<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
----------------------------
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________
<TABLE>
<S> <C>
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.)
2231 East Camelback Road, Suite 410 2231 East Camelback Road, Suite 400
Phoenix, AZ 85016 Phoenix, AZ 85016
(Address of principal executive (Address of principal executive
offices, including zip code) offices, including zip code)
(602) 852-3900 (602) 852-3900
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
</TABLE>
Indicate by check mark whether the Registrants (1) have filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrants were required to file such
reports), and (2) have been subject to such filing requirements for the
past 90 days. Yes X No .
----- -----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.
45,345,503 Shares of Beneficial Interest, par value $0.01 per
share, of Starwood Lodging Trust paired with 45,345,503 Shares of
Common Stock, par value $0.01 per share, of Starwood Lodging
Corporation, outstanding as of May 5, 1997.
<PAGE> 2
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements of Starwood Lodging Trust and
Starwood Lodging Corporation are provided pursuant to the requirements of this
item.
INDEX TO FINANCIAL STATEMENTS
Starwood Lodging Trust and Starwood Lodging Corporation:
Combined Consolidated Balance Sheets - As of March 31, 1997 and December 31,
1996
Combined Consolidated Statements of Operations - For the three months ended
March 31, 1997 and 1996
Combined Consolidated Statements of Cash Flows - For the three months ended
March 31, 1997 and 1996
Starwood Lodging Trust:
Consolidated Balance Sheets - As of March 31, 1997 and December 31, 1996
Consolidated Statements of Operations - For the three months ended March 31,
1997 and 1996
Consolidated Statements of Cash Flows - For the three months ended March 31,
1997and 1996
Starwood Lodging Corporation:
Consolidated Balance Sheets - As of March 31, 1997 and December 31, 1996
Consolidated Statements of Operations - For the three months ended March 31,
1997 and 1996
Consolidated Statements of Cash Flows - For the three months ended March 31,
1997 and 1996
Notes to Financial Statements
2
<PAGE> 3
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Hotel assets held for sale - net ................................ $ 29,233 $ 21,644
Hotel assets - net .............................................. 1,544,546 1,100,030
----------- -----------
1,573,779 1,121,674
Mortgage notes receivable - net ................................. 89,580 90,741
Investments ..................................................... 8 948
----------- -----------
Total real estate investments ................................ 1,663,367 1,213,363
Cash and cash equivalents ....................................... 148,169 25,426
Accounts, interest and rent receivable .......................... 56,988 43,278
Notes receivable - net .......................................... 2,800 2,930
Inventories, prepaid expenses and other assets .................. 25,324 27,743
----------- -----------
$ 1,896,648 $ 1,312,740
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and revolving lines of credit ...... $ 593,025 $ 422,334
Mortgage and other notes payable ................................ 129,354 57,232
Accounts payable and other liabilities .......................... 53,572 57,296
Distributions payable ........................................... 22,868 19,258
----------- -----------
798,819 556,120
----------- -----------
Commitments and contingencies
MINORITY INTEREST ............................................... 254,451 163,959
----------- -----------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest at March 31, 1997 and
December 31, 1996; $.01 par value; authorized 100,000,000
shares; outstanding 46,031,000 and 40,078,000 at March 31,
1997 and December 31, 1996, respectively ..................... 416 401
Corporation common stock at March 31, 1997 and
December 31, 1996; $.01 par value; authorized 100,000,000
shares; outstanding 46,031,000 and 40,078,000 at March 31,
1997 and December 31, 1996, respectively ..................... 416 401
Additional paid-in capital ...................................... 1,088,641 827,760
Distributions in excess of earnings ............................. (246,095) (235,901)
----------- -----------
843,378 592,661
----------- -----------
$ 1,896,648 $ 1,312,740
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
-------- -------
<S> <C> <C>
REVENUE
Rooms ............................................ $106,973 $37,126
Food and beverage ................................ 43,538 9,827
Other ............................................ 11,666 3,349
-------- -------
Total hotel revenue ............................ 162,177 50,302
Gaming ........................................... 3,920 6,829
Interest from mortgage and other notes ........... 4,086 2,525
Rents from leased hotel properties and
income from investments ........................ 198 183
Management fees and other income ................. 2,338 740
-------- -------
172,719 60,579
-------- -------
EXPENSES
Rooms ............................................ 26,989 9,153
Food and beverage ................................ 33,682 7,839
Other ............................................ 57,051 18,590
-------- -------
Total hotel expenses ........................... 117,722 35,582
Gaming ........................................... 4,089 5,835
Interest ......................................... 10,491 3,223
Depreciation and amortization .................... 24,560 7,660
Administrative and general ....................... 5,815 2,373
-------- -------
162,677 54,673
-------- -------
Income before minority interest .................. 10,042 5,906
Minority interest ................................ 2,256 1,816
-------- -------
NET INCOME ............................. $ 7,786 $ 4,090
======== =======
NET INCOME PER PAIRED SHARE ............ $ 0.18 $ 0.20
======== =======
Weighted Average Number of Paired Shares ......... 44,313 20,697
======== =======
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ................................................ $ 7,786 $ 4,090
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Minority interest .............................................. 2,256 1,816
Depreciation and amortization .................................. 24,560 7,660
Accretion of discount .......................................... (1,418) (780)
Warrants and paired shares issued as compensation .............. 569 --
Changes in operating assets and liabilities:
Increase in accounts receivable, inventories,
prepaid expenses and other assets ............................ (12,862) (6,169)
Increase (decrease) in accounts payable and other liabilities .. (3,872) 6,948
--------- ---------
Net cash provided by operating activities ............ 17,019 13,565
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of hotel properties .................................. (229,979) (109,412)
Improvements and additions to hotel assets ....................... (20,665) --
Purchase of investments .......................................... -- (9)
Sales of investments ............................................. 940 --
Net proceeds from sales of hotel assets .......................... -- 634
Purchase of mortgage and other notes receivable .................. -- (20,113)
Principal received on mortgage and other notes receivable ........ 2,816 941
--------- ---------
Net cash used in investing activities ................ (246,888) (127,959)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under collateralized notes payable and
revolving lines of credit ...................................... 170,682 60,887
Borrowings under mortgage and other notes payable ................ 98,000 467
Principal payments on mortgage and other notes payable ........... (25,878) --
Net proceeds from equity offerings ............................... 129,667 --
Contributed capital and adjustments............................... (253) 76,068
Distributions paid ............................................... (19,606) (9,284)
--------- ---------
Net cash provided by financing activities ............ 352,612 128,138
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS ........................... 122,743 13,744
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF
THE PERIOD ...................................................... 25,426 9,332
--------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD .......................................................... $ 148,169 $ 23,076
========= =========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
STARWOOD LODGING TRUST
UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Hotel assets held for sale - net ........................................... $ 19,715 $ 12,615
Hotel assets - net ......................................................... 1,433,350 988,309
----------- -----------
1,453,065 1,000,924
Mortgage notes receivable - net ............................................ 89,580 90,741
Mortgage notes receivable - Corporation .................................... 88,989 88,077
Investments ................................................................ 8 948
----------- -----------
Total real estate investments ........................................ 1,631,642 1,180,690
Cash and cash equivalents .................................................. 124,272 3,810
Rent and interest receivable .............................................. 14,509 12,617
Notes receivable - net ..................................................... 1,980 2,237
Notes receivable - Corporation ............................................. 36,185 17,741
Prepaid expenses and other assets .......................................... 13,987 16,271
=========== ===========
$ 1,822,575 $ 1,233,366
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and revolving lines of credit ................. $ 593,025 $ 422,334
Mortgage and other notes payable ........................................... 127,704 55,269
Accounts payable and other liabilities ..................................... 9,588 9,200
Distributions payable ...................................................... 22,769 19,258
----------- -----------
753,086 506,061
----------- -----------
Commitments and contingencies
MINORITY INTEREST .......................................................... 248,389 158,005
----------- -----------
SHAREHOLDERS' EQUITY
Trust shares of beneficial interest at March 31, 1997 and
December 31, 1996; $.01 par value; authorized 100,000,000 shares;
outstanding 46,031,000 and 40,078,000 at March 31, 1997
and December 31, 1996, respectively ..................................... 416 401
Additional paid-in capital ................................................. 986,759 729,276
Distributions in excess of earnings ........................................ (166,075) (160,377)
----------- -----------
821,100 569,300
=========== ===========
$ 1,822,575 $ 1,233,366
=========== ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
STARWOOD LODGING TRUST
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
------- -------
<S> <C> <C>
REVENUE
Rents from Corporation ................................. $40,939 $13,520
Interest from Corporation .............................. 2,542 2,188
Interest from mortgage and other notes ................. 4,086 2,504
Rents from other leased hotel properties and
income from joint ventures .......................... 198 183
Other income ........................................... 1,322 406
------- -------
49,087 18,801
------- -------
EXPENSES
Interest ............................................... 10,459 3,168
Depreciation and amortization .......................... 20,234 3,386
Administrative and general ............................. 2,213 1,188
------- -------
32,906 7,742
------- -------
Income before minority interest ........................ 16,181 11,059
Minority interest ...................................... 3,998 3,917
------- -------
NET INCOME ................................... $12,183 $ 7,142
======= =======
NET INCOME PER SHARE ......................... $ 0.28 $ 0.35
======= =======
Weighted Average Number of Shares ...................... 44,313 20,697
======= =======
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
STARWOOD LODGING TRUST
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................................... $ 12,183 $ 7,142
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest ............................................ 3,998 3,917
Depreciation and amortization ................................ 20,234 3,386
Accretion of discount ........................................ (1,418) (780)
Deferred interest - Corporation .............................. (998) 936
Warrants and paired shares issued as compensation ............ 528 --
Changes in operating assets and liabilities:
Increase in rent and interest receivable,
prepaid expenses and other assets ........................ (577) (2,708)
Increase (decrease) in accounts payable and other liabilities. 240 (1,356)
--------- ---------
Net cash provided by operating activities .......... 34,190 10,537
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of hotel properties ................................ (229,979) (88,240)
Improvements and additions to hotel assets ..................... (16,716) --
Purchase of investments ........................................ -- (9)
Sales of investments ........................................... 940 --
Net proceeds from sales of hotel assets ........................ -- 634
Purchase of mortgage and other notes receivable ................ -- (20,113)
Principal received on mortgage and other notes receivable ...... 2,682 925
Net change in notes receivable - Corporation ................... (18,358) (24,614)
--------- ---------
Net cash used in investing activities .............. (261,431) (131,417)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under collateralized notes payable and
revolving lines of credit .................................... 170,682 60,887
Borrowings under mortgage and other notes payable .............. 98,000 --
Principal payments on mortgage and other notes payable ......... (25,565) --
Net proceeds from equity offerings ............................. 123,215 --
Contributed capital and adjustments ............................ 977 76,169
Distributions paid ............................................. (19,606) (9,284)
--------- ---------
Net cash provided by financing activities .......... 347,703 127,772
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS .......................... 120,462 6,892
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD ................................................ 3,810 710
--------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD ........................................................ $ 124,272 $ 7,602
========= =========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
STARWOOD LODGING CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Hotel assets held for sale - net ................................... $ 9,518 $ 9,029
Hotel assets - net ................................................. 111,196 111,721
--------- ---------
Total real estate investments ................................ 120,714 120,750
Cash and cash equivalents .......................................... 23,897 21,616
Accounts receivable ................................................ 42,479 30,661
Notes receivable ................................................... 820 693
Inventories, prepaid expenses and other assets ..................... 11,337 11,472
--------- ---------
$ 199,247 $ 185,192
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage and other notes payable ................................... $ 1,650 $ 1,963
Mortgage notes payable - Trust ..................................... 88,989 88,077
Notes payable - Trust .............................................. 36,185 17,741
Accounts payable and other liabilities ............................. 43,984 48,096
Distributions payable .............................................. 99 --
--------- ---------
170,907 155,877
--------- ---------
Commitments and contingencies
MINORITY INTEREST .................................................. 6,062 5,954
--------- ---------
SHAREHOLDERS' EQUITY
Corporation common stock at March 31, 1997 and
December 31, 1996; $.01 par value; authorized 100,000,000
shares; outstanding 46,031,000 and 40,078,000 at March 31,
1997 and December 31, 1996, respectively ........................ 416 401
Additional paid-in capital ......................................... 101,882 98,484
Accumulated deficit ................................................ (80,020) (75,524)
--------- ---------
22,278 23,361
--------- ---------
$ 199,247 $ 185,192
========= =========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 10
STARWOOD LODGING CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
--------- --------
<S> <C> <C>
REVENUE
Rooms ........................... $ 106,973 $ 37,126
Food and beverage ............... 43,538 9,827
Other ........................... 11,666 3,349
--------- --------
Total hotel revenue ........... 162,177 50,302
Gaming .......................... 3,920 6,829
Interest from notes receivable .. -- 21
Management fees and other income 1,016 334
--------- --------
167,113 57,486
--------- --------
EXPENSES
Rooms ........................... 26,989 9,153
Food and beverage ............... 33,682 7,839
Other ........................... 57,051 18,590
--------- --------
Total hotel expenses .......... 117,722 35,582
Gaming .......................... 4,089 5,835
Rent - Trust .................... 40,939 13,520
Interest - Trust ................ 2,542 2,188
Interest - other ................ 32 55
Depreciation and amortization ... 4,326 4,274
Administrative and general ...... 3,602 1,185
--------- --------
173,252 62,639
--------- --------
Loss before minority interest ... (6,139) (5,153)
Minority interest ............... (1,742) (2,101)
--------- --------
NET LOSS .............. $ (4,397) $ (3,052)
========= ========
NET LOSS PER SHARE .... $ (0.10) $ (0.15)
========= ========
Weighted Average Number of Shares 44,313 20,697
========= ========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 11
STARWOOD LODGING CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ....................................................... $ (4,397) $ (3,052)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Minority interest ............................................ (1,742) (2,101)
Depreciation and amortization ................................ 4,326 4,274
Deferred interest - Trust .................................... 998 (936)
Paired shares issued as compensation ......................... 41 --
Changes in operating assets and liabilities:
Increase in accounts receivable, inventories,
prepaid expenses and other assets .......................... (12,285) (3,461)
Increase (decrease) in accounts payable and other liabilities. (4,112) 8,304
-------- --------
Net cash provided by (used in) operating activities....... (17,171) 3,028
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of hotel properties ................................ -- (21,172)
Improvements and additions to hotel assets ..................... (3,949) --
Principal received on notes receivable ......................... 134 16
-------- --------
Net cash used in investing activities .................... (3,815) (21,156)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under mortgage and other notes payable .............. -- 467
Principal payments on mortgage and other notes payable ......... (313) --
Net proceeds from equity offerings ............................. 6,452 --
Contributed capital and adjustments ............................ (1,230) (101)
Net change in notes payable - Trust ............................ 18,358 24,614
-------- --------
Net cash provided by financing activities ................ 23,267 24,980
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS .......................... 2,281 6,852
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD ................................................ 21,616 8,622
-------- --------
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD ....................................................... $ 23,897 $ 15,474
======== ========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 12
STARWOOD LODGING TRUST AND
STARWOOD LODGING CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q which mandate adherence to
Rule 10-01 of Regulation S-X. Accordingly, these statements do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management of
Starwood Lodging Trust (the "Trust") and Starwood Lodging Corporation (the
"Corporation"), all adjustments necessary for a fair presentation, consisting
only of normal recurring accruals, have been included. The financial statements
presented herein have been prepared in accordance with the accounting policies
described in the Registrants' Joint Annual Report on Form 10-K for the year
ended December 31, 1996 and should be read in conjunction therewith.
NOTE 2. BASIS OF PRESENTATION
The Trust and the Corporation (together, the "Company") have unilateral
control of SLT Realty Limited Partnership ("Realty") and SLC Operating Limited
Partnership ("Operating"), respectively, and therefore, the historical financial
statements of Realty and Operating are consolidated with those of the Trust and
the Corporation, respectively. Unless the context otherwise requires, all
references herein to the "Company" refer to the Trust and the Corporation, and
all references to the "Trust" and to the "Corporation" include the Trust and the
Corporation and those entities respectively owned or controlled by the Trust or
the Corporation, including Realty and Operating. Information with respect to the
shares of beneficial interest of the Trust which are paired with shares of
common stock of the Corporation (the "Paired Shares"), has been adjusted to
reflect a three-for-two stock split effective January 27, 1997. The total
number of units outstanding in Realty and Operating was 58,908,013 at March 31,
1997.
For the three months ended March 31, 1996, the Company accounted for
its 58.2% investment in the joint venture that owns the Boston Park Plaza under
the equity method of accounting. Beginning with the Company's Joint Annual
Report on Form 10-K for the year ended December 31, 1996, the Company has
consolidated the results from the Boston Park Plaza and, accordingly, has
recorded a minority interest relating to the 41.8% third party minority interest
in such joint venture. In addition, the Company has restated its results for the
three months ended March 31, 1996 to reflect the consolidation of this
investment.
NOTE 3. HOTEL ASSETS
On January 8, 1997, the Company completed the purchase of the 220-room
Deerfield Beach Hilton Hotel, located in Deerfield Beach, Florida, for
approximately $11.5 million in cash.
On January 17, 1997, the Company completed the purchase of the 263-room
Radisson Hotel Denver South, located in Denver, Colorado, for approximately
$21.75 million in cash.
12
<PAGE> 13
On February 14, 1997, the Company acquired HEI Hotels, LLC ("HEI"), a
Westport, Connecticut-based hotel operating company, which manages 19 hotels,
and ten hotel properties (the "HEI Owned Hotels") that HEI owned in a joint
venture with PRISA II, an institutional real estate investment fund managed by
Prudential Real Estate Investors. Realty and Operating issued to PRISA II and
the owners of HEI, limited partnership interests in Realty and Operating which
are exchangeable for approximately 6.548 million Paired Shares of the Trust and
Corporation (valued for purposes of the transaction at approximately $215
million), and paid $112 million in cash and notes in connection with the
transaction.
The HEI Owned Hotels consist of ten hotel assets (all of which are
managed by HEI) with 3,040 hotel rooms, located in Long Beach, California;
Norfolk, Virginia; Baltimore, Maryland; Edison, New Jersey; Arlington, Virginia;
Charleston, South Carolina; King of Prussia, Pennsylvania; Santa Rosa,
California; Novi, Michigan; and Atlanta, Georgia. The nine additional hotels
managed by HEI (the "HEI Managed Hotels"), which contain a total of 2,297 rooms,
are located in Houston, Texas; Ontario, California; Grand Junction, Colorado;
Danbury, Connecticut; Princeton, New Jersey; Smithtown, New York; Wilmington,
Delaware; Bethesda, Maryland and Virginia Beach, Virginia.
On February 21, 1997, the Company completed the purchase of the
578-room Days Inn in Chicago, Illinois for approximately $48 million in cash.
On March 11, 1997, the Company completed the purchase of the 120-suite
Hermitage Suites Hotel in Nashville, Tennessee for approximately $15.8 million,
comprised of limited partnership interests in Realty and Operating exchangeable
for 233,106 Paired Shares of the Trust and the Corporation (valued for the
purposes of this transaction at $9.4 million) and $6.4 million in cash.
On March 12, 1997, the Company completed the purchase of the 100-room
Hotel De La Poste in New Orleans, Louisiana for approximately $16.0 million in
cash.
NOTE 4. TAX EXEMPT BONDS
On February 20, 1997, the Company guaranteed bonds issued by The
Philadelphia Authority for Industrial Development in the principal amount of
$39.5 million due October, 2013 (the "Tax Exempt Bonds"). The Tax Exempt Bonds
bear interest at a rate of 6.5% with no principal amortization, were issued at a
discount to yield 6.7% and are secured by two hotels of the Company located at
the Philadelphia International Airport. Net proceeds from the Tax Exempt Bonds
of approximately $37.6 million were used to partially fund the acquisition of
the 578-room Days Inn in Chicago, Illinois.
NOTE 5. OFFERINGS
On March 26, 1997, the Company completed a public offering of 3,000,000
Paired Shares (the "March 1997 Offering"). Net proceeds from the March 1997
Offering of approximately $130.0 million were used, in part, to fund the
acquisition of the hotels referred to in Note 8 below.
13
<PAGE> 14
NOTE 6. HOTEL ASSETS HELD FOR SALE
At March 31, 1997, the Company's portfolio included six hotel
properties which were held for sale. The six properties include the 293-room
Radisson Marque Hotel in Winston-Salem, North Carolina, the 151-room Bay Valley
Resort in Bay City, Michigan, the 155-room Tyee Hotel in Olympia, Washington,
the 166-room Best Western in Las Cruces, New Mexico, the 175-room Best Western
Airport in El Paso, Texas and the 142-room Best Western in Savannah, Georgia. On
April 15, 1997, the Company sold the Radisson Marque Hotel in Winston-Salem for
approximately $7.5 million in cash.
NOTE 7. COMBINED PRO FORMA FINANCIAL INFORMATION
Due to the impact of the 15 hotels acquired by the Company in the first
quarter of 1997, the following combined pro forma statements of operations are
presented to supplement the historical statements of operations. These combined
pro forma statements reflect the acquisition of the HEI Owned Hotels as if they
occurred on January 1, 1996:
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
1997 1996
--------------------------
Combined (in thousands,
except per share amounts)
<S> <C> <C>
Revenues ............................ $184,792 $82,840
Net income (loss) ................... 9,341 6,877
Net income (loss) per share ......... $ 0.21 $ 0.33
</TABLE>
NOTE 8. SUBSEQUENT EVENTS
On April 3, 1997, the Company completed the purchase of the 264-suite
Marriott Suites hotel in San Diego, California for approximately $32.5 million
in cash. On April 4, 1997, the Company completed the purchase of the 129-room
Tremont Hotel in Chicago, Illinois for approximately $14.4 million in cash. On
May 7, 1997, the Company completed the purchase of the 172-room Raphael Hotel in
Chicago, Illinois for approximately $17.8 million in cash.
NOTE 9. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.128, Earnings Per Share (SFAS
128) which specifies the computation, presentation, and disclosure requirements
for earnings per share. SFAS 128 replaces the presentation of primary and fully
diluted EPS pursuant to Accounting Principles Board Opinion No. 15 Earnings Per
Share (APB 15) with the presentation of basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing net income available to common
stockholders by the weighted average number of shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. The Company is required to adopt SFAS
14
<PAGE> 15
128 with its December 31, 1997 financial statements and restate all prior period
EPS information. The Company will continue to accounts for EPS under APB 15
until that time.
A summary of the Company's basic EPS and diluted EPS for the three
months ended March 31 follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------- ---------------
Basic and
Basic EPS Diluted EPS Diluted EPS
--------------- -------------- ---------------
<S> <C> <C> <C>
Trust $ 0.29 $ 0.28 $ 0.35
Corporation $(0.10) $(0.10) $(0.15)
Combined $ 0.19 $ 0.18 $ 0.20
</TABLE>
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis should be read in
conjunction with the Management's Discussion and Analysis included in the
Company's Joint Annual Report on Form 10-K for the year ended December 31, 1996.
HISTORICAL RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1996
THE TRUST
Rents from the Corporation, which are based largely on hotel revenues,
increased $27.4 million for the three months ended March 31, 1997, as compared
to the corresponding period of 1996. The increase was primarily the result of
rents earned by the Trust on 41 hotels containing approximately 12,500 rooms
(the "Acquired Hotels") acquired by the Trust since April 1996. The investment
in the Acquired Hotels (the 442-room Clarion Hotel located at the San Francisco
Airport, the 308-suite Doubletree Guest Suites in Irving, Texas, the 254-suite
Doubletree Guest Suites in Ft. Lauderdale, Florida, and the 260-room Westin in
Tampa, Florida acquired in April 1996; the 177-room Days Inn in Philadelphia,
Pennsylvania and 251-suite Doubletree Guest Suites in Philadelphia, Pennsylvania
acquired in July 1996; the acquisition of a portfolio of 8 hotels owned by an
institution (the "Institutional Portfolio"), the acquisition of a portfolio of 9
hotels owned by Hotels of Distinction Ventures, Inc. (the "HOD Portfolio")
(excluding the 293-room Radisson Marque in Winston-Salem, North Carolina which
was acquired by the Corporation), and the 294-room Marriott Forrestal Village in
Princeton, New Jersey acquired in August 1996; the 121-room Doral Tuscany and
the 199-room Doral Court in New York, New York acquired in September 1996; the
257-room Westwood Marquis in Los Angeles, California acquired in December 1996;
the 220-room Deerfield Beach Hilton in Deerfield Beach, Florida and 263-room
Radisson Denver South in Denver, Colorado acquired in January 1997; the HEI
Owned Hotels and the 578-room Days Inn Chicago acquired in February 1997 and the
120-suite Hermitage Suites in Nashville, Tennessee and the 100-room Hotel De La
Poste in New Orleans, Louisiana acquired in March 1997), accounted for increased
rents of $27.9 million for the three months ended March 31, 1997, as compared to
the corresponding period in 1996.
In addition, rents earned by the Trust from continuously owned
properties leased to the Corporation decreased by approximately $500,000 for the
three months ended March 31, 1997, as compared to the corresponding period in
1996. The decrease was primarily the result of the sale of three hotel assets in
1996 (the Best Western in Columbus Ohio, and the Bourbon Street Hotel and Casino
and the King 8 Hotel, Gambling Hall and Truck Plaza (the "King 8") both located
in Las Vegas, Nevada).
Interest from the Corporation increased by approximately $354,000 for
the three months ended March 31, 1997, as compared to the corresponding period
of 1996. The increase in interest income was primarily a result of interest paid
on the first mortgage of the Midland Hotel in Chicago, Illinois which was
acquired by the Corporation in March 1996.
Interest from mortgage and other notes amounted to $4.1 million for the
three months ended March 31, 1997, as compared to $2.5 million for the
corresponding period in 1996. The increase resulted from the purchase during the
third quarter of 1996 of debt, a portion of which is
16
<PAGE> 17
secured by the 305-room Holiday Inn in Milpitas, California and a first mortgage
note secured by the King 8 which was sold in the fourth quarter of 1996. The
increase was offset in part by principal amortization.
Other income for the three months ended March 31, 1997 includes a $1.2
million gain (net of related expenses) realized in connection with the sale of
securities.
Interest expense increased by approximately $7.3 million for the three
months ended March 31, 1997, as compared to the corresponding period of 1996.
The increase was due to borrowings under two loan facilities and a term loan
(the "Lehman Facilities") with Lehman Brothers, Inc. and certain of its
affiliates ("Lehman Brothers"), and a loan facility with Goldman Sachs (the
"Goldman Facility" and together with the Lehman Facilities, the "Lines of
Credit"); a mortgage secured by the Doral Court and Doral Tuscany in New York,
with the Sumitomo Trust and Banking Co., Ltd. (the "Doral Mortgage"); a mortgage
secured by the Boston Park Plaza with the Life Insurance Company of Georgia (the
"BPP Mortgage"); a short term loan with The Prudential Insurance Company of
America on behalf of Prudential Property Investment Separate Accounts II; and
the Tax Exempt Bonds, used to acquire the above mentioned properties offset by
the net proceeds from two public offerings in 1996 and the March 1997 Offering.
Depreciation and amortization expense increased by approximately $16.8
million during the three months ended March 31, 1997 as compared to the
corresponding period of 1996, principally due to the acquisition of the Acquired
Hotels.
Administrative and general expenses for the three months ended March
31, 1997 increased by approximately $1.0 million to $2.2 million, as compared to
$1.2 million for the corresponding period of 1996. The increase resulted
predominantly from expenses incurred as a result of the awards granted under the
Trust's Long-Term Incentive Plan, the hiring during the quarter of Gary M.
Mendell as the President of the Trust, and the hiring in September 1996 of
Steven R. Goldman as an officer the Trust (Mr. Goldman served as an officer of
the Corporation until September 1996).
Minority interest represents primarily the interest of the limited
partners in Realty for the three months ended March 31, 1997, approximately
$108,000 relating to the 41.8% minority interest of a third-party in the joint
venture that owns the Boston Park Plaza hotel and approximately $82,000 relating
to the 6.5% minority interest of a third-party in the joint venture that owns
the Westwood Marquis.
THE CORPORATION
Hotel revenues increased by approximately $111.9 million for the three
months ended March 31, 1997, as compared to the corresponding period of 1996.
The leasing and assumption of management of the Acquired Hotels and the addition
of the 293-room Radisson Marque hotel in Winston-Salem, North Carolina and the
257-room Midland Hotel in Chicago, Illinois resulted in increases in hotel
revenues of approximately $109.2 million for the three months ended March 31,
1997. The remaining increase of $2.7 million for the three months ended March
31, 1997 is attributable to other continuously owned properties.
Hotel gross margin for the three months ended March 31, 1997, was $44.5
million, or 27.4% of hotel revenues, as compared to $14.7 million, or 29.3% of
hotel revenues, for the same period of 1996. The decrease in gross margin was
primarily due to the increase in the food and
17
<PAGE> 18
beverage revenue component of total hotel revenue (26.9% for the three months
ended March 31, 1997 as compared to 19.5% for the same period in 1996) resulting
from the Company's continued investment in full-service hotels offset, in part,
by increases in revenue per available room ("REVPAR") and the termination of
third-party management agreements.
Gaming revenues for the three months ended March 31, 1997, as compared
to the corresponding period of 1996, decreased by approximately $2.9 million to
$3.9 million. Gaming gross margin for the three months ended March 31, 1997 was
a loss of $170,000, as compared to a profit of $994,000 for the corresponding
period in 1996.
The decrease in gaming revenues and the decline in gaming gross margin
predominately resulted from the sale of the Bourbon Street Hotel and Casino in
September 1996. The real property of the King 8 was also sold in 1996 for
approximately $18.8 million. The sale of the personal property of the King 8 for
$3 million is scheduled to close following the receipt by the purchaser or his
designee of required gaming approval. HICN, a subsidiary of the Corporation,
leases the real property from the purchaser and has agreed to continue to
operate the hotel and casino while the purchaser obtains required gaming
licenses and approvals.
Management fees and other income for the three months ended March 31,
1997 includes approximately $157,000 of management fee income from the joint
venture that owns the Boston Park Plaza hotel and approximately $309,000 of
management fee income from the HEI Managed Hotels.
Administrative and general expenses for the three months ended March
31, 1997 increased to $3.6 million or 2.2% of revenues, as compared to $1.2
million or 2.1% of revenues for the corresponding period of 1996. The increase
was primarily a result of increases in payroll costs commensurate with the
Company's growth, the assumption of management of hotels previously operated by
third-parties, and expenses incurred as a result of awards granted under the
Corporation's Long-Term Incentive Plan.
Depreciation and amortization expense increased by approximately
$52,000 for the three months ended March 31, 1997, as compared to the
corresponding period of 1996.
Minority interest represents primarily the interest of the limited
partners in Operating, a loss of $454,000 relating to the 41.8% minority
interest of a third-party in the joint venture that owns the Boston Park Plaza
hotel and approximately $7,000 relating to the 6.5% minority interest of a third
party in the joint venture that owns the Westwood Marquis.
For information with respect to rent and interest paid to the Trust
during the three months ended March 31, 1997 and 1996, see, "The Trust"
immediately above.
EXTERNAL GROWTH
During the three months ended March 31, 1997, the Company acquired
equity interests in 15 hotels containing more than 4,400 rooms at a combined
cost exceeding $425 million, as follows: the 220-room Deerfield Beach Hilton in
Deerfield Beach, Florida (January 1997); the 263-room Radisson Denver South in
Denver, Colorado (January 1997); the HEI Owned Hotels consisting of 3,040 rooms
(February 1997); the 578-room Days Inn in Chicago, Illinois (February 1997); the
120-suite Hermitage Suites Hotel in Nashville, Tennessee (March 1997); and the
100-room Hotel De La Poste in New Orleans, Louisiana (March 1997).
18
<PAGE> 19
INTERNAL GROWTH
On a same-store-sales basis, including the results of all hotels
acquired prior to March 31, 1997, for the period from their respective dates of
acquisition if acquired in 1997 as compared to the same period in 1996 and
excluding hotels held for sale and hotels under substantial renovation during
the quarter (Dallas Park Central in Dallas, Texas, Meany Tower in Seattle,
Washington and the Westin Washington, D.C.), REVPAR for the three months ended
March 31, 1997, increased 5.3% from $66.01 to $69.51 over the same period in
1996. The increase in REVPAR resulted from an increase in average daily rate
("ADR") of 8.9%, from $93.84 to $102.19, while the occupancy rate decreased by
2.3 percentage points.
The overall REVPAR increase for the three months ended March 31, 1997
was largely attributable to the strong increase in REVPAR at the Company's
upscale hotels. These hotels experienced an increase in REVPAR of 5.6% for the
three months ended March 31, 1997, as compared to the corresponding period of
1996. ADR for the Company's upscale hotels increased 8.3% for the three months
ended March 31, 1997, as compared to the corresponding period in 1996 while
occupancy rates decreased by 1.7 basis points.
The following tables summarize average occupancy, ADR and REVPAR on a
year-over-year basis for the Company's 74 owned and operated (including owned
but third-party managed hotels and including hotels acquired during the first
quarter for the period beginning with their respective dates of acquisition and
ending at the end of each period), non-gaming hotels for the three months ended
March 31, 1997 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
56 Upscale Hotels 1997 1996
------------- --------------
<S> <C> <C>
Occupancy Rate ................ 67.7% 69.4%
ADR ........................... $105.35 $97.27
REVPAR ........................ $ 71.33 $67.54
REVPAR % change ............... 5.6%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
18 Midscale/Economy Hotels 1997 1996
------------- --------------
<S> <C> <C>
Occupancy Rate ................ 54.6% 64.0%
ADR ........................... $69.84 $61.87
REVPAR ........................ $38.12 $39.60
REVPAR % change ............... (3.7)%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
65 Non-Gaming Hotels(1) 1997 1996
------------- --------------
<S> <C> <C>
Occupancy Rate ................ 68.0% 70.3%
ADR ........................... $102.19 $93.84
REVPAR ........................ $ 69.51 $66.01
REVPAR % change ............... 5.3%
</TABLE>
(1) Excluding six hotels held for sale and three hotels under substantial
renovation during the quarter.
Management believes that increases in REVPAR resulted primarily from
increases in demand due to continued favorable economic conditions which have
resulted in increased business and leisure travel throughout the United States,
while the supply of hotel rooms has not increased as rapidly, particularly in
major urban locations. Revenue increases for the quarter were greatest at hotels
located in the major urban markets of New York, Philadelphia, San
19
<PAGE> 20
Francisco, San Diego, and Chicago. REVPAR was negatively impacted by the Easter
holiday which fell during the first quarter of 1997 and during the second
quarter of 1996. REVPAR for the quarter was also negatively impacted by the
Atlanta properties (4.6% decrease in REVPAR) which benefited in 1996 from strong
ADR and occupancy relating to pre-Olympic activities.
Management believes that there are several important factors that have
contributed to the improved profitability of hotel properties, including
increased ADR and effective cost management. Because a substantial portion of
the hotels' operating costs and expenses are generally fixed, the Company
derives substantial operating leverage from increases in revenue. However, the
Company's continued investment in full-service properties has led to a larger
component of food and beverage revenue when compared to the same period last
year. Consequently, gross margins for the three months ended March 31, 1997
declined to 27.4% from 29.3% in the corresponding period in 1996.
During the three months ended March 31, 1997, consistent with its
business objective to capture the economic benefits otherwise retained by
third-party operators, the Corporation assumed management of the 15 hotels
acquired during the period. Management believes that the assumption of direct
control over the operations of these hotels will allow the Corporation to
effectively use the experience of management to improve operations. In addition,
during the three months ended March 31, 1997, the Corporation assumed management
of the HEI Managed Hotels.
During the three months ended March 31, 1997, the Company completed the
renovation of the Dallas Park Central, which reopened as the Radisson Hotel, and
the $6 million renovation of the Westin in Washington, D.C. Other hotels with
renovations in progress at the end of the first quarter included the Sheraton
Colony Square in Atlanta, Georgia ($6.5 million total renovation) and the Meany
Tower in Seattle, Washington (approximately $5.2 million). Renovations have also
begun and are scheduled to be completed in 1997 and 1998 for the Clarion Hotel
at the San Francisco Airport, the Radisson Hotel in Gainesville, Florida, the
Westin in Tampa, Florida, the Doubletree Philadelphia Airport in Philadelphia,
Pennsylvania, the Westwood Marquis in Los Angeles, California, and the Doral
Inn, the Doral Tuscany and the Doral Court in New York. In addition, the Boston
Park Plaza's renovation is currently scheduled to begin in November 1997, during
a seasonally weak period.
SEASONALITY AND DIVERSIFICATION
Demand is affected by normally recurring seasonal patterns. Generally
the Company's portfolio of hotels as a whole has performed better in the second
and third quarters due to decreased travel in the winter months. Additional
acquisitions may further affect the seasonality of the Company's current
portfolio. The Company has continued to implement a business strategy of
franchise and geographic diversification.
20
<PAGE> 21
COMBINED LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW PROVIDED BY OPERATING ACTIVITIES
The principal source of cash to be used to fund the Company's operating
expenses, interest expense, recurring capital expenditures and distribution
payments by the Trust is cash flow provided by operating activities. The Company
anticipates that cash flow provided by operating activities will provide the
necessary funds on a short and long term basis to meet operating cash
requirements including all distributions to shareholders by the Trust. During
the first quarter of 1997, the Trust paid a distribution of $0.39 per share
(after giving effect to the three-for-two stock split in January 1997) declared
in the fourth quarter of 1996. During the second quarter of 1997, the Trust paid
a distribution of $0.39 per share declared in the quarter ending March 31, 1997.
CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES
The Company intends to finance the acquisition of additional hotel
properties, hotel renovations and capital improvements and provide for general
corporate purposes through the Lines of Credit, through additional lines of
credit and, when market conditions warrant, through the issuance of additional
equity or debt securities.
In March 1996, Realty entered into a $24 million one year non-recourse
secured term loan (the "Term Loan") to fund the acquisition in March 1996 of the
257-room Midland Hotel in Chicago, and in April 1996, the amount of the Term
Loan was increased to $94 million. The Term Loan is secured by nine properties
of the Company on a cross-collateralized basis but is non-recourse to Realty. As
of March 31, 1997, Realty had borrowed $94 million under the Term Loan, which
accrues interest at a rate equal to the one, two, or three-month LIBOR, at the
Company's option, plus (a) 1.95% for the first $24 million and (b) 1.75% for the
balance of the Term Loan. The maturity date of the Term Loan was extended to
October 1997 with a right to further extend at the Company's option to April
1998.
In July 1996, the maturity date of the Mortgage Loan Funding Facility
(the "Mortgage Facility") with Lehman Brothers, which is secured by six notes
receivable, was extended from January 25, 1997, to July 25, 1997. As of March
31, 1997, Realty had borrowed $70.6 million under the Mortgage Facility.
In August 1996, the Company entered into the Goldman Facility for a
one-year (extendible to 18 months) loan of up to $300 million to fund a portion
of the acquisition cost of the HOD Portfolio and for general corporate purposes.
The Goldman Facility bears interest at one-month LIBOR plus 1.75% (2.75% during
the six month extension period) and is secured by interests in the Institutional
Portfolio and the HOD Portfolio. At March 31, 1997, the Company had borrowed
$268.0 million under the Goldman Facility.
On March 26, 1997, the Company completed the March 1997 Offering of
3,000,000 Paired Shares at a net price to the Company of approximately $43.35
per share. The net proceeds of approximately $130.0 million were used, in part,
to fund the acquisitions of the 264-suite Marriott Suites hotel in San Diego,
California, and the 129-room Tremont Hotel in Chicago, Illinois and for general
corporate purposes.
21
<PAGE> 22
As previously discussed, during the first quarter ended March 31, 1997,
the Company completed the renovation of the Dallas Park Central in Dallas, Texas
(now a Radisson) and the Westin in Washington, D.C. Other hotels with
significant renovations in progress at the end of the first quarter or planned
for 1997 and 1998, included the Sheraton Colony Square in Atlanta, Georgia; the
Meany Tower Hotel in Seattle, Washington; the Westin in Tampa, Florida; the
Doubletree Philadelphia Airport in Philadelphia, Pennsylvania; the Westwood
Marquis in Los Angeles, California; the Clarion Hotel at the San Francisco
Airport; the Radisson Hotel in Gainesville, Florida; and the Doral Inn, Doral
Tuscany and Doral Court in New York, New York. In addition, the Boston Park
Plaza's renovation is currently scheduled to begin in November, 1997, during a
seasonally weak period. The Company plans to expend in excess of $100 million
for renovations in 1997 including the renovations mentioned above. Major and
minor renovations, expansions and upgrades of other hotels are also being
contemplated. In addition, the Company intends to develop new hotels on a
selective basis. Sources of capital for major renovations, expansions and
upgrades of hotels as well as new construction are expected to be excess funds
from operations, additional debt financing, and additional equity raised in the
public and private markets.
As of March 31, 1997, since January 1, 1996, the Company has invested
over $1.3 billion in acquisitions of hotel assets. As part of its investment
strategy, the Company plans to continue to acquire additional hotels. Future
acquisitions are expected to be funded through further draws under the Lines of
Credit, draws under new lines of credit, issuance of long-term debt on either a
secured or unsecured basis, issuance of limited partnership units by Realty and
Operating that are exchangeable for Paired Shares and the issuance of additional
equity or debt securities by the Company. The Company intends to incur
additional indebtedness in a manner consistent with its policy of maintaining a
ratio of debt-to-total market capitalization of not more than 50%. On February
14, 1997, the Company issued 6,548,225 limited partnership units (valued for
purposes of the transaction at approximately $215 million) exchangeable for
Paired Shares and entered into a short term loan with The Prudential Insurance
Company of America on behalf of Prudential Property Investment Separate Account
II in the principal amount of $97.5 million (the "Prudential Loan") in order to
partially fund the acquisition of the HEI Portfolio. As of March 31, 1997, the
Company had borrowed $72.0 million under the Prudential Loan, which bears
interest at a rate of 7.0% and is due May 30, 1997.
On February 20, 1997, the Company guaranteed the Tax Exempt Bonds in
the principal amount of $39.5 million due October, 2013. The Tax Exempt Bonds
bear interest at a rate of 6.5% with no principal amortization, were issued at a
discount to yield 6.7% and are secured by two hotels of the Company located at
the Philadelphia International Airport. Net proceeds from the Tax Exempt Bonds
of approximately $37.6 million were used to partially fund the acquisition of
the 578-room Days Inn in Chicago, Illinois.
On April 3, 1997 the Company announced that it was working with
institutional lenders on the development of new credit facilities for up to $700
million which would consolidate and replace current credit facilities and
provide capacity for future acquisitions.
Management of each of the Trust and of the Corporation believes that it
will have access to capital resources sufficient to satisfy the cash
requirements of each of the Trust and the Corporation and to expand and develop
their business in accordance with their strategy for future growth.
22
<PAGE> 23
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") is one measure
of financial performance of an equity REIT such as the Trust. Combined FFO (as
defined by the National Association of Real Estate Investments Trusts) (1) for
the three months ended March 31, 1997, grew by 152% to $33.1 million, compared
to combined FFO of $13.1 million for the corresponding period in 1996. The
following table shows the calculation of historical combined FFO for the
indicated periods:
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
1997 1996
------------------------
(in thousands)
<S> <C> <C>
Income before minority interest ......................... $ 10,042 $ 5,906
Real estate related depreciation and amortization ....... 24,560 7,660
Amortization of financing costs ......................... (1,121) (279)
Minority interest-Boston Park Plaza ..................... (368) (162)
======== =======
Funds From Operations ................................... $ 33,113 $13,125
======== =======
</TABLE>
- ------------
(1) With respect to the presentation of FFO, management elected early
adoption of the "new definition" as recommended in the March 1995
NAREIT White Paper on FFO beginning January 1, 1995. Management and
industry analysts generally consider funds from operations to be one
measure of the financial performance of an equity REIT that provides a
relevant basis for comparison among REITs and it is presented to assist
investors in analyzing the performance of the Company. FFO is defined
as income before minority interest (computed in accordance with
generally accepted accounting principles), excluding gains (losses)
from debt restructuring and sales of property, and real estate related
depreciation and amortization (excluding amortization of financing
costs). FFO does not represent cash generated from operating activities
in accordance with generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash needs. FFO should
not be considered an alternative to net income as an indication of the
Company's financial performance or as an alternative to cash flows from
operating activities as a measure of liquidity.
FFO includes $1.4 million and $780,000 of interest income recognized in
excess of the interest received on mortgage notes receivable (as a result of the
notes having been purchased at a discount) for the three months ended March 31,
1997 and 1996, respectively.
23
<PAGE> 24
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
Recent Sales of Unregistered Securities
During the quarter ended March 31, 1997, the Trust and the
Corporation issued 74,698 Paired Shares in exchange for a like number of limited
partnership units of Realty and Operating. In addition, in partial consideration
for the acquisition of HEI and the HEI Owned Hotels each of Realty and Operating
issued 6,548,225 partnership units. Immediately following the close of this
transaction, 2,775,000 limited partnership unit were exchanged for a like number
of Paired Shares of the Trust and Corporation. Also, in partial consideration
for the acquisition of the Hermitage Suites Hotel in Nashville, Tennessee each
of Realty and Operating issued 233,106 limited partnership units. The limited
partnership units in Realty and Operating are exchangeable for, at the option of
the Trust and the Corporation, either cash, Paired Shares (at the rate of one
Paired Share for a limited partnership unit of Realty together with a limited
partnership unit of Operating) or a combination of cash and Paired Shares. The
issuance of Paired Shares by the Trust and the Corporation and the issuance of
limited partnership units by Realty and Operating was each exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Section 4(2) of the Securities Act.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
3.1 Bylaws of Starwood Lodging Corporation as amended.
3.2 Trustees' Regulations of Starwood Lodging Trust as amended.
24
<PAGE> 25
10.1 Employment Agreement between Starwood Lodging Trust and Gary M.
Mendell dated as of January 15, 1997.
10.2 Promissory Note dated, as of February 14, 1997, by SLT Realty
Limited Partnership, and Starwood Lodging Trust (together
"Makers"), Starwood Lodging Corporation, and SLC Operating
Limited Partnership, in favor of the Prudential Insurance
Company of America, on behalf of Prudential Property Investment
Separate Account II ("Payee").
10.3 Contribution Agreement, dated as of January 15, 1997, by and
among HEI Hotels, L.L.C., Westport Management, L.L.C., Savior
Limited Partnership, Judith Rushmore, Orna L. Shulman, Murray
Dow, Steve Mendell, Gary Mendell, Zapco Communications, Inc.,
Westport Hospitality, Inc., Starwood Lodging Corporation, and
SLC Operating Limited Partnership.
10.4 Contribution Agreement, dated as of January 15, 1997, by and
among SLT Realty Limited Partnership, SLT Financing Partnership,
SLC Operating Limited Partnership, Starwood Lodging Trust,
Starwood Lodging Corporation and the individuals and entities
set forth on schedules A-1 and A-2 who are signatories to the
agreement.
10.5 Amended and Restated Installment Sale Agreement dated as of
February 1, 1997 between Philadelphia Authority for Industrial
Development and SLT Realty Limited Partnership.
10.6 Employment Agreement between Starwood Lodging Trust and Ronald
C. Brown dated as of February 4, 1997.
10.7 Employment Agreement between Starwood Lodging Trust and Steven
R. Goldman dated as of February 4, 1997.
11. Combined statement regarding computation of per share earnings.
27.1 Financial Data Schedule for Starwood Lodging Corporation.
27.2 Financial Data Schedule for Starwood Lodging Trust.
(b) Reports on Form 8-K.
On February 10, 1997, the Trust and the Corporation filed Joint Current
Report on Form 8-K to report, under Item 2 of Form 8-K, the probable
acquisition of HEI, and to file under Item 7 of Form 8-K, the following
financial statements and pro forma financial information:
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION-Pro Forma
Combined and Separate Pro Forma Balance Sheets at September 30,
1996.
Combined and Separate Pro Forma Statements of Operations for the
twelve months ended September 30, 1996.
25
<PAGE> 26
PRU-HEI HOTEL GROUP
Combined Balance Sheet as of January 2, 1997.
Combined Statement of Operations for the Fifty-Three Week Period
Ended January 2, 1997.
Combined Statement of Changes in Owners' Capital.
Combined Statement of Cash Flows for the Fifty-Three Week Period
Ended January 2, 1997.
WESTPORT HOLDINGS, L.L.C.
Consolidated Balance Sheet as of January 2, 1997.
Consolidated Statement of Operations for the Year Ended January
2, 1997.
Consolidated Statement of Changes in Members' Capital.
Consolidated Statement of Cash Flows for the Year Ended January
2, 1997.
On February 14, 1997, the Trust and the Corporation filed a Joint Current Report
on Form 8-K, under Item 2 of Form 8-K, to report the completion of the purchase
of HEI.
On March 20, 1997, the Trust and the Corporation filed a Joint Current Report on
Form 8-K to file, under Item 5 of Form 8-K, a form of underwriting agreement.
On March 21, 1997, the Trust and the Corporation filed a Joint Current Report on
Form 8-K to file, as an exhibit under Item 7 of Form 8-K, an Indenture Trustee's
statement of eligibility and qualification on Form T-1.
26
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
Registrant Registrant
/s/ RONALD C. BROWN /s/ ALAN M. SCHNAID
- ----------------------------- ---------------------------------------
Ronald C. Brown Alan M. Schnaid
Senior Vice President and Vice President and Corporate Controller
Chief Financial Officer (Principal Accounting Officer)
(Principal Financial Officer)
Date: May 8, 1997.
- -----
27
<PAGE> 1
Exhibit 3.1
BY-LAWS OF
STARWOOD LODGING CORPORATION
(AS AMENDED THROUGH APRIL 24, 1997)
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 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 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 a majority 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 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.
<PAGE> 2
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 inform the stockholders who make the request of the reasonably estimated
costs of preparing and mailing a notice of the meeting, and on payment of those
costs to the Corporation, notify each stockholder entitled to notice of the
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 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
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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 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
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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 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 thereat in writing to the Secretary.
To be timely, a stockholder's notice must be delivered personally or mailed to
and received at, the principal
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executive offices of the Corporation within ten days of the earlier of (i) the
date that notice of the meeting was mailed in accordance with Article II hereof
or prior public disclosure of the date of the meeting was made, or (ii) the date
that a request for a special meeting was made by a stockholder in accordance
with Section 2 of Article II hereof.
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 Securities Exchange Act of 1934 (the "Exchange
Act"), as from time to time amended.
SECTION 8. INFORMAL ACTION BY STOCKHOLDERS. Any action
required or permitted to be taken at a meeting of stockholders may be taken
without a meeting if there is filed with the records of stockholders meetings a
unanimous written consent which sets forth the action and is signed by each
stockholder entitled to vote on the matter and a written waiver of any right to
dissent signed by each stockholder entitled to notice of the meeting but not
entitled to vote at it.
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
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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 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
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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
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
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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 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 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.
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(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 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.
(iv) "Operating Partnership" shall mean SLC Operating Limited
Partnership, a Delaware limited partnership.
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(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.
(c) 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
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.
(d) Nothing contained in this Section 13 shall be construed to
relieve any Interested Person from any fiduciary obligation imposed by law.
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(e) 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.
SECTION 14. INDEPENDENT DIRECTORS. Notwithstanding anything to
the contrary contained in these By-Laws, not less than a majority of the Board
of Directors of the Corporation shall be composed of "Independent Directors."
For purposes of this Section 14, an "Independent Director" is a Director of the
Corporation who is not employed by or an affiliate (as defined in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
in effect on June 29, 1995), of the Corporation, Starwood Lodging Trust or
Starwood Capital Group, L.P.
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.
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.
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(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 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.
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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 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
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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 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
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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.
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 BY-LAWS. To the extent not
prohibited by law, the Board of Directors shall have the power to adopt, alter
and repeal these By-Laws, and to
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adopt new by-laws. The stockholders of the Corporation shall also have the power
to alter and repeal these By-Laws, and to adopt new by-laws.
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Exhibit 3.2
TRUSTEES' REGULATIONS OF
STARWOOD LODGING TRUST
(AS AMENDED THROUGH APRIL 24, 1997)
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.
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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.
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.
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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 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 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
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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
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.
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(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 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.
(c) 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
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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.
(d) Nothing contained in this Section 14 shall be construed to
relieve any Interested Person from any fiduciary obligation imposed by
law.
(e) 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.
SECTION 15. INDEPENDENT TRUSTEES. Notwithstanding anything to
the contrary contained in these Trustees' Regulations, not less than a majority
of the Board of Trustees of the Trust shall be composed of "Independent
Trustees." For purposes of this Section 15, an "Independent Trustee" is a
Trustee of the Trust who is not employed by or an affiliate (as defined in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as in effect on June 29, 1995), of the Trust, Starwood Lodging Corporation
or Starwood Capital Group, L.P.
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 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
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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;
(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;
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(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 on such date and at such time as may be fixed by the
Board of Trustees.
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 a
majority 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
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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.
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 inform the
Shareholders who make the request of the reasonably estimated costs of preparing
and mailing a notice of the meeting, and on payment of those costs to the Trust,
notify each Shareholder entitled to notice of the 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
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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 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
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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 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 explosion 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)
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is or are 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 III 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 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
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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 within ten days of
the earlier of (i) the date that notice of the meeting was mailed in accordance
with Article III hereof or prior public disclosure of the date of the meeting
was made or, (ii) the date that a request for a special meeting was made by a
Shareholder in accordance with Section 6 of Article III hereof.
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.
SECTION 14. INFORMAL ACTION BY SHAREHOLDERS. Any action
required or permitted to be taken at a meeting of Shareholders may be taken
without a meeting if there is filed with the records of Shareholders meetings a
unanimous written consent which sets forth the action and is signed by each
Shareholder entitled to vote on the matter and a written waiver of any right to
dissent signed by each Shareholder entitled to notice of the meeting but not
entitled to vote at it.
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
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.
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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' 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
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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 10.1
EMPLOYMENT AGREEMENT
between
STARWOOD LODGING TRUST
and
GARY M. MENDELL
Employment Agreement ("Agreement") dated as of January 15, 1997 between
Gary M. Mendell (the "Executive") and Starwood Lodging Trust, a Maryland real
estate investment trust (the "Company"), with its principal office at 2231 East
Camelback Road, Suite 410, Phoenix, Arizona 85016.
WHEREAS, the Company desires to employ the Executive as its President,
and the Executive desires to accept such employment, upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows:
ARTICLE I.
Employment
Section 1.01 Position; Responsibilities. (a) The Company
hereby employs the Executive commencing on the date hereof (the "Commencement
Date") but conditioned on the closing (the date of closing is referred to herein
as the "Closing Date") under the Contribution Agreement (the "Contribution
Agreement") dated as of January 15, 1997, among the Company, Starwood Lodging
Corporation (the "Corporation"), SLT Realty Limited Partnership (the "Realty
Partnership"), SLC Operating Limited Partnership (the "Operating Partnership")
and the Contributing Parties named therein. The employment hereunder shall be at
will and shall be terminable by either party with or without Cause and with or
without notice; provided, however, the Executive shall give the Company at least
30 days advance written notice prior to any voluntary termination by the
Executive.
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(b) The Board of Trustees of the Company has elected Executive as
President of the Company, effective upon the Closing Date and conditioned on the
closing under the Contribution Agreement. The Executive's responsibilities from
and after the Closing Date shall include all matters customarily associated with
the position of President, including, without limitation, subject to direction
by the Chief Executive Officer or the Board (as hereinafter defined), those
related to acquisitions, divestitures, finance, financial reporting, SEC
compliance and investor relations for the Company and for the Realty Partnership
and direct and indirect subsidiaries. The Executive shall perform such duties
and services consistent with his position as may be assigned to him from time to
time by the Board of Trustees of the Company or any committee of the Board
(collectively, the "Board") or by the Chief Executive Officer.
(c) The Board has also elected the Executive as a member of the Board
effective on the Closing Date but conditioned on the closing under the
Contribution Agreement, and the Executive agrees to serve as a member of the
Board.
(d) The Company will establish an office in Westport, Connecticut,
where Executive will perform his duties and responsibilities, and such office
will be adequately staffed for that purpose. The Executive will work with the
Chief Executive Officer and the Board concerning the appropriate location of the
Company's principal executive office and in connection therewith the appropriate
relocations and hiring of employees.
Section 1.02 Performance of Duties. The Executive shall duly and
faithfully perform all of the duties assigned to him to the best of his
abilities, and he shall devote his full time, attention and best efforts to the
performance of such duties and (subject to Section 4.01) shall not engage in any
other business activities except with the prior written approval of the Board.
Section 1.03 Representation and Warranty of Executive. The Executive
hereby represents and warrants to the Company that the Executive is not aware of
any presently existing fact, circumstance or event (including, but without
limitation, any health condition or legal constraint) which would preclude or
restrict him from providing to the Company the services contemplated by this
Agreement, or which would give rise to any
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<PAGE> 3
breach of any term or provision hereof, or which could otherwise result in the
termination of his employment hereunder for Cause.
Section 1.04 Representation and Warranty of Company. The Company hereby
represents and warrants to Executive that it has received all authorizations
necessary for the execution of the Agreement on the terms and conditions set
forth herein and for the grant of the Option and the Performance Award as set
forth in Section 2.04 hereof and Attachments A and B hereto, that it has taken
all actions necessary to make such grants.
ARTICLE II.
Compensation
Section 2.01 General. The Company shall compensate the Executive for
all of his services under this Agreement, as set forth below.
Section 2.02 Basic Compensation. The Executive's minimum annual salary
("Base Salary") commencing on the Closing Date and conditioned upon the closing
under the Contribution Agreement, shall be at the rate of $365,000 and shall be
payable in bi-weekly or other installments in accordance with the Company's
normal payment schedule for senior management. The Base Salary shall be subject
to annual review commencing at the end of 1997 and at the end of each year
thereafter, if the Executive is employed by the Company at that time, and may be
increased (but not decreased) for subsequent years.
