agent for the benefit of the Senior Lender a Required Lien;
(c) all Assets as to which any applicable statute, rule, regulation, decision
or other law precludes SLT or the Borrower from granting to the Collateral
Agent for the benefit of the Senior Lender a Required Lien; (d) any Asset
subject to an equipment or other personal property lease which precludes SLT or
the Borrower from granting to the Collateral Agent for the benefit of the
Senior Lender a Required Lien; (e) the trust or corporate seal, the charter
document or documents, the trustees' regulations or bylaws, the partnership
agreement and certificates of limited partnership, the minute book or books,
the share or stock book or books and the original tax returns or reports of the
Borrower and SLT (or any predecessor of either), and the personnel files of the
Borrower's and SLT's executive officers; (f) any Hotel Property that is defined
as an Excluded Asset in paragraph (ii) of subsection 6.5(f) and any Hotel
Property or Assets that have been refinanced as provided in subsection 6.2(i);
(g) any Assets acquired in whole or in part with the proceeds of a Merrill
Loan; (h) any other Asset as to which the Collateral Agent has elected in a
writing delivered to the Borrower or SLT not to require the granting of a
Required Lien; and (i) any Asset as to which an amount equal to the Minimum
Release Price has been paid by the Borrower to the Senior Lender to amortize
the Loans. The Senior Lender's determination that an Asset is an Excluded
Asset as defined in this paragraph shall be conclusive absent manifest error.
The Collateral Agent may from time to time request that the Borrower
or SLT confirm in writing that any particular Asset (or category of Assets) in
which the Borrower or SLT has any right, title or interest but which was
previously disclosed as an Excluded Asset has become Collateral. However, the
failure of the Borrower or SLT to execute any such requested confirmation shall
in no way invalidate or otherwise impair any Required Lien in that Asset.
"Excluded Cash" means, collectively, all Cash and Cash Equivalents of
the Companies or any of them:
(a) held in the form of surety bonds up to an aggregate
of $700,000;
(b) held in the form of utility and worker's compensation
insurance deposits; or
(c) held in the form of impounds for taxes and insurance
or other liens or impounds pursuant to requirements of any Prior
Mortgage Note or other liens encumbering the property of the Borrower.
"Excluded Disposition" means any sale from inventory or of furniture,
fixtures, equipment or similar property in the ordinary course of business or
any disposition of obsolete property or equipment. However, if any such
property or equipment sold or otherwise disposed of is necessary for the
operation of the business of the Company disposing of the same, such property
or equipment shall be promptly restored or replaced with other property or
equipment having such value and utility as such Company shall reasonably
determine necessary for the sound operation of the business of such Company,
and such replacement
<PAGE> 18
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property or equipment shall (unless such replacement property or equipment
constitutes an Excluded Asset or Excluded Intercompany Asset) immediately upon
acquisition by any of the Companies or installation in any Hotel Property
become subject to the Required Liens or the Intercompany Liens, as applicable.
Any transfer of title to a Hotel Property pursuant to an exercise of remedies
by the holder of a Prior Mortgage Note also shall constitute an Excluded
Disposition provided that any proceeds in excess of those necessary to satisfy
the Prior Mortgage Note (up to the amount of the applicable Minimum Release
Price) are paid to the Senior Lender for application to the Loans concurrently
with such transfer of title.
"Excluded Intercompany Asset" means (a) any Asset of any Company
listed on Schedule 3.26; (b) any gaming license, liquor license or other
governmental license or permit or deposit as to which any applicable statute,
rule, regulation, decision or other law precludes the Company owning or
otherwise having an interest in such Asset from granting to another Company an
Intercompany Lien; (c) any Assets as to which any applicable statute, rule,
regulation, decision or other law precludes any of the Companies owning or
otherwise having an interest in such Asset from granting to another Company an
Intercompany Lien; (d) any Asset subject to an equipment or other personal
property lease that precludes the Company that is the lessee thereunder from
granting to another Company an Intercompany Lien; or (iii) is cancelable by
such Company without penalty; (e) the corporate seal, the charter document or
documents, the bylaws, the partnership agreement and certificate of limited
partnership, the minute book or books, the share or stock book or books and the
original tax returns or reports of SLC (or any predecessor), the SLC
Subsidiaries, the Operating Partnership and the Gaming Partnership and the
personnel files of any Company's executive officers; (f) any Hotel Property
that is defined as an Excluded Asset pursuant to paragraph (ii) of subsection
6.5(f) and any Hotel Property or other Assets that have been refinanced as in
subsection 6.2(i); (g) any Asset acquired in whole or in part with the proceeds
of a Merrill Loan; (h) any other Asset as to which the Collateral Agent has
elected in a writing delivered to the Borrower not to cause to be granted an
Intercompany Lien; and (i) any Asset of any of the Companies as to which an
amount equal to the Minimum Release Price has been paid by the Borrower to the
Senior Lender to amortize the Loans. The Senior Lender's determination that an
Asset is an Excluded Intercompany Asset shall be conclusive absent manifest
error.
The Collateral Agent may from time to time request that the Borrower
or SLT confirm in writing that any particular Asset (or category of Assets) in
which the Borrower or SLT has an Intercompany Lien but that was previously
disclosed as an Excluded Intercompany Asset has become Intercompany Collateral.
However, the failure of the Borrower or SLT to execute any such requested
confirmation shall in no way invalidate or otherwise impair any Intercompany
Lien in that Asset.
"Existing Mortgage Notes" means each of the promissory notes and other
evidences of Indebtedness identified as "Existing Mortgage Notes" on Schedule 1
to the Mortgage Note Assignment, as each such note may from time to time, in
accordance with the terms of this Agreement and the Mortgage Note Assignment,
be amended or otherwise modified, renewed or extended, and all notes or other
evidences of Indebtedness hereafter given in substitution or
<PAGE> 19
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exchange therefor or replacement thereof, in accordance with the terms of this
Agreement and the Mortgage Note Assignment.
"Extended Termination Date" has the meaning set forth in subsection
1.4(a).
"Extension Fee" has the meaning set forth in subsection 1.8(a).
"Extension Option" has the meaning set forth in Section 1.4.
"First Closing, First Closing Date and First Closing Notes" has the
meanings set forth in the Prior Credit Agreement.
"First Closing Loans" means the Loans made pursuant to the First
Closing Notes.
"Formation Agreement" has the meaning set forth in the recitals to
this Agreement.
"Franchise Agreement" means each of the franchise (or similar license)
agreements for the operation of any Hotel Property to which any of the
Companies is a party as of the date of the Third Closing, as each may from time
to time, in accordance with the terms of this Agreement, be amended or
otherwise modified, renewed or extended, together with any and all new
franchise or license agreement(s) for the operation of any Hotel Property
entered into by any of the Companies from and after the Third Closing Date,
whether in substitution of or exchange for or replacement of a franchise or
license agreement listed on Schedule 3.6(a) or otherwise, in accordance with
the terms of this Agreement.
"Future Mortgage Notes" means each of the promissory notes and other
evidences of secured Indebtedness executed by a maker in favor of any of the
Companies after January 28, 1993 and evidencing the unpaid portion of the
purchase price of any of the Assets comprising a Hotel Property, as each may
from time to time be or have been amended or otherwise modified, renewed or
extended, and all notes or other evidences of Indebtedness hereafter given in
substitution of or exchange therefor or replacement thereof, in each case in
accordance with the terms of this Agreement (or the Prior Credit Agreement, as
applicable) and the Mortgage Note Assignment.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis.
"Gaming Assets" has the meaning set forth in the recitals to this
Agreement.
"Gaming Partnership" has the meaning set forth in recitals to this
Agreement.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, quasi-judicial, regulatory or administrative
functions of or pertaining to government.
<PAGE> 20
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"Ground Lease" means each ground lease to which any Company is a party
of land upon which all or any substantial portion of any Hotel Property is
located or that is otherwise material to the operation of such Hotel Property,
as each may from time to time be amended or otherwise modified, renewed or
extended, together with any and all new ground lease(s) of land upon which all
or any substantial portion of any Hotel Property acquired by any Company from
and after the date of this Agreement is located or that is otherwise material
to the operation of such Hotel Property.
"Harvey Notes" has the meaning given such term on Schedule 3.26.
"Hazardous Materials" means any chemical, material or substance
included in the definition of "hazardous substances," "hazardous wastes",
"hazardous materials", "extremely hazardous waste", "restricted hazardous
waste", or "toxic substances," or words of similar import under any applicable
local, state or federal law or under the regulations adopted or publications
promulgated pursuant thereto relating to pollution or protection of the
environment, including the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601, et. seq.; the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Sec. 1801, et.
seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sec.
6901, et. seq.; and the Federal Water Pollution Control Act, as amended, 33
U.S.C. Sec. 1251, et. seq.
"Hazardous Materials Activities" means any use, handling,
transportation, production, management, release, emission, generation, removal,
disposal, discharge or storage of Hazardous Materials.
"Hazardous Materials Laws" means any federal, state or local laws,
ordinances or regulations now or hereafter existing or enacted relating to
Hazardous Materials (including without limitation, the use, handling,
transportation, production, management, release, emission, generation, removal,
disposal, discharge or storage thereof).
"HIC" means SLC.
"HIC Operating Account" has the meaning set forth in the Cash
Management Memorandum.
"HIT" means SLT.
"HICN" has the meaning set forth in the recitals to this Agreement.
"HIT Operating Account" has the meaning set forth in the Cash
Management Memorandum.
"Hotel Property" means each hotel, hotel/casino, retail space and/or
office building now or hereafter owned or leased by SLT, the Realty Partnership
or any other Company, including all Real Property, inventory, furnishings,
equipment, fixtures, Franchise Agreements, Material
<PAGE> 21
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Agreements and any and all other agreements, instruments, general intangibles,
accounts, licenses (including Material Licenses), chattel paper, documents,
books and records and other Assets specifically or primarily relating to such
hotel, hotel/casino, retail space and/or office building whether such Assets
are now or hereafter owned or leased by the SLT, the Realty Partnership or any
other Company.
"Hotel Specific Accounts" means as to each applicable Hotel Property
each of the accounts described below as defined in the Cash Management
Memorandum (i) if such Hotel Property is managed by one of the Companies, the
Hotel Collection Account, Hotel Disbursement Account and any new Deposit
Account created for purposes of depositing credit card receipts arising from
the operations carried on at such Hotel Property; (ii) if such Hotel Property
is the subject of a Management Agreement, then the applicable Local
Disbursement Account, Local Deposit Account and Management Company
Consolidation Account (but only if deposits to such Management Company
Consolidation Account are limited solely to Cash and Cash Equivalents arising
directly from the operations of such Hotel Property); (iii) if such Hotel
Property is the Bourbon Street Hotel/Casino, then the Bourbon Street General
Disbursement Account, Bourbon Street Cage Account, Bourbon Street Travel
Agent's Commission Account and Bourbon Street Visa/MC Account; or (iv) if such
Hotel Property is the King 8 Hotel/Casino and Truck Plaza, then the King 8
General Disbursement Account, King 8 Visa/MasterCard Account and King 8 Cage
Account.
"Improvements" means all buildings, structures and other improvements
located or being constructed on any Real Property (specifically including any
such property in which the Borrower or any other Company holds a leasehold
estate).
"Increased Capital Costs" has the meaning set forth in Section 1.13.
"Indebtedness" means, as applied to any Person, the aggregate, without
duplication, of (a) all items (except items of capital or surplus or of
retained earnings) that in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of the balance
sheet of such Person as of the date of which Indebtedness is to be determined,
including any Capital Lease but excluding (i) any such items as would be
included under the caption "Shareholders Equity" or "Partners Equity" on the
liability side of such balance sheet or (ii) any Capital Lease the primary
purpose of which is not intended to be a financing of real estate, improvements
or personalty, and (b) all Indebtedness secured by any Lien to which any Asset
owned or held by such Person is subject, whether or not the indebtedness
secured thereby shall have been assumed but excluding all Contingent
Obligations of such Person.
"Indemnified Liabilities" has the meaning set forth in Section 10.2.
"Indemnitee and Indemnitees" has the meaning set forth in Section 10.2.
"Indirect Hotel Property" means a hotel or hotel/casino (including all
real, personal and mixed property thereof) with respect to which SLT or the
Borrower holds a Mortgage.
<PAGE> 22
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"Initial Termination Date" has the meaning set forth in subsection
1.4(a).
"Intercompany Collateral" means the Assets of the Companies that
secure the Intercompany Liens.
"Intercompany Lease" means a lease between SLT or the Realty
Partnership, on the one hand, and SLC, a Subsidiary of SLC or the Operating
Partnership, on the other hand.
"Intercompany Liens" means the Liens granted and to be granted by the
obligors of the Intercompany Notes to the obligees thereof to secure the
payment of the Intercompany Notes, together with the Liens granted and to be
granted to secure the Subsidiary Guaranties and the Operating Partnership
Guaranties.
"Intercompany Loan Documents" means, collectively, all Intercompany
Notes, all Operating Partnership Guaranties, all Subsidiary Guaranties and all
Intercompany Security Documents executed in connection with the perfection of
any Lien in any Intercompany Collateral, including any and all amendments or
other modifications, supplements, extensions or renewals thereto or thereof and
any other document that recites that it is an "Intercompany Loan Document."
"Intercompany Loans" means all outstanding intercompany advances,
loans and extensions of credit by, among or to the Companies which are made and
cross-collateralized to the extent feasible with the security given for the
Intercompany Loans or otherwise governed by the terms of this Agreement.
"Intercompany Notes" means all negotiable promissory notes payable by
any of the Companies to any of the other Companies.
"Intercompany Security Documents" means all agreements, documents or
instruments delivered from time to time by any Person in connection with the
transactions contemplated by this Agreement and granting or creating an
Intercompany Lien in any Asset to secure any Subsidiary Guaranty, the
Intercompany Loans or the Operating Partnership Guaranties, including any and
all amendments, modifications, supplements, extensions or renewals thereto or
thereof.
"Intercreditor Agreement" means any agreement entered into on or after
the Third Closing Date by and among the Senior Lenders (if at the time there is
more than one Senior Lender) or by and among the Senior Lender or Senior
Lenders and the Collateral Agent with respect to the transactions contemplated
hereby.
"Interest Period" means a period of thirty (30) days, provided that:
(a) the initial Interest Period for the Loans shall
commence on the date hereof and end on the last day of the month in
which such date occurs, and each
<PAGE> 23
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Interest Period occurring thereafter in respect of the Loans shall
commence on the date on which the next preceding Interest Period
expires;
(b) if any Interest Period would otherwise expire on a
day which is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day. However, if any Interest Period
would otherwise expire on a day which is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day; and
(c) if any Interest Period begins on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period, such Interest Period shall end on the
last Business Day of such calendar month.
"Investment" means, as applied to any Person, any direct or indirect
purchase or other acquisition by that Person of legal title to or a beneficial
interest in stock or other securities of any other Person, or any direct or
indirect loan, advance or capital contribution by the first Person to any other
Person.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind, including any conditional sale or
other title retention agreement or any lease in the nature thereof, but
excluding other imperfections of title.
"Liquid Investments" means Investments described in subsection 6.3(b)
(other than intercompany equity investments) and in subsections 6.3(c) through
6.3(f).
"Loans" means the loans made by the Senior Lender pursuant to this
Agreement, including the First Closing Loans, the Second Closing Loans, the
Third Closing Loans and any Acquisition Loans.
"Loan Documents" means collectively, this Agreement, the Notes, the
Security Documents, the Subsidiary Guaranties, the Operating Partnership
Guaranties, the Confirmation of Position Agreement, the Waiver and Release, the
Solvency Certificates, the Environmental Indemnity, any certificate of any
Responsible Officer of any of the Companies or any of such Companies general
partner delivered to the Collateral Agent or any of the Senior Lender at any of
the Closings or on any Pledge Date and any other document that recites that it
is a "Loan Document."
"London Interbank Offered Rate" applicable to any Interest Period
means (i) the rate for deposits in dollars for a period of 30 days which
appears on Telerate page 3750 as of 11:00 a.m. (New York time) on the date that
is two Business Days before the first day of such Interest Period (each such
date a "Euro-Dollar Interest Determination Date"); or (ii) if on any
Euro-Dollar Interest Determination Date no quotation is given on the Telerate
page 3750, the rate for deposits in dollars for a period of 30 days which
appears on the display page designated as "LIBO" on the Reuters Monitor Money
Rates Service (the "Reuters Screen LIBO Page") (or such other page as may
replace the LIBO page on that service for the purposes of
<PAGE> 24
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displaying London interbank offered rates of major banks); or (iii) if no
quotation is given on the Reuters Screen LIBO Page, the average (rounded
upward, if necessary, to the next higher 1/16 of 1%) of the respective rates
per annum at which deposits in dollars are offered by the Euro-Dollar Reference
Banks in the London interbank market to the Euro-Dollar Interest Determination
Date in an amount approximately equal to the principal amount of the Loans and
for a period of time comparable to such Interest Period.
"Major Damage and Major Condemnation" have the respective meanings set
forth in subsection 5.5(d).
"Maker" has the meaning set forth in the Mortgage Note Assignment.
"Management Company" means any Person who from time to time is the
manager or operator under any Management Contract, and any successor or
assignee to or of such Person's rights thereunder.
"Management Contract" means any contract or agreement between any of
the Companies and any non-Company Person for the management of any Hotel
Property, as amended, modified or restated from time to time.
"Management Subordination Agreement" means a written agreement
executed by a Management Company and in substantially the form of Exhibit O or
such other form as shall be reasonably acceptable to the Senior Lender.
"Margin Stock" has the meaning set forth in Article 2.
"Material Adverse Change" means any adverse change in the condition or
value of any one or more Hotel Properties, in the collectibility of any one or
more Mortgage Notes or otherwise in the business, operations, Assets or
financial condition of the Borrower or any of the other Companies, which change
materially and adversely affects the ability of the Borrower to pay the
principal of or interest on the Notes or any other amount due to the Senior
Lender under this Agreement and the other Loan Documents, or materially impairs
the rights and remedies of the Senior Lender under the Security Documents or
the Intercompany Security Documents or the value of the Collateral and the
Intercompany Collateral, in each case taken as a whole.
"Material Adverse Effect" means (i) a loss in the value of any Hotel
Property in an amount that exceeds the greater of $300,000 or seven percent
(7.00%) of the value of such Hotel Property immediately prior to such loss;
(ii) a material adverse change in the collectibility of any Mortgage Note with
a then outstanding principal balance of more than $300,000; (iii) a material
adverse change in the business, operations, Assets (other than as set forth in
the immediately preceding clauses (i) and (ii)) or financial condition of the
Borrower or of the Borrower and the other Companies taken as a whole; or (iv) a
material adverse change in the ability of the Borrower or any of the other
Companies to perform its obligations under, and/or to consummate the
transactions contemplated to be consummated by such
<PAGE> 25
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Company by, this Agreement and the other Loan Documents or Intercompany Loan
Documents.
"Material Agreements" means (i) Franchise Agreements; (ii) Ground
Leases; (iii) Material Subleases; (iv) Intercompany Leases; (v) each equipment
or personal property lease to which any Company is a party and that
individually requires the expenditure of more than $25,000 by any Company in
any year, has a remaining term of more than one year and is not cancelable by
the Company party to the same without penalty; (vi) leases, partnership
agreements and management agreements under which any of the Companies leases,
manages or otherwise operates any hotel other than the limited partnership
agreement of the Realty Partnership and the limited partnership agreement of
the Operating Partnership and the Intercompany Leases; (vii) Management
Contracts; (viii) Union Contracts binding on any of the Companies; (ix) each
contract or other agreement that individually requires the expenditure of more
than $25,000 by any Company and that is not cancelable by such Company without
penalty or payment, whether or not such agreement has a remaining term of less
than one year and is otherwise described in the immediately preceding clauses
(i) through (viii); and (x) all executory construction, engineering,
architectural, maintenance and other similar contacts or other agreements that
individually requires the expenditure of more than $25,000 by any Company in
any year, has a remaining term of more than one year and is not cancelable by
such Company without penalty.
"Material License" means each material certificate, permit and license
of any Governmental Authority, including certificates of occupancy, innkeepers'
licenses, liquor licenses and gaming licenses necessary for the Companies'
operation in the ordinary course of business of each Hotel Property.
"Material Sublease" means any sublease (or, if no Intercompany Lease
exists for such Hotel Property, then any lease) to which any Company is a party
now existing or hereafter created affecting any of the Hotel Properties with
monthly rents (including basic and percentage) payable to any of the Companies
in excess of $5,000 per month.
"Merger" means the previously contemplated merger of SLT and SLC.
"Merrill Loans" has the meaning set forth in subsection 1.7(a).
"Minimum Aggregate Balances" has the meaning set forth in Section 6.16.
"Minimum Amount" has the meaning set forth in paragraph (ii) of
subsection 5.1(d).
"Minimum Release Price" has the meaning set forth in Section 6.10.
"Minor Damage and Minor Condemnation" have the respective meanings set
forth in subsection 5.5(d).
<PAGE> 26
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"Mixed-Use Property" means a Hotel Property as to which ten percent
(10%) or more the total gross revenues of such property does not result from
the operation of a hotel or casino. For the foregoing purposes income which is
typically ancillary to the operation of a hotel or casino such as income from
the operation of a restaurant, shops, parking lot, health club or other
recreational facilities typically associated with the operation of a hotel or
casino shall be deemed income from the operation of a hotel or casino.
"Mortgage" means a mortgage, deed of trust, security deed, installment
land sale contract or similar security interest creating a Lien against Real
Property and Improvements.
"Mortgage Note" and "Mortgage Notes" means, collectively, the Existing
Mortgage Notes, the Future Mortgage Notes and the Starwood Mortgage Notes, or
any other mortgage notes held by either of the Partnerships from time to time,
but shall not include the Harvey Notes.
"Mortgage Note Assignment" means the Collateral Assignment of Mortgage
Notes dated as of January 28, 1993, between the Borrower and the Collateral
Agent, including without limitation the Amendment to Collateral Assignment of
Mortgage Notes dated as of the Third Closing Date and any and all other
amendments or other modifications, supplements, extensions or renewals thereto
or thereof.
"Mortgage Note Security Documents" has the meaning set forth in the
Mortgage Note Assignment.
"Nevada Gaming Approvals" has the meaning set forth in the recitals to
this Agreement.
"Nevada Gaming Authorities" has the meaning set forth in the recitals
to this Agreement.
"Note" and "Notes" means the promissory note(s) issued by the Borrower
to the Senior Lender on the First Closing Date, the Second Closing Date and the
Third Closing Date, as the same may be amended from time to time, together with
any notes issued in exchange therefor or in substitution thereof.
"O&M Manual" means one of the Operations and Maintenance Procedures
Manuals prepared by Dames & Moore in connection with the First Closing and
containing the O&M Procedures.
"O&M Procedures" means the procedures contained in the O&M Manuals for
the monitoring, disclosure and, if required by applicable law, encapsulation
and/or removal of all ACM present at the Best Western in Albuquerque, New
Mexico, the Meany Tower in Seattle, Washington and the Portland Inn in
Portland, Oregon.
<PAGE> 27
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"Obligations" means all present and future obligations, indebtedness
or liabilities of every kind or nature of the Borrower at any time and from
time to time owed to the Collateral Agent or the Senior Lender (i) under any
one or more of the Loan Documents, any amendments, extensions, restatements or
renewals of, supplements to, or substitutions or replacements for, any one or
more of the foregoing, or (ii) arising under successive transactions renewing,
increasing, extending or continuing the obligations described in the
immediately preceding clause (i), changing the interest rate or other terms
thereof, or creating new or additional obligations after prior obligations have
been in whole or in part satisfied, and without limiting the generality of the
foregoing, including all such obligations, indebtedness and liabilities,
whether for principal, interest (including interest that, but for the filing of
a petition in bankruptcy with respect to the Borrower, would have accrued on
the Obligations), reimbursement obligations, fees, costs, expenses, premiums,
charges, attorneys' fees or indemnities, whether heretofore, now or hereafter
made, incurred or created, whether voluntarily or involuntarily and however
arising, whether secured or unsecured (and if secured, regardless of the nature
or extent of the security), whether or not now due, whether absolute or
contingent, liquidated or unliquidated, or determined or undetermined, whether
the Borrower may be liable individually or jointly with others.
"Operating Cash Threshold" means $7,000,000. Nothing in this
definition shall be construed as requiring any specific level of cash reserves
or as requiring that amounts in excess of the Operating Cash Threshold be
applied to amortize the Loans.
"Operating Partnership Guaranties" means, collectively, the Operating
Partnership Guaranty by the Operating Partnership, the Operating Partnership
Guaranty by SLC, the Operating Partnership Guaranty by HICN, the Operating
Partnership Guaranty of Western Host, Inc. (each of the foregoing as delivered
in connection with the Third Closing) and the Operating Partnership Guaranty by
the Gaming Partnership (to be delivered by the Gaming Partnership as provided
in Article IV).
"PBGC" has the meaning set forth in Section 3.16.
"Partnership Interests" means all right, title and interest of any
partner in either the Realty Partnership, the Operating Partnership or the
Gaming Partnership.
"Partnerships" has the meaning set forth in the recitals to this
Agreement.
"Pass-Through Transfer" means a sale or other transfer (which may
include one or more related, intermediate transfers in a whole loan format to
one or more Affiliates of the Senior Lender) of all or a portion of the Loans
to a trust or another Person as a part of a transaction that involves the sale
of participation certificates evidencing an interest in such Loans or the
public issuance or private placement of securities evidencing an interest in
such Loans, which securities also may evidence an interest in other mortgage
loans, may be issued through a REMIC and may, as a condition to their issuance,
be required to be rated (which rating may be required to be "AA/Aa" or higher)
by one or more Rating Agencies.
<PAGE> 28
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"Permitted Closing Expenses" means for any (i) Asset Sale, (ii)
issuance of any debt or equity security or (iii) renewal, extension or
refinancing of Indebtedness, customary and reasonable expenses incurred in
connection therewith, including brokers' and finders' fees and commissions,
title premiums and other amounts paid or payable to title insurance companies,
survey costs, recording and filing fees, documentary transfer Taxes, the cost
of documentary stamps, escrow costs, points and other financing or refinancing
fees, fees and expenses of counsel, accountants, investment bankers and
consultants, customary prorations and the portion of any termination fee under
any Management Contract required to be paid because of the sale of the Hotel
Property being sold in such Asset Sale. However, Permitted Closing Expenses
shall include payments and/or reimbursements of fees, commissions, expenses
and/or costs to an Affiliate only if and to the extent permitted by Section
6.12. The Borrower expressly acknowledges and agrees, however, that only
commercially reasonable franchise or management termination fees (no matter how
designated) payable by any of the Companies in connection with any Asset Sale
shall be included within the definition of Permitted Closing Expenses.
"Permitted Deductions" means (x) in the case of any payment received
on account of any Asset Sale or refinancing permitted hereunder, the amount of
outstanding principal, interest and expenses paid to the holder of the Prior
Mortgage Note secured by the Hotel Property or mortgage note that is the
subject of such Asset Sale or refinancing permitted hereunder, and (y) in the
case of any payment received on account of an Asset Sale or the issuance of any
debt or equity security or refinancing of a Hotel Property or mortgage note
Permitted Closing Expenses incurred in connection with that Asset Sale,
securities issuance or refinancing.
"Permitted Distributions" has the meaning set forth in Section 6.7.
"Permitted Indebtedness" has the meaning set forth in Section 6.1.
"Permitted Investments" has the meaning set forth in Section 6.3.
"Permitted Liens" has the meaning set forth in Section 6.2.
"Permitted Prior Mortgage" has the meaning set forth in paragraph (i)
of subsection 6.10(b).
"Person" means any natural person, corporation, limited partnership,
general partnership, joint stock company, joint venture, association, company,
trust, bank, trust company, land trust, business trust or other organization,
irrespective of whether a legal entity, or any government, or agency or
political subdivision thereof.
"Plan" has the meaning specified in paragraph (i) of subsection
3.16(a).
"Pledge Date" means the date on which a Hotel Property or a Mortgage
Note has been or shall be acquired and Required Liens or Intercompany Liens
granted in that Asset.
<PAGE> 29
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"Prior Credit Agreement" has the meaning set forth in the recitals to
this Agreement.
"Prior Mortgage Note" means any evidence of any Indebtedness of any
Company for borrowed money that is secured by a Permitted Lien against any
Hotel Property or other Real Property and Improvements, which Permitted Lien is
senior to the Required Liens, if any, against that Hotel Property or Real
Property and Improvements.
"Rating Agencies" means, in connection with any Pass-Through Transfer,
any nationally recognized statistical rating organizations from which the
Senior Lender or its Affiliate may seek a rating with respect to such
Pass-Through Transfer.
"Real Property" means all real property owned or leased by the
Companies, whether owned or leased on the date of this Agreement or hereafter
owned or leased, including all Improvements thereon, whether existing on the
date of this Agreement or existing hereafter.
"Relevant States" has the meaning set forth in subsection 15.6(h).
"REMIC" means a "real estate mortgage investment conduit" as defined
in Section 860D of the Code.
"REO Subsidiary" means a Subsidiary owned by the Senior Lender that
takes title to any of the Hotel Properties in a deed in lieu transaction or
pursuant to the exercise of remedies under the Security Documents.
"Reorganization Proxy Statement" means the joint proxy statement of
SLT and SLC dated November 11, 1994.
"Required Liens" has the meaning set forth in Section 1.10.
"Residual Notes" means the promissory notes issued by the Borrower to
the Senior Lender at the Third Closing in substantially the form of Exhibit
A-3A.
"Responsible Officer" means the president, chief executive officer,
chief operating officer, chief financial officer, executive vice president,
senior vice president, treasurer, controller, assistant treasurer or assistant
controller of a Person (or, in the case of a partnership, of a general partner
or, in the case of the Operating Partnership, the managing general partner, of
that partnership).
"Restoration Fund" has the meaning set forth in subsection 5.5(b).
"Restricted Payment" means (a) any dividend or other distribution,
direct or indirect, on or on account of partnership interests in a Partnership,
shares of beneficial interest of SLT or shares of capital stock of SLC now or
hereafter outstanding, and (b) any redemption, purchase or other acquisition,
direct or indirect, of any of the above-described partnership interests or
shares or of any warrant or right to purchase any such partnership interest or
<PAGE> 30
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share, including the repurchase of any such partnership interest, shares or
warrants or any refund of the purchase price thereof in connection with the
exercise by the holder thereof of any right of rescission or similar remedies
with respect thereto.
"Restructuring Plan" means the plan described in Schedule 4.2(q).
"Second Closing, Second Closing Date and Second Closing Notes" have
the respective meanings set forth in the Prior Credit Agreement.
"Second Closing Loans" means the Loans made pursuant to, and evidenced
by, the Second Closing Notes.
"Security Documents" means each of the security documents executed and
delivered at the First Closing, the Second Closing, the Third Closing and all
other agreements, documents or instruments delivered from time to time by any
Person in connection with the transactions contemplated by this Agreement or
any other Loan Document granting or creating a Required Lien in any Asset of
the Borrower to secure any of the Obligations (other than Obligations under the
Environmental Indemnity).
"Senior Lender" has the meaning set forth in the preamble to this
Agreement and includes without limitation all of the Senior Lender's successors
and, assigns and all participants, if any, in the Loans.
"Senior Lenders" means the Senior Lender.
"Senior Lender's Expenses" has the meaning set forth in subsection
10.1(d).
"SLC" has the meaning set forth in the recitals to this Agreement, and
any reference to HIC in any Loan Document or Intercompany Loan Document shall
mean SLC.
"SLT" has the meaning set forth in the preamble to this Agreement, and
any reference to HIT in any Loan Document or Intercompany Loan Document shall
mean SLT.
"Solvency Certificate" has the meaning set forth in subsection 4.1(c).
"Solvent" means, as applied to any Person on any date, that on such
date: (a) the present fair valuation of assets of such Person is greater than
such Person's probable liabilities in respect of existing debts; (b) such
Person does not intend to, and does not believe that it will, incur debts
beyond such Person's ability to pay as such debts mature and (c) such Person is
not engaged in business or a transaction, and is not about to engage in a
business or transaction which business or transaction would leave such Person
with assets remaining that would constitute unreasonably small capital after
giving effect to the nature of the particular business or transaction. For
purposes of this definition: (i) the "fair valuation" of any assets means the
amount realizable within a reasonable time, either through collection or sale
of such assets at their regular market value, which is the amount obtainable by
a capable and diligent
<PAGE> 31
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businessman from an interested buyer willing to purchase such assets within a
reasonable time under ordinary circumstances and (ii) the term "debts" includes
any legal liability, whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent.
"Stated Rate" has the meaning set forth in subsection 1.5(a).
"Starwood" has the meaning set forth in the recitals to this Agreement.
"Starwood Account" has the meaning set forth in the Cash Management
Memorandum.
"Starwood Assets" means the Starwood Hotels, the Starwood Mortgage
Notes and all other Assets contributed to the Partnerships by the Starwood
Partners prior to the Third Closing or thereafter and includes the membership
interest in SLT Realty Company, L.L.C. owned by the Borrower and SLT.
"Starwood Hotels" means those hotel (and mixed-use) properties
contributed by the Starwood Partners to the Partnerships prior to the Third
Closing or thereafter, including all Real Property, inventory, furnishings,
equipment, fixtures, Franchise Agreements, Material Agreements and any and all
other agreements, instruments, general intangibles, accounts, licenses
(including Material Licenses), chattel paper, documents, books and records and
other Assets specifically or primarily relating to each such hotel or mixed-use
property, whether such Assets are now or hereafter owned or leased by a
Partnership.
"Starwood Mortgage Notes" means each of the secured promissory notes
and other secured evidences of Indebtedness executed by a maker in favor of or
endorsed or assigned to any of the Starwood Partners and contributed by the
Starwood Partners to the Partnerships in connection with the Starwood
Reorganization or thereafter, as each may from time to time be or have been
amended or otherwise modified, renewed or extended, and all secured notes or
other secured evidences of Indebtedness hereafter given in substitution of or
exchange therefor or replacement thereof, in each case in accordance with the
terms of this Agreement and the Mortgage Note Assignment (to the extent
applicable).
"Starwood Partners" means those affiliates of Starwood that are
parties to the Formation Agreement.
"Starwood Reorganization" means the transactions provided for in the
Formation Agreement.
"Subsidiary" means (i) as applied to the Borrower or the Operating
Partnership, (x) any subsidiary of any general partner of the Borrower or the
Operating Partnership and (y) the Gaming Partnership, and (ii) as applied to
any other Person, any other Person of which more than 50% (by number of votes)
of the outstanding Voting Stock (other than director's qualifying shares) is at
the time owned, directly or indirectly, by such first Person or by one or more
Subsidiaries of such first Person or by such first Person and one or more
Subsidiaries of such first Person. However, none of Western Host Palm Springs
Partners, a California limited
<PAGE> 32
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partnership, SLT Realty Company L.L.C. and Moorland Hotel Limited Partnership
shall be deemed a Subsidiary of SLT, SLC or either Partnership. Starwood and
Starwood Partners are not Subsidiaries of the Borrower or the Operating
Partnership.
"Subsidiary Guaranty" means each of those certain Subsidiary
Guaranties dated as of January 28, 1993, and executed by a Subsidiary of SLC.
"Taxes" means any taxes, charges, fees, levies or other assessments
based upon or measured by net or gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, withholding, payroll, employment, excise,
occupation, premium, property, or conduct of business, together with any
interest and penalties, additions to tax and additional amounts imposed by any
federal, state, local or foreign taxing authority.
"Third Closing, Third Closing Loans and Third Closing Notes" have the
respective meanings set forth in Section 1.2.
"Third Closing Date" has the meaning set forth in Section 1.1.
"Title Insurer" means the title company or companies that issued or
issue the Title Policy and any other title insurance company or companies
selected by the Borrower and approved by the Senior Lender.
"Title Policy" means the title insurance policies issued to the
Collateral Agent for the benefit of the Senior Lender, at the First Closing and
the Second Closing, including all endorsements and modifications or amendments
to such policies or new title insurance policies, issued or made prior to or as
of the Third Closing, and at any time any Hotel Property or Mortgage Note
becomes subject to Required Liens, an ALTA standard form title insurance policy
issued by the Title Insurer and complying with the written title instructions
given from time to time by the Collateral Agent, for the benefit of the
Collateral Agent, in accordance with this Agreement, insuring the validity and
priority of the Required Liens with respect to such Hotel Property and of the
assignment, as security for the Obligations (other than Obligations under the
Environmental Indemnity), of such Mortgage Note payable to or held by the
Borrower and the mortgage securing such Mortgage Note, (with such reinsurance
or coinsurance as the Collateral Agent may reasonably require, any such
reinsurance to be with direct access endorsements) or (if such title company is
unable or unwilling to issue the same) by another Title Insurer, and which
shall not contain exceptions for mechanics' liens, persons in occupancy or
matters which would be shown by a survey except as specifically permitted by
this Agreement or as specifically permitted in writing by the Senior Lender not
to be unreasonably withheld, and shall contain (to the extent available with
respect to such Hotel Property) such of the following endorsements as the
Senior Lender, in its reasonable discretion, shall require: (i) comprehensive
endorsement, (ii) variable rate of interest endorsement, (iii) usury
endorsement, (iv) revolving credit endorsement, (v) doing business endorsement,
(vi) tie-in endorsement; (vii) negative amortization endorsement; and (viii)
such additional endorsements as the Senior Lender may reasonably require.
However, such policy at the Borrower's option need not include as to such Hotel
Property any additional
<PAGE> 33
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endorsement or endorsement(s), the cost(s) of which (individually or in the
aggregate), would increase the basic premium otherwise payable in respect of
such Hotel Property by ten percent (10%) or more.
"Total Loss" has the meaning set forth in subsection 5.5(d).
"Under-Performing Asset" has the meaning set forth in paragraph (i)(B)
of subsection 6.5(f).
"Union Contract" means any union contract, collective bargaining
agreement or multi-employer labor agreement.
"Voting Stock" means securities (including shares of stock,
partnership interests, shares of beneficial interest and the like) having
ordinary voting power to elect a majority of the board of directors or board of
trustees or to elect the general partner (or other governing body) of the
Person in question, irrespective of whether or not at the time securities of
any class or classes of such Person shall have or might have voting power by
reason of the happening of any contingency.
"Waiver and Release" means that certain Waiver and Release dated as of
January 28, 1993, executed by the predecessors in interest of the Senior Lender
in favor of SLT, SLC and certain of their respective Subsidiaries.
"Warrant Agreement" means that certain Warrant Agreement dated as of
January 28, 1993, among SLT, SLC and the predecessors in interest of the Senior
Lender, including any and all amendments or other modifications, supplements,
extensions or renewals thereto or thereof.
"Warrants" means the warrants issued to the Senior Lenders pursuant to
the Warrant Agreement.
ARTICLE 1.
Amount and Terms of the Credit
1.1 Restructuring of Indebtedness. The Borrower is indebted to
the Senior Lender under the Second Closing Notes in the principal amount of
$118,313,327.92. On the date hereof, the principal amount of the Loans has
been increased by $13,436,672.08 so that the Third Closing Notes executed and
delivered on the date hereof evidence the Loans in the aggregate principal
amount of $131,750,000. In addition, the Senior Lender has advanced on the
date hereof the sum of $12,000,000 and received from the Partnerships an
unsecured promissory note in the amount of $11,400,000 and an unsecured
promissory note of $600,000. Such unsecured notes shall not be governed by
this Agreement and shall not be construed as Third Closing Notes.
<PAGE> 34
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The Prior Credit Agreement is hereby amended and restated in its
entirety as hereinafter set forth effective on the date hereof (the "Third
Closing Date"). Without limiting the generality of the foregoing, the
provisions of this Agreement shall supersede any and all covenants, conditions
or other provisions of the Loan Documents or the Intercompany Loan Documents
executed and delivered on or prior to the date hereof that conflict with or are
inconsistent with the provisions of this Agreement. However, nothing in this
Agreement is intended or shall be deemed to waive, limit or otherwise modify or
affect any representation, warranty, covenant, condition or other provision of
the Prior Credit Agreement or of any other Loan Document or Intercompany Loan
Document executed and delivered prior to the Third Closing Date to the extent
that such representation, warranty, covenant, condition or other provision
relates to a fact, circumstance or event occurring prior to the Third Closing
Date.
1.2 Assignment and Assumption; Third Closing Loans.
(a) The Borrower shall fully pay, perform and discharge
each and all of its duties, liabilities and obligations hereunder and under the
Loan Documents and the Intercompany Loan Documents when due. The Realty
Partnership shall issue on the date hereof to the Senior Lender promissory
notes substantially in the forms of Exhibit A-3A and Exhibit A-3B
(collectively, the "Third Closing Notes") in exchange and substitution for the
Second Closing Notes and to evidence the increased indebtedness described in
Section 1.1 (the indebtedness evidenced by the Third Closing Notes, the "Third
Closing Loans"). The Second Closing Notes are hereby deemed automatically
superseded and replaced by the Third Closing Notes. The Second Closing Notes
shall be so marked and shall be held by the Collateral Agent until the Third
Closing Loans and all other amounts due under the Loan Documents and the
Intercompany Loan Documents have been paid in full.
(b) Except as otherwise provided herein, nothing
contained herein shall (i) discharge SLT from or result in a novation of any of
its duties, liabilities or obligations under any of the Loan Documents or
Intercompany Loan Documents or (iii) operate to diminish or impair in any
manner the Required Liens or Intercompany Liens existing as of the date hereof.
(c) The Realty Partnership hereby confirms:
(i) it has assumed, effective as of January 1, 1995, all
of the payment and performance obligations of HIT set
forth in the Second Closing Notes, the Prior Credit
Agreement, the Loan Documents and the Intercompany
Loan Documents; and
(ii) the Operating Partnership has assumed, effective
January 1, 1995, all of the payment and performance
obligations of SLC and the SLC Subsidiaries (other
than HICN) set forth in the Prior Credit Agreement,
the Loan Documents and the Intercompany Loan
Documents, including, but not limited to any
Subsidiary Guaranty, Consent to Assignment of Rents,
Subordination, Estoppel, Attornment Agreement, as
modified, and any guaranties or security agreements
relating to any of the foregoing,
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and further has agreed to be bound by all of the terms
and provisions of said agreements, all as though each
of said agreements had been made, executed and
delivered by the Operating Partnership.
1.3 Dating and Registration of Notes; Transfer of Third Closing
Loans. Each Third Closing Note shall be dated as of the Third Closing Date and
shall be in such denomination and registered in such name as the Senior Lender
may request. The Senior Lender shall have the right but not the obligation,
subject to compliance with applicable securities and other laws, to divide the
Loans into one or more separate Loans evidenced by one or more separate Notes.
1.4 Maturity Date.
(a) The term of the Third Closing Loans shall commence on
the date hereof and shall terminate on April 1, 1997 (the "Initial Termination
Date"). However, the Borrower shall have the option to extend the term of the
Third Closing Loans (the "Extension Option") for a period of one (1) year after
the Initial Termination Date to April 1, 1998 (the "Extended Termination
Date"). The Extension Option shall be exercisable by the delivery by the
Borrower to the Collateral Agent of irrevocable written notice not less than
one (1) month prior to the Initial Termination Date, time being of the essence
with respect to the delivery of the such notice. The Borrower's right to
exercise the Extension Option shall be subject to the following terms and
conditions: (i) no Event of Default shall have occurred and be continuing on
the date the Borrower delivers the Extension Notice or on the Initial
Termination Date; (ii) the Borrower shall have paid to the Senior Lender the
Extension Fee pursuant to Section 1.8 and (iii) the Borrower shall make the
Mandatory Prepayment required in paragraph (iv) of subsection 1.9(b).
(b) If the Borrower does not exercise its Extension
Option in accordance with subsection 1.4(a), the principal balance of the Loans
outstanding, together with accrued unpaid interest thereon, shall be due and
payable on the Initial Termination Date; if the Extension Option is exercised,
the principal balance of the Loans, together with accrued unpaid interest
thereon shall be due and payable on the Extended Termination Date.
1.5 Interest.
(a) Stated Rate. The Third Closing Notes shall bear
interest on the principal amount thereof outstanding during each Interest
Period, at a rate per annum equal to the lesser of (i) the sum of the
Euro-Dollar Margin and the applicable Adjusted London Interbank Offered Rate
(the "Stated Rate") and (ii) the maximum rate permitted under applicable law.
Interest shall be payable monthly in arrears, on the first Business Day of each
month, on the basis of a 360-day year for the actual number of days elapsed.
The first payment of interest on the outstanding principal balances of the
Loans shall be due and payable on April 1, 1995. A payment of interest on the
outstanding principal balances shall be due and payable on the first Business
Day of each calendar month thereafter through the Initial Termination Date or,
if the Extension Option is exercised, through the Extended Termination Date, on
which date the Borrower shall pay in full the aggregate outstanding principal
balances of the Loans, all
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accrued unpaid interest thereon and all other amounts payable with respect to
the Loans or otherwise to the Senior Lender.
(b) Notice by Collateral Agent. The Collateral Agent
shall determine the Stated Rate for each Interest Period. The Collateral Agent
shall give prompt notice to the Borrower and the Senior Lender of each Stated
Rate so determined, and its determination thereof shall be conclusive in the
absence of manifest error.
1.6 Additional Interest. Upon the occurrence and during the
continuance of an Event of Default and in all events from and after the Initial
Termination Date (or if the Extension Option has been exercised, the Extended
Termination Date), the Third Closing Notes shall bear interest on the unpaid
principal amount thereof, and on any overdue payment of interest thereon, at a
rate per annum equal to the lesser of (i) three percent (3.00%) above the
Stated Rate and (ii) the maximum rate permitted under applicable law.
1.7 Acquisition Credit Facility; Severance of Loans.
(a) Until December 24, 1995, Merrill, in its individual
capacity and not as a Senior Lender, shall either provide to the Borrower one
or more additional loans as acquisition financing up to an aggregate of
$75,000,000 or arrange for such loans to be provided by the Senior Lender. Any
such loans, if made by the Senior Lender shall be made upon the terms and
subject to the conditions set forth in the Terms of Acquisition Credit Facility
set forth on Schedule 1.7 (the "Acquisition Credit Facility"). Such loans made
by the Senior Lender shall be cross-collateralized, to the extent practicable,
with the Loans. Any such loan by the Senior Lender is referred to herein as an
"Acquisition Loan." The principal amount of each Acquisition Loan shall reduce
the amount of the Acquisition Credit Facility specified above.
(b) Notwithstanding the foregoing, any such loans
described in the first sentence of subsection 1.7(a) above, if made by Merrill,
in its individual capacity and not as a Senior Lender hereunder, or by any of
its Affiliates shall be made under the Acquisition Credit Facility (any such
loan, a "Merrill Loan"), except for those terms, provisions and conditions that
Merrill may waive, in its sole discretion. The original principal amount of
each Merrill Loan shall reduce the aggregate amount of the Acquisition Credit
Facility specified above. The Senior Lenders hereby consent to the making of
the Merrill Loans, which shall be the secured recourse obligations of the
Borrower collateralized and guarantied in a manner similar to the Loans and the
Intercompany Loans, provided that none of the Merrill Loans shall be
cross-collateralized with the Loans made or Collateral and Intercompany
Collateral granted, pursuant to this Agreement. Notwithstanding any other
provisions of this Agreement, (i) the term "Cash and Cash Equivalents" shall be
deemed not to include the proceeds of any Merrill Loan, (ii) any acquisition of
Assets by any Company in whole or in part with the proceeds of a Merrill Loan
shall be deemed a "Permitted Investment," (iii) any Assets so acquired shall be
deemed "Excluded Assets" and "Excluded Intercompany Assets," (iv) any Liens in
favor of Merrill, in its individual capacity and not as a Senior Lender, or any
of its Affiliates with respect to any Assets so acquired shall be deemed
"Permitted Liens" and (v) all Indebtedness of any Company to Merrill or any of
its Affiliates in connection with any Merrill Loan shall be
<PAGE> 37
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deemed "Permitted Indebtedness." Notwithstanding the provisions of subsection
5.8(c) (relating to additional Collateral) and any other provisions of this
Agreement, the Senior Lender shall not have the right to elect to require that
any Assets acquired by any Company in whole or in part with the proceeds of any
Merrill Loan shall become part of the Collateral or Intercompany Collateral.
(c) If Merrill is the sole Senior Lender under this
Agreement and there are no participants in the Loans, Merrill may require that
one or more Loans (or any portions thereof) made pursuant to this Credit
Agreement be split and severed into one or more separate and distinct loans
that are not cross-collateralized to the Assets securing the Loans. The
Borrower agrees to cooperate and shall cause the Companies to cooperate in such
severance. Any new loan created by the severance shall be governed by a credit
agreement substantially similar to this Agreement and the loan documents and
intercompany loan documents executed and delivered with respect thereto shall
be substantially similar to the Loan Documents and the Intercompany Loan
Documents. The principal balance of the Third Closing Notes shall be reduced
by the applicable value of the Assets set forth in Schedule 1.9 and the
Borrower shall execute and deliver a new separate note in such amount in
connection with the new, severed loan.
1.8 Fees.
(a) Extension Fee. If the Borrower exercises its Extension
Option pursuant to Section 1.4, then, simultaneously with the delivery of the
notice exercising such option, the Borrower shall pay to the Collateral Agent
for the benefit of the Senior Lender a fee (the "Extension Fee") in an amount
equal to one-half of one percent (0.50%) of the aggregate of the Loans
outstanding on the date of the delivery of such notice, which balance shall be
determined after reducing same for the mandatory prepayment of principal in
connection with the exercise of the Extension Option as provided in paragraph
(v) of subsection 1.9(a).
(b) Service Charges. The Borrower shall pay from time to
time to the Person at the time serving as manager of the Cash Management System
the customary service charges of such Person for maintenance and administration
of the Cash Management System. A copy of such service charges as in effect as
of December 31, 1994 has been provided by Wells Fargo Bank, National
Association, to SLT.
1.9 Prepayment.
(a) Optional Prepayment. Upon not less than ten (10)
Business Days' notice to the Senior Lender and the Collateral Agent, at its
option the Borrower may permanently prepay the Third Closing Notes then
outstanding in whole at any time or in part from time to time without penalty
or premium. Any such prepayment of the principal amount of the Notes in part
shall be in an aggregate principal amount of not less than $500,000. Any such
prepayment shall include an additional amount equal to accrued interest on the
amount prepaid to the date of such prepayment.
<PAGE> 38
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(b) Mandatory Prepayments. From and after the Third
Closing, the Borrower shall pay or cause to be paid each of the following
amounts to the Senior Lender in a prepayment of principal of the Third Closing
Notes together with the accrued interest thereon through the date of such
prepayment:
(i) If any of the Companies shall, directly or
indirectly, receive any payment in Cash and Cash
Equivalents on account of any public issuance of any
debt or equity security or on account of any private
issuance of any debt or equity security which when
aggregated with all such other private issuances
since December 31, 1994 exceeds $60,000,000, the
Borrower shall immediately pay, or cause the
Companies to pay an amount equal to all such proceeds
received less Permitted Closing Expenses until the
outstanding principal amounts of the Loans are
reduced to an aggregate amount equal to 50% or less
of the Aggregate Asset Value of all the Companies'
Assets.
(ii) An amount equal to the aggregate of all amounts
received by any of the Companies during each fiscal
quarter in respect of payments of principal of
Mortgage Notes (but as to each Mortgage Note not in
excess of the Minimum Release Price) or any other
promissory notes payable to any of the Companies
other than the Harvey Notes and the Intercompany
Notes, on the earlier to occur of the last day of the
fiscal quarter of the Borrower and the date on which
the aggregate amount of such payments received by the
Companies since the date of such then most recent
prepayment exceeds $250,000. Interest received by
any of the Companies in respect of the principal of
the Mortgage Notes or of other promissory notes
payable to any of the Companies may be retained by
the Company receiving the same.
(iii) If the Borrower or any of the Companies shall sell or
refinance any Asset and in connection therewith shall
seek the release of the Required Lien or Intercompany
Lien on such Asset, if any, then, an amount equal to
the amount of the Minimum Release Price in connection
with that Asset; provided, however, that in the case
of any sale of a Hotel Property in which a portion of
the total consideration to the Companies is deferred
or consists of a Future Mortgage Note, as provided in
subsection 6.10(b), such amount shall be an amount at
least equal to twenty-five percent (25%) of the
applicable Minimum Release Price.
(iv) If the Borrower exercises its Extension Option, on
the Initial Termination Date, the amount of
$10,000,000 as a prepayment of principal, which
amount shall be increased pursuant to Schedule 1.7
with respect to Acquisition Loans which are
cross-collateralized with the Third Closing Loans.
<PAGE> 39
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(c) Notices of Prepayments. Concurrently with each
prepayment made pursuant to this Section, the Collateral Agent and the Borrower
shall furnish by facsimile transmission to the Senior Lender a notice showing
in reasonable detail the amount paid with respect to each Note then outstanding
and the manner of calculating the amount of each such prepayment.
(d) Formula for Application of Prepayments.
(i) All mandatory principal payments with respect to the
Third Closing Loans shall be applied to principal on
the Third Closing Notes.
(ii) Notwithstanding anything to the contrary in this
Agreement, no payment or prepayment of principal
shall be applied to any Note other than the Residual
Notes, except to the extent that (A) such payment or
prepayment is made from the proceeds of Collateral
securing such Note, (B) all of the Notes then
outstanding are paid in full, or (C) such payment is
made at a time when the Senior Lender's Residual
Notes have no principal balance outstanding in which
case such payment or prepayment may be applied in the
Senior Lender's discretion to any of the Notes held
by such Senior Lender.