Section 2.03 Incentive Compensation. In addition to the Base Salary,
the Company shall pay to the Executive as incentive compensation ("Incentive
Compensation"), in respect of each fiscal year of the Company which ends during
the time when the Executive is employed by the Company, an amount determined in
accordance with any bonus or short term incentive compensation program based
upon achieving specified performance criteria which may be established by the
Board either for the Executive or for senior management generally; provided,
however, that in no event may such Incentive Compensation in respect of any
fiscal year of the Company exceed 100% of the Executive's Base Salary for that
year.
All Incentive Compensation earned under this Section 2.03 shall be
payable as soon as reasonably practicable, but in no
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event later than 120 days after the end of the relevant fiscal year of the
Company.
Section 2.04 Stock Option. On the date hereof, the Option Committee of
the Board has granted to the Executive, conditioned upon the closing under the
Contribution Agreement, a "Paired Option" (the "Option") under the Starwood
Lodging Trust 1995 Long-Term Incentive Plan (Amended and Restated as of August
12, 1996) (the "LTIP") which was approved by a vote by the shareholders of the
Company at the Annual Meeting of Shareholders held December 30, 1996. The Option
is for the purchase of an aggregate of 200,000 Paired Shares of the Company and
the Corporation (before giving effect to the three-for-two stock split by way of
a 50% stock dividend declared by the Company on December 5, 1996). The Option is
exercisable at $56.125 per Paired Share (which is the Fair Market Value per
Paired Share on the date of grant as defined in the LTIP). The Option vests as
to 20% of the number of Paired Shares covered thereby on each anniversary of the
Closing Date, commencing with the second anniversary (occurring in 1999) through
the fourth anniversary (occurring in 2001) of the Closing Date and the balance
on the fifth anniversary of the Closing Date (occurring in 2002), except to the
extent otherwise provided in the LTIP or the Option Agreement and the Option
expires ten years from the Closing Date. The terms of the Option are a set forth
in the Option Agreement annexed as Attachment "A," and is otherwise subject to
all other provisions of the LTIP, except that (a) termination for Cause and for
Good Reason shall be as set forth in and subject to this Agreement and (b) in
the event the Executive's employment by the Company shall terminate for any
reason other than (i) termination by the Company for Cause, or (ii) termination
by the Executive without "Good Reason" prior to the first anniversary of the
Closing Date or after 18 months from the Closing Date, all unvested portions of
the Option shall thereupon immediately vest and remain exercisable until
expiration of the full ten-year term of the Option. In addition, the Committee
has concurrently granted to the Executive a Performance Award under the LTIP
relating to all Paired Shares underlying the Option, the terms of which are set
forth on the Term Sheet annexed as Attachment "B". The Performance Period under
the Performance Award shall be the five year period commencing on December 5,
1996; and the Performance Measure shall be a 15% Shareholder Return over the
Performance Period. The Executive shall be eligible for grants in the future of
additional Paired Options, Paired Shares and
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Performance Awards under the LTIP at the discretion of the Option Committee of
the Board. Upon exercise of any option, all Paired Shares delivered pursuant
thereto will be subject to applicable resale and other restrictions as set forth
in the LTIP. The Company shall use its best efforts to file and keep effective a
registration statement on Form S-8 with the Securities and Exchange Commission
covering the Paired Shares issuable under the LTIP.
Section 2.05 Other Programs. The Executive shall also be entitled to
participate in all employee benefit plans, including retirement programs, if
any, and group health care plans, and to take time off for vacation or illness
in accordance with the Company's policy for senior management. Such plans shall
be comparable to those of the Corporation, and the Executive shall be entitled
to such participation on a basis no less favorable to the Executive than is made
available to the Chief Executive Officer of the Corporation; provided, however
that the foregoing shall not apply to the LTIP or any other stock award, stock
option or other stock derivative or equity based plan or program. The Executive
shall also receive not less than four weeks paid vacation and all other fringe
benefits as are from time to time made generally available to the senior
management of the Company.
Section 2.06 Expense Reimbursements. The Company shall reimburse the
Executive for all proper expenses incurred by him in the performance of his
duties hereunder in accordance with the policies and procedures established by
the Company.
Section 2.07 Withholding. The Base Salary and all other payments to the
Executive for his services to the Company shall be subject to all withholding
and deductions required or permitted by federal, state or other law, including
those authorized by the Executive but not otherwise required by law, including
but not limited to state, federal and local income taxes, unemployment tax,
Medicare, FICA and any contributions pursuant to any employee benefit program
which may be adopted by the Company for the benefit of its senior executives.
ARTICLE III.
Termination of Employment
Section 3.01 Events of Termination. The Executive's employment by the
Company is at will. Accordingly, it may be
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terminated at any time by the Company or the Executive with or without Cause
(subject to compliance with applicable notice provisions of this Article III and
Section 1.01 above).
As stated in Section 1.01 above, Executive may terminate his employment
hereunder at any time for any reason by delivering to the Company 30 days'
advance written notice of termination. In addition, Executive may resign and
terminate his employment hereunder for "Good Reason" (which shall also be deemed
a termination by the Company other than for Cause), subject, however, to prior
delivery to the Company of a Preliminary Notice of Good Reason and the failure
of the Company to effect a cure within the time set forth below. For purposes of
this Agreement, "Good Reason" means (i) the failure to elect and continue
Executive as President of the Company or to nominate Executive for re-election
as a member of the Board, (ii) the failure to assign Executive duties,
authorities, responsibilities and reporting requirements consistent with his
position and otherwise as set forth herein, or if the scope of Executive's
duties and responsibilities as President of the Company are in the aggregate
materially reduced, except for any reduction in duties and responsibilities due
to Executive's illness or disability or temporary suspensions of duties and
responsibilities pending results of any Board commissioned investigation as to
potential "Cause" for termination of Executive's employment, (iii) a reduction
in or a delay in the payment of Executive's total cash compensation and benefits
from those required to be provided in accordance with the provisions of this
Agreement, or a breach by the Company of any other material provision of this
Agreement or the Option or Performance Award referred to in Section 2.04, (iv) a
requirement by the Company, the Board or the Chief Executive Officer that
Executive be based outside of Westport, Connecticut, other than on travel
reasonably required to carry out Executive's obligations under the Agreement or,
(v) the failure of the Company to obtain the assumption in writing of its
obligations to perform this Agreement by any successor to all or substantially
all of the assets of the Company within 15 days after a merger, consolidation,
sale or similar transaction; provided, however, that (a) "Good Reason" shall not
include acts which are cured by the Company within 30 days from receipt by the
Company of a written notice from Executive (the "Preliminary Notice of Good
Reason") identifying in reasonable detail the act or acts constituting "Good
Reason", (b) "Good Reason" shall not exist unless the Preliminary Notice of Good
Reason shall have been
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given by Executive within 60 days after learning of the act, failure or event
(or, in the case of a series of related acts, failures or events, within 120
days of the first such act, failure or event) which Executive alleges
constitutes "Good Reason" hereunder, (c) if the Company has failed to cure as
provided above, "Good Reason" shall not exist unless Executive shall have given
notice of termination hereunder for Good Reason within 60 days from delivery of
the Preliminary Notice of Good Reason (which termination shall be effective 30
days from the giving of such notice), and (d) if the Company has commenced an
expedited arbitration in the manner prescribed below within 15 days after
receipt of the Executive's notice of termination, such termination shall be
effective as a termination of employment and shall be deemed a termination by
Executive other than for Good Reason unless and until the Arbitrator shall have
determined otherwise. If the Company has timely commenced such an arbitration
proceeding, in the manner prescribed below, no payments shall be due Executive
under Section 3.02 (i) or (ii) hereof until the conclusion of the arbitration
proceeding or further proceeding contemplated by Section 5.04 hereof and only if
an award is rendered by the Arbitrator in favor of Executive. If the Company
fails to file a demand for arbitration with the American Arbitration Association
and file the requisite fees pursuant to Rule 4 of the National Rules for the
Resolution of Employment Disputes effective June 1, 1996 (the "National Rules")
within 15 days after receipt of notice of termination from the Executive, and
diligently pursue such proceeding in accordance with the procedures set forth in
Section 5.04 hereof, Executive's termination of employment from the Company
shall be conclusively presumed to have been for Good Reason.
The Company shall have the right to terminate for "Cause" upon notice
to the Executive only in the event of (a) a material breach of this Agreement by
the Executive, including without limitation, a willful failure by the Executive
(other than any such failure resulting from Executive's incapacity due to
physical or mental illness) substantially to perform his duties hereunder (not
including, however, failure to meet performance targets or exercise of the
Executive's rights to terminate during the Window Period (as hereinafter
defined)), after being notified in writing by the Company of the particular acts
or circumstances of such breach and the Executive's failure to cure within 30
days thereafter, (b) the commission by the Executive of one or more acts of
theft, fraud or willful, material misappropriation from
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<PAGE> 8
the Company, (c) a breach by the Executive of his fiduciary duties under
Maryland laws as an officer or member of the Board of the Company, or (d)
Executive's conviction of a felony.
Notwithstanding the foregoing, termination by the Company for Cause
shall not be effective until and unless (i) notice of intention to terminate for
Cause has been given by the Company within four months after the Board learns of
the act, failure or event constituting "Cause" and (ii) the Board has voted (at
a meeting of the Board duly called and held as to which termination of Executive
is an agenda item) by a majority vote to terminate Executive for Cause after
Executive has been given notice of the particular acts or circumstances which
are the basis for the termination for Cause and has been afforded at least 20
days notice of the meeting and an opportunity to present his position in writing
and the Board has given notice of termination to Executive within three days
thereafter (and the Executive's termination of employment shall be effective
immediately upon receipt of such notice but shall not be deemed a termination of
employment for Cause unless and until all of the conditions set forth in clauses
(i) through (iii) hereof have occurred), and (iii) if Executive has commenced an
expedited arbitration in the manner prescribed below within 15 days after such
notice of termination, disputing the Company's right under this Agreement to
terminate for Cause, the Arbitrator shall thereafter have determined that the
Executive was terminated for Cause; provided, however, that (a) Company may
suspend the Executive with pay at any time during the period commencing with the
giving of notice to Executive under clause (i) above until final notice of
termination is given under clause (ii) above; and (b) no further payments shall
be due Executive under Section 3.02 hereof unless and until the Arbitrator shall
have determined that the Executive was terminated without Cause. If Executive or
his representative fails to file a demand for arbitration with the American
Arbitration Association and file the requisite fees pursuant to Rule 4 of the
National Rules within 15 days of receipt of notice of termination from the
Board, and diligently pursue such proceeding in accordance with the procedures
set forth in Section 5.04 hereof, such termination shall be conclusively
presumed to have been for Cause.
If the Arbitrator declines to rule that the Executive was terminated
for Cause, the Executive shall be treated as having been terminated without
Cause and Executive shall have the rights
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<PAGE> 9
provided under Section 3.02 below with respect to a termination without Cause.
For all purposes of this Agreement, "Good Reason" and "Cause" shall
have the applicable defined meaning as set forth above in this Section 3.01.
Upon any termination of his employment by the Company or by Executive,
Executive will concurrently resign his membership, if any, on the Board.
Section 3.02 Severance Package. In the event the Executive's employment
under this Agreement is terminated by the Company other than for "Cause" (and a
termination due to the Executive's death or permanent disability shall be
treated for purposes of this Agreement as a termination by the Company other
than for Cause) or by the Executive for "Good Reason", or by the Executive
without "Good Reason" during the six month period (the "Window Period")
commencing with the first anniversary of the Closing Date, then the Executive
shall, subject to the delays permitted by Section 3.01 for arbitration, be
entitled to receive the following ("Severance Package"):
(i) an amount, which shall be payable in one lump sum within 30 days of
the date of determination that the Executive's termination is (x) other than for
Cause, (y) for Good Reason, or (z) without Good Reason during the Window Period,
as applicable, equal to (a) one year's Base Salary based on the Base Salary then
in effect plus (b) if the termination occurs prior to the third anniversary of
the Commencement Date an amount equal to the greater of 70% of the Executive's
Base Salary for the first year of his employment hereunder or the actual bonus
for the immediately preceding year;
(ii) the immediate vesting of the Option granted pursuant to Section
2.04 hereof (and the Performance Period with respect to such Award shall
terminate on the effective date of Executive's termination of employment and the
Performance Measure shall be computed through such date), with preservation of
all rights relating to the Option and the Performance Award conferred under
Section 2.04 hereof, and under the Option Agreement and the Term Sheet, for the
full term of the Option and Performance Award and, following timely exercise of
any such options, the Executive shall receive title to the shares issued in
respect of such
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<PAGE> 10
options free and clear of any lien, claim or encumbrance by, through or under
the Company;
(iii) Company paid medical insurance benefits available to all other
senior executives of the Company during the 12-month period subsequent to
termination of employment shall be paid by the Company, and thereafter all COBRA
rights available to the Executive shall be paid by the Executive, but COBRA
rights shall be measured from the termination date.
During any delays permitted by Section 3.01 for arbitration to
determine whether the Executive's termination by the Company was other than for
"Cause" or by the Executive for "Good Reason," if a Corporate Transaction is
agreed to which would constitute a Change of Control event under the LTIP, the
Company will include appropriate provisions which Will enable the Executive to
participate in such Change of Control event as if the arbitration were resolved
favorably to the Executive, but subject to such a favorable resolution.
The parties agree that the foregoing shall be the Executive's sole and
exclusive monetary remedy by reason of termination by the Executive for "Good
Reason", or without Good Reason during the Window Period, or by reason of any
termination by the Company other than for "Cause", it being agreed that as his
actual damages would be difficult to measure or quantify and would be
impracticable to determine, such amount shall constitute liquidated damages for
the Executive by reason of such termination by Executive for "Good Reason", or
without Good Reason during the Window Period, or by reason of any termination by
the Company other than for "Cause".
Section 3.03 Rights on Termination for Cause or Without Good Reason. No
Severance Package shall be due or owing to the Executive in the event that the
Company shall terminate the Executive's employment for "Cause" or in the event
that the Executive shall terminate his employment with the Company (other than
during the Window Period) for reasons other than "Good Reason"; provided,
however that Executive shall in all events be paid all accrued but unpaid Base
Salary, awarded but unpaid Incentive Compensation, and other benefits through
the date of termination. In addition, in the event that the Company shall
terminate the Executive's employment for "Cause" or in the event that the
Executive shall terminate his employment with the
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<PAGE> 11
Company (other than during the Window Period) for reasons other than "Good
Reason", then except as provided in the following two sentences, all unvested
options, unvested Performance Awards and unvested restricted Paired Shares then
held by Executive shall automatically be forfeited (subject, however, to any
contrary determination of the Board in its sole discretion). No forfeiture of
unvested Options, Performance Awards or unvested restricted Paired Shares shall
occur until 15 days after the later of (i) the conclusion of any arbitration
proceeding or further proceeding contemplated by Section 3.01 hereof or, (ii) if
no arbitration proceeding is commenced, until the time for commencing such a
proceeding has lapsed (the later of such two dates being referred to herein as
the "Forfeiture Date"), but no additional service-based or time-based vesting
shall occur with respect to any such Options, Performance Awards or Paired
Shares following the date Executive's employment is deemed terminated under
Section 3.01. Executive may exercise vested Options, and receive a settlement of
vested Performance Awards at any time prior to the Forfeiture Date. In all other
respects, the terms of the grant of any such options or award of any such Paired
Shares shall govern.
ARTICLE IV.
Noncompetition; Confidential Information
Section 4.01 Other Business Ventures. In addition to the restriction
from having other employment provided in Section 1.02 hereof and except as
expressly contemplated by Article VI below, during the term of the Executive's
employment hereunder the Executive shall not, without the prior written approval
of the Board, directly or indirectly engage in, represent, be connected with or
have a financial interest in any business which is or, to the best of his
knowledge, is about to become competitive with the business of the Company;
provided, however, that nothing herein contained shall be deemed to prohibit the
Executive from being a passive investor owning up to 2% of any class of
outstanding securities of any company not in the business of owning or operating
hotels whose stock is publicly traded, or from continuing (for a period of up to
three years from the Closing Date) as a director, President and as an owner of
equity in Hospitality Equity Investors, Inc., a Connecticut corporation. The
Company shall have a right of first refusal with respect to Executive's interest
in Hospitality Equity Investors, Inc., which shall be exercisable for thirty
days after receipt by the Company
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<PAGE> 12
of notice from Executive of a proposed transfer and the material terms thereof;
and Executive and Company will promptly enter into a definitive right of first
refusal agreement in customary form reflecting the foregoing. Notwithstanding
any other provision of this Agreement, the performance by Executive of his
duties with respect to Hospitality Equity Investors, Inc., and with respect to
the partnerships for which it acts as general partner during the three-year
period commencing on the Closing Date shall not be a basis for finding the
Executive in breach of this Agreement so long as such corporation and
partnerships do not acquire new properties, and Executive's time devoted to the
affairs of such entities is limited to the amount reasonably necessary to
discharge his fiduciary duties to the investors in such entities.
Section 4.02 Confidential Information. Except (i) in the course of his
employment with the Company, or (ii) as he may be required pursuant to any law
or court order or similar process, the Executive shall not at any time during or
after the term of the Executive's employment hereunder, directly or indirectly
disclose or use any confidential information or proprietary data with respect to
the Company or the Corporation, 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, the Executive shall cooperate with the Company as to
redaction or other protective measures with respect to any unnecessary public
disclosure of any such confidential information or proprietary data.
Section 4.03 Inducing of Company Employees. During the term of the
Executive's employment hereunder, the Executive shall not, except in the course
of the performance of his duties hereunder or with the prior approval of the
Board, in any way directly or indirectly induce or attempt to induce or
otherwise counsel, advise or encourage any person to leave the employ of the
Company. In addition, in the event of termination of Executive's employment, the
Executive shall not, with respect to any person or persons who to the
Executive's best knowledge was employed by the Company, the Corporation, or
their respective subsidiaries or the Realty Partnership or the Operating
Partnership ("Company Employee") at any time during the period commencing six
months prior to such termination:
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<PAGE> 13
(i) for a period of 12 months following the date on which such
termination becomes effective as aforesaid, in any way directly or indirectly
hire, attempt to hire, or cause to be hired any Company Employee, without the
prior written approval of the Board; and
(ii) for a period of 12 months following the date on which such
termination becomes effective as aforesaid, in any way directly or indirectly
induce or attempt to induce or otherwise counsel, advise or encourage any
Company Employee to leave the employment of the Company or the Corporation or
their respective subsidiaries or the Realty Partnership or the operating
Partnership, without the prior written approval of the Board.
ARTICLE V.
Miscellaneous
Section 5.01 Notices. All notices, requests or other communications
provided for in this Agreement shall be made, if to the Company, to the
Secretary of the Company at the Company's principal executive office, and if to
the Executive, to his address on the books of the Company (or to such other
address as the Company or Executive may give to the other for purposes of notice
hereunder).
Copies of all notices given to Executive shall be sent to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022-4677
Attention: Bruce M. Montgomerie, Esq.
Copies of all notices given to the Company shall be sent to:
Sidley & Austin
555 W. 5th St.
Los Angeles, CA 90013-1010
Attention: Sherwin L. Samuels, Esq.
All notices, requests or other communications provided for in this
Agreement shall be made in writing either (a) by personal
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<PAGE> 14
delivery to the party entitled thereto, (b) by facsimile with confirmation of
receipt, (c) by mailing in the United States mails to the last known address of
the party entitled thereto or (d) by express courier service. The notice,
request or other communication shall be deemed to be received upon personal
delivery, upon confirmation of receipt of facsimile transmission or upon receipt
by the party entitled thereto if by United States mail or express courier
service; provided, however, that if a notice, request or other communication is
not received during regular business hours, it shall be deemed to be received on
the next succeeding business day of the Company.
Section 5.02 Assignment and Succession. The rights and obligations of
the Company under this Agreement shall inure to the benefit of and be binding
upon its successors and assigns. The Executive's rights and obligations
hereunder are personal and may not be assigned; provided, however that in the
event of the termination of the Executive's employment due to the Executive's
death or permanent disability, the Executive's legal representative shall have
the right to receive the Severance Package as more particularly set forth in
Section 3.02 above.
Section 5.03 Headings. The Article, Section , paragraph and
subparagraph headings are for convenience of reference only and shall not define
or limit the provisions hereof.
Section 5.04 Arbitration. In the event of any controversy, dispute or
claim arising out of or related to this Agreement or the Executive's employment
by the Company, the parties shall negotiate in good faith in an attempt to reach
a mutually acceptable settlement of such dispute. If negotiations in good faith
do not result in a settlement of any such controversy, dispute or claim, it
shall be finally settled by expedited arbitration in accordance with the
National Rules of the American Arbitration Association governing employment
disputes, subject to the following:
(a) The Arbitrator shall be determined from a list of names of five
impartial arbitrators each of whom shall be an attorney experienced in
arbitration matters concerning executive employment disputes, supplied by the
American Arbitration Association (the "Association") chosen by Executive and the
Company each in turn striking a name from the list until one name remains.
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<PAGE> 15
(b) The expenses of the arbitration shall be borne equally by each
party; and each party shall bear its own legal fees and expenses, except that
Executive shall be awarded his reasonable attorney's fees and expenses if an
award is rendered by the Arbitrator in his favor.
(c) The Arbitrator shall determine whether and to what extent any party
shall be entitled to damages under this Agreement. No party shall be entitled to
punitive damages, and each party waives all such rights if any.
(d) The Arbitrator shall not have the power to add to nor modify any of
the terms or conditions of the this Agreement. The Arbitrator's decision shall
not go beyond what is necessary for the interpretation and application of the
provision of this Agreement in respect of the issue before the Arbitrator. The
Arbitrator shall not substitute his or her judgment for that of the parties in
the exercise of rights granted or retained by this Agreement. The Arbitrator's
award or other permitted remedy, if any, and the decision shall be based upon
the issue as drafted and submitted by the respective parties and the relevant
and competent evidence adduced at the hearing.
(e) The Arbitrator shall have the authority to award any remedy or
relief provided for in this Agreement, in addition to any other remedy or relief
(including provisional remedies and relief) that a court of competent
jurisdiction could order or grant. In addition, the Arbitrator shall have the
authority to decide issues relating to the interpretation, meaning or
performance of this Agreement even if such decision would constitute an advisory
opinion in a court proceeding or if the issues would otherwise not be ripe for
resolution in a court proceeding, and any such decision shall bind the parties
in their continuing performance of this Agreement. The Arbitrator's written
decision shall be rendered within sixty days of the hearing. The decision
reached by the Arbitrator shall be final and binding upon the parties as to the
matter in dispute. To the extent that the relief or remedy granted by the
Arbitrator is relief or remedy on which a court could enter judgment, a judgment
upon the award rendered by the Arbitrator shall be entered in any court having
jurisdiction thereof (unless in the case of an award of damages, the full amount
of the award is paid within 10 days of its determination by the Arbitrator).
Otherwise, the award shall be binding on the parties in
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<PAGE> 16
connection with their continuing performance of this Agreement and in any
subsequent arbitral or judicial proceedings between the parties.
(f) The arbitration shall take place in New York City or in the locale
of the Company's executive office in Connecticut, as elected by the party
commencing arbitration.
(g) The arbitration proceeding and all filing, testimony, documents and
information relating to or presented during the arbitration proceeding shall be
disclosed exclusively for the purpose of facilitating the arbitration process
and for no other purpose and shall be deemed to be information subject to the
confidentiality provisions of this Agreement.
(h) The parties shall continue performing their respective obligations
under this Agreement notwithstanding the existence of a dispute while the
dispute is being resolved unless and until such obligations are terminated or
expire in accordance with the provisions hereof.
(i) The parties may obtain a pre-hearing exchange of information
including depositions, interrogatories, production of documents, exchange of
summaries of testimony or exchange of statements of position, and the Arbitrator
shall limit such disclosure to avoid unnecessary burden to the parties and shall
schedule promptly all discovery and other procedural steps and otherwise assume
case management initiative and control to effect an efficient and expeditious
resolution of the Dispute. At any oral hearing of evidence in connection with an
arbitration proceeding, each party and its counsel shall have the right to
examine its witness and to cross-examine the witnesses of the other party. No
testimony of any witness shall be presented in written form unless the opposing
party or parties shall have the opportunity to cross-examine such witness,
except as the parties otherwise agree in writing.
(j) Notwithstanding the dispute resolution procedures contained in this
Section 5.04, either party may apply to any court having jurisdiction (i) to
enforce this Agreement to arbitrate, (ii) to seek provisional injunctive relief
so as to maintain the status quo until the arbitration award is rendered or the
Dispute is otherwise resolved, or (iii) to challenge or vacate any final
judgment, award or decision of the Arbitrator
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<PAGE> 17
that does not comport with the express provisions of this Section 5.04.
Section 5.05 Invalidity. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality or enforceability of the remaining provisions hereof shall
not in any way be affected or impaired.
Section 5.06 Waivers. No omission or delay by either party hereto in
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof, or the exercise of
any other right, power or privilege.
Section 5.07 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 5.08 Entire Agreement. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof. No representation, promise
or inducement has been made by either party hereto that is not embodied in this
Agreement and neither party shall be bound by or liable for any alleged
representation, promise or inducement not set forth herein. This Agreement may
not be amended, except by a written instrument hereafter signed by each of the
parties hereto.
Section 5.09 Interpretation. The parties hereto acknowledge and agree
that each party and its or his counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to-its drafting. Accordingly,
(i) the rules of construction to the effect that any ambiguities are resolved
against the drafting party shall not be employed in the interpretation of this
Agreement, and (ii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in favor of or against any
party regardless of which party was generally responsible for the preparation of
this Agreement.
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<PAGE> 18
Section 5.10 Governing-Law. This Agreement and the performance hereof
shall be construed and governed in accordance with the internal laws of the
State of New York without reference to principles of conflict of laws.
Section 5.11 Disclaimer. The name "Starwood Lodging Trust" is the
designation of a Maryland real estate investment trust and its Trustees (as
Trustees but not personally) under a Declaration of Trust dated August 25, 1969,
as amended and restated, and all persons dealing kith Starwood Lodging Trust
must look solely to Starwood Lodging Trust's property for the enforcement of any
claims against Starwood Lodging Trust, as the Trustees, officers, agents and
security holders of Starwood Lodging Trust assume no personal obligations of
Starwood Lodging
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<PAGE> 19
Trust, and their respective property shall not be subject to claims of any
person relating to such obligation.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officer and the Executive has signed this Agreement as of
the day and year first above written.
STARWOOD LODGING TRUST
By:
----------------------------
Name:
--------------------------
Its:
---------------------------
-------------------------------
GARY M. MENDELL
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<PAGE> 20
Execution Copy
Attachment "A" to Employment Agreement between
Starwood Lodging Trust and Gary M. Mendell
dated January 15, 1997
STARWOOD LODGING TRUST
NON-QUALIFIED STOCK OPTION AGREEMENT
Starwood Lodging Trust, a trust organized under the laws of
Maryland (the "Company"), hereby grants to Gary M. Mendell (the "Optionee") as
of January 15, 1997 (the "Option Date"), pursuant to the provisions of the
Starwood Lodging Trust 1995 Long-Term Incentive Plan (Amended and Restated as of
August 12, 1996) (the "Plan"), a non-qualified option (the "Option") to purchase
from the Company 200,000 Paired Shares (before giving effect to the
three-for-two stock split by way of a 50% stock dividend declared by the Company
on December 5, 1996), at the price of $56.125 per Paired Share upon and subject
to the terms and conditions set forth below. References to employment by the
Company shall include employment by a subsidiary or affiliate of the Company.
Capitalized terms not defined herein or in the Employment Agreement entered into
between Optionee and the Company dated January 15, 1997 (the "Employment
Agreement") shall have the meanings specified in the Plan.
This grant of the Option is subject to and conditioned upon
the closing under the Contribution Agreement dated as of January 15, 1997 (the
"Contribution Agreement") among the Company, Starwood Lodging Corporation, SLT
Realty Limited Partnership, SLC Operating Limited Partnership and the
Contributing Parties named therein. (The date of such closing is referred to
herein as "the Closing Date".)
1. Option Subject to Acceptance of Agreement.
The Option may not be exercised unless the optionee shall
accept this Agreement by executing it in the space provided below and returning
such original execution copy to the Company.
2. Time and Manner of Exercise of Option.
<PAGE> 21
2.1. Maximum Term of Option. In no event may the option be
exercised, in whole or in part, after ten years from Closing Date (the
"Expiration Date").
2.2. Exercise of Option. (a) The Option shall become
exercisable as to one-fifth of the number of Paired Shares subject to the Option
on each anniversary of the Closing Date, commencing with the second anniversary
(occurring in 1999) through the fourth anniversary (occurring in 2001) of the
Closing Date, and the balance on the fifth anniversary of the Closing Date
(occurring in 2002), and otherwise as provided below in this Section 2.2.
(b) If the Optionee's employment by the Company terminates for
Cause, the Option, whether or not then exercisable, shall terminate
automatically on the effective date of the Optionee's termination of employment
for Cause. For purposes of this Section 2.2, optionee shall only be deemed
terminated by the Company for Cause if his termination for Cause has become
effective under and pursuant to the Employment Agreement (but, as provided in
the Employment Agreement, only upon the conclusion of an arbitration proceeding,
if it is timely commenced in accordance with such Agreement).
(c) If the Optionee's employment by the Company is terminated
by the Company other than for "Cause" within the meaning of Section 2.2(b)
hereof (and a termination due to Executive's death or Disability shall be
treated for purposes of this Agreement as a termination by the Company other
than for "Cause" , or if the Optionee's employment by the Company is terminated
by the Optionee for "Good Reason" as determined in accordance with the
provisions of the Employment Agreement, or by the Optionee during the "Window
Period" as permitted under the Employment Agreement, then the Option shall
become fully exercisable and may thereafter be exercised by the Optionee or the
Optionee's Legal Representative until and including the Expiration Date.
(d) If the Optionee's employment by the Company is treated
(after giving effect to any arbitration proceeding) as having been terminated by
the Optionee without Good Reason (except during the "Window Period") under the
Employment Agreement, the Option shall be exercisable only to the extent it is
exercisable on the effective date of the Optionee's termination of employment
and may thereafter be exercised by the
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<PAGE> 22
Optionee or the Optionee's Legal Representative until and including the earlier
of (i) the date which is three months after the effective date of the Optionee's
termination of employment or service (or, if later, the date which is 15 days
after the Forfeiture Date) and (ii) the Expiration Date.
(e) If the Optionee dies at any time prior to the Expiration
Date following termination of employment for a reason giving Optionee the right
to exercise until the Expiration Date under paragraph (c) above, the Option
shall be exercisable by the Optionee's Legal Representative or Permitted
Transferees, as the case may be, until and including the Expiration Date.
2.3 Method of Exercise. Subject to the limitations set forth
in this Agreement, the Option may be exercised by the Optionee (1) by giving
written notice to the Company specifying the number of whole Paired Shares to be
purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Company's satisfaction) either (i) in cash, (ii) previously
owned whole Paired Shares (which the Optionee has held for at least six months
prior to the delivery of such Paired Shares or which the Optionee purchased on
the open market and for which the Optionee has good title, free and clear of all
liens and encumbrances) having a fair market value, determined as of the date of
exercise, equal to the aggregate purchase price payable pursuant to the Option
by reason of such exercise, (iii) in cash by a broker-dealer acceptable to the
Company to whom the Optionee has submitted an irrevocable notice of exercise or
(iv) a combination of (i) and (ii), and (2) by executing such documents as the
Company may reasonably request. The Committee shall have sole discretion to
disapprove of an election pursuant to either clause (ii) or (iii). Any fraction
of a Paired Share which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the Optionee.
No certificate representing a Paired Share shall be delivered until the full
purchase therefor has been aid.
2.4 Termination of Option. (a) In no event may the Option be
exercised after it terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of
the Paired Shares subject to the Option expire or are
3
<PAGE> 23
exercised, cancelled or forfeited, the Optionee shall promptly return this
Agreement to the Company for full or partial cancellation, as the case may be.
Such cancellation shall be effective regardless of whether the Optionee returns
this Agreement. If the Optionee continues to have rights to purchase Paired
Shares hereunder, the Company shall, within 10 days of the Optionee's delivery
of this Agreement to the Company, either (i) mark this Agreement to indicate the
extent to which the Option has expired or been exercised, cancelled or forfeited
or (ii) issue to the Optionee a substitute option agreement applicable to such
rights, which agreement shall otherwise be identical to this Agreement in form
and substance.
3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. The Option may not be
transferred by the Optionee other than (i) by will or the laws of descant and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act.
Except to the extent permitted by the foregoing sentence, during the Optionee's
lifetime the Option is exercisable only by the Optionee or the Optionee's Legal
Representative. Except as permitted by the foregoing, the Option may not be
sold, transferred, assigned, pledged, hypothecated, voluntarily encumbered or
otherwise disposed of (whether by operation of law or otherwise) or be subject
to execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate, voluntarily encumber or otherwise dispose
of the option, the Option and all rights hereunder shall, to the extent of any
such attempt, immediately become null and void.
3.2. Investment Representation. The optionee hereby represents
and covenants that (a) any Paired Shares purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act and any
applicable state securities laws; (b) any subsequent sale of any such Paired
Shares shall be made either pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws, or pursuant
to an exemption from registration under the Securities Act and such state
securities laws; and (c) if requested by the Company, the Optionee shall submit
a written statement, in form satisfactory
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<PAGE> 24
to the Company, to the effect that such representation (x) is true and correct
as of the date of purchase of any Paired Shares hereunder or (y) is true and
correct as of the date of any sale of any such Paired Shares, as applicable. As
a further condition precedent to any exercise of the Option, the optionee shall
comply with all regulations and requirements of any regulatory authority having
control of or supervision over the issuance or delivery of the Paired Shares
and, in connection therewith, shall execute any documents which the Board or the
Committee shall in its sole discretion deem necessary or advisable.
3.3. Withholding Taxes. (a) As a condition precedent to the
delivery of Paired Shares upon exercise of the Option, the Optionee shall, upon
request by the Company, pay to the Company in addition to the purchase price of
the Paired Shares, such amount of cash as the Company may be required, under all
applicable federal, state, local or other laws or regulations, to withhold and
pay over as income or other withholding taxes (the "Required Tax Payments") with
respect to such exercise of the Option. If the Optionee shall fail to advance
the Required Tax Payments after request by the Company, the Company may, in its
discretion, deduct any Required Tax Payments from any amount then or thereafter
payable by the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole Paired Shares (which the Optionee has held for at
least six months prior to the delivery of such Paired Shares or which the
Optionee purchased on the open market and for which the Optionee has good title,
free and clear of all liens and encumbrances) having a fair market value,
determined as of the date the obligation to withhold or pay taxes first arises
in connection with the Option (the "Tax Date"), equal to the Required Tax
Payments, (3) a cash payment by a broker-dealer acceptable to the Company to
whom the Optionee has submitted an irrevocable notice of exercise or (4) any
combination of (1) and (2). The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (2)-(4). Paired Shares to
be delivered may not have a Fair Market Value in excess of the minimum amount of
the Required Tax Payments. Any fraction of a Paired Share which would be
required to satisfy any such obligation shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing a
Paired Share shall
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<PAGE> 25
be delivered until the Required Tax Payments have been satisfied in full.
(c) Unless the Committee otherwise determines, if the optionee
is subject to Section 16 of the Exchange Act, the Optionee may deliver to the
Company previously owned whole Paired Shares in accordance with Section 3.3(b),
but only if such delivery is in connection with the delivery of Paired Shares in
payment of the exercise price of the option.
3.4 Adjustment. In the event of any stock split, stock
dividend (including, without limitation, the three-for-two stock split by way of
a 501 stock dividend declared by the Company on December 5, 1996),
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Paired Shares other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the fair market value of a Paired Share on
the exercise date over (B) the exercise price of the Option. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
3.5. Compliance with Applicable Law. The Option is subject to
the condition that if the listing, registration or qualification of the Paired
Shares subject to the Option upon any securities exchange or under any law, or
the consent or approval of any governmental body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with, the
purchase or delivery of Paired Shares hereunder, the Option may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained, free of
any conditions not acceptable to the Company. The Company agrees to use
reasonable efforts to effect or obtain any such listing, registration,
qualification, consent or approval.
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<PAGE> 26
3.6. Delivery of Certificates. Upon the exercise of the
Option, in whole or in part, the Company shall deliver or cause to be delivered
one or more certificates representing the number of Paired Shares purchased
against full payment therefor. The Company shall pay all original issue or
transfer taxes and all fees and expenses incident to such delivery, except as
otherwise provided in Section 3.3.
3.7. Option Confers No Rights as Stockholder. The Optionee
shall not be entitled to any privileges of ownership with respect to Paired
Shares subject to the Option unless and until purchased and delivered upon the
exercise of the option, in whole or in part, and the Optionee becomes a
stockholder of record with respect to such delivered Paired Shares; and the
Optionee shall not be considered a stockholder of the Company or the Corporation
with respect to any such Paired Shares not so purchased and delivered.
3.8. Option Confers No Rights to Continued Employment. In no
event shall the granting of the Option or its acceptance by the optionee give or
be deemed to give the Optionee any right to continued employment by the Company
or any affiliate of the Company.
3.9. Decisions of Board or Committee. The Board or the
Committee shall have the right to resolve all questions which may arise in
connection with the Option or its exercise. Any interpretation, determination or
other action made or taken by the Board or the Committee regarding the Plan or
this Agreement shall be final, binding and conclusive (subject to the provisions
for termination by the Company for Cause and termination by the Optionee for
Good Reason or without Good Reason during the window Period as set forth in the
Employment Agreement).
3.10. Company to Reserve Paired Shares. The Company shall at
all times prior to the expiration or termination of the Option reserve or cause
to be reserved and keep or cause to be kept available, either in its treasury or
out of its authorized but unissued Paired Shares, the full number of Paired
Shares subject to the Option from time to time.
3.11. Agreement Subject to the Plan. Except to the extent
otherwise expressly provided herein, this Agreement is subject to the provisions
of the Plan and shall be interpreted in
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<PAGE> 27
accordance therewith. The Optionee hereby acknowledges receipt of a copy of the
Plan.
3.12. Gross-Up. In the event that a Change in Control as
defined in the Plan has occurred, and the aggregate of all payments or benefits
made or provided to the Optionee under this Agreement, the Employment Agreement
and under all other plans and programs of the Company (the "Aggregate Payment")
is determined by the Internal Revenue Service ("IRS") or by the "Auditor" (as
hereinafter defined) to constitute a Parachute Payment, as such term is defined
in Section 28OG(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company shall pay to the Optionee, prior to the time any excise tax
imposed by Section 4999 of the Code ("Excise Tax") is payable with respect to
such Aggregate Payment, an additional amount which, after the imposition of all
income and excise taxes thereon, is equal to the Excise Tax on the Aggregate
Payment. In no event shall the Company be obligated to pay the Optionee's income
taxes due with respect to his exercise of the Option or with respect to payments
or benefits received under any Performance Awards or under any other plans or
programs of the Company. Unless a determination is made by the IRS, the
determination of whether the Aggregate Payment constitutes a Parachute Payment
and, if so, the amount to be paid to the Executive and the time of payment
pursuant to the preceding sentence of this Section 3.12 shall be made by the
accounting firm of Coopers & Lybrand (the "Auditor").
4. Miscellaneous Provisions.
4.1. Designation as Non-Qualified Stock Option. The Option is hereby
designated as not constituting an "incentive stock option" within meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this
Agreement shall be interpreted and treated consistently with such designation.
4.2. Meaning of Certain Terms. (a) As used herein, the term "Legal
Representative" shall include an executor, administrator, legal representative,
beneficiary or similar person and the term "Permitted Transferee" shall include
any transferee (i) pursuant to a transfer permitted under Section 4.4 of the
Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary
designation procedures which may be approved by the Company.
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4.3. Successors. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of the Optionee, acquire any rights hereunder in
accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications provided
for in this Agreement shall be made, if to the Company, to the Secretary of the
Company at the Company's principal executive office, and if to the Optionee, to
his address on the books of the Company (or to such other address as the Company
or Optionee may give to the other for purposes of notice hereunder).
Copies of all notices given to the Optionee shall be sent to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022-4677
Attention: Bruce M. Montgomerie, Esq.
Copies of all notices given to the Company shall be sent to:
Sidley & Austin
555 W. 5th St.
Los Angeles, CA 90013-1010
Attention: Sherwin L. Samuels, Esq.
All notices, requests or other communications provided for in this
Agreement shall be made in writing either (a) by personal delivery to the party
entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing
in the United States mails to the last known address of the party entitled
thereto or (d) by express courier service. The notice, request or other
communication shall be deemed to be received upon personal delivery, upon
confirmation of receipt of facsimile transmission or upon receipt by the party
entitled thereto if by United States mail or express courier service; provided,
however, that if a notice, request or other communication is not received during
regular business hours, it shall be deemed to be received on the next succeeding
business day of the Company.
4.5. Governing Law. The Option, this Agreement, and all determinations
made and actions taken pursuant hereto and
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<PAGE> 29
thereto, to the extent not governed by the laws of the United States, shall be
governed by the laws of the State of New York and construed in accordance
therewith without giving effect to principles of conflicts of laws.
4.6. Counterparts. This Agreement may be executed in two counterparts
each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.
4.7 Disclaimer. The name "Starwood Lodging Trust" is the designation of
a Maryland real estate investment trust and its Trustees (as Trustees but not
personally) under a Declaration of Trust dated August 25, 1969, as amended and
restated, and all persons dealing with Starwood Lodging Trust must look solely
to Starwood Lodging Trust's property for the enforcement of any claims against
Starwood Lodging Trust, as the Trustees, officers, agents and security holders
of Starwood Lodging Trust assume no personal obligations of Starwood Lodging
Trust, and their respective property shall not be subject to claims of any
person relating to such obligation.
4.8. Dispute Resolution. The provisions of Section 5.04 of the
Employment Agreement relating to resolution of disputes shall also apply to
resolution of disputes under this Agreement.
STARWOOD LODGING TRUST
By:
----------------------------------------
Name:
----------------------------------
Its:
----------------------------------
Accepted this ... day of January, 1997.
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<PAGE> 30
- ----------------------------------------------
Gary M. Mendell
"Optionee"
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<PAGE> 31
ATTACHMENT "B" TO EMPLOYMENT AGREEMENT BETWEEN
STARWOOD LODGING TRUST AND GARY M. MENDELL
DATED JANUARY 15, 1997
TERM SHEET
GARY M. MENDELL
PERFORMANCE AWARD
1. All defined terms used in this Term Sheet and not defined in the
Employment Agreement between Starwood Lodging Trust and Gary M. Mendell
("Executive") dated January 15, 1997 (the "Employment Agreement") shall
have the meaning specified in the Starwood Lodging Trust 1995 Long-Term
Incentive Plan, (Amended and Restated as of August 12, 1996) (the "Plan").
2. Performance Award is deemed granted to Executive on the terms set forth
herein on the date of grant of the Option under Section 2.04 of the
Employment Agreement. Definitive Performance Award Agreement (the
"Agreement") consistent with this Term Sheet to be executed and delivered
no later than date similar agreements are executed and delivered to other
senior executives to reflect the Performance Awards referenced in the
Plan. Performance Award to Gary M. Mendell is effective and rights under
this Term Sheet shall be enforceable notwithstanding absence of Agreement.
3. Performance Award applies to 200,000 Paired Shares under Option (before
giving effect to three-for-two stock split by way of a 50% stock dividend
declared by the Company on December 5, 1996).
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4. Performance Period shall be the five-year period commencing on December 5,
1996 subject to acceleration and termination provisions of Employment
Agreement and Plan. If vesting of the Option is accelerated under Section
2.2(c) of the Option Agreement or because of a Change of Control event
under the Plan, the Performance Period shall expire upon such
acceleration, and the Performance Measure shall be computed through such
date and the Performance Award shall be settled in the manner provided in
Section 4.2(c) of the Plan upon and to the extent of exercise of the
Option.
5. Performance Measure shall be a 15% Shareholder Return.
6. Term of Performance Award shall be ten years, subject to the acceleration
and termination provisions Section 4 of this Term Sheet.
7. The Performance Award Agreement shall be consistent with this Term Sheet
and, to the extent not inconsistent therewith, the Plan, with the
following modifications and exceptions:
(i) The Agreement will not provide "otherwise" in the contemplation of
Section 4.2(c) of the Plan.
(ii) For all purposes, termination by the Company for Cause and by the
Executive for Good Reason shall be treated as becoming effective pursuant
to and as defined in the Employment Agreement, and termination by
Executive for Good Reason, or without Good Reason during the Window
Period, under the Employment Agreement shall be deemed a termination by
the Company without Cause, and to the extent necessary, the Agreement
shall be deemed to provide "otherwise" under Sections 4.2(b), 4.3(a) and
4.3(b) of the Plan.
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8. The name "Starwood Lodging Trust" is the designation of a Maryland real
estate investment trust and its Trustees (as Trustees but not personally)
under a Declaration of Trust dated August 25, 1969, as amended and
restated, and all persons dealing with Starwood Lodging Trust must look
solely to Starwood Lodging Trust, as the Trustees, officers, agents and
security holders of Starwood Lodging Trust assume no personal obligations
of Starwood Lodging Trust, and their respective property shall not be
subject to claims of any person relating to such obligation.
9. Notice and all other "Miscellaneous" provisions of Article V of the
Employment Agreement to be equally applicable to Term Sheet and Agreement.
Date: _______________
Starwood Lodging Trust
By:
Its:
Gary M. Mendell
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<PAGE> 1
Exhibit 10.2
SLT REALTY LIMITED PARTNERSHIP
STARWOOD LODGING TRUST
PURCHASE MONEY
PROMISSORY NOTE
$97,500,000.00 NEW YORK, NEW YORK
FEBRUARY 14, 1997
WHEREAS, pursuant to that certain Contribution Agreement dated as of
January 15, 1997 (the "REALTY CONTRIBUTION AGREEMENT"), by and among SLT Realty
Limited Partnership, a Delaware limited partnership ("REALTY PARTNERSHIP"),
Starwood Lodging Trust, a Maryland real estate investment trust ("TRUST" and
together with Realty Partnership, "MAKERS"), Starwood Lodging Corporation, SLC
Operating Limited Partnership, The Prudential Insurance Company of America, on
behalf of Prudential Property Investment Separate Account II ("PAYEE"), the
other Contributing Parties (as defined therein) and the Property Companies (as
defined therein), Makers are purchasing interests in the Property Companies;
WHEREAS, as partial payment of the Purchase Price (as defined in the
Realty Contribution Agreement) for the Property Companies, Makers (and their
affiliates) have requested that Payee accept this Note and Payee has agreed to
accept this Note as such partial payment; and
WHEREAS, unless otherwise indicated, capitalized terms shall have
the meanings set forth in Section 7 hereof.
NOW, THEREFORE, Makers, jointly and severally, agree as follows:
FOR VALUE RECEIVED, each Maker, jointly and severally,
unconditionally promises to pay to the order of Payee in the manner and at the
place hereinafter provided, the principal amount of NINETY SEVEN MILLION FIVE
HUNDRED THOUSAND DOLLARS ($97,500,000.00) on the Maturity Date, subject to the
obligation of Makers to prepay a portion of this Note on or prior to February
20, 1997 pursuant to Section 1(b) hereof.
Makers also promise to pay interest on the unpaid principal amount
hereof from the date hereof until paid in full at a fixed rate per annum equal
to 7.00%; provided that any principal amount not paid when due and, to the
extent permitted by applicable law, any interest not paid when due, in each case
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (both before as well as after judgment), shall bear interest
payable upon demand at a rate that is 6.00%
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<PAGE> 2
per annum in excess of the rate of interest otherwise payable under this Note.
Interest on this Note shall be payable upon any prepayment of this Note (to the
extent accrued on the amount being prepaid) and on the Maturity Date. All
computations of interest shall be made by Payee on the basis of a 360 - day
year, for the actual number of days elapsed in the relevant period (including
the first day but excluding the last day of such period). In no event shall the
interest rate payable on this Note exceed the maximum rate of interest permitted
to be charged under applicable law.
1. PAYMENTS.
(a) All payments of principal and interest in respect of this Note
shall be made in lawful money of the United States of America in same day funds,
payable in accordance with the wire instructions set forth in Schedule I hereto,
or at such other place as Payee may direct in writing. Whenever any payment on
this Note is stated to be due on a day that is not a Business Day, such payment
shall instead be made on the next Business Day, and such extension of time shall
be included in the computation of interest payable on this Note. Each payment
made hereunder shall be credited first to interest then due and the remainder of
such payment shall be credited to principal, and interest shall thereupon cease
to accrue upon the principal so credited. Each of Payee and any subsequent
holder of this Note agrees, by its acceptance hereof, that before disposing of
this Note or any part hereof it will make a notation hereon of all principal
payments previously made hereunder and of the date to which interest hereon has
been paid; provided, however, that the failure to make a notation of any payment
made on this Note shall not limit or otherwise affect the obligation of Makers
hereunder with respect to payments of principal or interest on this Note.
(b) Makers shall prepay $25,500,000.00 of the principal amount of
this Note together with interest accrued thereon on or prior to February 20,
1997.
(c) Makers may elect to extend the Maturity Date from April 15, 1997
to May 14, 1997 by giving written notice of such extension to Payee on or prior
to 5:00 p.m. (New York City time) on April 11, 1997 (with time being of the
essence).
2. PREPAYMENTS. Makers shall have the right at any time and from time
to time to prepay the principal of this Note in whole or in part, without
premium or penalty, upon at least 2 days' notice; provided that each such
prepayment shall be in a minimum amount of $1,000,000 and integral multiples of
$500,000 in excess of that amount (subject to Section 1(b) hereof). Any
prepayment hereunder shall be accompanied by interest on the principal amount of
the Note being prepaid to the date of prepayment.
3. COVENANTS. Each Maker, jointly and severally, covenants and agrees
that until this Note is paid in full it will:
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<PAGE> 3
(a) promptly provide to Payee all financial and operational
information with respect to such Maker as Payee may reasonably request;
(b) promptly after the occurrence of an Event of Default or an
event, act or condition that, with notice or lapse of time or both, would
constitute an Event of Default, provide Payee with a certificate of the
chief executive officer or chief financial officer of such Maker
specifying the nature thereof and such Maker's proposed response thereto;
(c) maintain a net worth equal to $275,000,000 plus seventy five
percent (75%) of any equity issued by Makers after the date hereof; and
(d) not merge or consolidate with any other Person, or sell, lease
or otherwise dispose of all or any substantial part of its property or
assets to any other Person outside the ordinary course of business.
4. REPRESENTATIONS AND WARRANTIES. Each Maker, jointly and severally,
hereby represents and warrants to Payee that:
(a) Realty Partnership is a duly organized and validly existing
partnership in good standing under the laws of the State of Delaware and
has the partnership power and authority to own and operate its properties,
to transact the business in which it is now engaged and to execute and
deliver this Note;
(b) Trust is a duly organized and validly existing real estate
investment trust in good standing under the laws of the State of Maryland
and has the power and authority to own and operate its properties, to
transact the business in which it is now engaged and to execute and
deliver this Note;
(c) this Note constitutes the duly authorized, legally valid and
binding obligation of such Maker, enforceable against such Maker in
accordance with its terms;
(d) all consents and grants of approval required to have been
granted by any Person in connection with the execution, delivery and
performance of this Note have been granted;
(e) the execution, delivery and performance by such Maker of this
Note do not (i) violate any law, governmental rule or regulation, court
order or agreement to which it is subject or by which its properties are
bound or the agreement of limited partnership, as amended, or any other
organizational documents of such Maker or (ii) result in the creation of
any lien or other encumbrance with respect to the property of such Maker;
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<PAGE> 4
(f) there is no action, suit, proceeding or governmental
investigation pending or, to the knowledge of such Maker, threatened
against such Maker or any of its subsidiaries or any of their respective
assets which, if adversely determined, would have a material adverse
effect on the business, operations, properties, assets, condition
(financial or otherwise) or prospects of such Maker and its subsidiaries,
taken as a whole, or the ability of such Maker to comply with its
obligations hereunder; and
(g) the representations and warranties of Realty Partnership
contained in Section 7.02 of the Realty Contribution Agreement and of
Trust contained in Section 7.04 of the Realty Contribution Agreement (in
each case, which, by this reference, are incorporated herein in their
entirety) are and will be true, correct and complete on and as of the date
hereof to the same extent as though made on and as of the date hereof,
except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true, correct and
complete on and as of such earlier date.
5. EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "EVENT OF DEFAULT":
(a) failure of Makers to pay any principal, interest or other amount
due under this Note when due, whether at stated maturity, by required
prepayment (including without limitation as required under Section 1(b)
hereof), declaration, acceleration, demand or otherwise; or
(b) failure of any Maker to pay, or the default in the payment of,
amounts due under or in respect of any promissory note, indenture or other
agreement or instrument relating to any indebtedness for borrowed money of
$1,000,000 or more owing by such Maker, to which it is a party or by which
such Maker or any of its property is bound beyond any applicable grace
period; or the occurrence of any other event or circumstance and notice or
lapse of time or both which permits acceleration of such indebtedness; or
(c) failure of any Maker to perform or observe in all material
respects any other term, covenant or agreement to be performed or observed
by it pursuant to this Note; or
(d) any representation or warranty made by any Maker to Payee in
connection with this Note shall prove to have been false in any material
respect when made (including, without limitation, the representations and
warranties contained in Sections 7.02 and 7.04 of the Realty Contribution
Agreement and incorporated by reference herein in accordance with Section
4(f)); or
4
<PAGE> 5
(e) any order, judgment or decree shall be entered against any Maker
decreeing the dissolution or split-up of such Maker; or
(f) suspension of the usual business activities of any Maker or the
complete liquidation, or liquidation of a substantial portion, of any
Maker's business; or
(g) (i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of any Maker or any of its
respective affiliates in an involuntary case under Title 11 of the United
States Code entitled "Bankruptcy" (as now and hereinafter in effect, or
any successor thereto, the "BANKRUPTCY CODE") or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
which decree or order is not stayed; or any other similar relief shall be
granted under any applicable federal or state law; or (ii) an involuntary
case shall be commenced against any Maker or any of its respective
affiliates under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having
similar powers over any Maker or any of its respective affiliates or over
all or a substantial part of its property shall have been entered; or the
involuntary appointment of an interim receiver, trustee or other custodian
of any Maker or any of its respective affiliates for all or a substantial
part of its property shall have occurred; or a warrant of attachment,
execution or similar process shall have been issued against any
substantial part of the property of any Maker or any of its respective
affiliates, and, in the case of any event described in this clause (ii),
such event shall have continued for 30 days unless dismissed, bonded or
discharged; or
(h) an order for relief shall be entered with respect to any Maker
or any of its respective affiliates or any Maker or any of its respective
affiliates shall commence a voluntary case under the Bankruptcy Code or
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief
in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of
or taking possession by a receiver, trustee or other custodian for all or
a substantial part of its property; or any Maker or any of its respective
affiliates shall make an assignment for the benefit of creditors; or any
Maker or any of its respective affiliates shall be unable or fail, or
shall admit in writing its inability, to pay its debts as such debts
become due; or the partners of any Maker or any of its respective
affiliates (or any committee thereof) shall adopt any resolution or
otherwise authorize action to approve any of the foregoing; or
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<PAGE> 6
(i) any Maker shall challenge, or institute any proceedings to
challenge, the validity, binding effect or enforceability of this Note or
any endorsement of this Note or any other obligation to Payee.
6. REMEDIES. Upon the occurrence of any Event of Default specified in
Section 5(g) or 5(h) above, the principal amount of this Note together with
accrued interest thereon shall become immediately due and payable, without
presentment, demand, notice, protest or other requirements of any kind (all of
which are hereby expressly waived by Makers). Upon the occurrence and during the
continuance of any other Event of Default Payee may, by written notice to
Makers, declare the principal amount of this Note together with accrued interest
thereon to be due and payable, and the principal amount of this Note together
with such interest shall thereupon immediately become due and payable without
presentment, further notice, protest or other requirements of any kind (all of
which are hereby expressly waived by Makers).
7. DEFINITIONS. The following terms used in this Note shall have the
following meanings (and any of such terms may, unless the context otherwise
requires, be used in the singular or the plural depending on the reference):
"BUSINESS DAY" means any day other than a Saturday, Sunday or legal
holiday under the laws of the State of New York or any other day on which
banking institutions located in such state are authorized or required by
law or other governmental action to close.
"EVENT OF DEFAULT" means any of the events set forth in Section 5.
"MATURITY DATE" means April 15, 1997, unless Makers notify Payee of
Makers' election to extend the Maturity Date in accordance with Section
1(b) hereof, in which case "Maturity Date" shall mean May 14, 1997.
"PERSON" means any individual, partnership, joint venture, firm,
corporation, association, bank, trust or other enterprise, whether or not
a legal entity, or any government or political subdivision or any agency,
department or instrumentality thereof.
8. MISCELLANEOUS.
(a) All notices and other communications provided for hereunder
shall be in writing (including telegraphic, telex, telefacsimile or cable
communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered
as follows: if to Makers, at its address specified opposite its signature below;
and if to Payee, at c/o Prudential Real Estate Investors, 8 Campus Drive
Parsippany, NJ 07054, Attention: Gary L. Kauffman (Fax 201-683-1790), James P.
Walker, Esq. (Fax 201-683-1788), with copies to:
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<PAGE> 7
O'Melveny & Myers LLP, 153 East 53rd Street, New York, New York 10022;
Attention: Robert S. Insolia, Esq. (Fax 212-326-2061), or in each case at such
other address as shall be designated in writing from time to time by Payee or
Makers. All such notices and communications shall be effective when received by
the other party.
(b) Makers agree to indemnify Payee against any losses, claims,
damages and liabilities and related expenses, including counsel fees and
expenses, incurred by Payee arising out of or in connection with or as a result
of the loan evidenced by this Note. In particular, Makers promise to pay all
costs and expenses, including reasonable attorneys' fees, incurred in connection
with the collection and enforcement of this Note. Makers agree to pay all
reasonable out-of-pocket expenses of Payee incurred in connection with the
enforcement and administration of this Note, the documents and instruments
referred to herein and any amendments, waivers or consents relating hereto or
thereto including, without limitation, the reasonable fees and expenses of
outside counsel for Payee. In addition, Makers agree to pay, and to save Payee
harmless from all liability for, any stamp or other documentary taxes which may
be payable in connection with Makers' execution or delivery of this Note.
(c) No failure or delay on the part of Payee or any other holder of
this Note to exercise any right, power or privilege under this Note and no
course of dealing between Makers and Payee shall impair such right, power or
privilege or operate as a waiver of any default or an acquiescence therein, nor
shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies expressly provided in this
Note are cumulative to, and not exclusive of, any rights or remedies that Payee
would otherwise have. No notice to or demand on Maker in any case shall entitle
Makers to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of Payee to any other or
further action in any circumstances without notice or demand.
(d) Makers and any endorser of this Note hereby consent to renewals
and extensions of time at or after the maturity hereof, without notice, and
hereby waive diligence, presentment, protest, demand and notice of every kind
and, to the full extent permitted by law, the right to plead any statute of
limitations as a defense to any demand hereunder.
(e) If any provision in or obligation under this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(f) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF MAKERS AND PAYEE
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS
7
<PAGE> 8
OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
(g) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY MAKER ARISING OUT
OF OR RELATING TO THIS NOTE MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY
OF THIS NOTE EACH MAKER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. Each Maker
hereby agrees that service of all process in any such proceeding in any such
court may be made by registered or certified mail, return receipt requested, to
such Maker at its address set forth below its signature hereto, such service
being hereby acknowledged by Maker to be sufficient for personal jurisdiction in
any action against such Maker in any such court and to be otherwise effective
and binding service in every respect. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of
Payee to bring proceedings against such Maker in the courts of any other
jurisdiction.
(h) EACH MAKER AND, BY THEIR ACCEPTANCE OF THIS NOTE, PAYEE AND ANY
SUBSEQUENT HOLDER OF THIS NOTE, HEREBY IRREVOCABLY AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS NOTE OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT
MATTER OF THIS NOTE AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING
ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including without limitation contract claims, tort
claims, breach of duty claims and all other common law and statutory claims.
Each Maker and, by their acceptance of this Note, Payee and any subsequent
holder of this Note, each (i) acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this relationship, and that each will continue
to rely on this waiver in their related future dealings and (ii) further
warrants and represents that each has reviewed this waiver with its legal
counsel and that each knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF
THIS NOTE. In the event of litigation, this provision may be filed as a written
consent to a trial by the court.
8
<PAGE> 9
(i) Makers agree that each Maker shall be jointly and severally
liable for each and every obligation set forth in this Note.
(j) Each Maker hereby waives the benefit of any statute or rule of
law or judicial decision which would otherwise require that the provisions of
this Note be construed or interpreted most strongly against the party
responsible for the drafting thereof.
(k) Realty Partnership is a partnership and the agreement herein
contained shall remain in full force and effect notwithstanding any changes in
the individuals composing such partnership, and the terms "Realty Partnership"
and "Maker," as used herein, shall include any alternate or successor
partnerships, but any predecessor partnerships and their respective partners
shall not thereby be released from any liability. Payee may renew or extend any
of the liabilities of any of the partners of the partnership and may make
additional advances or extensions of credit to any of them or release or fail to
set off any deposit account or credit of any of them or grant other indulgences
to any of them, all from time to time, before or after the maturity hereof, with
or without further notice to or assent from any of the other partners or other
parties liable with respect hereto.
(l) Makers agree and acknowledge that time is of the essence in this
Note.
(m) The name "Starwood Lodging Trust" is a designation of Starwood
Lodging Trust and its trustees (as trustees but not personally) under a
Declaration of Trust dated August 25, 1969, as amended and restated as of June
6, 1988 and as further amended subsequent thereto, which states that all persons
dealing with Starwood Lodging Trust shall look solely to the assets of Starwood
Lodging Trust for enforcement of any claims against Starwood Lodging Trust, and
the trustees, officials, agents and security holders of Starwood Lodging Trust
assume no personal liability for obligations entered into on behalf of Starwood
Lodging Trust, and their respective individual assets shall not be subject to
the claims of any person relating to such obligations.
[Remainder of Page Intentionally Left Blank]
9
<PAGE> 10
IN WITNESS WHEREOF, each Maker has caused this Note to be executed
and delivered by its duly authorized general partner, as of the day and year and
at the place first above written.
SLT REALTY LIMITED PARTNERSHIP
By: STARWOOD LODGING TRUST,
Its General Partner
By: /S/ [ILLEGIBLE]
------------------------------------------
Name:
Title:
STARWOOD LODGING TRUST
By: /S/ [ILLEGIBLE]
------------------------------------------------
Name:
Title:
Notice address for Makers:
Starwood Lodging Trust
2231 East Camelback Road, Suite 410
Phoenix, AZ 85016
Telephone: (602) 852-3900
Telecopy: (602) 852-0984
Attention: Steven R. Goldman
Attention: Nir Margalit, Esq.
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telephone: (312) 861-2000
Telecopy: (312) 861-2200
Attention: Stephen G. Tomlinson, Esq.
S-1
<PAGE> 11
TRANSACTIONS ON PROMISSORY NOTE
<TABLE>
<CAPTION>
Amount of Amount of Outstanding
Amount of Principal Interest Principal
Loan Made Paid Paid Balance Notation
Date This Date This Date This Date This Date Made By
- ---- --------- --------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
Exhibit 10.3
================================================================================
CONTRIBUTION AGREEMENT
DATED AS OF JANUARY 15, 1997
BY AND AMONG
HEI HOTELS, L.L.C.,
WESTPORT MANAGEMENT, L.L.C.,
WESTPORT HOLDINGS, L.L.C.,
SAVIOR LIMITED PARTNERSHIP,
JUDITH RUSHMORE,
ORNA L. SHULMAN,
MURRAY DOW,
STEVE MENDELL,
GARY MENDELL,
ZAPCO COMMUNICATIONS, INC.,
WESTPORT HOSPITALITY, INC.,
STARWOOD LODGING CORPORATION,
AND
SLC OPERATING LIMITED PARTNERSHIP
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS................................................... 1
(a) Defined Terms................................................. 1
(b) Other Definitions............................................. 5
SECTION 2. BASIC TRANSACTION............................................. 6
(a) Contributed Assets............................................ 6
(b) Consideration................................................. 6
(c) Net Worth Adjustment.......................................... 7
(d) Limit on Consideration........................................ 8
SECTION 3. CLOSING OF THE TRANSACTION.................................... 8
SECTION 4. CONDITIONS TO OBLIGATION OF BUYER............................. 9
(a) Representations and Warranties................................ 9
(b) Performance of Covenants...................................... 9
(c) Consents...................................................... 9
(d) Regulatory Approval........................................... 9
(e) Delivery of Interests......................................... 9
(f) Reserved...................................................... 9
(g) Absence of Material Adverse Change........................... 10
(h) Absence of Litigation........................................ 10
(i) Compliance with Applicable Laws.............................. 10
(j) Related Transactions......................................... 10
(k) Reserved..................................................... 10
(l) Payoff Letter................................................ 10
(m) Reserved..................................................... 10
(n) Reserved..................................................... 10
(o) Reserved..................................................... 10
(p) Reserved..................................................... 11
(q) Seller Closing Deliveries.................................... 11
(r) Proceedings.................................................. 12
SECTION 5. CONDITIONS TO OBLIGATION OF SELLERS.......................... 12
(a) Representations and Warranties............................... 12
(b) Performance of Covenants..................................... 12
(c) Compliance with Applicable Laws.............................. 12
(d) Absence of Litigation........................................ 12
</TABLE>
- ii -
<PAGE> 3
TABLE OF CONTENTS (continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(e) Regulatory Approval.......................................... 12
(f) Related Transactions......................................... 13
(g) Employment Agreements........................................ 13
(h) Buyer's Closing Deliveries................................... 13
(i) Proceedings.................................................. 13
(j) Reserved..................................................... 14
(k) No Material Adverse Change to Buyer.......................... 14
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE PRINCIPALS
AND THE SELLERS............................................................. 14
(a) Organization of the Company.................................. 14
(b) Authorization of Transaction................................. 14
(c) Noncontravention; Consents................................... 14
(d) Capitalization of the Company................................ 15
(e) Brokers' Fees................................................ 16
(f) Subsidiaries and Investments................................. 16
(g) Financial Statements......................................... 16
(h) Events Subsequent to the Latest Balance Sheet................ 16
(i) Absence of Undisclosed Liabilities........................... 18
(j) Legal Compliance............................................. 18
(k) Leased Properties............................................ 19
(l) Title........................................................ 19
(m) Condition of Assets.......................................... 19
(n) Real Property................................................ 19
(o) Tax Matters.................................................. 20
(p) Intellectual Property........................................ 21
(q) Contracts and Commitments.................................... 22
(r) Insurance.................................................... 24
(s) Litigation; Proceedings...................................... 24
(t) Licenses and Permits......................................... 24
(u) Employees.................................................... 25
(v) Employee Benefits............................................ 26
(w) Environment, Health and Safety............................... 26
(x) Reserved..................................................... 27
(y) Reserved..................................................... 27
(z) Insider Interests............................................ 27
(aa) Reserved..................................................... 27
(bb) Investment Representation.................................... 27
</TABLE>
- iii -
<PAGE> 4
TABLE OF CONTENTS (continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(cc) Closing Date................................................. 27
SECTION 7. REPRESENTATIONS AND WARRANTIES OF BUYER AND SLC.............. 27
(a) Organization of Buyer........................................ 28
(b) Authorization of Transaction................................. 28
(c) Noncontravention............................................. 28
(d) Status of the Partnership Agreement.......................... 28
(e) No Litigation; Proceedings................................... 28
(f) Units........................................................ 28
(g) Financial Statements; Undisclosed Liabilities................ 29
(h) Reservation of Paired Shares................................. 29
(i) Closing Date................................................. 29
SECTION 8. PRE-CLOSING COVENANTS........................................ 29
(a) Affirmative Covenants of the Company, the Principals, and the
Sellers...................................................... 29
(b) Negative Covenants of the Company, the Principals and the
Sellers...................................................... 31
(c) Affirmative Covenants of Buyer............................... 31
SECTION 9. SURVIVAL; INDEMNIFICATION.................................... 32
(a) Survival..................................................... 32
(b) Indemnification by the Principals and the Sellers............ 32
(c) Limits on Indemnification.................................... 33
(d) Indemnification by Buyer and SLC............................. 34
(e) Notice of Indemnification.................................... 34
(f) Failure to Notify............................................ 35
(g) Notice of Loss; Insurance.................................... 35
(h) Payment of Indemnification Amount............................ 36
(i) Dispute Resolution........................................... 37
(j) Type of Remedy............................................... 38
(k) Limitation on Liability of the Company....................... 38
SECTION 10. ADDITIONAL AGREEMENTS........................................ 39
(a) Sellers and Principals Nonsolicitation and Confidentiality... 39
(b) Exclusivity.................................................. 40
(c) Mutual Assistance and Records................................ 40
(d) Press Releases............................................... 40
(e) Transaction Expenses......................................... 41
(f) Certain Taxes................................................ 41
</TABLE>
- iv -
<PAGE> 5
TABLE OF CONTENTS (continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(g) Further Assurances........................................... 41
(h) Litigation Support........................................... 41
(i) Admission of Buyer as Member................................. 42
(j) Post-Closing Status of the Company........................... 42
(k) Benefits for Employees of the Company........................ 42
(l) Retention of Managers of the Company......................... 42
(m) Retention By Sellers......................................... 42
(n) Reserved..................................................... 43
(o) Production of Schedules...................................... 43
(p) Disposition of the Interests by the Sellers.................. 43
SECTION 11. TERMINATION; EFFECT OF TERMINATION........................... 43
(a) Termination.................................................. 43
(b) Effect of Termination........................................ 44
(c) Deposit; Remedy for Pre-Closing Breach by Buyer.............. 44
SECTION 12. MISCELLANEOUS................................................ 44
(a) No Third Party Beneficiaries................................. 44
(b) Entire Agreement............................................. 45
(c) Successors and Assigns....................................... 45
(d) Counterparts................................................. 45
(e) Disclosure................................................... 45
(f) Severability................................................. 45
(g) Headings..................................................... 45
(h) Captions..................................................... 45
(i) Notices...................................................... 45
(j) Governing Law................................................ 47
(k) Consent to Jurisdiction...................................... 47
(l) Amendments and Waivers....................................... 47
(m) Incorporation of Exhibits and Schedules...................... 47
(n) Construction................................................. 48
(o) Knowledge of Sellers and Principals Attributable to the
Company...................................................... 48
</TABLE>
- v -
<PAGE> 6
<TABLE>
<CAPTION>
LIST OF EXHIBITS
----------------
<S> <C> <C>
Exhibit A - Term Sheet For Class A Units
Exhibit B - Form of Exchange Rights Agreements
Exhibit C - Form of Registration Rights Agreement
Exhibit D-1 - Form of Employment Agreement - Gary Mendell
Exhibit D-2 - Form of Employment Agreement - Murray Dow
</TABLE>
<TABLE>
<CAPTION>
LIST OF SCHEDULES
-----------------
<S> <C> <C>
Schedule 2(a)(i) - Schedule of Sellers Selling to Buyer
Schedule 2(a)(ii) - Schedule of Sellers Selling to SLC
Schedule 2(b) - Allocation of Consideration Among Sellers
Schedule 4(c) - Consents Schedule
Schedule 4(l) - Indebtedness for which Payoff Letters are Requested
Schedule 6(a) - Qualifications of the Company
Schedule 6(c) - Noncontravention; Consents and Approvals; Licences and
Permits
Schedule 6(d) - Capitalization of the Company
Schedule 6(e) - Brokers' Fees
Schedule 6(g) - Financial Statements
Schedule 6(h) - Events Subsequent to Latest Balance Sheet
Schedule 6(i) - Otherwise Undisclosed Liabilities
Schedule 6(j) - Legal Compliance
Schedule 6(k) - Leased Property
</TABLE>
- vi -
<PAGE> 7
<TABLE>
<S> <C> <C>
Schedule 6(o) - Tax Matters
Schedule 6(p) - Intellectual Property
Schedule 6(q) - Contracts and Commitments
Schedule 6(r) - Insurance
Schedule 6(s) - Litigation
Schedule 6(t) - Licenses and Permits
Schedule 6(u) - Employee Matters
Schedule 6(w) - Environment, Health and Safety
Schedule 6(z) - Insider Interests
Schedule 7(c) - Noncontravention; Consents and Approvals
Schedule 7(f) - Warrants, Options, etc.
Schedule 12(i) - Notice Information for Principals and Sellers
</TABLE>
- vii -
<PAGE> 8
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made and entered
into as of January 15, 1997, by and among SLC Operating Limited Partnership, a
Delaware limited partnership ("Buyer"), Starwood Lodging Corporation, a Maryland
corporation ("SLC"), HEI Hotels L.L.C., a Delaware limited liability company
(the "Company"), Westport Management, L.L.C., a Delaware limited liability
company, Westport Holdings, L.L.C., a Delaware limited liability company, and
Savior Limited Partnership, a Delaware limited partnership, the holders of all
of the issued and outstanding membership interests of the Company (each a
"Seller" and collectively, the "Sellers"), and Judith Rushmore, Orna L. Shulman,
Murray Dow, Steve Mendell, Gary Mendell, Zapco Communications, Inc.,a Delaware
corporation, and Westport Hospitality, Inc., a Delaware corporation, each either
an executive of the Company or an owner of a Seller (each a "Principal" and
collectively, the "Principals"). Buyer, SLC, the Company, the Principals and the
Sellers are referred to collectively herein as the "Parties." Capitalized terms
used herein and not otherwise defined are defined in Section 1.
Subject to the terms and conditions set forth in this Agreement, the
Sellers desire to contribute to Buyer and SLC, and Buyer and SLC desire to
acquire from the Sellers, all of the issued and outstanding membership interests
of the Company (the "Interests"), thereby acquiring the Company's business,
assets and properties (operating as a going concern) which constitute the
Company's business (the "Business").
NOW, THEREFORE, in consideration of the mutual promises herein made,
and in consideration of the representations, warranties, and covenants herein
contained, the Parties, intending to be legally bound, agree as follows:
SECTION 1. DEFINITIONS.
(a) Defined Terms. The following definitions shall be applied to the
capitalized terms used in this Agreement for all purposes, unless otherwise
clearly indicated to the contrary.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"Class A Unit" means the Class A Units described in the Term Sheet
For Class A Units attached hereto as Exhibit A.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Corporation Shares" shall mean the shares of common stock, par
value $.01 per share, of SLC.
<PAGE> 9
"Employee Pension Benefit Plan" shall have the meaning set forth in
Section 3(2) of ERISA.
"Employee Welfare Benefit Plan" shall have the meaning set forth in
Section 3(1) of ERISA.
"Environmental, Health and Safety Laws" means all laws, rules and
regulations of federal, state, local, and foreign governments (and all agencies
thereof) and other requirements having the force or effect of law relating to or
imposing liability or standards of conduct concerning pollution or protection of
the environment, public health and safety, or employee health and safety, and
all judgments, orders and decrees of federal, state, local and foreign
governments (and all agencies thereof) having the force and effect of law issued
or promulgated thereunder, and all related common law theories, including
without limitation, the Comprehensive Environmental Response, Compensations and
Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the
Occupational Safety and Health Act of 1970, each as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Rights Agreement" means that certain Exchange Rights
Agreement dated of even date herewith by and among Buyer, the Sellers, and
certain other parties listed on the signature pages thereto substantially in the
form of Exhibit B attached hereto.
"GAAP" means United States generally accepted accounting principles,
applied on a consistent basis.
"Government Entity" means the United States of America or any other
nation, any state or other political subdivision thereof, or any entity
exercising executive legislative, judicial, regulatory or administrative
functions of government.
"Intellectual Property" means (i) all inventions (whether or not
patentable or reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, divisions, extensions, and reexaminations
thereof, (ii) all registered and unregistered trademarks, service marks, trade
dress, logos, trade names, Internet domain names and corporate names, including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (iii) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith, (iv)
all trade secrets and confidential business information, (v) all computer
software, (vi) all other proprietary rights, and (vii) all copies and tangible
embodiments thereof; provided that the names "HEI International, Inc." "HEI
Mid-East Hotels Ltd.," "HEI Israel Hotels, LLC" and "Hospitality Equity
Investors, Inc.", and abbreviated forms thereof shall not be considered
Intellectual Property.
- 2 -
<PAGE> 10
"Investments" means, with respect to any Person, any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or other ownership or beneficial interest
(including partnership interests and joint venture interests) of any other
Person, and any capital contribution by such Person to any other Person.
"Lien" shall mean any security interest, pledge, bailment (in the
nature of a pledge or for purposes of security), mortgage, deed of trust, the
grant of a power to confess judgment, conditional sales and title retention
agreement (including any lease in the nature thereof), charge, encumbrance or
other similar arrangement or interest in real or personal property.
"Marketing and Service Agreements" means any agreement or contract
pursuant to which the Company provides sales, marketing and reservation services
to hotels.
"Material Adverse Effect" means any material adverse change in the
business, assets, financial condition, operating results, employee relations,
franchise relations, customer or supplier relations or business prospects of the
entity in question, taken as a whole, other than any such changes occurring as a
result of the consummation of the transactions contemplated by this Agreement
and the Transaction Documents.
"Multiemployer Plan" shall have the meaning set forth in Section
3(37) of ERISA.
"Net Worth" means the aggregate amount of all the Company's assets
minus the aggregate amount of all the Company's liabilities, with all such items
defined and measured in accordance with GAAP, applied consistently with the 1995
Balance Sheet. If any item on (or which, under GAAP, should be reflected on) the
1995 Balance Sheet is not reflected in accordance with GAAP, Net Worth will
nonetheless be computed in accordance with GAAP.
"Partnership Agreement" means the Amended and Restated Limited
Partnership Agreement of Buyer, dated as of June 29, 1995, as the same may be
amended, modified or supplemented from time to time in accordance with its
terms.
"Paired Share Price" shall mean the unweighted average closing price
for the Paired Shares on the New York Stock Exchange for the thirty consecutive
trading days ending on the day before the date on which any determination is
made.
"Paired Shares" shall mean one common share of beneficial interest,
par value $.01 per share, of SLT and one share of common stock, par value $.01
per share, of SLC that are subject to a pairing agreement between SLT and SLC.
"Permitted Liens" means (i) any Lien created or existing pursuant to
any indebtedness for borrowed money listed on Schedule 6(q) or reflected on the
Estimated Closing Balance Sheet, (ii) Liens for Taxes not delinquent or the
validity of which is being contested in good faith by appropriate proceedings
and as to which adequate reserves have been established on the Company's
- 3 -
<PAGE> 11
financial statements in accordance with GAAP, and (iii) statutory landlord's,
mechanic's, carrier's, worker's, repairman's or other similar Liens arising or
incurred in the ordinary course of business.
"Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"PRISA Contribution Agreement" means that certain Contribution
Agreement, dated of even date herewith, by and among SLTRLP, Buyer, and the
parties listed on Schedule A thereto.
"Prohibited Transaction" has the meaning set forth in Section 406 of
ERISA and Section 4975 of the Code.
"Registration Rights Agreement" means that certain Registration
Rights Agreement dated of even date herewith by and among Buyer, the Sellers,
SLT, SLTRLP, and certain other parties listed on the signature pages thereto
substantially in the form of Exhibit C attached hereto.
"SLT" means Starwood Lodging Trust, a Maryland real estate
investment trust.
"SLTRLP" means SLT Realty Limited Partnership, a Delaware limited
partnership.
"Subsidiary" means any corporation or other entity with respect to
which a specified Person (or a Subsidiary thereof) has the power to vote or
direct the voting of sufficient securities to elect a majority of the directors
or persons performing similar functions or with respect to which such Person (or
Subsidiary) acts as a general partner or managing member or otherwise controls
the day-to-day operations of such entity.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not,
and including any obligation to indemnify or otherwise assume or succeed to the
Tax liability of any other Person.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Transaction Documents" means this Agreement, the Exchange Rights
Agreement, the Registration Rights Agreement, the Employment Agreements, the
PRISA Contribution Agreement, and all other agreements, instruments,
certificates and other documents to be entered into
- 4 -
<PAGE> 12
or delivered by any Party in connection with the transactions contemplated to be
consummated by any of the foregoing.
(b) Other Definitions. The terms set forth below are defined on the
following pages of this Agreement.
<TABLE>
<S> <C>
1995 Balance Sheet ...................................................... 16
AAA ..................................................................... 37
Agreement ............................................................... 1
Arbitration Expenses .................................................... 37
Arbitrator .............................................................. 37
Business ................................................................ 1
Buyer ................................................................... 1
Buyer's Information ..................................................... 31
Cap ..................................................................... 33
Cash Portion ............................................................ 6
Closing ................................................................. 8
Closing Balance Sheet ................................................... 7
Closing Date ............................................................ 8
Closing Net Worth ....................................................... 7
Closing Price ........................................................... 6
Company ................................................................. 1
Confidential Information ................................................ 39
Consents ................................................................ 9
Consideration ........................................................... 6
Contribution Amount ..................................................... 6
Costs and Fees .......................................................... 37
Deposit ................................................................. 44
Dispute ................................................................. 37
Employment Agreements ................................................... 13
Estimated Closing Balance Sheet ......................................... 7
Estimated Closing Net Worth ............................................. 7
Financial Statements .................................................... 16
Indemnification Amount .................................................. 36
Indemnified Party ....................................................... 34
Indemnifying Party ...................................................... 34
Independent Auditor ..................................................... 7
Interests ............................................................... 1
Latest Balance Sheet .................................................... 16
Licenses ................................................................ 24
Liquor Licenses ......................................................... 25
Losses .................................................................. 32
Parties ................................................................. 1
</TABLE>
- 5 -
<PAGE> 13
<TABLE>
<S> <C>
Partnership Parties ..................................................... 32
Principal ............................................................... 1
Principals .............................................................. 1
Restricted Parties ...................................................... 39
Restricted Period ....................................................... 39
Seller .................................................................. 1
Sellers ................................................................. 1
SLC ..................................................................... 1
SLC Amount .............................................................. 6
Starwood Financial Statements ........................................... 29
Units ................................................................... 27
WARN .................................................................... 26
</TABLE>
SECTION 2. BASIC TRANSACTION.
(a) Contributed Assets. On and subject to the terms and conditions
of this Agreement, at the Closing, for the consideration specified in Section
2(b),
(i) Buyer agrees to purchase from each of the Sellers
specified on Schedule 2(a)(i) to be attached hereto, and each of the
Sellers specified thereon agrees to sell to Buyer, and
(ii) SLC agrees to purchase from each of the Sellers specified
on Schedule 2(a)(ii) to be attached hereto, and each of the Sellers
specified thereon agrees to sell to SLC,
all of such Seller's Interests, free and clear of all Liens other than Liens
created or arising from actions taken by Buyer or SLC.
(b) Consideration. Subject to Section 2(d), in addition to the
execution and delivery of the Transaction Documents to which Buyer is a party,
the consideration (the "Consideration") to be delivered by Buyer and SLC to
Sellers at the Closing, allocated among the Sellers in proportion to their
respective holdings of Interests as set forth in Schedule 2(b) to be attached
hereto, shall consist of the following:
(i) from Buyer, a number of Class A Units equal to the
quotient of (x) the remainder of $14,500,000 (as adjusted pursuant to
Section 2(c), the "Contribution Amount") minus the Cash Portion divided by
(y) $49.25 (the "Closing Price"); and
(ii) an amount of cash equal to $6,147,000 (the "Cash
Portion"), payable by wire transfer of immediately available funds as
follows:
(A) from SLC, an amount of cash equal to the
Consideration multiplied by the number 0.01 (the "SLC Amount");
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<PAGE> 14
(B) from Buyer, an amount of cash equal to the Cash
Portion minus the SLC Amount.
The Consideration may be increased or decreased in accordance with Section 2(c)
hereof; all such adjustments shall be made in the same proportions of cash and
Class A Units as shown on Schedule 2(b). The portion of the Consideration to be
paid by Buyer and SLC and to be received by each Seller, and the part of such
portion to be paid in the form of Class A Units and/or cash to such Seller, is
set forth on Schedule 2(b); provided that the total number of Class A Units and
Cash Portion received by all Sellers pursuant to this Section 2 shall not exceed
the amounts set forth therefor in subsections (i) and (ii) above.
(c) Net Worth Adjustment.
(i) At least two (2) business days prior to the Closing, the
Company and Sellers in good faith shall prepare an unaudited estimated
consolidated balance sheet of the Company as of the Closing Date (the
"Estimated Closing Balance Sheet") and an estimate of the Net Worth of the
Company as of the close of business on the Closing Date (the "Estimated
Closing Net Worth") based on the Company's books and records and other
information then available.
(ii) If Estimated Closing Net Worth is greater than zero, the
Consideration shall be adjusted upwards by such excess. If Estimated
Closing Net Worth is less than zero, the Consideration shall be adjusted
downwards by such shortfall until the Consideration is zero. Class A Units
included in the Consideration shall be reduced based on the Closing Price.
(iii) As promptly as practicable, but in no event later than
75 days after the Closing, Sellers will deliver to Buyer a balance sheet
of the Company as of the Closing (the "Closing Balance Sheet") prepared by
the Company on a basis consistent with the 1995 Balance Sheet, which
Closing Balance Sheet will reflect the Sellers' determination of the Net
Worth as of the close of business on the Closing Date (the "Closing Net
Worth").
(iv) If Buyer disagrees with Sellers' determination of Closing
Net Worth, Buyer shall notify Sellers in writing of such disagreement
(such notice setting forth the basis for such disagreement in reasonable
detail) and Sellers and Buyer thereafter shall negotiate in good faith to
resolve any such disagreements. If Sellers and Buyer are unable to resolve
any such disagreements within thirty (30) days after Sellers deliver the
Closing Balance Sheet to Buyer, Sellers and Buyer shall submit the dispute
to a "Big Six" public accounting firm jointly selected by Sellers and
Buyer (the "Independent Auditor") for resolution. If Sellers and Buyer are
unable to agree upon an Independent Auditor, the Independent Auditor shall
be selected by lot from a list of four "Big Six" accounting firms (of
which two firms
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<PAGE> 15
shall be selected by each of Sellers and Buyer, but excluding any firm
which has previously audited the Company's or Buyer's financial
statements).
(v) Sellers and Buyer shall use their reasonable best efforts
to cause the Independent Auditor to resolve all disagreements over the
Closing Net Worth as soon as practicable, but in any event within 60 days
after submission of the disputes to the Independent Auditor. The
resolution of such disagreements and the determination of Closing Net
Worth by the Independent Auditor shall be final and binding on Sellers and
Buyer.
(vi) The Independent Auditor will determine the allocation of
its costs and expenses in determining the Closing Net Worth based upon the
percentage which the portion of the contested amount not awarded to each
party bears to the amount actually contested by such party. For example,
if Buyer claims the Closing Net Worth is $1,000 greater than the amount
determined by Sellers' accountants, and Sellers contests only $500 of the
amount claimed by Buyer, and if the Independent Auditor ultimately
resolves the dispute by awarding Buyer $300 of the $500 contested, then
the costs and expenses of arbitration will be allocated 60% (i.e., 300
(divided by) 500) to Sellers and 40% (i.e., 200 (divided by) 500) to
Buyer.
(vii) If Closing Net Worth (as finally determined pursuant to
this Section 2(c)) is greater than Estimated Closing Net Worth, Buyer
shall, within three (3) business days after Closing Net Worth is finally
determined pursuant to this Section 2(c), pay to the Sellers, in
immediately available funds and Class A Units in the same proportions as
shown on Schedule 2(b), using the Closing Price as the value per Paired
Share, the difference between Closing Net Worth and Estimated Closing Net
Worth. If Closing Net Worth is less than Estimated Closing Net Worth, the
Sellers shall, within three (3) business days after Closing Net Worth is
finally determined pursuant to this Section 2(c), in the same proportion
as shown on Schedule 2(b), pay to Buyer, in immediately available funds or
Class A Units (using the same such value) as Sellers shall elect, an
amount equal to the difference between Closing Net Worth and Estimated
Closing Net Worth. Without duplication, all amounts owed pursuant to this
Section 2(c) shall include an amount equal to interest, from and excluding
the Closing Date to and including the date of payment, at the prime rate
announced by Chase Manhattan Corp. (or any successor thereto) from time to
time, calculated on the basis of a 365-day year.
(viii) All determinations pursuant to this Section 2(c) shall
be made in accordance with GAAP.
(d) Limit on Consideration. The Parties agree that, notwithstanding
anything to the contrary in this Agreement, in no event shall the Consideration
(valued for this purpose at the Closing Price), as adjusted, exceed an amount
equal to $14,900,000.
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<PAGE> 16
SECTION 3. CLOSING OF THE TRANSACTION. The closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Kirkland & Ellis, 153 East 53rd Street, New York, New York, at
10:00 a.m. local time on January 31, 1997, or such other time and place as the
Parties may mutually determine (as modified below, the "Closing Date"); provided
that either the Company or the Buyer may postpone the Closing Date for up to 60
days in order to obtain any consents or waivers of rights of first refusal
required to transfer the franchise agreements.
SECTION 4. CONDITIONS TO OBLIGATION OF BUYER. The obligation of
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions as of the
Closing:
(a) Representations and Warranties. The representations and
warranties set forth in Section 6 shall be true and correct in all material
respects at and as of the Closing Date as though then made and as though the
Closing Date was substituted for the date of this Agreement throughout such
representations and warranties, except to the extent of any change in the
representations and warranties set forth in Section 6 solely caused by the
transactions contemplated by the Transaction Documents or by ordinary course
operations if such change does not have a Material Adverse Effect on the
Company.
(b) Performance of Covenants. The Sellers, the Principals and the
Company shall have performed in all material respects all of their respective
covenants and agreements required to be performed by them under this Agreement
prior to the Closing Date.
(c) Consents. Each of the Company, the Principals and Sellers will
have obtained, on terms and conditions reasonably satisfactory to Buyer and
without any liability, obligation, capital expenditure, additional commitment or
other such action by the Company (other than any liability taken into account in
Section 2(c) and any liability, obligation, capital expenditure, additional
commitment or other such action provided for in Section 10(e)), (A) all
consents, approvals, and releases by governmental agencies that are required for
the consummation of the transactions contemplated by the Transaction Documents,
(B) all consents, approvals, and releases by third parties that are required for
the consummation of the transactions contemplated by the Transaction Documents,
(C) all consents, approvals, and releases by third parties that are required in
order to prevent a breach of, or a default under, or a termination, change in
the terms or conditions or modification of, any instrument, contract, lease,
license or other agreement to which the Company is a party and which is set
forth on Schedule 4(c) to be attached hereto or to which any property of the
Company is subject and which is set forth on Schedule 4(c), (D) releases of any
and all Liens (other than Permitted Liens) held by third parties for which the
underlying indebtedness has been, or will be, repaid by the Company on the
Closing Date (collectively, the "Consents").
- 9 -
<PAGE> 17
(d) Regulatory Approval. All necessary filings with regulatory
authorities (including Hart-Scott-Rodino filings and approvals, if necessary)
will have been made and all waiting periods will have expired.
(e) Delivery of Interests. Each Seller shall have tendered all of
his or her Interests, accompanied by a duly executed power of attorney over such
Interests, endorsed in blank, on the Closing Date.
(f) Reserved.
(g) Absence of Material Adverse Change. Since the date hereof, there
shall have been no event, circumstance or condition (not including (i) the
termination of the management contract currently in force for the management of
the Smithtown Sheraton and (ii) bonus payments to be made prior to Closing as
disclosed pursuant to Section 6(h)(xii)) which has resulted or will result in a
Material Adverse Effect on the Company, provided that for purposes of this
Section 4(g) the existence of any Material Adverse Effect shall be determined by
viewing the Company as a whole.
(h) Absence of Litigation. No action or proceeding before any court
or government body will be pending or threatened which, in the reasonable
judgment of Buyer, makes it inadvisable or undesirable to consummate the
transactions contemplated by any of the Transaction Documents by reason of the
probability that the action or proceeding will result in a judgment, decree or
order that would prevent the carrying out of the Transaction Documents or any of
the transactions contemplated thereby, declare unlawful the transactions
contemplated hereby or cause such transactions to be rescinded.
(i) Compliance with Applicable Laws. The consummation of the
transactions contemplated by the Transaction Documents will not be prohibited by
any applicable constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Government Entity or
subject Buyer or the Company to any penalty, liability or (in Buyer's sole
judgment) other onerous condition arising under any applicable constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge
or other restriction of any Government Entity.
(j) Related Transactions. All of the Transaction Documents shall
have been duly executed by all parties thereto and shall be in full force and
effect, and the transactions contemplated in the PRISA Contribution Agreement
shall have been or shall simultaneously be consummated in accordance with the
terms thereof (unless such transactions have not been consummated by reason of
Buyer's breach thereof).
(k) Reserved.
- 10 -
<PAGE> 18
(l) Payoff Letter. Buyer shall have received at or prior to Closing
a payoff letter in respect of each indebtedness listed on Schedule 4(l) to be
attached hereto reasonably satisfactory in form and substance to Buyer and its
counsel.
(m) Reserved.
(n) Reserved.
(o) Reserved.
(p) Reserved.
(q) Seller Closing Deliveries. The Company, Principals and Sellers
shall have delivered to Buyer at Sellers' expense each of the following:
(i) an Officer's Certificate of the Company, dated as of the
Closing Date, stating that the conditions specified in Section 4(a)
through (j), inclusive, have been fully satisfied;
(ii) a certificate (dated not less than five business days
prior to the Closing) of the Secretary of State of the State of Delaware
as to the good standing of the Company in the State of Delaware, and
certificates (dated not less than five business days prior to the Closing)
of good standing as a foreign limited liability company in each
jurisdiction in which the Company does business where qualification to do
business is required.
(iii) copies of all agreements, filings, instruments and other
documents evidencing the formation and organization of the Company as a
limited liability company, all in form and substance reasonably
satisfactory to Buyer and its counsel;
(iv) such instruments of sale, transfer, assignment,
conveyance and delivery, in form and substance reasonably satisfactory to
counsel for Buyer, as are required in order to transfer to Buyer good and
marketable title to the Interests, free and clear of all Liens;
(v) with respect to each of the real property leases listed on
Schedule 6(k), an estoppel letter from the landlords listed on Schedule
6(k), in form and content reasonably satisfactory to Buyer, stating the
following: (a) the copy of the lease or sublease, as applicable, attached
to the estoppel letter is a true, correct and complete copy of the lease
or sublease, and represents the entire agreement between the landlord and
the Company; (b) the Company is not in breach or default under the lease
or sublease and no event has occurred which, with notice or the passage of
time, would constitute a breach or default, or permit termination,
modification or acceleration under the lease or sublease; (c) the landlord
has not
- 11 -
<PAGE> 19
repudiated any provision of the lease or sublease; (d) there are no
disputes, oral agreements or forbearance programs in effect as to the
lease or sublease; (e) the amount of rent due under the lease and the date
rent has been paid through; (f) the Company has satisfied all obligations
as tenant under the lease or sublease; and (g) such other matters as Buyer
may reasonably request;
(vi) copies of the Consents and any filings related thereto;
(vii) a duly executed certificate in the form prescribed by
Treasury Regulations Section 1.1445-2(b)(2)(iii)(B) that no Seller is a
foreign person; and
(viii)such other documents relating to the transactions
contemplated by the Transaction Documents as Buyer reasonably requests.
(r) Proceedings. All proceedings taken or required to be taken by
the Company, Principals or Sellers in connection with the transactions
contemplated by the Transaction Documents to be consummated at or prior to the
Closing and all documents incident thereto shall be reasonably satisfactory in
form and substance to Buyer and its counsel.
Buyer may waive any condition specified in this Section 4 if it executes a
writing so stating at or prior to the Closing.
SECTION 5. CONDITIONS TO OBLIGATION OF SELLERS. The obligation of
Sellers to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions as of the
Closing:
(a) Representations and Warranties. The representations and
warranties set forth in Section 7 shall be true and correct in all material
respects at and as of the Closing Date as though then made and as though the
Closing Date was substituted for the date of this Agreement throughout such
representations and warranties.
(b) Performance of Covenants. Buyer and SLC shall have performed in
all material respects all of the covenants and agreements required to be
performed by them under this Agreement prior to the Closing Date.
(c) Compliance with Applicable Laws. The consummation of the
transactions contemplated by the Transaction Documents will not be prohibited by
any applicable constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Government Entity or
subject the Sellers to any penalty, liability or other onerous condition arising
under any applicable constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any Government
Entity.
- 12 -
<PAGE> 20
(d) Absence of Litigation. No action or proceeding before any court
or government body will be pending or threatened which, in the judgment of the
Sellers, makes it inadvisable or undesirable to consummate the transactions
contemplated by any of the Transaction Documents by reason of the probability
that the action or proceeding will result in a judgment, decree or order that
would prevent the carrying out of the Transaction Documents or any of the
transactions contemplated thereby, declare unlawful the transactions
contemplated hereby or cause such transactions to be rescinded.
(e) Regulatory Approval. All necessary filings with regulatory
authorities (including Hart-Scott-Rodino filings and approvals, if necessary)
will have been made and all waiting periods will have expired.
(f) Related Transactions. All of the Transaction Documents shall
have been duly executed by all parties thereto and shall be in full force and
effect, and the transactions contemplated in the PRISA Contribution Agreement
shall have been or shall simultaneously be consummated in accordance with the
terms thereof.
(g) Employment Agreements. Each of Gary Mendell and Murray Dow shall
have entered into an Employment Agreement in the form of Exhibit D-1 and Exhibit
D-2, respectively, attached hereto and each of the agreements that are exhibits
thereto (collectively, the "Employment Agreements"), and each Employment
Agreement and each of the agreements that are exhibits thereto shall be in full
force and effect.
(h) Buyer's Closing Deliveries. Buyer shall have delivered to the
Sellers the following:
(i) an Officer's Certificate of Buyer and SLC, dated as of the
Closing Date, stating that the conditions applicable to such Party
specified in Sections 5(a) through 5(g), inclusive, have been fully
satisfied;
(ii) certified copies of the resolutions of the board of
directors of SLC authorizing and approving the transactions contemplated
by the Transaction Documents to which SLC is a party;
(iii) copies of all necessary governmental and third party
consents, approvals, releases and filings required to be obtained by Buyer
and SLC in connection with the consummation of the transactions
contemplated hereby;
(iv) a certificate (dated not less than five business days
prior to the Closing) of the Secretary of State of the State of Delaware
as to the good standing of Buyer in the State of Delaware and a
certificate (dated not less than five business days prior to the Closing)
of the Secretary of State of the State of Maryland as to the good standing
of SLC in the State of Maryland;
- 13 -
<PAGE> 21
(v) such documents or other evidence of the issuance of the
Class A Units referred to in Section 2(b) above as the Sellers may
reasonably request; and
(vi) such other documents relating to the transactions
contemplated by the Transaction Documents as the Sellers reasonably
request.
(i) Proceedings. All proceedings taken or required to be taken by
Buyer and SLC in connection with the transactions contemplated hereby to be
consummated at or prior to the Closing and all documents incident thereto shall
be satisfactory in form and substance to the Company and its counsel.
(j) Reserved.
(k) No Material Adverse Change to Buyer. Since the date hereof,
there has been no event, circumstance or condition which has resulted in a
Material Adverse Effect on Buyer, provided that for purposes of this Section
5(k) the existence of any Material Adverse Effect shall be determined by viewing
SLT, SLC, SLTRLP and Buyer as a whole; provided further that any fluctuations in
hotel market conditions in general or in the market prices of the Paired Shares
shall not constitute a Material Adverse Effect.
The Sellers may waive any condition specified in this Section 5 if they execute
a writing so stating at or prior to the Closing.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE
PRINCIPALS AND THE SELLERS. As a material inducement to Buyer to enter into and
perform its obligations under this Agreement, the Company, the Principals and
the Sellers jointly and severally represent and warrant to Buyer as follows:
(a) Organization of the Company. The Company is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and is qualified to do business in every jurisdiction in which the
nature of its business or its ownership of property requires it to be qualified,
except where the failure to do so would not cause a Material Adverse Effect on
the Company. Schedule 6(a) to be attached hereto lists all of the jurisdictions
in which the Company is qualified to do business.
(b) Authorization of Transaction. Each of the Company and the
Sellers has full power and authority to execute and deliver the Transaction
Documents to which it is a party and to perform its obligations thereunder. The
members or managers of the Company and the Sellers have duly authorized the
execution and delivery of the Transaction Documents to which the Company is a
party and the consummation of the transactions contemplated thereby. No other
proceedings on the part of the Company are necessary to approve and authorize
the execution and delivery of the Transaction Documents or the consummation of
the transactions contemplated by the Transaction
- 14 -
<PAGE> 22
Documents. Each Transaction Document to which the Company and Sellers are a
party will, upon execution by such party constitute the valid and legally
binding obligation of such party, enforceable against such party in accordance
with its terms and conditions, subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws and to general principles of equity
(whether considered in proceedings at law or in equity).
(c) Noncontravention; Consents.
(i) Neither the execution and the delivery of the Transaction
Documents to which each of the Company, the Principals and Sellers is a
party, nor the consummation of the transactions contemplated by the
Transaction Documents, shall (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or
other restriction of any Government Entity to which the Company, the
Principals or Sellers is subject or any provision of the articles of
organization, by-laws, or operating agreement of the Company, (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, result in a premium, penalty or modification under,
create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under, any agreement, contract, lease, license,
franchise, permit, indenture, mortgage, instrument or other arrangement to
which the Company is a party or by which it is bound, unless such effect
does not have a Material Adverse Effect on the Company, or (C) result in
the imposition of any Lien upon any of the assets of the Company or upon
the Interests, unless such effect does not have a Material Adverse Effect
on the Company. Without limiting the generality of the foregoing, the
Company has not entered into any agreement, nor is it bound by any
obligation of any kind whatsoever, directly or indirectly, to transfer or
dispose of (whether by sale of membership interests, assets, assignment,
merger, consolidation or otherwise) the Company or the Business to any
party other than Buyer.
(ii) Except as set forth on Schedule 6(c) to be attached
hereto, neither the Company, the Principals, nor the Sellers are required
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any Government Entity or third party in order for
such Party to enter into the Transaction Documents and to consummate the
transactions contemplated by the Transaction Documents. Except as set
forth on Schedule 6(c), no other authorization, consent, or approval is
required to allow the Sellers to consummate the transactions.
(d) Capitalization of the Company. The capitalization of the Company
is completely set forth on Schedule 6(d) to be attached hereto, including the
respective holdings of the Sellers and all other holders of Interests. There are
no restrictions on the transfer of the Interests other than those set forth in
the Company's constitutive documents and those arising from federal and
applicable state securities laws. All currently issued and outstanding Interests
were duly authorized and validly issued in accordance with the terms of the
Company's constitutive documents and in compliance with applicable laws, and are
fully paid and non-assessable. Except as set forth on Schedule 6(d) and except
as created by this Agreement, there are no outstanding interests, equity
- 15 -
<PAGE> 23
interests (including, without limitation, any interests containing equity
features), subscriptions, purchase rights, subscription rights, conversion
rights, exchange rights, options, warrants, preemptive rights, rights of first
refusal, rights of first offer, or other rights or other arrangements or
commitments outstanding or obligating the Company or any holder of Interests to
issue, sell or otherwise cause to be outstanding any Interests, any security
convertible into or exercisable or exchangeable for Interests, or any other
equity participation in the Company. There are no outstanding or authorized
equity appreciation, phantom interest, profit participation or similar rights
with respect to the Company. Except as set forth on Schedule 6(d), there are no
voting trusts, proxies, or other agreements or understandings with respect to
the Interests. At the Closing, upon receipt of the Interests, Sellers will have
transferred the Interests to be contributed hereunder free and clear of all
Liens, and, pursuant to Section 10(i), as of the Closing Buyer will be admitted
as a member of the Company.
(e) Brokers' Fees. Except as set forth on Schedule 6(e) to be
attached hereto, neither the Company, the Principals, nor the Sellers have any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement. All items
as set forth on Schedule 6(e) shall be the sole obligation of the Party that
incurred such obligation; provided that in no event shall any assets of the
Company be used to satisfy any such obligation (except to the extent that such
obligations are paid out of Net Worth and do not reduce Net Worth to less than
zero), it being understood and agreed that any such obligation on the part of
the Company shall be fully paid and discharged when due by the Sellers (except
as described in the previous parenthetical).
(f) Subsidiaries and Investments. The Company has no subsidiaries
and does not own, directly or indirectly, any stock, membership interests,
partnership interests or joint venture interests in, or any security issued by,
any other Person.
(g) Financial Statements. Schedule 6(g) to be attached hereto
contains the following financial statements (collectively, the "Financial
Statements"):
(i) the audited balance sheets of the Company as of December
31, 1995 (the "1995 Balance Sheet") and the related statements of income,
members' equity and changes in financial position for the 226 day period
then ended; and
(ii) the unaudited balance sheets of the Company as of
November 28, 1996 (the "Latest Balance Sheet") and the related statements
of income, members' equity and changes in financial position for the
eleven-month period then ended.
Each of the Financial Statements (including in all cases the notes thereto, if
any) is accurate and complete in all material respects, is consistent with the
books and records of the Company (which, in turn, are accurate and complete in
all material respects) and fairly presents in all material respects the
financial condition and results of operations of the Company in accordance with
GAAP throughout the periods covered thereby, subject in the case of unaudited
financial statements to
- 16 -
<PAGE> 24
changes resulting from normal year-end adjustments (which will not be material
individually or in the aggregate) and to the absence of materially adverse
footnote disclosure. Each Financial Statement has been prepared in accordance
with GAAP consistently applied.
(h) Events Subsequent to the Latest Balance Sheet. Since the Latest
Balance Sheet, there has not been any event, circumstance or condition which has
resulted in Material Adverse Effect on the Company. Since that date, except as
set forth on Schedule 6(h) to be attached hereto, the Company has conducted its
businesses in the ordinary course of business consistent with past custom and
practice, has incurred no liabilities other than in the ordinary course of
business consistent with past custom and practice, and has not:
(i) sold, assigned, conveyed, transferred, canceled, leased,
licensed, encumbered or waived any property, tangible asset, Intellectual
Property or other intangible asset or right other than in the ordinary
course of business and consistent with past custom and practice;
(ii) entered into any agreement, contract, lease, license or
other arrangement (or series of related agreements, contracts, leases and
licenses and arrangements) other than in the ordinary course of business
consistent with past custom and practice;
(iii) other than in the ordinary course of business,
accelerated, terminated, modified (except pursuant to Buyer's
instructions) or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) involving
more than $50,000 to which the Company is a party or by which the Company
is bound and no other party has and, to the Company's knowledge, no other
party intends to take any such action;
(iv) sold, assigned, transferred, abandoned or permitted to
lapse any licenses or permits which, individually or in the aggregate, are
material to the Business or any portion thereof, or any Intellectual
Property or other intangible assets;
(v) waived any right other than in the ordinary course of
business consistent with past practice and custom;
(vi) made any loan or advance to, or guarantee for the benefit
of, or any Investment in, any Person;
(vii) made capital expenditures and commitments therefor in
excess of $50,000;
(viii) mortgaged or pledged any of its assets or subjected any
of them to any Lien;
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<PAGE> 25
(ix) experienced any damage, destruction, or loss (whether or
not covered by insurance) to any of its or their properties or assets in
excess of $50,000;
(x) except as disclosed pursuant to Section 6(h)(xii) or
referred to in Section 6(h)(xiii) below, entered into any employment
contract or collective bargaining agreement, written or oral, or modified
the terms of any such existing contract or agreement;
(xi) granted any increase in the base compensation of any of
its managers, members, officers or employees other than in the ordinary
course of business consistent with past custom and practice;
(xii) adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance, Employee Pension Benefit Plan,
Employee Welfare Benefit Plan or other plan, contract or commitment for
the benefit of any of its managers, members, officers and employees;
(xiii)except as provided in Section 10(m), entered into any
transaction with any of its managers, members, officers, employees or
Affiliates (other than ordinary course employment and deferred
compensation and bonus arrangements entered into in accordance with past
custom and practice) which are not reflected on the 1995 Balance Sheet or
the Latest Balance Sheet (each of which obligations shall be paid prior to
Closing or shall be reflected on the Closing Balance Sheet);
(xiv) experienced any other occurrence, event, incident,
action, failure to act or transaction outside of the ordinary course of
business (except as contemplated by the Transaction Documents) or entered
into any other material transaction, whether or not in the ordinary course
of business that has resulted in Material Adverse Effect; or
(xv) committed to do any of the foregoing.
(i) Absence of Undisclosed Liabilities. Except as set forth on
Schedule 6(i) to be attached hereto, the Company has no debts, liabilities or
obligations of any nature (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due and
regardless of when asserted including, without limitation, Taxes with respect to
or based upon transactions or events occurring on or before the Closing), and to
the knowledge of the Company there is no basis for any proceeding, hearing,
investigation, charge, complaint, claim with respect to any debt, liability or
obligation, except for (i) liabilities reflected in the liabilities section of
the Latest Balance Sheet, (ii) liabilities under agreements, contracts, purchase
orders and other similar arrangements set forth on Schedule 6(q) attached hereto
or not set forth on Schedule 6(q) due solely to the specific dollar threshold
contained in Section 6(q) which have arisen in the ordinary course of business
(none of which relates to a breach of contract or default), and (iii)
liabilities which have arisen since the date
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<PAGE> 26
of the Latest Balance Sheet in the ordinary course of business (none of which
relates to (x) breach of contract, default, breach of warranty, or infringement
or any liability under any Environmental, Health and Safety Laws, or (y) tort,
violation of law. or any other action, suit or proceeding which require the
payment by the Company of an amount, either individually or in the aggregate, in
excess of $20,000).
(j) Legal Compliance. Except as set forth on Schedule 6(j) to be
attached hereto, the Company has complied with and is in compliance with all
applicable laws, rules and regulations of federal, state, local and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed, commenced or threatened against any of them alleging any failure to so
comply, except to the extent that failure to comply has not and will not have a
Material Adverse Effect on the Company, taken as a whole.
(k) Leased Properties. Schedule 6(k) to be attached hereto lists all
real property that is occupied by the Company (other than the Hotels (as defined
in the PRISA Contribution Agreement)) in connection with its business but not
owned by the Company and the leases, subleases and agreements by which such
property is used and occupied. Except as otherwise described on Schedule 6(k),
with respect to each such parcel of leased real property: (i) the leases and
subleases described on Schedule 6(k) constitute all of the leases, subleases and
agreements under which the Company holds any interest in any real estate used in
connection with its business; (ii) the Company has delivered to the Buyer and
its counsel true, correct and complete copies of all of the leases, subleases
and agreements described on Schedule 6(k); (iii) each such lease, sublease or
agreement is legal, valid, binding, enforceable and in full force and effect as
to the Company, and will continue to be legal, valid, binding, enforceable and
in full force and effect on identical terms after the Closing; (iv) the Company
or to the Company's knowledge, any other party to any such lease, sublease or
agreement is not in breach or default thereof, and no event has occurred which,
with notice or the lapse of time, or both, would constitute such a breach or
default or permit termination, modification or acceleration thereof or
thereunder; (v) to the Company's knowledge, no party other than the Company to
any such lease, sublease or agreement has repudiated any provision thereof; (vi)
there are no disputes, oral agreements or forbearance programs in effect as to
any such lease, sublease or agreement; (vii) no such lease, sublease or
agreement has been modified in any respect, except to the extent disclosed in
documents delivered to the Buyer and its counsel; (viii) the Company has not
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in any leasehold or subleasehold except for Permitted Liens; (ix) to
the Company's knowledge, all buildings, improvements and other property thereon
are supplied with utilities and other services necessary for the operation
thereof (including gas, electricity, water, telephone, sanitary and storm sewers
and access to public roads); and (x) there are no pending (or, to the best of
the Company's knowledge, threatened) condemnation proceedings, lawsuits, or
other administrative actions relating to such parcel or other matters affecting
adversely the current use, occupancy, or value of such parcel.
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<PAGE> 27
(l) Title. The Company owns good and marketable title, free and
clear of all Liens (other than Permitted Liens), to all of the tangible personal
and intangible property and assets of the Company shown on the Latest Balance
Sheet or acquired thereafter which have not been disposed of in the ordinary
course of business consistent with past custom and practice, except for rights
of licensors and lessors of such assets which are subject to a license or lease
described in Schedule 6(q) or Schedule 6(k), or not required to be described on
such schedules.
(m) Condition of Assets. All of the Company's machinery, equipment
and other tangible personal property and assets are in good condition and
repair, except for ordinary wear and tear.
(n) Real Property. The Company does not directly or indirectly own
any real property.
(o) Tax Matters. Except as set forth on Schedule 6(o) to be attached
hereto,
(i) the Company has timely filed or shall timely file all Tax
Returns which are required to be filed, and all such Tax Returns are true,
complete and accurate in all material respects and have been prepared in
compliance with applicable law;
(ii) all Taxes due and payable as of the Closing Date by the
Company, whether or not shown on a Tax Return, have been paid or shall be
paid by the Company or the Sellers, all Taxes accrued but not yet due are
shown on the Closing Balance Sheet and no Taxes are delinquent;
(iii) no deficiency for any amount of Tax has been asserted or
assessed by a taxing authority against the Company or any Seller with
respect to the operations of the Company and neither the Company nor any
Seller has any knowledge that any such assessment or asserted Tax
liability shall be made;
(iv) the Company does not reasonably expect any taxing
authority to claim or assess any additional Taxes for any period, and no
audit or investigation by any taxing authority is pending or has been
threatened in writing;
(v) the Company has not consented to extend the time beyond
the Closing in which any Tax may be assessed or collected by any Taxing
authority;
(vi) the Company has no liability for Taxes of any other
Person under Treasury Regulations Section 1.1502-6 or any similar
provision of local, state or foreign Tax law;
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<PAGE> 28
(vii) the Company is not a party to or bound by any Tax
allocation or Tax sharing agreement and has no current or potential
contractual obligation to indemnify any other person with respect to
Taxes;
(viii)the Company is, and since its formation has been,
validly classified as a partnership for federal income tax purposes;
(ix) no claim has ever been made by a taxing authority in a
jurisdiction where the Company does not pay Tax or file Tax Returns that
the Company is or may be subject to Taxes assessed by such jurisdiction;
(x) the Company has withheld and prior to Closing shall have
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor or
other third party; and
(xi) Schedule 6(o) contains a list of states, territories and
jurisdictions (whether foreign or domestic) in which the Company is
required to file Tax Returns relating to the Business.
(p) Intellectual Property.
(i) Schedule 6(p) to be attached hereto sets forth a complete
and correct list of all:
(A) patented or registered Intellectual Property and
pending patent applications or other applications for registrations
of Intellectual Property owned or filed by or on behalf of the
Company;
(B) all trade names, Internet domain names and
unregistered trademarks and service marks owned by the Company;
(C) all licenses or similar agreements or arrangements
for the Intellectual Property to which the Company is a party,
either as licensee or licensor.
(ii) Except as set forth on Schedule 6(p):
(A) the Company owns and possess all right, title and
interest in and to, or to the Company's knowledge has a valid and
enforceable license to use, the Intellectual Property used in the
operation of the Business as currently conducted and as currently
proposed to be conducted, free and clear of all liens, licenses,
security interests, encumbrances and other restrictions;
- 21 -
<PAGE> 29
(B) to the Company's knowledge no claim by any third
party contesting the validity, enforceability, use or ownership of
any such Intellectual Property has been made, is currently
outstanding or is threatened, and there are no grounds for the same;
(C) to the Company's knowledge no loss or expiration of
any such Intellectual Property is threatened, pending or reasonably
foreseeable;
(D) the Company has not received any notice of, and
neither the Company, any Principal nor any Seller have any knowledge
of any facts which indicate a likelihood of, any infringement or
misappropriation by, or conflict with, any third party with respect
to such Intellectual Property;
(E) the Company has not infringed, misappropriated or
otherwise conflicted with any Intellectual Property rights or other
rights of any third parties and no infringement, misappropriation or
conflict will occur as a result of the operation of the Business as
currently conducted or as currently proposed to be conducted; and
(F) the transactions contemplated by this Agreement will
not conflict with, violate, terminate or create a right to terminate
any license or other agreement with any third party relating to such
Intellectual Property or result in a modification in the terms of
any such license or other agreement.