1.10 Security. The Notes and the other Obligations other than
Obligations under the Environmental Indemnity shall be secured by valid and
perfected Liens that are first in priority, except for the Permitted Liens
described in subsection 6.2(b) through the end of Section 6.2, in favor of the
Collateral Agent for the benefit of the Senior Lender in all of the Assets of
the Borrower and all of the Assets of SLT, except for Excluded Assets
(collectively, the "Required Liens"). Each Intercompany Loan and each
Operating Partnership Guaranty shall be secured by valid and perfected Liens
that are first in priority except for Permitted Liens described in subsection
6.2(c) through the end of Section 6.2 and, in the case of each Intercompany
Loan, in all the assets of the obligor as to each such Intercompany Loan and,
in the case of each Operating Partnership Guaranty, in all the assets of the
Company giving such Operating Partnership Guaranty, as applicable, except in
each case for Excluded Intercompany Assets.
1.11 Form and Terms of Payment. All payments by the Borrower of
principal of or interest on the Notes shall be made in immediately available
funds at the addresses specified for such purpose by the Senior Lender on
Attachment I or by such other method and/or at such other address as the Senior
Lender shall have furnished to the Borrower in writing. Concurrently with each
such payment, the Borrower shall furnish by facsimile transmission to the
Senior Lender and the Collateral Agent a notice showing in reasonable detail
the amount paid with respect to each Note then outstanding and the manner of
calculating each such amount. If any payment of principal of or interest on
the Notes shall become due on a day which is not a Business Day, such payment
may be made on the next succeeding Business Day and such extension shall be
included in computing interest in connection with such payment.
<PAGE> 40
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1.12 Pro Rata Treatment. If there is more than one Senior Lender,
each payment and prepayment of the principal of the Notes shall be allocated to
each Senior Lender as set forth on Attachment I. Such allocation may be
changed with respect to any Senior Lender from time to time by notice to the
Borrower from that Senior Lender and the transferee of that Senior Lender's
interest of any portion of the Loans.
1.13 Increased Capital. If any Senior Lender shall have determined
in good faith that compliance with any applicable law, rule, regulation,
guideline, request or directive, whether or not having the force of law, which
shall be imposed, issued or amended from and after the date of this Agreement
by any governmental authority, central bank or comparable agency, has or would
have directly or indirectly the effect of reducing the rate of return on the
capital or assets of such Senior Lender or its participant as a consequence of
its commitments or obligations hereunder, then from time to time, upon such
Senior Lender's delivering a written demand therefor to the Collateral Agent
and the Borrower setting forth its reasonable calculations, the Borrower shall
pay to such Senior Lender on demand such additional amount or amounts
("Increased Capital Costs") as will compensate such Senior Lender for such
reduction. However, (a) if the Collateral Agent or the applicable Senior
Lender shall fail to notify the Borrower promptly after making such
determination, the Borrower shall not be liable to pay to such Senior Lender
any Increased Capital Costs relating to the period prior to such Senior
Lender's notifying the Borrower. The determination by such Senior Lender of
any such amount shall, in the absence of manifest error, be conclusive. If so
requested by the Borrower, such Senior Lender shall demonstrate the basis for
such determination.
1.14 Additional Costs. If any Governmental Authority shall:
(a) subject any Senior Lender, directly or indirectly, to
any tax, levy, impost, duty, charge, fee, deduction or withholding of any
nature with respect to this Agreement, the Loans or any loan commitments
maintained hereunder, other than Taxes; or
(b) materially change the basis of taxation, except for
changes in Taxes, directly or indirectly, of the principal of or the interest
on any Loans or any other amounts payable to such Senior Lender under this
Agreement; or
(c) impose on any Senior Lender, directly or indirectly,
any other conditions or requirements with respect to this Agreement, the Loans,
any loan commitments maintained hereunder or any class of loans or commitments
of which any of the Loans forms a part;
and the result of any of the foregoing is:
(i) to increase the cost to such Senior Lender, directly
or indirectly, of making, funding, issuing, renewing,
extending or maintaining any of the Loans; or
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(ii) to reduce the amount of principal, interest or other
amount payable to such Senior Lender, directly or
indirectly, hereunder on account of any of the Loans;
or
(iii) to require such Senior Lender, directly or
indirectly, to make any payment or to forego any
interest or other sum payable hereunder, the amount
of which payment or foregone interest or other sum is
calculated by reference to the gross amount of any
sum receivable or deemed received by such Senior
Lender from the Borrower hereunder;
then, and in each such case, the Borrower shall, within ten (10) Business Days
following receipt of notice from such Senior Lender including calculations of
the amounts payable, pay to such Senior Lender such additional amounts as will
be sufficient to compensate such Senior Lender for such additional cost,
reduction, payment or foregone interest or other sum. The determination by
such Senior Lender of any such amount shall, in the absence of manifest error,
be conclusive. At the Borrower's request, such Senior Lender shall demonstrate
the basis for such determination.
ARTICLE 2.
Use of Proceeds
The Borrower shall not use, and shall not permit any other Company to
use, directly or indirectly, any part of the proceeds of the Loans (a) for any
purpose which would cause any of the representations or warranties of the
Borrower set forth in this Agreement or any other Loan Document to be untrue
when made or deemed to have been made, (b) for the purpose of making any
Restricted Payment, (c) for the purpose of purchasing or carrying any "margin
stock" within the meaning of Regulation G (12 CFR Part 207) or Regulation U (12
CFR Part 221) of the Board of Governors of the Federal Reserve System ("Margin
Stock") or (d) for any purpose which would cause the violation of any covenant
contained in Article 5, 6 or 7.
ARTICLE 3.
Representations and Warranties
In order to induce the Senior Lender to agree to the amendment and
restatement reflected in this Agreement and to accept the Third Closing Notes,
the Borrower hereby makes the following representations and warranties to the
Collateral Agent and the Senior Lender as of the Third Closing Date. All of
such representations and warranties shall survive the execution and delivery of
this Agreement and the other Loan Documents and Intercompany Loan Documents
executed and delivered at the Third Closing.
3.1 Organization, Standing, etc. of the Borrower and the Other
Companies; Authorization. Except as otherwise set forth on Schedule 3.1:
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(a) Realty Partnership. The Realty Partnership is a
Delaware limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
partnership power and authority to own and operate its properties, to carry on
its business as now conducted and proposed to be conducted, to enter into this
Agreement and the other Loan Documents and Intercompany Loan Documents to be
executed and delivered by the Realty Partnership, to issue the Third Closing
Notes and to carry out the terms hereof and thereof.
(b) Operating Partnership. The Operating Partnership is
a Delaware limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
partnership power and authority to own and operate its properties, to carry on
its business as now conducted and proposed to be conducted, to enter into the
Loan Documents and Intercompany Loan Documents to be executed and delivered by
the Operating Partnership and to carry out the terms thereof.
(c) SLT. SLT is a real estate investment trust duly
organized, validly existing and in good standing under the laws of the State of
Maryland and has all requisite real estate investment trust power and authority
to own and operate its properties, to carry on its business as now conducted
and proposed to be conducted, to enter into this Agreement, the other Loan
Documents and the Intercompany Loan Documents to be executed by SLT and to
carry out the terms hereof and thereof.
(d) SLC. SLC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
all requisite corporate power and authority to own and operate its properties,
to carry on its business as now conducted and proposed to be conducted, to
enter into the Loan Documents and Intercompany Loan Documents to be executed by
it and to carry out the terms thereof.
(e) Authorization. The execution and delivery of and the
performance by the Companies of their obligations under this Agreement, the
other Loan Documents and the Intercompany Loan Documents, including the
granting of the Required Liens and the Intercompany Liens, (a) have been duly
authorized by all necessary real estate investment trust, corporate or
partnership action on the part of the Borrower and each of the other Companies
party thereto or bound thereby, and (b) will not result in any violation of or
be in conflict with or constitute a default under any declaration of trust,
articles of incorporation, partnership agreement, trustees regulations, by-laws
or other organizational or similar charter document of any of the Companies.
3.2 Subsidiaries. Schedule 3.2 correctly sets forth as to (a)
each Subsidiary of the Borrower or the Operating Partnership that is a
corporation, that Subsidiary's name, the jurisdiction of that Subsidiary's
incorporation, the number of shares of that Subsidiary's capital stock of each
class outstanding and the number of such outstanding shares owned by each other
Company, and (b) as to each Subsidiary of the Borrower or the Operating
Partnership that is not a corporation, that Subsidiary's name, the jurisdiction
of that Subsidiary's organization or formation and a detailed description of
that Subsidiary's capital structure which description
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indicates the direct or indirect interest of the Borrower and/or the Operating
Partnership in that Subsidiary. Except as otherwise set forth on Schedule 3.2,
each Subsidiary of the Borrower and/or the Operating Partnership is a
corporation, partnership or other entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of that Subsidiary's
formation, and has all requisite real estate investment trust, corporate,
partnership or other similar power and authority to own and operate that
Subsidiary's properties, to carry on that Subsidiary's business as now
conducted and as proposed to be conducted and to enter into the Loan Documents
and/or the Intercompany Loan Documents to be executed by that Subsidiary.
Except as otherwise set forth on Schedule 3.2, all of the outstanding shares of
capital stock, partnership interests or other equity securities of each
Subsidiary of the Borrower and/or of the Operating Partnership are validly
issued, fully paid and nonassessable, and are owned by the Borrower and/or the
Operating Partnership as and to the extent specified in Schedule 3.2, in each
case free of any Lien, right of first refusal, preemptive right or option other
than the Required Liens, the Intercompany Liens and other Permitted Liens.
3.3 Qualification. Except as otherwise set forth on Schedule 3.3,
each of the Companies is duly qualified, licensed or otherwise authorized to do
business and in good standing as a foreign real estate investment trust,
corporation, partnership or other entity in each jurisdiction in which the
character of the properties owned or the nature of the activities conducted by
that Company makes such qualification, licensing or other authorization
necessary.
3.4 Financial Information; Disclosure. SLT and the Realty
Partnership have furnished the Senior Lender with the annual, quarterly and
other reports listed in Schedule 3.4. The financial statements included in
those reports have been prepared in accordance with GAAP applied on a
consistent basis or in such financial statements themselves, and fairly present
the financial position and results of operations of the Person or Persons to
which those financial statements purport to relate as of the dates and for the
periods indicated. Except as otherwise set forth on Schedule 3.4, since the
end of the most recent fiscal period shown in any of such financial statements,
there has not been any change in the business, results of operations, Assets or
financial condition of any Company resulting in any Material Adverse Effect.
Neither this Agreement, nor any report filed with the Securities and Exchange
Commission and listed on Schedule 3.4 nor any of the financial statements
included in the reports listed in Schedule 3.4, when this Agreement and such
reports and financial statements are read as a whole, contains any materially
untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein contained not materially
misleading. After giving effect to the disclosures made on Schedule 3.4, there
are no circumstances involving any of the Companies or with respect to any
Hotel Property or Mortgage Note or, to the knowledge of the Borrower, any
Indirect Hotel Property, not disclosed by the Borrower to the Senior Lender in
writing that, based upon facts and circumstances currently known to the
Borrower or the Operating Partnership, will result in any Material Adverse
Effect. The Borrower is not contemplating either the filing of a petition by
the Borrower under the Bankruptcy Code or any other federal or state bankruptcy
or insolvency law or the liquidation of all or a major portion of the
Borrower's Assets. The
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Borrower has no knowledge of any Person contemplating the filing of any such
petition against the Borrower.
3.5 Licenses. Schedule 3.5(a) accurately and completely lists
each gaming license and each alcohol beverage license currently held by any of
the Companies. Except as otherwise set forth in Schedule 3.5(b), each such
gaming license, each such alcohol beverage license and all of the Material
Licenses are validly issued and in full force and effect, and each of the
Companies has fulfilled and performed in all material respects all of that
Company's obligations with respect thereto and has all requisite real estate
investment trust, corporate or partnership power and authority to operate
thereunder. Except as otherwise set forth on Schedule 3.5(b), there is no
outstanding notice from any Governmental Authority to the effect that any
Company fails to hold any Material License necessary for that Company's
operation of a Hotel Property or of any violation by any Company of any
Material License (other than violations that are not material), and no such
Material License is presently suspended or subject to any pending or overtly
threatened legal, administrative or investigatory proceeding that could result
in a suspension or revocation of such Material License.
3.6 Material Agreements. Schedule 3.6(a) accurately and
completely lists all executory Material Agreements. Except as otherwise set
forth on Schedule 3.6(b), neither the Borrower nor any of the other Companies
is in default, nor does the Borrower know of any claim by any Person that the
Borrower or any other Company is or, upon the passage of time or giving of
notice or both, will be in default under any material term of any Material
Agreement to which such Company is a party or by which that Company or any of
its Assets may be bound, except for such defaults that will not result in a
Material Adverse Effect. All of the Material Agreements are valid, subsisting
agreements of the Companies party thereto and are in full force and effect.
Except as otherwise set forth on Schedule 3.6(b), to the knowledge of the
Borrower or the Operating Partnership, there exists no violation or breach of
any material term of any Material Agreement on the part of any Person other
than a Company that is a party to such agreement, which violation or breach
will, or in the reasonable business judgment of the Borrower or the Operating
Partnership based upon facts and circumstances currently known to the Borrower
or the Operating Partnership, is likely to have a Material Adverse Effect.
Except as otherwise set forth on Schedule 3.6(b), none of the Material
Agreements listed therein contains any provision restricting the incurring of
indebtedness by any of the Companies or that, in the reasonable business
judgment of the Borrower or the Operating Partnership based upon facts and
circumstances currently known to the Borrower or the Operating Partnership, is
likely to result in a Material Adverse Effect.
3.7 Tax Returns and Payments. The Companies have each filed all
tax returns required by law to be filed and have paid all Taxes, assessments
and other governmental charges levied upon any of their respective Assets,
income or franchises, other than those not yet delinquent and those, not
substantial in aggregate amount, being or about to be contested as provided in
Section 5.6 (relating to the payment of certain taxes). The charges, accruals
and reserves on the books of the Companies in respect of their respective Taxes
are adequate in the opinion of the Borrower to discharge all such tax
liabilities. Except as otherwise set forth on Schedule 3.7, the Borrower does
not know of any deficiency proposed, asserted, or assessed
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by any Governmental Authority in respect of Taxes against the Borrower or any
of the other Companies that if paid would result in a Material Adverse Change.
Neither the Borrower nor any of the other Companies is a party to, bound by or
obligated under any tax sharing or similar agreement.
3.8 Indebtedness, Liens and Investments. Schedules 3.8(a), (b),
(c) and (d) accurately and completely describe, as of the date or dates
indicated therein, (a) all outstanding Indebtedness of the Companies to Persons
other than the Senior Lender and other Companies in respect of borrowed money
and the deferred purchase price of property, including all Capital Leases; (b)
all existing Liens in respect of Assets of any of the Companies other than the
Required Liens, the Intercompany Liens and Permitted Liens described in
subsection 6.2(b) (relating to Liens securing an Intercompany Loan or a
Subsidiary Guaranty, including Intercompany Liens) and, except for those Liens
of record, in subsection 6.2(d) (relating to Liens for certain Taxes, certain
Liens to secure performance, mechanics' and similar Liens, certain judgment
Liens and certain other Liens); (c) all outstanding Investments of any of the
Companies in any Person other than another Company; and (d) all existing
Contingent Obligations of any of the Companies other than to the Senior Lender
or the Collateral Agent under the Loan Documents or the Intercompany Loan
Documents.
3.9 Title to Assets. Except as otherwise set forth on Schedule
3.8(b), each of the Companies has good and marketable title to all of the Real
Property owned by that Company, and good title to or a valid leasehold interest
in or other right to possess and use all of such Company's other Assets. None
of such Assets is subject to any Lien or to an agreement to give any Lien,
except the Permitted Liens. The Companies enjoy quiet possession under all
Ground Leases, Intercompany Leases and equipment and personal property leases
listed on Schedule 3.6(a) to which the Companies are parties as lessees.
3.10 Litigation, etc. Except as otherwise set forth on Schedule
3.10, there is no litigation, or any proceeding or investigation by any
Governmental Authority, pending or presently overtly threatened against any of
the Companies that (a) questions the validity or enforceability of this
Agreement, the other Loan Documents or the Intercompany Loan Documents, or any
action taken or required to be taken pursuant hereto or thereto; or (b) in the
reasonable business judgment of the Borrower based upon facts and circumstances
currently known to the Borrower, is likely to result in a Material Adverse
Effect.
3.11 Authorization; Compliance with Other Instruments. The
execution and delivery of and performance of the Companies' obligations under
this Agreement, the other Loan Documents and the Intercompany Loan Documents,
including the granting of the Required Liens and the Intercompany Liens; (a)
will not result in any violation of or be in conflict with or constitute a
default under any term of (i) any Material Agreement, Existing Mortgage Note,
Prior Mortgage Note or other agreement or instrument to which any of the
Companies is a party or by which any of the Companies is bound, (ii) any
judgment, decree or order issued against any of the Companies, or (iii) to the
knowledge of the Borrower or the Operating Partnership, any statute, rule or
regulation of any Governmental Authority applicable to any of the Companies;
and (b) will not result in the creation of any Lien upon any of the Assets of
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any of the Companies pursuant to any such term, except pursuant to this
Agreement and the Security Documents and Intercompany Security Documents, or
otherwise result in the acceleration of any Indebtedness or obligation of any
of the Companies, except for, in the case of each of clauses (a) and (b), such
conflicts, breaches, defaults, Liens and/or such accelerations of Indebtedness
or obligations as are set forth on Schedule 3.11 or as will not, individually
or in the aggregate, result in a Material Adverse Effect. Except as otherwise
set forth on Schedule 3.11, none of the Companies is in violation of any term
of that Company's declaration of trust, articles of incorporation, partnership
agreement or other charter or other organizational document or trustees'
regulations or by-laws or other similar document.
3.12 Compliance with Laws. Neither the Borrower nor any of the
other Companies is in violation of any judgment, decree or order served on any
Company, or any other judgment, decree, order, statute, rule or regulation of
any Governmental Authority to which such Company or any of its Hotel Properties
or Mortgage Notes is subject, the failure to comply with which would have a
Material Adverse Effect.
3.13 Government Regulation. None of the Companies is: (a) an
"investment company," or a company directly or indirectly "controlled" by or
acting on behalf of an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended, or an "investment adviser" within
the meaning of the Investment Advisers' Act of 1940, as amended; (b) a "Holding
Company" or a "Subsidiary Company" of a "Holding Company", or an "affiliate" of
a "Holding Company" or of a "Subsidiary Company" of a "Holding Company", as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended; or (c) subject to any other federal or state regulation limiting that
Company's ability to incur the Obligations other than Obligations under the
Environmental Indemnity or, in the case of any Company other than the Borrower,
obligations incurred or to be incurred by that Company under the Intercompany
Loan Documents to which that Company is a party.
3.14 Consents. Except for the orders, consents, approvals, other
authorizations and filings specified in Schedule 3.14(c) and those orders,
consents, approvals, other authorizations and filings obtained or given in
connection with the Third Closing (and in connection with the First Closing and
the Second Closing to the extent they are effective on the date hereof) none of
the Companies is or was required to obtain any order, consent, approval or
other authorization of, or required to give any notification to or make any
other filing other than the filing of UCC financing statements, fixture filings
and Mortgages with, any other Person, including any Governmental Authority and
any other Person party to any Material Agreement, in connection with the
Companies' execution and delivery of and performance of their obligations under
any Loan Document or any Intercompany Loan Document, including the granting of
the Required Liens and the Intercompany Liens granted on the date hereof and
the performance of the Companies' other obligations under the Security
Documents and the Intercompany Security Documents. All of the orders,
consents, approvals, other authorizations and filings described in this Section
3.14 are herein referred to as the "Consents."
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3.15 Margin Stock. None of the Companies owns or has any present
intention of acquiring any Margin Stock.
3.16 Employee Retirement Income Security Act of 1974. (a) Except
as otherwise set forth on Schedule 3.16, to the Borrower's knowledge:
(i) Each "employee benefit plan" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), each "Plan" within the meaning of
Section 4975(e)(1) of the Code (a "Plan") sponsored by a
Company or an ERISA Affiliate, as defined below, of a Company,
and each "multi-employer plan" within the meaning of Section
3(37) of ERISA to which any Company or any ERISA Affiliate of
a Company makes contributions, complies in all material
respects with all applicable provisions of ERISA and the Code;
(ii) Neither any Company nor any ERISA Affiliate of a Company has
incurred any material liability to the Pension Benefit
Guaranty Corporation ("PBGC"), any "employee benefit plan" or
any "Plan" on account of any of the following: any failure to
meet the contribution requirements of such plan, any failure
to meet minimum funding requirements of such plan, one or more
transactions prohibited by Section 406 of ERISA, one or more
"prohibited transactions" within the meaning of Section
4975(c) of the Code, any termination of a single employer
plan, any partial or complete withdrawal from a
"multi-employer plan", or the insolvency, reorganization or
termination of any "multi- employer plan"; and
(iii) No event has occurred or condition exists that presents a
material risk that any Company or any ERISA Affiliate of a
Company will incur any material liability on account of any of
the foregoing circumstances.
(b) The consummation of the transactions contemplated by this
Agreement, will not result in any of the Companies' engaging in any transaction
prohibited by Section 406 of ERISA, or any "prohibited transaction", for which
an exemption is not available. Schedule 3.16 sets forth (i) all "employee
benefit plans" and "Plans" of the Companies including any group or individual
severance or other payment plans, (ii) whether or not such plans are funded in
whole or in part and (iii) the amount of such funding or the amount of any
unfunded obligation or liability under each of such plans.
3.17 Ownership of Borrower and SLT.
(a) Borrower. Schedule 3.17(a) correctly sets forth a detailed
description of the Borrower's capital structure, the number of Units, as
defined in the Borrower's partnership agreement, outstanding and, to the
knowledge of the Borrower, each Person who has the authority, directly or
indirectly, to vote and/or transfer Percentage Interests, as also defined in
the Borrower's partnership agreement, constituting five percent (5.00%) or more
of all such
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Percentage Interests. Except as otherwise set forth in Schedule 3.17(a), the
Borrower is not obligated in any manner to issue any one or more additional
Units.
(b) SLT. Schedule 3.17(b) correctly sets forth a detailed
description of SLT's capital structure, the number of SLT's shares of
beneficial interest outstanding and, to the knowledge of SLT, each Person who
has the authority, directly or indirectly, to vote and/or transfer shares of
beneficial interest of SLT constituting five percent (5.00%) or more of all
such outstanding shares. All of those outstanding shares of beneficial
interest are validly issued, fully paid and nonassessable. Except as otherwise
set forth in Schedule 3.17(b), SLT is not obligated in any manner to issue any
additional shares of beneficial interest.
3.18 Environmental Matters. The Senior Lender and the Collateral
Agent have been furnished by the Borrower with a "Phase I" and/or a "Phase II"
environmental survey or report with respect to each Hotel Property currently
owned or leased by the Borrower or SLT (collectively, the "Environmental
Surveys"). Except as otherwise set forth in the Environmental Surveys or in
Schedule 3.18, the Borrower has no knowledge that the Companies' ownership or
operation of the Hotel Properties or the current physical condition of any of
the Hotel Properties violates any applicable Hazardous Materials Law, except
for such violations as will not, individually or in the aggregate, result in a
Material Adverse Effect.
3.19 Trademarks, etc. The Borrower and each of the other Companies
own or hold licenses in all trademarks, trade names, copyrights, patents,
patent rights and patent licenses that are necessary to conduct the Companies'
respective businesses in all material respects as currently operated. The
consummation of the transactions contemplated by this Agreement, the other Loan
Documents and the Intercompany Loan Documents will not adversely alter or
impair any of such rights of the Borrower or any of the other Companies, except
as otherwise set forth on Schedule 3.19. Neither the Borrower nor any of the
other Companies has been charged or is overtly being threatened to be charged
with any infringement of, nor to the Borrower's knowledge has any Company
infringed on, any unexpired trademark, trademark registration, trade name,
patent, copyright, copyright registration or other proprietary right of any
Person which infringement, in the reasonable business judgment of the Borrower
based upon facts and circumstances currently known to the Borrower or the
Operating Partnership, would if proved be likely to have a Material Adverse
Effect.
3.20 Burdensome Court Orders, etc. The Borrower and the other
Companies are not, individually or in combination, subject to any court order,
writ, injunction or decree of any court or Governmental Authority that has had
or, in the reasonable business judgment of the Borrower based upon facts and
circumstances currently known to the Borrower or the Operating Partnership, is
likely to have, a Material Adverse Effect.
3.21 Fire, Explosion, Labor Disputes, etc. Except as otherwise set
forth on Schedule 3.21, no Hotel Property is presently affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or of the public enemy or other casualty,
whether or not covered by insurance, that, in the reasonable
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business judgment of the Borrower based upon the facts and circumstances
currently known to the Borrower, is likely to have a Material Adverse Effect.
3.22 Binding Obligations. This Agreement, the Notes and the other
Loan Documents and the Intercompany Loan Documents executed and delivered at or
prior to the Third Closing are the legally valid and binding obligations of the
Company or Companies party thereto, enforceable against each such Company in
accordance with those agreements' respective terms, except as enforcement may
be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally.
3.23 Lien Validity. Except in each case as otherwise set forth in
Schedule 3.23, each of the Required Liens and Intercompany Liens that has been
granted by SLT and/or SLC in their respective Assets prior to the Third Closing
Date has been validly created and perfected to the extent that each such Lien
in such Assets can be perfected by the proper filing of financing statements
and recordation of fixture filings, Mortgages and other applicable Security
Documents and Intercompany Security Documents with the appropriate filing or
recording officer in each of the necessary jurisdictions, and giving effect to
the delivery to the Collateral Agent or its agent of the original share
certificates so delivered at or in connection with the First Closing. Except
as otherwise set forth in Schedule 3.23, the Required Liens and the
Intercompany Liens granted or to be granted by the Realty Partnership and/or
the Operating Partnership in their respective Assets, including the increases
thereof, in the amounts accrued thereby, other than the Excluded Assets and
Excluded Intercompany Assets, on or after the Third Closing Date have been or
when granted shall be validly created and, upon the proper filing of financing
statements and recordation of fixture filings, Mortgages and other applicable
Security Documents and Intercompany Security Documents with the appropriate
filing or recording officers in each of the necessary jurisdictions, and upon
delivery of original share certificates and promissory notes to the Collateral
Agent, those Required Liens and Intercompany Liens will be perfected to the
extent that Liens in such Assets can be perfected by such filing, recordation
and pledge.
3.24 Solvency. Subject to the assumptions set forth on Schedule
3.24, the Borrower and each of the other Companies is Solvent. Neither the
execution and delivery of this Agreement or any of the other Loan Documents or
Intercompany Loan Documents, nor the granting of the Required Liens or the
Intercompany Liens, nor, based upon facts and circumstances known to the
Borrower or the Operating Partnership, the consummation of any of the
transactions contemplated by this Agreement to be consummated on or after the
Third Closing Date, will in any way render the Borrower or any of such other
Companies not Solvent.
3.25 Accounts. Schedule 3.25 accurately and completely describes
each Cash Management Account, each Collateral Account and each other deposit
account, demand, time or money market account or certificate of deposit
currently maintained at any financial institution by any Company in which any
Excluded Cash is held, including the name and address of each financial
institution at which any such account is maintained. There is no
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account or certificate of deposit maintained or held by any of the Companies
other than the accounts and certificates listed on Schedule 3.25.