(iii) The Company, the Principals and Sellers have taken all
necessary action to maintain and protect such Intellectual Property so as
not to adversely effect the validity, enforcement, use or ownership of
such Intellectual Property. The Intellectual Property owned or used by the
Company prior to the Closing will be owned or available for use by the
Company on identical terms and conditions immediately subsequent to the
Closing.
(q) Contracts and Commitments. Except as set forth on Schedule 6(q)
to be attached hereto, the Company is not a party to any written or oral:
(i) (A) contract for the employment of any officer, individual
employee, or other person or entity on a full-time, part-time, consulting
or other basis for a discernable period of time (not including any oral
employment-at-will contracts entered into in the ordinary course of
business or any employment contracts with non-executives), (B) contract
with any labor union, (C) severance agreement or (D) agreement relating to
loans to officers, managers, members or affiliates, other than advances in
the ordinary course of business consistent with past practice and custom;
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<PAGE> 30
(ii) agreement or indenture relating to the borrowing of money
or to the mortgaging, pledging or otherwise placing a lien on any asset or
group of assets of the Company;
(iii) outstanding powers of attorney executed on behalf of the
Company or any Guaranty;
(iv) guarantee of any obligation for borrowed money or
otherwise;
(v) agreement with respect to the lending or investing of
funds to or in any other Person;
(vi) management contract or other similar arrangement relating
to the management and operation of hotels;
(vii) partnership, joint venture or other similar agreement or
arrangement;
(viii)lease or agreement under which it is lessee of or holds
or operates any property, real or personal, owned by any other party,
except for any lease of personal property under which the aggregate rental
payments do not exceed $25,000;
(ix) lease or agreement under which it is lessor of or permits
any third party to hold or operate any property, real or personal, owned
or controlled by it;
(x) assignment, license, indemnification or agreement with
respect to any form of intangible property, including any Intellectual
Property, except as already disclosed on Schedule 6(p) or any franchise or
marketing representation agreement or arrangement;
(xi) contract or group of related contracts with the same
party (excluding purchase orders entered into in the ordinary course of
business) for the purchase or sale of products or services under which the
undelivered balance of such products and services has a selling price in
excess of $50,000;
(xii) contract which limits its freedom to use any
Intellectual Property anywhere in the world, except as required by
applicable licenses, or which prohibits it from freely engaging in
business anywhere in the world;
(xiii)any material agreement with any Government Entity;
(xiv) contract or group of related contracts with the same
party continuing over a period of more than six months from the date or
dates thereof that is not terminable by each party thereto on sixty (60)
days or less notice without penalty;
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<PAGE> 31
(xv) contract relating to the marketing or sales of its
services; or
(xvi) other agreement material to the Business or involving
payments or receipts greater than $50,000 in any fiscal year.
Except as specifically disclosed in Schedule 6(q),the Company has performed all
material obligations required to be performed by it and is not in default under
or in breach of nor in receipt of any claim of default or breach under any
agreement, lease, contract, commitment or other agreement to which it is a
party; and no event has occurred which with the passage of time or the giving of
notice or both would result in a default, breach or event of noncompliance under
any such agreement or would allow any other party to such agreement to
terminate, modify or accelerate any rights under any such agreements or
otherwise take any action which would have a Material Adverse Effect on the
Company. The Company has no knowledge of any breach or anticipated breach by any
other party of any agreement relating to the Business. Each item described on
Schedule 6(q) is valid, binding and enforceable against the Company in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws and to general principles of equity
(whether considered in proceedings at law or in equity). Upon consummation of
the transactions contemplated by the Transaction Documents, subject to the
receipt of any necessary approvals and consents set forth on Schedule 6(c), each
item described on Schedule 6(q) shall be in full force and effect without
penalty or other modification. Buyer has been supplied with a true and correct
copy of each of the contracts which are referred to on Schedule 6(q), together
with all amendments, waivers or other modifications thereto and renewals and
extensions thereof.
(r) Insurance. Schedule 6(r) to be attached hereto lists and briefly
describes each insurance policy maintained by the Company with respect to its
properties, assets and business. All of such insurance policies are in full
force and effect and will remain in full force and effect following the Closing
for the remainder of their respective terms without any further action or
payment (other than premiums payable in the ordinary course) by the Buyer and
the Company is not in default with respect to its obligations under any of such
insurance policies and has not received any notification of cancellation of any
of such insurance policies and has no claim outstanding which could be expected
to cause a material increase in the Company's insurance rates. The Company
maintains insurance coverage of a type and amount customary for organizations of
similar size engaged in similar lines of business.
(s) Litigation; Proceedings. Except as set forth on Schedule 6(s) to
be attached hereto, there are no actions, suits, proceedings (including
grievance proceedings), hearings, orders, investigations, inquiries, charges,
complaints or claims pending or to the Company's knowledge threatened against or
affecting the Company or the Business (or, to the Company's knowledge, pending
or threatened against or affecting any of the officers, managers, members or
employees of the Company with respect to the Business), or to which the Company
may be bound or affected, at law or in equity, or before or by any Government
Entity which, if adversely determined, would reasonably be expected to have a
Material Adverse Effect on the Company viewing the Company as a whole. The
Company (i) is not subject to any judgment, order or decree of, or settlement or
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<PAGE> 32
conciliation agreement subject to enforcement by, any Government Entity, (ii)
has not received any opinion or memorandum or legal advice from legal counsel to
the effect that it is exposed, from a legal standpoint to any liability or
disadvantage which may be material to its businesses or (iii) is not engaged in
any legal action to recover monies due it or for damages sustained by it.
(t) Licenses and Permits. Schedule 6(t) to be attached hereto
contains a complete listing and summary description of all material permits,
licenses, certificates, approvals and other authorizations of any Government
Entity or other similar rights (collectively, the "Licenses") used in the
conduct of the Business. Except as indicated Schedule 6(t), the Company owns or
possess all right, title and interest in and to all of the Licenses that are
necessary to conduct the Business as presently conducted and as presently
proposed to be conducted, including, without limitation, all Licenses required
under any federal, state or local law relating to public health and safety,
employee health and safety, pollution or protection of the environment other
than those Licenses where the failure to obtain such Licenses would not
reasonably be expected to have a Material Adverse Effect on the Company viewing
Company as a whole. The Company is in material compliance with the terms and
conditions of such Licenses and has received no notices that it is in violation
of any of the terms or conditions of such Licenses. The Company has taken all
necessary action to maintain such Licenses. No loss or expiration of any such
License is threatened (to the Company's knowledge), pending or reasonably
foreseeable other than expiration in accordance with the terms thereof. Except
as indicated on Schedule 6(t), all of the material Licenses shall survive the
transfer of the Interests to the Buyer. Notwithstanding anything to the contrary
in this Section 6(t), Buyer hereby acknowledges that some of the permits,
licenses, certificates, approvals and other authorizations of any Government
Entity required in order to serve alcohol in connection with the operation of
the Business (the "Liquor Licenses") may not be transferable. Furthermore,
Buyer hereby agrees to bear the cost of transferring each Liquor License.
Sellers hereby agree to fully cooperate with Buyer in effecting the transfer of
the Liquor Licenses.
(u) Employees.
(i) The Company has complied and remains in compliance with
all laws and contracts relating to labor and employment including, without
limitation, provisions thereof relating to wages, hours, equal
opportunity, collective bargaining, immigration and the payment of social
security and other taxes.
(ii) Except as set forth in Schedule 6(u) to be attached
hereto:
(A) there is no charge or complaint pending or, to
knowledge of the Company, threatened before any Government Entity
against the Company, or any of its employees, officers or managers,
alleging violation of any federal, state or local statute, ordinance
or regulation relating to any employee's (or group of employees')
employment or prospective employment at the Company, and to the
knowledge of the Company no basis for any such claim exists; nor
will this transaction form the basis of or result in any such charge
or complaint;
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<PAGE> 33
(B) within the last three years the Company has not
experienced any union organizing attempt, strikes, work stoppage or
slow down, or any other labor dispute or question concerning
representation, and no such action is currently pending or, to
knowledge of the Company, threatened;
(C) the Company is not a party to any collective
bargaining agreement or relationship with any labor union;
(D) to the knowledge of the Principals, no executive,
key employee or group of employees of the Company has any plans to
terminate their employment with the Company;
(E) no current or former employee of the Company has
asserted any claim or, to knowledge of the Company, threatened any
claim against the Company for overtime pay, wages, salary or bonus
or vacation time, excluding in each case current payroll periods;
and
(F) neither the Company nor any of the Company's
members, managers, officers or employees is subject to any
noncompete, nonsolicitation, employment, consulting or similar
agreement relating to, affecting, or in conflict with, the Business
or his, her or its activities for the Business.
(G) The Company has not implemented any plant or
operating unit closing, or layoff of employees, that could implicate
the Worker Adjustment Retraining and Notification ("WARN") Act of
1988, as amended, or any similar state or local law or regulation,
and no such layoffs will be implemented before Closing without
advance notification to Buyer.
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<PAGE> 34
(v) Employee Benefits. Other than a 401(k) plan: the Company has no
deferred or incentive compensation (excluding discretionary cash bonuses
disclosed pursuant to Section 6(h)(xii)), profit sharing, retirement,
hospitalization, Employee Pension Benefit Plans or Employee Welfare Benefit
Plans. The Company is not a participating or contributing employer in any
Multiemployer Plan with respect to employees of the Company nor has the Company
incurred any withdrawal liability with respect to any Multiemployer Plan or any
liability in connection with the termination or reorganization of any
Multiemployer Plan. The Company has not incurred and has no reason to expect
that it will incur any liability to the PBGC or otherwise under Title IV of
ERISA (including any withdrawal liability) or under the Code with respect to any
Employee Pension Benefit Plan that the Company or any member of its Controlled
Group (within the meaning of Code Section 414(b) and (c)) has ever maintained or
to which any of them has ever contributed, or ever has been required to
contribute. Any such plans that the Company has ever maintained or to which it
has ever contributed, including the 401(k) plan, have been administered in
compliance with ERISA and the Code and all applicable laws.
(w) Environment, Health and Safety. Except as set forth on Schedule
6(w) to be attached hereto or in the environmental reports delivered to Buyer
and listed on Schedule 6(w):
(i) the Company has obtained all permits, licenses, and other
authorizations which are required for the ownership and operation of the
Business under all applicable Environmental, Health and Safety Laws;
(ii) the Company has not handled or disposed of any substance,
arranged for the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated the
Business or any property or facility (and, to knowledge of the Company, no
such property or facility is contaminated with hazardous materials,
substances or waste) so as to give rise to any liability or corrective or
remedial obligation under any Environmental, Health and Safety Laws;
(iii) the Company has complied with all Environmental, Health
and Safety Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has, to the Company's
knowledge, been filed or commenced against the Company alleging any
failure to so comply;
(iv) the Company has not assumed or undertaken any liability
of any other Person under any Environmental, Health and Safety Laws;
(v) to the Company's knowledge, no underground storage tanks,
landfills or waste disposal areas, asbestos-containing materials, or
PCB-containing equipment or fluids have been or are present on any real
property listed on Schedule 6(k); and
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<PAGE> 35
(vi) the transactions contemplated by this Agreement do not
impose any obligations under any Environmental, Health and Safety Laws for
site investigation or cleanup, or notification to any government agencies
or third parties.
(x) Reserved.
(y) Reserved.
(z) Insider Interests. Except as set forth on Schedule 6(z) or as
set forth in Section 10(m), to be attached hereto, no officer, member or manager
of the Company or any relative or Affiliate of such Person has any agreement
with the Company or any interest in any property (real, personal or mixed,
tangible or intangible) used in or pertaining to the Business, except solely as
a member or employee.
(aa) Reserved.
(bb) Investment Representation. Sellers are receiving the Class A
Units to be delivered pursuant hereto (the "Units") for their own account with
the present intention of holding such Units for purposes of investment, and each
such party has no intention of selling such Units in a distribution in violation
of the federal securities laws or any applicable state securities laws. Each
Seller is either an accredited investor as defined in Rule 501 of the Securities
Act of 1933, as amended (an "Accredited Investor") or, together with their
Purchaser Representative, is sophisticated.
(cc) Closing Date. The representations and warranties of the
Company, any Principal or any Seller contained in this Section 6 and elsewhere
in this Agreement and all information contained in any exhibit, schedule or
attachment hereto or in any writing delivered by, or on behalf of, the Company,
any Principal or any Seller to Buyer shall be true and correct on the Closing
Date as though then made, except as affected by the transactions expressly
contemplated by this Agreement.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF BUYER AND SLC. As a
material inducement to the Company, the Principals and Sellers to enter into and
perform their obligations under this Agreement, Buyer and SLC hereby represent
and warrant to such Parties as follows:
(a) Organization of Buyer. Buyer is a limited partnership duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, and is qualified to do business in all jurisdictions in which such
qualification is required. SLC is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland, and is
qualified to do business in all jurisdictions in which such qualification is
required.
- 28 -
<PAGE> 36
(b) Authorization of Transaction. Buyer and SLC have full power and
authority to enter into this Agreement and perform all of their obligations
hereunder. The execution and delivery of this Agreement and the performance by
Buyer and SLC of their obligations hereunder have been duly authorized by such
action as may be required, and no further action or approval is required in
order to constitute this Agreement as a binding and enforceable obligation of
Buyer and SLC.
(c) Noncontravention. Neither the execution and the delivery of the
Transaction Documents, nor the consummation of the transactions contemplated by
the Transaction Documents, shall (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any Government Entity to which Buyer or SLC is subject or any
provision of their partnership agreement or articles of incorporation,
respectively, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Buyer or SLC is a party or by which Buyer or SLC is bound or to which any of
their assets are subject. Except as set forth on Schedule 7(c) to be attached
hereto, Buyer and SLC are not required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by the Transaction Documents.
(d) Status of the Partnership Agreement. The Partnership Agreement
is in full force and effect, a true, complete and correct copy thereof has been
delivered to the Company and there are no dissolution, termination or
liquidation proceedings pending or contemplated with respect to Buyer. To
Buyer's knowledge, there are no uncured defaults or breaches by any partner
under the Partnership Agreement. Buyer is taxable as a "partnership" as defined
in Section 7701(a) of the Code and is not taxable as a publicly traded
partnership within the meaning of Section 7704 of the Code.
(e) No Litigation; Proceedings. There are no pending or, to Buyer's
knowledge, threatened investigations, actions, suits, proceedings or claims
against or affecting Buyer at law or in equity or before or by any Government
Entity which, if determined adversely, would have a material adverse impact on
Buyer or the transactions contemplated hereby.
(f) Units. The capitalization of Buyer is as set forth in its
Partnership Agreement. There are no restrictions on the transfer of the Units
other than those contained in the Partnership Agreement, the Exchange Rights
Agreement or the Registration Rights Agreement and those arising from federal
and applicable state securities laws. Except as set forth on Schedule 7(f) to be
attached hereto and except as created by this Agreement, as of the date hereof,
there are no outstanding subscriptions, options, warrants, preemptive or other
rights or other arrangements or commitments obligating Buyer to issue any Class
A Units. If and when issued, the Paired Shares issuable upon exchange of the
Units delivered hereunder pursuant to the Exchange Rights Agreement will be duly
authorized, validly issued and fully paid. At the Closing, upon receipt of the
Interests, Buyer will
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<PAGE> 37
have transferred the Units free and clear of all Liens (other than any liens in
favor of the partners of Buyer pursuant to the Partnership Agreement), and as of
the Closing, Sellers will be admitted as limited partners of Buyer. The issuance
of the Units to Sellers at the Closing will not require any approval or consent
of any Government Entity except any such approval that shall have been obtained
on or prior to the Closing. Assuming the accuracy of the representation in
Section 6(bb) the issuance of the Units to Sellers hereunder is exempt from
registration under the Securities Act of 1933 and applicable state securities
laws.
(g) Financial Statements; Undisclosed Liabilities. True and complete
copies of (i) the audited financial statements of Buyer as of December 31, 1995,
together with all related notes and schedules thereto, accompanied by the
reports thereon of Buyer's independent auditors and (ii) the unaudited financial
statements of Buyer as of September 30, 1996 for the nine months then ended,
together with all notes and schedules thereto (collectively, the "Starwood
Financial Statements") have been delivered to the Sellers. The Starwood
Financial Statements were prepared in accordance with the books of account and
other financial records of Buyer, present fairly the consolidated financial
condition and results of operations of Buyer as of the dates thereof or for the
periods covered thereby, and have been prepared in accordance with GAAP and
since the date of the latest Starwood Financial Statements, there has not been
any event, circumstance or condition which has resulted in Material Adverse
Effect on the Company; provided that for purposes of this Section 7(g) the
existence of any Material Adverse Effect shall be determined by viewing SLT,
SLC, SLTRLP and Buyer as a whole; provided further that any fluctuations in
hotel market conditions in general or in the market prices of the Paired Shares
shall not constitute a Material Adverse Effect.
(h) Reservation of Paired Shares. Upon the Closing, SLC shall have
reserved for issuance a number of SLC's common shares, and has the right to
acquire shares of Starwood Lodging Trust, equal to the number of Paired Shares
into which the Units are exchangeable pursuant to the Exchange Rights Agreement.
(i) Closing Date. The representations and warranties of Buyer
contained in this Section 7 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto shall be true and
correct on the Closing Date as though then made, except as affected by the
transactions expressly contemplated by this Agreement.
SECTION 8. PRE-CLOSING COVENANTS.
(a) Affirmative Covenants of the Company, the Principals, and the
Sellers. From and after the date of this Agreement to the Closing Date, except
as otherwise consented to in writing by Buyer, the Sellers and the Principals
shall, and shall cause the Company to:
(i) conduct the Company's operations according to the ordinary
and usual course of business and use reasonable best efforts to preserve
intact its business organization, keep available the services of officers
and employees, and maintain satisfactory relationships with suppliers,
customers, franchisees and others having business relationships with them;
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(ii) promptly inform Buyer in writing of any variances from
the representations and warranties contained in Section 6 (which
notification shall not be deemed to amend any disclaimers made therein or
cure any breach thereof) or of any facts, circumstances or conditions
which are likely to result in the Buyer's conditions to Closing not being
satisfied by the date contemplated in Section 11(a)(iii);
(iii) permit representatives and agents of Buyer to have
reasonable access (upon reasonable notice, during normal business hours,
coordinated through Murray Dow) to the Company's books, records, property,
facilities, customers, suppliers, sales representatives, consultants, key
employees and independent accountants in connection with Buyer's due
diligence review of the Company;
(iv) use commercially reasonable efforts to obtain all third
party and governmental approvals and consents necessary or desirable to
consummate the transactions contemplated hereby and to cause the other
conditions to Buyer's obligations hereunder to be satisfied;
(v) maintain all of the Company's assets in good repair, order
and condition, except for ordinary wear and tear not caused by neglect,
and maintain insurance reasonably comparable to that in effect on the date
hereof;
(vi) maintain the existence of and use reasonable efforts to
protect all Intellectual Property used in the Business;
(vii) maintain the existence of and protect all of the
governmental permits, licenses, approvals and other authorizations of the
Business;
(viii)comply with all applicable laws, ordinances, and
regulations in the operation of the Business (including, without
limitation, Environmental, Health and Safety Laws);
(ix) maintain its books, accounts and records in accordance
with GAAP; and
(x) conduct the cash management customs and practices of the
Business (including, without limitation, the collection of receivables and
payment of payables) in the usual and ordinary course of business in
accordance with past custom and practice.
(b) Negative Covenants of the Company, the Principals and the
Sellers. From and after the date of this Agreement to the Closing Date, without
the prior written consent of Buyer, the Sellers and Principals shall not, and
shall not permit the Company to:
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(i) take any action referred to in Section 6(h);
(ii) except as specifically contemplated by this Agreement,
enter into any transaction other than in the ordinary course of business;
(iii) declare or pay any dividends or make any other
distributions in respect of the Interests which would result in the
Company having a negative Closing Net Worth of greater than $14,500,000;
(iv) issue, authorize or propose the issuance of, or purchase,
redeem or propose the purchase or redemption of, any membership interests
of or other equity interest (or interest containing equity features) in
the Company or securities convertible into or exchangeable for, or rights,
warrants or options (including employee options) to acquire, any such
interests or other convertible securities;
(v) transfer any of the assets of the Company to any Person
other than in the ordinary course of business; or
(vi) take any action which would cause the representations or
warranties contained in Section 6 to cease to be true and correct as of
the Closing as though then made.
(c) Affirmative Covenants of Buyer. From and after the date of this
Agreement to the Closing Date, except as otherwise consented to in writing by
the Company, Buyer shall:
(i) promptly inform the Company in writing of any variances
from the representations and warranties contained in Section 7 (which
notification shall not be deemed to amend any disclaimers made therein or
cure any breach thereof) or of any facts, circumstances or conditions
which are likely to result in the Sellers' conditions to Closing not being
satisfied by the date contemplated in Section 11(a)(iii);
(ii) permit representatives and agents of the Sellers and the
Company to have reasonable access (upon reasonable notice, during normal
business hours) to Buyer's books, records, property, facilities,
customers, suppliers, sales representatives, consultants, key employees
and independent accountants ("Buyer's Information") in connection with
Sellers' and the Company's due diligence review of Buyer, provided that
each of the Company, the Sellers, the Principals, and each party given
such access shall not, directly or indirectly, use for its or his own
purposes or disclose to any third party any Buyer's Information without
the prior written consent of Buyer, unless and to the extent that (a) the
Buyer's Information becomes widely and generally known to and available
for use by the hotel and hospitality industry other than as a result of
any such party's acts or omissions to act or (b) such party is required by
order of a court of competent jurisdiction (by subpoena or similar
process) to disclose or discuss any Buyer's Information (provided that in
such case, such party shall promptly inform Buyer of such event, shall
cooperate with Buyer in
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attempting to obtain a protective order or to otherwise restrict such
disclosure and shall only disclose Buyer's Information to the minimum
extent necessary to comply with any such court order); and
(iii) use commercially reasonable efforts to obtain all third
party and governmental approvals and consents necessary or desirable to
consummate the transactions contemplated hereby and to cause the other
conditions to Buyer's obligations hereunder to be satisfied.
SECTION 9. SURVIVAL; INDEMNIFICATION.
(a) Survival. All representations, warranties, covenants and
agreements set forth in this Agreement or in any certificate or other writing
delivered in connection with this Agreement shall survive the Closing and the
consummation of the transactions contemplated thereby notwithstanding any
examination made for or on behalf of the Sellers, the Principals, or Buyer, the
knowledge of any of their officers, directors, partners, employees or agents, or
the acceptance of any certificate or opinion; provided that the Company's, the
Principals' and the Sellers' obligation to indemnify Buyer in respect of
breaches thereof shall be subject to the limitations set forth in (c) below;
provided further that the Company's obligation to indemnify or make
contributions to the Sellers and the Principals in respect of breaches thereof
shall be subject to the limitations set forth in Section 9(k); and provided
further that the Buyer's obligation to indemnify the Company, the Sellers and
the Principals in respect of breaches thereof shall be subject to the
limitations set forth in Section 11(c).
(b) Indemnification by the Principals and the Sellers. Subject to
the limitations set forth in (c) below, the Principals and the Sellers shall
jointly and severally indemnify Buyer and each of its respective affiliates,
officers, directors, partners, employees, agents, representatives, successors
and permitted assigns (collectively, the "Partnership Parties") and hold each of
them harmless against and pay on behalf of or reimburse such Partnership Parties
in respect of any loss (including diminution in value of, or losses incurred by
or in respect of, the Company), liability, demand, claim, action, cause of
action, cost, damage, deficiency, tax, penalty, fine or expense, whether or not
arising out of third party claims (including, without limitation, interest,
penalties, reasonable attorneys' fees and expenses, court costs and all amounts
paid in investigation, defense or settlement of any of the foregoing)
(collectively, "Losses") which any such Partnership Party may suffer, sustain or
become subject to, as a result of, in connection with, relating or incidental to
or by virtue of:
(i) the breach of any representation or warranty contained in
this Agreement or any schedule or exhibit hereto by the Company, the
Principals or the Sellers;
(ii) the breach of any covenant or agreement of the Company,
the Principals, or the Sellers contained in this Agreement by the Company,
the Principals or the Sellers; and
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(iii) any claims of any brokers or finders claiming by,
through or under the Company, the Principals, or the Sellers with regard
to the contribution of the Interests.
For the purposes of subsections (i) and (ii) above, if Buyer or SLC has actual
knowledge at the Closing that a representation, warranty, covenant or agreement
of the Company, the Sellers or the Principals has been breached by the Company,
the Sellers or the Principals, and Buyer or SLC is fully aware of both the
nature and extent of such breach and elects to consummate the transactions
contemplated hereby in spite of such breach, then Buyer and SLC will be deemed
to have waived such breach, and the Company, the Principals and the Sellers will
not have to indemnify Buyer or SLC against any Losses resulting from such breach
to the extent of Buyer's knowledge thereof.
(c) Limits on Indemnification. The Indemnification provided for in
Section 9(b) above is subject to the following limitations:
(i) the Company, the Principals, and the Sellers will be
liable to Partnership Parties with respect to claims referred to in
subsection (b)(i) above only if such Partnership Party gives written
notice to the Company, the Principals, and the Sellers:
(A) within 12 months after the Closing Date for claims
arising from breaches of the representations and warranties set
forth in Sections 6(c) (except 6(c)(i)(A)), 6(g), 6(h), 6(i), 6(k),
6(l), 6(m), 6(n), 6(p), 6(q), 6(r), 6(s), 6(t), 6(u) (other than
6(u)(i)), 6(v) and 6(cc) (to the extent related to the other
sections referenced in this Section 9(c)(i)(A));
(B) prior to 30 days following the expiration of the
applicable statute of limitations for claims by governmental
authorities or third parties against the Company which relate to
breaches of the representations and warranties set forth in Sections
6(c)(1)(A), 6(e), 6(j), 6(o), 6(u)(i), 6(w), 6(bb) and 6(cc) (to the
extent related to the other sections referenced in this Section
9(c)(i)(B)); or
(C) at any time after the Closing Date for claims
arising from breaches of the representations and warranties set
forth in Sections 6(a), 6(b), 6(d), 6(f), 6(z) and 6(cc) (to the
extent related to the other sections referenced in this Section
9(c)(i)(C)).
(ii) The Company, the Principals, and the Sellers will not be
liable for any Loss with respect to claims referred to in subsection
(b)(i) and (ii) above to the extent such Losses exceed an amount equal to
the sum of $500,000 (the "Cap").
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(d) Indemnification by Buyer and SLC. Buyer and SLC, jointly and
severally agree to indemnify the Company, the Principals, or the Sellers and
their agents, representatives, successors and assigns and to hold them harmless
against any Loss which they may suffer, sustain or become subject to, as the
result of a breach of any representation, warranty, covenant or agreement by
Buyer or SLC contained in this Agreement; provided that Buyer shall provide such
indemnification with respect to any breach of the representations and warranties
contained in Sections 7(c) through 7(i) only if Buyer shall have received
written notice of such breach (1) within 12 months after the Closing Date for
breaches of Sections 7(c), 7(d), 7(e), 7(g), and 7(i) (to the extent related to
the other Sections referenced in this Section 9(d)(1)), and (2) at any time
after the Closing Date for breaches of Sections 7(a), 7(b), 7(f) and 7(h) and
7(i) (to the extent related to the other Sections referenced in this Section
9(d)(2)); provided further that Buyer's liability under this Section 9(d) shall
be limited pursuant to Section 9(k). For the purposes of this Section 9(d), if
the Company, any Principal or any Seller has actual knowledge at the Closing
that a representation, warranty, covenant or agreement of the Buyer or SLC has
been breached by the Buyer or SLC, and such Party is fully aware of both the
nature and extent of such breach and elects to consummate the transactions
contemplated hereby in spite of such breach, then the Company, the Principals
and the Sellers will be deemed to have waived such breach, and Buyer and SLC
will not have to indemnify the Company, the Principals or the Sellers against
any Losses resulting from such breach to the extent of the Company's, the
Principals' and the Sellers' knowledge thereof.
(e) Notice of Indemnification. If a party hereto seeks
indemnification under this Section 9, such party (the "Indemnified Party") shall
give written notice to the other party (the "Indemnifying Party") of the facts
and circumstances giving rise to the claim. In that regard, if any suit, action,
claim, liability or obligations shall be brought or asserted by any third party
which, if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Section 9, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in reasonable detail the
basis of such claim and the facts pertaining thereto. The Indemnifying Party, if
it so elects, shall assume and control the defense thereof (and shall consult
with the Indemnified Party with respect thereto), including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
necessary expenses; provided that, as a condition precedent to the Indemnifying
Party's right to assume control of such defense, it must first: (i) admit in
writing its obligation to provide indemnification in respect of such matter and
(ii) demonstrate that it will bear the greatest portion of the Loss if the claim
is successful in light of the Threshold and the Cap; and provided further that
the Indemnifying Party shall not have the right to assume control of such
defense if the claim which the Indemnifying Party seeks to assume control (1)
seeks non-monetary relief; or (2) involves criminal or quasi-criminal
allegations. In the event that the Indemnified Party retains control of the
defense of such claim, the Indemnified Party shall use good faith efforts,
consistent with prudent business judgment, to defend such claim. If the
Indemnifying Party is permitted to assume and control the defense and elects to
do so, the Indemnified Party shall have the right to employ counsel separate
from counsel employed by the Indemnifying Party in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Party shall be at the expense of the Indemnified
Party unless (A) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, (B) the Indemnifying
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Party has been advised by counsel that a reasonable likelihood exists of a
conflict of interest between the Indemnifying Party and the Indemnified Party
and such counsel advises the Indemnifying Party of the general nature of such
conflict, or (C) the Indemnifying Party has failed to assume the defense and
employ counsel. The Indemnifying Party shall not be liable for any settlement of
any such action or proceeding effected without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld; however,
if there shall be a final judgment for the plaintiff in any such action, the
Indemnifying Party agrees to indemnify and hold harmless the Indemnified Party
from and against any loss or liability by reason of such judgment subject to the
limitations of Section 9(c).
(f) Failure to Notify. In the event any senior officer (including,
without limitation, any president or executive vice-president) of any
Indemnified Party has actual knowledge of any valid claim or defense (and not
merely any facts or circumstances which may give rise to such claim or defense)
against a third party who is a party to the applicable claim in connection with
any Loss as to which such Indemnified Party seeks indemnification pursuant to
this Section 9 and such Indemnified Party without good reason fails to notify
the Indemnifying Party of such claim or defense or without good reason fails to
assert such claim or defense on its own behalf, then the Indemnified Party shall
not be entitled to receive indemnification from the Indemnifying Party to the
extent of the Loss which is proven by the Indemnifying Party to have been
occasioned by such failure to notify or such failure to assert such claim or
defense. The determination of whether a party had "good reason" for any failure
to notify or failure to assert any claim or defense shall be made by the
Arbitrator pursuant to Section 9(i) in the event of any dispute with respect
thereto.
(g) Notice of Loss; Insurance.
(i) In the event any Indemnified Party is insured pursuant to
an unexpired insurance policy against any occurrence giving rise to any
Loss as to which such Indemnified Party seeks indemnification pursuant to
this Section 9, the Indemnified Party shall promptly give notice of such
insurance coverage to the Indemnifying Party and the Indemnifying Party
shall, in its reasonable discretion, elect either (i) to require the
Indemnified Party to make a claim pursuant to such insurance policy for
such Loss and the Indemnifying Party's obligation to indemnify the
Indemnified Party shall thereafter be reduced by the amount of insurance
proceeds received by the Indemnified Party as a result of such claim or
(ii) to indemnify the Indemnified Party without requiring a claim to be
made by the Indemnified Party on such insurance policy. In the event the
Indemnifying Party elects to require the Indemnified Party to make a claim
on such insurance policy pursuant to clause (i) above, the Indemnifying
Party shall pay any increase in insurance premiums resulting directly and
proximately from such claim by the Indemnified Party on such insurance
policy; provided that if any such increase in such insurance premium is
caused by one or more claims on such insurance policy as a result of
Losses which are not subject to indemnification pursuant to this Section
9, then the Indemnifying Party shall be obligated to pay such increase in
insurance premiums only to the extent such increase is attributable to
claims made by the Indemnified Party pursuant to clause (i) above. The
determination of the amount of such increase in insurance premiums
attributable to any claim made pursuant to clause (i) above
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shall be made by the mutual agreement of the Parties acting in good faith,
and in the event the Parties are unable to so agree shall be made by the
Arbitrator pursuant to subsection (i) below. The Indemnified Party shall
provide to the Indemnifying Party such documentation relating to such
increase in insurance premium as shall be necessary to establish the
amount of such increase and shall otherwise cooperate with the
Indemnifying Party in establishing the amount of such increase
attributable to the claim made pursuant to clause (i) above.
(ii) Notwithstanding any of the provisions of this Section 9,
the Sellers and the Principals shall use reasonable best efforts to make
and pursue claims for insurance proceeds for Losses which Buyer incurs and
which may be covered by insurance policies that were in effect prior to
the Closing (irrespective of any limitations on survival of the
Principals' or the Sellers' direct liability therefor), and to promptly
remit any proceeds received on account of such claims to Buyer upon
receipt, it being agreed that Losses satisfied by such proceeds shall not
be applied against the Cap.
(h) Payment of Indemnification Amount. In the event that any Party
is entitled to indemnification hereunder from any other Party, within 15 days
after a final determination of the amount of such indemnification pursuant to
the terms of this Section 9 (the "Indemnification Amount"), the Indemnifying
Party shall pay such Indemnification Amount either (i) by payment of immediately
available funds to the Indemnified Party or (ii) if the Indemnified Party is a
Partnership Party, by delivering or causing Buyer to cancel on its books and
records a number of Units held by the Indemnifying Party having a current market
value (based upon the Paired Share Price as of the date of the final
determination of such Indemnification Amount) equal to the Indemnification
Amount, and to the extent such delivery or cancellation of Units is insufficient
to pay such Indemnification Amount, immediately available funds for the
remaining balance of such Indemnification Amount. To the extent any Indemnifying
Party fails to pay the Indemnification Amount within such 15 day period, the
Indemnification Amount shall accrue interest for the benefit of the Indemnified
Party at a rate per annum equal to the prime rate announced by Chase Manhattan
Corp. at the end of such 15 day period plus 2%, compounded quarterly, until
paid. Without limiting the obligations of the Principals and the Sellers set
forth above, in the event that the transactions contemplated hereby are
consummated and the Partnership Parties are entitled to indemnification from the
Principals and/or the Sellers and such Persons fail to timely pay the
Indemnification Amount, then without limiting any other remedies the Partnership
Parties may have at law or in equity, the Partnership Parties may elect to
satisfy such amount, in whole or in part, by canceling a number of Units and/or
Paired Shares held by the Sellers and/or their Permitted Transferees (as defined
in the Exchange Rights Agreement) having a current market value (based upon the
Paired Share Price as of the date of such cancellation) equal to the
Indemnification Amount plus any interest accrued thereon, in which case the
holder of such canceled Units and/or Paired Shares shall surrender such canceled
Units and/or Paired Shares to the issuer(s) thereof immediately following
delivery to such holder of written notice of such cancellation.
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(i) Dispute Resolution. Any dispute, controversy, or claim arising
under or relating to this Section 9 ("Dispute") shall be resolved by final and
binding arbitration administered by the American Arbitration Association ("AAA")
under its Commercial Arbitration Rules, subject to the following:
(i) Any party to a Dispute may demand that any Dispute be
submitted to binding arbitration. The demand for arbitration shall be in
writing, shall be served on the other party in the manner prescribed
herein for the giving of notices, and shall set forth a short statement of
the factual basis for the claim, specifying the matter or matters to be
arbitrated.
(ii) The arbitration shall be conducted by an arbitrator
appointed by the AAA (the "Arbitrator") who shall conduct such evidentiary
or other hearings as such arbitrator deems necessary or appropriate and
thereafter shall make a final determination as soon as practicable. Any
arbitration pursuant hereto shall be conducted by the Arbitrator as the
parties may mutually agree or, if the parties do not so agree, under the
guidance of the Federal Rules of Civil Procedure and the Federal Rules of
Evidence, but the Arbitrator shall not be required to comply strictly with
such Rules in conducting any such arbitration. All such arbitration
proceedings shall take place in New York, NY.
(iii) Except as provided herein:
(A) each party shall bear its own "Costs and Fees,"
which are defined as all reasonable pre-award expenses of the
arbitration, including travel expenses, out-of-pocket expenses
(including but not limited to, copying and telephone) witness fees,
and reasonable attorney's fees and expenses;
(B) the fees and expenses of the Arbitrator and all
other costs and expenses incurred in connection with the arbitration
("Arbitration Expenses") shall be borne equally by the parties; and
(C) Notwithstanding the foregoing, the Arbitrator shall
be empowered to require any one or more of the parties to bear all
or any portion of such Costs and Fees and/or the fees and expenses
of the Arbitrator in the event that the Arbitrator determines such
party has acted unreasonably or in bad faith.
(iv) The Arbitrator shall have the authority to award any
remedy or relief that a Court of the State of New York could order or
grant, including, without limitation, specific performance of any
obligation created under the Transaction Documents, the awarding of
punitive damages, the issuance of an injunction, or the imposition of
sanctions for abuse or frustration of the arbitration process. The
decision of the Arbitrator and any award pursuant thereto shall be in
writing and counterpart copies thereof shall be delivered to each party.
The decision and award of the Arbitrator shall be binding on all parties.
In
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rendering such decision and award, the Arbitrator shall not add to,
subtract from or otherwise modify the provisions of this Section 9. Either
party to the arbitration may seek to have judgment upon the award rendered
by the Arbitrator entered in any court having jurisdiction thereof.
(v) Each party agrees that it will not file any suit, motion,
petition or otherwise commence any legal action or proceeding for any
matter which is required to be submitted to arbitration as contemplated
herein except in connection with the enforcement of an award rendered by
the Arbitrator and except to seek non-monetary equitable relief including,
with limitation, the issuance of an injunction or temporary restraining
order pending a final determination by the Arbitrator. Upon the entry of
any order dismissing or staying any action or proceeding filed contrary to
the preceding sentence, the party which filed such action or proceeding
shall promptly pay to the other party the reasonable attorney's fees,
costs and expenses incurred by such other party prior to the entry of such
order.
(j) Type of Remedy. The Parties hereto each acknowledge and agree
that, to the extent permitted by law, the sole and exclusive remedy with respect
to any claims for monetary relief relating to the subject matter of this
Agreement shall be pursuant to the indemnification provisions set forth in this
Section 9. Notwithstanding the foregoing, each of the Parties hereto
acknowledges and agrees that the other Parties hereto would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached and
that any remedy at law would be inadequate. Accordingly, each of the Parties
hereto agrees that the other Parties hereto shall be entitled to retain all
non-monetary equitable remedies available to it, including, without limitation,
injunctive relief to prevent breaches of the provisions of this Agreement and
specific enforcement of this Agreement and the terms and provisions hereof in
any action instituted before any arbitrator pursuant to Section 9(i) above or in
any court of the United States or any state thereof having jurisdiction over the
parties and the matter as allowed pursuant to Section 9(i) above or otherwise,
in addition to any other remedy to which it may be entitled, at law or in
equity, other than claims for monetary relief, which shall be governed by the
terms of this Section 9. Notwithstanding the foregoing, nothing in this Section
9(j) shall limit or restrict any Party's right to maintain or recover on any
action based upon fraud or misrepresentation.
(k) Limitation on Liability of the Company. Notwithstanding anything
to the contrary contained in this Agreement, in the event that the transactions
contemplated by this Agreement have been consummated as contemplated hereby, the
Company shall have no liability whatsoever (whether pursuant to this Section 9
or otherwise) to any Partnership Party, nor to any Principal or any Seller in
respect of any claim the basis for which arose prior to the Closing, whether
arising by reason of a claim for contribution in respect of any liability
arising hereunder, a right of indemnification under the Company's constitutive
documents, any other agreement between the Company and such Party or otherwise,
and the Sellers and the Principals hereby waive and release the Company from any
such obligation effective as of the Closing.
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SECTION 10. ADDITIONAL AGREEMENTS.
(a) Sellers and Principals Nonsolicitation and Confidentiality.
(i) During the period beginning on the Closing Date and ending
on the third anniversary of the Closing Date (the "Restricted Period"),
the Sellers and the Principals (collectively, the "Restricted Parties")
shall not (A) induce or attempt to induce any employee of the Company,
Buyer or their Affiliates to leave their employ, hire any management-level
employee (whether or not solicited) or otherwise in any way interfere with
the relationship between Buyer, the Company or their Affiliates and any of
their employees or (B) induce or attempt to induce any supplier, licensee,
licensor, franchisee, or other business relation of Buyer, the Company or
their Affiliates to cease doing business with them or in any way interfere
with the relationship between Buyer, the Company or their Affiliates and
any customer or business relation.
(ii) Each of Buyer and SLC acknowledges that the information,
observations and data relating to the Business of a proprietary and/or
confidential nature which either party has obtained as a result of its due
diligence review of the Company, and each Restricted Party acknowledges
that the information, observations and data relating to the Business of a
proprietary and/or confidential nature which any such Restricted Party has
obtained as an employee, officer, manager or member of the Company, or
will obtain during the course of his or its association with the Company,
Buyer and their Affiliates after the Closing, are the property of such
Person ("Confidential Information"). Each Restricted Party agrees that it
or he shall not, directly or indirectly, use for its or his own purposes
or disclose to any third party any of such Confidential Information
without the prior written consent of Buyer, unless and to the extent that
the aforementioned matters (a) become generally known to and available for
use by the hotel and hospitality industry other than as a result of any
Restricted Party's acts or omissions to act; (b) are rightfully received
by a Restricted Party from a party who was not subject to any obligations
of confidentiality; or (c) to the extent a Restricted Party is required by
order of a court of competent jurisdiction (by subpoena or similar
process) to disclose or discuss any Confidential Information (provided
that in such case, such Restricted Party shall promptly inform Buyer of
such event, shall cooperate with Buyer in attempting to obtain a
protective order or to otherwise restrict such disclosure and shall only
disclose Confidential Information to the minimum extent necessary to
comply with any such court order). Buyer and SLC agree that, in the event
the transactions contemplated hereby are not consummated in accordance
with the terms hereof, they shall not, directly or indirectly, use for
their own purposes or disclose to any third party any of such Confidential
Information without the prior written consent of the Company, unless and
to the extent that the aforementioned matters (a) become generally known
to and available for use by the hotel and hospitality industry other than
as a result of either Buyer's or SLC's acts or omissions to act; (b) are
rightfully received by Buyer or SLC from a party who was not subject to
any obligations of confidentiality; or (c) to the extent Buyer or SLC is
required by order of a court of competent jurisdiction (by subpoena or
similar process) to disclose or discuss any
- 40 -
<PAGE> 48
Confidential Information (provided that in such case, such party shall
promptly
inform the Company of such event, shall cooperate with the Company in
attempting to obtain a protective order or to otherwise restrict such
disclosure and shall only disclose Confidential Information to the minimum
extent necessary to comply with any such court order).
(iii) The Parties hereto agree that each may suffer
irreparable harm from a breach by any other Party of any of the covenants
or agreements contained in this Section 10. In the event of an alleged or
threatened breach by any Party of any of the provisions of this Section
10(a), each other Party or their successors or assigns may, in addition to
all other rights and remedies existing in their favor, apply to any court
of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the
provisions hereof (including the extension of the Restricted Period by a
period equal to the length of the violation of this Section 10(a)), in
each case without the necessity of posting a bond or other security.
(iv) Each Party agrees that the covenants made in Section
10(a)(i), (ii) and (iii) shall be construed as an agreement independent of
any other provision of this Agreement and shall survive any order of a
court of competent jurisdiction terminating any other provision of this
Agreement.
(b) Exclusivity. During the period from the date of this Agreement
to the earlier of (i) the Closing or (ii) the date that this Agreement is
terminated, if it is terminated, in accordance with its terms, neither the
Company, any Principal, nor any Seller will, directly or indirectly, without the
prior written consent of Buyer, initiate discussions or engage in negotiations
with, or provide any information other than publicly available information to,
any Person (other than Buyer and their respective representatives) concerning
any possible proposal regarding a sale of the Interests or a merger,
consolidation, sale of assets (other than sales of inventory in the ordinary
course of business) or other similar transaction involving the Company. Any such
activity will constitute a material breach of this Agreement.
(c) Mutual Assistance and Records. The Parties agree that they will
mutually cooperate in the expeditious filing of all notices, reports and other
filings with any governmental authority required to be submitted jointly by
Buyer and any Seller in connection with the execution and delivery of this
Agreement, the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby or thereby.
(d) Press Releases. Unless required by law (in which case each of
Buyer and the Company hereby agree to use reasonable efforts to consult with the
other party prior to any such disclosure as to the form and content of such
disclosure), after the date hereof, through and including the Closing Date, no
press releases, announcements to the employees, customers or suppliers of the
Company or other releases of information related to this Agreement or the
transactions contemplated the Transaction Documents will be issued or released
without the consent of both Buyer and the Company. After the Closing, Buyer may
issue any such releases of information at its sole discretion.
- 41 -
<PAGE> 49
(e) Transaction Expenses. Each Party shall pay all of its expenses
incurred in connection with the transactions contemplated hereby (whether
consummated or not); provided that any expenses incurred but not paid by the
Company prior to the Closing (other than those expenses expressly assumed by
Buyer or SLC hereunder) shall be reflected as a current liability on the books
and records of the Company and shall be included in the determination of
Estimated Closing Net Worth and Closing Net Worth. Fees, costs and expenses
incurred in terminating or assigning the any franchise agreements or in
obtaining replacement franchise agreements therefor shall be borne by Buyer;
provided, however, that if such costs shall exceed the sum of $500,000 with
respect to the Atlanta Embassy Suites Hotel, all such costs in excess of such
amount with respect to such hotel shall be borne equally by the Sellers and
Buyer. The costs of transferring the Liquor Licences is provided for in Section
6(t) hereof.
(f) Certain Taxes. Each of Buyer, on the one hand, and the Sellers,
on the other hand, shall be responsible for, as and when due, one-half of all
transfer, documentary, sales, use, stamp, registration, conveyance, value added
or other Taxes and fees arising out of the sale of the Interests or otherwise
incurred in connection with this Agreement or the consummation of the
transactions contemplated by the Transaction Documents and all charges for or in
connection with the recording of any document or instrument contemplated hereby;
provided that the Sellers shall solely be responsible for the satisfaction of
any Taxes based on income arising under any local, state, or federal Tax law,
rule, or regulation in respect of the transactions contemplated by this
Agreement. Each Seller will, at his own expense, file all necessary Tax Returns
and other documentation in connection with the Taxes and fees encompassed in
this Section 10(f).
(g) Further Assurances. The Sellers shall execute and deliver such
further instruments of conveyance and transfer and take such additional action
as Buyer may reasonably request to effect, consummate, confirm or evidence the
transfer to Buyer of the Interests, and the Sellers shall execute such documents
as may be reasonably necessary to assist Buyer in preserving or perfecting its
rights in the Interests.
(h) Litigation Support. Except in the case of a dispute among the
parties hereto, in the event and for so long as any Party actively is contesting
or defending against any charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand in connection with (i) any transaction
contemplated by this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
the Company, each of the other Parties will cooperate with such contesting or
defending Party and its counsel in the contest or defense, make available their
personnel, inform such party of any facts giving rise to any defense or
counterclaim and provide such testimony and access to their books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 9(b)).
- 42 -
<PAGE> 50
(i) Admission of Buyer as Member. Effective as of the Closing and
conditioned upon the consummation thereof, the Sellers, in their capacity as
members of the Company, hereby unanimously consent to the admission of Buyer and
SLC as members of the Company in substitution of the Sellers.
(j) Post-Closing Status of the Company. Buyer hereby covenants and
agrees that for a minimum period of three years after the Closing Date, the
Company will operate in its current fashion managing the assets and hotels
currently managed by the Company and shall remain a wholly-owned subsidiary of
Buyer or SLC. As additional hotels are acquired by SLTRLP and leased to Buyer,
it is anticipated that certain of these hotels be managed by the Company and
appropriate staffing levels will be maintained. Each of the existing operating
personnel of the Company shall report to Murray Dow in his capacity as Chief
Operating Officer of the Company. The Company will not be merged into Buyer or
SLC before the end of such three year period without the prior written consent
of Gary Mendell (in his capacity as a Seller). Thereafter, the Company shall be
merged into Buyer (or one of its affiliates) rather than disposed of if Buyer no
longer wishes the Company to remain as a wholly-owned subsidiary. Buyer agrees
to keep the principal offices of the Company in the vicinity of Westport,
Connecticut, for a minimum period of two years after the Closing.
(k) Benefits for Employees of the Company. Buyer hereby covenants
and agrees that after the Closing it will cause the Company to continue to pay
the current employees of the Company wages and bonuses and current benefits at
no less than the level they are currently receiving for a period of two years or
until their term of employment ceases, whichever is earlier. Buyer shall also
make available for grant, at the direction of Gary Mendell (in his capacity as a
Seller), to employees of the Company (other than Gary Mendell and Murray Dow)
100,000 options (before the 3:2 split in the Paired Shares) with respect of
Paired Shares, exercisable at the closing price of the Paired Shares on the day
immediately preceding the grant date.
(l) Retention of Managers of the Company. The six general managers
to be designated by Murray Dow and all executive-level employees of the Company
other than Murray Dow and Gary Mendell, (whose term of office shall be governed
by their employment agreements) shall be guaranteed employment in their current
positions at their current levels of compensations for a minimum period of 2
years after Closing.
(m) Retention By Sellers. Buyer and SLC acknowledge and consent to
the retention by the Sellers of all rights in and to, and the continued use of,
the names HEI International, Inc., HEI Mid-East Hotels Ltd., HEI Israel Hotels,
LLC, and Hospitality Equity Investors, Inc., and abbreviated forms thereof, the
retention of the interests in the entities having such names and the continued
involvement by those entities in their current businesses, including the
following hotel properties: Marriot Seaview Hotel, Atlantic City, NJ; Marriot
Residence Inn, Shelton, CT; Marriot Residence Inn, Princeton, NJ; Danbury
Hilton, Danbury, CT; and Marriot Hotel, Trumbull, CT, Sheraton Gateway Houston
Airport, Houston, TX; Ontario Airport Hilton, Ontario, CA; Bethesda Ramada;
Bethesda, MD; Wilmington Hilton, Wilmington, DE; Sheraton Long Island;
Smithtown,
- 43 -
<PAGE> 51
NY. Buyer acknowledges and approves of the Company's obligation to continue to
provide services to HEI Mid-East Hotels Ltd. (and its international management
affiliates) at arm's length pricing, subject to periodic review and approval by
the Company's General Partner as to the fairness of the pricing in light of the
services provided by the Company.
(n) Reserved.
(o) Production of Schedules. Each Party hereby covenants and agrees
to deliver all schedules required to be delivered hereunder by such Party, with
such delivery being made in accordance with the terms of Section 12.01 of the
PRISA Contribution Agreement.
(p) Disposition of the Interests by the Sellers. The Parties
acknowledge that, prior to the Closing, one or more of the Sellers may undergo
dissolution or may transfer all or substantially all of their assets to some or
all of the Principals. The Parties further acknowledge that in such an event,
all of the obligations and liabilities assigned hereunder to any such Seller
shall be fully performed and discharged by the Principals who receive the assets
of such Seller, and the rights of such Seller shall inure to such Principals.
SECTION 11. TERMINATION; EFFECT OF TERMINATION.
(a) Termination.This Agreement may be terminated as provided below:
(i) by mutual written consent of Buyer and the Sellers;
(ii) by Buyer if there has been a material misrepresentation
or breach of warranty or covenant hereunder on the part of the Company,
the Principals or the Sellers, or by the Sellers if there has been a
material misrepresentation or breach of warranty or covenant hereunder on
the part of the Buyer, in both cases only if such breach or
misrepresentation is not cured within 15 days of notice of such breach or
misrepresentation given by the aggrieved Party to the other Parties
(except no such notice or 15-day period shall be permitted if such breach
or misrepresentation is incurable in the reasonable opinion of the
aggrieved Party);
(iii) by either Buyer or the Sellers if all material
conditions to such party's obligations (including, but not limited to, the
conditions set forth in Sections 4 and 5, as applicable) have not been
satisfied or waived and the transactions contemplated hereby have not been
consummated by the Closing Date, as postponed pursuant to Section 3; or
(iv) by either Buyer or the Sellers, within three days of the
other's delivery of schedules as contemplated by Section 10(o), but only
if such schedules disclose matters which, taken as a whole, materially
adversely affect the business prospects, assets, liabilities, financial
condition or operating results of the Party on whose behalf such schedules
were submitted;
- 44 -
<PAGE> 52
(v) provided that neither Buyer nor the Sellers shall be
entitled to terminate pursuant to this Section 11(a) if such Party's
willful breach of this Agreement has prevented the consummation of the
transactions contemplated hereby.
(b) Effect of Termination. In the event of the termination of this
Agreement pursuant to subsection (a) above, this Agreement and the other
Transaction Documents shall thereafter become void and have no effect, and no
party hereto shall have any liability and is hereby unconditionally released
from any such liability to any other party hereto or its members, partners,
managers, directors or officers in respect thereof, except for breaches of this
Agreement prior to the time of such termination provided that the following
Sections of this Agreement shall survive such a termination: 9, 10(a)(ii),
10(a)(iii), 10(a)(iv), 10(d), 10(e), 11 and 12.
(c) Deposit; Remedy for Pre-Closing Breach by Buyer.
(i) SLTRLP has deposited or has caused to be deposited certain
amounts in an escrow account as contemplated in the PRISA Contribution
Agreement (the "Deposit"). Forfeiture of the Deposit as contemplated in
the PRISA Contribution Agreement shall be the sole and exclusive remedy of
the Sellers in the event that (A) Buyer fails to consummate the
transactions contemplated by this Agreement and the Transaction Documents,
(B) all of the conditions to the obligations of Buyer contained in Section
4 and elsewhere have been satisfied, and (C) Buyer is not permitted to
terminate this Agreement pursuant to Section 11(a); and Buyer shall use
its reasonable best efforts to cause the Deposit to be paid as required
under the PRISA Contribution Agreement. Such forfeiture shall constitute
liquidated damages paid by Buyer for the benefit of the Sellers as a
result of Buyer's breach, and shall be the sole and exclusive remedy of
the Sellers against Buyer for any and all such breaches.
(ii) In the event that the transactions contemplated by this
Agreement and the other Transaction Documents are not consummated and the
Deposit is not subject to forfeiture under the PRISA Contribution
Agreement, the Deposit shall be subject to return to the Buyer, SLTRLP or
such other depositing party as set forth in the PRISA Contribution
Agreement. The Company, the Principals, and the Sellers shall use their
reasonable best efforts in such case to cause the Deposit to be returned
to Buyer, SLTRLP or such other depositing party under such circumstances.
SECTION 12. MISCELLANEOUS.
(a) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
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<PAGE> 53
(b) Entire Agreement. This Agreement (including the documents
referred to herein) and the Transaction Documents constitute the entire
agreement between the Parties and supersedes any prior understandings,
agreements or representations by or between the Parties, written or oral, that
may have related in any way to the subject matter hereof and shall survive the
Closing.
(c) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided that Buyer may (i) assign any or all of its rights
and interests hereunder to one or more of its Affiliates, to any lender
providing financing for the transactions contemplated hereby or to any Person
acquiring all or substantially all of Buyer's assets (however effected) and (ii)
designate one or more of its Affiliates to perform its obligations hereunder
provided that Buyer remains bound by the terms of this Agreement.
(d) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(e) Disclosure. To the extent that a disclosure made on any of the
schedules to this Agreement is clearly and unambiguously applicable to any other
schedule to this Agreement, such disclosure shall be deemed to have been made on
such other schedule.
(f) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Captions. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
(i) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given when delivered
personally or telecopied (with copy sent by mail within one day of transmission)
to the recipient or sent to the recipient by reputable express courier service
(charges prepaid), and addressed to the intended recipient as set forth below:
- 46 -
<PAGE> 54
If to the Company:
HEI Hotels, L.L.C.
55 Greens Farms Road
Westport Corporate Office Park, North Building
Westport, CT 06880
Telephone: 203-226-9540
Telecopy: 203-454-7678
Attention: Gary Mendell
with a copy to:
Willkie Farr & Gallagher
153 East 53rd Street
New York, NY 10022
Telephone: 212-935-8000
Telecopy: 212-821-8111
Attention: Bruce M. Montgomerie
If to Buyer and/or SLC:
Starwood Lodging Corporation
2231 E. Camelback #400
Phoenix, AZ 85016
Telephone: 602-852-3900
Telecopy: 602-852-0984
Attention: Nir Margalit
and:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telephone: (312) 871-2000
Telecopy: (312) 861-2200
Attention: Gary R. Silverman, Esq.
- 47 -
<PAGE> 55
and
Sidley & Austin
555 West Fifth Street
Los Angeles, CA 90013
Telephone: 213-896-6000
Telecopy: 213-896-6600
Attention: Sherwin L. Samuels, Esq.
If to the Principals and/or the Sellers:
see Schedule 12(i) attached hereto
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means, but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is received
by the intended recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(j) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
(k) Consent to Jurisdiction Each of the Parties irrevocably submits
to the exclusive jurisdiction of the federal and state courts located in the
State of New York for the purposes of any suit or other proceeding arising out
of the transactions contemplated by this Agreement. Each of the Parties further
agrees to commence any such suit or proceeding only in one of the federal or
state courts located in the State of New York.
(l) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Buyer, the Principals and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(m) Incorporation of Exhibits and Schedules. The exhibits and
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
- 48 -
<PAGE> 56
(n) Construction. Where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. The language used in this Agreement shall
be deemed to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against any Party.
(o) Knowledge of Sellers and Principals Attributable to the Company.
Whenever any statement herein or in any schedule, exhibit, certificate or other
document delivered to any Party pursuant to this Agreement is made "to the
Company's knowledge" or "to the best of the Company's knowledge" or words of
similar intent or effect, the Company's knowledge shall be deemed to include the
knowledge of each of Gary Mendell, Arthur Green and Murray Dow.
* * * * *
- 49 -
<PAGE> 57
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date first above written.
BUYER: SLC OPERATING LIMITED PARTNERSHIP
By: Starwood Lodging Corporation
Its: Managing General Partner
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
SLC: STARWOOD LODGING CORPORATION
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
THE COMPANY: HEI HOTELS, L.L.C.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
<PAGE> 58
THE SELLERS: WESTPORT MANAGEMENT, L.L.C.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
WESTPORT HOLDINGS, L.L.C.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
SAVIOR LIMITED PARTNERSHIP
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
<PAGE> 59
--------------------------------------------
GARY MENDELL
--------------------------------------------
STEVE MENDELL
--------------------------------------------
JUDITH RUSHMORE
--------------------------------------------
MURRAY DOW
--------------------------------------------
ORNA L. SHULMAN
ZAPCO COMMUNICATIONS, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
WESTPORT HOSPITALITY, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
<PAGE> 60
TERM SHEET FOR
CLASS A UNITS
1. Members of HEI ("Members") to be issued a new class of limited partnership
interest in SLC Operating Limited Partnership ("SLC") called "Class A
Units."
2. The Class A Units are intended to put the Members in substantially the
same after-tax economic position as if the Members had been issued limited
partnership units in both SLC and SLT Realty Limited Partnership ("SLT")
in a 5:95 ratio. More particularly, the Class A Units:
a. Will be entitled to preferred distributions (including liquidating
distributions) from SLC, to be distributed prior to other
distributions, in an amount equal to the sum of the distributions
from an equal number of units from SLT and SLC, when and as paid
from SLT or SLC, as applicable.
b. Will have an exchange rights agreement with Starwood Lodging
Corporation ("Corporation") entitling each Class A Unit to be
exchanged for, at the Corporation's election, one paired share of
the Corporation and Starwood Lodging Trust ("Trust") or the cash
equivalent of one paired share.
c. Will have a registration rights agreement with the Trust and the
Corporation that provides the Members with substantially the same
rights as the Contributing Parties Registration Rights Agreement
under the PRISA Contribution Agreement.
3. To the extent that the distributions with respect to the Class A Units would
otherwise be taxed in a less favorable manner than distributions with respect to
units in SLT, the Class A Units will be entitled to either a special allocation
of tax items or a cash gross up.
4. SLC will agree that, without the consent of a majority of the Class A Units
(not to be unreasonably withheld or delayed provided all distributions are
current), it will limit its borrowings from SLT or other sources so that SLC has
at all times sufficient borrowing capacity to discharge its obligations with
respect to the Class A Units (including the Exchange Rights Agreement) and SLC
will use its best effort to make the distributions described in paragraph a. at
the same time as dividends made by SLT.
5. If any distributions with respect to the Class A Units are not paid when due,
such distributions will accumulate and compound at a rate of prime plus 8% per
annum.
<PAGE> 1
Exhibit 10.4
================================================================================
CONTRIBUTION AGREEMENT
DATED AS OF JANUARY 15, 1997
BY AND AMONG
SLT REALTY LIMITED PARTNERSHIP
SLT FINANCING PARTNERSHIP
SLC OPERATING LIMITED PARTNERSHIP
STARWOOD LODGING TRUST
STARWOOD LODGING CORPORATION
AND THE INDIVIDUALS AND ENTITIES SET FORTH ON
SCHEDULES A-1 AND 1-2 HERETO
WHO ARE SIGNATORIES TO THIS AGREEMENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
1.01 Property.....................................................2
1.02 Certain Other Definitions....................................3
ARTICLE II CONTRIBUTION; CONSIDERATION; DEPOSIT
2.01 Agreement to Contribute.....................................11
2.02 Reserved....................................................12
2.03 Consideration for Contribution..............................12
2.04 [Reserved]..................................................12
2.05 Deposit.....................................................12
ARTICLE III TITLE
3.01 Title to Property...........................................13
ARTICLE IV NET WORKING CAPITAL ADJUSTMENT
4.01 Net Working Capital Adjustment..............................15
(a) Estimated Closing Balance Sheet....................15
(b) Adjustment.........................................15
(c) Final Closing Balance Sheet........................16
(d) Independent Auditor................................16
(e) Final Adjustment...................................17
4.02 Errors......................................................17
ARTICLE V [Reserved]
ARTICLE VI RISK OF LOSS
6.01 Risk of Loss................................................18
6.02 Casualty....................................................18
6.03 Eminent Domain..............................................18
6.04 Elections Upon Casualty or Eminent Domain...................18
(a) Minor Loss.........................................18
(b) Substantial Loss...................................18
(c) Major Casualty Damage..............................19
6.05 Adjustment Amount...........................................19
ARTICLE VII REPRESENTATIONS AND WARRANTIES
7.01 Contributing Party's Representation and Warranties..........20
(a) Subsidiaries and Investments.......................20
(b) Property Company Capitalization; Title to Property
Company Interests .................................20
(c) Tax Matters........................................21
(d) Insurance..........................................23
2
<PAGE> 3
(e) Single-Purpose Entity..............................23
(f) Leases.............................................23
(g) Compliance With Laws...............................23
(h) Contracts..........................................24
(i) Employees..........................................24
(j) No Pending Condemnation Proceedings................24
(k) Real Estate Taxes..................................24
(l) No Other Interests.................................24
(m) No Litigation......................................24
(n) No Further Action; Execution and Delivery..........24
(o) Good Standing......................................25
(p) Proprietary Rights.................................25
(q) Financial Statements...............................25
(r) Events Subsequent to November 28, 1996.............25
(s) Absence of Undisclosed Liabilities.................26
(t) No "Foreign Person"................................26
(u) Environmental Matters - No Violations..............26
(v) Environmental Matters - Environmental Claims.......27
(w) [Reserved].........................................27
(x) Investment Representation..........................27
(y) Binding Effect.....................................28
(z) Status of Constituent Documents....................28
7.02 The Partnerships' Representations and Warranties............28
(a) Power and Authority Non-contravention, Investment..28
(b) Good Standing......................................29
(c) Binding Effect.....................................29
(d) Status of the Constituent Documents................29
(e) No Litigation; Proceedings.........................29
(f) Units..............................................29
(g) Financial Statements; Undisclosed Liabilities......30
(h) Conduct in the Ordinary Course of Business.........30
(i) ERISA Matters......................................30
7.03 The Corporation's Representation and Warranties.............31
(a) Power and Authority, Non-contravention.............31
(b) Good Standing......................................31
(c) Binding Effect.....................................31
(d) Status of the Constituent Documents................31
(e) No Litigation; Proceedings.........................31
(f) Capitalization.....................................31
(g) Financial Statements; Undisclosed Liabilities......32
(h) Conduct in the Ordinary Course of Business.........32
(i) SEC Documents......................................32
(j) Reservation of Shares..............................32
(k) ERISA Matters......................................33
7.04 The Trust's Representations and Warranties..................33
(a) Power and Authority, Non-contravention.............33
3
<PAGE> 4
(b) Good Standing......................................33
(c) Binding Effect.....................................33
(d) Status of the Constituent Documents................33
(e) No Litigation; Proceedings.........................34
(f) Capitalization.....................................34
(g) Financial Statements; Undisclosed Liabilities......34
(h) Conduct in the Ordinary Course of Business.........34
(i) SEC Documents......................................35
(j) Reservation of Shares..............................35
(k) ERISA Matters......................................35
ARTICLE VIII CONDITIONS
8.01 Conditions to the Partnerships' Obligations.................35
(a) Exchange Rights Agreement..........................35
(b) HEI Contribution...................................35
(c) No Material Misrepresentation etc..................36
(d) Title to Property..................................36
(e) Contributing Parties' Proceedings..................36
(f) Contributing Party's Performance, Consents.........36
(g) Licenses...........................................37
(h) Franchise License Agreements.......................37
(i) Notices............................................37
(j) ERISA Limitations..................................37
8.02 Conditions to Contributing Party's Obligations..............37
(a) The Starwood Parties' Proceedings..................38
(b) The Starwood Parties' Performance..................38
(c) No Material Misrepresentation etc..................38
(d) Exchange Rights Agreement..........................38
(e) Registration Rights Agreement......................38
(f) [Reserved].........................................38
(g) HEI Contribution...................................38
(h) [Reserved].........................................38
(i) Partnership Amendments.............................38
(j) ERISA Limitations..................................39
ARTICLE IX DOCUMENTS
9.01 The Contributing Parties' Closing Deliveries................40
(a) Assignment of Property Company Interests...........40
(b) Confirmation of Distribution of Contributed Assets.40
(c) Bills of Sale and General Assignment...............40
(d) Affidavits Regarding Authority, "Foreign Person"...40
(e) Title Requirements.................................40
(f) Transfer Tax Returns...............................40
(g) [Reserved].........................................40
(h) Pay-Off Letters....................................41
(i) Good Standing Certificate..........................41
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(j) Others as Reasonably Required......................41
9.02 The Partnerships Closing Deliveries.........................41
(a) Good Standing Certificate..........................41
(b) Partnership Amendments.............................41
(c) Affidavit..........................................41
(d) Others as Reasonably Required......................41
9.03 Closing Deliveries by the Trust and the Corporation.........41
(a) Good Standing......................................41
(b) Paired Shares......................................41
(c) Affidavit..........................................42
(d) Others as Reasonably Required......................42
ARTICLE X COSTS
10.01 Transaction Costs...........................................42
ARTICLE XI BROKERAGE
11.01 Broker......................................................42
ARTICLE XII SCHEDULES, CLOSING, "AS IS"
12.01 Schedules...................................................43
12.02 Access......................................................43
(a) Access - Partnerships..............................43
(b) Access - Contributing Parties......................43
12.03 Certain Definitions.........................................44
12.04 Deliveries..................................................44
12.05 Effect of Inspections, "As Is"..............................44
(c) [Reserved].........................................45
12.06 Delivery of Property Company Records........................45
12.07 The Partnerships' Indemnification...........................45
12.08 Date and Location Closing...................................46
ARTICLE XIII EARNEST MONEY, DEFAULT AND REMEDIES
13.01 Duties of Escrow Agent......................................46
(a) Earnest Money Deposits.............................46
(b) Disputes...........................................46
(c) Costs..............................................46
(d) Limited Duties.....................................46
(e) Liability..........................................46
13.02 Default.....................................................47
(a) Contributing Parties Default.......................47
(b) Starwood Parties' Default..........................47
(c) [Reserved].........................................48
ARTICLE XIV INDEMNIFICATION
14.01 Survival....................................................48
14.02 Indemnification by Contributing Parties.....................48
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14.03 Indemnification by Starwood Parties.........................49
14.04 Procedures..................................................51
ARTICLE XV FURTHER ASSURANCES
15.01 Further Assurances..........................................54
ARTICLE XVI PRE-CLOSING OPERATIONS
16.01 Contributing Party's Conduct of Business....................54
16.02 On-Site Representative......................................55
ARTICLE XVII NOTICES
17.01 Procedure for Notice........................................55
ARTICLE XVIII ADDITIONAL COVENANTS
18.01 Board Representation........................................57
18.02 Obligation of the Contributing Parties As to Closing
Conditions..................................................58
18.03 Obligation of The Starwood Parties As to Closing
Conditions..................................................58
ARTICLE XIX [RESERVED]
ARTICLE XX MISCELLANEOUS
20.01 Modifications and Waivers...................................58
20.02 Governing Law...............................................58
20.03 Captions etc................................................58
20.04 Rules of Construction.......................................59
20.05 Successors and Assigns......................................59
20.06 Entire Agreement............................................59
20.07 Counterparts................................................59
20.08 Starwood Lodging Trust......................................59
20.09 Confidentiality and Exclusivity.............................59
20.10 Joint Liability.............................................60
20.11 Press Releases..............................................60
20.12 Expiration..................................................60
LIST OF SCHEDULES....................................................63
LIST OF EXHIBITS.....................................................65
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CONTRIBUTION AGREEMENT
THIS AGREEMENT is made and entered into as of January 15,
1997, by and among SLT REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership ("SLT"), SLT FINANCING PARTNERSHIP, a Delaware general partnership
("SLT FINANCING") and SLC OPERATING LIMITED PARTNERSHIP, a Delaware limited
partnership ("SLC", and together with SLT and SLT Financing, the
"PARTNERSHIPS"), STARWOOD LODGING TRUST, a Maryland real estate investment trust
(the "TRUST"), STARWOOD LODGING CORPORATION, a Maryland corporation (the
"CORPORATION"), the individuals and entities listed on Schedule A-1 attached
hereto and made a part hereof (each a "CONTRIBUTING PARTY" and collectively, the
"CONTRIBUTING PARTIES") and the entities set forth on Schedule A-2 attached
hereto and made a part hereof (each a "PROPERTY COMPANY" and collectively, the
"PROPERTY COMPANIES"), each of whom are parties to this Agreement as evidenced
by their execution hereof.
RECITALS
A. The Contributing Parties are the direct or indirect owners of the
limited liability company membership interests, limited partnership interests
(as general or limited partners), joint venture interests or general partnership
interests, as applicable, in the respective Property Companies as set forth
opposite each Contributing Party's name on Schedule A-1 (collectively, the
"PROPERTY COMPANY INTERESTS").
B. The Property Companies are the owners of ten (10) hotels and the
related real and personal property, both tangible and intangible, all as more
particularly described in Article I below (each a "HOTEL" and collectively, the
"HOTELS"). Each Property Company owns the Hotel set forth opposite its name on
Schedule A-2 attached hereto.
C. The Partnerships, the Trust and the Corporation (collectively, the
"STARWOOD PARTIES") and the Contributing Parties desire to provide for the
following transactions to be effected simultaneously but in the order set forth
below, all upon the terms and conditions herein set forth:
(1) The Contributing Parties desire to cause the Property
Companies to distribute to the Contributing Parties certain tangible
and intangible personal property assets owned by the Property Companies
in connection with the operation of the Hotels, as such assets are more
particularly described on Schedule B attached hereto (the "CONTRIBUTED
ASSETS") and SLC desires to acquire from the Contributing Parties such
Contributed Assets for the purpose of operating the Hotels in exchange
for limited partnership interests in SLC as set forth on Schedule B and
the Contributing Parties desire to contribute such assets to SLC and to
receive such consideration therefor all upon the terms and conditions
herein set forth.
(2) Certain Contributing Parties which are entities which are
direct owners of Hotel Company Interests shall distribute such Hotel
Company Interest to the Contributing Parties which own interests in
such entities.
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(3) SLT Financing desires to acquire from the Contributing
Parties the Property Company Interests described on Schedule C attached
hereto and the Contributing Parties desire to transfer such Property
Company Interests to SLT Financing all upon the terms and conditions
herein set forth.
(4) SLT desires to acquire from the Contributing Parties the
Property Company Interests described on Schedule D attached hereto in
exchange for cash and limited partnership interests in SLT as set forth
in Schedule D and the Contributing Parties desire to contribute such
Property Company Interests to SLT and to receive such consideration
therefor all upon the terms and conditions herein set forth.
(5) The Contributing Parties desire to immediately upon
closing convert a portion of the limited partnership interests in SLT
and SLC received pursuant hereto into Paired Shares (as defined below)
as more particularly set forth on Schedule E attached hereto.
D. The Trust, on behalf of the Trust and on behalf of SLT (as the
general partner of SLT), and the Corporation, on behalf of the Corporation and
on behalf of SLC (as the managing general partner of SLC), entered into a letter
of intent with HEI Hotels, LLC and The Prudential Insurance Company of America
on behalf of Prudential Property Investment Separate Account II, collectively on
behalf of the Contributing Parties, which letter of intent is dated December 9,
1996 (the "LETTER OF INTENT"), regarding the transactions contemplated in this
Agreement and the HEI Contribution Agreement (as hereinafter defined). Upon
execution of this Agreement and the other Transaction Documents (as defined
below) this Agreement and the other Transaction Documents shall supersede the
terms and provisions of the Letter of Intent.
IN CONSIDERATION of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement, intending to be bound legally and equitably, agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Property. The term "PROPERTY" means and includes with respect to
each Property Company, such Property Company's right title and interest in and
to: (a) the land described in Schedule 1.01 hereto designated thereon as owned
by such Property Company, together with all right, title and interest in and to
any land lying in the bed of any street, road, avenue or alleyway open, proposed
or closed in front of or adjoining such land, and all right, title and interest
in and to any strips, gores, easements, rights of way, riparian rights and
privileges belonging to or inuring to the benefit of such land and all right,
title and interest in and to any tenements, hereditaments and appurtenances
belonging or in anywise appertaining to any or all of the aforesaid (the
"LAND"), (b) all buildings, structures and improvements now or hereafter erected
or situate on, over or beneath the Land, including, but not limited to, the
Hotels (the "BUILDINGS"), (c) the Tenant Leases (the Land, the Buildings and the
Tenant Leases are sometimes collectively referred to herein as the "REAL
PROPERTY"), (d) the FF&E, (e) the Inventory and other tangible personal property
now or hereafter
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situate on, attached or appurtenant to or used in connection with the Land
and/or the Buildings (collectively, with the FF&E, the "TANGIBLE PERSONAL
PROPERTY"), (e) the Intangible Property, (I) the Contracts, (g) the Proprietary
Rights, and (h) the Miscellaneous Interests, and in all cases whether owned by
such Property Company as of the date of this Agreement or acquired by such
Property Company prior to the Closing Date (defined below).
1.02 Certain Other Definitions.
(a) "ADA" means the Americans with Disabilities Act, as
amended.
(b) "AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
(c) "ASSUMED DEBT" means those mortgage loan obligations of
certain of the Property Companies as set forth on Schedule 1.02(c).
(d) [RESERVED]
(e) "BUSINESS DAY" means any day other than Saturdays, Sundays
and legal holidays on which federal banks are not open for business.
(f) "CLOSING" and "CLOSING DATE" are defined in Section 12.08.
(g) "CODE" means the Internal Revenue Code of 1986, as
amended.
(h) "CLOSING VALUE" of an OP Unit shall mean the greater of
(i) the average closing price of a Paired Share as reported as of the close of
trading on the New York Stock Exchange on the five (5) trading days immediately
preceding the date of Closing, or (ii) $49.25.
(i) [RESERVED]
(j) "CONSTITUENT DOCUMENTS" means:
(1) with respect to any Person that is a limited
partnership: (i) its agreement of limited partnership; (ii) its
certificate of limited partnership; (iii) any amendments or supplements
to items (i) and (ii); and (iv) any other certificate or instrument
required to be filed in the jurisdiction of formation of such Person to
evidence the formation or continued existence thereof;
(2) with respect to any Person that is a limited liability
company: (i) the operating agreement for such Person; (ii) the
certificate of formation for such Person; (iii) any amendments or
supplements to the items described in clauses (i) and (ii) above; and
(iv) any other certificate or instrument required to be filed in the
jurisdiction of formation of such Person to evidence the formation or
continued existence thereof;
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(3) with respect to a Person that is a corporation:
(i) its articles of incorporation; (ii) its by-laws; (iii) any
amendments or supplements to the items described in clauses (i) and
(ii); and (iv) any other certificate or instrument required to be filed
in the jurisdiction of formation of such Person to evidence the
formation or continued existence thereof;
(4) with respect to any Person that is a general
partnership or joint venture, the agreement of general partnership or
joint venture agreement for such person and any amendments or
modifications thereto; and
(5) with respect to any Person that is a trust: (i)
the declaration of trust for such Person; (ii) the trust regulations,
if any, pertaining thereto; (iii) any amendment or supplement to the
items set forth in clauses (i) and (ii) above; and (iv) any other
certificate or instrument required to be filed in the jurisdiction of
formation of such Person to evidence its formation or continued
existence.
(k) "CONTRACTS" means with respect to each Property
Company, the interest of such Property Company in:
(1) those future reservations and advance bookings
for the use of all or any part of the Property, involving aggregate
payments to the Property Company of $25,000 or more in any 12 month
period, and
(2) those other agreements, utility contracts, leases
(other than Tenant Leases), concession agreements, the License
Agreements, service contracts, and commitments which have an aggregate
unpaid balance of $25,000.00 or more by the Property Company or are not
terminable without payment of any fee or penalty on sixty (60) days or
less notice.
(l) "CONTRIBUTED ASSETS" is defined in Recital C(1).
(m) "CORPORATION SHARES" has the meaning given in Section
7.03(f).
(n) "DEPOSIT" has the meaning given in Section 2.05.
(o) "ELIGIBLE INVESTMENT" has the meaning given in
Section 2.04(b).
(p) "ENVIRONMENTAL LAWS" means and includes any law or
regulation of any federal, state or local governing or administrative body
relating to pollution or protection or cleanup of the environment (including,
but not limited to, ambient air, surface water, groundwater, land surface or
subsurface strata) including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Resources Conservation and Recovery Act of 1976, as amended ("RCRA") and other
such Legal Requirements relating to (i) release, containment, removal,
remediation, response, cleanup or abatement of any sort of hazardous substance,
pollutant, contaminant or waste, (ii) the manufacture, generation, formulation,
processing, labeling, distribution, introduction into commerce, use, treatment,
handling, storage, disposal or transportation of any chemical or toxic substance
or (iii) the
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management, use, storage, disposal, cleanup or removal of asbestos,
asbestos-containing materials, polychlorinated biphenyls or any other chemical
or toxic substance.
(q) "ENVIRONMENTAL REPORTS" has the meaning given in
Section 7.01(u).
(r) "EQUIPMENT LEASES" means, with respect to each
Property Company, any leases to which such Property Company is a party for
telephone systems, computer systems, electronic door lock systems, mini bars and
other equipment and systems used in connection with the Hotels.
(s) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the regulations, interpretations and exemptions
promulgated thereunder.
(t) "EVALUATION MATERIALS" has the meaning given in
Section 2.04(c).
(u) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(v) "EXCLUDED LIABILITIES" is defined in Section 8.02(i).
(w) "FF&E" means with respect to each Property Company,
the interest of such Property Company in, all fixtures, furniture, furnishings,
fittings, equipment, computer hardware, machinery, apparatus, artwork,
appliances, and audio/visual equipment and used in connection with the
ownership, operation and maintenance of the Hotels owned by such Property
Company (other than the Inventory). FF&E shall also include funds in the
aggregate amount of Two Million Nine Hundred Thousand Dollars ($2,900,000.00),
subject to adjustment as provided for below, as a reserve for scheduled calendar
year 1997 FF&E expenditures for all of the Hotels; provided, however, that such
sum shall be adjusted at Closing:
(1) upwards to reflect the aggregate amount then
unpaid for certain FF&E expenditure items budgeted for the Hotels with
respect to calendar year 1996, as such items are described on Schedule
1.02(w), and
(2) downwards to reflect any amount expended prior to
Closing for certain FF&E expenditure items budgeted for the Hotels with
respect to calendar year 1997, as such items are described on Schedule
1.02(w);
i.e., such sum assumes that at Closing all FF&E expenditures budgeted for 1996
will have been paid and no FF&E expenditures budgeted for 1997 will have been
paid.
(x) "FINANCIAL STATEMENTS" is defined in Section 7.01(q).
(y) "GAAP" means United States generally accepted
accounting principles, applied on a consistent basis.
(z) "GOVERNMENT ENTITY" means any federal, state or
municipal governmental or quasi governmental body or agency or any subdivision
thereof.
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(aa) "HEI" means HEI Hotels, LLC, a Delaware limited
liability company.
(bb) "HEI CONTRIBUTION AGREEMENT" means the Contribution
Agreement of even date herewith between the Partnerships, HEI and the other
parties thereto for the contribution of the "HEI Business" (as defined therein)
to the Partnerships pursuant to the terms thereof.
(cc) "HEI CONTRIBUTION" has the meaning set forth in the
HEI Contribution Agreement.
(dd) "INTANGIBLE PROPERTY" means with respect to each
Property Company all use, occupancy, liquor and other operating permits and
licenses relating thereto used in connection with the Property owned by such
Property Company; the interest of the Property Company in all information and
reservation systems owned by such Property Company, including all computer
programs, software and documentation thereof relating to such systems (subject
to the limitations of any applicable license agreements pertaining thereto), and
including all electronic data processing systems, program specifications, source
codes, logs, input data and report layouts and forms, record file layouts,
diagrams, functional specifications and narrative descriptions, flow-charts and
other related materials used in connection therewith; and all contract rights.
The Intangible Property shall not include any rights to the name "Prudential" or
any derivative thereof.
(ee) "INVENTORY" means with respect to each Property
Company, all merchandise, inventories, materials and supplies used or intended
for use at or held for sale in connection with the operation of the Hotel and
owned by such Property Company (and not by tenants or concessionaires)
including, without limitation:
(i) All beer, wine, spirits and other alcoholic
and non-alcoholic beverages (to the extent
the same may be legally transferred to the
Partnerships);
(ii) Food inventory, china, silverware, glassware
and other kitchen supplies and equipment;
(iii) Office and engineering supplies;
(iv) Housekeeping and other cleaning supplies,
paper and other supplies including, but not
limited to, stationery, toilet paper,
writing pens, and menus;
(v) Towels, linens, bedding and other guest room
supplies, including without limitation,
bathing and personal hygiene supplies;
(vi) Inventory stocks of furniture, furnishings,
carpeting, drapery fabrics and wall
coverings;
(vii) Supplies used with respect to any
recreational facility comprising a portion
of the Property; and
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(viii) Inventories at all sundry shops or other
retail outlets located in or comprising a
portion of the Real Property.
(ff) "INVESTMENTS" means, with respect to any Person, any
direct or indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or other ownership or beneficial
interest (including, without limitation, partnership interests and joint venture
interests) in any other Person, and any capital contribution by such Person to
any other Person.
(gg) "KNOWLEDGE" as to the Starwood Parties shall mean the
present actual knowledge of Steve Goldman or any of the other persons identified
on Schedule 1.02(gg) with respect to the Starwood Parties, and as to the
Contributing Parties shall mean the present actual knowledge of Gary Mendell or
any of the other persons identified on Schedule 1.02(gg) with respect to the
Contributing Parties. As used herein, "Knowledge" of a breach of any covenant,
representation or warranty means the actual knowledge of any such individual of
the fact or circumstance which constitutes such a breach, whether or not such
individual actually knows such fact or circumstance does constitute a breach of
this Agreement or the other Transaction Documents.
(hh) "LEGAL REQUIREMENTS" means all federal, state and
local laws, statutes, ordinances, rules and regulations affecting or in any way
relating to the Property or its operation, including, without limitation any
Environmental Laws, ADA and the Occupational Safety and Health Act of 1970 as
amended.
(ii) "LIABILITIES" means any liability, obligation, cost
or expense of any nature whatsoever, whether now known or unknown, asserted or
unasserted, accrued or unaccrued, liquidated or unliquidated or due or to become
due, including, without limitation, any liability in respect of any Taxes or
other Legal Requirements.
(jj) "LICENSE AGREEMENT" means with respect to each
Property Company, the franchise and license agreement to which such Property
Company is a party as identified opposite its name on Schedule 1.02(jj).
(kk) "LIEN" means any lien, pledge, encumbrance, security
agreement, conditional sale agreement or other title retention device.
(ll) "MANAGEMENT AGREEMENT" means with respect to each
Property Company, the hotel management agreement to which HEI and such Property
Company are parties as identified on Schedule 1.02(ll) and "MANAGER" means HEI
in such capacity under the applicable Management Agreement.
(mm) "MINIMUM SHARE OWNERSHIP" means either (i) ownership
by PRISA II of a total number of SLT OP Units and SLC OP Units plus Paired
Shares which (in the aggregate) equals fifty percent (50%) or more of the
aggregate number of SLT OP Units, SLC OP Units and Paired Shares (if any)
received by PRISA II at Closing as a part of the Contribution Amount, or (ii)
that PRISA II is one of the five largest shareholders of the Trust on a fully
diluted basis (assuming,
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for purposes of such calculation, that all outstanding SLT OP Units and SLC OP
Units (other than those owned by the Trust and the Corporation) have been
converted into Paired Shares).
(nn) "MISCELLANEOUS INTERESTS" means with respect to each
Property Company, all of such Property Company's right, title and interest in
and to (i) the business operations conducted by such Property Company directly
or through agents with, in or upon the Land, Buildings and/or Tangible Personal
Property (the "HOTEL BUSINESS") including, without limitation, the good will
pertaining thereto, (ii) all promotional and advertising literature and
materials, catalogs, booklets, manuals, records, guest, tenant and supplier
lists and correspondence with guests, tenants and/or suppliers, (iii)
transferable telephone exchange numbers, (iv) originals (or, where appropriate,
copies) of all financial, personnel and other books, records and files wherever
located and held by or on behalf of such Property Company or its agents in
connection with the Property, including without limitation, copies thereof in
computer readable form (where available) and (v) all other assets, properties,
rights and claims of the Property Companies which are used or held for use in
connection with the Property and/ or the Hotel Business including, without
limitation, guest histories and the Hotels' sales and marketing plans.
(oo) "NET WORKING CAPITAL" means as to each Property Company,
the aggregate amount as of the Closing Date of (i) all such Property Company's
cash, cash equivalents, accounts receivable and other current assets, minus (ii)
the aggregate amount of all such Property Company's accounts payable and all
other current liabilities, with all such items defined and measured in
accordance with GAAP, applied consistently with the Financial Statements for
such Property Company. If any item on (or which, under GAAP, should be reflected
on) the Financial Statements for such Property Company is not reflected in
accordance with GAAP, Net Working Capital for such Property Company will
nonetheless be computed in accordance with GAAP. In computing Net Working
Capital, all accounting entries will be taken into account regardless of their
amount, all known errors and omissions will be corrected and all known proper
adjustments will be made.
(pp) "NEW ENCUMBRANCES" has the meaning given in Section
3.01(b).
(qq) "OWNERSHIP LIMITATION" means the limitations contained in
the declaration of trust for the Trust and the Corporation's articles of
incorporation prohibiting actual or constructive ownership by any one person or
group of related persons of more than 8% of the issued and outstanding Paired
Shares taking into account the attribution rules of Section 544(a) of the Code
as modified by Section 856(h) of the Code or Section 318(a) of the Code as
modified by Section 856(d)(5) of the Code.
(rr) "PAIRED SHARES" means one common share of beneficial
interest, par value $.01 per share of the Trust and one share of common stock,
par value $.01 per share, of the Corporation that are subject to a pairing
agreement between the Trust and the Corporation.
(ss) "PAIRING AGREEMENT" means the Pairing Agreement dated as
of June 25, 1980, as amended, between the Trust and the Corporation providing,
in relevant part, for the pairing of all outstanding Trust Shares and
Corporation Shares and requiring, as a condition of transfer, that Trust Shares
are transferable only together with an equal number of Corporation Shares and
that Corporation Shares are transferable only together with an equal number of
Trust Shares.
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(tt) "PARTNERSHIP AGREEMENTS" means the limited partnership
agreements for SLC and SLT, including any amendments thereto.
(uu) "PERMITTED ENCUMBRANCES" has the meaning given in Section
3.01(b).
(vv) "PERSON" means an individual, a partnership, a limited
liability company, a corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a Governmental
Entity.
(ww) "PRISA II" means The Prudential Insurance Company of
America on behalf of Prudential Property Investment Separate Account II.
(xx) [RESERVED]
(yy) "PROPRIETARY RIGHTS" means, with respect to any Property
Company, such Property Company's interest in the following (other than such
interest held under a License Agreement): all patents and applications therefor,
all trademarks, trademark registrations and applications therefor, all
copyrights, copyright registrations and applications owned or held by such
Property Company in connection with its Hotel, including, without limitation,
those listed on Schedule 1.02(yy) hereto and the right to use the names of the
Hotels and their restaurants, dining and meeting rooms (other than pursuant to a
License Agreement).
(zz) "PURSUIT COSTS" is defined in Section 3.01(d).
(aaa) "PLAN ASSET REGULATION" is defined in Section 7.02(f).
(bbb) "SEC DOCUMENTS" means copies of all reports and
statements jointly filed by the Trust and the Corporation with the Securities
and Exchange Commission ("SEC") since January 1, 1995.
(ccc) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(ddd) "SINGLE-PURPOSE ENTITY" means a corporation, general or
limited partnership or limited liability company which was organized solely for
the purpose of owning a Hotel and at all times since its formation:
(i) has not engaged in any material business or owned
material assets unrelated to such Hotel;
(ii) if such entity is a limited partnership, has as its
only general partners (A) general partners which were organized solely
for the purpose of owning such general partnership interest and which
at all times since their formation have not engaged in any material
business or owned any material assets unrelated to such general
partnership interest, or (B) PRISA II;
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(iii) has maintained its accounts, books and records
separate from any other Person;
(iv) subject to the rights and interests of Manager
under the applicable Management Agreement for such Hotel (including
such rights in or with respect to any accounts for such Hotel), has not
commingled its funds or assets with those of any other Person;
(v) has conducted its business in its name except for
the use of the name of the Hotel and other tradenames in the conduct of
its business, which tradenames are set forth on Schedule 1.02(ddd);
(vi) has maintained its financial statements and
accounting records separate from any other Person;
(vii) has paid or reimbursed, directly or through
Manager or other independent contractors acting on its behalf, its own
liabilities out of its own funds and assets;
(viii) has complied in all material respects with the
requirements of its Constituent Documents and other applicable
corporate, limited liability company or partnership formalities;
(ix) has held and identified itself as a separate and
distinct entity under its own name (except as provided in clause (v)
above) and not as a division or part of any other Person or entity; and
(x) has not made loans to or guaranteed the loans or
other obligations of any Person or entity.
(eee) "SLC OP UNITS" has the meaning given in Section 2.03.
(fff) "SLT OP UNITS" has the meaning given in Section 2.03.
(ggg) "STARWOOD PARTIES" is defined in Recital C.
(hhh) "SUBSIDIARY" means any Person with respect to which a
specified Person has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors or persons performing similar
functions or with respect to which such Person acts as a general partner or
managing member or otherwise controls the day-to-day operations of such entity.
(iii) "TAX" means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any
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interest, penalty, or addition thereto, whether disputed or not, and including
any obligation to indemnify or otherwise assume or succeed to such tax liability
of any other Person.
(jjj) "TAX RETURN" means any return, declaration, report,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
(kkk) "TITLE COMMITMENTS" has the meaning given in Section
3.01(b).
(lll) "TITLE INSURER" means First American Title Insurance
Company.
(mmm) "TITLE POLICIES" has the meaning given in Section
8.01(d).
(nnn) "TENANT LEASE(S)" means with respect to any Hotel, any
lease, license or other occupancy agreement granting to any Person (excluding
HEI and the Property Company which owns such Hotel) the right to use and occupy
any portion of such Hotel, other than guest room reservations or advance booking
agreements entered into in the ordinary course of business or otherwise
disclosed in the Schedules to this Agreement.
(ooo) "TRANSACTION DOCUMENTS" means this Agreement, the
Exchange Rights Agreement, the Registration Rights Agreement, the HEI
Contribution Agreement, the Co-Investment Agreement, and all other agreements,
instruments, certificates and other documents to be entered into or delivered by
any party in connection with the transactions contemplated to be consummated by
any of the foregoing.
(ppp) "TRUST SHARES" has the meaning given in Section 7.04(f).
(qqq) "UNPERMITTED TITLE EXCEPTIONS" has the meaning given in
Section 3.01(b).
ARTICLE II
CONTRIBUTION; CONSIDERATION; DEPOSIT
2.01 Agreement to Contribute. Each of the Contributing Parties hereby
jointly and severally agrees to: (i) cause the Property Company in which such
Contributing Party owns a Property Company Interest to distribute the
Contributed Assets owned by such Property Company to the Contributing Parties
owning such Property Company Interests in-kind in proportion to their respective
Property Company Interests in such Property Company, (ii) contribute to SLC the
Contributed Assets received by such Contributing Party in exchange for SLC OP
Units as set forth below; (iii) contribute to SLT a portion of the Property
Company Interests owned by such Contributing Party in exchange for Cash and SLT
OP Units as set forth below; and (iv) contribute to SLT Financing the remaining
portion of the Property Company Interests owned by such Contributing Party in
exchange for Cash as set forth below.
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2.02 Reserved.
2.03 Consideration for Contribution. In consideration of the
contribution of the Contributed Assets and Property Company Interests to the
Partnerships by the Contributing Parties, the Partnerships shall cause to be
delivered to the Contributing Parties at Closing the following items of value
having an agreed upon aggregate value equal to Three Hundred Twelve Million
Three Hundred Eighty Thousand Dollars ($312,380,000), (the "CONTRIBUTION
AMOUNT"), subject to adjustment as provided in this Agreement:
(1) pay cash in the amount of $80,525,000.00 (the "CASH");
(2) assume or take subject to the Assumed Debt (which shall be
repayable by SLT without prepayment penalty or premium); and
(3) the balance of the Contribution Amount in limited
partnership interests ("OP UNITS") in the Partnerships (based upon
$49.25 per Paired Share), consisting of an equal number of OP Units of
SLT ("SLT OP UNITS") and OP Units of SLC ("SLC OP UNITS"),
exchangeable, subject to the Ownership Limitation, into an equal number
of Paired Shares as provided in and subject to the limitations of the
Exchange Rights Agreement. The Contributing Parties shall have the
right to convert a portion of the SLT OP Units and SLC OP Units so
received into Paired Shares immediately following the issuance thereof
in accordance with Schedule E attached hereto.
The parties agree the allocation of the Contribution Amount among the
Contributing Parties shall be as set forth on Schedule 2.03 and that each of the
Partnerships is receiving assets with a fair market value substantially equal to
the Cash and OP Units in such Partnership issued in exchange therefor. Any sales
tax due upon the contribution of the Contributed Assets shall constitute a
Transaction Cost (as defined in Section 10.01).
2.04 [Reserved]
2.05 Deposit.
(a) The Contributing Parties acknowledge that SLT shall on the
date of execution hereof make an earnest money deposit (together with any
interest earned thereon, the "INITIAL DEPOSIT") in the amount of Five Million
Dollars ($5,000,000) with First American Title Insurance Company (the "ESCROW
AGENT") pursuant to the terms of the escrow instructions (the "ESCROW
AGREEMENT") in the form attached as Exhibit "A" hereto. Provided this Agreement
has not been sooner terminated, upon the approval or deemed approval of the
Schedules of this Agreement (as provided in Section 12.01), SLT shall deposit
with the Escrow Agent on or prior to 6:00 P.M. (EST) on January 17, 1997 an
additional $5,000,000.00 (the "ADDITIONAL DEPOSIT" and together with the Initial
Deposit and any interest or other earnings on either the "DEPOSIT"), for a total
deposit of $10,000,000.00. The Deposit shall be non-refundable except as
provided herein.
(b) If the Closing shall occur, the Deposit shall be applied
to the Cash portion of the Contribution Amount. If this Agreement is terminated
pursuant to Section 12.01, the Initial
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Deposit shall be returned by the Escrow Agreement to SLT. If the Partnerships
fail or refuse to close for any reason other than (x) an uncured default by one
or more of the Contributing Parties under Section 13.02 of this Agreement, (y)
the failure of one or more of the conditions in Section 8.01, or (z) termination
of this Agreement pursuant to Article VI, the Deposit shall be paid to the
Contributing Parties, as liquidated damages as their sole and exclusive remedy
for such default. If (1) one or more of the Contributing Parties fail or refuse
to perform their obligations under this Agreement, or (2) if one or more of the
conditions set forth in Section 8.01 is not satisfied or waived by the
Partnerships, or (3) this Agreement is terminated pursuant to Article VI, then
subject to the provisions of Section 13.02, the Deposit shall be refunded and
repaid to SLT.
(c) The Deposit shall be invested in accordance with the terms
of the Escrow Agreement and interest shall accrue for the benefit of and be paid
to the party to whom the Deposit is paid pursuant to this Section 2.05.
(d) The duties of the Escrow Agent hereunder are purely
ministerial in nature, and the Escrow Agent shall have no liability to either
party so long as it acts in good faith in accordance with the provisions of the
Escrow Agreement.
ARTICLE III
TITLE
3.01 Title to Property.
(a) Prior to or contemporaneously with the execution and
delivery of this Agreement, each of the Contributing Parties will deliver to SLT
a copy of the most recent surveys of the Real Property as the Contributing
Parties have in their possession (the "OLD SURVEYS"). If required by the Title
Insurer as a condition to the removal of any survey exceptions from the Title
Policies, the Starwood Parties may obtain prior to the Closing a recertification
of one or more of the Surveys or a new survey of each parcel of the Real
Property, prepared by a licensed surveyor, satisfactory to SLT, and conforming
to 1992 ALTA/ACSM Minimum Requirements for Urban Land Title Surveys ("NEW
SURVEYS" and, together with the Old Surveys, the "SURVEYS"), including Table A
Items Nos. 1-4 and 6-14, and such other standards as the Title Insurer may
require. The Surveys shall be so certified (or recertified) to SLT, and Title
Insurer in a form satisfactory to such parties.
(b) The Partnerships have had a bringdown of title to the Real
Property performed by the Title Insurer and shall provide copies thereof (the
"TITLE COMMITMENTS") to the applicable Contributing Parties and shall obtain
such UCC searches and other evidence of title to the Property Company Interests
and the remainder of the Property as the Partnerships shall deem appropriate
(the "SEARCHES"). Except as set forth on Schedule 3.01 hereto, the matters
disclosed by the Title Commitments and the Old surveys are referred to herein as
the "Permitted Encumbrances". The matters set forth on Schedule 3.01 shall be
limited to such matters that materially impair the current use, value or
continued operation of the affected Hotel and such matters are referred to as
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"Unpermitted Title Exceptions". Notwithstanding the foregoing, Permitted
Encumbrances shall include (and Unpermitted Title Exceptions shall exclude) any
and all Liens securing:
(i) the Assumed Debt;
(ii) unpaid real estate taxes and assessments not yet
due and payable;
(iii) Uniform Commercial Code vendor liens securing
the non-delinquent payment for goods; and
(iv) obligations of any Property Company which will
be credited at Closing in the Net Working Capital adjustment provided
for in Article IV, i.e., Liens securing any current liabilities of such
Property Company.
In the event that (i) the Searches disclose Liens or other encumbrances not
disclosed by the Title Commitments or that are not otherwise Permitted
Encumbrances; or (ii) the Partnerships obtain any New Surveys, or any subsequent
bringdowns of the Title Commitments or the Searches, and the same disclose
matters which are not disclosed by the Old Surveys, Title Commitments or the
Searches and are not otherwise Permitted Encumbrances in accordance with the
foregoing, the Partnerships shall promptly so notify the applicable Contributing
Party, but such additional matters ("NEW ENCUMBRANCES") shall be Permitted
Encumbrances unless objected to in writing by the Partnerships prior to Closing,
in which event the matters so objected to shall be Unpermitted Title Exceptions,
unless the Starwood Parties proceed to consummate the Closing transactions
provided for herein notwithstanding such matters, as provided for in Section
3.01(d) below, in which event all matters disclosed to the Starwood Parties
prior to Closing shall constitute Permitted Exceptions for purposes of this
Agreement.
(c) As to any Unpermitted Title Exceptions, the Contributing
Parties shall notify the Partnerships as soon as reasonably practicable but in
all events prior to Closing, whether the Contributing Parties:
(i) will cause the same to be discharged or removed
at or prior to Closing (whereupon the Contributing Parties will be
obligated to do so); or
(ii) will not cause the same to be so discharged.
The Contributing Parties' failure to respond shall constitute such Contributing
Parties' election to proceed under clause (ii).
(d) If the Contributing Parties shall notify the Partnerships
pursuant to paragraph (c)(ii) that the Contributing Parties will not cause an
Unpermitted Title Exception to be discharged at or prior to Closing, or shall be
deemed to have made such election, the Closing shall be deferred, if necessary,
to the date which is five (5) business days after receipt of such notice by the
Partnerships, and the Partnerships shall notify the Contributing Parties within
such five (5) business day period of the Partnerships' election in its sole
discretion, either:
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(i) to accept title subject to such Unpermitted Title
Exception(s) as the Contributing Parties shall have declined to cure,
without reduction in or offset to the Contribution Amount; or
(ii) to terminate this Agreement and receive a prompt
refund of the Deposit; provided, however, that if any such Unpermitted
Title Exception is a New Encumbrance, the Partnerships shall also be
entitled to receive reimbursement by the Contributing Parties of the
reasonable out-of-pocket fees and expenses actually incurred by the
Starwood Parties in pursuing the transactions contemplated hereby
including, without limitation: travel expenses; fees and expenses of
third party service providers providing legal, accounting, engineering,
or other services in connection with such pursuit; title insurance,
survey and other search fees; and other customary analytical or due
diligence expenses (collectively, the "PURSUIT COSTS") up to an amount
not to exceed One Million Dollars ($1,000,000) within fifteen (15) days
after providing to the Contributing Parties an invoice setting forth in
reasonable detail the amount of such Pursuit Costs.
The Partnerships' failure to respond on a timely basis shall constitute the
Partnerships' election to proceed under clause (ii). The foregoing shall
constitute the sole remedies of the Starwood Parties with respect to the matters
provided for in this Section 3.01(d) (without limiting the generality of the
foregoing, the provisions of Section 13.02(a) shall not apply thereto).
ARTICLE IV
NET WORKING CAPITAL ADJUSTMENT
4.01 Net Working Capital Adjustment.
(a) Estimated Closing Balance Sheet. Net Working Capital for
each of the Property Companies shall be determined as of the Closing Date in
accordance with the procedure set forth below, and the Cash portion of the
Contribution Amount shall be adjusted up or down in accordance with such
determination. At least two (2) business days prior to the Closing, each
Property Company and the Partnerships in good faith shall prepare an unaudited
estimated balance sheet of such Property Company as of the Closing Date (the
"ESTIMATED CLOSING BALANCE SHEET") and an estimate of the Net Working Capital of
the Property Company as of the close of business on the Closing Date (the
"ESTIMATED CLOSING NET WORKING CAPITAL") based on the Property Company's books
and records and other information then available. For purposes of the
determination of Estimated Net Working Capital, all of the guest room revenue
and applicable tax for the night preceding the Closing Date shall be treated as
accounts receivable of such Property Company for the day preceding the Closing
Date, but the Starwood Parties shall receive a credit in the determination of
Net Working Capital equal to one-half (1/2) of the amount of such accounts
receivable for guest room revenue and applicable tax for the night preceding the
Closing Date.
(b) Adjustment. If the Estimated Closing Net Working Capital
for any Property Company is greater than zero, the Cash portion of the
Contribution Amount allocated to the Property Company Interests in such Property
Company shall be adjusted upwards by such excess. If
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Estimated Closing Net Working Capital for any Property Company is less than
zero, the Cash portion of the Contribution Amount allocated to the Property
Company Interest in such Property Company shall be adjusted downwards by such
shortfall until the Cash Portion is zero, and thereafter the number of OP Units
included in the portion of the Contribution Amount allocated to Property Company
Interests in such Property Company shall be reduced based upon the Closing
Value, until such shortfall is fully offset.
(c) Final Closing Balance Sheet. As promptly as practicable,
but in no event later than ninety (90) days after Closing, the Partnerships will
cause HEI to deliver to the Contributing Parties a balance sheet of each of the
Property Companies as of the Closing (the "CLOSING BALANCE SHEET") prepared by
HEI on a basis consistent with the most recent balance sheet on the Financial
Statements for such Property Company, which Closing Balance Sheet will reflect
the HEI's determination (as certified by the chief financial officer of HEI) of
the Net Working Capital as of the close of business on the Closing Date (the
"CLOSING NET WORKING CAPITAL") of such Property Company.
(d) Independent Auditor.
(i) If the Contributing Parties disagree with HEI's
determination of Closing Net Working Capital, the
Contributing Parties shall notify the Partnerships in
writing of such disagreement (such notice setting
forth the basis for such disagreement in reasonable
detail) and the Partnerships and the Contributing
Parties thereafter shall negotiate in good faith to
resolve any such disagreements. If the Partnerships
and the Contributing Parties are unable to resolve
any such disagreements within thirty (30) days after
the Partnerships cause HEI to deliver the Closing
Balance Sheet to the Contributing Parties, the
Partnerships and the Contributing Parties shall
subject the dispute to a "Big Six" public accounting
firm jointly selected by the Partnerships and the
Contributing Parties (the "INDEPENDENT AUDITOR") for
resolution. If the Partnerships and the Contributing,
Parties are unable to agree upon an Independent
Auditor, the independent Auditor shall be selected by
lot from a list of four "Big Six" accounting firms
(of which two firms shall be selected by each of the
Partnerships and the Contributing Parties, but
excluding any firm which has previously audited such
Property Company's or any of the Starwood Parties'
financial statements).
(ii) The Partnerships and the Contributing Parties shall
use their reasonable best efforts to cause the
Independent Auditor to resolve all disagreements over
the Closing Net Working Capital as soon as
practicable, but in any event within 60 days after
submission of the disputes to the Independent
Auditor. The resolution of such disagreements and the
determination of Closing Net Working Capital by the
Independent Auditor shall be final and binding on the
Partnerships and the Contributing Parties.
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(iii) The Independent Auditor will determine the allocation of
its costs and expenses in determining the Closing Net
Working Capital based upon the percentage which the
portion of the contested amount not awarded to each
party bears to the amount actually contested by such
party. For example, if the Contributing Parties claim
the Closing Net Working Capital is $1,000 greater than
the amount determined by the Partnership's accountants,
and the Partnerships contest only $500 of the amount
claimed by the Contributing Parties, and if the
Independent Auditor ultimately resolves the dispute by
awarding the Contributing Parties $300 of the $500
contested, then the costs and expenses of arbitration
will be allocated 60% (i.e., 300 500) to the
Partnerships and 40% (i.e., 200 500) to the Contributing
Parties.
(e) Final Adjustment. If the Closing Net Working Capital for
any Property Company (as finally determined pursuant to Section 4.01(c) or (d),
as applicable) is greater than the Estimated Closing Net Working Capital, the
Partnerships shall, within three (3) business days after the Closing Net Working
Capital is so finally determined, pay to the Contributing Parties owning
Property Company Interests in such Property Company in immediately available
funds, the difference between the Closing Net Working Capital and the Estimated
Closing Net Working Capital. If the Closing Net Working Capital for such
Property Company is less than the Estimated Closing Net Working Capital for such
Property Company, the Contributing Parties owning Property Company Interests in
such Property Company shall, within three (3) business days after the Closing
Net Working Capital for such Property Company is so finally determined, pay to
the Partnerships, in immediately available funds, the difference between Closing
Net Working Capital and Estimated Closing Net Working Capital for such Property
Company. All amounts owed pursuant to this Section 4.01 (e) shall include
interest thereon, from and excluding the day which is fifteen (15) days after
the date on which the party entitled to receive such amount makes written demand
for its payment to and including the date of payment, at the "prime" rate as
announced by Chase Manhattan Bank N.A. on the date on which such demand is made
calculated on the basis of a 365-day year. All determinations pursuant to this
Section 4.01(e) shall be made in accordance with GAAP.
4.02 Errors. Notwithstanding the foregoing and in addition to the
provisions of Subsections 4.01(a) - (e), if at any time within one year
following Closing either party discovers any items which should have been
included in the Net Working Capital Adjustments but which were omitted
therefrom, or any error in the computation of such adjustments, or any items not
previously capable of determination, such items or error shall be properly
adjusted as of Closing without interest thereon.
ARTICLE V
[Reserved]
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ARTICLE VI
RISK OF LOSS
6.01 Risk of Loss. Subject to the following provisions of this Article
VI, the Contributing Parties shall bear all risk of all loss or damage to the
Property from all causes until Closing.
6.02 Casualty. If one or more of the Hotels is materially damaged by
any fire or other casualty prior to Closing, the Property Company owning such
damaged Hotel will immediately notify the Partnerships in writing of the same (a
"CASUALTY NOTICE"). The Casualty Notice will include a reasonably detailed
description of the property damage and such Property Company's best estimate of
the cost and time required to repair such damage. The cost of repairing such
damage to any Hotel as estimated by an architect or other qualified consultant
retained by such Property Company is herein referred to as a "CASUALTY LOSS"
with respect to such Hotel.
6.03 Eminent Domain. In the event that a portion of one or more of the
Hotels are taken by eminent domain or becomes subject to a taking by eminent
domain or a deed in lieu of condemnation prior to Closing, the affected Property
Company will immediately notify the Partnerships in writing, of the same (a
"EMINENT DOMAIN NOTICE"). The reasonably estimated value of the portion of any
Hotel taken or subject to taking by eminent domain is herein referred to as a
"CONDEMNATION LOSS" with respect to such Hotel.
6.04 Elections Upon Casualty or Eminent Domain. If any of the events
described in Section 6.02 or Section 6.03 occurs prior to Closing, then the
provisions of this Section 6.04 shall apply:
(a) Minor Loss. Subject to Section 6.04(c) below, if the
amount of the Casualty Loss or the Condemnation Loss, as applicable (the
"LOSS"), to any Hotel is equal to or less than One Million Dollars ($1,000,000),
then the Partnerships shall receive a credit to the Cash portion of the
Contribution Amount equal to the Adjustment Amount (as defined in Section 6.05),
and in such event the Closing will be as otherwise provided herein with respect
to the Property Company Interests and Contributed Assets of the Property Company
which owns the Hotel subject to such Loss.
(b) Substantial Loss. Subject to Section 6.04(c) below, if the
amount of the Loss to any Hotel is greater than One Million Dollars
($1,000,000), then the Partnerships, must elect (as their sole and exclusive
remedy) with respect to the Property Company Interests and Contributed Assets of
the Property Company owning such Hotel either:
(i) to proceed with the transaction without the
Property Company Interests and Contributed Assets of such Property
Company, with a reduction in the Contribution Amount based on Schedule
2.03; provided, however, that the Partnerships shall not have the right
to make such election under this clause (i) with respect to more than
two Hotels; or
(ii) to proceed with the transaction contemplated by
this Agreement with such Property Company Interests and Contributed
Assets, including (as assets of such
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Property Company) such Property Company's rights in any insurance or
condemnation proceeds (as applicable) which remain unpaid to such
Property Company in connection with such Loss and a credit against the
Cash portion of the Contribution Amount equal to the Adjustment Amount,
and in such event the Closing will be as otherwise provided herein.
Such election must be made by the Partnerships within ten (10) business days
following receipt of the Casualty Notice or Eminent Domain Notice (the "Loss
Election Date"), as applicable (the "LOSS NOTICE"), and the Closing Date shall
be extended, if necessary, to the third (3rd) Business Day following the Loss
Election Date. The Partnerships' failure to give timely notice under this
Section 6.04(b) will be deemed to be an election under clause (ii).
(c) Major Casualty Damage. If the aggregate amount of the Loss
with respect to any Hotel is greater than Five Million Dollars ($5,000,000), or
if three or more Hotels each have a Loss in excess of One Million Dollars
($1,000,000), then the Partnerships must elect (as their sole and exclusive
remedy) either:
(i) to proceed in accordance with Section 6.04(b)
above; or
(ii) to terminate this Agreement by giving notice to
such effect to the Contributing Parties not later than the Loss
Election Date. In the event of such termination, then the entire amount
of the Deposit will be refunded to SLT.
The Partnerships' failure to give timely notice under this Section 6.04(c) will
be deemed to be an election under clause (ii) of this Section 6.04(c).
6.05 Adjustment Amount. As used in this Article VI, "ADJUSTMENT AMOUNT"
means the sum of (i) in the case of casualty damage covered by a Property
Company's property casualty insurance, the amount of the deductible under such
insurance policy with respect to such casualty damage (not to exceed the amount
of such casualty damage), plus (ii) any amounts previously paid to such Property
Company as insurance or condemnation proceeds, as applicable, and not expended
by such Property Company prior to Closing for the purpose for which received
(including but not limited to expenditures for restoration of the affected Hotel
in connection with such casualty or condemnation); provided, however, that in
determining the adjustments to be made to the Cash portion of the Contribution
Amount at Closing for the Adjustment Amount (in accordance with this Article VI)
and for Net Working Capital (in accordance with Article IV), appropriate
adjustment shall be made so as to not double count as current assets of a
Property Company any unexpended amounts received by a Property Company as
insurance or condemnation proceeds or the right of a Property Company to receive
any insurance or condemnation proceeds, and so as to not double count as current
liabilities of such Property Company any liabilities of a Property Company for
which such insurance or condemnation proceeds have been or will be payable.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.01 Contributing Party's Representation and Warranties. To induce the
Starwood Parties to enter into this Agreement each Contributing Party makes the
following representations and warranties on behalf of such Contributing Party,
and on behalf of or with respect to the Property Company in which such
Contributing Party owns Property Company Interests all of which (i) are now
true, and (ii) except as expressly provided herein to the contrary, shall be
true as of Closing, subject, in each case, to the exceptions set forth on the
Schedules attached to this Agreement and on any supplemental schedules thereof
as may be delivered to the Starwood Parties prior to the Closing, provided,
however, that:
(1) prior to Closing, the remedies of the Starwood
Properties for any breach of such representations and warranties shall
be limited in accordance with Section 13.02(a);
(2) an election by the Starwood Parties to complete
Closing notwithstanding Knowledge of any breach thereof shall
constitute a waiver of such breach in accordance with Section 12.05(b);
and
(3) after Closing, the liability of the Contributing
Parties for any breach of such representations and warranties shall be
limited in accordance with Section 14.02(b).