3.26 All Assets. The Collateral subject to the Required Liens
includes all Assets of the Borrower other than Excluded Assets, and the
Intercompany Collateral includes all Assets of each Company that is an obligor
under an Intercompany Note or a guarantor under a Subsidiary Guaranty other
than, in each case, Excluded Intercompany Assets, shown on the latest balance
sheets included in Schedule 3.4, except for Assets sold or otherwise disposed
of in the ordinary course of business as heretofore conducted or as otherwise
set forth on Schedule 3.26. Schedule 3.26 also indicates which of the Assets
shown on such balance sheets constitute Excluded Assets or Excluded
Intercompany Assets other than such Assets that may constitute Excluded Assets
or Excluded Intercompany Assets solely at the election of the Senior Lender.
3.27 Certain Schedules. Set forth on Schedule 4.2(q) is a true and
correct copy of the Restructuring Plan. Set forth on Schedule 7.3 are
illustrations of the calculation of certain financial covenants set forth in
this Agreement.
ARTICLE 4.
Gaming Partnership
4.1 Consent to Transfer of Assets of HICN to Gaming Partnership.
Subject to the fulfillment or waiver by Senior Lender of each
of the following conditions, Senior Lender shall consent to the transfer of the
Assets of HICN to the Gaming Partnership:
(a) Security Documents. The Borrower shall have, or
shall have caused the Gaming Partnership and the Operating Partnership to have,
executed, acknowledged and delivered to the Collateral Agent execute any
agreements or other documents reasonably requested by the Collateral Agent or
the Senior Lender in order to confirm matters relating to the Reorganization
and to assume and perform the obligations or HICN in connection with the Third
Closing, including without limitation an amendment to real property security
documents in substantially the form executed the Borrower and the Operating
Partnership in connection with the transfer of the other Hotel Properties to
the Borrower and the Operating Partnership, and (ii) if and to the extent the
Gaming Partnership then maintains any disbursement, deposit or other account in
the name of the Gaming Partnership, such additional security documents as are
necessary to perfect the Intercompany Liens in all Cash and Cash Equivalents of
the Gaming Partnership and an amendment to the Cash Management Memorandum as
necessary to reflect the transfer of any one or more deposit accounts to the
Gaming Partnership.
(b) Operating Partnership Guaranty. The Gaming
Partnership shall have executed, acknowledged and delivered an Operating
Partnership Guaranty in substantially the form of Exhibit K-3, a security
agreement securing the Operating Partnership Guaranty in the
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form executed by the Operating Partnership at the Third Closing and related
UCC-1 financing statements and other documents perfecting the Liens granted by
such security agreement.
(c) Solvency Certificate. The Gaming Partnership shall
have delivered a certificate (a "Solvency Certificate") in substantially the
form of Exhibit F-3, dated as of the date the Assets of HICN are transferred to
the Gaming Partnership, signed by the chief financial officer of the general
partner of the Gaming Partnership, certifying that the Gaming Partnership is
Solvent as of the date of such Solvency Certificate.
(d) Officer's Certificate. The Borrower shall have
delivered an officer's certificate, dated as of the date the Assets of HICN are
transferred to the Gaming Partnership, signed by a Responsible Officer of the
general partner of the Borrower, certifying that the Nevada Gaming Approvals
have been obtained and that true and correct copies of all such Nevada Gaming
Approvals are attached to the certificate.
(e) Local Counsel Opinion. The Borrower shall have
delivered an opinion of the Companies' Nevada counsel, in form acceptable to
the Collateral Agent, that all Gaming Approvals required by applicable law in
connection with the transfer of Assets to the Gaming Partnership have been
obtained.
(f) Notwithstanding any other provision of this Agreement
including the Restructuring Plan, the Senior Lender has not consented, nor
shall it be deemed to have consented, to the transfer of any of the Assets of
HICN to the Gaming Partnership prior to the fulfillment or waiver by Senior
Lender of each of the foregoing conditions.
ARTICLE 5.
Affirmative Covenants
The Borrower covenants and agrees that, until the payment in full all
of the principal and interest on the Loans and all other sums due under the
Loan Documents and Intercompany Loan Documents, the Borrower shall perform, and
shall cause each of the other Companies to perform, each and all of the
following covenants applicable to that Company, unless such performance shall
be waived by the Senior Lender:
5.1 Financial Statements The Borrower shall furnish or cause to
be furnished to Senior Lender:
(a) Annual. Within ninety (90) days after the end of
each fiscal year of the Realty Partnership and the Operating Partnership:
(i) such financial statements as are required to be
included in SLT's and SLC's annual report on
Securities and Exchange Commission Form 10-K, which
shall include audited financial statements of the
Operating Partnership and the Realty Partnership,
together with the opinion of
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Deloitte & Touche or other independent public
accountants selected by the Borrower and satisfactory
to the Senior Lender, whose approval shall not be
unreasonably delayed or withheld, on the
aforementioned financial statements, which opinion
shall state that such financial statements have been
prepared in accordance with GAAP and that the audit by
such accountants in connection with such financial
statements has been made in accordance with generally
accepted auditing standards related to reporting;
(ii) a statement signed by the accountants who have
delivered the opinion described in the preceding
paragraph to the effect that in connection with their
examination of the financial statements to which such
opinion relates such accountants have reviewed the
provisions of this Agreement, specifically including
the provisions of Sections 7.1 (relating to the
covenant regarding Adjusted Net Worth) and 7.2
(relating to the covenant regarding Available Cash),
and have no knowledge of any event or condition that
constitutes a Default or Event of Default or, if such
accountants have such knowledge, specifying the nature
and period of existence thereof. However, in issuing
such statement such accountants shall not be required
to go beyond normal auditing procedures conducted in
connection with the aforesaid opinion; and
(iii) a certificate signed by the chief financial
officer or controller of the general partner of the
Borrower, and the chief financial officer or
controller of the managing general partner of the
Operating Partnership, separately identifying and
describing all material Contingent Obligations of the
Borrower and its Subsidiaries (if any) and of the
Operating Partnership and its Subsidiaries.
(b) Quarterly. Within forty-five (45) days after the end
of each of the first three quarterly accounting periods in each fiscal year of
the Borrower:
(i) such financial statements as are required to be
included in SLT's and SLC's quarterly report on
Securities and Exchange Commission Form 10-Q (which
will include the financial statements of the Operating
Partnership and the Realty Partnership), signed by the
chief financial officer of the general partner of the
Borrower and the chief financial officer or controller
of the managing general partner of the Operating
Partnership;
(ii) a report, specifying in reasonable detail any material
developments with respect to any litigation,
proceeding or investigation described in paragraph
(ii) or (iii) of subsection 5.2(c), signed by a
Responsible Officer of the general partner of the
Borrower; and
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(iii) a report signed by the chief financial officer of the
general partner of the Borrower, setting forth the
status of the Companies' relations with franchisors,
non-Company lessors and lienholders, and the status
of the Borrower's efforts to maximize the value of
each Mortgage Note with respect to which the
mortgagor is in default and each Hotel Property owned
by the Borrower with respect to which the ground
lessee is in default.
(c) Monthly. As soon as available, but in any event not
later than forty-five (45) days after the end of each monthly accounting period
in each fiscal year of the Borrower, or, in the case of each monthly accounting
period ending in January, within seventy-five (75) days after the end of such
period:
(i) (A) unaudited balance sheets of the Borrower as at
the end of such period and the related unaudited
statements of income and partners' equity and the
related consolidated statement of cash flows for such
period and for the period from the beginning of the
current fiscal year to the end of such period and
(B)(I) the unaudited balance sheets of the Operating
Partnership as at the end of such period and the
related unaudited statements of income and partners'
equity and the related consolidated statement of cash
flows for such period and for the period from the
beginning of the current fiscal year to the end of
such period and (II) the unaudited combined and
combining balance sheets of the Borrower and of the
Operating Partnership as at the end of such period
and the related unaudited combined and combining
statements of income and partners' equity and related
combined statement of cash flows for such period and
for the period from the beginning of the current
fiscal year to the end of such period, in each case
setting forth in comparative form with respect to
such combined financial statements, figures for the
same period and portion of the previous fiscal year,
signed by the chief financial officer of the general
partner of the Borrower and the chief financial
officer, the principal accounting officer or the
controller of the managing general partner of the
Operating Partnership;
(ii) either (A) with respect to each Hotel Property and
each Indirect Hotel Property, if any, operated during
such period by any Company, an operating report
prepared in accordance with the American Hotel &
Motel Association's Uniform System of Accounts for
Hotels, signed by a Responsible Officer of the
Company responsible for the operations of the Hotel
Property or Indirect Hotel Property in question,
setting forth the revenues, expenses and cash flows
of such Hotel Property or Indirect Hotel Property and
including with respect to each Hotel Property in
comparative form figures for such month as set forth
in the Borrower's budget for such month or (B) with
respect to each Hotel Property or Indirect Hotel
Property operated by a Person other than a Company, a
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copy of any similar operating report with
respect to such property received by the Borrower or
any other Company from the Person responsible for the
operations of such Hotel Property or Indirect Hotel
Property; and
(iii) a deviation report substantially in the form of
Exhibit V on a cumulative year-to-date basis;
(iv) a three-month monthly consolidated rolling cash
receipts and cash disbursement forecast for the
Companies taken as a whole, including a roll-forward
of the corporate cash balance; and
(v) the report required each month regarding the Mortgage
Notes required by the Portfolio Management System as
defined in the Mortgage Note Assignment.
(vi) The Borrower shall use all reasonable efforts to
deliver each of the annual, quarterly and monthly
reports of information described above in a uniform
complete package consisting of all related specified
items.
(d) Projections and Capital Expenditures Budget. Not
more than thirty (30) days after the commencement of each fiscal year of the
Borrower:
(i) monthly projected balance sheets and statements of
income, partners' equity and cash flows for the
Borrower and for the Operating Partnership for such
fiscal year, and annual projected statements of
income and cash flows for each Hotel Property and
each Indirect Hotel Property, in each case signed by
the chief financial officer of the general partner of
the Borrower and the chief financial officer of the
managing general partner of the Operating
Partnership, and promptly upon the preparation
thereof any other significant projections that the
Borrower or the Operating Partnership prepares and
revisions of all such projections; and
(ii) a Capital Expenditures budget in substantially the
form of Exhibit W (a "Capital Expenditures Budget")
for each Hotel Property as to which Capital
Expenditures are proposed to be made by any of the
Companies during such fiscal year, which Capital
Expenditures Budget shall include allocations for
Capital Expenditures necessary to comply with
applicable Franchise Agreements, ground and other
leases, management agreements and health and safety
laws. Such Capital Expenditures Budget shall be
subject to the approval of the Senior Lender, which
approval shall not be unreasonably delayed or
withheld and may not be withheld if such Capital
Expenditures Budget (A) provides for the expenditure
of an aggregate amount that does not exceed the sum
of (1) five percent (5.00%) of the Companies' total
hotel revenues for the previous fiscal
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year, (2) five percent (5.00%) of the
Companies' total gaming revenues for the previous
fiscal year and (3) $6,000,000 with respect to
Capital Expenditures to be made prior to the Initial
Termination Date for the Hotel Properties of Park
Central, Dallas, Texas, French Quarter, Lexington,
Kentucky, and Capitol Hill, Washington, D.C.. The
Capital Expenditures Budget shall not be less than
the sum of (a) three percent (3.00%) of the
Companies' total hotel revenues for the previous
fiscal year plus (b) one percent (1.00%) of the
Companies' total gaming revenues for the previous
fiscal year or such lower amount as the Collateral
Agent shall reasonably approve (the "Minimum
Amount"). Capital Expenditures shall be made to each
Hotel Property at which Capital Expenditures are
proposed to be made that are consistent with Capital
Expenditures then customarily being made by prudent
hotel owners/operators with respect to properties
comparable to that Hotel Property. To the extent
the Companies do not spend the Minimum Amount, the
Companies shall reserve the unspent amount and spend
such amount in the next succeeding fiscal year in
addition to complying with that fiscal year's
requirement.
(e) Auditors' Letters. Promptly upon receipt thereof, a
copy of each comment letter (and any supplement or supplements thereto)
submitted to the management of the Borrower, the Operating Partnership, SLT or
SLC in respect of that Company's internal control matters by that Company's
independent public accountants in connection with an annual, interim or special
audit of the financial statements of that Company made by such accountants.
The Borrower shall obtain such a letter in connection with each of its annual
audits.
(f) Management Company Reports. The Borrower shall
direct each Management Company to deliver to the Senior Lender, at the same
time such document is delivered to the Borrower, a copy of each notice of
default delivered by such Management Company to any of the Companies, and the
Borrower shall provide upon the request of the Senior Lender a copy of any and
all material reports and analysis received by the Borrower from any Management
Company.
5.2 Other Information and Reports. The Borrower shall furnish or
cause to be furnished to the Senior Lender:
(a) Communications With Shareholders. Promptly following
the mailing or other public distribution or release thereof, one (1) copy of
(i) each annual, quarterly or other regular or periodic report including
financial statements, notice of meeting or proxy statement sent by the
Borrower, the Operating Partnership, SLT or SLC to each of that Company's
partners, shareholders or stockholders, as applicable, (ii) any registration
statement or prospectus filed by any of the Companies with any securities
exchange or with the Securities and Exchange Commission or any successor
agency, and (iii) any press release or other similar
<PAGE> 56
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statement made available generally by any of the Companies to the public
concerning material developments in such Company's business.
(b) Notices of Default on Other Documents. Within five
(5) Business Days after any Responsible Officer of the Borrower obtains
knowledge that any party to any Material Agreement or any Material License or
the holder of any evidence of material Indebtedness or other security of the
Borrower or any of the other Companies, including any Prior Mortgage Note, has
given notice of or taken any other material action with respect to, a claimed
default or event of default by any of the Companies, a copy of any written
notice received with respect to such claimed default or event of default,
together with a certificate signed by the chief financial officer of the
general partner of the Borrower specifying the notice given or action taken by
such holder and the nature of the claimed default or event of default and what
action the Borrower or such other Company as is claimed to have committed the
default or event of default has taken and proposes to take with respect
thereto.
(c) Notice of Litigation or Other Material Development.
Within five (5) Business Days after any Responsible Officer of the Borrower
obtains knowledge of:
(i) any condition or event that constitutes an Event of
Default or, to the knowledge of the president, chief
executive officer or chief financial officer of the
general partner of the Borrower, a Default;
(ii) any litigation, or any investigation or proceeding by
any Governmental Authority, that (A) alleges any
criminal conduct on the part of any of the Companies
or any of their respective general partners,
trustees, directors, officers, employees or agents in
their capacity as such, (B) alleges any material
violation by any of the Companies of any Hazardous
Materials Law or (C) involves a claim against any of
the Companies that arises other than in the ordinary
course of business, as to which the insurance carrier
has denied coverage or that is not covered by
insurance and that seeks damages in an amount which,
individually, or when aggregated with all other such
claims not theretofore reported to the Senior Lender,
is greater than or equal to $500,000;
(iii) any other investigation of, or proceeding against,
the Companies or any of them by any Governmental
Authority, or any other litigation against the
Companies that, in the reasonable business judgment
of the Borrower, is likely to result in a Material
Adverse Change;
(iv) any material labor controversy resulting in or
threatening to result in a strike against any of the
Companies;
(v) the adoption or termination by any Company of any
Plan as defined by the Code or the occurrence of any
"reportable event" as defined in ERISA as to any Plan
of any Company;
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(vi) any written proposal by any Governmental Authority to
acquire any Hotel Property or any material portion
thereof, or any other material written communication,
notice, order or report furnished, other than in the
ordinary course of business, by any of the Companies
to, or received by any of the Companies, other than
in the ordinary course of business from the PBGC, the
Department of Labor or any other Governmental
Authority having jurisdiction over any of the
Companies or their Assets;
(vii) any change in the composition of the Board of
Trustees of SLT, the Board of Directors of SLC or the
executive officers of the general partner of the
Borrower or the managing general partner of the
Operating Partnership; or
(viii) any Person's seeking to obtain or threatening in
writing to seek to obtain a decree or order for
relief with respect to the Borrower or any of the
other Companies in an involuntary case under the
Bankruptcy Code or any other federal or state
bankruptcy, insolvency or other similar law now or
hereafter in effect;
the Borrower shall deliver to the Senior Lender and the Collateral Agent a
certificate signed by a Responsible Officer of the Borrower specifying the
nature and period of existence of such event or condition and what action the
Borrower or, if appropriate, another Company or Companies has taken, is taking
and proposes to take with respect thereto.
The Borrower shall also furnish or cause to be furnished to the Senior
Lender and the Collateral Agent such other information regarding the business,
affairs and condition of the Companies as the Senior Lender or the Collateral
Agent may from time to time reasonably request if and to the extent that such
information is then readily available to the Borrower or another Company in the
ordinary course of business without unreasonable cost or expense. In addition,
the Borrower shall permit, and shall cause each of the other Companies to
permit, at least once during each quarterly accounting period in each fiscal
year of the Borrower, the Senior Lender, or if there is more than one Senior
Lender, the Senior Lenders as a group, or the Collateral Agent on their behalf,
through their respective agents and employees, to inspect the Companies' books
and to make copies thereof and extracts therefrom and, to the fullest extent
permitted by law, any of the Hotel Properties or other Assets of the Companies
and to discuss the affairs, finances and accounts of the Companies with, and to
be advised as to the same by, the Companies' respective executive officers and,
at least once during each fiscal year of the Borrower, the Companies'
independent public accountants, all at such reasonable times as the Senior
Lender or the Collateral Agent may from time to time request. However, the
Senior Lender or the Collateral Agent, as the case may be, shall notify the
Borrower in advance of any discussion between any Senior Lender or the
Collateral Agent and the Companies' accountants, and the Borrower shall have
the right to be present during such discussions. The inspection rights of the
Senior Lender and the Collateral Agent set forth in this Section shall be in
addition to the inspection rights of the Collateral Agent under the
Intercompany Security Documents.
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5.3 Legal Existence: Franchises: Compliance with Laws. (a) The
Borrower shall, and shall cause each of the other Companies to: maintain its
existence and business (except as otherwise contemplated by the Restructuring
Plan); maintain its licensing, qualification or other authorization to do
business as a foreign partnership, foreign real estate investment trust,
foreign corporation or other foreign business entity in all states where
necessary for the conduct of such Company's business as from time to time
conducted; maintain all Assets which are necessary for the conduct of such
business now or hereafter owned, in good repair, working order and condition,
ordinary wear and tear excepted; take all actions to maintain and keep in full
force and effect all such Material Agreements and Material Licenses as are
necessary for the conduct of such business; and, except as otherwise provided
herein, comply in all material respects with all applicable statutes, rules,
regulations and orders of, and all applicable restrictions imposed by, all
Governmental Authorities in respect of the conduct of such business and the
ownership of such Company's Assets. However, neither the Borrower nor any of
the other Companies shall be required by reason of this Section to comply with
any such statute, rule, regulation, order or restriction at any time while the
Borrower or such other Company shall be contesting its obligation to do so in
good faith by appropriate proceedings promptly initiated and diligently
conducted, and if the Borrower or such other Company shall have set aside on
its books such reserves, if any, with respect to that matter as are required by
GAAP and deemed adequate by such Company and its independent public
accountants.
(b) The Borrower shall not, and shall not permit any of the
other Companies to, engage in any business other than the businesses of hotel
and hotel/casino ownership, operation and/or management as heretofore conducted
and activities incidental thereto. The foregoing shall not be construed to
prohibit the ownership or operation of a Mixed-Use Property; provided, however,
that the aggregate non-hotel and non-casino gross revenues of Mixed-Use
Properties shall not constitute more than ten percent (10%) of the gross
revenues of all the Companies' Assets. In addition, the Borrower and the other
Companies may acquire additional casino properties provided the total asset
value of all casinos does not exceed twenty percent (20%) of the Aggregate
Asset Value.
5.4 Insurance.
(a) The Borrower shall maintain or cause to be maintained
at the Borrower's expense with companies satisfactory to the Senior Lender,
whose approval shall not be unreasonably delayed or withheld and shall not be
withheld as to any Company rated A-VII or better in the most current issue of
Best's Key Rating Guide, the following minimum insurance coverages, which
coverages may be included as part of a blanket policy, insuring the Hotel
Properties and other Assets of the Companies:
(i) insurance that complies with the worker's
compensation and employer's liability laws of all
states in which the Borrower or any other Company
shall have employees;
(ii) comprehensive general liability insurance covering
all operations of the Borrower and the other
Companies and with a combined single limit of
<PAGE> 59
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not less than $1,000,000 per occurrence for bodily
injury, including death, and property damage;
(iii) fire, extended coverage, vandalism and malicious
mischief insurance in an amount not less than one
hundred (100%) of the full replacement cost of the
personal property and Improvements on the Real
Property associated with the Hotel Properties and the
Companies' other Assets, with deductibles not to
exceed $100,000 for any one occurrence (or in the
case of earthquake or flood insurance, ten percent
(10%) of the total insurable value), with a
replacement cost coverage endorsement, an agreed
amount endorsement if requested by the Senior Lender,
a contingent liability from operation of building
laws endorsement, a demolition cost endorsement and
an increased cost of construction endorsement ("full
replacement cost", as used herein, meaning the cost
of replacing the Improvements exclusive of the cost
of excavations, foundations and footings below the
lowest basement floor) and the Companies' personal
property therein without deduction for physical
depreciation thereof);
(iv) umbrella liability insurance in addition to the
coverage specified in (ii) above, in an amount not
less than $10,000,000 per occurrence;
(v) for each Hotel Property in an area designated by the
Secretary of Housing and Urban Development as having
special flood hazards, flood insurance on the
Improvements included in such Hotel Property and any
and all Company personal property used or to be used
in connection therewith, up to the maximum limits of
insurance available under the National Flood
Insurance Program as authorized by the Flood Disaster
Protection Act of 1973, as amended or recodified from
time to time;
(vi) business interruption insurance and/or loss of rental
value insurance, as appropriate, payable for a period
of twelve (12) months and sufficient to cover eighty
percent (80%) of the gross income from the Hotel
Properties for a period of twelve (12) months, as
determined at the commencement of each insurance
policy year; and
(vii) products and completed operations, business
automobile liability, liquor liability, personal and
advertising injury liability, false arrest and libel
and slander insurance.
Notwithstanding the foregoing provisions of subparagraphs
(iii), (v), (vi) and (vii), the Borrower shall, with respect to acquired
mortgage notes and Existing Mortgage Notes, fully enforce the coverage (with
the intention of attaining the maximum coverage allowed) and related terms
provided for in the applicable mortgage note but which may be less coverage
than specified above.
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(b) The Borrower shall furnish to the Collateral Agent
originals or, if not available, certified copies of such policies of insurance
upon execution hereof and upon the renewal or replacement of existing coverage
or the obtaining of additional coverage.
(c) Each insurance policy required by paragraphs (i),
(ii) (iv) and (vii) of subsection 5.4(a) shall name the Collateral Agent, for
the benefit of the Senior Lender, as an additional insured party with respect
to the Collateral insured by such policy. Each insurance policy required by
paragraphs (iii), (v) and (vi) of subsection 5.4(a) and any and all other
policies applicable to the Collateral shall name the Collateral Agent, for the
benefit of the Senior Lender, as a loss payee with respect to the Collateral
and shall provide that all proceeds payable thereunder shall be paid to the
Collateral Agent to be applied as provided herein. Except as may be otherwise
approved by the Senior Lender, none of such insurance policies shall include
any non- Company Assets.
(d) Each insurance policy required by paragraphs (iii)
and (v) of subsection 5.4(a) shall be on a non-reporting form basis and to the
extent the same relates to the Collateral shall contain a provision (i)
requiring the insurer to notify the Senior Lender and the Collateral Agent in
writing at least ten (10) days in advance of any cancellation or material
change in such policy; and (ii) stating that any loss otherwise payable
thereunder shall be payable notwithstanding any change in title to or ownership
of the covered Hotel Property after the event giving rise to the loss.
(e) In the event of an insured loss to all or any portion
of the Borrower's Assets which loss is estimated to be in an amount in excess
of $200,000, the Borrower shall give immediate written and oral notice thereof
to the Collateral Agent, and the Collateral Agent may make proof of loss with
respect to the Collateral or Intercompany Collateral if not made promptly by
the Borrower or another Company. However, any adjustment or proof of loss in
excess of $200,000 shall require the prior written consent of the Senior
Lender, which consent shall not be unreasonably delayed or withheld. Each
insurance company concerned with the circumstances described in the immediately
preceding sentence is hereby authorized and directed to make payment under such
insurance to the Collateral Agent instead of to the Borrower and the Collateral
Agent jointly, other than with respect to the return of unearned premiums
which, except as otherwise provided in subsection 5.4(g), shall be returned to
the Borrower. The Borrower irrevocably appoints the Collateral Agent as the
Borrower's attorney-in-fact to endorse any draft for such payment, which
appointment, being for security, is irrevocable. The Collateral Agent shall
immediately, and in any event within ten (10) Business Days, notify the
Borrower of the Collateral Agent's receipt of any payment pursuant to the
immediately preceding sentence.
(f) The proceeds of any business interruption insurance
carried in accordance with paragraph 5.4(a)(vi) and paid to the Collateral
Agent shall be promptly paid by the Collateral Agent to the Borrower.
(g) All right, title and interest of the Borrower in and
to the policies contemplated in this Section, and all renewals thereof, have
been assigned pursuant to the
<PAGE> 61
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Security Documents by the Borrower to the Collateral Agent as additional
security for payment of the Obligations, other than Obligations under the
Environmental Indemnity, to the extent permitted by applicable law and subject
to the rights of the Borrower's insurance premium finance company, if any. The
Borrower hereby agrees (i) to give notice of such assignment to the companies
issuing such policies as herein required, and (ii) if an Event of Default shall
have occurred and be continuing, any amount that would otherwise be available
under said insurance policies to any of the Companies upon cancellation or
termination of any of such policies or renewals, whether in the form of return
of premiums or otherwise, shall be payable to the Collateral Agent as assignee
thereof.