Subject to the foregoing, the Contributing Parties represent and warrant as
follows:
(a) Subsidiaries and Investments. The Property Company has no
subsidiaries and does not own, directly or indirectly, any stock, membership
interests, partnership interests or joint venture interests in, or similar
equity ownership interest issued by, any other Person.
(b) Property Company Capitalization; Title to Property Company
Interests.
(i) The capitalization of the Property Company is
completely set forth on Schedule 7.01(b) hereto. There are no restrictions on
the transfer of the Property Company Interests other than those set forth in the
Property Company's Constituent Documents, true, correct and complete copies of
which have been provided to the Partnerships, and those arising from federal and
applicable state securities laws. All currently issued and outstanding Property
Company Interests were duly authorized and validly issued in accordance with the
terms of the Property Company's Constituent Documents and in compliance with
applicable laws, and are fully paid and non-assessable. Except as set forth on
Schedule 7.01(b) and except as created by this Agreement, there are no
outstanding interests, equity interests, subscriptions, purchase rights,
subscription rights, conversion rights, exchange rights, options, warrants,
preemptive rights, rights of first refusal, rights of first offer, or other
rights or other arrangements or commitments outstanding or obligating the
Property Company to issue, sell or otherwise cause to be outstanding any
Property Company Interests, any security convertible into or exercisable or
exchangeable for Property Company Interests, or any other equity participation
in the Property Company. At the Closing, upon receipt
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of the Property Company Interests, SLT and SLT Financing will be admitted as a
member partner or joint venturer (as applicable) of the Property Company.
(ii) Each Contributing Party severally represents and
warrants as follows in this subsection (b)(ii) with respect to the Property
Company Interest(s) set forth opposite its name on Schedule 7.01(b) hereto. Such
Contributing Party owns all of such Property Company Interest(s) and there are
no other holders of all or any portion of or interests in such Property Company
Interest(s). Such Property Company Interest(s) contributed to the Partnerships
at Closing by such Contributing Party will be free and clear of all Liens.
Except as set forth on Schedule 7.01(b) and except as created by this Agreement,
there are no outstanding interests, equity interests, subscriptions, purchase
rights, subscription rights, conversion rights, exchange rights, options,
warrants, preemptive rights, rights of first refusal, rights of first offer, or
other rights or other arrangements or commitments outstanding with respect to
such Property Company Interest(s) or obligating such Contributing Party to
issue, sell or otherwise cause to be outstanding any Property Company Interests,
any security convertible into or exercisable or exchangeable for Property
Company Interests, or any other equity participation in the Property Company.
Such Property Company Interest(s) are not subject to any voting trusts, proxies,
or other agreements or understandings. Each Contributing Party that is a Person
other than an individual has full power and authority to enter into this
Agreement and to assume and perform all of its obligations hereunder and the
execution and delivery of this Agreement and the performance by such
non-individual Contributing Party of its obligations hereunder have been duly
authorized by such partnership, trust, limited liability and/or corporate action
(including, without limitation approval by each of the partners and/or
shareholders thereof of such Contributing Party) as may be required.
Notwithstanding any other provision of this Agreement or the other Transaction
Documents, the liability of each Contributing Party for the representations and
warranties of such Contributing Party pursuant to this subsection (b)(ii) shall
be several and not joint, and no Contributing Party shall be liable or
responsible for the representations and warranties made by any other
Contributing Party pursuant to this subsection (b)(ii) or pursuant to any
similar provision of the other Transaction Documents.
(c) Tax Matters. Except as set forth on Schedule 7.01(c):
(i) the Property Company has timely filed or shall
timely file all Tax Returns which are required to
be filed, and all such Tax Returns are true,
complete and accurate in all respects and have
been prepared in compliance with applicable law.
The Property Company is taxed as a "partnership"
as defined in Section 761(a) of the Code;
(ii) all Taxes due and payable as of the Closing Date
by the Property Company, whether or not shown on a
Tax Return, have been paid or shall be paid by the
Property Company or the Contributing Parties, or
adjusted for pursuant to Article IV, and all Taxes
accrued but not yet due are shown on the Financial
Statements provided pursuant to Section 7.01(q) or
the Estimated Closing Balance Sheet or the Closing
Balance Sheet in accordance with Section 4.01 and
no Taxes are delinquent;
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(iii) no deficiency for any amount of Tax has been
asserted or assessed by a taxing authority against
the Property Company or any Contributing Party
with respect to the operations of the Property
Company and the Contributing Parties have no
Knowledge that any such assessment or asserted Tax
liability shall be made;
(iv) no audits or investigations by any taxing
authority are currently pending, or to the
Knowledge of the Contributing Parties threatened,
and to the Contributing Parties' Knowledge, the
Property Company does not reasonably expect any
taxing authority to claim or assess any additional
Taxes for any period;
(v) the Property Company has not consented to extend
the time beyond the Closing in which any Tax may
be assessed or collected by any Taxing authority;
(vi) the Property Company has not been a member of an
Affiliated Group (as defined in Section 1504 of
the Code) or any similar group defined under
local, state or foreign Tax law and has no
liability for Taxes of any other Person under
Treasury Regulations Section 1.1502-6 or any
similar provision of local, state or foreign Tax
law;
(vii) the Property Company is not a party to or, to the
Knowledge of the Contributing Parties, bound by
any Tax allocation or Tax sharing agreement and
has no contractual obligation to indemnify any
other person with respect to Taxes;
(viii) the Property Company does not have any obligation
to make any payment that will be non-deductible
under Section 280G of the Code (or any
corresponding provision of state, local or foreign
Tax law);
(ix) to the Knowledge of the Contributing Parties, no
claim has ever been made by a taxing authority in
a jurisdiction where the Property Company does not
pay Tax or file Tax Returns that the Property
Company is subject to Taxes assessed by such
jurisdiction;
(x) the Property Company has no liability for any
Taxes, if any, required to have been withheld and
paid in connection with amounts paid or owing to
any employee, creditor, independent contractor or
other third party other than amounts adjusted for
pursuant to Article IV; and
(xi) Schedule 7.01(c) contains a list of all states,
territories and jurisdictions (whether foreign or
domestic) in which the Property Company is
required to file Tax Returns.
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(d) Insurance. Schedule 7.01(d) attached hereto lists and
briefly describes each insurance policy maintained by the Property Company with
respect to its properties, assets and business. All of such insurance policies
are in full force and effect and will not, by their terms, terminate by reason
of the transactions provided for herein at Closing, and the Property Company is
not in default with respect to its obligations under any of such insurance
policies and has not received any notification of cancellation of any of such
insurance policies and has no claim outstanding which could be expected to cause
a material increase in the Property Company's insurance rates.
(e) Single-Purpose Entity. Except as set forth on Schedule
7.01(e), the Property Company, at all times since its formation has been a
Single-Purpose Entity.
(f) Leases. Schedule 7.01(f) contains a true and complete list
of all Tenant Lease(s) under which the aggregate remaining payments to the
Property Company owning the affected Hotel exceed $25,000.00, including all
addenda, amendments and modifications thereto, and the Contributing Party has
previously provided to the Partnerships true and correct copies of each such
item. Except as noted on Schedule 7.01(f): (i) the Contributing Parties have no
Knowledge that the lessor or the lessee under any Lease has failed to pay,
perform or observe any of the terms, covenants and conditions on the such
party's part to be paid, performed and observed thereunder; (ii) all brokerage,
leasing and other commissions and all other compensation and fees due and
payable in connection with the Tenant Lease(s), have been fully paid, shall be
included in the Net Working Capital adjustment at Closing in accordance with
Article IV, or shall be fully paid by the Contributing Party prior to the
Closing; (iii) except as shown on Schedule 7.01(f), no tenant has prepaid rent
for more than the following month, has received or is entitled to receive a rent
concession in connection with its tenancy, or is entitled to any work (not yet
performed) or consideration (not yet given) in connection with its tenancy, (iv)
the Property Company is the holder of the lessor's interest under each of the
Tenant Leases and has not assigned or hypothecated any of such rights other than
in respect of the Assumed Debt.
(g) Compliance With Laws. The Contributing Parties have no
Knowledge of a violation of any Legal Requirements, or any standards and
regulations of appropriate supervising Boards of Fire Underwriters and similar
agencies, bearing on construction, operation or use of the Property or any part
thereof (other than as to matters previously cured), or that any investigation
has been commenced or is contemplated respecting any such possible violation
other than as disclosed in the written information made available to the
Starwood Parties. To the Contributing Parties' Knowledge, all notices, licenses,
permits, certificates and authority required in connection with the
construction, completion, use or occupancy of the Real Property or any part
thereof by the Property Company have been obtained and are and on the Closing
Date will be in effect and in good standing. This subsection (g) shall exclude,
however, any representation concerning the Edison Crowne Plaza, or the Property
Company which owns that Hotel, with regard to all Legal Requirements which
constitute Environmental Laws.
(h) Contracts. True and complete copies of all Contracts
(including all amendments thereto) to which the Property Company is a party or
by which it is bound have been delivered to the Partnerships. Except as set
forth in Schedule 7.01(h): (i) there are no Contracts to which the Property
Company is a party or by which it is bound; (ii) the Property Company has
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complied with all material provisions of such Contracts and, to the Knowledge of
the Contributing Parties, no party thereto is in material default under any of
them; and (iii) to the Knowledge of the Contributing Parties, all such Contracts
are in full force and effect and no event has occurred which constitutes or
which with the passage of time or the giving of notice, or both, would
constitute a default under any thereof or would excuse performance by any party
thereto.
(i) Employees. Except as set forth on Schedule 7.01(i), there
are no union contracts, collective bargaining agreements or other labor
contracts affecting the Property or any of the employees thereof (other than
tenants, concessionaires or other independent contractors other than Manager).
The Property Company has no employees and to the Contributing Parties'
Knowledge, there are no employees of Manager who by reason of any Legal
Requirement, union contract, collective bargaining agreement or other Contract
would become employees of the Partnerships by reason of the acquisition of the
Property Company Interests by the Partnerships. The Property Company has no
single-employer or multi-employer defined benefit pension plans covered by Title
IV of ERISA.
(j) No Pending Condemnation Proceedings. The Contributing
Parties have no Knowledge of pending or proposed condemnation proceedings
affecting the Property or any part thereof.
(k) Real Estate Taxes. Except as set forth on Schedule
7.01(k), (i) the Property Company has not commenced any proceedings which are
pending for the reduction of the assessed valuation of the Real Property or any
portion thereof, and (ii) the Contributing Parties have no Knowledge of any
special assessment affecting the Property.
(l) No Other Interests. Except as set forth on Schedule
7.01(l), to the Knowledge of the Contributing Parties, no Person other than the
Contributing Parties has any right to acquire any interest in the Property or
any part thereof.
(m) No Litigation. Except as set forth on Schedule 7.01(m),
neither the Contributing Party, nor the Property Company is a party to, and to
the Contributing Parties' Knowledge there is no pending or threatened
litigation, claim, action or proceeding by any Person which would materially
impair the use, occupancy or value of the Property or any part thereof or which
otherwise relates to the Property or the Contributing Parties' Property Company
Interests.
(n) No Further Action; Execution and Delivery. No further
action or approval by any Person is required in order to constitute this
Agreement as a binding and enforceable obligation of each Contributing Party.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder on the part of the Contributing Party do not
and will not violate its Constituent Documents (if any) or the Constituent
Documents of the applicable Property Company, and do not and will not conflict
with or result in the breach of any condition or provision of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrances upon any of the property or assets of the applicable Property
Company or upon any Property Company Interest by reason of the terms of any
contract, mortgage, lien, lease, agreement, indenture, instrument or judgment to
which the Contributing Party is a party or which is binding upon the
Contributing Party or the applicable Property Company.
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<PAGE> 31
(o) Good Standing. The Property Company, and each Contributing
Party which is a Person other than an individual, is duly organized, validly
existing and in good standing under the laws of the State of its organization
and the Property Company is qualified to do business and is in good standing in
the State in which the Real Property is located.
(p) Proprietary Rights. To the best of the Contributing
Parties' Knowledge, Schedule 1.02(ll) contains a true and complete list of all
Proprietary Rights (including registration numbers, where applicable) and all
license agreements (whether as licensor or licensee) relating to such
Proprietary Rights. Except as otherwise set forth in Schedule 1.02(ll), the
Property Company owns or has the right to use all Proprietary Rights currently
used by it in the Property's business as presently conducted, all of which
ownership rights are in good standing and, to the Contributing Parties'
Knowledge, uncontested. The Contributing Parties have no Knowledge of any claim,
action, proceeding or investigation pending or threatened against the Property
Company with respect to any such Proprietary Rights or that any party thereto is
in substantial default under any license or other agreement relating to such
Proprietary Rights, or that any such licenses and agreements are not valid,
enforceable and in full force and effect.
(q) Financial Statements. Representatives of the Contributing
Parties have delivered to the Starwood Parties true and complete copies of all
financial statements with respect to each of the Hotels (i) as were delivered to
the applicable Property Company by the entity from which the Property Company
acquired the Hotel, and (ii) as have been prepared by Manager on behalf of the
applicable Property Company with respect to periods since the acquisition of
such Hotel by Property Company through the four-week fiscal period which ended
November 28, 1996 (collectively, the "FINANCIAL STATEMENTS"). To the Knowledge
of the Contributing Parties, the Financial Statements for each Property Company
have been based on information contained in the Property Company's books and
records, fairly present the Property Company's financial condition and results
of operations as of the times and for the periods referred to therein, and have
been prepared in accordance with GAAP.
(r) Events Subsequent to November 28, 1996. Since November 28,
1996, to the Contributing Parties' Knowledge, there has not been any material
adverse change in the business, assets, financial condition or operating results
of the Property Company. Since that date, except as set forth on Schedule
7.01(r) attached hereto, the Property Company has conducted its business in the
ordinary course of business consistent with past custom and practice, and has
incurred no Liabilities other than in the ordinary course of business consistent
with past custom and practice. Except as hereinafter provided, this subsection
(r) shall exclude, however, any representation concerning the Edison Crowne
Plaza, or the Property Company which owns that Hotel, with regard to Liabilities
in respect of those Legal Requirements which constitute Environmental Laws,
provided that to the Contributing Parties' Knowledge, there is no material
violation of such representation as it relates to such Hotel.
(s) Absence of Undisclosed Liabilities. Except as set forth on
Schedule 7.01(s), to the Knowledge of the Contributing Parties, the Property
Company has no Liabilities of the nature required by GAAP to be shown on a
balance sheet, except for;
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<PAGE> 32
(i) Liabilities reflected or reserved against on the
unaudited balance sheet of the Property Company as of November 28, 1996
in the liabilities section of such balance sheet;
(ii) Liabilities which have arisen since November 28,
1996 in the ordinary course of business of the Property Company (none
of which relates to breach of contract, default, breach of warranty,
tort, infringement, violation of any Legal Requirement, or any other
action, suit or proceeding); and
(iii) Liabilities which will be reflected or reserved
against on the Estimated Closing Balance Sheet (as provided for in
Section 4.01(a) above) or on the Closing Balance Sheet (as provided for
in Section 4.01(c) above) in the liabilities sections of such balance
sheets.
Except as hereinafter provided, this subsection (s) shall exclude, however, any
representation concerning the Edison Crowne Plaza, or the Property Company which
owns that Hotel, with regard to Liabilities in respect of those Legal
Requirements which constitute Environmental Laws, provided that to the
Contributing Parties' Knowledge, there is no material violation of such
representation as it relates to such Hotel.
(t) No "Foreign Person". The Contributing Party is not a
"foreign person," as such term is defined in Section 1445 of the Code. The sale
transaction contemplated by this Agreement is not subject to Section 897 of the
Code or to the withholding requirements of Section 1445 of the Code.
(u) Environmental Matters - No Violations.
(i) Except as to the Edison Crowne Plaza, all
environmental reports (including all revisions and updates thereto) pertaining
to the Property prepared by or on behalf of the Contributing Party or the
Property Company or otherwise in its possession or control (the "ENVIRONMENTAL
REPORTS") are listed on Schedule 7.01(u) and true and complete copies of such
Environmental Reports have been delivered to the Partnerships. As to the Edison
Crowne Plaza, to the Knowledge of the Contributing Party, Schedule 7.01(u) lists
all Environmental Reports pertaining to such Hotel which disclose material
information relating to the environmental condition of such Hotel. The
representations and warranties in Section 7.01(u)(ii) and in Section 7.01(v)
shall not apply to the Edison Crowne Plaza Hotel or to the Property Company
which owns such Hotel, and the representations and warranties in Section
7.01(g), with respect to the Edison Crowne Plaza and such Property Company shall
be limited to exclude Environmental Laws from the Legal Requirements applicable
to such representations and warranties.
(ii) Subject to Section 7.01(u)(i) above, the Contributing
Parties have no Knowledge that any condition exists on the Property as a result
of its operation or activities thereon which condition constitutes a violation
of or which will give rise to Environmental Clean-Up Liabilities or
Environmental Claims pursuant to any Environmental Laws relating to the
Property. "ENVIRONMENTAL CLEANUP LIABILITY" means any cost or expense of any
nature whatsoever required to be undertaken under or pursuant to any
Environmental Law to contain, remove, remedy, respond
26
<PAGE> 33
to, clean up or abate any release of hazardous substance, pollutant, contaminant
or waste, or other contamination of surface water, groundwater, land surface or
subsurface strata, whether on-site or off-site, arising from activities at the
Property including, but not limited to, manufacture, generation, formulation,
processing, labeling, distribution, introduction into commerce or on-site or
off-site use, treatment, handling, storage, disposal or transportation of any
hazardous substance, pollutant, contaminant or waste, but excluding cleaning
supplies used in connection with the Hotel Business which are properly packaged
and stored, and used in compliance with all Environmental Laws.
(v) Environmental Matters - Environmental Claims. Subject to
Section 7.01(u)(i) above, except as set forth in the Environmental Reports, the
Contributing Parties have no Knowledge of any pending, threatened or
contemplated Environmental Claims affecting the Property (excluding the Edison
Crowne Plaza). "ENVIRONMENTAL CLAIMS" means any claim for reimbursement of
remediation expense, personal injury, property damage or damage to natural
resources made, asserted or prosecuted by or on behalf of any third party
(whether based on negligent acts or omissions, statutory liability, strict
liability without fault or otherwise) including, without limitation, any
governmental entity, employee, former employee or guest, or their respective
legal representatives, heirs, beneficiaries and estates, relating to or arising
out of the release of any hazardous substance, pollutant, contaminant or waste
or the violation of any Environmental Law.
(w) [Reserved]
(x) Investment Representation. The Contributing Party is
receiving the SLT OP Units and the SLC OP Units (collectively, the "UNITS") to
be delivered pursuant hereto for its own account (other than with respect to
PRISA II) with the present intention of holding such Units for purposes of
investment, and each such party has no intention of selling Units in a
distribution in violation of the federal securities laws or any applicable state
securities laws. Except for the individuals listed on Schedule 7.01(x), the
Contributing Party and, for each Contributing Party other than PRISA II which is
not an individual, each Person owning equity interests in such Contributing
Party other than PRISA II (an "EQUITY OWNER"), is an accredited investor as
defined in Rule 501 of the Securities Act (an "ACCREDITED INVESTOR") and has
sufficient knowledge and experience in financial and business matters and
investing in entities similar to the Trust, the Corporation, SLT and SLC so as
to be able to evaluate the risks and merits of its investment in SLT and SLC and
the Contributing Party, and any Equity Owner therein, has had an opportunity to
discuss the business, management and financial affairs of the Trust, the
Corporation, SLT and SLC with the management of the Trust and the Corporation.
Except for the individuals listed on Schedule 7.01(x), each Permitted Transferee
(as defined in the Transfer Restriction and Exchange Rights Agreement) is, and
immediately prior to receiving any Units will be, an Accredited Investor. The
Contributing Party and any Equity Owner therein understands that (i) the Paired
Shares and Units have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act, and (ii) upon any issuance of the Paired Shares
pursuant to the Transfer Restriction and Exchange Agreement, such Paired Shares
must be held indefinitely unless such Shares are registered upon receipt
thereof, or unless a subsequent disposition thereof is registered under the
Securities Act and applicable state securities laws or is exempt from such
registration.
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<PAGE> 34
(y) Binding Effect. When executed and delivered by each
Contributing Party, the Transaction Documents required to be executed by the
respective Contributing Parties will each be duly authorized, valid and binding
upon such Contributing Party.
(z) Status of Constituent Documents. Schedule 7.01(z) sets
forth a true and complete list of each Property Company's Constituent Documents.
Each of the Property Company's Constituent Documents is in full force and
effect, and true, complete and correct copies thereof have been delivered to the
Partnerships. There are no dissolution, termination or liquidation proceedings
pending or, to the Knowledge of the Contributing Parties, contemplated with
respect to the Property Company. To the Contributing Parties' Knowledge there
are no uncured defaults or breaches by any Person under the Constituent
Documents for such Property Company.
7.02 The Partnerships' Representations and Warranties. To induce the
Contributing Parties to enter into this Agreement, each Partnership makes the
following representations and warranties, as to itself, all of which (i) are now
true and (ii) shall be true as of the Closing:
(a) Power and Authority Non-contravention, Investment. The
Partnership has full power and authority to enter into this Agreement and to
assume and perform all of its obligations hereunder; the execution and delivery
of this Agreement and the performance by the Partnership of its obligations
hereunder have been duly authorized by such action as may be required, and no
further action or approval is required in order to constitute this Agreement as
a binding and enforceable obligation of the Partnership. Neither the execution
nor delivery of this Agreement by the Partnership, nor consummation of the
transactions contemplated hereby or compliance with or fulfillment of the terms
and provisions hereof by the Partnership, will (i) conflict with, result in a
breach of the terms, conditions or provisions of, or constitute a default, an
event of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights, or result in the creation or imposition of any
encumbrance upon any of the assets of the Partnerships under the Partnership's
Constituent Documents, or any other instrument, agreement, mortgage, indenture,
deed of trust, permit, concession, grant, franchise, license, judgment, order,
award, decree or other restriction of which the Partnership is a party or any of
its properties is subject or by which any of them is bound or any Legal
Requirement affecting any of them, or (ii) require the approval, consent or
authorization of, or the making of any declaration, filing or registration with,
any third party or any foreign, federal, state or local court, Government Entity
or regulatory body, by or on behalf of the Partnership, except for (A) the
applicable requirements of the gaming authorities of the State of Nevada and of
the Clark County, Nevada Liquor and Gaming Licensing Board (the "NEVADA GAMING
APPROVALS") and (B) the filing of appropriate documents with the SEC under the
Securities Act. The Partnerships are receiving the Property Company Interests to
be delivered hereto for their own account with the present intention of holding
such Property Company Interests for purposes of investment, and each Partnership
has no intention of selling such Property Company Interests in a distribution in
violation of federal securities, laws or any applicable state securities laws.
The Partnerships are Accredited Investors and have sufficient knowledge and
experience in financial and business matters and investing in entities similar
to the Property Companies so as to be able to evaluate the risks and merits of
their investment in the Property Companies and the Partnerships have had an
opportunity to discuss the business, management and financial affairs of the
Property Companies with the management of the Property Companies.
28
<PAGE> 35
(b) Good Standing. The Partnership is duly organized, validly
existing and in good standing under the laws of the state of its formation and
are qualified to do business in all jurisdictions in which such qualification
legally is required.
(c) Binding Effect. When executed and delivered by each
Partnership, the Transaction Documents required to be executed by the
Partnership hereunder will each be duly authorized, valid and shall be binding
upon the Partnership.
(d) Status of the Constituent Documents. Schedule 7.02(d) sets
forth a true and complete list of all of the Partnerships' Constituent
Documents. Each of the Partnership's Constituent Documents is in full force and
effect, and true, complete and correct copies thereof have been delivered to the
Contributing Party. There are no dissolution, termination or liquidation
proceedings pending or, to the Knowledge of the Starwood Parties, contemplated
with respect to the Partnership. There are no uncured defaults or breaches by
the general partner or to the Knowledge of the Starwood Parties, any limited
partner under the Partnerships' Constituent Documents.
(e) No Litigation; Proceedings. Except as set forth on
Schedule 7.02(e), there are no pending or, to Starwood Parties' Knowledge,
threatened actions, suits, proceedings or claims against or affecting the
Partnership at law or in equity or before or by any Government Entity.
(f) Units. The capitalization of each of the Partnerships is
as set forth in their respective Partnership Agreements. As of December 31,
1996, 32,682,481 OP Units of each of SLC and SLT were issued and outstanding, of
which at least the OP Units of SLT and SLC set forth on Schedule 7.02(f) were
held by limited partners that are not affiliated with the Trust within the
meaning of the Department of Labor's ERISA plan asset regulation, 29 C.F.R.
Section 2510.3-101(f) (the "Plan Asset Regulation"). There are no restrictions
on the transfer of the SLT OP Units and SLC OP Units to be issued pursuant to
Section 2.03 other than those contained in the respective Partnership's
Constituent Documents, the Transfer Restriction and Exchange Rights Agreement or
the Registration Rights Agreement and those arising from federal and applicable
state securities laws. All currently issued and outstanding OP Units were duly
authorized and validly issued in accordance with the terms of the respective
Partnership's Constituent Documents and in compliance with applicable laws and
are convertible into Paired Shares in accordance with the terms of the Transfer
Restriction and Exchange Rights Agreement. Except as set forth on Schedule
7.02(f) and except as created by this Agreement, as of the date hereof, there
are no outstanding subscriptions, options, warrants, preemptive or other rights
or other arrangements or commitments obligating the Partnerships to issue any
Units. If and when issued, the Paired Shares issuable upon exchange of the Units
delivered hereunder pursuant to the Transfer Restriction and Exchange Rights
Agreement will be duly authorized, validly issued, fully paid and
non-assessable. At the Closing, upon receipt of the Property Company Interests
and Contributed Assets, the Partnerships will have transferred the Units to be
issued hereunder free and clear of all Liens (other than any Liens in favor of
the partners of the Partnership pursuant to the Partnership's Constituent
Documents), and as of the Closing, the Contributing Partners will be admitted as
limited partners of the Partnerships. The issuance of the Units to the
Contributing Parties at the Closing will not require any approval or consent of
any Person except any such approval that shall have been obtained on or prior to
the Closing. Assuming the accuracy of the representations in Section 7.01(x),
the issuance of the Units to the Contributing
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<PAGE> 36
Parties hereunder is exempt from registration under the Securities Act and
applicable state securities laws.
(g) Financial Statements; Undisclosed Liabilities. True and
complete copies of (i) the audited financial statements of SLC and SLT as of
December 31, 1995, together with all related notes and schedules thereto,
accompanied by the reports thereon of SLC's and SLT's independent auditors, and
(ii) the unaudited financial statements of SLC and SLT as of September 30, 1996
and for the nine months then ended, together with all related notes and
schedules thereto (collectively, the "PARTNERSHIPS' FINANCIAL STATEMENTS"), have
been delivered to the Contributing Parties. The Partnerships' Financial
Statements were prepared in accordance with the books of account and other
financial records of SLC and SLT, present fairly the consolidated financial
condition and results of operations of SLC and SLT as of the dates thereof or
for the periods covered thereby, and have been prepared in accordance with GAAP.
Except as disclosed on Schedule 7.02(g), (i) there are no Liabilities of SLC and
SLT of the nature required by GAAP to be shown on a balance sheet, other than
Liabilities reflected or reserved against on the balance sheets of SLC and SLT
as of September 30, 1996, and (ii) Liabilities which have arisen since that date
in the ordinary course of business.
(h) Conduct in the Ordinary Course of Business. Except as set
forth on Schedule 7.02(h), since September 30, 1996, the business of each of the
Partnerships has been conducted in all material respects in the ordinary course,
consistent with past practice, and the business of each of the Partnerships will
be conducted as aforesaid through the Closing.
(i) ERISA Matters. The terms of this transaction are not
materially less favorable to PRISA II than the terms that would be available
generally in an arms'-length transaction between unrelated parties. Neither
Partnership maintains or contributes to an employee benefit plan maintained by
an employer or employee organization identified on Schedule 7.02(i).
(j) Tax Status. Each Partnership is taxable as a "partnership"
as defined in Section 7701(a) of the Code, and is not taxable as a corporation
by reason of being a publicly traded partnership within the meaning of Section
7704 of the Code.
7.03 The Corporation's Representation and Warranties. To induce the
Contributing Parties to enter into this Agreement, the Corporation makes the
following representations and warranties, all of which (i) are now true and (ii)
shall be true as of the Closing:
(a) Power and Authority, Non-contravention. The Corporation
has full power and authority to enter into this Agreement and to assume and
perform all of its obligations hereunder, the execution and delivery of this
Agreement and the performance by the Corporation of its obligations hereunder
have been duly authorized by such action as may be required, and no further
action or approval is required in order to constitute this Agreement as a
binding and enforceable obligation of the Corporation; neither the execution or
delivery of this Agreement by the Corporation, nor consummation of the
transactions contemplated hereby or compliance with or fulfillment of the terms
and provisions hereof by the Corporation, will (i) conflict with, result in a
breach of the terms, conditions or provisions of, or constitute a default, an
event of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights, or result in the
30
<PAGE> 37
creation or imposition of any encumbrance upon any of the assets of the
Corporation, under the Corporation's Constituent Documents, the Pairing
Agreement or any other instrument, agreement, mortgage, indenture, deed of
trust, permit, concession, grant, franchise, license, judgment, order, award,
decree or other restriction of which the Corporation is a party or any of its
respective properties is subject or by which any of them is bound, or under any
Legal Requirements affecting any of them, or (ii) require the approval, consent
or authorization of, or the making of any declaration, filing or registration
with, any third party or any foreign, federal, state or local court,
Governmental Entity or regulatory body, by or on behalf of the Corporation,
except for (A) the Nevada Gaming Approvals, or (B) the filing of appropriate
documents with the SEC under the Exchange Act.
(b) Good Standing. The Corporation is duly organized, validly
existing and in good standing under the laws of the state of its formation and
is qualified to do business in all jurisdictions in which such qualification
legally is required.
(c) Binding Effect. When executed and delivered by the
Corporation, the documents required to be executed by the Corporation hereunder
will each be duly authorized, valid and shall be binding upon the Corporation.
(d) Status of the Constituent Documents. Schedule 7.03(d) sets
forth a true and complete list of the Corporation's Constituent Documents. The
Corporation's Constituent Documents are in full force and effect, and true,
complete and correct copies thereof have been delivered to the Contributing
Party. There are no dissolution, termination or liquidation proceedings pending,
or contemplated with respect to the Corporation.
(e) No Litigation; Proceedings. Except as set forth on
Schedule 7.03(e), there are no pending or, to the Starwood Parties' Knowledge,
threatened actions, suits, proceedings or claims against or affecting the
Corporation at law or in equity or before or by any Government Entity.
(f) Capitalization. As of December 31, 1996, the entire
authorized capital stock of the Corporation (the "CORPORATION SHARES") consisted
of 100,000,000 shares of which 26,718,649 were issued and outstanding and
73,281,351 shares were held in treasury. Each issued and outstanding Corporation
Share has been paired with an issued and outstanding Trust Share (as hereinafter
defined) pursuant to the terms of the Pairing Agreement. The Paired Shares
issued to the Contributing Parties at Closing will be duly authorized, validly
issued, fully paid and nonassessable and shall be issued hereunder free and
clear of all Liens. Except as set forth on Schedule 7.03(f), there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that require the Corporation to issue, sell, or otherwise cause to become
outstanding any Corporation Shares. The Issuance of the Paired Shares to the
Contributing Parties at the Closing will not require any approval or consent of
any Person except for any such approval that shall have been obtained on or
prior to the Closing. Assuming the accuracy of the representations in Section
7.01(x), the issuance of the Paired Shares to the Contributing Parties is exempt
from registration under the Securities Act and applicable state securities laws.
There are no restrictions on the transfer of the Paired Shares other than those
in the Constituent Documents of the Trust and the Corporation, the Transfer
Restriction and Exchange
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Rights Agreement, or the Registration Rights Agreement and those arising from
federal and applicable state securities laws.
(g) Financial Statements; Undisclosed Liabilities. True and
complete copies of (i) the audited financial statements of the Corporation as of
December 31, 1995, together with all related notes and schedules thereto,
accompanied by the reports thereon of the Corporation's independent auditors,
and (ii) the unaudited financial statements of the Corporation as of September
30, 1996 and for the nine months then ended, together with all related notes and
schedules thereto (collectively, the "CORPORATION'S FINANCIAL STATEMENTS"), have
been delivered to the Contributing Parties. The Corporation's Financial
Statements were prepared in accordance with the books of account and other
financial records of the Corporation, present fairly the consolidated financial
condition and results of operations of the Corporation as of the dates thereof
or for the periods covered thereby, and have been prepared in accordance with
GAAP. Except as disclosed on Schedule 7.03(g), (i) there are no Liabilities of
the Corporation of the nature required by GAAP to be shown on a balance sheet,
other than Liabilities reflected or reserved against on the balance sheets of
the Corporation as of September 30, 1996, and (ii) Liabilities which have arisen
since that date in the ordinary course of business.
(h) Conduct in the Ordinary Course of Business. Except as set
forth on Schedule 7.03(h), since September 30, 1996, the business of the
Corporation has been conducted in all material respects in the ordinary course,
consistent with past practice, and the business of the Corporation will be
conducted as aforesaid through the Closing.
(i) SEC Documents. The SEC Documents taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(j) Reservation of Shares. Upon Closing, the Corporation shall
have reserved for issuance a number of Corporation Shares equal to the number of
Paired Shares into which the SLC OP Units included in the Contribution Amount
are exchangeable pursuant to the Transfer Restriction and Exchange Rights
Agreement.
(k) ERISA Matters. The terms of this transaction are not
materially less favorable to PRISA II than the terms that would be available
generally in an arms'-length transaction between unrelated parties. The
Corporation does not maintain or contribute to an employee benefit plan
maintained by an employer or employee organization identified on Schedule
7.03(k).
7.04 The Trust's Representations and Warranties. To induce the
Contributing Parties to enter into this Agreement, the Trust makes the following
representations and warranties, all of which (i) are now true and (ii) shall be
true as of the Closing:
(a) Power and Authority, Non-contravention. The Trust has full
power and authority to enter into this Agreement and to assume and perform all
of its obligations hereunder; the execution and delivery of this Agreement and
the performance by the Trust of its obligations hereunder have been duly
authorized by such action as may be required, and no further action or approval
is required in order to constitute this Agreement as a binding and enforceable
obligation
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of the Trust; neither the execution or delivery of this Agreement by the Trust,
nor consummation of the transactions contemplated hereby or compliance with or
fulfillment of the terms and provisions hereof by the Trust, will (i) conflict
with, result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights, or result in the
creation or imposition of any encumbrance upon any of the assets of the Trust
under the Trust's Constituent Documents, the Pairing Agreement or any other
instrument, agreement, mortgage, indenture, deed of trust, permit, concession,
grant, franchise, license, judgment, order, award, decree or other restriction
to which the Trust is a party or any of its properties is subject or by which it
is bound, or under any Legal Requirements affecting it, or (ii) require the
approval, consent or authorization of, or the making of any declaration, filing
or registration with, any third party or any foreign, federal, state or local
court, Government Entity or regulatory body, by or on behalf of the Trust,
except for (A) the Nevada Gaming Approvals, or (B) the filing of appropriate
documents with the SEC under the Securities Act.
(b) Good Standing. The Trust is duly organized, validly
existing and in good standing under the laws of the state of its formation and
is qualified to do business in all jurisdictions in which such qualification
legally is required.
(c) Binding Effect. When executed and delivered by the Trust,
the documents required to be executed by the Trust hereunder will each be duly
authorized, valid and shall be binding upon each Trust.
(d) Status of the Constituent Documents. Schedule 7.04(d) sets
forth a true and complete list of the Trust's Constituent Documents. The Trust's
Constituent Documents are in full force and effect, and a true, complete and
correct copy thereof has been delivered to the Contributing Party. There are no
dissolution, termination or liquidation proceedings pending or contemplated with
respect to the Trust. The Trust has elected to be taxed as a REIT (as defined
below) for its taxable year ending December 31, 1995 and the Trust is organized
and operated in such a manner as to qualify for taxation as a "real estate
investment trust" as defined in Section 856 of the Code ("REIT") for the taxable
year ending December 31, 1995 and through the Closing Date. The Trust is
grandfathered from the application of Section 269B of the Code pursuant to
Section 136(c)(3) of the Deficit Reduction Act of 1984.
(e) No Litigation; Proceedings. Except as set forth on
Schedule 7.04(e), there are no pending or, to the Starwood Parties' Knowledge,
threatened actions, suits, proceedings or claims against or affecting the Trust
at Law or in equity or before or by any (Government Entity which would prevent
or impair the transactions contemplated hereby.
(f) Capitalization. The entire authorized shares of beneficial
interest of the Trust (the "TRUST SHARES") as of December 31, 1996 consisted of
100,000,000 shares of which 26,718,649 were issued and outstanding and
73,281,351 shares were held in treasury. Each issued and outstanding Trust Share
has been paired with an issued and outstanding of Corporation Share pursuant to
the terms of the Pairing Agreement. The Paired Shares issued to the Contributing
Parties at Closing will be duly authorized, validly issued, full paid and
non-assessable and shall be issued hereunder free and clear of all Liens. Except
as set forth on Schedule 7.04(f), there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
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exchange rights, or other Contracts or commitments that require the Trust to
issue, sell or otherwise cause to become outstanding any Paired Shares. The
Issuance of the Paired Shares to the Contributing Parties at the Closing will
not require any approval or consent of any Person except for any such approval
that shall have been obtained on or prior to the Closing. Assuming the accuracy
of the representations in Section 7.01(x), the issuance of the Paired Shares to
the Contributing Parties is exempt from registration under the Securities Act
and applicable state securities laws. There are no restrictions on the transfer
of the Paired Shares other than those in the Constituent Documents of the Trust
and the Corporation, the Transfer Restriction and Exchange Rights Agreement, or
the Registration Rights Agreement and those arising from federal and applicable
state securities laws.
(g) Financial Statements; Undisclosed Liabilities. True and
complete copies of (i) the audited financial statements of the Trust as of
December 31, 1995, together with all related notes and schedules thereto,
accompanied by the reports thereon of the Trust's independent auditors, and (ii)
the unaudited financial statements of the Trust as of September 30, 1996 and for
the nine months then ended, together with all related notes and schedules
thereto (collectively, the "TRUST'S FINANCIAL STATEMENTS"), have been delivered
to the Contributing Parties. The Trust's Financial Statements were prepared in
accordance with the books of account and other financial records of the Trust,
present fairly the consolidated financial condition and results of operations of
the Trust as of the dates thereof or for the periods covered thereby, and have
been prepared in accordance with GAAP. Except as disclosed on Schedule 7.04(g),
(i) there are no Liabilities of the Trust of the nature required by GAAP to be
shown on a balance sheet, other than Liabilities reflected or reserved against
on the balance sheets of the Trust as of September 30, 1996, and (ii)
Liabilities which have arisen since that date in the ordinary course of
business.
(h) Conduct in the Ordinary Course of Business. Except as set
forth on Schedule 7.04(h), since September 30, 1996, the business of the Trust
has been conducted in all material respects in the ordinary course, consistent
with past practice, and the business of the Trust will be conducted as aforesaid
through the Closing.
(i) SEC Documents. The SEC Documents taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(j) Reservation of Shares. Upon Closing, the Trust shall have
reserved for issuance a number of Trust Shares equal to the number of Paired
Shares into which the SLT OP Units included in the Contribution Amount are
exchangeable pursuant to the Transfer Restriction and Exchange Rights Agreement.
(k) ERISA Matters. The terms of this transaction are not less
favorable to PRISA II than the terms that would be available generally in an
arms'-length transaction between unrelated parties. The Trust does not maintain
or contribute to an employee benefit plan maintained by an employer or employee
organization identified on Schedule 7.04(k).
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ARTICLE VIII
CONDITIONS
8.01 Conditions to the Partnerships' Obligations. The obligation of the
Partnerships to acquire the Property Company Interests and the Contributed
Assets from the Contributing Parties and to pay the Contribution Amount is
subject to satisfaction prior to or simultaneously with the Closing of the
following conditions, any of which may be waived in writing in whole or in part
by the Partnerships. Subject to Section 12.05(b), a failure of the circumstances
made a condition under this Section 8.01 shall not constitute a waiver of any
covenants, warranties and representations provided for elsewhere in this
Agreement; provided, however, that notwithstanding the foregoing,
(i) the Partnerships' sole remedies in the event any
such conditions are not satisfied or waived shall be to terminate this
Agreement and receive a refund of the Deposit or to proceed as
otherwise contemplated by the provisions of Section 13.02(a); and
(ii) if Closing occurs, the liability of the
Contributing Parties in connection with any breach of the covenants,
representations or warranties provided elsewhere in this Agreement
shall be limited as provided in Section 12.05(b) and Section 14.02(a):
(a) Exchange Rights Agreement. The Contributing Parties shall
have entered into the Transfer Restriction and Exchange Rights Agreement in the
form of Exhibit "B" attached hereto (the "EXCHANGE RIGHTS AGREEMENT"), and the
Exchange Rights Agreement shall be in full force and effect.
(b) HEI Contribution. The HEI Contribution shall have been
completed in accordance with the terms of the HEI Contribution Agreement.
(c) No Material Misrepresentation etc. There shall not be any
material error, misstatement or omission in the representations or warranties
made by any Contributing Party in this Agreement.
(d) Title to Property. SLT shall have obtained from the Title
Insurer an ALTA Owners Policy of Title Insurance, Form B-1970 (or such other
form acceptable to SLT), for each of the parcels of Real Property based upon the
Title Commitments ("TITLE POLICIES").
The Title Policies will be dated as of the Closing Date and must:
(i) insure title to the applicable parcels of Real
Property and all recorded easements benefiting such parcels, subject
only to Permitted Encumbrances;
(ii) contain an "extended coverage endorsement"
insuring over the general exceptions contained customarily in such
policies; and
(iii) contain non-imputation and "Fairway"
endorsements.
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The Title Policies must not raise any material survey defect or encroachment
from or onto any of the Real Property which has not been cured or insured over
prior to the Closing. Title to the Property other than the Real Property shall
be subject to no Liens other than Permitted Encumbrances.
In addition to the requirements of the Title Policies set forth above,
the Partnerships may, at their sole cost and expense, obtain such additional
endorsements as they may desire, but the non-availability of any such optional
additional endorsements shall not constitute a failure of a condition to
Closing.
(e) Contributing Parties' Proceedings. All proceedings to be
taken by the Contributing Parties and Property Companies in connection with the
transactions contemplated by this Agreement shall have been contemplated and all
documents to be furnished by them incident thereto shall be reasonably
satisfactory in substance and in form to the Partnerships and the Partnerships'
counsel.
(f) Contributing Party's Performance, Consents. Subject to the
provisions of Section 8.01(g) regarding licenses and Section 8.01(h) regarding
License Agreements, all covenants, actions and agreements made by each
Contributing Party which are to be performed or completed on or before the
Closing shall have been performed or completed in all material respects, and all
documents to be delivered by each Contributing Party at the Closing shall have
been delivered, and each Contributing Party and Property Company shall have
received all consents, authorizations and approvals required in connection with
the transactions contemplated in this Agreement except where the failure to
obtain such consent does not and would not reasonably be expected to have a
material adverse effect on the use or value of the Property, the performance by
the affected Contributing Party of its obligations hereunder or the ability to
operate the affected Hotel after Closing in substantially the same manner in
which it is presently operated.
(g) Licenses. There shall have been issued all appropriate
licenses and/or approvals required to permit the continued operation of all
portions of the Property, including without limitation full liquor service at
the Property, from and after the Closing, provided that the Contributing Parties
and the Partnerships shall cooperate fully to effect the transfer of all
licenses, permits and approvals as of Closing, but if despite such efforts any
license cannot be transferred as of Closing, the Contributing Parties and the
Partnerships shall agree to reasonable alternate arrangements customary in the
applicable jurisdiction so as to permit the continued operation of the affected
Hotel(s) in the manner in which presently operated and Closing shall proceed as
scheduled.
(h) Franchise License Agreements. With respect to each License
Agreement, the applicable Property Company, shall have received all consents or
other relief required from the licensor thereunder to permit the transaction
contemplated hereby or shall have terminated such License Agreement effective as
of the Closing Date, provided:
(i) that the Contributing Parties and the
Partnerships shall cooperate fully to attempt to negotiate a mutually
acceptable resolution of such matters with each franchisor or licensor
under a License Agreement, but if despite such efforts such resolution
has not been fully negotiated and agreed to by Closing, the
Contributing Parties and the Partnerships shall agree to reasonable
alternate arrangements and Closing shall proceed as scheduled; and
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(ii) that any fees or capital expenditures required
to be paid under or in connection with such License Agreement as a
condition for the approval by the licensor or franchisor of the
transfer, termination or reissuance of the same shall, subject to
Section 10.01 hereof, be borne by the Partnerships.
(i) Notices. Each Contributing Party or Property Company, as
appropriate, shall execute and deliver all notices required by any Contract or
permit issued by any Governmental Entity for the transactions contemplated
herein.
(j) ERISA Limitations. Any limitations on OP Unit ownership by
the Contributing Parties reasonably necessary to comply with the Plan Asset
Regulation so as to avoid the result that the assets of SLT and/or SLC
constitute "Plan Assets" for purposes of the Plan Asset Regulation and which may
arise due to the transactions contemplated in this Agreement and in the other
Transaction Documents shall be resolved in a manner mutually satisfactory to the
Contributing Parties and the Starwood Parties. In resolving any such
limitations, the Starwood Parties and the Contributing Parties shall first
consider equal decreases in the number of OP Units and increases in the number
of Paired Shares to be issued immediately after Closing, and, if the parties do
not mutually agree to do so, the parties may alternatively agree to decrease the
number of OP Units to be delivered to the Contributing Parties pursuant to
Section 2.03 and increase the Cash portion of the Contribution Amount based on
the Closing Value of the OP Units not delivered. The parties currently
contemplate that immediately following the issuance of the OP Units at the
Closing, PRISA II shall convert approximately 1,850,000 OP Units into Paired
Shares, leaving PRISA II with approximately 1,150,000 OP Units in each of SLT
and SLC. The parties hereby agree to cooperate in all reasonable respects to
endeavor to resolve any such limitations without the necessity of increasing the
Cash portion of the Contribution Amount.
8.02 Conditions to Contributing Party's Obligations. The obligation of
the Contributing Parties to contribute the Property Company Interests and
Contributed Assets to the Partnerships is subject to satisfaction simultaneously
with the Closing of the following conditions (any of which may be waived in
whole or in part by the Contributing Parties, but only in writing at or prior to
the Closing). Subject to Section 12.05(b), a failure to discover any
circumstances made a condition under this Section 8.02 shall not constitute a
waiver of any covenants, warranties and representations provided for elsewhere
in this Agreement and the Contributing Parties sole remedies in the event any
such conditions are not satisfied or waived shall be to proceed as contemplated
by Section 13.02(b) or Article XIV.
(a) The Starwood Parties' Proceedings. All proceedings to be
taken by the Starwood Parties in connection with the transactions contemplated
by this Agreement shall have been completed and all documents to be furnished by
them incident thereto shall be reasonably satisfactory in substance and in form
to the Contributing Parties and their counsel.
(b) The Starwood Parties' Performance. All covenants, actions
and agreements made by each Starwood Party which are to be performed or
completed on or before the Closing shall have been performed or completed in all
material respects, including, without limitation, payment of the Contribution
Amount, and all documents to be delivered by each Starwood Party at the Closing
shall have been delivered, and each Starwood Party shall have received all
consents required
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in connection with the transactions contemplated in this Agreement except where
the failure to obtain such consent does not and would not reasonably be expected
to have a material adverse effect on the performance by the affected Starwood
Party of its obligations hereunder.
(c) No Material Misrepresentation etc. There shall not be any
material error, misstatement or omission in the representations or warranties
made by the Starwood Parties in this Agreement.
(d) Exchange Rights Agreement. The Starwood Parties shall have
entered into the Exchange Rights Agreement and the Exchange Rights Agreement
shall be in full force and effect.
(e) Registration Rights Agreement. The Starwood Parties shall
have entered into the Registration Rights Agreement in the form of Exhibit "C"
attached hereto (the "REGISTRATION RIGHTS AGREEMENT"), and the Registration
Rights Agreement shall be in full force and effect.
(f) [Reserved]
(g) HEI Contribution. The HEI Contribution shall have been
completed in accordance with the HEI Contribution Agreement.
(h) [Reserved]
(i) Partnership Amendments. The Contributing Parties shall
have been admitted as limited partners to SLT and SLC pursuant to the terms of
an amendment to the partnership agreements of each of SLT and SLC reflecting the
issuance of the OP Units to the Contributing Parties and their admission to the
respective Partnerships, which amendments shall be in form and substance
reasonably satisfactory to the Contributing Parties and their counsel. Such
amendments shall provide, in part, that upon receipt by the Partnerships of the
Property Company Interests and the Contributed Assets and the admission of the
Contributing Parties to the Partnerships, the Partnerships shall indemnify and
hold harmless the Contributing Parties of and from Liabilities of the Property
Company whose interests have been acquired except for any undisclosed material
Liability of such Property Company as of the Closing Date (collectively, the
"EXCLUDED LIABILITIES"); provided, however, that the Excluded Liabilities shall
not include:
(i) any Liability incurred in the ordinary course of
operating the applicable Hotel prior to the Closing Date;
(ii) any Liability disclosed by the Transaction
Documents, the Schedules or Exhibits thereto, any supplement to such
schedules or exhibits delivered to the Starwood Parties prior to
Closing, the agreements, reports or other documents referred to in any
of the foregoing, the Financial Statements, the financial statements
prepared in connection with the Net Working Capital adjustment provided
for in Article IV;
(iii) any Liability of which the Starwood Parties
otherwise had Knowledge prior to Closing; or
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(iv) any Liability incurred on or after the Closing
Date;
and the Partnerships shall be obligated to hold the Contributing Parties
harmless from all such enumerated Liabilities.
(j) ERISA Limitations. Any limitations on OP Unit ownership by
the Contributing Parties reasonably necessary to comply with the Plan Asset
Regulation so as to avoid the result that the assets of SLT and/or SLC
constitute "Plan Assets" for purposes of the Plan Asset Regulation and which may
arise due to the transactions contemplated in this Agreement and in the other
Transaction Documents shall be resolved in a manner mutually satisfactory to the
Contributing Parties and the Starwood Parties. In resolving any such
limitations, the Starwood Parties and the Contributing Parties shall first
consider equal decreases in the number of OP Units and increases in the number
of Paired Shares to be issued immediately after Closing, and, if the parties do
not mutually agree to do so, the parties may alternatively agree to decrease the
number of OP Units to be delivered to the Contributing Parties pursuant to
Section 2.03 and increase the Cash portion of the Contribution Amount based on
the Closing Value of the OP Units not delivered. The parties currently
contemplate that immediately following the issuance of the OP Units at the
Closing, PRISA II shall convert approximately 1,850,000 OP Units into Paired
Shares, leaving PRISA II with approximately 1,150,000 OP Units in each of SLT
and SLC. The parties hereby agree to cooperate in all reasonable respects to
endeavor to resolve any such limitations without the necessity of increasing the
Cash portion of the Contribution Amount.
ARTICLE IX
DOCUMENTS
9.01 The Contributing Parties' Closing Deliveries. At the closing, each
Contributing Party shall execute as necessary and deliver or cause to be
delivered the following:
(a) Assignment of Property Company Interests. Duly executed
and acknowledged Assignment and Assumption of the Property Company Interests in
form and substance reasonably satisfactory to the Parties and their counsel and
sufficient to transfer and convey all right, title and interest in, to and under
the Property Company Interests to the respective Partnerships who shall
countersign and return a copy of the same to signify such Partnership's
assumption of obligations thereunder arising after the Closing, subject to the
provisions of Section 8.02(i).
(b) Confirmation of Distribution of Contributed Assets. Copies
of duly executed instruments whereby each Property Company distributes title to
the Contributed Assets owned by such Property Company to the Contributing
Parties holding Property Company Interests therein (to permit such Contributing
Parties to contribute such assets to SLC in accordance with this Agreement).
(c) Bills of Sale and General Assignment. A duly executed and
acknowledged Bill of Sale and General Assignment from the Contributing Parties
in form and substance reasonably
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satisfactory to the Parties and their counsel and sufficient to transfer and
convey the Contributed Assets to SLC.
(d) Affidavits Regarding Authority, "Foreign Person".
Affidavits sworn to by each Contributing Party to the effect (1) that the
signatures on the instruments executed and delivered by such Contributing Party
in connection with the transactions contemplated hereby are sufficient to bind
such party; (2), if such Contributing Party is not an individual, that all
requisite consents or approvals to the Closing transactions required under the
applicable Constituent Documents have been obtained; (3) that the Contributing
Party is not a "foreign person" as that term is defined in Section 1445(f)(3) of
the Code; and (4) that the U.S. taxpayer identification number of each
Contributing Party is as set forth in such affidavit.
(e) Title Requirements. Subject to the Constituent Parties'
obligations under Section 3.01, any and all certificates, affidavits and other
instruments and documents which the Title Company shall reasonably require to
permit it to issue the Title Policies in the condition required herein.
(f) Transfer Tax Returns. All transfer and other tax returns
and information returns as may be required in connection with the transactions
contemplated by this Agreement, duly executed by the applicable Property
Company.
(g) [Reserved]
(h) Pay-Off Letters. Pay-off letters with respect to the
Assumed Debt indicating all sums required to satisfy and permit the discharge of
record of any lien securing the Assumed Debt.
(i) Good Standing Certificate. A Certificate (dated not more
than ten business days prior to the Closing) of the Secretary of State of the
state of formation for each Property Company as to the good standing in such
state of each of the Property Companies.
(j) Others as Reasonably Required. Such other documents as may
be reasonably required to consummate the transactions herein contemplated.
9.02 The Partnerships Closing Deliveries. The Partnerships at Closing
shall pay or cause to be paid the Contribution Amount to the Contributing
Parties and shall execute, acknowledge and/or deliver to the Contributing
Parties:
(a) Good Standing Certificate. A certificate (dated not more
than ten business days prior to the Closing) of the Secretary of State of the
State of Delaware as to the good standing of each of the Partnerships in the
State of Delaware.
(b) Partnership Amendments. The amendments to the Partnership
Agreements for SLT and SLC required by Section 8.02(i).
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(c) Affidavit. An affidavit sworn to by a general partner or
officer of each of the Partnerships to the effect that (1) the signatures on the
instruments executed and delivered by the Partnerships in connection with this
transaction are sufficient to bind the Partnerships, (2) all requisite consents
or approvals to the Closing transactions required under the applicable
Constituent Documents have been obtained, and (3) the consummation of the
transaction by the Partnerships are not prohibited or restricted in any way
either under the Constituent Documents or under Legal Requirements applicable to
the transaction.
(d) Others as Reasonably Required. Such other documents as may
be reasonably required to consummate the transactions herein contemplated.
9.03 Closing Deliveries by the Trust and the Corporation. At Closing,
each of the Trust and the Corporation shall respectively execute and deliver to
the Contributing Parties the following:
(a) Good Standing. A certificate (dated not more than ten
business days prior to the Closing) of the Secretary of State of the State of
Maryland for each of the Trust and the Corporation as to the good standing of
each of the Trust and the Corporation respectively in the State of Maryland.
(b) Paired Shares. Such stock certificates or other evidence
of the issuance of the Paired Shares, if any, to the Contributing Parties as the
Contributing Parties may reasonably request.
(c) Affidavit. Affidavits sworn to by an officer of the
Corporation and the Trust to the effect that (1) the signatures on the
instruments executed and delivered by the Corporation and Trust in connection
with this transaction are sufficient to bind the Corporation and the Trust (2)
all requisite consents or approvals to the Closing transactions required under
the applicable Constituent Documents have been obtained, and (3) the
consummation of the transaction by the Corporation and the Trust are not
prohibited or restricted in any way either under the Constituent Documents or
under Legal Requirements applicable to the transaction.
(d) Others as Reasonably Required. Such other documents as may
be reasonably required to consummate the transactions herein contemplated.
ARTICLE X
COSTS
10.01 Transaction Costs. The Partnerships and the Contributing Parties
shall each pay one-half (1/2) of the amount of all costs associated with
transfer taxes, deed stamps, gains taxes, sales or use taxes relating to the
transfer of personal property (collectively "TRANSFER COSTS") and the costs
associated with title searches and the issuance of the Title Policies (other
than optional endorsements) and preparation of surveys (collectively "TITLE
COSTS"). The Partnerships and the Contributing Parties shall each bear and pay
one-half (1/2) of any escrow costs and recording fees and charges. Fees, costs
and expenses incurred in terminating or assigning the License Agreements or in
obtaining replacement franchise agreements therefor shall be borne by the
Partnerships; provided, however, that if such costs shall exceed $500,000 with
respect to the Atlanta Embassy Suites Hotel,
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all such costs in excess of such amount with respect to such Hotel shall be
borne equally by the Contributing Parties and the Starwood Parties. Fees, costs
and expenses incurred in connection with the issuance of all appropriate
licenses and/or approvals required to permit the continued operation of full
liquor service at the Property shall be borne by the Partnerships. All other
costs and expenses incurred by the Contributing Parties in connection herewith,
including, without limitation, all attorneys' fees and costs shall be borne by
the Contributing Parties. All other costs and expenses incurred by the Starwood
Parties in connection herewith, including, without limitation, all attorneys'
fees and costs shall be borne by the Starwood Parties.
ARTICLE XI
BROKERAGE
11.01 Broker. Each Contributing Party and each of the Starwood Parties
represents and warrants that it has not dealt with any broker in connection with
this transaction other than (i) Goldman, Sachs & Co., whose fees shall be paid
by the Contributing Parties, (ii) Prudential Securities Incorporated whose fees
shall be paid by HEI (as provided in the HEI Contribution Agreement) and (iii)
Merrill, Lynch & Co., whose fees shall be paid by HEI pursuant to its agreement
with Merrill, Lynch & Co. Each of the Starwood Parties and each Contributing
Party hereby agrees to indemnify, defend and hold the other parties to this
Agreement harmless from and against any claim, cost, damage or expense including
reasonable attorneys' fees in defense thereof, made by any other broker claiming
to have been retained by such Person in connection with the transactions
contemplated hereby.
ARTICLE XII
SCHEDULES, CLOSING, "AS IS"
12.01 Schedules. Each of the parties hereto shall cause to be prepared
and delivered to the other parties hereto all Schedules pertaining to such party
as soon as reasonably practicable after the date hereof. If, prior to 6:00 P.M.
(EST) on January 17, 1997, the Starwood Parties have not terminated this
Agreement in accordance with the following sentence, the Starwood Parties shall
be deemed to have approved such Schedules and SLT shall be obligated to
immediately increase the Deposit by $5,000,000 as provided for in Section 2.05
above. If the Schedules disclose matters which, taken as a whole, materially
adversely affect the business prospects, assets, liabilities, financial
condition or operating results of the party on whose behalf such Schedule was
submitted, then, the party for whose benefit such Schedule was submitted, may,
by notice to the party on whose behalf such Schedule was submitted, elect to
terminate this Agreement, in which event this Agreement (and all other
Transaction Documents) shall terminate and be of no further force and effect,
except for those provisions which specifically survive such termination, and the
Initial Deposit shall be returned to SLT.
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12.02 Access.
(a) Access - Partnerships. The Contributing Parties shall
permit the Partnerships and their authorized representatives at such time or
times as the Partnerships may reasonably request (and either before or after
Closing) (i) upon reasonable prior notice, to inspect, review, or copy the books
and records, including, without limitation, any financial statements
(collectively, the "PROPERTY COMPANY RECORDS") of each of the Property Companies
and/or their respective agents' relating to the ownership, management and
operation of the Property for any periods prior to the Closing Date (the
"PROPERTY COMPANY RECORDS REVIEW"), (ii) to inspect the physical condition of
the Property (the "PHYSICAL INSPECTION"), (iii) to enter the Property for the
purpose of observing the taking of any inventories and the counting of house
cash, and (iv) to schedule and perform interviews of Hotel employees, provided
that all such interviews shall be scheduled through Murray Dow of HEI who shall
make all reasonable efforts to accommodate the Partnerships' scheduling
requests. The Contributing Parties shall cause the Property Companies to direct
the managers of the Hotels to cooperate in such investigations by the
Partnerships, and take such steps as may be reasonably within the power of the
Property Companies to compel the managers so to cooperate, and the Partnerships
shall use commercially reasonable efforts to minimize disruption to the Hotel
Business.
(b) Access - Contributing Parties. The Starwood Parties shall
permit the Contributing Parties and their authorized representatives at such
time or times as the Contributing Parties may reasonably request (and either
before or after Closing (i) upon reasonable prior notice, to inspect, review, or
copy the books and records, including, without limitation, any financial
statements (collectively, the "STARWOOD RECORDS") of each of the Starwood
Parties and/or their respective agents' relating to the ownership, management
and operation of the Starwood Parties or their hotels (the "STARWOOD RECORDS
REVIEW"), and (ii) to schedule and perform interviews of employees of the
Starwood Parties, their affiliates and managers, provided that all such
interviews shall be scheduled through Steve Goldman who shall make all
reasonable efforts to accommodate the Contributing Parties' scheduling requests.
12.03 Certain Definitions. For the purposes of Section 12.02:
(a) Records (of the Property Companies or the Starwood
Parties, as applicable) shall include, without limitation, all past and current,
rent rolls, paid bill files, depreciation schedules, canceled checks, payroll
tax returns and any additional records reasonably requested by the Partnerships
or the Contributing Parties, as the case may be (excluding bank statements) in
the possession of the Property Companies or the Starwood Parties, or their
respective agents; and
(b) Physical Inspection may include, without limitation, the
roofs, foundation, interiors, soil, landscaping, painting, pools, dumpster pads,
heating systems, electrical systems, plumbing, sewerage systems, water supply,
painting, appliances, carpeting, drapes, clubhouse, roads, parking areas and
inspection for evidence of termite infestation and/or environmental matters.
12.04 Deliveries. The Contributing Parties shall fully cooperate with
the Partnerships and the Partnerships' representatives in making the foregoing
review, audit and inspection, and shall upon request from the Partnerships
deliver to the Partnerships such information, reports or other records
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<PAGE> 50
as may be relevant to such review and within the possession of the Contributing
Parties or the Property Companies. The Starwood Parties shall fully cooperate
with the Contributing Parties and the Contributing Parties' representatives in
making the foregoing review, audit and inspection, and shall upon request from
the Partnerships deliver to the Partnerships such information, reports or other
records as may be relevant to such review and within the possession of the
Starwood Parties or the Property Companies.
12.05 Effect of Inspections, "As Is".
(a) Upon completion of the Closing, the Partnerships will be
deemed to have accepted the Property on an "As Is" basis, subject to the
provisions of Articles VII, XIV and XVI (as limited in accordance with Sections
12.05(b), 13.02(a) and 14.02(b) of this Agreement) and the terms and conditions
of the other Transaction Documents. The sole obligation of the Contributing
Parties with respect to the physical condition of the Property will be to
contribute the Property Company Interests and the Contributed Assets to the
Partnerships with the Property in substantially the same physical condition
(excluding normal wear and tear) as existed on the date of execution and
delivery of this Agreement. Subject to the provisions of Articles VII, XIV, and
XVI (as limited in accordance with Sections 12.05(b), 13.02(a) and 14.02(b) of
this Agreement), the Partnerships have agreed to accept possession of the
Property Company Interests and Contributed Assets on the Closing Date with the
Property and Hotel Business of each Hotel on an "As Is" basis. The Partnerships
and Contributing Parties agree that at Closing the Property will be "As Is,"
and, except as expressly set forth in Section 7.01 hereof, such Closing
transactions will be without representation or warranty of any kind, express or
implied (including, without limitation, warranty of income potential, operating
expenses, uses, merchantability or fitness for a particular purpose), and the
Partnerships do hereby disclaim and renounce any such representation or warranty
other than as expressly made pursuant to Section 7.01 (but subject to the
limitations and qualifications provided for in this Agreement). For purposes of
this Agreement, the term "As Is" means, as and where the Property presently
exist as of the date of execution and delivery of this Agreement, including,
without limitation, all faults, defects, claims, Liens, and other conditions of
every kind or description with respect to (a) the physical and environmental
condition of the Property and the Hotels (including defects seen and unseen and
conditions natural and artificial), (b) subject to Article III, the Property
Companies' title to the Real Property and the Hotels, (c) subject to Article
III, the Property Companies' title to the Tangible Personal Property, Intangible
Property, Proprietary Interests and Miscellaneous Interests, (d) all Legal
Requirements to which the Property is subject, (e) the financial operations of
the Hotels, demands, actions, or causes of action that relate in any way to the
Hotels or the ownership and operations thereof and, (f) all other matters
related in any way to the ownership and operation of the Property and the
Hotels, whether known or unknown, subject in each case to the obligations of the
Contributing Parties under Articles VII, XIV and XVI (as limited in accordance
with Sections 12.05(b), 13.02(a) and 14.02(b) of this Agreement) and the terms
of the other Transaction Documents.
(b) The right of inspection, review and audit referred to in
Section 12.02(a) of this Agreement, and the exercise of such right by the
Partnerships shall not constitute a waiver by the Partnerships of the breach of
any covenant, representations or warranty of the Contributing Parties; provided,
however, that if the Starwood Parties have Knowledge of any such breach at the
time of Closing, and elect to complete the Closing in accordance with the terms
hereof notwithstanding such
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Knowledge, then the Starwood Parties shall irrevocably be deemed to have waived
any such breach of which the Starwood Parties had Knowledge at Closing.
Likewise, the review, investigation and analysis of the Starwood Parties, the OP
Units and the Paired Shares by the Contributing Parties shall not constitute a
waiver by the Contributing Parties of the breach of any covenant, representation
or warranty of the Starwood Parties; provided, however, that if the Contributing
Parties have Knowledge of any such breach at the time of Closing, and elect to
complete the Closing notwithstanding such Knowledge, then the Contributing
Parties shall irrevocably be deemed to have waived any such breach of which the
Contributing Parties had Knowledge at Closing. For purposes of this Section
12.05(b) and Article XIII and XIV, Knowledge with respect to a party shall
include the present actual Knowledge of the individual attorneys actively
representing such party in connection with the transactions contemplated hereby.
(c) [Reserved]
12.06 Delivery of Property Company Records. The Contributing Parties
shall cause the Property Company Records to remain with the Property Companies
upon the contribution of the Property Company Interests and Contributed Assets
to the Partnerships at Closing. The Partnerships agree for a period of five (5)
years subsequent to the Closing Date, upon request of the Contributing Parties,
to make available to the Contributing Parties all information and statements in
the Partnerships' possession (including, without limitation, the Property
Company Records) with regard to any period prior to the Closing Date which may
be reasonably required by the Contributing Parties in connection with the
Property Companies' control of the Property or the operation thereof.
12.07 The Partnerships' Indemnification. The Partnerships agree to
indemnify, defend and hold the Contributing Parties harmless from and against
any claim, damage or expense, including reasonable attorneys' fees, incurred by
the Contributing Parties and arising from the Partnerships' entry upon the
Property for the performance of the Partnerships' due diligence reviews and such
indemnification shall survive the Closing or termination of this Agreement.
12.08 Date and Location Closing. The Closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place on January 31,
1997 at 10:00 a.m. at the offices of Kirkland & Ellis, 153 East 53rd Street, New
York, NY, or at such other time and place as the parties may mutually determine
(the "CLOSING DATE"), provided that either party hereto may adjourn the Closing
for a period not to exceed thirty (30) days for the purpose of obtaining the
consents required pursuant to Section 8.01(h) (provided that such period shall
be sixty (60) days with respect to the consent required from Hilton Hotels
Corp.)
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ARTICLE XIII
EARNEST MONEY, DEFAULT AND REMEDIES
13.01 Duties of Escrow Agent. The duties of Escrow Agent will be as
provided in the Escrow Agreement and shall include:
(a) Earnest Money Deposits. During the term of this Agreement,
Escrow Agent will hold, deposit, invest and deliver the Deposits in accordance
with the terms and provisions of this Agreement.
(b) Disputes. If this Agreement is terminated by the mutual
written agreement of the Contributing Parties and the Starwood Parties, or if
Escrow Agent is unable to determine at any time to whom any of the Deposit
should be delivered, or if a dispute develops between the Contributing Parties
and the Starwood Parties concerning to whom the Deposit should be delivered,
then in any such event, Escrow Agent will request joint written instructions
from the Contributing Parties and the Starwood Parties and will deliver the
Deposit in accordance with such joint written instructions. In the event that
such written instructions are not received by Escrow Agent within ten (10) days
after Escrow Agent has served a written request for instructions upon the
Contributing Parties and the Starwood Parties, Escrow Agent will have the right
to pay the Deposit into a court of competent jurisdiction and interplead the
Contributing Parties and the Starwood Parties in respect thereof, and thereafter
Escrow Agent will be discharged of any obligations in connection with this
Agreement.
(c) Costs. If costs or expenses are incurred by Escrow Agent
because of litigation or a dispute between the Contributing Parties and the
Starwood Parties arising out of the holding of the Deposit in escrow, the
Contributing Parties and the Starwood Parties will each pay Escrow Agent
one-half of such reasonable and direct costs and expenses. Except for such costs
and expenses, no fee or charge will be due or payable to Escrow Agent for its
services as escrow holder other than its usual and customary investment fees, if
any.
(d) Limited Duties. By joining in the Escrow Agreement, Escrow
Agent undertakes only to perform the duties and obligations imposed upon it
under the terms of the Escrow Agreement and expressly does not undertake to
perform any of the other covenants, terms and provisions incumbent upon the
Contributing Parties and the Starwood Parties hereunder.
(e) Liability. The Starwood Parties and the Contributing
Parties hereby agree and acknowledge that Escrow Agent assumes no liability in
connection herewith except for gross negligence or willful misconduct; that
Escrow Agent will never be responsible for the validity, correctness or
genuineness of any document or notice referred to under this Agreement; and that
Escrow Agent may seek advice from its own counsel and will be fully protected in
any action taken by it in good faith in accordance with the opinion of its
counsel.
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13.02 Default.
(a) Contributing Parties Default. Notwithstanding any other
provision of this Agreement, if the Contributing Parties, or any one of them,
fail to perform any of their material obligations or agreements within fifteen
(15) days following written demand for such performance contained herein and if
the Starwood Parties are not then in default of any of their material
obligations and agreements contained herein, then as their sole and exclusive
remedy the Starwood Parties may elect to:
(i) terminate this Agreement by giving written notice
of termination and the reasons therefor to the Contributing Parties, in
which event neither the Contributing Parties nor the Starwood Parties
will have any further obligations or liabilities one to the other
hereunder (except for any indemnity of one party by the other which
expressly survives Closing or termination of this Agreement), and the
Contributing Parties and Escrow Agent will immediately thereafter
return the entire Deposit to SLT and the Contributing Parties shall
reimburse the Starwood Parties for all Pursuit Costs actually incurred
by the Starwood Parties in pursuing the transactions contemplated
hereby up to an amount not to exceed One Million Dollars ($1,000,000);
(ii) waive such default and complete the Closing as
contemplated by this Agreement without any adjustment to or reduction
in the Contribution Amount as a result of such default (except to the
extent to the same affects the Net Working Capital Adjustment pursuant
to Section 4.01); or
(iii) waive all other actions, rights or claims for
damages, other than costs and expenses incurred in enforcing this
Agreement and bring an equitable action for specific performance of the
terms of this Agreement (i.e., to compel any Contributing Party to
comply with its covenants under this Agreement).
If the Starwood Parties shall elect to proceed pursuant to clause (iii) above
and shall successfully prosecute such action for specific performance, the
Contributing Parties shall reimburse the Starwood Parties for all fees, costs
and expenses incurred in prosecuting such action including, without limitation,
reasonable attorneys fees, but if the Contributing Parties shall prevail in any
such action, the Starwood Parties shall reimburse the Contributing Parties for
all fees, costs and expenses incurred in defending such action including,
without limitation, reasonable attorneys fees.
(b) Starwood Parties' Default. If the Starwood Parties fail to
close the transaction contemplated hereby (except for permitted terminations set
forth herein) and the Contributing Parties are not then in default of any of
their material obligations or agreements contained herein, then the Contributing
Parties' sole option hereunder will be to terminate this Agreement, whereupon
Escrow Agent will pay the Deposit to the Contributing Parties as liquidated
damages, and the Starwood Parties will have no further obligations or
liabilities hereunder (except for any indemnity or liability specifically stated
to survive termination of this Agreement). The Contributing Parties' election to
receive the Deposit as liquidated damages is agreed to due to the difficulty,
inconvenience, and uncertainty of ascertaining actual damages for such breach by
the Starwood Parties and the Starwood Parties agree that the same is a
reasonable and fair estimate of such damages. The Starwood Parties
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waive and release any right to (and covenant that they will not) sue the
Contributing Parties or the Property Companies or seek or claim a refund of all
or any portion of the Deposit on the grounds that it is unreasonable in amount
and exceeds the Contributing Parties' actual damages or that its retention by
the Contributing Parties constitutes a penalty.
(c) [Reserved]
ARTICLE XIV
INDEMNIFICATION
14.01 Survival. Subject to the provisions of Section 12.05(b) and
Section 13.02, and to the completion of the Closing, all representations,
warranties, covenants and agreements set forth in the Transaction Documents or
in any certificate or other writing delivered in connection with the Transaction
Documents shall survive such Closing, and the consummation of the transactions
contemplated thereby notwithstanding any examination made for or on behalf of
the Starwood Parties or the Contributing Parties; provided that the Contributing
Parties' obligation to indemnify the Starwood Parties and the Starwood Parties'
obligation to indemnify the Contributing Parties in respect of breaches thereof
shall be subject to the limitations set forth below. The provisions of this
Article XIV shall apply only after Closing, and none of the Starwood Parties,
the Contributing Parties or the Property Companies shall have any liability or
obligation under the provisions of this Article XIV unless and until the Closing
occurs.
14.02 Indemnification by Contributing Parties.
(a) Subject to the provisions of Sections 12.05(b) and
13.02(a), and the limitations set forth in Section 14.02(b) below, as the
exclusive remedy of the Starwood Parties under this Agreement after Closing, the
Contributing Parties hereby jointly and severally (except as otherwise provided
in Section 7.01(b)(ii) above, with respect to the representations and warranties
therein made severally by the Contributing Parties and as to which the
indemnification obligations created hereby shall also be several), agree to
indemnify each of the Starwood Parties (who for purposes of this Article XIV,
shall include each of their respective Affiliates, officers, directors,
partners, employees, agents, representatives, successors and permitted assigns)
and hold each of them harmless against and pay on behalf of or reimburse such
Starwood Parties in respect of any liability (including, without limitation,
interest, penalties, reasonable attorneys fees and expenses, court costs and
amounts paid in investigation, defense or settlement of any of the foregoing)
(collectively, "LOSSES") which any such Starwood Party may suffer, sustain or
become subject to, as a result of, in connection with, relating or incidental to
or by virtue of the breach of any covenant, representation or warranty made by
the Contributing Parties under this Agreement (a "BREACH").
(b) The indemnification provided for in Section 14.02(a) above
is subject to the following limitations:
(i) Each Contributing Party will be liable to the
Starwood Parties under Section 14.02(a) with
respect to a Breach only (a) if Starwood Parties
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had no Knowledge of such Breach on or before the
Closing Date; and (b) the Starwood Parties give
the Contributing Party written notice of such
claim under Section 14.02(a):
(A) within the earlier of (i) six months after the
Closing Date or (ii) thirty (30) days
following completion of the final
determination of Closing Net Working Capital
of any Property Company pursuant to Section
4.01(d) for claims arising from or relating to
any Breach except a breach of the
representations and warranties of Contributing
Parties under Sections 7.01(b)(i), (b)(ii),
(e), (n) or (x);
(B) within twelve (12) months after the Closing
Date for claims arising from or relating to
any breaches of the representations and
warranties of the Contributing Parties under
Section 7.01(b)(i);
(C) Within eighteen (18) months after the Closing
Date for claims arising from or relating to
any breaches of the representations and
warranties of the Contributing Parties under
Section 7.01(e); or
(D) at any time after the Closing Date for claims
arising from or relating to any breaches of
the representations and warranties of the
Contributing Parties under Sections 7.01
(b)(ii), or (x).
(ii) The Contributing Parties will not be liable for
any Loss arising from any Breach unless and until
the aggregate amount of all such Losses relating
to all such Breaches exceeds $100,000 (the
"THRESHOLD"), in which case the Contributing
Parties, shall be liable for the amount of all
such Losses in excess of the Threshold; provided
that the aggregate liability of the Contributing
Parties hereunder shall not exceed: (i) $500,000
in respect of Losses relating to any single Hotel;
and (ii) $2,750,000 (the "CAP AMOUNT") in respect
of all Losses for which indemnification is sought
by the Starwood Parties pursuant hereto.
14.03 Indemnification by Starwood Parties.
(a) Subject to the provisions of Sections 12.05(b) and
13.02(a), and the limitations set forth in Section 14.03(b) below, as the
exclusive remedy of the Contributing Parties under this Agreement after Closing,
the Starwood Parties hereby jointly and severally agree to indemnify each of the
Contributing Parties (who for purposes of this Article XIV, shall include each
of their respective Affiliates, officers, directors, partners, employees,
agents, representatives, successors and permitted assigns) and hold each of them
harmless against and pay on behalf of or reimburse such Contributing Parties in
respect of any liability (including, without limitation, interest,
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penalties, reasonable attorneys fees and expenses, court costs and amounts paid
in investigation, defense or settlement of any of the foregoing) (collectively,
"LOSSES") which any such Contributing Party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to or by
virtue of the breach of any covenant, representation or warranty made by the
Starwood Parties under this Agreement (a "BREACH").
(b) The Indemnification provided for in Section 14.03(a) above
is subject to the following limitations;
(i) Each Starwood Party will be liable to the
Contributing Parties with respect to claims
referred to in subsection (a)(i) above only if (a)
the Contributing Parties had no Knowledge of such
claim on or before the Closing Date and (b); if
the Contributing Parties give the Starwood Parties
written notice of such claim:
(A) within the earlier of (i) six months after the
Closing Date or (ii) thirty (30) days
following completion of the final
determination of Closing Net Working Capital
of any Property Company pursuant to Section
4.01(d) for claims arising from or relating to
breaches of the representations and warranties
set forth in Sections 7.02 (e), (g), and (h),
7.03 (e), (g), and (h) and 7.04 (e) (g) and
(h);
(B) within twelve (12) months after the Closing
Date for claims arising from or relating to
any breaches of the representations and
warranties set forth in Section 7.03(f) or
7.04(f);
(C) at any time after the Closing Date for claims
arising from or relating to breaches of the
representations and warranties set forth in
Section 7.02(a) - (d), (f), or (i) - (j), 7.03
(a) - (d), or (i) - (k) or 7.04 (a) - (d), or
(i) - (k).
(ii) The Starwood Parties will not be liable for any
Loss arising from any breach of any covenant,
representation or warranty contained in this
Agreement or any Schedule or Exhibit hereto unless
and until the aggregate amount of all such Losses
relating to all such breaches exceeds the
Threshold, in which case the Starwood Parties,
shall be liable for the amount of all such Losses
in excess of the Threshold; subject to a maximum
aggregate liability for all such Losses in the
amount of the Cap Amount.
14.04 Procedures.
(a) If a party hereto seeks indemnification under this Article
XIV such party (the "INDEMNIFIED PARTY") shall give written notice to the other
party (the "INDEMNIFYING PARTY") of the facts and circumstances giving rise to
the claim. In that regard, if any suit, action, claim, liability or obligations
shall be brought or asserted by any third party which, if adversely determined,
would
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entitle the Indemnified Party to indemnity pursuant to this Article XIV, the
Indemnified Party shall promptly notify the Indemnifying Party of the same in
writing, specifying in detail the basis of such claim and the facts pertaining
thereto and the Indemnifying Party, if it so elects, shall assume and control
the defense thereof (and shall consult with the Indemnified Party with respect
thereto), including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all necessary expenses; provided that the
Indemnifying Party shall not have the right to assume control of such defense if
the claim which the Indemnifying Party seeks to assume control (1) seeks
non-monetary relief; or (2) involves criminal or quasi-criminal allegations. In
the event that the Indemnified Party retains control of the defense of such
claim, the Indemnified Party shall use good faith efforts, consistent with
prudent business judgment, to defend such claim. If the Indemnifying Party is
permitted to assume and control the defense and elects to do so, the Indemnified
Party shall have the right to employ counsel separate from counsel employed by
the Indemnifying Party in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel employed by the Indemnified
Party shall be at the expense of the Indemnified Party unless (A) the employment
thereof has been specifically authorized by the Indemnifying Party in writing,
(B) the Indemnifying Party has been advised by counsel that a reasonable
likelihood exists of a conflict of interest between the Indemnifying Party and
the Indemnified Party and such counsel advises the Indemnifying Party of the
general nature of such conflict, (C) the Indemnifying Party has failed to assume
the defense and employ counsel, or (D) the Indemnified Party has reasonably
determined that an adverse outcome could have a material adverse effect on its
business, reputation or could reasonably be expected to have a materially
adverse precedential effect; in which case the fees and expenses of the
Indemnified Party's counsel shall be paid by the Indemnifying Party. The
Indemnifying Party shall not be liable for any settlement of any such action or
proceeding effected without the written consent of the Indemnifying Party,
however, if there shall be a final judgment for the plaintiff in any such
action, the Indemnifying Party agrees to indemnify and hold harmless the
Indemnified Party from and against any loss or liability by reason of such
judgment.
(b) In the event any Indemnified Party which is an individual,
or any senior officer (including, without limitation, any president or
vice-president) of any other Indemnified Party or any general partner or member
thereof, has actual knowledge of any valid claim or defense (and not merely any
facts or circumstances which may give rise to such claim or defense) against a
third party who is a party to the applicable claim in connection with any Loss
as to which such Indemnified Party seeks indemnification pursuant to this
Article XIV and such Indemnified Party without good reason fails to notify the
Indemnifying Party of such claim or defense or without good reason fails to
assert such claim or defense on its own behalf, then the Indemnified Party shall
not be entitled to receive indemnification from the Indemnifying Party to the
extent of the Loss which is proven by the Indemnifying Party to have been
occasioned by such failure to notify or such failure to assert such claim or
defense. The determination of whether a party had "good reason" for failure to
notify or failure to assert any claim or defense shall be made by the Arbitrator
pursuant to subsection (i) below.
(c) In the event any Indemnified Party is insured pursuant to
an unexpired insurance policy against any occurrence giving rise to any Loss as
to which such Indemnified Party seeks indemnification pursuant to this Article
XIV (including, without limitation, pursuant to any insurance policy maintained
by any Property Company before or after Closing), the Indemnified
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Party shall promptly give notice of such insurance coverage to the Indemnifying
Party and the Indemnifying Party shall, in its reasonable discretion, elect
either (i) to require the Indemnified Party to make a claim pursuant to such
insurance policy for such Loss and the Indemnifying Party's obligation to
indemnify the Indemnified Party shall thereafter be reduced by the amount of
insurance proceeds received by the Indemnified Party as a result of such claim
or (ii) to indemnify the Indemnified Party without requiring a claim to be made
by the Indemnified Party on such insurance policy. In the event the Indemnifying
Party elects to require the Indemnified Party to make a claim on such insurance
policy pursuant to clause (i) above, the Indemnifying Party shall pay any
increase in insurance premiums resulting directly and proximately from such
claim by the Indemnified Party on such insurance policy; provided that if any
such increase in such insurance premium is caused by one or more claims on such
insurance policy as a result of Losses which are not subject to indemnification
pursuant to this Article XIV, then the Indemnifying Party shall be obligated to
pay such increase in insurance premiums only to the extent such increase is
attributable to claims made by the Indemnified Party pursuant to clause (i)
above. The determination of the amount of such increase in insurance premiums
attributable to any claim made pursuant to clause (i) above shall be made by the
mutual agreement of the Parties acting in good faith, and in the event the
Parties are unable to so agree shall be made by the Arbitrator pursuant to
subsection (i) below. The Indemnified Party shall provide to the Indemnifying
Party such documentation relating to such increase in insurance premium as shall
be necessary to establish the amount of such increase and shall otherwise
cooperate with the Indemnifying Party in establishing the amount of such
increase attributable to the claim made pursuant to clause (i) above.
(d) In the event that the Starwood Parties are entitled to any
indemnification hereunder from the Contributing Parties, within 15 days after a
final determination of the amount of such indemnification pursuant to the terms
of this Article XIV (the "INDEMNIFICATION AMOUNTS"), the Contributing Parties
shall make an election to pay (and shall pay) such Indemnification Amount either
(i) by payment of immediately available funds to the Starwood Parties or (ii) by
delivering or causing the Partnerships to cancel on their respective books and
records an equal number of SLT OP Units and SLC OP Units held by the
Contributing Parties having a current market value (based upon the Paired Share
price as of the date of the final determination of such Indemnification Amount)
equal to the Indemnification Amount, and to the extent such delivery or
cancellation of SLT OP Units and SLC OP Units is insufficient to pay such
Indemnification Amount, immediately available funds for the remaining balance of
such Indemnification Amount. In the event that the Contributing Parties are
entitled to any indemnification hereunder from the Starwood Parties, within 15
days after a final determination of the amount of such indemnification pursuant
to the terms of this Article XIV, the Starwood Parties shall satisfy such
obligation by payment of immediately available funds to the Contributing
Parties.
(e) Any dispute, controversy, or claim arising under or
relating to this Article XIV ("DISPUTE") shall be resolved by final and binding
arbitration administered by the American Arbitration Association ("AAA") under
its Commercial Arbitration Rules, subject to the following:
(i) Either party may demand that any Dispute be
submitted to binding arbitration. The demand for arbitration shall be
in writing, shall be served on the other party in the manner prescribed
herein for the giving of notices, and shall set forth a short statement
of the factual basis for the claim, specifying the matter or matters to
be arbitrated.
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<PAGE> 59
(ii) The arbitration shall be conducted by an
arbitrator appointed by the AAA (the "ARBITRATOR") who shall conduct
such evidentiary or other hearings as such arbitrator deems necessary
or appropriate and thereafter shall make a final determination as soon
as practicable. Any arbitration pursuant hereto shall be conducted by
the Arbitrator as the parties may mutually agree or, if the parties do
not so agree, under the guidance of the Federal Rules of Civil
Procedure and the Federal Rules of Evidence, but the Arbitrator shall
not be required to comply strictly with such Rules in conducting any
such arbitration. All such arbitration proceedings shall take place in
New York, New York.
(iii) Except as provided herein:
(A) each party shall bear its own "COSTS AND
FEES," which are defined as all reasonable pre-award expenses
of the arbitration, including travel expenses, out-of-pocket
expenses (including but not limited to, copying and telephone)
witness fees, and reasonable attorney's fees and expenses;
(B) the fees and expenses of the Arbitrator
and all other costs and expenses incurred in connection with
the arbitration ("ARBITRATION EXPENSES") shall be borne
equally by the parties; and
(C) notwithstanding the foregoing, the
Arbitrator shall be empowered to require any one or more of
the parties to bear all or any portion of such Costs and Fees
and/or the fees and expenses of the Arbitrator in the event
that the Arbitrator determines such party has acted
unreasonably or in bad faith.
(iv) The Arbitrator shall have the authority to award
damages, including costs but shall not have the authority to award
punitive damages, to impose sanctions for abuse or frustration of the
arbitration process, or to compel specific performance. The decision of
the Arbitrator and any award pursuant thereto shall be in writing and
counterpart copies thereof shall be delivered to each party. The
decision and award of the Arbitrator shall be binding on all parties.
In rendering such decision and award, the Arbitrator shall not add to,
subtract from or otherwise modify the provisions of this Article XIV.
Either party to the arbitration may seek to have judgment upon the
award rendered by the Arbitrator entered in any court having
jurisdiction thereof.
(v) Each party agrees that it will not file any suit,
motion, petition or otherwise commence any legal action or proceeding
for any matter which is required to be submitted to arbitration as
contemplated herein except in connection with the enforcement of an
award rendered by the Arbitrator and except to seek non-monetary
equitable relief including, with limitation, the issuance of an
injunction or temporary restraining order pending a final determination
by the Arbitrator. Upon the entry of any order dismissing or staying
any action or proceeding filed contrary to the preceding sentence, the
party which filed such action or proceeding shall promptly pay to the
other party the reasonable attorney's fees, costs and expenses incurred
by such other party prior to the entry of such order.
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(vi) All aspects of the arbitration shall be
considered confidential and shall not be disseminated by any party with
the exception of the ability and opportunity to prosecute its claim or
assert its defense to any such claim. The Arbitrator shall be required
to issue prescriptive orders as may be required to enforce and maintain
this covenant of confidentiality during the course of the arbitration
and after the conclusion of same so that the result and the underlying
data, information, materials and other evidence are forever withheld
from public dissemination with the exception of its subpoena by a court
of competence jurisdiction in an unrelated proceeding brought by a
third party.
(f) Nothing in this Article XIV shall limit or restrict any
party's right to maintain or recover on any action based upon fraud.
ARTICLE XV
FURTHER ASSURANCES
15.01 Further Assurances. The Contributing Parties, the Property
Companies and the Starwood Parties, at or after Closing, and without further
consideration, shall execute, acknowledge and deliver to the other such other
documents and instruments, and take such other actions, as either shall
reasonably request or as may be necessary more effectively to transfer to the
Partnerships the Property in accordance with this Agreement.
ARTICLE XVI
PRE-CLOSING OPERATIONS
16.01 Contributing Party's Conduct of Business. Except as required by
applicable Legal Requirements, until the Closing or earlier termination of this
Agreement, each Contributing Party shall with respect to the Property Company in
which it owns Property Company Interests:
(a) operate or cause HEI as manager, to operate the Property
in accordance with the terms of the Management Agreements applicable
thereto diligently and only in the ordinary course of business
consistent with past practices so as to preserve its business and
goodwill intact, and reserve for the Partnerships the goodwill and
relationships of the Property Companies with their suppliers, tenants,
and others having relations with them and so as to: (i) maintain the
Property in material compliance with all Legal Requirements; (ii)
maintain all insurance presently maintained thereon in full force and
effect, and (iii) comply in all material respects with any License
Agreement applicable to each Hotel;
(b) not sell, transfer, pledge or convey any Property Company
Interest (except for distributions to the holders of equity interests
in a Contributing Party), or permit the Property Company or HEI, except
in the ordinary course of business, to sell, assign, or convey any
right, title, or interest whatever in or to the Property or any part
thereof, or any Inventory or
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<PAGE> 61
create or permit to exist any Lien thereon without promptly discharging
the same (other than in the ordinary course of business) or with
respect to Permitted Encumbrances;
(c) promptly inform the Partnerships in writing of any
variances from the representations and warranties contained in Section
7.01;
(d) use reasonable efforts to cooperate with the Partnerships
in order to attempt to obtain all third party and governmental
approvals and consents necessary or desirable to consummate the
transactions contemplated hereby and to cause the other conditions to
the parties obligations hereunder to be satisfied; and
(e) maintain its books, accounts and records in accordance
with GAAP consistently applied.
16.02 On-Site Representative. After the date of execution and delivery
of this Agreement, the Partnerships shall be entitled to have their
representatives on-site at the Hotels to participate in and receive all
information pertaining to the operation and management of each Hotel Business,
and the parties shall reasonably cooperate in such efforts.
ARTICLE XVII
NOTICES
17.01 Procedure for Notice. All notices, demands, consents, approvals
and other communications which are required or desired to be given hereunder
shall be in writing and shall be sent by Federal Express or other similar
courier, with a simultaneous copy by facsimile transmission, to the recipient as
set forth below or at such other address as such parties shall have last
designated by notice to the other:
IF TO THE CONTRIBUTING PARTIES:
c/o HEI Hotels LLC
55 Greens Farms Road
Westport Corporate Office Park
Westport, CT 06880
Fax No. 203/454-7678
c/o Prudential Real Estate Investors
8 Campus Drive
Parsippany, NJ 07054
Attention: Gary L. Kauffman (Fax: 201/683-1790)
Joseph D. Margolis, Esq. (Fax: 201/683-1788)
James P. Walker, Esq. (Fax: 201/683-1788)
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<PAGE> 62
with copies to:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022
Attention: Robert S. Insolia, Esq. (Fax No. 212/326-2061)
William N. Cooney, Esq. (Fax No. 213/669-6407)
Willkie, Farr & Gallagher
153 East 53rd Street
New York, New York 10022
Attention: Bruce M. Montgomerie, Esq.
Fax No. 212/821-8927
IF TO THE STARWOOD PARTIES:
SLT Operating Limited Partnership
c/o Starwood Lodging Trust
2231 East Camelback Road, Suite 410
Phoenix, AZ 85016
Telephone: (602) 852-3900
Telecopy: (602) 852-0984
Attention: Steven R. Goldman
SLC Operating Limited Partnership
c/o Starwood Lodging Corporation
2231 East Camelback Road, Suite 400
Phoenix, AZ 85016
Telephone: (602) 852-3900
Telecopy: (602) 852-0984
Attention: Nir Margalit, Esq.
Starwood Lodging Trust
2231 East Camelback Road, Suite 410
Phoenix, AZ 85016
Telephone: (602) 852-3900
Telecopy: (602) 852-0984
Attention: Steven R. Goldman
Starwood Lodging Corporation
2231 East Camelback Road, Suite 400
Phoenix, AZ 85016
Telephone: (602) 852-3900
Telecopy: (602) 852-0984
Attention: Nir Margalit, Esq.
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<PAGE> 63
WITH COPIES TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telephone: (312) 861-2000
Telecopy: (312) 861-2200
Attention: Stephen G. Tomlinson, Esq.
Sidley & Austin
555 West Fifth Street
Los Angeles, CA 90013
Telephone: 213/896-6000
Telecopy: 213/896-6600
Attention: Sherwin L. Samuels, Esq.
Notices signed by the parties' respective attorneys shall be deemed sufficient
within the meaning of this Section without the signatures of the parties
themselves. Notices, demands, consents, approvals, and other communications
shall be deemed given one (1) day after delivery to such courier. During the
existence of a strike, notice and other communications may be given by personal
service and such notices and communications shall be effective when delivered.
ARTICLE XVIII
ADDITIONAL COVENANTS
18.01 Board Representation.
(a) Not later than fifteen (15) days after the Closing Date,
the Trust shall: (i) take all necessary action, if any, to increase the
number of trustees of the Trust by two, and (ii), subject to the Nevada
Gaming Approvals, nominate and support for election to the board of
trustees of the Trust Gary M. Mendell and Roger S. Pratt.
(b) For so long as PRISA II shall maintain the Minimum Share
Ownership, PRISA II shall continue to be entitled to designate, subject
to the Nevada Gaming Approvals, one representative to be nominated for
election to the board of trustees of the Trust, and the Trust shall
cause the board of trustees of the Trust to so nominate such designee,
and to support such nomination along with the other nominees of
management and the board of directors, for election to the board of
trustees of the Trust at any annual or special meeting of the
shareholders of the Trust called for the purpose of electing trustees.
Roger Pratt is the individual so designated by PRISA II as of the date
of this Agreement. If the representative designated by PRISA II shall
be elected to the board of trustees of the Trust, such right of PRISA
II shall be suspended until such representative is up for re-election
or the seat occupied thereby otherwise becomes vacant. Upon the death,
disability, retirement, removal (with or without cause) or resignation
of any such trustee designated by PRISA II, PRISA II shall have the
right to designate a replacement for such individual to fill such
capacity and
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serve as a trustee of the Trust for the remainder of the departing
trustee's term, and the trustees of the Trust shall appoint such
replacement individual to the board of trustees of the Trust to fill
such vacancy. If PRISA II shall at any time fail to maintain the
Minimum Share Ownership, then the rights granted to PRISA II by this
Section 18.01 shall immediately terminate and the party designated by
PRISA II, if then a Trustee of the Trust, shall promptly resign such
trusteeship.
(c) The election and removal of trustees of the Trust shall at
all times remain subject to the terms and conditions of the Trust's
Constituent Documents. The provisions of this Section 18.01 shall
survive Closing.
18.02 Obligation of the Contributing Parties As to Closing Conditions.
The Contributing Parties shall use commercially reasonable efforts to satisfy or
cause to be satisfied all closing conditions pursuant to Sections 8.01 and 8.02
which are within the reasonable control of the Contributing Parties, including,
without limitation, attempting to obtain the consent, authorization or approval
of any Person required in connection with the transactions contemplated in this
Agreement. Such consents or approvals with respect to licenses and with respect
to the License Agreements shall be subject to the specific provisions of Section
8.01(g) and Section 8.01(h), respectively.
18.03 Obligation of The Starwood Parties As to Closing Conditions. The
Starwood Parties shall use commercially reasonable efforts to satisfy or cause
to be satisfied all Closing conditions pursuant to Sections 8.01 and 8.02 which
are within the reasonable control of the Starwood Parties, including, without
limitation, obtaining the consent, authorization or approval of any Person
required in connection with the transactions contemplated in this Agreement.
ARTICLE XIX
[RESERVED]
ARTICLE XX
MISCELLANEOUS
20.01 Modifications and Waivers. This Agreement may not be changed or
terminated orally. No waiver of any party of any breach hereunder shall be
deemed a waiver of any other or subsequent breach.
20.02 Governing Law. This Agreement shall be construed, interpreted and
applied in accordance with the internal laws of the State of New York without
giving effect to doctrines relating to conflicts of laws.
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20.03 Captions etc. The titles of the Articles, Sections or subsections
of this Agreement are nor convenience only and shall not be considered or
referred to in resolving questions of interpretation or construction.
20.04 Rules of Construction. This Agreement shall be construed without
regard to any presumption or other rule requiring construction against the party
causing this Agreement to be drafted. If any words or phrases in this Agreement
shall have been stricken out or otherwise eliminated, whether or not any other
words or phrases have been added, this Agreement shall be construed as if the
words or phrases so stricken out or otherwise eliminated were never included in
this Agreement and no implication or inference shall be drawn from the fact that
such words or phrases were so stricken out or otherwise eliminated. All terms
and words used in this Agreement, regardless of the number or gender in which
they are used, shall be deemed to include any other number and any other gender
as the context may require.
20.05 Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and to their respective heirs,
executors, administrators and successors and assigns, it being the intention of
the parties not to confer any benefits hereunder upon any other persons, firms,
corporations or other entities.
20.06 Entire Agreement. This Agreement and the Exhibits and Schedules
hereto, which are incorporated in and form a part of this Agreement, contains
all of the terms agreed upon between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto.
20.07 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which shall
constitute but one and the same instrument.
20.08 Starwood Lodging Trust. The name "Starwood Lodging Trust" is a
designation of Starwood Lodging Trust and its Trustees (as Trustees but not
personally) under a Declaration of Trust dated August 25, 1969, as amended and
restated as of June 6, 1988 and as further amended subsequent thereto, which
states that all persons dealing with Starwood Lodging Trust shall look solely to
the assets of Starwood Lodging Trust for enforcement of any claims against
Starwood Lodging Trust, and the trustees, officials, agents and security holders
of Starwood Lodging Trust assume no personal liability for obligations entered
into on behalf of Starwood Lodging Trust, and their respective individual assets
shall not be subject to the claims of any person relating to such obligations.
20.09 Confidentiality and Exclusivity.
(a) Each party acknowledges that the information, observations
and data relating to the business of the other parties hereto of a proprietary
and/or confidential nature which the such party possess or which any such party
has obtained or will obtain during the course of the transactions provided for
herein are the property of such other parties ("CONFIDENTIAL INFORMATION"). Each
party agrees that it or he shall not, directly or indirectly, use for its or his
own purposes or disclose to any third party any of such Confidential Information
without the prior written consent of the other parties, unless and to the extent
that the aforementioned matters (a) become
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<PAGE> 66
generally known to and available for use by the hotel and hospitality industry
other than as a result of any party's acts or omissions to act; (b) are
rightfully received by a party from a party who was not subject to any
obligations of confidentiality; or (c) to the extent a party is required by
order of a court of competent jurisdiction (by subpoena or similar process) to
disclose or discuss any Confidential Information (provided that in such case,
such party shall promptly inform the other parties of such event, shall
cooperate with the such other parties in attempting to obtain a protective order
or to otherwise restrict such disclosure and shall only disclose Confidential
Information to the minimum extent necessary to comply with any such court
order). Notwithstanding the foregoing, after the Closing, the Starwood Parties
may use for their own purposes or disclose to any third party any Confidential
Information relating solely to the business of the Property Companies acquired
pursuant hereto without the prior written consent of the other parties hereto.
(b) During the period from the date of execution of this
Agreement to the earliest of (i) the date of termination of this Agreement, (ii)
the Closing Date, or (iii) February 15, 1997, neither the Contributing Parties
nor any Property Company will, directly or indirectly, without the prior written
consent of the Starwood Parties: (i) submit, solicit, initiate, encourage, or
pursue any proposal or offer from any Person or enter into any agreement or
accept any offer relating to any (a) reorganization, liquidation, dissolution or
recapitalization of any Property Company, (b) merger or consolidation involving
the Property Companies, (c) purchase or sale of any assets owned by, or equity
ownership interests in, any Property Company, or (d) any similar transaction or
business combination involving the Property Companies or substantially all of
the assets of any of them (each of the foregoing actions described in clauses
(a) - (d), a "RESTRICTED TRANSACTION"; or (ii) furnish any information with
respect to, assist or participate in or facilitate in any manner any Restricted
Transaction. The Contributing Parties each agree to notify the Starwood Parties
immediately if any Person makes any written proposal or offer with respect to a
Restricted Transaction to any of them or to any Property Company.
(c) The parties hereto agree that they may each suffer
irreparable harm from a breach by any other party of any of the covenants or
agreements contained herein. In the event of an alleged or threatened breach by
any party of any of the provisions of this Section 20.09, the other parties or
their successors or assigns may, in addition to all other rights and remedies
existing in their favor, apply to any court of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof. Each party agrees that the
covenants made in Section 20.09 shall be construed as an agreement independent
of any other provision of this Agreement and shall survive any order of a court
of competent jurisdiction terminating any other provision of this Agreement.
20.10 Joint Liability. The liability of SLT, SLC, SLT Financing, the
Corporation and the Trust under this Agreement shall be joint and several.
20.11 Press Releases. Except as may otherwise be required by law or
mutually agreed by the Parties, the timing and content of all press releases and
other public announcements and all announcements to the Contributing Parties'
and Property Companies customers, suppliers or licensors relating to the
transactions contemplated by the Transaction Documents shall be determined
jointly by the Starwood Parties and the Contributing Parties.
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20.12 Expiration. The offer made in this Agreement by the Starwood
Parties execute the transactions contemplated hereby shall expire, if not sooner
accepted by the Contributing Parties by execution and delivery of this
Agreement, at 5:00 P.M. E.S.T. on January 16, 1997 and shall be of no force or
effect thereafter.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
SLT:
SLT REALTY LIMITED PARTNERSHIP, a
Delaware limited partnership
By: STARWOOD LODGING TRUST, a Maryland
real estate investment trust, General Partner
By: __________________________________
Name: __________________________________
Its: __________________________________
SLT FINANCING:
SLT FINANCING PARTNERSHIP, a Delaware
general partnership
By: SLT REALTY LIMITED PARTNERSHIP, a
Delaware limited partnership
By: STARWOOD LODGING TRUST, a
Maryland real estate investment trust,
General Partner
By: __________________________________
Name: __________________________________
Its: __________________________________
<PAGE> 69
SLC:
SLT OPERATING LIMITED PARTNERSHIP,
a Delaware limited partnership
By: STARWOOD LODGING corporation, a
Maryland corporation, Managing General Partner
By: __________________________________
Name: __________________________________
Its: __________________________________
TRUST:
STARWOOD LODGING TRUST, a Maryland
real estate investment trust
By: _________________________________________
Name: _________________________________________
Its: _________________________________________
CORPORATION:
STARWOOD LODGING CORPORATION, a
Maryland corporation
By: _________________________________________
Name: _________________________________________
Its: _________________________________________
<PAGE> 70
THE PROPERTY COMPANIES
PRUDENTIAL HEI JOINT VENTURE
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II
By: ________________________________________
Gary L. Kauffman
Vice President
By: ATLANTA HOTEL ASSOCIATES, LP
By: HOSPITALITY EQUITY INVESTORS, INC.
Its Majority General Partner
By: ____________________________________
Gary M. Mendell
President
<PAGE> 71
VIRGINIA HOTEL ASSOCIATES, L.P.
By: PRUWEST NORFOLK, L.L.C., Its Partner
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Partner
By: _______________________________
Gary L. Kauffman
Vice President
By: WESTPORT NORFOLK ASSOCIATES LIMITED PARTNERSHIP
By: WESTPORT HOSPITALITY, INC.
Its General Partner
By: _________________________________
Gary M. Mendell
President
EDISON HOTEL ASSOCIATES, L.P.
By: PRUWEST EDISON, L.L.C., Its Partner
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: _______________________________
Gary L. Kauffman
Vice President
By: WESTPORT RARITAN, L.L.C., Its Partner
By: ___________________________________
Gary M. Mendell
Managing Member
<PAGE> 72
BW HOTEL REALTY, L.P.
By: PRUWEST BALTIMORE, L.L.C., Its Partner
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: ________________________________
Gary L. Kauffman
Vice President
By: WESTPORT BWI, L.L.C., Its Partner
By: ____________________________________
Gary M. Mendell
Managing Member
NOVI HOTEL ASSOCIATES, L.P.
By: PRUWEST NOVI, L.L.C., Its Partner
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: ________________________________
Gary L. Kauffman
Vice President
By: WESTPORT NOVI, L.L.C., Its Partner
By: _______________________________
Gary M. Mendell
Managing Member
<PAGE> 73
PARK RIDGE HOTEL ASSOCIATES, L.P.
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Partner
By: ____________________________________
Gary L. Kauffman
Vice President
By: WESTPORT PARK RIDGE, L.P., Its Partner
By: WESTPORT PARK RIDGE, L.L.C., Its General Partner
By: ______________________________
Gary M. Mendell
Managing Member
By: WESTPORT PARK RIDGE, L.L.C., Its Partner
By: _____________________________
Gary M. Mendell
Managing Member
LONG BEACH HOTEL ASSOCIATES, L.L.C.
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: __________________________________
Gary L. Kauffman
Vice President
By: WESTPORT LONG BEACH, L.L.C., Its Member
By: _____________________________
Gary M. Mendell
Managing Member
<PAGE> 74
CHARLESTON HOTEL ASSOCIATES, L.L.C.
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: ____________________________________________
Gary L. Kauffman
Vice President
By: WESTPORT CHARLESTON, L.L.C., Its Member
By: ____________________________________________
Gary M. Mendell
Managing Member
SANTA ROSA HOTEL ASSOCIATES, L.L.C.
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: ____________________________________________
Gary L. Kauffman
Vice President
By: WESTPORT SANTA ROSA, L.L.C., Its Member
By: ____________________________________________
Gary M. Mendell
Managing Member
<PAGE> 75
CRYSTAL CITY HOTEL ASSOCIATES, L.L.C.
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: ____________________________________________
Gary L. Kauffman
Vice President
By: WESTPORT CRYSTAL CITY, L.L.C., Its Member
By: ____________________________________________
Gary M. Mendell
Managing Member
THE CONTRIBUTING PARTIES
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
ON BEHALF OF PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II
By: _________________________________________
Gary L. Kauffman
Vice President
ATLANTA HOTEL ASSOCIATES, LP
By: HOSPITALITY EQUITY INVESTORS, INC.
Its Majority General Partner
By: ________________________________
Gary M. Mendell
President
<PAGE> 76
PRUWEST NORFOLK, L.L.C.
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: ____________________________________________
Gary L. Kauffman
Vice President
PRUWEST EDISON, L.L.C.
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: ____________________________________________
Gary L. Kauffman
Vice President
PRUWEST BALTIMORE, L.L.C.
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: ____________________________________________
Gary L. Kauffman
Vice President
PRUWEST NOVI, L.L.C.
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
on behalf of PRUDENTIAL PROPERTY INVESTMENT
SEPARATE ACCOUNT II, Its Member
By: ____________________________________________
Gary L. Kauffman
Vice President
<PAGE> 77
WESTPORT NORFOLK ASSOCIATES LIMITED PARTNERSHIP
By: WESTPORT HOSPITALITY, INC.
Its General Partner
By: ____________________________________________
Gary M. Mendell
President
WESTPORT RARITAN, L.L.C.
By: _____________________________________________________
Gary M. Mendell
Managing Member
WESTPORT BWI, L.L.C.
By: _____________________________________________________
Gary M. Mendell
Managing Member
WESTPORT NOVI, L.L.C.
By: _____________________________________________________
Gary M. Mendell
Managing Member
WESTPORT PARK RIDGE, L.P.
By: WESTPORT PARK RIDGE, L.L.C., Its General Partner
By: ____________________________________________
Gary M. Mendell
Managing Member
<PAGE> 78
WESTPORT PARK RIDGE, L.L.C.
By: _____________________________________________________
Gary M. Mendell
Managing Member
WESTPORT LONG BEACH, L.L.C.
By: _____________________________________________________
Gary M. Mendell
Managing Member
WESTPORT CHARLESTON, L.L.C.
By: _____________________________________________________
Gary M. Mendell
Managing Member
WESTPORT SANTA ROSA, L.L.C.
By: _____________________________________________________
Gary M. Mendell
Managing Member
WESTPORT CRYSTAL CITY, L.L.C.
By: _____________________________________________________
Gary M. Mendell
Managing Member
WESTPORT HOSPITALITY, INC.
By: _____________________________________________________
Gary M. Mendell
President
<PAGE> 79
WESTPORT HOLDINGS, L.L.C.
By: _____________________________________________________
Gary M. Mendell
Managing Member
By: _____________________________________________________
Murray L. Dow, II
Managing Member
By: _____________________________________________________
Orna L. Shulman
Managing Member
HOSPITALITY EQUITY INVESTORS, INC.
By: _____________________________________________________
Gary M. Mendell
President
THE GARY MENDELL FAMILY TRUST
By: _____________________________________________________
Eleanor Mendell
Trustee
ZAPCO INTEREST HOLDINGS LIMITED PARTNERSHIP
By: ZAPCO VERMONT AVENUE, INC.
Its General Partner
By: ____________________________________________
Orna L. Shulman
Vice President
<PAGE> 80
LOUDOUN INTERTECH DEVELOPMENT CORPORATION
By: _____________________________________________________
Orna L. Shulman
Vice President
_______________________________________________
Gary M. Mendell
_______________________________________________
Steve Mendell
_______________________________________________
Murray L. Dow, II
_______________________________________________
Judith K. Rushmore
_______________________________________________
Ellen-Jo Mendell
_______________________________________________
Orna L. Shulman
_______________________________________________
Felix J. Cacciato, Jr.