5.5 Restoration.
(a) In the event that there occurs any damage to or
destruction of any Improvements forming a part of any Hotel Property owned by
the Borrower or SLT and subject to the Required Liens ("Damage") or that any
portion of the Real Property or other Assets constituting such a Hotel Property
is taken under the power of eminent domain (a "Condemnation") and such Damage or
Condemnation constitutes Major Damage or a Major Condemnation or a Total Loss as
hereinafter defined, then, except for such proceeds of any insurance as the
Borrower may require in order to effect any demolition of the remaining portion
of Improvements that may be required by applicable law, which proceeds shall be
paid to the Borrower by the Senior Lender, the Senior Lender shall have the
absolute right to (i) retain and apply the proceeds of any insurance or sums
received as a result of such Condemnation, at its sole election, to principal
payable on the Notes then outstanding; or (ii) require the Borrower to restore
or repair, or cause to be repaired or otherwise restored, the damaged or taken
Hotel Property or portion thereof according to plans and specifications approved
by the Senior Lender and in accordance with the requirements of subsection
5.5(b), if and to the extent that such repair or restoration is then permitted
by applicable law. However, if (i) such Damage or Condemnation does not
constitute a Total Loss, (ii) no Event of Default has occurred and is
continuing, (iii) the Borrower certifies to the Senior Lender that, in that
Company's reasonable business judgment, there are sufficient net proceeds from
insurance or sums received as a result of such Condemnation or from Company
funds to complete repair or the restoration of the Improvements affected thereby
to, in the case of a casualty, substantially the same value, condition and
character as existed immediately prior to such damage or, in the case of a
Condemnation, to such condition and character as shall permit the continued
operation of such Hotel Property, and (iv) the insurer, in the case of an
insured casualty loss, does not deny liability as to the insureds, the Senior
Lender shall, if the Borrower shall so request, consent to the use of the net
proceeds of any insurance or any sums received as the result of such
Condemnation for restoration of such Hotel Property. In the event that there
occurs any Minor Damage or Minor Condemnation as hereinafter defined to any
Hotel Property owned or leased by the Borrower or SLT and subject to the
Required Liens, the Borrower shall have the right to apply the proceeds of any
insurance received as a result of such Minor Damage or sums received as a result
of such Minor Condemnation to principal payable on the Notes then outstanding,
or repair or restore or cause the restoration of the damaged or taken Hotel
Property or portion thereof according to plans and specifications approved by
the Senior Lender and in accordance with the requirements of subsection 5.5(b).
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(b) All restorations made pursuant to subsection 5.5(a)
shall be conducted in accordance with the following conditions:
(i) Prior to the commencement of restoration, if the cost
to restore is anticipated to exceed $500,000, the
architect, contracts, contractors, plans and
specifications for the restoration shall have been
approved in advance in writing by the Senior Lender,
whose approval shall not be unreasonably delayed or
withheld, and the Senior Lender shall have been
provided with proof of the effective filing of a
waiver of mechanics' liens so as to prevent to the
maximum extent permitted by law such liens from
attaching to such Hotel Property;
(ii) Such restoration is then allowed by applicable law
and all necessary permits and approvals shall have
been obtained;
(iii) The net proceeds of such insurance or condemnation
award (the "Restoration Fund") shall have been
deposited with the Collateral Agent, and any interest
earned on such deposited funds shall be a part of and
follow the Restoration Fund;
(iv) At the time of any disbursement from the Restoration
Fund, no Event of Default shall have occurred and be
continuing, no mechanic's or material supplier's
liens shall have been filed and remain undischarged,
and a bring-down of title insurance with respect to
the damaged or condemned Hotel Property shall have
been delivered to the Collateral Agent;
(v) Disbursements from the Restoration Fund shall be made
by the Collateral Agent from time to time in an
amount not exceeding the cost of the work completed
since the last disbursement, upon receipt by the
Collateral Agent of customary evidence of the stage
of completion and of performance of the work in a
good and workmanlike manner in accordance with the
contracts, plans and specifications; and
(vi) The Collateral Agent may retain ten percent (10%) of
all requests for disbursements from the Restoration
Fund as retainage until the restoration is fully
completed.
Notwithstanding the foregoing, no Restoration Fund shall be
required in connection with Minor Damage or Minor Condemnation.
(c) If the estimated cost of restoration, as determined
by the Borrower in its reasonable business judgment from time to time and
certified to the Senior Lender, exceeds the net amount of insurance proceeds or
condemnation proceeds awarded for the cost of such restoration and deposited in
the Restoration Fund, the amount of such excess shall be paid promptly, but in
no event later than sixty (60) days after notification by the Collateral Agent,
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by the Borrower to the Collateral Agent to be added to the Restoration Fund.
Any insurance or condemnation proceeds remaining in the Restoration Fund after
completion of repairs or restoration, other than any retainage, shall be
distributed by the Collateral Agent or the Borrower. Upon certification by the
Borrower to the Senior Lender that all conditions under the applicable
construction contract for the release of any retainage have been fulfilled, any
such retainage shall be made available by the Collateral Agent to the Borrower
and shall be used by the Borrower for payment of such construction costs.
(d) For purposes of this Section 5.5, "Major Damage" or
"Major Condemnation" shall mean a loss to the extent that the costs of repair
or other restoration equal or exceed the lesser of (i) 15% of the appraised
value of the damaged or taken Hotel Property or portion thereof based on the
most recent insurance appraisal for such Hotel Property or, if there is no such
insurance appraisal or in the case of a Major Condemnation, based on the most
recent Appraisal of such Hotel Property, excluding land for any Major Damage
only, and (ii) $500,000; "Minor Damage" or "Minor Condemnation" shall mean a
loss to the extent that the costs of repair or other restoration do not exceed
the lesser of (i) 15% of such appraised value and (ii) $500,000; and "Total
Loss" shall mean a loss with respect to which replacement cost of the
Improvements and personal property is greater than or equal to 80% of such
appraised value of such Improvements and personal property.
5.6 Payment of Taxes. The Borrower shall, and shall cause each of
the other Companies to, pay and discharge before delinquency or the imposition
of any penalty or interest all Taxes imposed upon such Company or its income
or upon any of that Company's Assets or upon any part thereof, as well as all
lawful claims of any kind including claims for labor, materials and supplies
that, if unpaid, might by law become a Lien, other than an inchoate Lien, upon
such Company's Assets. However, neither the Borrower nor any of the other
Companies shall be required to pay any such Taxes or claims if (i) the Lien
securing such Taxes or claims shall remain inchoate or any statutory bond with
respect to any Lien securing such delinquent Taxes or claims shall have been
provided, (ii) the amount, applicability or validity of the Taxes or claim
shall currently be contested in good faith by appropriate proceedings promptly
initiated and diligently conducted, (iii) enforcement of the Lien is being
stayed and (iv) the Borrower or such other Company shall have set aside on its
books such reserves with respect to the Taxes or claim as are required by GAAP
and deemed appropriate by such Company and its independent public accountants.
Upon the request of the Senior Lender, the Borrower shall furnish to the Senior
Lender copies of all federal income tax returns filed by the Borrower or the
Operating Partnership within ten (10) Business Days after the filing thereof.
5.7 Payment of Other Indebtedness. etc. Except as to matters
being contested in good faith and, where the Borrower deems necessary or
appropriate, by appropriate proceedings, the Borrower shall, and shall cause
each of the other Companies to, pay promptly when due or in conformance with
customary trade terms all other material Indebtedness of that Company and
perform in all material respects all other material obligations incident to the
conduct of such Company's business, except as otherwise permitted under Section
6.6 (relating to Intercompany Loans and Leases).
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5.8 Further Assurances.
(a) General. From time to time the Borrower shall
execute and deliver, or shall cause to be executed and delivered, such
additional instruments, certificates or documents, and shall take all such
additional actions, as may be necessary for the purposes of implementing or
effectuating the provisions of this Agreement and the other Loan Documents or
Intercompany Loan Documents, or of more fully perfecting or renewing the Senior
Lender's rights with respect to the Collateral pursuant hereto or thereto.
Upon the exercise by the Senior Lender of any power, right, privilege or remedy
pursuant to this Agreement or any other Loan Document which exercise requires
any consent, approval, registration, qualification or authorization of any
Person, including any Governmental Authority, the Borrower shall, at its
expense, execute and deliver, or shall cause the execution and delivery by the
other Companies, and shall use all reasonable efforts to cause the execution
and delivery by any other Governmental Authority or other Person of, all
applications, certifications, instruments and other documents that the Senior
Lender may require to be obtained for such consent, approval, registration,
qualification or authorization.
(b) Mortgage Notes. Without limiting the generality of
the foregoing, the Borrower shall, as more fully set out in the Mortgage Note
Assignment, assign to the Collateral Agent, as security for the Obligations
other than Obligations under the Environmental Indemnity, all of the Borrower's
right, title and interest in and to all Mortgage Notes, all Direct Note
Collateral and all Borrower's Residual General Intangibles, in each case
arising on account of any sale or other disposition of a Hotel Property after
the Third Closing (except Excluded Assets), and such Mortgage Notes, Direct
Note Collateral and Borrower's Residual General Intangibles shall constitute
Collateral for all purposes hereof. The Borrower shall deliver to the
Collateral Agent copies of all documents and instruments related to such
Collateral upon the receipt of such documents or instruments by the Borrower or
any of the other Companies.
(c) Additional Collateral.
(i) If: (A) the Borrower acquires any right, title or interest in
any Asset other than an Excluded Asset, which Asset does not
upon acquisition become subject to the Required Liens, or any
Asset other than an Excluded Intercompany Asset is acquired by
a non-Borrower Company that has granted Intercompany Liens,
which Asset does not upon acquisition become subject to an
Intercompany Lien, in each case by virtue of an after-acquired
property clause in any then existing Security Document or
Intercompany Security Document, (B) the Borrower prepays in
full any Prior Mortgage Note applicable to any Hotel Property
owned by the Companies and the holder of which Prior Mortgage
Note had not previously consented to the granting of the
Required Liens and/or Intercompany Liens (regardless of
whether such holder has previously consented to the granting
of second liens to the Collateral Agent for the benefit of the
Senior Lender), or (C) the Senior Lender for any reason
elects, in its sole and absolute discretion, to require that
any Asset, that theretofore constituted an Excluded
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Asset or an Excluded Intercompany Asset solely at the election
of the Senior Lender, become a part of the Collateral or the
Intercompany Collateral, then the Borrower shall and/or shall
cause each other Company with any right, title or interest in
such Asset to execute, acknowledge and deliver to the
Collateral Agent such additional Security Documents or
Intercompany Security Documents as are necessary to grant and
perfect the Required Lien or Intercompany Lien with respect to
such Asset, which Security Documents or Intercompany Security
Documents shall be in all material respects consistent in form
and substance with the Security Documents or Intercompany
Security Documents theretofore executed.
(ii) If the Borrower or any of the Companies shall acquire one
hundred percent (100%) of the ownership or operation of the
Hotel Asset located in Milwaukee, Wisconsin, then if requested
by the Senior Lender, the Borrower will cooperate with the
Senior Lender to restructure the Moorland Debt so that the
Indirect Hotel Property located in Milwaukee, Wisconsin shall
be direct Collateral for the Loans or, if the ownership is
acquired by a Company other than the Borrower, direct
Intercompany Collateral for the Intercompany Loans, in each
case in substitution for the currently existing pledge of the
Moorland Debt. The Borrower's obligations under this
paragraph (ii) shall be subject to the rights of any and all
other lenders holding prior Liens secured by the Hotel
Property and to the Companies' ability to grant the Required
Liens and the Intercompany Liens in the Asset in compliance
with the terms of the Companies agreements with such third
party lenders.
(d) Management Contracts. If at any time or from time to
time any of the Companies enters into a new Management Contract, including
replacing an existing Management Contract but excluding any Management Contract
for a Hotel Property that is at the time in question an Excluded Asset, then
the Borrower shall cause each Management Company that is a party thereto to
execute, acknowledge and deliver a Management Subordination Agreement.
5.9 Cash Management System. The Borrower shall, and shall cause
each of the other Companies and Management Companies to deposit all receipts,
regardless of the form in which they are received, but excluding all receipts
that constitute Excluded Assets or Excluded Intercompany Assets and all
receipts from the operation of Hotel Property that is subject to a Prior
Mortgage Note and that are required by the holder thereof to be deposited in an
account other than the Cash Management Account, in the Cash Management Accounts
and otherwise to comply with the terms and conditions of the Cash Management
System described in the Cash Management Memorandum, subject to the provisions
of Section 6.16 of this Agreement. Notwithstanding the foregoing, certain
accounts not in the Cash Management System on the Third Closing Date are to be
included in such system after the Third Closing Date as provided in Section
6.16 of this Agreement.
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5.10 Action Under Hazardous Materials Laws.
(a) Upon the Borrower's obtaining knowledge of (i) the
presence on any Real Property of any Hazardous Materials in violation of
applicable Hazardous Materials Laws, (ii) the conduct at such Real Property of
Hazardous Materials Activity in violation of applicable Hazardous Materials
Laws or (iii) the existence of any environmental liability on the part of the
Borrower or any of the other Companies under applicable Hazardous Material Laws
with respect to any Real Property (any of the foregoing items (i), (ii), and
(iii), an "Environmental Situation"), which Environmental Situation, in the
reasonable business judgment of the Borrower, is likely to result in a Material
Adverse Change, the Borrower shall, at its sole cost and expense (A) promptly
notify the Senior Lender, (B) take all material actions as shall be required by
applicable Hazardous Materials Laws and (C) provide the Senior Lender upon its
request from time to time with one or more reports as to the status of any such
remediation efforts.
(b) After reasonable notice to the Borrower, whether or
not a Default or an Event of Default shall have occurred, the Senior Lender
may, in its discretion for the purpose of assessing and ensuring the value of
the Real Property, obtain one or more environmental assessments or audits of
the Real Property prepared by a hydrogeologist, an independent engineer or
other qualified consultant or expert approved by the Senior Lender to evaluate
or confirm (i) whether any Hazardous Materials are present in the soil or water
at any Real Property and (ii) whether the use and operation of Real Property
complies with all Hazardous Materials Laws. Environmental assessments may
include detailed visual inspections of any Real Property, including any and all
storage areas, storage tanks, drains, dry wells and leaching areas, the taking
of soil samples, surface water samples and ground water samples and any other
investigations or analyses as the Senior Lender deems appropriate. With
respect to any parcel of Real Property and all related Improvements, the first
such environmental assessment requested by the Senior Lender after the Third
Closing shall be obtained at the sole cost and expense of the Borrower. Any
environmental assessments subsequently requested by the Senior Lender with
respect to such parcel of Real Property shall be at the sole cost and expense
of the Senior Lender. However, if (i) at the time of any such request, a
Default or Event of Default shall have occurred and shall not have been cured,
or (ii) such request is the result of an Environmental Situation that shall
have come to the attention of the Senior Lender, then any such environmental
assessments subsequently requested shall be obtained at the sole cost and
expense of the Borrower. Each environmental assessment obtained pursuant to
this subsection 5.10(b) at the cost and expense of the Borrower shall be
prepared by the consultant or expert that prepared the environmental assessment
of that Real Property provided by the Borrower prior to the Third Closing and
to the extent practicable shall take the from of a update of the original
environmental assessment. (Any reference to the Senior Lender in this
subsection 5.10(b) shall be deemed to be a reference to the Senior Lenders
collectively if at the applicable time there is more than one Senior Lender.)
5.11 Asbestos Monitoring. The Borrower shall comply with all of
the O&M Procedures set forth in the O&M Manuals, and with all applicable laws,
rules and regulations
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relating to the presence of asbestos or asbestos-containing materials ("ACM")
on any of the Hotel Properties.
5.12 Appraisals and Marketing Studies. The Collateral Agent shall
from time to time after the Third Closing, at the request of the Senior Lender,
arrange for an Appraisal or market study of any Hotel Property and/or Indirect
Hotel Property or a market study of the business of any Hotel Property and/or
Indirect Hotel Property. In connection with any such Appraisal or any such
market study, the Borrower shall furnish or cause to be furnished to the Person
conducting such Appraisal or market study in a timely manner such information
as is necessary to enable such Person to conduct and complete such Appraisal or
market study. With respect to each Hotel Property and each Indirect Hotel
Property, the first such Appraisal and, with respect to the businesses of such
Hotel Property or such Indirect Hotel Property, the first such market study,
requested by the Senior Lender after the Third Closing shall be obtained at the
sole cost and expense of the Borrower. Any Appraisal requested after the first
such requested Appraisal, and any market study requested after the first such
requested market study, with respect to such Hotel Property or Indirect Hotel
Property, shall be at the sole cost and expense of the Senior Lender. However,
if at the time of any such request any Material Adverse Effect shall have
occurred and be continuing with respect to such Hotel Property or Indirect
Hotel Property or a Default or Event of Default shall have occurred and shall
not have been cured, then any such subsequently requested Appraisal or market
study shall be obtained at the sole cost and expense of the Borrower. Each
Appraisal or market study obtained pursuant to this Section 5.12 at the cost
and expense of the Borrower shall be prepared by the consultant or expert that
prepared the Appraisal or market study of that Hotel Property or Indirect
Property provided by the Borrower to the Senior Lender in connection with the
Third Closing, if any, and may, if acceptable to the Senior Lender in its sole
discretion, take the form of an update of that original Appraisal or market
study. (Any reference to the Senior Lender in this Section 5.12 shall be
deemed to be a reference to the Senior Lenders collectively if at the
applicable time there is more than one Senior Lender.)
5.13 Termination of Material Licenses and Material Agreements.
Except in connection with an Asset Sale pursuant to and in accordance with the
provisions of Section 6.10 (relating to Sales of Assets) or an Excluded
Disposition, the Borrower shall, and shall cause each of the other Companies
to, keep in full force and effect and not terminate, surrender or amend any
Material License or Material Agreement (other than any Intercompany Loan
Document or Intercompany Lease, which items are governed by Section 6.6), the
loss, termination, surrender or amendment of which would, after giving effect
to any replacement license or agreement then or theretofore obtained, result in
a Material Adverse Effect.
5.14 Covenant regarding Second Liens. Within sixty (60) days after
the Third Closing Date, the Borrower shall use its best efforts to obtain a
second mortgage Lien in the highest amount practical as a Required Lien on the
Park Central Hotel, Dallas, Texas, and shall use its best efforts to execute
and deliver all documentation in recordable form requested by the Senior Lender
to grant to the Senior Lender such Lien. The Borrower shall also use its best
efforts to obtain, with respect to the Best Western Airport Hotel, Albuquerque,
New Mexico, the ground lessor's consent to increase the Required Lien amount
with respect to a
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second mortgage Lien on such hotel, and shall satisfy the first mortgage on
Embassy Suites, Phoenix, Arizona, which first mortgage amount shall be
deposited as additional security for the Loans with the Senior Lender until
payment can be made.
ARTICLE 6.
Negative Covenants
The Borrower covenants and agrees that until payment in full of all
principal of and interest on the Loans and all costs and expenses payable by
the Borrower pursuant to Section 10.1 (relating to certain expenses of the
Third Closing and certain other expenses), the Borrower shall, and shall cause
each of the other Companies to, perform each and all of the following covenants
applicable to it unless such compliance shall be waived by the Senior Lender:
6.1 Indebtedness. The Borrower shall not, and shall not permit
any of the other Companies to, create, incur, assume or become or remain liable
in respect of any Indebtedness, except the following (collectively, the
"Permitted Indebtedness"):
(a) Indebtedness to the Senior Lender hereunder;
(b) Indebtedness consisting of Intercompany Loans.
However, at all times such Intercompany Loans shall be evidenced by
Intercompany Notes and all right, title and interest of the obligee of each
such Intercompany Note in and to such note and the related Intercompany
Collateral shall have been assigned to the Collateral Agent, for the benefit of
the Senior Lender, as security for the Obligations (other than Obligations
under the Environmental Indemnity);
(c) Current liabilities (other than for borrowed money)
incurred in the ordinary course of the Companies' respective businesses and in
accordance with customary trade practices;
(d) Indebtedness, if any, of the Companies existing as of
the Third Closing and referred to in Schedule 3.8(a), in not more than the
respective unpaid principal amounts thereof specified in such Schedule and all
renewals, extensions or refinancings of any such Indebtedness in an amount not
exceeding the lesser of (i) the principal amount thereof outstanding as of the
Third Closing or (ii) the principal amount thereof remaining unpaid immediately
prior to such renewal, extension or refinancing, together with, in each
instance, Permitted Closing Expenses incurred in connection with the renewal,
extension or refinancing (and any Indebtedness permitted under this
subparagraph (d) may be recourse to the extent the same is recourse on the date
hereof);
(e) Indebtedness of the Companies in respect of
Contingent Obligations to the extent permitted under Section 6.4, or in respect
of any Operating Partnership Guaranty;
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(f) Indebtedness of a Partnership to SLT, SLC, a
Subsidiary, incurred pursuant to Section 7.3 of the partnership agreement of
the Realty Partnership or Section 7.3 of the partnership agreement for the
Operating Partnership. However, (i) at the election of the Senior Lender such
Indebtedness must be evidenced by an Intercompany Note and the other conditions
set forth in subsection 6.1(b) (relating to Intercompany Loans) must be
satisfied with respect to such Indebtedness, and (ii) at the time such
Indebtedness is incurred, the general partner to which such Indebtedness is
owed shall execute a subordination agreement, in form reasonably acceptable to
the Senior Lender, subordinating such Indebtedness to the Loans;
(g) Non-recourse Indebtedness incurred or assumed by the
Partnerships in connection with the acquisition of Hotel Properties or other
Assets after the Third Closing Date in accordance with the provisions of
Section 6.5 or a non-recourse refinancing of such Indebtedness in a principal
amount not exceeding the amount being refinanced;
(h) With respect to a Hotel Property or a direct or
indirect interest therein acquired by the Borrower or any other Company as
permitted by, and subject to the conditions of, Section 6.5, any non-recourse
Indebtedness to which such Hotel Property or a direct or indirect interest
therein is subject to at the time of such acquisition or a non-recourse
refinancing of such Indebtedness in a principal amount not exceeding the amount
being refinanced;
(i) Indebtedness, which may be recourse Indebtedness,
incurred in connection with the Acquisition Credit Facility or the Merrill
Loans, and additional loans similar to the Merrill Loans made by the originator
of the Merrill Loans up to an aggregate amount of $50,000,000 after the
expiration of the Acquisition Loan Facility, as provided in Schedule 1.7.;
(j) Indebtedness of the Companies secured as permitted
by, and subject to the provisions of, subsections 6.2(e) and 6.2(h) (which
Section 6.2(h) obligations may be recourse);
(k) Non-recourse Indebtedness of the Companies secured as
permitted by, and subject to the provisions of, subsection 6.2(i);
(l) Indebtedness of the Companies (which may be
unsecured) incurred to Starwood or any Affiliate of Starwood concurrently with
the execution and delivery of this Agreement in connection with the
cancellation of the Warrants, and all extensions or renewals of the same.
However, the maximum principal amount of such Indebtedness shall not exceed
$800,000;
(m) subject to the Borrower's and the other Companies'
prior compliance with the provisions of paragraph (i) of subsection 1.9(b) in
connection with the application of the proceeds of any public issuance of debt
or equity securities, Indebtedness of the Partnerships to Starwood upon
consummation of the Reorganization and which are payable
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only if (i) SLT and SLC consummate a public offering of shares of beneficial
interest of SLT and shares of the common stock of SLC within eighteen (18)
months following the consummation of the Reorganization and (ii) such offering
results in the receipt by SLT and SLC of gross proceeds of not less than
$150,000,000 and as otherwise described in the Reorganization Proxy Statement;
and
(n) obligations under ground leases, operating leases and
Capital Leases which are not financing devices.
6.2 Liens. The Borrower shall not, and shall not permit any of
the other Companies to, directly or indirectly, create, incur, assume or suffer
to exist, any Lien, or any agreement to give or refrain from giving any Lien,
with respect to any Asset now owned or hereafter acquired by the Borrower or
any of the other Companies, except the following (collectively, the "Permitted
Liens"):
(a) Any Lien securing the Obligations (other than
Obligations under the Environmental Indemnity), including the Required Liens;
(b) Any Lien securing an Intercompany Loan or a
Subsidiary Guaranty, including the Intercompany Liens, but only if all right,
title and interest of the lienholder in and to such Lien shall have been
assigned to the Collateral Agent, for the benefit of the Senior Lender, as
security for the Obligations (other than Obligations under the Environmental
Indemnity);
(c) The Liens existing as of the Third Closing referred
to in Schedule 3.8(b) as delivered at the Third Closing, or any Liens securing
any renewal, extension or refinancing of the Indebtedness secured by any such
Lien(s), but only if (i) such renewed, extended or refinanced Indebtedness,
which may include revolving debt, is in an amount not exceeding the lesser of
(A) the principal amount thereof secured as of the Third Closing Date or (B)
the principal amount thereof remaining unpaid immediately prior to such
renewal, extension or refinancing, in each case together with Permitted Closing
Expenses incurred in connection with the renewal, extension or refinancing; and
(ii) the Lien(s) securing such renewed, extended or refinanced Indebtedness,
which may include revolving debt, are confined to the Assets originally
encumbered or replacements thereof (or, in the case of renewed, extended or
refinanced Prior Mortgage Note Indebtedness existing as of the Third Closing
Date, the applicable Hotel Property (together with that Hotel Property's
"Leases," "Hotel Occupancy Leases" and "Rents" as each such term is defined in
the Absolute Assignment of Leases, if any, for the Hotel Property) and the
Companies' Cash and Cash Equivalents contained from time to time solely in the
Hotel Specific Accounts relating to the applicable Hotel Property). In any
event, the Required Liens and Intercompany Liens, as applicable, shall be
subordinate to any Lien securing any such renewed, extended or refinanced
Indebtedness if and to the extent that the Required Liens and/or the
Intercompany Liens, as applicable, were subordinate to the Lien(s) securing the
renewed, extended or refinanced Indebtedness prior to such renewal, extension
or refinancing. However, in the case of renewed, extended or refinanced Prior
Mortgage Note Indebtedness existing as of the Third Closing Date, the Required
Liens
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and/or the Intercompany Liens, as applicable, with respect to the applicable
Hotel Property (together with the applicable Leases, Hotel Occupancy Leases and
Rents and the Hotel Specific Accounts) shall be subordinate to any Liens(s)
that secure such renewed, extended or refinanced Prior Mortgage Note
Indebtedness and that are limited solely to the applicable Hotel Property,
including that Hotel Property's Leases, Hotel Occupancy Leases, Rents and Hotel
Specific Accounts. It is the intent of the foregoing provisions that the
Borrower shall have the right to grant to the holder of the renewed, extended
or refinanced Prior Mortgage Note Indebtedness existing as of the Third Closing
Date such security therefor as is customarily granted to institutional mortgage
lenders by owners and operators of hotel properties.
(d) Liens for Taxes not yet delinquent or subject to
interest or penalty or which are being contested in good faith as provided in
Section 5.6 (relating to the payment of certain taxes); Liens in connection
with workmen's compensation, unemployment insurance or other social security
obligations; Liens securing the performance of bids, tenders, contracts, surety
and appeal bonds; Liens to secure progress or partial payments and other Liens
of like nature arising in the ordinary course of business of the Companies;
mechanics', workmen's, materialmen's or other like Liens arising in the
ordinary course of business of the Companies in respect of obligations which
are not yet overdue or are being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted, and enforcement
thereof is being stayed and with respect to which such Company shall have set
aside on its books such reserves, if any, as are required by GAAP and deemed
appropriate by such Company and its independent public accountants; Liens of or
resulting from any judgment or award the time for the appeal or the hearing of
which shall not have expired or in respect of which any of the Companies shall
at any time in good faith be prosecuting an appeal or proceeding for a review
and in respect of which a stay of execution pending such appeal or proceeding
for review shall have been secured; as to Excluded Cash, the Liens described in
clause (c) of the definition thereof; and other Liens incidental to the
ordinary course of business of the Companies or to the ownership of their
respective Assets (including survey exceptions, easements or reservations or
rights of others for rights of way, utilities and other similar purposes, or
zoning or other restrictions as to the use of real property), which were not
incurred in connection with the borrowing of money or the obtaining of credit
and which do not materially detract from the value of the Assets of the
Companies or materially and adversely affect the use thereof in the operation
of the Companies' respective businesses;
(e) All Liens permitted under Section 9(b)(1) of the
Mortgage Note Assignment;
(f) All Liens granted in connection with the Acquisition
Credit Facility or the Merrill Loans and additional loans similar to the
Merrill Loans made by the originator of the Merrill Loans up to an aggregate
$50,000,000 after the expiration of the Acquisition Loan Facility as provided
in Schedule 1.7;
(g) Liens referred to as Permitted Liens in paragraph
(ii) of subsection 6.5(f) or otherwise permitted under Section 6.5;
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(h) Purchase money Liens, including Capital Leases the
principal purpose of which is financing, created in respect of personal
property or fixtures acquired by any of the Companies after the date hereof or
existing in respect of personal property or fixtures so acquired at the time of
acquisition thereof. However, (i) each such Lien shall at all times be
confined solely to the item or items of property so acquired and (ii) the
aggregate outstanding principal amount of Indebtedness secured by all such
Liens shall at no time exceed the greater of $2,000,000 or one percent (1.00%)
of the Aggregate Asset Value. However, if the aggregate principal amount of
such Indebtedness is in excess of $2,000,000 with respect to any subsequent
expenditures of $50,000 or more the Borrower shall use its best efforts to
obtain a recognition agreement from such lienholder for the benefit of Senior
Lender;
(i) Liens of Mortgages or similar arrangements granted,
given or incurred by a Company or Companies after the date hereof on one or
more Hotel Properties to secure any refinancing of any Acquisition Loan or
Merrill Loan up to the outstanding principal balance of such loan immediately
prior to such refinancing. However,
(A) in connection with any refinancing, upon the
closing of such refinancing with respect to which the Senior Lender
releases a Lien, an amount equal to the Minimum Release Price
applicable to the transaction, with respect to such loan in connection
with such Hotel Property or Properties shall have been paid by the
Borrower to the Senior Lender in amortization of the Loans; and
(B) the Borrower shall have furnished or caused
to be furnished to the Senior Lender, copies of the agreements,
instruments and other documents evidencing such Indebtedness and/or
creating any such Lien or Liens, the terms of which documents, when
read as a whole, be at least as favorable to the Borrower as the terms
of the corresponding Security Documents or the security documents
delivered in connection with any Merrill Loan.
(j) Liens of lessors which have been granted by any of
the Companies in connection with the acquisition of leasehold estates relating
to a Hotel Property, provided such leasehold interest and the leases which
create those interests are not principally financings.
6.3 Investments. The Borrower shall not, and shall not permit any
of the other Companies to, directly or indirectly, make or permit to remain
outstanding any Investment in any Person unless such Investment is one of the
following and unless the Collateral Agent holds the Required Lien thereon (or
if such Investment is held by any of the other Companies, the Borrower has an
Intercompany Lien thereon, which has been assigned to the Collateral Agent, for
the benefit of the Senior Lender, as security for the Obligations (other than
Obligations under the Environmental Indemnity)) (collectively, the "Permitted
Investments"):
(a) extensions of trade credit by the Companies in the
ordinary course of business in the operation of the Hotel Properties, but
excluding any Intercompany Loans;
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(b) the Investments outstanding as of the Third Closing
Date, if any, referred to in Schedule 3.8(c);
(c) marketable direct obligations of the United States of
America or of any department or agency thereof if backed by the full faith and
credit of the United States of America, maturing not more than one year from
the date of acquisition by any of the Companies thereof;
(d) repurchase obligations with respect to any security
described in subsection 6.3(c) above, provided that the long term unsecured
debt obligations, or the short term deposit or debt obligations, of the party
agreeing to repurchase such obligations are rated in the highest rating
category of each of Standard & Poor's Corporation and Moody's Investors
Service, Inc.;
(e) securities bearing interest or sold at a discount for
a term of no more than one year issued by any corporation incorporated under
the laws of the United States of America or any state thereof, which securities
have credit ratings from Standard & Poor's Corporation and Moody's Investors
Service, Inc. of AAA and Aaa, respectively, at the time of such investment or
contractual commitment providing for such investment;
(f) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof)
having the highest credit ratings from Standard & Poor's Corporation at the
time of such investment;
(g) certificates of deposit, money market deposits,
bankers' acceptances or other similar types of investments maturing not more
than one year from the date of acquisition thereof and evidencing direct
obligations of any commercial bank or trust company organized and operating in
the United States or any state thereof or the District of Columbia, the debt
securities of which are rated within the two (2) highest grades by either
Standard & Poor's Corporation or Moody's Investors Service, Inc.;
(h) Intercompany Loans permitted by subsection 6.1(b)
(relating to Indebtedness in connection with Intercompany Loans);
(i) Investments acquired in connection with Asset
acquisitions permitted by Section 6.5 or otherwise permitted by this Agreement
and Asset Sales permitted by Section 6.10;
(j) loans or advances in the ordinary course of the
Companies' businesses to trustees, directors, officers and employees for
expenses (including moving expenses relating to a transfer) incidental to
carrying on the respective businesses of the Companies. However, the aggregate
principal amount of all such loans and advances outstanding shall at no time
exceed $250,000;
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(k) acquisitions by one Company of the securities of
another Company (including, but not limited to, shares of beneficial interest,
shares of capital stock, membership interests and interests in the Partnerships
and the Gaming Partnership subject to compliance with each of the conditions of
Section 4 in the case of the Gaming Partnership) to the extent contemplated by
the Restructuring Plan;
(l) investments contributed to the Partnerships by the
Starwood Partners pursuant to the Starwood Reorganization;
(m) any investment in or origination of a Mortgage Note
that is secured by a mortgage or mortgages encumbering one or more hotel
properties or Mixed-Use Properties provided (i) no payment default has occurred
under such Mortgage Note during the preceding twelve (12) month period; (ii)
the hotel property or Mixed-Use Properties that are encumbered by the mortgage
conform to the financial characteristics set forth in Section 6.5(f)(i)(A);
(iii) the Borrower or any applicable Company shall grant a Required Lien or an
Intercompany Lien on such Mortgage Note; (iv) the Senior Lender shall approve
the mortgage loan servicer in connection with said Mortgage Note or, if the
Borrower shall service the Mortgage Note itself, the Borrower shall service
such Mortgage Note under standards approved by the Senior Lender; (v) the
Mortgage Note together with all other such Mortgage Notes so acquired which are
not first priority Liens shall not exceed ten (10%) percent of the Aggregate
Asset Value. However, if (i) and (ii) above have not been complied with with
respect to a particular Mortgage Note which the Borrower or any of the
Companies intends to acquire, then the Borrower may purchase such Mortgage Note
if the Borrower or any of the Companies can demonstrate to the reasonable
satisfaction of the Senior Lender that the price of the Mortgage Note is
adequately discounted to reflect the value as reasonably determined by the
Senior Lender provided that the aggregate values of all such Mortgage Notes
held by the Borrower and the Companies at any time shall not exceed ten percent
(10%) of the Aggregate Asset Value. The Mixed-Use Property constraints
contained in Section 5.3(b) shall apply with respect to investments in Mortgage
Notes secured by Mixed-Use Properties.
(n) investments permitted by subsection 6.5(h).
6.4 Contingent Obligations. The Borrower will not, and will not
permit any of the other Companies to, directly or indirectly, create or become
or be liable with respect to any Contingent Obligation, except:
(a) Contingent Obligations existing as of the Third
Closing Date and referred to on Schedule 3.8(d) as delivered at the Third
Closing;
(b) Any renewal, extension or refinancing of any
Contingent Obligation described in subsection 6.4(a) in an amount not exceeding
the lesser of (A) the amount thereof outstanding as of the Third Closing or (B)
the amount thereof remaining unpaid immediately prior to such renewal,
extension or refinancing, together with, in each instance, Permitted Closing
Expenses incurred in respect of such renewal, extension or refinancing;
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(c) Contingent Obligations incurred in connection with
Asset acquisitions permitted by Section 6.5 or Asset Sales permitted by Section
6.10;
(d) Contingent Obligations incurred as of the Third
Closing pursuant to the Partnerships' acquisition of the Starwood Assets;
(e) Any renewal, extension or refinancing of any
Contingent Obligation described in subsection 6.4(d) in an amount that together
with the amount of all other Contingent Obligations described in subsection
6.4(d) then outstanding does not exceed the lesser of (A) the aggregate amount
of Contingent Obligations described in subsection 6.4(d) outstanding as of the
Third Closing or (B) the aggregate amount of Contingent Obligations described
in subsection 6.4(d) remaining unpaid immediately prior to such renewal,
extension or refinancing, together with, in each instance, Permitted Closing
Expenses incurred in respect of such renewal, extension or refinancing;
(f) Any guaranties of the Companies in connection with
any Merrill Loan; and
(g) the Contingent Obligation given in connection with
the Harvey Notes.
6.5 Acquisitions. The Borrower will not, and will not permit any
of the other Companies to, directly or indirectly, acquire (except in the
ordinary course of business of the Companies) the Assets of any Person, except:
(a) Assets acquired pursuant to the making of Capital
Expenditures to the extent permitted by Section 6.8;
(b) acquisitions of Assets of some or all of SLC's
Subsidiaries and/or some or all of the Subsidiaries of the Operating
Partnership, in each case by the Borrower, by the Operating Partnership, by
another Subsidiary of SLC or by SLC;
(c) Assets acquired from the Starwood Partners pursuant
to the Starwood Reorganization;
(d) Assets acquired pursuant to the Borrower's or SLT's
exercise of any remedy under any Mortgage Note or the consummation of any deed
in lieu of foreclosure transaction;
(e) Assets acquired with the proceeds of an Acquisition
Loan from the Senior Lender or the proceeds of a Merrill Loan;
(f) Assets (other than those acquired with the proceeds
of an Acquisition Loan or a Merrill Loan referred to in subsection 6.5(e)) that
make up, are included in or acquired as a part of a Hotel Property or Mortgage
Note if as to any such Hotel Property (or any Hotel Property relating to any
Mortgage Note) each and all of the following conditions are satisfied:
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(i) (A) As of the date the definitive agreement to
acquire those Assets is signed and as of the date of
the closing thereunder, the Hotel Property's EBITDA
(defined for this purpose as income from operations
after deducting all expenses (including management
expenses equal to the greater of the actual amount of
such expenses and an amount equal to four percent
(4.00%) of total gross revenues) other than interest,
income taxes, depreciation and amortization and after
elimination of all extraordinary items) for the
immediately preceding 12 months is equal to or
greater than 1.2 times the sum of:
(1) the acquired Hotel Property's annualized debt
service (defined for this purpose as
principal and interest scheduled to be paid
with respect to the 12-month period beginning
on the scheduled acquisition date on any debt
(other than the Loans) to which that property
will be subject after the acquisition, with
the interest to be paid calculated by
dividing the total interest that will be
payable with respect to the five-year period
beginning on the scheduled acquisition date
and dividing that amount by five), and
(2) three percent (3.00%) of the property's total
gross revenues from operations for the
12-month period ended on the acquisition
date.
(B) Notwithstanding the foregoing subparagraph
(A) of this subsection 6.5(f), if the Borrower wishes
to acquire Assets that make up, are included in or
are to be acquired as a part of a Hotel Property and
(1) such Hotel Property's EBITDA for the immediately
preceding 12 months does not equal or exceed the
amount provided in such subparagraph (A) (an
"Under-Performing Asset"), (2) the outstanding
principal amounts of the Loans then outstanding have
been reduced to an aggregate amount equal to fifty
percent (50%) or less of the Aggregate Asset Value,
and (3) the EBITDA of all of the Companies Assets on
a combined basis including the Hotel Property
intended to be acquired shall comply with the
requirements set forth in subparagraph (A) above,
then, for purposes of determining whether the
Borrower's acquisition of such Hotel Property would
be permitted by the terms of this Section 6.5, the
condition set forth in such subparagraph (A) shall
nevertheless be deemed to have been complied with if
the Borrower can demonstrate to the reasonable
satisfaction of the Senior Lender that it is
expected, based on pro forma financial information,
that the EBITDA (as defined above) of the Hotel
Property for the immediately ensuing 12 months will
equal or exceed the amount provided in subparagraph
(A) (the "Earnings Projection"). The Borrower shall
acquire no more than two (2) Hotel Properties subject
to an Earnings Projection. However, if the EBITDA of
an acquired Hotel Property subject to an Earnings
Projection equals or exceeds the Earnings Projection
at any time before or after the first
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anniversary of such acquisition, the Borrower may
thereafter acquire another such Hotel Property subject
to an Earnings Projection such that the Company shall
own no more than two (2) Hotel Properties at any time
each of which either has not yet met its Earnings
Projection or has failed to meet its Earnings
Projection. In no event, however, shall the Company
acquire Hotel Properties which are Under-Performing
assets if following such acquisition, the applicable
Asset values set forth on the Aggregate Asset Value
Schedule 1.9 for all such Under-Performing Assets
(including the proposed acquisition) would equal or
exceed $15,000,000. However, if at the time of any
proposed acquisition of an Under-Performing Asset (1)
the outstanding principal amounts of the Loans then
outstanding have been reduced to an aggregate amount
equal to fifty percent (50%) or less of the Aggregate
Asset Value and (2) the ratio of (a)(i) Available Cash
plus (b) Capital Expenditures for the prior four (4)
consecutive fiscal quarters of the Borrower to the sum
of (b)(x) Cash Interest, (y) three percent (3%) of
total gross revenues from Hotel Properties and (z) one
percent (1%) of total gross revenue from casinos
during such period is at least 2:1, then such Hotel
Property may be acquired not subject to an Earnings
Projection so long as the value of all such Hotel
Properties so acquired (including any other Hotel
Properties acquired subject to an Earnings Projection
which has not yet been met) shall not at any time
exceed an amount equal to twenty percent (20%) of the
Aggregate Asset Value. Notwithstanding the foregoing,
the 2:1 coverage test will not be deemed satisfied if,
as a result of the acquisition of an Under-Performing
Asset otherwise, permitted the 2:1 coverage test would
not continue to be met following such acquisition.
(ii) The Required Liens and the Intercompany Liens shall
be granted by the Borrower in each Hotel Property or
Mortgage Note acquired by the Borrower as permitted
by this subsection 6.5(f). However, if and to the
extent that any such Hotel Property or Mortgage Note
is so acquired subject to any Indebtedness and the
consent of the holder of that Indebtedness is
required to grant the Required Liens and the
Intercompany Liens in that Hotel Property or Mortgage
Note, the Borrower shall use all reasonable efforts
to obtain such consent. If such consent is obtained,
the Borrower shall grant the Required Liens and the
Intercompany Liens in that Hotel Property or Mortgage
Note; if such consent is not obtained, that Hotel
Property or Mortgage Note shall constitute an
Excluded Asset and Excluded Intercompany Asset. All
such Required Liens and Intercompany Liens shall be
subordinate to the Liens granted to secure the
repayment of any Indebtedness described above and to
all extensions, renewals or refinancings, if any, of
such Indebtedness the principal amounts of which do
not exceed the then outstanding principal balances
being extended, renewed or refinanced. All such
Indebtedness or permitted refinancing thereof shall
constitute
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Permitted Indebtedness and all Liens, if any, securing such
Indebtedness or permitted refinancing shall constitute
Permitted Liens.
The Borrower shall not be deemed to have fulfilled the foregoing
conditions until the Collateral Agent and its counsel have received the
necessary due diligence materials to review in a reasonable time before the
date upon which the requested closing of the acquisition is to occur;
(g) Acquisitions of Assets described in subsection 6.3(m).
Mortgage Notes originated pursuant to subsection 6.3(m) that are other than
Mortgage Notes received in connection with a sale of Assets by the Companies
may be financed or refinanced and such financing or refinancing may be secured
by Liens on such Mortgage Notes; and
(h) Assets constituting an interest in a business or property in a
hotel-related field, including any hotel management company or hotel franchisor
or an entity that owns Hotel Properties (where the ownership of the Companies
in such entity is less than or equal to sixty-six percent (66%)). However,
the terms of any such acquisition shall not include (i) any contingent
obligations on the part of any of the Companies after the closing of such
acquisition; or (ii) any obligation on the part of any of the Companies to
make additional equity investments or meet capital calls in any Person after
such acquisition, if deducting the present value of the aggregate of such
obligations described in clauses (i) and (ii) above would result in an Adjusted
Net Worth which is less than the minimum Adjusted Net Worth required in Section
7.1. In addition, such acquisition shall be subject to the prior consent of
the Senior Lender based on, among other things, its sole but good faith
determination as to whether such acquisition would have a Material Adverse
Effect on any of the Companies, its business operations or income or on
Adjusted Net Worth, and such determination may take into account, without
limitation, whether such acquisition would constitute an evasion of any of the
other requirements or limitations set forth in this Article VI. Subject to the
foregoing, acquisitions permitted hereunder may be acquired subject to
non-recourse secured indebtedness which indebtedness may be refinanced
non-recourse from time to time.
6.6 Intercompany Loans and Leases, etc. The Borrower shall not, and shall
not permit any of the other Companies to, effect any waiver, amendment or
other modification to, or any restatement or termination of, any Intercompany
Loan Document or Intercompany Lease, or effect any accrual, deferral or
forgiveness of any obligation owing to the Borrower by any of the other
Companies under any Intercompany Loan or Intercompany Lease. Notwithstanding
the foregoing:
(a) if and to the extent that from time to time, the gross revenues
less the operating and other expenses of any obligor under any Intercompany
Lease or Intercompany Note as then in effect shall be insufficient to pay all
obligations as and when due thereunder, each such obligor and obligee shall be
permitted to accrue or defer any such deficiency; and
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(b) Intercompany Leases may be terminated in connection
with the sale of a Hotel Property (or an Excluded Disposition) pursuant to
Section 6.10 (relating to Sale of Assets); and
(c) if the Borrower so elects, the aggregate principal
amount of the Intercompany Loans owing to the Borrower may be reduced (whether
through amendment of one or more of said notes, waiver, forbearance,
extinguishment or other form of termination or otherwise). However, (i) no
Operating Partnership Guaranty shall be deemed amended, extinguished, decreased
or in any way affected by any such reduction in the Intercompany Loans; and
(ii) the Borrower shall not agree to any such reduction of the Intercompany
Loans other than in connection with federal and state income tax requirements
applicable to the maintenance of SLT's status under income tax laws as a real
estate investment trust; and the Borrower shall comply as to the Moorland Debt
with the provisions of paragraph (ii) of Subsection 5.8(c); and
(d) none of the Companies shall be precluded from making
advances or loans to any one or more other Companies in the ordinary course of
business to the extent permitted under subsection 6.1(b) or to fund deficits
under 6.6(a) or an acquisition permitted under Section 6.5.
6.7 Restricted Payments. The Borrower shall not, and shall not
permit any of SLT, the Operating Partnership or SLC to, directly or indirectly
declare, order, pay or make any Restricted Payment, or set aside any sum or
Asset therefor, and shall not permit any of the other Companies to directly or
indirectly declare, order, pay or make any dividend or distribution on or on
account of its equity securities at any time outstanding or, in the case of any
SLC Subsidiary that is a partnership, on partnership interests therein (or to
redeem any such equity securities or partnership interests, as the case may
be), except for the following ("Permitted Distributions"): (i) dividends and
distributions by the SLC Subsidiaries to SLC, or by SLT Subsidiaries to SLT,
pursuant to the Restructuring Plan; (ii) distributions by the Realty
Partnership to its partners (including SLT) each fiscal year of the Realty
Partnership in an aggregate amount that does not exceed the greatest of (A) the
greatest of (x) thirty percent (30%) of the combined net income (determined for
book purposes and without deduction for income tax liabilities, if any) of the
Realty Partnership and the Operating Partnership, (y) $3,000,000, (B) an amount
such that SLT's proportionate share of such amount shall be sufficient for SLT
to make distributions to SLT's shareholders sufficient to maintain SLT's status
for federal income tax purposes as a real estate investment trust, or (C) the
Applicable Amount; (iii) distributions by the Operating Partnership to its
partners each fiscal year of the Operating Partnership in an aggregate amount
that does not exceed the greater of (x) thirty percent of the combined net
income, determined as provided above, of the Realty Partnership and the
Operating Partnership, (y) $3,000,000 or (z) the Applicable Amount; and (iv)
such distributions of the Realty Partnership to its partners (including SLT)
and the Operating Partnership to its partners (including SLC) to which the
Senior Lender may from time to time consent. For purposes of this Section 6.7,
Restricted Payments "required by applicable law to maintain SLT's status for
federal income tax purposes as a real estate investment trust" shall include
Restricted Payments necessary to satisfy the ninety-five percent (95%)
distribution test
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of Section 857(a) of the Code. The "Applicable Amount" is defined as, for each
fiscal year, an amount equal to eighty-five percent (85%) of the sum of (i) the
combined taxable income of the Partnerships (determined for purposes of applying
the ninety-five percent (95%) distribution test of Section 857(a) of the Code
for the applicable fiscal year) plus (ii) an amount equal to the aggregate of
all depreciation deducted in (i) above during the applicable fiscal year in
determining the Partnerships' respective taxable income for such fiscal year.
Amounts distributed to SLT or SLC pursuant to the foregoing may in turn be
distributed or dividended to the shareholders of SLT or SLC, as appropriate.
However, (A) the foregoing limitations on dividends and distributions shall not
apply if, at the time of any such dividend or distribution, (1) the aggregate
outstanding principal amounts of the Loans equals or is less than fifty percent
(50%) of the Aggregate Asset Value and (2) no Event of Default has occurred and
is continuing; and (B) there shall be no limitation of any redemption, purchase
or other acquisition of any partnership interests, shares, warrants or rights
included in the definition of Restricted Payments if at the time of such
redemption, purchase or other acquisition No Event of Default has occurred and
is continuing. Notwithstanding the foregoing, no distribution or dividend shall
be permitted if as a result an Event of Default would occur under any provisions
of this Agreement.
6.8 Capital Expenditures. Except as expressly provided to the
contrary below, the Borrower shall not, and shall not permit any of the other
Companies to, use Cash or Cash Equivalents of the Borrower or any of the other
Companies to make any Capital Expenditure (except for emergency repairs and
emergency replacements required in order to permit the continued operation of
the Assets to which such repairs or restorations are made) other than in
accordance with the Capital Expenditure Budget, and then only in accordance
with the following terms and conditions:
(a) Subject to any title retention agreements in
connection with a transaction permitted under subsection 6.2(h), title to any
Asset acquired pursuant to any such Capital Expenditure shall be vested in the
Company operating the Hotel Property in respect of which said Asset was
purchased (unless the Asset is a fixture installed in a Hotel Property, in
which event title shall be vested in the Realty Partnership or SLT, as
applicable) or as otherwise agreed to by the Senior Lender;
(b) Any Asset (other than an Excluded Asset or Excluded
Intercompany Asset) acquired pursuant to any such Capital Expenditure shall,
immediately upon acquisition by any of the Companies and installation in any
Hotel Property then subject to the Required Liens and the Intercompany Liens,
also become subject to the Required Liens or the Intercompany Liens, as
applicable; and
(c) Each Capital Expenditure shall maintain or improve
the value of the affected Hotel Property.
6.9 Mergers and Consolidations. The Borrower shall not, and shall
not permit any of the other Companies to, enter into any merger or
consolidation other than as contemplated by the Restructuring Plan or by the
Mortgage Note Assignment with respect to an REO
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Nominee (as defined in the Mortgage Note Assignment) unless the Borrower and
the Operating Partnership are the surviving entities, SLT continues to be the
managing general partner of the Borrower, SLC continues to be the managing
general partner of the Operating Partnership and the Borrower, after such
merger or consolidation, continues to comply with Section 7.1 relating to its
Adjusted Net Worth and otherwise complies with all the provisions of this
Agreement.
6.10 Sale of Assets. The Borrower shall not, and shall not permit
any of the other Companies to, directly or indirectly, sell, assign or lease or
otherwise dispose of any Asset owned by such Company to a non-Company Person,
other than non- real estate items sold in the ordinary course of business or in
connection with permitted replacements of renovations or an Asset acquired in
whole or in part with the proceeds of any Merrill Loan or a sale or other
disposition that is an Excluded Disposition (an "Asset Sale"), unless each of
the following conditions shall have been satisfied:
(a) No Default or Event of Default shall have occurred
and be continuing;
(b) Such Asset is disposed of for a consideration and
upon terms deemed by the Borrower (and any other Company disposing of any Asset
in such transaction) to be fair and adequate and, with respect to any Hotel
Property or Mortgage Note owned by the Borrower or SLT as of the date hereof or
acquired hereafter, for a consideration that will result in payments to the
Senior Lender (in the form of Cash and Cash Equivalents and principal payments
pursuant to Mortgage Notes) of not less than the minimum release price (the
"Minimum Release Price") applicable to such Hotel Property or Mortgage Note as
specified on Schedule 6.10. (Subject to Section 14.10, the aggregate of the
Minimum Release Prices, and the Minimum Release Price on an Asset by Asset
basis, shall not exceed one hundred twenty-five percent (125%) of the allocated
loan amount set forth on Schedule 1.9 in the aggregate, or on an Asset by Asset
basis, except as set forth on the initial Schedule 6.10; and no loan amount
allocated to a Mortgage Note shall exceed the outstanding principal balance of
such Mortgage Note; and the Minimum Release Price for a Mortgage Note shall not
exceed the greater of the outstanding principal balance of the Mortgage Note as
of the date hereof or, if later, as of the date of acquisition of such Mortgage
Note (subject to such added allowances as provided in Section 14.10.) On the
closing of the sale of such Asset, the Borrower or such other Company disposing
of such Asset shall pay to the Senior Lender an amount equal to the Minimum
Release Price, as provided in paragraph (iii) of subsection 1.9(b). However,
in the case of any sale of a Hotel Property in which a portion of the total
consideration to the Companies for such sale is deferred or consists of a
promissory note of the buyer, the economic terms of the Future Mortgage Note
shall comply with the requirements specified in (i) below. The documentation
for the Future Mortgage Note shall include each of the instruments, agreements
and documents referred to in paragraph (ii) below.
(i) Any Future Mortgage Note shall be pledged to the
Senior Lender and shall provide the maximum term of
such note shall be no more than seven (7) years; all
principal payments with respect to such Future
Mortgage Notes shall be paid to the Senior Lender to
amortize the Loans
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as and to the extent provided in paragraph (ii) of
subsection 1.9(b); such Future Mortgage Note shall not
provide for payment of interest that results in
negative amortization; the mortgage securing the
Future Mortgage Note shall constitute a first lien on
the Hotel Property of the mortgagor (unless there is
prior mortgage debt secured by the underlying
collateral that will be assumed or taken subject to by
the buyer and that was not increased in connection
with such sale (a "Permitted Prior Mortgage"), in
which event the mortgage securing the Future Mortgage
Note may be a second lien) and the loan-to-value ratio
of the lien securing the Future Mortgage Note in
combination with any Permitted Prior Mortgage shall
not at closing exceed 80%; at least twenty five
percent (25%) of the Minimum Release Price of the
Hotel Property sold shall be paid in Cash or Cash
Equivalents by the purchaser to the seller and then
simultaneously paid in Cash or Cash Equivalents to the
Senior Lender to amortize the Loans as and to the
extent provided in paragraph (ii) of Subsection
1.9(b); the Cash or Cash Equivalents portion of the
sale consideration, together with the lesser of the
outstanding principal balance of the Future Mortgage
Note or the market value of the Future Mortgage Note
(which shall be discounted to present value using
current market rates of interest equal to the
comparable U.S. Treasury Bond issue plus 350 basis
points) shall be equal to at least the applicable
Minimum Release Price; and the aggregate market value
of all such Future Mortgage Notes pledged to the
Senior Lender at any one time shall not exceed
$20,000,000. Notwithstanding, the foregoing, in the
event a buyer acquires a Hotel Property with new
acquisition indebtedness, then the liens securing same
("Acquisition Indebtedness Liens") may be prior to the
security for the Future Mortgage Note (which in no
event shall have a lower lien priority than a Second
Lien) and the combined loan-to-value ratio with the
Future Mortgage Note shall not be greater than eighty
percent (80%) and with respect to the related sale
twenty-five percent (25%) of the Minimum Release Price
in Cash or Cash Equivalents requirement is increased
by the amount of such Acquisition Indebtedness Lien.
(ii) The documentation for the Future Mortgage Note shall
include:
(A) a Future Mortgage Note;
(B) a Mortgage;
(C) an assignment of rents and leases;
(D) a security agreement and one or more UCC
financing statements;
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(E) documentation for creating a security
interest in the liquor license associated
with the property sold, if such license is
sold and to the extent that a granting of
such security interest is permitted by
applicable law;
(F) a collateral assignment of the franchise
agreement applicable to such Hotel Property,
if the applicable franchisor routinely
consents to such assignment and of the
accounts receivable applicable to such Hotel
Property; and
(G) Where the original principal amount of a
Future Mortgage Note is in excess of
$3,000,000, (i) the Mortgage Note Security
Documents either will require the applicable
Maker (as defined in the Mortgage Note
Assignment) to pay to the Borrower periodic
installments for Taxes and insurance premiums
(in which event such amounts will
automatically become subject to the Required
Lien of the Borrower's Security Agreement or
other applicable Security Document) or to
establish separate accounts, in which event
such amounts will be subject to the Lien of
the Mortgage Note Security Documents, but in
either case only during any period in which a
prior mortgage does not require same.
The form of each of the agreements, instruments, provisions
and documents described in subparagraphs (A) through (G) of this paragraph (ii)
shall be subject to the approval of the Collateral Agent on behalf of the
Senior Lender, such approval not to be unreasonably delayed or withheld.
(c) In each sale of a Hotel Property (other than an
Excluded Asset) involving a promissory note or the deferred payment of a
portion of the total consideration for such sale, each of the applicable
requirements of the Mortgage Note Assignment, if any, shall have been
fulfilled.
Upon the fulfillment of each of the conditions listed above in this
Section 6.10, the Collateral Agent shall execute, acknowledge and deliver to
the escrow agent for such Asset Sale (or if there is no such escrow agent, the
Borrower's counsel), such documents as the Borrower shall reasonably require to
evidence the release of the Required Liens and, to the extent the same have
been assigned for security to the Collateral Agent, the Intercompany Liens
against each item of Collateral and Intercompany Collateral included in such
Asset Sale.
6.11 Issuance of Additional Shares. etc. The Borrower shall not,
and shall not permit any of the other Companies to, directly or indirectly:
(a) issue any additional shares of capital stock or
beneficial interest (including treasury shares) or additional partnership
interests (or options to acquire any such shares or partnership interests),
whether now or hereafter authorized, other than (i) shares
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issued pursuant to the exercise of options outstanding as of January 28, 1993
(or extension(s), renewal(s) or replacement(s) thereof), (ii) shares issued
pursuant to the exercise of options granted under or in connection with an
employment agreement or other transaction permitted under Sections 6.10
(relating to transactions with Affiliates) or 6.15 (relating to certain
employment and compensation matters), (iii) shares issued by a Subsidiary of
SLT, the Realty Partnership, SLC or the Operating Partnership to that
Subsidiary's parent entity and pledged, directly or indirectly and
simultaneously with issuance, to the Collateral Agent, for the benefit of the
Senior Lender, pursuant to the Security Documents and the Intercompany Security
Documents, (iv) shares or Partnership Interests issued in connection with
acquisitions of Assets permitted under Section 6.5, or (v) other shares (or
other securities) of SLT, SLC, the Borrower or the Operating Partnership as long
as the applicable provisions of paragraph (i) of Subsection 1.9(b) are complied
with; or
(b) except as permitted in subsection 6.11(a) above,
sell, assign, pledge or otherwise encumber or dispose of any shares of capital
stock or beneficial interest of any of the Subsidiaries of SLC (or options to
acquire any such shares), or any partnership interests held by any of the
Companies, other than as contemplated by the Restructuring Plan and except for
the pledge of such shares and interests to the Collateral Agent, for the
benefit of the Senior Lender.
6.12 Transactions with Affiliates. The Borrower shall not, and
shall not permit any of the other Companies to, directly or indirectly, enter
into any lease or other transaction, including any loan, advance, guarantee,
credit accommodation, waiver of rights or amendments to existing transactions,
transfers of assets, investments, distributions or similar transactions, with
any Affiliate other than (a) has occurred pursuant to the Starwood
Reorganization, (b) other transactions expressly described by the Restructuring
Plan, including new Intercompany Leases, (c) employment and consulting
agreements and other compensation arrangements permitted under Section 6.15,
(d) other transactions (other than agreements and arrangements permitted under
Section 6.15) on fair and reasonable terms no less favorable to the Borrower or
such other Company as would obtain in a comparable arm's-length transaction
with an unrelated Person, and no more favorable to the Affiliate than the
Affiliate would have received on commercially reasonable terms and conditions
in the marketplace generally, and (e) payments pursuant to any engagement of
any counsel, accountant or investment banker that is, or to any law, accounting
or investment banking firm, a member, partner or shareholder of which is,
directly or through a professional corporation, an Affiliate. In addition, the
Borrower shall not, and shall not permit any of the other Companies to,
directly or indirectly purchase or acquire or otherwise enter into any
transaction to purchase or acquire the legal or beneficial interest in any
Prior Mortgage Note (in lieu of satisfaction thereof), without the Senior
Lender's prior written consent.
6.13 Prohibition on Sale of Receivables. Except in connection with
the sale of a Hotel Property in accordance with the provisions of Section 6.10
or a Hotel Property acquired in whole or in part with the proceeds of a Merrill
Loan, the Borrower shall not, and shall not permit any of the other Companies
to, sell, transfer, assign or otherwise dispose of with recourse or for less
than the face value thereof any of the Companies' respective accounts
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receivable. However, nothing in this Section 6.13 shall prohibit the Borrower
or any other Company from settling, compromising or similarly discounting
accounts receivable in the ordinary course of such Company's business.
6.14 Modification of Certain Documents, Agreements and Instruments.
Except as otherwise provided for in the Restructuring Plan, the Borrower shall
not, and shall not permit any of the other Companies to, amend that Company's
declaration of trust, articles or certificate of incorporation, partnership
agreement, by-laws or other organizational or similar charter document, as
applicable, without the prior written consent of the Senior Lender, which
consent shall not be unreasonably delayed or withheld.
6.15 Employment and Compensation Matters. The Borrower shall not,
and shall not permit any of the other Companies to, directly or indirectly,
enter into any employment agreement, consulting agreement or other compensation
arrangement with any officer, director or employee of the Borrower or of any of
the other Companies, except for (i) agreements and arrangements terminable by
the Company party thereto at will, and agreements and arrangements for a term,
which, in either case must provide for not more than usual and customary
compensation and employment benefits and (ii) that certain employment agreement
between SLT and Mr. Lapin described in the Reorganization Proxy Statement.
6.16 Cash and Cash Equivalents Held by Other Companies. The
Borrower hereby covenants that on or before the Third Closing Date it shall
deliver and deposit into the HIT Operating Account and the HIC Operating
Account (or such other account in California where the Senior Lender has a
Required Lien or an Intercompany Lien) funds in an aggregate amount equal to at
least two (2) month's interest payments on the Loans calculated at the then
current Stated Rate, and shall maintain aggregate minimum balances in such
accounts until after all of the Obligations shall have been paid in full equal
to at least two (2) months interest payments on the Loans calculated at the
Stated Rate, as the same may increase or decrease from time to time (the
"Minimum Aggregate Balances"). For purposes of the Cash Management Memorandum,
the definitions of "Cash Threshold" and "Operating Cash Threshold" shall be as
provided in this Agreement. The Borrower agrees that the Cash Management
Memorandum shall be amended, within ninety (90) days after the Third Closing
Date, to include in the Cash Management System the accounts of the Hotel
Properties included in the Starwood Assets. Upon the Third Closing, the
Borrower and the Senior Lender shall instruct the manager of the Cash
Management System that on and after the Third Closing Date, such manager shall
continue to manage the Cash Management System in accordance with the terms of
the Cash Management Memorandum but that, notwithstanding any provisions of the
Cash Management Memorandum, provided no Event of Default has occurred and is
continuing, such manager shall no longer routinely apply any funds in the HIT
Operating Account and the HIC Operating Account to payment of the Loans. In
addition, the Borrower and the Senior Lender shall inform the manager of the
Borrower's obligation to maintain the Minimum Aggregate Balances in the HIT
Operating Account and the HIC Operating Account and shall instruct such manager
to permit withdrawals or transfers from such accounts only to the extent of the
excess over the Minimum Aggregate Balances until after a Responsible Officer of
the Senior Lender shall have certified to such manager that all of the
Obligations have been paid in full. Once the Borrower
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has performed its covenant set forth above to fund the Minimum Aggregate
Balances in the HIT Operating Account and the HIC Operating Account, and so
long as such Minimum Aggregate Balances are maintained, the Borrower shall be
permitted to transfer, dispose of or invest all other funds in all accounts in
the Cash Management System in any manner not inconsistent with the terms of
this Agreement the Loan Documents or the Intercompany Loan Documents.
6.17 Management Companies and Management Contracts. The Borrower
shall not, and shall not permit any of the other Companies to, enter into any
Management Contract other than with a Management Company and pursuant to a
Management Contract (substantially in the form of Exhibit Y or another form
reasonably acceptable to the Senior Lender) that has been approved by the
Senior Lender, such approval not to be unreasonably withheld or delayed.
However, the Senior Lender may withhold such consent in its sole and unfettered
discretion if the Borrower shall not have delivered to the Senior Lender
written acknowledgement of any proposed Management Company that the lien of the
Management Contract is subordinate to all Liens granted under the Security
Documents.
6.18 Compliance with ERISA, etc. The Borrower shall make, and
shall cause all other Companies to make, all payments or contributions to Plans
required under the terms of such Plans and in accordance with applicable
minimum funding requirements of ERISA and the Code. The Borrower shall cause
all Plans sponsored by the Companies to be maintained in material compliance
with ERISA and the Code. The Borrower shall not engage, and shall not permit
or suffer any other Company, or any Person entitled to indemnification or
reimbursement from the Borrower or any other Company in respect of such
transaction to engage, in any "prohibited transaction" for which an exemption
is not available. No Company will terminate, and each Company will use all
reasonable efforts to prevent the PBGC from terminating, any Plan, and no
Company shall withdraw from any multi-employer Plan, in each case in any manner
which in the reasonable business judgment of the Borrower, is likely to result
in a Material Adverse Change.
6.19 No Additional Accounts. The Borrower shall not, and shall not
permit any of the other Companies to, maintain any account at any financial
institution other than the Cash Management Accounts, except accounts opened in
connection with any Merrill Loan. However, any of the Companies shall be
permitted to maintain one or more accounts into which Excluded Cash or Liquid
Investments have been deposited, but only if such Company shall have, to the
maximum extent permitted by any other party claiming an interest in the
Excluded Cash or Liquid Investment, granted the Required Liens or the
Intercompany Liens in such Company's interest in such Excluded Cash or Liquid
Investment (except to the extent the same constitutes an Excluded Asset or an
Excluded Intercompany Asset) and the Borrower shall take or assist the
Collateral Agent in taking all steps necessary to perfect such Required Liens
and Intercompany Liens.
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ARTICLE 7.
Financial Covenants
The Borrower covenants and agrees that, during the term of the Loans,
the Borrower shall perform each and all of the following covenants:
7.1 Minimum Adjusted Net Worth. The Borrower shall not permit
Adjusted Net Worth as at the last day of any fiscal quarter to be less than the
sum of (a) $40,000,000, (b) 75% of the net proceeds of any equity contributed
to the Borrower after the date hereof (other than equity contributed to the
Borrower and used to acquire hotel assets within six months of contribution or
which constitutes equity in contributed hotel assets both of which are governed
by clause (c) following) and (c) 50% of the net equity book value of any hotel
assets contributed to or acquired by Borrower after the Third Closing Date and
prior to the Initial Termination Date or, if the Extension Option is exercised,
the Extended Termination Date.
7.2 Available Cash. The Borrower shall not permit the ratio of the
Companies' Available Cash for any period of four (4) consecutive quarters of the
Borrower ending on or after January 1, 1995 to the sum of Cash Interest for, and
Capital Expenditures made, during such period to be less than 1.075 to 1.
7.3 Illustrations. Schedule 7.3 constitutes a worksheet showing a
calculation of Adjusted Net Worth and Available Cash.
ARTICLE 8.
Defaults; Remedies
8.1 Events of Default: Acceleration. If any of the following
events (each an "Event of Default") shall occur:
(a) The Borrower shall default (and shall not cure such
default within five (5) Business Days thereafter) more than twice in any period
of twelve (12) months in the payment of principal of or interest on any Note,
whether at maturity or at a date fixed for the payment of any installment or
prepayment thereof or any Commitment Fee; or
(b) The Borrower shall default in the payment of any
amount due under the Loan Documents or the Intercompany Loan Documents or any
other amount due to the Senior Lender or the Collateral Agent from the Borrower
hereunder or thereunder, and such default shall not have been remedied within
three (3) Business Days after Senior Lender (or the Collateral Agent on its
behalf) notifies the Borrower in writing of such default; or
(c) The Borrower shall default in the performance of or
compliance with any term contained herein and such default shall not have been
remedied within thirty (30) days
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after written notice of such default has been given to the Borrower by the
Senior Lender (or the Collateral Agent on its behalf); or
(d) The Borrower or any of the other Companies that is a
party to any of the other Loan Documents or any Intercompany Loan Documents
shall default in the performance of or compliance with any term contained in
any of the other Loan Documents or any Intercompany Loan Documents, and such
default shall not have been remedied within (i) the period of grace, if any,
specified therein or (ii) if no such period of grace is specified therein,
thirty (30) days after written notice of such default has been given to the
Borrower by the Senior Lender (or the Collateral Agent on its behalf).
However, such 30-day cure period shall only apply if such default is capable of
cure; or
(e) Any representation or warranty made by the Borrower
herein or in any other Loan Document or any Intercompany Loan Document shall
have been false or incorrect in any material respect when made or deemed to
have been made; or
(f) The Borrower or any of the other Companies shall
default in any payment due on any Indebtedness (other than Indebtedness
evidenced by Prior Mortgage Notes) in respect of borrowed money, any Capital
Lease or the deferred purchase price of property or in the performance of or
compliance with any other material term of any evidence of such Indebtedness,
any such Capital Lease or any such deferred purchase price agreement or of any
mortgage, indenture or other agreement relating thereto, and such default shall
continue for more than the period of grace, if any, specified therein, or
applicable thereto and shall not have been waived pursuant thereto, and the
effect of such default is to permit the holder of such Indebtedness (including
by action of such holder of such Indebtedness or a trustee or receiver for such
holder) to cause such Indebtedness to become due prior to its stated maturity
or the exercise of default remedies, but only if the Borrower or any of the
other Companies shall have received any notice of default or has knowledge of
such default; or
(g) Any holder of Indebtedness in respect of borrowed
money, any lessor under any Capital Lease or the payee under any contract for
the purchase of property (or any Person claiming under, by or through any such
holder, lessor or payee) shall accelerate any payment of any obligation owing
thereunder (or seek to exercise default remedies under or relating to such
Indebtedness for borrowed money, Capital Lease or contract for purchase of
property), but only if the amount of accelerated obligations and obligations as
to which the exercise of default remedies has been sought in the aggregate
exceeds $2,000,000. However, in calculating such $2,000,000 amount, the
aggregate amount of all recourse claims for all Prior Mortgage Notes shall be
included; or
(h) Any of the Companies shall discontinue its business
(except pursuant to the Restructuring Plan) or shall make an assignment for the
benefit of creditors, or shall fail generally to pay that Company's debts as
such debts become due, or shall apply for or consent to the appointment of or
taking possession by a trustee, receiver or liquidator (or other similar
official) of or for such Company or any substantial part of the Assets of such
Company, or shall file a petition or commence a case under the Bankruptcy Code
or any other applicable
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federal or state bankruptcy, insolvency or other similar law, or any of the
Companies shall take any corporate or trust action to dissolve or liquidate any
of the Companies (except pursuant to the Restructuring Plan); or
(i) There shall be filed against any of the Companies an
involuntary petition, or commenced against any of the Companies a case under
the Bankruptcy Code or any other applicable federal or state bankruptcy,
insolvency or other similar law, which petition or case is not dismissed within
sixty (60) days after such filing or commencement, or there shall be entered
any decree appointing a trustee, receiver or liquidator (or other similar
official) of or for any of the Companies or any substantial part of the Assets
of any of the Companies and such decree is not dismissed within thirty (30)
days after entry of the same; or
(j) A final judgment in an amount that, together with the
amounts of all other outstanding final judgments against any of the Companies,
if any, exceeds in the aggregate $2,000,000 (in each case net of any insurance
proceeds or awards to be received in respect of the same) shall be rendered
against any of the Companies and, within thirty (30) days after entry thereof,
such judgment shall not have been discharged or execution thereof stayed
pending appeal, or, within thirty (30) days after the expiration of any such
stay, such judgment shall not have been discharged, or any such judgment shall
not be discharged forthwith upon the commencement of proceedings to foreclose
any Lien that may attach as security therefor and before any of the Assets of
any of the Companies shall have been seized in satisfaction thereof; or
(k) There shall occur any event or condition that results
in a Material Adverse Change. However, it shall not be an Event of Default
under this subsection 8.1(k) if such Material Adverse Change arose from the
occurrence of an event of default described in subsections 18(b) or 18(d) of
any of the Mortgages securing the Obligations, so long as the Collateral Agent
has available the rights and remedies provided in the Security Documents and
Intercompany Security Documents with respect to such an event of default; or
(l) A Change of Control shall occur; or
(m) Any Gaming License of any of the Companies shall be
terminated or suspended and such suspension shall not have been lifted within
thirty (30) days after receipt by the Borrower or such other Company of notice
of such suspension other than in connection a sale of Assets related to such
Gaining License and permitted by the terms of this Agreement; or
(n) The Collateral Agent shall fail to have the Required
Liens on any item of Collateral for the benefit of the Senior Lender or any
Intercompany Lien shall be invalidated (unless such failure or invalidation
results solely from action or inaction on the part of the Collateral Agent or
any Senior Lender), and such failure or invalidation shall continue for fifteen
(15) or more days after written notice thereof from any Senior Lender or the
Collateral Agent to the Borrower. However, it shall not be an Event of Default
if the Collateral Agent shall not have a Required Lien in any Collateral
Account (as defined in the Cash Management
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Memorandum) or an Intercompany Lien in any Collateral Account shall be
invalidated, if the Borrower has done or caused the other Companies to do all
acts provided for or required by the Cash Management Memorandum; or
(o) The Borrower shall fail, or shall fail to cause any
other Company or fail to require any Management Company, to comply with any
transfer of any Cash or Cash Equivalents required by the Cash Management
System, which failure to transfer has not been cured within two (2) Business
Days after delivery of written notice to the Borrower by the Manager of the
Cash Management System; or
(p) The Borrower shall fail to deliver the Daily Cash
Worksheet for three (3) consecutive Business Days, which failure has not been
cured by the delivery of all such delinquent Daily Cash Worksheets within three
(3) Business Days after delivery of written notice to the Borrower by manager
under the Cash Management System; or
(q) The Borrower shall fail to deliver to the Collateral
Agent a copy of any notice of default or notice of event of default given under
any Prior Mortgage Note or loan or security document related thereto or any
Ground Lease within five (5) Business Days after receipt of such notice by the
Borrower; or
(r) The Borrower shall fail to timely perform the
covenant set forth in Section 5.14;
then, if any Event of Default of the character described in subsections 8.1
(a), (b), (c), (d), (e), (f), (g), (j), (k), (l), (m) (n), (o), (p), (q) or (r)
shall occur, the Senior Lender may, by written notice to the Borrower, declare
the principal of and accrued interest in respect of its Notes to be forthwith
due and payable, whereupon the principal of and accrued interest in respect of
such Notes shall become forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived
by the Borrower. Upon the occurrence of an Event of Default of the character
described in subsections 8.1(h) or 8.1(i), the principal of and accrued
interest in respect of all the Notes shall become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower.
8.2 Remedies on Default. In case any one or more Events of Default
shall occur and be continuing, the Collateral Agent acting on behalf of the
Senior Lender may proceed to protect, exercise and enforce its rights and
remedies hereunder and under the other Loan Documents or Intercompany Loan
Documents and any other rights and remedies provided by law or equity by an
action at law, suit in equity or other appropriate judicial or non-judicial
action, whether for the specific performance of any agreement contained herein
or in any Note or other Loan Document or Intercompany Loan Document, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law. No course of
dealing and no delay on the part of the Collateral Agent or the Senior Lender
in exercising any right shall operate as a waiver thereof or otherwise
prejudice the Senior Lender's rights. No right conferred hereby or by any Note
or
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other Loan Document or Intercompany Loan Document upon the Senior Lender shall
be exclusive of any other right referred to herein or therein or now or
hereafter available at law, in equity, by statute or otherwise.
ARTICLE 9.
Setoff
In addition to all rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence and
during the continuation of any Event of Default, Senior Lender and the
Collateral Agent are hereby authorized by the Borrower at any time and from
time to time, without prior notice to the Borrower or to any other Person (any
such notice being hereby expressly waived) and without regard to the value of
the Collateral, to set off and to apply any and all deposits (general, special,
time or demand, including Indebtedness evidenced by certificates of deposit,
whether matured or unmatured) and any other Indebtedness to the Borrower at any
time held or owing by such Senior Lender or the Collateral Agent against and on
account of the Obligations (other than Obligations under the Environmental
Indemnity) of the Borrower to such party applying the setoff.
ARTICLE 10.
Expenses: Indemnification
10.1 Expenses. The Borrower shall pay or cause to be paid, within
30 (thirty) days after the Senior Lender or the Collateral Agent on its behalf
shall have so requested and the Borrower shall have received customary
documentation evidencing such costs and expenses, the costs and expenses
described in subsections (a) through (d) below (collectively, the "Senior
Lender's Expenses"). However, the Borrower shall not be obligated to make
payments of any expenses in connection with routine servicing of the Loans:
(a) reasonable and customary fees and disbursements of
the respective counsel for each of the Senior Lender and the Collateral Agent,
specifically including any local counsel retained by any such party, as well as
the reasonable allocated costs of any in-house counsel of any of the foregoing,
incurred after the Third Closing in connection with the negotiation,
documentation, preparation and/or interpretation of this Agreement or any of
the other Loan Documents and Intercompany Loan Documents, if any, (specifically
including any amendments, consents or waivers hereafter requested by the
Borrower);
(b) all recording and filing fees, transfer and document
stamp and similar Taxes which may be payable after the Third Closing in respect
of the execution, delivery or filing or recordation of any of the Loan
Documents and Intercompany Loan Documents, if any, (specifically including any
amendments, consents or waivers thereof); and
(c) all other reasonable and customary costs and expenses
incurred by the Senior Lender or the Collateral Agent after the Third Closing
in connection with the
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implementation of this Agreement and the other Loan Documents or Intercompany
Loan Documents, if any, including costs and expenses reasonably incurred in
connection with the non-routine administration (including the costs of
Appraisals obtained at the Borrower's expense as provided in Section 5.12, if
any) of any of the rights of the Senior Lender or the Collateral Agent under
this Agreement or under any of the other Loan Documents, and Intercompany Loan
Documents;
(d) all other reasonable and customary costs and expenses
incurred by the Senior Lender or the Collateral Agent at any time in connection
with the enforcement of any of the rights of the Senior Lender or the
Collateral Agent under this Agreement or under any of the other Loan Documents
in the event of any Event of Default;
10.2 Indemnification. The Borrower hereby indemnifies, defends
and holds harmless the Senior Lender and the Collateral Agent and any holder of
any interest in the Notes, and the officers, directors, employees and agents of
and counsel to the Senior Lender, the Collateral Agent and such holders
(collectively, the "Indemnitees" and each individually, an "Indemnitee") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, causes of action, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel (including the allocated costs of in-house counsel
of the Senior Lender or the Collateral Agent) for such Indemnitees in
connection with any investigative, administrative or judicial action, suit or
proceeding, whether or not such Indemnitee shall be designated a party thereto)
that may be imposed on, incurred by or asserted against such Indemnitee, if and
to the extent that the same arise from the transactions evidenced by the Loan
Documents, the Intercompany Loan Documents, the Borrower's use or intended use
of the proceeds of the Acquisition Loans, if any, the breach of any
representation, warranty or covenant by any Company in any of the Loan
Documents or any of the Intercompany Loan Documents, the consummation of the
Starwood Reorganization or the Companies' consummation of the other
transactions contemplated by this Agreement, including any matter relating to
or arising out of the execution, delivery, filing or recordation of any of the
Security Documents or the Intercompany Security Documents (collectively, the
"Indemnified Liabilities"). However, (i) except as to the Indemnified
Liabilities set forth in clause (iii) below, the Borrower shall have no
obligation hereunder to any Indemnitee with respect to Indemnified Liabilities
to the extent the same arise from any breach of any agreement made by such
Indemnitee under this Agreement or from the gross negligence or willful
misconduct of any Indemnitee, (ii) the rights of any Indemnitee hereunder
against the Borrower in respect of any act or omission of any of the Borrower
or any of the other Companies shall not be limited as a consequence of any act
or omission of any other Indemnitee, and (iii) the Indemnified Liabilities
shall include without limitation any and all claims against any Indemnitee
arising from the Third Closing and the execution and delivery of this Agreement
and any other Loan Documents or Intercompany Loan Document executed pursuant
hereto or thereto or in connection herewith or therewith, including any claim
that the granting of the Required Liens and/or Intercompany Liens by the
Borrower or any of the other Companies tortiously interferes with the right of
any other Person. Each Indemnitee shall promptly notify, or cause to be
notified, the Borrower of (i) each action, suit or proceeding involving an
Indemnified Liability that is served on such
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Indemnitee and (ii) each threatened action, suit or proceeding involving an
Indemnified Liability of which the officer of such Indemnitee who is the named
person for notices to be sent under the Loan Documents has written notice, but
the failure to give prompt notice shall not adversely affect the indemnity
rights granted to such Indemnitee herein except to the extent that the Borrower
can establish that it has been prejudiced by such failure. If any
investigative, judicial or administrative action, suit or proceeding arising
from any of the foregoing is brought against any Indemnitee indemnified or
intended to be indemnified pursuant to this Section 10.2, the Borrower, to the
extent directed by the Indemnitees or intended Indemnitees, shall resist and
defend such action, suit or proceeding or cause the same to be resisted and
defended by counsel designated by the Indemnitees (which counsel shall be
reasonably satisfactory to the Borrower, whose approval shall not be
unreasonably delayed or withheld). Each Indemnitee shall use its best efforts
to cooperate in the defense of any such action, suit or proceeding, but solely
at the cost of the Borrower. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Section 10.2 may be unenforceable
because it is violative of any law or public policy, the Borrower shall make
the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. The
obligations of the Borrower under this Section 10.2 shall survive the
termination of this Agreement and the discharge of the other Obligations.
10.3 Residual Indemnity Claims. Notwithstanding any provision in
any Security Document or Intercompany Security Document requiring the trustee
thereunder, the Collateral Agent (however designated) or the Senior Lender to
release, cause to be released or consent to the release of any Required Lien or
Intercompany Lien upon the payment in full in cash of the "Secured Obligations"
as defined by such Security Document or Intercompany Security Document, the
trustee, the Collateral Agent or the Senior Lender shall release, cause to be
released or consent to the release of such Lien notwithstanding the fact that
such Secured Obligations include continuing indemnification obligations at such
time as all other Secured Obligations then due and payable in cash to the
trustee, the Collateral Agent or any Senior Lender have been paid. However, if
at that time indemnification is reasonably claimed by the Collateral Agent or
the Senior Lender in accordance with the applicable indemnification provision
or provisions of that Security Document or Intercompany Security Document and
described in a written notice provided to the indemnifying Company in
accordance with said indemnification provision or provisions, the trustee, the
Collateral Agent or the Senior Lender may condition its or their release (or
actions taken to cause, or consent to, such release) upon the delivery to the
Collateral Agent of cash collateral (or other collateral acceptable to the
Collateral Agent) in an amount (or, in the case of any noncash collateral,
having a fair market value equal to 150% of the amount of the "Indemnified
Liabilities" (as such term is defined in the applicable Security Document or
Intercompany Security Document) for which indemnification has been claimed as
aforesaid.
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ARTICLE 11.
Amendments and Waivers, etc.
11.1 Waivers in Writing, etc. The failure of any of the parties
hereto to insist upon the strict performance of any term, condition or other
provision of this Agreement or any of the other Loan Documents or Intercompany
Loan Documents or to exercise any right or remedy hereunder or thereunder shall
not constitute a waiver by such party of any such term, condition or other
provision or (as to the Borrower) any Default or Event of Default in connection
therewith; and any waiver of any such term, condition or other provision or of
any such Default or Event of Default shall not affect or alter this Agreement
or any of the other Loan Documents or Intercompany Loan Documents, and each and
every term, condition and other provision of this Agreement and the other Loan
Documents and Intercompany Loan Documents shall, in such event, continue in
full force and effect and shall be operative with respect to any other then
existing or subsequent Default or Event of Default in connection therewith. No
waiver by the Senior Lender shall be effective unless it is in writing, signed
by the Senior Lender and delivered to the Borrower, and no waiver or approval
by the Borrower shall be effective unless it is in writing, signed by the
Borrower, and delivered to the Senior Lender. Similarly, no course of dealing
or delay on the part of the Borrower in exercising any right or remedy to which
the Borrower may be entitled as a result of any action or omission by the
Senior Lender with respect to any Loan or otherwise in connection with this
Agreement or any other Loan Document or Intercompany Loan Documents shall
operate as a waiver of such right or otherwise prejudice the Borrower's rights.
ARTICLE 12.
Nature of the Senior Lender's Obligations
The obligations of the Senior Lender or, if at the relevant time there
is more than one Senior Lender, the Senior Lenders and the Collateral Agent
under this Agreement and each of the other Loan Documents owed to the Borrower
or any of the Companies are several as if each such Senior Lender and the
Collateral Agent were a party to a separate agreement with the Borrower or such
Company. None of the Senior Lender or the Collateral Agent shall be jointly or
severally liable to the Borrower or any of the other Companies for any act or
omission of the Collateral Agent. To the extent that the Senior Lender or the
Collateral Agent fails to perform any of its obligations under this Agreement
or any of the other Loan Documents to the Borrower or any of the other
Companies, then the Collateral Agent may, in its own sole and absolute
discretion and without any obligation whatsoever to do so, perform the
obligations that such Senior Lender or the Collateral Agent shall have so
failed to have performed. However, under no circumstances shall any act by
such party in curing or attempting to cure such failure be deemed to have
caused such party to have assumed an obligation to do the same.
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ARTICLE 13.
Limitation of Liability
The name "Starwood Lodging Trust" is a designation of SLT and its
Trustees (as Trustees but not personally) under a Declaration of Trust dated
August 25, 1969, as amended and restated as of June 6, 1988 and as further
amended, and all Persons dealing with SLT shall look solely to SLT's Assets for
the enforcement of any claims against SLT, as the Trustees, officers, agents
and security holders of SLT, in such respective capacities, assume no personal
obligations of SLT, and their respective individual Assets shall not be subject
to the claims of any Person relating to such obligations by reason of such
capacity. All Persons dealing with the Partnership shall look solely to their
Assets and the Assets of their general partners for the enforcement of any
claims against the Partnerships, as the limited partners in the Partnerships
assume no personal obligations of the Partnerships and their respective
individual Assets shall not be subject to the claims of any Person relating to
such obligations.
Nothing in this Article 13 shall limit or impair: (i) the validity or
enforceability of any Intercompany Loan, Intercompany Lien or Intercompany Loan
Document; (ii) the rights of the Collateral Agent, including in its capacity as
Secured Party, granted in any Loan Document to enforce any rights or remedies
relating to any Intercompany Loan, Intercompany Lien or Intercompany Loan
Document; (iii) the rights of the Collateral Agent or the Senior Lender under
any Subsidiary Guaranty or any Security Document or Intercompany Security
Document securing any of the guarantor's obligations under any Subsidiary
Guaranty; or (iv) any other right of the Collateral Agent or Senior Lender
against any Company other than SLT.
ARTICLE 14.
Miscellaneous
14.1 Notices, etc. All communications provided for herein shall be
in writing delivered or mailed, as follows:
(a) If to the Senior Lender or the Collateral Agent, in
accordance with Attachment I hereto, with a copy to:
Lawrence A. Swenson, Esq.
Thacher, Proffitt & Wood
Two World Trade Center
New York, New York 10048
All communications required to be delivered to the Senior Lender
hereunder or under any of the other Loan Documents or Intercompany Loan
Documents and all other communications to the Senior Lender (unless pertaining
solely to the Collateral) shall, unless otherwise expressly provided, be
delivered in accordance with Attachment I hereto; and no
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such communication shall be effective as to Senior Lender unless a separate
copy of such communication shall have been delivered to such Senior Lender.
(b) If to SLT or Realty Partnership, to it at:
11845 West Olympic Blvd., Suite 550
Los Angeles, California 90064
Attention: Jeffrey C. Lapin, President
with a copy to:
Laura A. Loftin, Esq.
Mitchell, Silberberg & Knupp
11377 West Olympic Boulevard, Suite 525
Los Angeles, California 90064
The address of any party may be changed at any time and from time to
time and shall be the most recent such address furnished in writing by such
party to each other party.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given hereunder to a Person
specified on Attachment I shall be in writing, shall be addressed as specified
thereon and may be delivered by hand or courier service or sent by
telefacsimile, telecopied, telexed, or sent by courier service or United States
mail, and shall be deemed to have been given (i) when delivered to the
addressee by hand or by courier service, if delivered on a Business Day, or if
delivered on a day other than a Business Day, on the next Business Day, or (ii)
upon receipt of a telefacsimile or telex if received on a Business Day or, if
received on a day other than a Business Day, on the next Business Day, or (iii)
four (4) Business Days after deposit in the United States mail (registered or
certified, with postage prepaid and properly addressed). For purposes hereof,
the address of each Person named on Attachment I shall be as set forth below
that Person's name on such Attachment unless and until notice of a change
thereof is delivered as provided in this Section to each other Person named on
such Attachment, whereupon notices shall be given to such other address.
14.2 Extensions of Time: Calculations. etc.
(a) [OMITTED]
(b) Calculations. Calculations hereunder shall be made
and financial data required hereby shall be prepared, both as to classification
of items and as to amounts, in accordance with GAAP recognized as such by the
American Institute of Certified Public Accountants in the opinions and
pronouncements of the Accounting Principles Board and statements and
pronouncements of the Financial Accounting Standards Board, which principles
and practices shall be consistently applied and in conformity with those used
in the preparation of the financial statements referred to herein. In
addition, all such calculations and financial
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data shall be prepared in accordance with the American Hotel and Motel
Association's Uniform System of Accounts for Hotels, as the same shall be in
effect from time to time. If (i) any changes in accounting principles from
those used in the preparation of the financial statements referred to in this
Agreement are hereafter occasioned by the promulgation of rules, regulations,
pronouncements, or opinions of, or required by, the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions), or there shall occur
any change in such Uniform System of Accounts for Hotels or in the Borrower's
or any of the other Companies' fiscal or tax years and, as a result of any such
change, there shall result a change in the method of calculating any of the
financial covenants, negative covenants, standards, or other terms or
conditions found in this Agreement, or (ii) the Borrower, for reasonable
business purposes, shall desire to change such accounting principles or the
application thereof (which change shall be consistent with accounting
principles then in effect pursuant to rules, regulations, pronouncements or
opinions of the Financial Accounting Standards Board or the American Institute
of Certified Public Accountants and with such Uniform System of Accounts for
Hotels) and such desired change would result in a change in the method of
calculating any of the financial covenants, negative covenants, standard, or
other terms and conditions found in this Agreement, then the parties hereto
agree to enter into negotiations in order to amend such provisions so as to
equitably reflect such changes with the desired result that the criteria for
evaluating the financial condition of the Borrower and the other Companies
shall be the same after such changes as if such changes had not been made.
14.3 Successors and Assigns; Participations. This Agreement and
the other Loan Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and the Senior Lender; provided that
Borrower may not sell, assign or transfer any interest in the Loan Documents
and the Intercompany Loan Documents, or any portion thereof, including, without
limitation, Borrower's rights, title, interests, remedies, powers and duties
hereunder or thereunder. The Senior Lender may, subject to compliance with
applicable law, sell, assign, transfer, or otherwise dispose of all or any part
of the Senior Lender's rights and benefits under each of the Notes, the Loan
Documents and the Intercompany Loan Documents in a Pass-Through Transaction or
otherwise or grant participations in the Notes. In the case of an assignment
by the Senior Lender, (i) the assignee shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would have if it
were the original "Senior Lender" hereunder, (ii) the Senior Lender shall be
relieved of all obligations hereunder upon any such assignment, and (iii) upon
any such substitution of the Senior Lender, an "Assignment and Acceptance"
shall be executed by the new Senior Lender. In the case of a participation
sold by the Senior Lender in the Notes, each participating lender shall be
entitled to receive all information received by the Senior Lender under this
Agreement; provided that Borrower and Collateral Agent shall have received
written notice of the address of each such participating lender.
Notwithstanding anything in this Agreement to the contrary, after an assignment
by the Senior Lender, the "Senior Lender" (prior to the assignment) shall
continue to have the benefits of any rights or indemnifications contained
herein that it had during the period such party was "Senior Lender" hereunder.
<PAGE> 98
-90-
Senior Lender and the Collateral Agent severally agree to use their
best efforts to maintain the confidentiality of the information obtained by
such Senior Lender or its agents, except when required to disclose such
information (i) for regulatory purposes; (ii) pursuant to legal process; (iii)
to its attorneys, accountants and auditors; (iv) for the purpose of selling
participations or interests in the Loans in accordance with the provisions of
this Section 14.3; or (v) as necessary for the enforcement of the Senior
Lender's or the Collateral Agent's rights hereunder. Notwithstanding the
foregoing sentence concerning confidentiality, the Borrower and the other
Companies (i) shall cooperate fully with the Senior Lender, any prospective
assignee or participant, any Rating Agency or any party to any agreement
executed in connection any sale of participations or other interests in the
Loans with respect to all reasonable requests and due diligence procedures and
to use their best efforts to facilitate such sale; and (ii) shall deliver, at
their reasonable expense, for inclusion in any prospectus, private placement
memorandum or other offering material or disclosure document such written
information regarding the Borrower or any of the other Companies and their
financial condition as shall be reasonably requested by the Senior Lender. All
fees of Rating Agencies and all other costs and expenses in connection with any
sale of participations or other interests in the Loans shall be paid by the
Senior Lender.
14.4 Counterparts, etc. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all the counterparts shall together constitute one and the same
instrument. Delivery of an executed counterpart hereof by telecopier shall be
equally effective as delivery of an executed counterpart by hand, courier
service or United States mail. Any party delivering an executed counterpart by
telecopier shall thereafter also promptly deliver an executed counterpart by
hand, courier service or United States mail, but the failure to deliver an
executed counterpart by one of such other means shall not affect the validity,
enforceability and binding effect of this Agreement.
14.5 Entire Agreement. etc. This Agreement (a) constitutes the
entire agreement between or among the parties hereto relating to the subject
matter hereof, (b) shall supersede and take the place of all negotiations,
drafts, instruments, and written or oral communications purporting to be an
agreement of the parties hereto relating to the subject matter hereof, and (c)
is intended by each of the parties hereto to be the complete statement of the
terms and conditions, and the final expression, of their agreement relating to
the subject matter hereof. The terms and conditions of Attachment I hereto and
of the Schedules and Exhibits referenced herein are incorporated herein and
shall be deemed to be a part hereof, whether or not such documents are actually
attached to this Agreement or constitute separate documents.
<PAGE> 99
-91-
14.6 Construction of this Agreement. The following principles
shall apply to the construction of this Agreement:
(a) This Agreement shall not be construed in favor of one
party rather than the other(s) based upon which party drafted the same, it
being acknowledged that all parties hereto contributed substantially to the
negotiation and preparation of this Agreement.
(b) The headings contained herein are included for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement. Each parenthetical description of a Section,
subsection, paragraph or subparagraph being referred to by cross-reference is
included for convenience of reference only and is not intended to limit the
substance of any such Section, subsection, paragraph or subparagraph being so
referred to by cross-reference or to affect the meaning or interpretation of
this Agreement.
(c) No course of dealing, course of performance, trade
usage or parol evidence of any nature shall be used to supplement or modify any
term or condition of this Agreement.
(d) Unless the context clearly requires otherwise, the
words "hereof", "herein", "hereby", "hereunder" and other similar terms used in
this Agreement refer to this Agreement as a whole and not exclusively to any
particular provision of this Agreement.
(e) Article, Section, subsection, Exhibit and Schedule
references are to this Agreement unless otherwise specified.
(f) Any reference in this Agreement to any of the
following documents includes any and all alterations, amendments, extensions,
modifications, renewals or supplements thereto or thereof, as applicable: this
Agreement; the other Loan Documents and Intercompany Loan Documents; the
Intercompany Notes; and the Mortgage Notes.
(g) Any reference in this Agreement to the "knowledge"
of any Person thereof shall mean such Person's actual, current knowledge, and
shall further mean (A) in the case of each of SLT, SLC and each of their
respective Subsidiaries, the actual, current knowledge of any of the
Responsible Officers of that Company, (B) in the case of the Realty
Partnership, the actual, current knowledge of any Responsible Officer of SLT,
and (C) in the case of the Operating Partnership, the actual, current knowledge
of any Responsible Officer of SLC. References herein to the foresight,
contemplation, reasonable business judgment and the like of the Companies shall
mean the foresight, contemplation, judgment or the like of such Companies'
respective principal executive officers.
(h) The Senior Lender shall have the right to require
such changes to the terms of the definitive documents the forms of which
constitute Exhibits to this Agreement (and all exhibits and schedules thereto)
as may be necessary (A) to implement or effectuate the provisions of this
Agreement or the Loan Documents (or to more fully perfect or renew the
Borrower's rights under the Intercompany Loan Documents), including such
changes as may
<PAGE> 100
-92-
be necessary to insure the effectiveness, perfection or priority of such
documents under the laws of each of the Relevant States (as defined in the
applicable Security Documents), or (B) to reflect the fact that the Starwood
Reorganization was not contemplated by the Restructuring Plan as originally
delivered to the Senior Lender, or other changes from time to time after the
First Closing in the corporate or operational structure of or among the
Companies; (ii) the Security Documents and Intercompany Security Documents
executed on any Pledge Date, as may be necessary based on the review of the
Starwood Assets conducted by the Senior Lender and/or the Collateral Agent
prior to any Pledge Date to insure the effectiveness, perfection and priority
of the Required Liens in the Starwood Realty Assets and the Required Liens and
Intercompany Liens in the Starwood Operating Assets granted to the Collateral
Agent, for the benefit of the Senior Lender, as of any Pledge Date; and (iii)
as to the form of opinion letter attached hereto as Exhibit C, as may be
necessary to reflect (A) changes necessitated by any changes made to the Loan
Documents pursuant to either of the preceding subparagraphs (i) or (ii) of this
subsection 14.6(h), (B) differences in the laws among the Relevant States or
changes from time to time after the Third Closing in the law of any Relevant
State, or (C) changes from time to time after the Third Closing in the
corporate or operational structure of or among the Companies.
(i) The word "including", as used in this Agreement,
shall be construed as "including without limitation".
(j) Any notice, certificate or other document (including
any financial statement or other document containing financial information)
required by the terms of this Agreement to be executed by a Responsible Officer
or another officer of any of the Companies shall be executed by such officer in
his or her capacity as such, solely on behalf of such Company and not in his or
her individual capacity.
(k) The words "ordinary course of business" to the extent
used in this Agreement with respect to any Company or Companies without further
modification, shall be construed as "ordinary course of business as heretofore
conducted or as conducted or proposed to be conducted pursuant to the
Restructuring Plan".
(l) Except as otherwise provided in Sections 1.13
(relating to the payment of certain amounts upon reductions of certain returns
on capital) and 1.14 (relating to certain additional costs), the words "rule"
and "regulation" shall include only such rules and regulations compliance with
which is required by applicable law.
(m) Time is of the essence of each provision of this
Agreement and all of the Loan Documents and Intercompany Loan Documents.
(n) For purposes of this Agreement, Indebtedness with
respect to which payments of principal and interest are non-recourse shall not
be construed as recourse indebtedness solely by reason of such Indebtedness
being subject to standard and customary recourse exceptions such as fraud,
waste, misappropriations or environmental matters.
<PAGE> 101
-93-
14.7 Severability. If any provision or provisions, or if any
portion of any provision or provisions, contained in this Agreement is or are
found by a court of competent jurisdiction to be in violation of any applicable
local, state or federal ordinance, statute, law, administrative or judicial
decision, or public policy, and if such court should declare any such portion,
provision or provisions of this Agreement to be illegal, invalid, unlawful,
void or unenforceable as written or applied, then it is the intent of the
parties hereto (i) that such portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid and
enforceable, including by virtue of any suspension or stay of such ruling
pending appeal or other judicial review, by virtue of any reversal of such
decision by a higher court or by reducing the amount or degree of any
obligation or waiver which is unenforceably excessive by the minimum amount in
order to make the same enforceable, (ii) that the remainder of this Agreement
shall be construed as if such illegal, invalid, unlawful, void or unenforceable
portion, provision or provisions were either not contained therein or not
applied in such a manner as to be so unenforceable and (iii) that the rights,
obligations and interests of the parties hereto under the remainder of this
Agreement (including such portion, provision or provisions as otherwise
applied) shall continue in full force and effect.
14.8 No Third-Party Beneficiaries. The provisions of this
Agreement are solely for the purpose, and shall have the sole effect, of
defining the relative rights and obligations of the parties hereto and may not
be relied upon or enforced by any Person not a party hereto; no Person shall
have third-party beneficiary rights hereunder. The Borrower hereby expressly
acknowledges that the provisions of any Intercreditor Agreement are solely for
the purpose, and shall have the sole effect, of defining the relative rights
and obligations of the Senior Lender and the Collateral Agent and may not be
relied upon or enforced by any Person not a party thereto (including the
Borrower and the other Companies) and that no Person (including the Borrower
and the other Companies) shall have third-party beneficiary rights thereunder.
The Borrower hereby acknowledges and agrees that the Collateral Agent in taking
or refraining from taking any action under this Agreement or any of the other
Loan Documents shall act or refrain from acting on the instructions of such
requisite number or percentage of the Senior Lenders (if at the relevant time
there is more than one Senior Lender), as any Intercreditor Agreement may
require and the Borrower shall have no obligation or right to inquire as to the
authority of the Collateral Agent in taking or refraining from taking any such
action. The Borrower further acknowledges and agrees that any reference in
this Agreement or any of the other Loan Documents to the discretion, judgment
or the like of the Collateral Agent shall mean the collective discretion,
judgment or the like of such requisite number or percentage of the Senior
Lenders as any Intercreditor Agreement may require and that whenever in any of
the Loan Documents or Intercompany Loan Documents any standard of
reasonableness is applied to the discretion, judgment or the like of the
Collateral Agent, such standard shall be met if such collective discretion,
judgment or the like meets such standard.
14.9 Choice of Law and Waiver of Jury Trial.
(a) Choice of Law. THE VALIDITY OF THIS AGREEMENT, ITS
CONSTRUCTION, INTERPRETATION AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO, SHALL BE DETERMINED UNDER, GOVERNED BY, AND
<PAGE> 102
-94-
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW.
(b) Waiver of Jury Trial. TO THE MAXIMUM EXTENT
PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY ACTION, CAUSE OF ACTION, CLAIM, DEMAND OR PROCEEDING
ARISING UNDER OR WITH RESPECT TO THIS AGREEMENT OR IN ANY WAY CONNECTED WITH,
RELATED TO OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THIS
AGREEMENT OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO
HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY
MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT OR OTHER
TRIBUNAL AS EVIDENCE OF THE CONSENT OF ANY OTHER PARTY TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.
14.10 Exhibits and Schedules. The Exhibits and Schedules referred
to herein are those exhibits and schedules (i) attached to the Prior Credit
Agreement (which Exhibits shall remain effective notwithstanding the fact that
this Agreement amends and restates the Prior Credit Agreement), (ii) attached
to this Agreement, which Exhibits and Schedules either have been, are being or
will be delivered by the parties prior to, concurrently with or after the
execution and delivery of this Agreement; and (iii) the Senior Lender in its
reasonable discretion may correct errors in the determination of Aggregate
Asset Value, and the Senior Lender may amend the allocated Loan amounts on
Schedule 1.9 and the Minimum Release Prices subject to the constraints of this
Agreement. The Senior Lender shall give prompt written notice to the Borrower
of any such corrections or amendments accompanied by a full restatement of the
affected schedule; provided, however, that the initial schedules as to
Aggregate Asset Value, Minimum Release Prices and allocated loan amounts shall
control notwithstanding the constraints in this Agreement, including Section
6.10.
14.11 Cross References. The Loan Documents, Intercompany Loan
Documents, Security Documents and Intercompany Security Documents contain
references to specific provisions of the Prior Credit Agreement and any
subsequent modified, amended or restated versions thereof. Any such reference
shall be deemed to be a reference to a corresponding provision of this Amended
and Restated Credit Agreement as provided on Schedule 14.11.
<PAGE> 103
-95-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
a sealed instrument as of the date first above written.
STARWOOD LODGING TRUST SLT REALTY PARTNERSHIP
By: Starwood Lodging Trust,
By: its general partner
--------------------------------
Jeffrey C. Lapin
By:
--------------------
Jeffrey C. Lapin
President
MERRILL LYNCH MORTGAGE
CAPITAL INC.
By:
--------------------------
Name:
Title:
BANKERS TRUST COMPANY, as
Collateral Agent
By:
--------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Corporation.
Hotel Investors of Arizona, Inc.
Hotel Investors of Nebraska, Inc.
Hotel Investors of Michigan, Inc.
Hotel Investors of Missouri, Inc.
Hotel Investors Corporation of Nevada
Hotel Investors of Virginia, Inc.
Columbus Operators, Inc.
Lyntex Properties, Inc.
Western Host, Inc.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Joint Registration Statement
No. 33-14292 of Starwood Lodging Trust and Starwood Lodging Corporation (the
"Companies") on Form S-8 of our report dated March 24, 1995 appearing in this
Joint Annual Report on Form 10-K of Starwood Lodging Trust and Starwood Lodging
Corporation for the year ended December 31, 1994.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Los Angeles, California
March 24, 1995
<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 10K.
</LEGEND>
<CIK> 0000048595
<NAME> STARWOOD LODGING TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 4,810,000
<SECURITIES> 0
<RECEIVABLES> 3,965,000
<ALLOWANCES> 0
<INVENTORY> 5,375,000
<CURRENT-ASSETS> 0
<PP&E> 51,353,000
<DEPRECIATION> (16,877,000)
<TOTAL-ASSETS> 48,626,000
<CURRENT-LIABILITIES> 9,704,000
<BONDS> 40,664,000
<COMMON> 1,213,000
0
0
<OTHER-SE> (2,955,000)
<TOTAL-LIABILITY-AND-EQUITY> 48,626,000
<SALES> 0
<TOTAL-REVENUES> 110,962,000
<CGS> 0
<TOTAL-COSTS> 107,765,000
<OTHER-EXPENSES> 1,324,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,071,000
<INCOME-PRETAX> (1,198,000)
<INCOME-TAX> (1,198,000)
<INCOME-CONTINUING> (1,198,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,198,000)
<EPS-PRIMARY> (0.10)
<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 ON F0RM 10K.
</LEGEND>
<CIK> 0000316206
<NAME> STARWOOD LODGING COPRORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 255,000
<SECURITIES> 0
<RECEIVABLES> 42,667,000
<ALLOWANCES> 0
<INVENTORY> 2,374,000
<CURRENT-ASSETS> 0
<PP&E> 165,648,000
<DEPRECIATION> (48,699,000)
<TOTAL-ASSETS> 162,245,000
<CURRENT-LIABILITIES> 5,061,000
<BONDS> 146,734,000
<COMMON> 12,133,000
0
0
<OTHER-SE> (1,683,000)
<TOTAL-LIABILITY-AND-EQUITY> 162,245,000
<SALES> 0
<TOTAL-REVENUES> 21,671,000
<CGS> 0
<TOTAL-COSTS> 6,788,000
<OTHER-EXPENSES> 1,324,000
<LOSS-PROVISION> 759,000
<INTEREST-EXPENSE> 16,265,000
<INCOME-PRETAX> (3,465,000)
<INCOME-TAX> (3,465,000)
<INCOME-CONTINUING> (3,465,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,465,000)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> 0
</TABLE>