_______________________________________________
Arthur C. Green
_______________________________________________
Mark J. Rosinsky
_______________________________________________
Randi L. Rosinsky
<PAGE> 81
_______________________________________________
John Daily
_______________________________________________
Michael D. Hall
_______________________________________________
Harvey Moore
_______________________________________________
Tracey Driscoll
_______________________________________________
Tom Clearwater
<PAGE> 82
LIST OF SCHEDULES
Schedule A-1 Contributing Parties and Property Company Interests
Schedule A-2 Property Companies and Hotels
Schedule B Contributed Assets and SLC Limited Partnership Interests
Schedule C Property Company Interests Contributed to SLT Financing
Schedule D Property Company Interests Contributed to SLT and SLT
Limited
Partnership Interests
Schedule E Conversion of Partnership Interests Into Paired Shares
Schedule 1.01 Land
Schedule 1.02(c) Assumed Debt
Schedule 1.02(w) FF&E Reserve Accounts
Schedule 1.02(gg) Knowledge Persons
Schedule 1.02(jj) License Agreements
Schedule 1.02(ll) Management Agreements
Schedule 1.02(yy) Proprietary Rights
Schedule 1.02 (ddd) Tradenames
Schedule 2.03 Allocation of Contribution Amount
Schedule 3.01 Unpermitted Title Exceptions
Schedule 7.01(b) Capitalization of Property Companies
Schedule 7.01(c) Tax Matters
Schedule 7.01(d) Insurance Policies
Schedule 7.01(e) Single Purpose Entity Exceptions
Schedule 7.01(f) Leases
Schedule 7.01(h) Contracts
Schedule 7.01(i) Employee Matters
Schedule 7.01(k) Real Estate Taxes
Schedule 7.01(l) Interests in the Property
Schedule 7.01(m) Litigation (Contributing Parties)
Schedule 7.01(q) Financial Statements
Schedule 7.01(r) Events Subsequent to November 28, 1996
Schedule 7.01(s) Liabilities (Contributing Parties)
Schedule 7.01(u) Environmental Matters, Environmental Reports
Schedule 7.01(x) Non-Accredited Investors (Contributing Parties)
Schedule 7.01(z) Property Company Constituent Documents
Schedule 7.02(d) Partnership Constituent Documents
Schedule 7.02(e) Litigation (Partnerships)
Schedule 7.02(f) Rights or Commitments as to Partnership Units
Schedule 7.02(g) Liabilities (Partnerships)
Schedule 7.02(h) Conduct (Partnerships)
Schedule 7.02(i) Employee Benefit Plans (Partnerships)
<PAGE> 83
Schedule 7.03(d) Corporation Constituent Documents
Schedule 7.03(e) Litigation (Corporation)
Schedule 7.03(f) Rights or Commitments as to Corporation Shares
Schedule 7.03(g) Liabilities (Corporation)
Schedule 7.03(h) Conduct (Corporation)
Schedule 7.03(k) Employee Benefit Plans (Corporation)
Schedule 7.04(d) Trust Constituent Documents
Schedule 7.04(e) Litigation (Trust)
Schedule 7.04(f) Rights or Commitments as to Trust Shares
Schedule 7.04(g) Liabilities (Trust)
Schedule 7.04(h) Conduct (Trust)
Schedule 7.04(k) Employee Benefit Plans (Trust)
<PAGE> 1
Exhibit 10.5
Closing Item No. A-2
1997A
AMENDED AND RESTATED INSTALLMENT SALE AGREEMENT
Between
PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT
and
SLT REALTY LIMITED PARTNERSHIP
Dated as of February 1, 1997
(Relating to a Project situate in
the City of Philadelphia, Pennsylvania)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
I. Background, Representations and Findings............................. 1
1.1 Background........................................................... 1
1.2 Company Representations.............................................. 2
1.3 Issuer Representations and Findings.................................. 3
II. Project Facilities................................................... 4
2.1 Transfer of Project Facilities....................................... 4
2.2 Construction of Future Improvements to Project Facilities............ 4
2.3 Provisions with Respect to Title..................................... 4
2.4 Administration of Contracts.......................................... 5
2.5 Notices and Permits.................................................. 5
2.6 Additions and Changes to the Project Facilities...................... 5
III. Financing the Project................................................ 5
3.1 Issuance of Bonds; Additional Financing.............................. 5
3.2 Bond Fund............................................................ 6
3.3 Bonds Not to Become Arbitrage Bonds.................................. 6
3.4 Restriction on Use of Bond Fund...................................... 6
IV. Sale and Purchase of the Project Facilities.......................... 6
4.1 Sale and Purchase of the Project Facilities.......................... 6
4.2 Security Interest.................................................... 7
4.3 Payment of Purchase Price............................................ 7
4.4 Acceleration of Payment to Redeem Bonds.............................. 7
4.5 No Defense or Set-Off................................................ 7
4.6 Settlement........................................................... 8
4.7 Assignment of Issuer's Rights........................................ 8
V. Covenants of the Company............................................. 9
5.1 Maintenance and Operation of the Project Facilities.................. 9
5.2 Maintenance of Existence............................................. 9
5.3 Payment of Trustee's and Remarketing Agent's Compensation and
Expenses........................................................... 10
5.4 Payment of Issuer's Fees and Expenses................................ 10
5.5 Condemnation of Project Facilities................................... 10
5.6 Damage to Project Facilities......................................... 10
5.7 Indemnity Against Claims............................................. 11
5.8 Taxes, Other Governmental Charges and Utility Charges................ 12
5.9 Insurance............................................................ 13
5.10 Prohibition of Liens................................................. 13
</TABLE>
(i)
<PAGE> 3
<TABLE>
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<S> <C>
5.11 Granting of Easements................................................ 14
5.12 Compliance with Laws................................................. 15
5.13 Recording Instruments................................................ 15
5.14 Filing of Financing Statements....................................... 15
5.15 Notice and Certification With Respect to Bankruptcy Proceedings...... 16
5.16 Continuing Disclosure................................................ 16
5.17 Representations as to Environmental Matters.......................... 17
5.18 Covenants as to Environmental Matters................................ 17
5.19 Certain Definitions.................................................. 17
5.20 Covenants of the Company with Respect to Federal Tax-Exempt Status
of Bonds........................................................... 18
5.21 Annual Certificate of the Company.................................... 19
VI. Events of Default and Remedies....................................... 19
6.1 Events of Default; Acceleration...................................... 19
6.2 Payment of Purchase Price on Default; Suit Therefor.................. 21
6.3 Other Remedies....................................................... 22
6.4 Waiver............................................................... 23
6.5 Cumulative Rights.................................................... 23
VII. Miscellaneous........................................................ 23
7.1 Receipt of Indenture................................................. 23
7.2 Limitation of Liability of the Issuer................................ 23
7.3 Notices.............................................................. 24
7.4 Severability......................................................... 24
7.5 Applicable Law....................................................... 24
7.6 Assignment........................................................... 24
7.7 Amendments........................................................... 25
7.8 Term of Agreement.................................................... 25
7.9 No Warranty of Condition or Suitability by the Issuer................ 25
7.10 Adjustments.......................................................... 25
7.11 Zoning............................................................... 26
7.12 Company's Federal Income Taxation.................................... 26
7.13 Amounts Remaining in Debt Service Fund............................... 26
7.14 Survival of Covenants, Conditions and Representations................ 26
7.15 Headings............................................................. 26
7.16 Exculpatory Clause................................................... 26
7.17 Waiver of Distraint.................................................. 26
7.18 Survival of Agreement................................................ 27
I. Background, Representations and Findings............................. 1
1.1 Background........................................................... 1
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
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<S> <C>
1.2 Company Representations.............................................. 2
1.3 Issuer Representations and Findings.................................. 3
II. Project Facilities................................................... 4
2.1 Transfer of Project Facilities....................................... 4
2.2 Construction of Future Improvements to Project Facilities............ 4
2.3 Provisions with Respect to Title..................................... 4
2.4 Administration of Contracts.......................................... 5
2.5 Notices and Permits.................................................. 5
2.6 Additions and Changes to the Project Facilities...................... 5
III. Financing the Project................................................ 5
3.1 Issuance of Bonds; Additional Financing.............................. 5
3.2 Bond Fund............................................................ 6
3.3 Bonds Not to Become Arbitrage Bonds.................................. 6
3.4 Restriction on Use of Bond Fund...................................... 6
IV. Sale and Purchase of the Project Facilities.......................... 6
4.1 Sale and Purchase of the Project Facilities.......................... 6
4.2 Security Interest.................................................... 7
4.3 Payment of Purchase Price............................................ 7
4.4 Acceleration of Payment to Redeem Bonds.............................. 7
4.5 No Defense or Set-Off................................................ 7
4.6 Settlement........................................................... 8
4.7 Assignment of Issuer's Rights........................................ 8
V. Covenants of the Company............................................. 9
5.1 Maintenance and Operation of the Project Facilities.................. 9
5.2 Maintenance of Existence............................................. 9
5.3 Payment of Trustee's and Remarketing Agent's Compensation and
Expenses........................................................... 10
5.4 Payment of Issuer's Fees and Expenses................................ 10
5.5 Condemnation of Project Facilities................................... 10
5.6 Damage to Project Facilities......................................... 10
5.7 Indemnity Against Claims............................................. 11
5.8 Taxes, Other Governmental Charges and Utility Charges................ 12
5.9 Insurance............................................................ 13
5.10 Prohibition of Liens................................................. 13
5.11 Granting of Easements................................................ 14
5.12 Compliance with Laws................................................. 15
5.13 Recording Instruments................................................ 15
5.14 Filing of Financing Statements....................................... 15
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
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<S> <C>
5.15 Notice and Certification With Respect to Bankruptcy Proceedings...... 15
5.16 Continuing Disclosure................................................ 16
5.17 Representations as to Environmental Matters.......................... 16
5.18 Covenants as to Environmental Matters................................ 17
5.19 Certain Definitions.................................................. 17
5.20 Covenants of the Company with Respect to Federal Tax-Exempt Status
of Bonds............................................................. 18
5.21 Annual Certificate of the Company.................................... 19
VI. Events of Default and Remedies....................................... 19
6.1 Events of Default; Acceleration...................................... 19
6.2 Payment of Purchase Price on Default; Suit Therefor.................. 21
6.3 Other Remedies....................................................... 21
6.4 Waiver............................................................... 23
6.5 Cumulative Rights.................................................... 23
VII. Miscellaneous........................................................ 23
7.1 Receipt of Indenture................................................. 23
7.2 Limitation of Liability of the Issuer................................ 23
7.3 Notices.............................................................. 23
7.4 Severability......................................................... 24
7.5 Applicable Law....................................................... 24
7.6 Assignment........................................................... 24
7.7 Amendments........................................................... 25
7.8 Term of Agreement.................................................... 25
7.9 No Warranty of Condition or Suitability by the Issuer................ 25
7.10 Adjustments.......................................................... 25
7.11 Zoning............................................................... 25
7.12 Company's Federal Income Taxation.................................... 26
7.13 Amounts Remaining in Debt Service Fund............................... 26
7.14 Survival of Covenants, Conditions and Representations................ 26
7.15 Headings............................................................. 26
7.16 Exculpatory Clause................................................... 26
7.17 Waiver of Distraint.................................................. 26
7.18 Survival of Agreement................................................ 26
</TABLE>
(iv)
<PAGE> 6
THIS AMENDED AND RESTATED INSTALLMENT SALE AGREEMENT, dated as of
February 1, 1997 (this "Agreement"), by and between THE PHILADELPHIA AUTHORITY
FOR INDUSTRIAL DEVELOPMENT (the "Issuer") and SLT REALTY LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Company"), provides as follows:
I. Background, Representations and Findings.
1.1 Background.
(a) The Issuer is a public instrumentality of the Commonwealth
of Pennsylvania and a body corporate and politic organized and existing under
the Pennsylvania Economic Development Financing Law, Act of August 23, 1967,
P.L. 251, as amended and supplemented, 73 P.S. Sections 371 et seq. (the
"Act"). Under the Act, the Issuer is authorized to enter into agreements
providing for the acquisition of industrial and commercial development projects
and the sale thereof to occupants for the public purposes of alleviating
unemployment and maintaining employment at a high level and creating and
developing employment opportunities by the acquisition and financing of
industrial, commercial, manufacturing and research and development enterprises.
(b) The Issuer has undertaken the financing of the costs of a
project (the "Project") consisting of the acquisition of certain real property
and the improvements thereon fronting on Island Avenue and otherwise abutting a
loop egress ramp from Interstate 95 in Philadelphia, Pennsylvania (the
"Premises"), the construction and installation of certain improvements and
equipment in and on the Premises (the Premises, together with such improvements
and equipment being hereinafter referred to as the "Project Facilities"), and
the sale of the Project Facilities to the Company for use and operation by the
Company or its designee as a suite hotel. A more complete description of the
Project Facilities and the Premises are set forth in Exhibit "A" attached to
this Agreement. The Issuer and Philadelphia HSR Limited Partnership, a
Massachusetts limited partnership ("HSR"), entered into an Installment Sale
Agreement (the "Original Agreement"), dated as of October 1, 1983, for the sale
of the Project Facilities to HSR on an installment basis. To finance the
Project, the Issuer issued its Commercial Development Revenue Bonds (Suite Hotel
Project), Series A in the aggregate principal amount of $27,275,000 (the "Prior
Bonds") under a Mortgage and Trust Indenture dated as of October 1, 1983 between
the Issuer and Mellon Bank, N.A. (as successor trustee to CoreStates Bank, N.A.,
which was successor by merger to First Pennsylvania Bank, N.A.), as trustee (the
"Prior Trustee"), as amended and supplemented by a Supplemental Mortgage and
Trust Indenture dated as of June 1, 1991 (collectively, the "Original
Indenture") between the Issuer and the Prior Trustee.
<PAGE> 7
(c) HSR transferred its equity interests in the Project
Facilities to the Company and has assigned to the Company all of its rights,
title, interests and obligations in, to and under the Original Agreement and the
Original Indenture pursuant to an Assignment and Assumption Agreement dated as
of June 3, 1996 between HSR and the Company.
(d) The Company has requested and the Issuer has proposed to
provide for the current refunding of the Prior Bonds through the issuance of up
to $27,820,000 aggregate principal amount of the Issuer's Commercial Development
Revenue Refunding Bonds (Doubletree Guest Suites Project) Series 1997A (the
"Bonds"). The Issuer and the Company intend that the interest on the Bonds will
not be included in gross income under the Internal Revenue Code of 1986, as
amended.
(e) The Issuer and First Union National Bank, as trustee (the
"Trustee"), have simultaneously herewith entered into an Amended and Restated
Mortgage and Trust Indenture dated as of the date hereof (the "Indenture") for
the purposes of amending and restating in its entirety the Original Indenture
and to provide for the issuance of and security for the Bonds.
(f) The Issuer has requested and SLT Realty Limited
Partnership, a Delaware limited partnership (the "Guarantor"), has proposed to
irrevocably and unconditionally guaranty the full and prompt payment of the
principal of, interest on, and premium, if any, on the Bonds by entering into a
Guaranty Agreement dated as of February 1, 1997 between the Guarantor and the
Trustee.
(g) The Issuer and the Company hereby enter into this
Agreement for the purposes of amending and restating in its entirety the
Original Agreement and providing for the sale of the Project Facilities to the
Company for purchase price amounts sufficient to pay the principal, interest and
premium, if any, due on the Bonds.
1.2 Company Representations. The Company represents that:
(a) The Company is a limited partnership duly organized and
existing in good standing under the laws of the State of Delaware, is authorized
to conduct business in the Commonwealth of Pennsylvania and has full power and
legal right to enter into this Agreement and perform its obligations hereunder.
The making and performance of this Agreement on the Company's part have been
duly authorized by all requisite action and will not violate or conflict with
its Partnership Agreement or any governmental rule or regulation or with any
agreement, instrument or document by which the Company or any of its properties
is bound.
2
<PAGE> 8
(b) The refinancing of the Project Facilities, as provided
under this Agreement, will tend to promote the employment and general welfare of
the residents of the City of Philadelphia and the Commonwealth of Pennsylvania
by promoting the continuation and expansion of gainful employment opportunities
for such residents.
(c) The Company intends to operate the Project Facilities as a
commercial development project within the meaning of the Act.
1.3 Issuer Representations and Findings. The Issuer hereby confirms
its findings and represents that:
(a) The Issuer is a public body corporate and politic
established in the Commonwealth of Pennsylvania pursuant to the Act, is
authorized and empowered by the provisions of the constitution and laws of the
Commonwealth of Pennsylvania (including the Act) and its resolutions dated
January 21, 1997 and February 18, 1997, to enter into the transactions
contemplated by this Agreement and to carry out its obligations hereunder. The
Project Facilities constitute and will constitute a commercial development
project within the meaning of the Act.
(b) The Company as the equitable owner of the Project
Facilities is engaged in commercial activities in the Commonwealth of
Pennsylvania requiring substantial capital and creating substantial employment
opportunities, and its operations contribute to economic growth and the creation
of employment opportunities in the Commonwealth of Pennsylvania. The Company is
financially responsible to assume its obligations prescribed by this Agreement
and the Act and is qualified to be a commercial occupant for purposes of the
Act.
(c) The Project Facilities will promote the health, safety and
general welfare of the people of the Commonwealth of Pennsylvania and the public
purposes of the Act by alleviating unemployment and by maintaining employment at
a high level and creating and developing employment opportunities in the
Commonwealth of Pennsylvania.
(d) The Project Facilities are located wholly within the
boundaries of the City of Philadelphia, Pennsylvania.
(e) The Project Facilities have been approved by the
Pennsylvania Department of Community and Economic Development (formerly the
Pennsylvania Department of Commerce) as required by the Act.
(f) The Project Facilities have been approved by a publicly
elected local official as required by the Act, after a public hearing held upon
reasonable notice.
3
<PAGE> 9
(g) The issuance of the Bonds and the execution of this
Agreement and the Indenture have been approved by the Issuer at a duly
constituted meeting.
(h) Except as otherwise permitted by this Agreement, the
Issuer covenants that it has not and will not pledge the income and revenues
derived from this Agreement other than to secure the Bonds.
II. Project Facilities.
2.1 Transfer of Project Facilities. The Company hereby grants,
conveys and assigns to the Issuer and the Trustee all of the right, title and
interest which it may have in and to the Project Facilities. Upon request of the
Issuer or the Trustee, the Company will grant, convey and assign, or cause to be
granted, conveyed and assigned, to the Issuer and the Trustee, by deed, bill of
sale, lease, assignment, license, grant of easement or other appropriate
instrument, such interest as it may have in the Project Facilities and such
additional rights as the Issuer or the Trustee shall require in order to comply
with the Act. The Company will be entitled to physical possession and control of
the Project Facilities, the Premises and all machinery, equipment, improvements,
fixtures and all other tangible personal property thereon, at all times prior,
during and subsequent to such granting, conveyance and assignment, and will be
liable at all such times for all risks, losses and damages with respect to the
Project Facilities and the Premises. The Issuer and the Trustee agree that,
without the prior written consent of the Company, it will not create any lien,
encumbrance, charge, easement, license, covenant, reversion, condition or
restriction upon the Project Facilities other than the security intended to be
given under the Indenture.
2.2 Construction of Future Improvements to Project Facilities. The
Company may award contracts and purchase orders covering construction for future
improvements of the Project Facilities. Any contracts and purchase orders so
awarded are hereinafter called the "Contracts." Each Contract for construction
will contain a valid waiver by the contractor of the right to file and maintain
any mechanic's liens on the Project Facilities, which waiver shall be filed
before commencement of work in the office of the Prothonotary of the City of
Philadelphia. The Company will pay all sums required to complete the same to the
extent that the cost thereof is not provided pursuant to the Indenture.
2.3 Provisions with Respect to Title. Any Contracts will provide
that legal title to the equipment included in the Project Facilities shall pass
directly from the Contractor to the Issuer, and at no time shall legal title to
any portion of the Project Facilities vest in, nor become the property of, the
Company. The Company agrees that title to the Project Facilities will remain in
the Issuer until settlement pursuant to Section 4.6 hereof, and that the
Issuer's title to the Project Facilities shall constitute ownership and not a
security interest; provided, however, that the Company alone shall be entitled
to deduct all depreciation on,
4
<PAGE> 10
and take any available tax credits in respect of, the Project Facilities on the
Company's income tax returns.
2.4 Administration of Contracts. The Company will have full
responsibility for preparing, administering, amending and enforcing any
Contracts and litigating or settling claims thereunder, and will be entitled to
all warranties, guaranties and indemnities provided under any Contracts and by
law. Subject to the provisions of Section 2.6 hereof, the Company may make
additions to or changes in the Project Facilities without prior consultation
with the Issuer or the Trustee (as hereinafter defined).
2.5 Notices and Permits. The Company shall give or cause to be given
all notices and comply or cause compliance with all laws, ordinances, municipal
rules and regulations and requirements of public authorities applying to or
affecting the conduct of work on the Project Facilities, and the Company will
defend and save the Issuer, its officers, members, agents and employees,
harmless from all fines due to failure to comply therewith. The Company shall
procure or cause to be procured all permits and licenses necessary for the
prosecution of the work.
2.6 Additions and Changes to the Project Facilities. The Company
may, at its option and at its own cost and expense, at any time and from time to
time, make such improvements, additions and changes to the Project Facilities as
it may deem to be desirable for its uses and purposes, provided that: (i) such
improvements, additions and changes shall constitute part of the Project
Facilities and be subject to the liens and security interests created by the
Indenture; and (ii) the Company shall not permit any removal, demolition,
substitution, improvement, alteration or deterioration of the Project Facilities
or any other act which would materially impair or reduce the usefulness or value
thereof, or the Issuer's interest therein, or the security provided under the
Indenture without the prior written consent of the Issuer and the Trustee. The
Company will revise Exhibit "A" from time to time to reflect any material
additions to, deletions from and changes in the Project Facilities and will
notify the Issuer and the Trustee of the nature, location and estimated costs of
such modifications. Upon written request of the Company, the Issuer shall give a
bill of sale to the Company, and the Trustee shall execute termination
statements for any filings made to perfect the security interests created by the
Indenture and by Section 4.2 hereof for any chattel or fixture permanently
removed from the Project Facilities by the Company.
III. Financing the Project.
3.1 Issuance of Bonds; Additional Financing. In order to refinance
the Project Facilities, the Issuer, upon request of the Company, will use its
best efforts to issue and sell, in one or more series, $27,820,000 aggregate
principal amount of its Commercial Development Revenue Refunding Bonds
(Doubletree Guest Suites Project) Series 1997A.
5
<PAGE> 11
The Bonds will be issued under and secured by the Indenture, intended to be
recorded in the Department of Records in and for the City of Philadelphia prior
to the recordation of this Agreement. The Company agrees that its interest in
the Project Facilities and its rights hereunder are and shall be subordinate to
the rights of the Trustee under the Indenture, and agrees to comply with and be
bound by all of the provisions thereof that are binding upon the Issuer. The
Company hereby agrees to make all payments of the Purchase Price (as defined in
Section 4.3 hereof) and other amounts due hereunder to enable the Issuer to make
all payments required of it under the Bonds and the Indenture. The Bonds will be
payable solely from payments made by the Company pursuant to the terms hereof,
or from other moneys available for such purpose under the terms of the
Indenture. The net proceeds of the Bonds shall be applied pursuant to Section
3.2 hereof and Section 4.02 of the Indenture.
3.2 Bond Fund. Upon the issuance of the Bonds, the Company will
provide the Prior Trustee $1,207,356.64 which, together with the proceeds of the
Bonds in the amount of $27,264,712.80, will be used to pay the principal of and
accrued interest on the Prior Bonds on February 20, 1997. The Company shall
deposit monies with the Trustee in the Bond Fund in amounts sufficient for the
payment of Costs of issuance as provided in Section 3.04 of the Indenture.
3.3 Bonds Not to Become Arbitrage Bonds. As provided in Article V of
the Indenture, the Trustee will invest moneys held by the Trustee as directed by
the Company. The Issuer and the Company hereby covenant to each other and to the
holders of the Bonds that, notwithstanding any other provision of this Agreement
or any other instrument, they will neither make nor instruct the Trustee to make
any investment or other use of the Debt Service Fund or other proceeds of the
Bonds which would cause the Bonds to be arbitrage bonds under Section 148 of the
Code and the regulations thereunder, and that they will comply with the
requirements of such Section and regulations throughout the terms of the Bonds.
The Company shall not resell any Bonds purchased by it pursuant to Section 6.06
of the Indenture at a price in excess of the principal amount thereof unless it
shall have first delivered to the Trustee an opinion of nationally recognized
bond counsel satisfactory to the Trustee to the effect that such resale will not
cause interest on the Bonds to become subject to Federal income tax under the
Code, as then enacted and construed.
3.4 Restriction on Use of Bond Fund. The Company shall not use or
direct the use of moneys from the Bond Fund in any way, or take or omit to take
any other action, so as to cause the interest on any Bonds to become subject to
Federal income tax, and shall use all of the spendable proceeds of the Bonds to
refund the Prior Bonds.
IV. Sale and Purchase of the Project Facilities.
4.1 Sale and Purchase of the Project Facilities. The Issuer hereby
agrees to sell to the Company, who hereby agrees to purchase, the Project
Facilities under and subject
6
<PAGE> 12
nevertheless, to all easements, covenants, reversions, conditions and
restrictions existing at the time of settlement pursuant to Section 4.6 hereof,
for the Purchase Price set forth in Section 4.3 hereof.
4.2 Security Interest. In order to secure its obligations hereunder,
the Company hereby assigns, transfers, sets over and grants to the Issuer and
the Trustee a security interest in all of the Company's right, title and
interest which it may have in and to the Project Facilities consisting of
equipment, including without limitation all equipment described in Exhibit A
whether now owned or hereafter acquired by the Company, and in all fixtures,
fittings, furnishings, furniture, machinery, appliances, apparatus, equipment,
rents, contracts, permits, licenses, leases, income and accounts now owned or
hereafter acquired by the Company and located in or on the Project Facilities,
all substitutions and replacements therefor, and all proceeds thereof, including
all insurance and condemnation proceeds. The terms of this Section 4.2 shall
constitute a security agreement within the meaning of the Pennsylvania Uniform
Commercial Code. The terms of this Section 4.2 shall not apply to any such
equipment or other personal property which is now or hereafter leased by the
Company or is subject to a purchase money security interest.
4.3 Payment of Purchase Price. The Company shall pay or cause to be
paid as set forth in this Section 4.3 the purchase price (the "Purchase Price")
for the Project Facilities. The Purchase Price will be an amount equal to the
principal or applicable redemption price of, and interest on, the Bonds. The
Purchase Price shall be payable in installments which, as to amount, correspond
to the payments of the principal or applicable redemption price of, and interest
on, the Bonds. All such installments of the Purchase Price are to be made to the
Trustee on or prior to the corresponding principal, redemption or interest
payment dates of the Bonds in funds available for payment, on such Bond payment
dates. If the Company fails to make any payment or fails to make any complete
payment required pursuant to this Section 4.3, the Trustee shall demand payment
of such deficiency or non-payment from the Guarantor under the Guaranty.
Payments of the principal or applicable redemption price of and interest on the
Bonds from any moneys held by the Trustee in the Debt Service Fund established
under the Indenture shall constitute payments of Purchase Price on behalf of the
Company.
4.4 Acceleration of Payment to Redeem Bonds. Whenever any Bonds are
subject to optional redemption pursuant to the Indenture, the Issuer will, upon
receipt of written direction of the Company, direct the Trustee to call the same
for redemption as provided in the Indenture. Whenever any Bonds are subject to
mandatory redemption pursuant to the Indenture, the Company will cooperate with
the Issuer and the Trustee in effecting such redemption.
4.5 No Defense or Set-Off. Except as provided in Section 7.16
hereof, the obligations of the Company to make or cause to be made payments of
the Purchase Price
7
<PAGE> 13
shall be absolute and unconditional without defense or set-off (except for the
defense of actual payment) by reason of any default by the Issuer under this
Agreement or under any other agreement between the Company and the Issuer or for
any other reason, including without limitation, any acts or circumstances that
may constitute failure of consideration, destruction of or damage to the Project
Facilities, commercial frustration of purpose, or failure of the Issuer to
perform and observe any agreement, whether express or implied, or any duty,
liability or obligation arising out of or connected with this Agreement, it
being the intention of the parties that the payments required of or on behalf of
the Company hereunder will be paid in full when due without any delay or
diminution whatsoever. Payments of the Purchase Price and additional sums
required to be paid by or on behalf of the Company hereunder shall be received
by the Issuer or its assigns as net sums and the Company agrees to pay or cause
to be paid all charges against or which might diminish such net sums.
4.6 Settlement. Settlement for the Project Facilities shall take
place within 60 days after (i) the Company shall have paid or caused to be paid
all amounts to be paid by or on behalf of the Company under the terms of this
Agreement and (ii) the Indenture shall have been released pursuant to Section
12.01 thereof; provided that no Event of Default as defined herein has occurred
and is continuing, and provided that settlement shall be held only after the
Company gives 10 days prior written notice to the Issuer of said settlement,
said notice to be given by the Company not later than 10 days prior to the
expiration of said 60-day period. In the event the Company refuses to take and
record title to the Project Facilities within the aforesaid 60-day period, the
Company shall pay to the Issuer, or its agent, a service charge of $100.00 per
month until such time as the Company accepts and records title to the Project
Facilities. At settlement, the Issuer will convey to the Company by special
warranty deed and bill of sale the Project Facilities excepting, however, any
part of the Project Facilities taken by eminent domain (or conveyed by a bona
fide sale in lieu thereof) during the term of this Agreement and subject,
nevertheless, to all easements, covenants, reversions, conditions and
restrictions, existing at the time of the conveyance to the Issuer pursuant to
the Original Indenture and the Original Agreement, or thereafter created or
agreed to by the Company. The Company agrees to pay all taxes, charges and
costs, including but not limited to reasonable legal fees, recording fees,
notary fees and any other similar fees and charges which must be paid in order
to complete settlement and in connection with the conveyance of the interest of
the Issuer in the Project Facilities from the Issuer to the Company hereunder
and, with respect to the Indenture and any other mortgage lien created by the
Issuer with the Company's consent, all mortgage satisfaction costs and fees.
4.7 Assignment of Issuer's Rights. As security for the payment of
the Bonds, the Issuer will assign to the Trustee all the Issuer's rights under
this Agreement (except the rights of the Issuer under Sections 5.4 and 5.7
hereof). The Company consents to such assignment and agrees to make or cause to
be made payments of the Purchase Price under Sections 4.3 and 4.4 hereof
directly to the Trustee without defense or set-off by reason
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of any dispute between the Company and the Trustee. Whenever the Company is
required to obtain the consent of the Issuer hereunder, the Company shall also
obtain the consent of the Trustee.
V. Covenants of the Company.
5.1 Maintenance and Operation of the Project Facilities.
(a) During the term of this Agreement, the Company will at its
own cost and expense keep and maintain, or cause to be kept and maintained, in
good repair and condition (excepting reasonable wear and tear) the Project
Facilities and all additions and improvements thereto, and pay, or cause to be
paid, any utility charges and other costs and expenses arising out of its use of
the Project Facilities, and will maintain and cause to be operated the Project
Facilities as a "commercial facility" (as defined in the Act), provided this
covenant shall not require the Company to operate any portion of the Project
Facilities after it is no longer economical and feasible, in the Company's
judgment, to do so and shall not prevent the Company from selling all or any
portion of the Project Facilities. This covenant is personal to the Company and
its successors or subsidiaries and will not be binding upon purchasers of any
portions of the Company's properties. The Company may from time to time enter
into management agreements, franchise agreements, license agreements and other
similar agreements with respect to operation of the Project Facilities,
including that lease agreement with SLC Operating Limited Partnership regarding
the Project Facilities.
(b) The Company agrees to timely pay for any improvements to
the Project Facilities lawfully done or lawfully ordered to be done by any
municipal, state or Federal authority and to comply in all material respects at
its own cost and expense with all lawful and enforceable notices received from
public authorities from and after the date hereof, which affect the Project
Facilities and the use and operation thereof, other than those improvements,
orders and notices, the amount, validity or application of which is at the time
being contested, in whole or in part, in good faith by appropriate proceedings
promptly initiated and diligently conducted.
5.2 Maintenance of Existence.
(a) So long as settlement pursuant to Section 4.6 hereof has
not occurred, the Company will maintain its existence and its qualification to
do business in Pennsylvania, except that it may (i) admit additional general
partners and limited partners, (ii) permit the withdrawal of limited partners
and (iii) with the consent of the Issuer and the Trustee, permit the withdrawal
of one or more of the general partners, if such partnership transfers do not
have an adverse effect on the tax-exempt status of interest on the Bonds.
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(b) In the event that Starwood Lodging Trust, a Maryland real
estate investment trust, the sole general partner of the Company, liquidates or
dissolves during any time when the Company is the equity owner of the Project
Facilities, voluntarily or involuntarily, the Bonds will immediately be subject
to redemption at the option of the Company, in whole, pursuant to the Indenture.
5.3 Payment of Trustee's and Remarketing Agent's Compensation and
Expenses. The Company will pay the Trustee's reasonable compensation and
expenses under the Indenture, including all costs of redeeming Bonds thereunder,
and will indemnify the Trustee, as provided in Section 9.04 of the Indenture.
The Company will pay the Remarketing Agent's reasonable compensation and
expenses under the Indenture, including all costs of remarketing Bonds
thereunder, and will indemnify the Remarketing Agent as provided in the
Remarketing Agreement.
5.4 Payment of Issuer's Fees and Expenses. Except to the extent
payment is provided from the proceeds of the Bonds, the Company will pay the
Issuer's standard administration fees and all reasonable expenses, including
legal and accounting fees, incurred by the Issuer in connection with the
issuance of the Bonds, and the performance by the Issuer of its functions and
duties under this Agreement and the Indenture. The Issuer's standard
administration fees in respect of this Agreement are $41,730 (all of which has
been prepaid) payable upon the execution and delivery of this Agreement, plus 1%
of each payment of interest on the Bonds made pursuant to the Indenture payable
at the Issuer's address hereinafter set forth at the respective times such
payments of interest on the Bonds are payable.
5.5 Condemnation of Project Facilities. In the event that the
Project Facilities or a portion thereof are condemned by a third party in the
exercise of the power of eminent domain (or a bona fide sale in lieu of such
condemnation shall have occurred), the Company covenants that it will deposit
the proceeds received from the condemnation or sale of the Project Facilities
with the Trustee and if no Event of Default under the Indenture has occurred and
is continuing, the Company may elect to apply the condemnation or sale proceeds
to the costs of replacing the portion of the Project Facilities which is the
subject of such condemnation, or, if permitted by the terms of the Bonds, to the
redemption of the Bonds then Outstanding.
5.6 Damage to Project Facilities. In the event of damage to or
destruction of part or all of the Project Facilities, the Company shall either:
(i) restore the Project Facilities as nearly as practicable to their condition
immediately before such damage or destruction or (ii) if permitted by the terms
of the Bonds, exercise within one year of the date of such occurrence its option
to request the Issuer to call the Bonds for redemption. Damage to or destruction
of all or a portion of the Project Facilities, or condemnation of all or any
part of the Premises, shall not terminate this Agreement, or cause any abatement
of or
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reduction in the payments to be made by or on behalf of the Company or otherwise
affect the respective obligations of the Issuer or the Company, except as set
forth in this Agreement. In the event of damage to or destruction of the Project
Facilities or any part thereof, the proceeds of any insurance policies required
to be maintained under Section 5.9(a) hereof shall be paid to the Trustee, and
if no Event of Default as defined herein or in the Indenture has occurred and is
continuing, shall be applied, at the election of the Company and in the manner
directed by the Company, to the repair or restoration of the portion of the
Project Facilities which is the subject of such damage or destruction or, if the
Company has elected to have Bonds called for redemption, as a prepayment of the
Purchase Price. If the Issuer or the Company is the payee, or one of the payees,
of any check or other instrument representing payment of any insurance proceeds
referred to in this Section 5.6, the Issuer or Company will endorse the same to
the order of the Trustee and deliver the same to the Trustee; and if the Issuer
or the Company fails to do so, the Issuer and the Company hereby irrevocably
authorize any officer or employee of the Trustee to endorse and deliver the same
as the Issuer's or Company's attorney-in-fact.
5.7 Indemnity Against Claims. In the exercise of the power of the
Issuer and its members and officers and employees and agents hereunder including
(without limiting the foregoing) the application of moneys, the investment of
funds and the letting or other disposition of the Project Facilities in the
event of default by the Company, neither the Issuer nor its members, officers,
employees or agents shall be accountable to the Company for any action taken or
omitted by it or its members or officers or employees or agents in good faith
and believed by it or them to be authorized or within the discretion or rights
or powers conferred. The Issuer, its officers, members, employees and agents
shall be protected in its or their acting upon any paper or document believed by
it or them to be genuine, and it or they may conclusively rely upon the advice
of counsel and may (but need not) require further evidence of any fact or matter
before taking any action. No recourse shall be had by the Company for any claims
based thereon or under the Indenture against any member or officer of the Issuer
alleging personal liability on the part of such person unless such claims are
based upon the bad faith, fraud or deceit of such person. The Company will
indemnify and hold harmless the Issuer and each member, officer, employee and
agent of the Issuer against any and all claims, losses, damages or liabilities,
joint and several, to which the Issuer or any member or officer or employee or
agent of the Issuer may become subject, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of the Project or the
Project Facilities or are based upon other alleged acts or omissions in
connection with the Project or the Project Facilities by the Issuer unless the
losses, damages or liabilities arise from bad faith, fraud or deceit of the
member, officer, employee or agent of the Issuer to be indemnified. In the event
any claim is made or action brought against the Issuer, or any member, officer,
employee or agent of the Issuer, except for claims or actions brought which
arise from malfeasance or nonfeasance in office, bad faith, fraud or deceit, the
Issuer may direct the Company to assume the defense of the claim and any action
brought thereon (if the Issuer gives the Company written notice of such
direction within ten (10) days
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of the institution of such claim or action) and pay all reasonable expenses
(including attorney's fees) incurred therein; or the Issuer may assume the
defense of any such claim or action, the reasonable cost (including attorney's
fees) of which shall be paid by the Company upon written request of the Issuer
to the Company; provided, however, the counsel selected by the Issuer to conduct
such defense shall be approved by the Company which approval shall not be
unreasonably withheld, and further provided that the Company may engage its own
counsel to participate in the defense of any such action if such engagement does
not give rise to a conflict of interest involving such counsel. The defense of
any such claim shall include the taking of all actions necessary or appropriate
thereto. Any claim for indemnification hereunder shall be by written notice.
5.8 Taxes, Other Governmental Charges and Utility Charges. The
Company shall pay, or cause to be paid, as the same respectively become due, all
taxes, assessments, whether general or special, and governmental charges of any
kind whatsoever that may at any time be lawfully assessed or levied against or
with respect to the Project Facilities, including any equipment or related
property installed or brought by the Company therein or thereon (including,
without limiting the generality of the foregoing, any taxes levied upon or with
respect to the revenues or income of the Issuer from the Project), and all
utility and other charges incurred in the operation, maintenance, use, occupancy
and upkeep of the Project Facilities; provided, that with respect to special
assessments or other governmental charges that lawfully may be paid in
installments over a period of years, the Company shall be obligated to pay only
such installments as are required to be paid during the term hereof. If the
Project Facilities are not taxed because of any interest the Issuer may have in
respect thereof, the Company shall pay to the political subdivisions in which
the Project Facilities are located an amount equal to the taxes that would be
otherwise due and payable, except to the extent all or a portion of the Project
Facilities are benefited by any real estate tax abatement ordinance or program.
Such amounts in lieu of taxes shall be payable by the Company directly to the
political subdivisions in which the Project Facilities are located. The Company
may, at its expense, in good faith contest any such taxes, assessments and other
charges and, in the event of any such contest (and the Issuer will cooperate in
such contest [but at no expense to the Issuer] if legally required or reasonably
helpful to do so), may permit the taxes, assessments or other charges so
contested to remain unpaid during the period of such contest and any appeal
therefrom, unless the Issuer or the Trustee shall notify the Company that, in
the opinion of counsel, by nonpayment of any such items the lien of the
Indenture will be materially endangered or the Project Facilities or any part
thereof will be subject to loss or forfeiture, in which event such taxes,
assessments or charges shall be paid promptly. The Company shall not use, as a
basis for contesting any tax, assessment or charge, the fact that legal title to
the Project Facilities is held by a body of governmental or quasi-governmental
status. The Issuer will cooperate fully with the Company in any such contest.
The Company also agrees to comply at its own cost and expense with all notices
received from public authorities from and after the date hereof. Except in the
case where the Company shall be contesting its obligation to pay any of the
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foregoing items pursuant to the terms of this Section, in the event that the
Company shall fail to pay any of the foregoing items required by this Section to
be paid by the Company, the Issuer or the Trustee may (but shall be under no
obligation to), after ten (10) days prior written notice to the Company of its
intent to do so, pay the same and any amounts so advanced therefor by the Issuer
or the Trustee shall become an additional obligation of the Company to the one
making the advancement, which amounts, together with interest thereon at the
rate of 15% per annum from the date thereof, the Company agrees and covenants to
pay.
5.9 Insurance.
(a) During the time that any Bonds are outstanding, the
Company shall at its own cost and expense:
(1) Insure the Project Facilities for any peril included
within the classification "fire and extended coverage", or, during the
period of any construction on the Premises, "builder's risk coverage" in
an amount equal to its insurable value, subject to deductions of not more
than $10,000, including standard mortgagee clauses in favor of the Trustee
and naming the Issuer and the Company as insureds as their respective
interests may appear and naming the Trustee as the sole loss payee. The
Company shall have full authority to adjust and settle claims and shall
pay any fees or costs incident thereto.
(2) Maintain comprehensive general liability insurance
which names the Issuer and the Trustee as the insureds, for the benefit of
the Issuer as well as the Company, and excess liability insurance of
$2,000,000 per occurrence and $5,000,000 aggregate coverage. The Company
shall have full authority to adjust and settle claims and shall pay any
fees or costs incident thereto.
(b) The Company shall require that any contractor employed for
construction of any improvements to the Project Facilities provide comprehensive
general liability coverage and worker's compensation coverage in amounts
customarily carried by contractors with respect to such construction.
(c) The insurance policies or endorsements shall cover the
entire Project Facilities and shall provide that the coverage will not be
reduced or cancelled without 30 days prior written notice to the Issuer and the
Trustee. The Company shall provide the Issuer and the Trustee with certificates
from the insurers at such times as may be necessary to show that insurance is
being maintained as required by this Section 5.9.
5.10 Prohibition of Liens. The Company shall not create or suffer to
be created by any other person any lien or charge upon the Debt Service Fund,
the Project
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Facilities or any part thereof or upon the rents, contributions or charges or
receipts or revenues therefrom other than in favor of the Issuer or the Trustee;
provided, that nothing in this Agreement shall limit the right of the Company to
enforce payments from the Debt Service Fund pursuant to Section 4.03 of the
Indenture; provided, further that the Company may grant a subordinate mortgage
and/or security agreement upon its interest in the Project Facilities or any
part thereof to secure any loans it may hereafter obtain. Upon the request of
the Company, the Issuer agrees to execute a joinder to any such mortgage and/or
security agreement to subject its interest in the Project Facilities to the lien
thereof; provided, however, that the Issuer shall not incur any personal
liability or be required to execute any evidence of indebtedness in connection
therewith. The Company further agrees to pay or cause to be discharged or make
adequate provision to satisfy and discharge, within 60 days after the same shall
become due, any such lien or charge and also all lawful claims or demands for
labor, materials, supplies or other charges which, if unpaid, might be or become
a lien upon the Debt Service Fund, the Project Facilities or any part thereof or
the revenues or income therefrom; provided, however, that nothing in this
Section 5.10 shall require the Company to pay or cause to be discharged or make
provision for any such lien or charge so long as the validity thereof shall be
contested in good faith and so long as the Project Facilities or any part
thereof are not subject to loss or forfeiture. The Issuer shall cooperate with
the Company in any such contest conducted at the Company's expense.
5.11 Granting of Easements. If no Event of Default under this
Agreement has occurred and is continuing, the Company may, notwithstanding
anything contained in this Agreement to the contrary, at any time or times,
grant easements, licenses, rights of way and other rights or privileges in the
nature of easements with respect to any property included in the Project
Facilities, free from the lien of this Agreement, or release or amend existing
easements, licenses, rights of way and other rights or privileges, all with or
without consideration and upon such terms and conditions as the Company shall
determine, and the Issuer agrees that it will execute and deliver any instrument
necessary or appropriate to confirm and grant, release or amend any such
easement, license, right of way or other right or privilege, upon receipt by the
Issuer and the Trustee of:
(a) A copy of the instrument of grant, release, or amendment
in form satisfactory to the Issuer and the Trustee;
(b) A written application signed by the Company requesting
such instrument; and
(c) A certificate executed by the Company, and such other
persons as the Issuer and the Trustee may reasonably require, stating that such
grant, release or amendment is not detrimental to the proper conduct of the
business of the Company, and that such grant, release or amendment will not
impair the effective use or interfere with the efficient and economical
operation of the Project Facilities and will not in any material
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respect weaken, diminish or impair the security intended to be given by or under
the Indenture.
If the instrument of grant shall so provide, any such easement or right and
rights of such other parties thereunder shall be superior to the rights of the
Issuer under this Agreement and shall not be affected by any termination of this
Agreement or default on the part of the Company hereunder. If no Event of
Default has occurred and is then continuing, any payments or other consideration
received by the Company for any such grant shall be and remain the property of
the Company but, if an Event of Default has occurred and is then continuing, all
rights then existing of the Company with respect to or under such grant, shall
inure to the benefit of and be exercisable by the Issuer and the Trustee.
Nothing in this Agreement shall diminish the respective rights of the Trustee
under the Indenture, including without limitation, the right to prohibit the
granting of easements without their prior written consent if such prior consent
is reserved.
5.12 Compliance with Laws. With respect to the Project Facilities
and any additions, alterations or improvements thereto, the Company will at all
times comply in all material respects with all applicable requirements of
Federal, state and local laws and with all applicable lawful requirements of any
agency, board, or commission created under the laws of the Commonwealth of
Pennsylvania or of any other duly constituted public authority, and will use,
and permit the use of, the Project Facilities only for such purposes as are
lawful under the Act; provided, however, that the Company shall be deemed in
compliance with this Section 5.12 so long as it is contesting in good faith any
such requirement by appropriate legal proceedings.
5.13 Recording Instruments. This Agreement (or a memorandum hereof)
shall be recorded in the Department of Records in and for the City of
Philadelphia, Pennsylvania and in such other place or places as may be required
by law at the expense of the Company, it being the intention of the parties
hereto that the Indenture shall first be recorded and that this Agreement (or a
memorandum hereof) shall be recorded immediately after the Indenture.
5.14 Filing of Financing Statements. The Company shall at its own
expense cause financing statements under the Pennsylvania Uniform Commercial
Code to be filed in the places required by law in order to perfect the security
interests created by Section 4.2 hereof, naming the Issuer as first secured
party and the Trustee as its assignee. From time to time, as reasonably
requested by the Trustee, the Company shall furnish to the Trustee an opinion of
counsel setting forth what actions, if any, should be taken by the Company or
the Trustee to preserve such security interest in favor of the Trustee, and the
right, title and interest of the Trustee in and to the trust estate created
under the Indenture. The Company shall execute and file or cause to be executed
and filed all further instruments as shall be required by law or reasonably
required by the Trustee to preserve such security interest, and
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shall furnish satisfactory evidence to the Trustee of the filing and refiling of
such instruments.
5.15 Notice and Certification With Respect to Bankruptcy
Proceedings. The Company shall promptly notify the Trustee of the occurrence of
any of the following events and shall keep the Trustee informed of the status of
any petition in bankruptcy filed (or bankruptcy or similar proceeding otherwise
commenced) against the Company and/or the Guarantor: (i) application by the
Company and/or the Guarantor for or consent by the Company and/or the Guarantor
to the appointment of a receiver, trustee, liquidator or custodian or the like
of itself or of its property, or (ii) admission by the Company and/or the
Guarantor in writing of its inability to pay its debts generally as they become
due, or (iii) general assignment by the Company and/or the Guarantor for the
benefit of creditors, or (iv) adjudication of the Company and/or the Guarantor
as a bankrupt or insolvent, or (v) commencement by the Company and/or the
Guarantor of a voluntary case under the United States Bankruptcy Code or filing
by the Company and/or the Guarantor of a voluntary petition or answer seeking
reorganization of the Company and/or the Guarantor, an arrangement with
creditors of the Company and/or the Guarantor or an order for relief or seeking
to take advantage of any insolvency law or filing by the Company and/or the
Guarantor of an answer admitting the material allegations of an insolvency
proceeding, or action by the Company and/or the Guarantor for the purpose of
effecting any of the foregoing, (vi) if without the application, approval or
consent of the Company and/or the Guarantor, a proceeding shall be instituted in
any court of competent jurisdiction, under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking in respect of the
Company and/or the Guarantor an order for relief or an adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a composition
or arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or the like of the Company and/or the
Guarantor or of all or any substantial part of its assets, or other relief in
respect thereof under any bankruptcy or insolvency law.
5.16 Continuing Disclosure. The Company hereby covenants and agrees
that it will comply with and carry out all the provisions of the Continuing
Disclosure Agreement. Notwithstanding any other provision of this Agreement,
failure by the Company to comply with the Continuing Disclosure Agreement shall
not be considered an Event of Default hereunder; however, the Trustee may (and,
at the direction of the Registered Owners (as defined in the Continuing
Disclosure Agreement) of at least 25% in aggregate principal amount of the Bonds
Outstanding, shall) or any Registered Owner of Bonds (as defined in the
Continuing Disclosure Agreement) may take such actions as may be necessary and
appropriate, including seeking specific performance by court order, to cause the
Company to comply with its obligations under this Section 5.16, but only to the
extent that the Trustee receives indemnity satisfactory to it for costs,
expenses and any other liabilities.
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5.17 Representations as to Environmental Matters.
(a) The Company is in compliance with all applicable
Environmental Laws relating to the Project Facilities, except for matters which,
individually or in the aggregate, could not have a Material Adverse Effect.
(b) The Company has all Environmental Approvals necessary or
desirable for the ownership and operation of the Project Facilities as presently
operated except for matters which, individually or in the aggregate, could not
have a Material Adverse Effect.
(c) To the best of the Company's knowledge, there is no
Environmental Claim pending or threatened, nor are there any past or present
acts, omissions, events or circumstances that could form the basis of any
Environmental Claim, against the Company except for matters which, individually
or in the aggregate, could not have a Material Adverse Effect.
(d) The Project Facilities are not an Environmental Cleanup
Site.
5.18 Covenants as to Environmental Matters. The Company hereby
covenants and agrees that:
(a) The Company will comply with all applicable Environmental
Laws relating to the Project Facilities, except for matters which, individually
or in the aggregate, could not have a Material Adverse Effect.
(b) Promptly upon becoming aware of any Environmental Claim
pending or threatened against the Company and relating to the Project
Facilities, or any past or present acts, omissions, events or circumstances that
could form the basis of such Environmental Claim, which if adversely resolved,
individually or in the aggregate, could have a Material Adverse Effect, the
Company shall give the Trustee notice thereof, together with a written statement
of an authorized officer of the Company setting forth the details thereof and
any action with respect thereto taken or proposed to be taken by the Company.
5.19 Certain Definitions. In addition to the terms defined in the
recitals, as used herein:
"Environmental Approvals" shall mean any governmental action
pursuant to or required under any Environmental Law.
"Environmental Claim" shall mean, with respect to any person, any
action, suit, proceeding, investigation, notice, claim, complaint, demand,
request for information or
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other written communication by any other person (including any governmental
authority or citizens group) alleging, asserting or claiming any actual or
potential: (a) violation of any Environmental Law, (b) liability under any
Environmental Law or (c) liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, or based on, or resulting
from, the presence or release into the environment of any Environmental Concern
Materials at the Project Facilities.
"Environmental Cleanup Site" shall mean any location which is listed
or proposed for listing on the National Priorities List, on CERCLIS or on any
other similar state list of sites requiring investigation or cleanup, or which
is the subject of any pending or threatened action, suit, proceeding or
investigation relating to or arising from any alleged violation of any
Environmental Law.
"Environmental Concern Materials" shall mean (a) any flammable
substance, explosive, radioactive material, hazardous material, hazardous waste,
toxic substance, solid waste, pollutant, contaminant or any related material,
raw material, substance, product or by-product of any substance specified in, or
regulated or otherwise affected by, any "Environmental Law", (b) any toxic
chemical or other substance from or related to industrial, commercial or
institutional activities, and (c) asbestos, gasoline, diesel fuel, motor oil,
waste and used oil, heating oil and other petroleum products or compounds,
polychlorinated biphenyls, radon and urea formaldehyde.
"Environmental Law" shall mean any law, whether now existing or
subsequently enacted, relating to: (a) pollution or protection of the
environment, including natural resources, (b) exposure of persons, including but
not limited to employees, to Environmental Concern Materials, (c) protection of
the public health or welfare from the effects of products, by-products, wastes,
emissions, discharges or releases of Environmental Concern Materials, or (d)
regulation of the manufacture, use or introduction into commerce of
Environmental Concern Materials including their manufacture, formulation,
packaging, labeling, distribution, transportation, handling, storage or
disposal. "Environmental Law" shall also include Environmental Approvals and the
terms and conditions thereof.
"Material Adverse Effect" shall mean a material adverse effect on
the business, operations, condition (financial or otherwise) or prospects of the
Company.
5.20 Covenants of the Company with Respect to Federal Tax-Exempt
Status of Bonds. It is the intention of the parties hereto that the interest on
the Bonds be and remain excluded from gross income for federal income tax
purposes, and, to that end, the Company does hereby covenant with the Issuer,
the Trustee and each of the holders of any Bonds, as follows:
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(a) that it will not cause or permit the proceeds of the Bonds
or the Project Facilities to be used in a manner which will cause the interest
on the Bonds to lose the exemption from federal income taxation conferred by
Section 103 of the Code and Section 103 of the 1954 Code;
(b) that so long as the Bonds are outstanding, it will fully
comply with all effective rules, rulings and regulations promulgated by the
Department of Treasury or the Internal Revenue Service with respect to the Bonds
issued under Section 103 of the Code and Section 103 of the 1954 Code so as to
maintain the tax-exempt status of the interest payable on the Bonds;
(c) that it will make no change in the Project Facilities
which would result in the Project Facilities not being an exempt airport
facility within the meaning of Section 103(b)(4)(D) of the 1954 Code;
(d) that it shall not directly or indirectly use or permit the
use (including the making of any investment) of any proceeds of the Bonds or any
other funds of the Issuer or the Company, or take or omit to take any action,
that would cause the Bonds to be "arbitrage bonds" within the meaning of Section
148(a) of the Code; and
(e) that it shall calculate or cause to be calculated and
shall pay or cause to be paid to the Untied States any arbitrage rebate at such
times as required under the Code.
5.21 Annual Certificate of the Company. The Company shall provide
the Trustee with a certificate certifying, to the best of the Company's
knowledge, whether an Event of Default under this Agreement has occurred within
the preceding calendar year. The Company shall provide the Trustee with such
certificate within thirty days of the end of each calendar year at the address
of the Trustee provided in Section 7.03 hereof or at such other address as the
Trustee shall provide.
VI. Events of Default and Remedies.
6.1 Events of Default; Acceleration. Each of the following events is
hereby defined as, and is declared to be and to constitute, an "Event of
Default":
(a) failure by the Company to make or cause to be made any
payment of Purchase Price in respect of principal or redemption price of the
Bonds required to be made under Section 4.3 or 4.4 hereof in accordance with the
conditions set forth in such Section on or before the date and time such payment
is due; or
19
<PAGE> 25
(b) failure by the Company to make or cause to be made any
payment of the Purchase Price in respect of interest or premium on the Bonds
required to be made under Section 4.3 or 4.4 hereof in accordance with the
conditions set forth in such Section on or before the date and time such payment
is due; or
(c) failure by the Company to observe and perform any other
covenant, condition or agreement on its part to be observed or performed under
this Agreement for a period of 60 days after written notice, specifying such
failure and requesting that it be remedied, is given to the Company by the
Issuer or the Trustee; provided, that if such failure is of such nature that it
can be corrected, but not within such period, the same shall not constitute an
Event of Default so long as the Company institutes corrective action within such
60-day period and is diligently pursuing the same; or
(d) failure by the Guarantor to make or cause to be made any
payment of Purchase Price in respect of principal or redemption price of the
Bonds required to be made under the Guaranty in accordance with the conditions
set forth in the Guaranty on or before the date and time such payment is due; or
(e) failure by the Guarantor to make or cause to be made any
payment of the purchase price of the Bonds equal to the principal amount thereof
plus accrued interest thereon upon mandatory purchase on a Purchase Date
pursuant to the terms of the Indenture; or
(f) failure by the Guarantor to observe and perform any other
covenant, condition or agreement on its part to be observed or performed under
the Guaranty for a period of 60 days after written notice, specifying such
failure and requesting that it be remedied, is given to the Guarantor by the
Issuer or the Trustee; provided, that if such failure is of such nature that it
can be corrected, but not within such period, the same shall not constitute an
Event of Default so long as the Guarantor institutes corrective action within
such 60-day period and is diligently pursuing the same; or
(g) for any reason the Bonds become due and payable by
acceleration in accordance with the terms thereof;
then and in each and every such case the Trustee, as assignee of the Issuer, by
notice in writing to the Company, may (and shall in the case of an Event of
Default described in clause (g) of this Section ) declare all sums which the
Company is obligated to pay under this Agreement to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Agreement contained to the
contrary notwithstanding.
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<PAGE> 26
In case the Trustee shall have proceeded to enforce any right under
this Agreement and such proceedings shall have been discontinued or abandoned
for any reason or shall have been determined adversely to the Issuer or the
Trustee, then and in every such case the Company, the Issuer and the Trustee
shall be restored respectively to their several positions and rights hereunder,
and all rights, remedies and powers of the Company, the Issuer and the Trustee
shall continue as though no such proceeding had been taken.
6.2 Payment of Purchase Price on Default; Suit Therefor.
(a) Subject to the provisions of Section 7.16 hereof, the
Company covenants that, in case default shall be made in the payment of any sum
payable by or on behalf of the Company under Section 4.3 or 4.4 of this
Agreement as and when the same shall become due and payable, whether at maturity
or by acceleration or otherwise -- then, upon demand of the Trustee, the Company
will pay or cause to be paid to the Issuer or its assignee the whole amount of
the Purchase Price that then shall have become due and payable under such
Sections ; and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including a reasonable
compensation to its assignee, its agents, attorney and counsel, and any expenses
or liabilities incurred by the Issuer or the Trustee other than through its
gross negligence or bad faith. In case the Company shall fail forthwith to pay
or cause to be paid such amounts upon such demand, the Issuer or its assignee
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company and collect in the manner
provided by law out of the Project Facilities the moneys adjudged or decreed to
be payable.
(b) In case there shall be pending proceedings for the
bankruptcy or for the reorganization of the Company under the Federal bankruptcy
laws or any other applicable law, or in case a receiver or trustee shall have
been appointed for the benefit of the creditors or the property of the Company
or in the case of any other similar judicial proceedings relative to the
Company, or to the creditors or property of the Company, the Trustee shall be
entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of the Purchase Price,
including interest owing and unpaid in respect thereof, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Issuer or
the Trustee allowed in such judicial proceedings relative to the Company, its
creditors, or its property, and to collect and receive any moneys or other
property payable or deliverable on any such claims, and to distribute the same
after the deduction of its charges and expenses; and any receiver, assignee or
trustee in bankruptcy or reorganization is hereby authorized to make such
payments to Issuer or the Trustee, and to pay to Issuer or the Trustee any
amount due it for compensation and expenses, including reasonable counsel fees
incurred by it up to the date of such distribution.
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<PAGE> 27
6.3 Other Remedies. The Trustee shall be entitled to any one or more
of the following remedies:
(a) The Company shall upon demand of the Trustee surrender
forthwith the possession of the Project Facilities, and it shall be lawful for
the Trustee, by such officer or agent as it may appoint, to take possession of
all or any part of the Project Facilities together with the books, papers and
accounts of the Company located at the Project Facilities and pertaining
thereto, and to hold, operate and manage the same, and from time to time make
such repairs and improvements as the Trustee shall deem wise.
(b) The Trustee may lease the Project Facilities or any part
thereof, in the name and for the account of the Company, receive and sequester
the rents, revenues, issues, earnings, income, products and profits therefrom,
collect rentals and enforce all other remedies of the Company under any existing
leases for any part of the Project Facilities, and apply such receipts and any
moneys received from any receiver of any part of the Project Facilities to the
payment of the Company's obligations hereunder, and, subject to Section 7.16
hereof, the Company shall remain liable for any deficiency in the payment of
such obligations after the application of such receipts and moneys.
(c) The Trustee may terminate this Agreement and resell the
Project Facilities at a private or public sale, after giving the notice set
forth in Section 6.3(e) below, and the moneys collected under such resale will
be applied to the payment of the Company's obligations hereunder, and, subject
to Section 7.16 hereof, the Company shall remain liable for any deficiency in
the payment of its obligations under this Agreement after the application of
such proceeds.
(d) The Trustee may take whatever action may be available at
law or in equity as may appear necessary or desirable to collect the Purchase
Price and any other amounts payable by the Company hereunder, or to enforce
performance and observance of any obligation, agreement or covenant of the
Company under this Agreement.
(e) The Trustee shall be entitled to all the rights and
remedies available from time to time under the Pennsylvania Uniform Commercial
Code as secured party in respect of the property subject to the security
interest created under Section 4.2 hereof, including without limitation the
right to take possession of such property and foreclose or otherwise realize
upon any of such property and to dispose of any of such property at public or
private sale(s) or other proceedings without advertisement or notice except as
required by law (it being understood that notice of any intended public or
private sale or other disposition shall be deemed to have been reasonably made
if delivered or mailed, postage prepaid, to the Company at the address of the
Company maintained with the records of the Trustee at least fifteen days prior
to the date of public sale or the date after which the private sale or other
disposition is to be consummated), and the Company agrees
22
<PAGE> 28
that the Trustee or its nominee may become the purchaser at any such sale(s),
the proceeds of such sale to be applied as provided in subparagraph (f) of this
Section.
(f) Any moneys received by the Issuer under this Section 6.3
shall be paid to its assignee and applied pursuant to the provisions of Section
8.11 of the Indenture.
No action taken pursuant to this Section 6.3 (including repossession of the
Project Facilities or termination of this Agreement) shall relieve the Company
or the Guarantor from their respective obligations pursuant to Sections 4.3, 4.4
and 6.2 hereof, all of which shall survive any such action. Notwithstanding the
preceding sentence, the obligations of the Company under this Agreement shall be
limited as provided in Section 7.16 hereof.
6.4 Waiver. The Company hereby waives and relinquishes the benefits
of any present or future law exempting the Project Facilities from attachment,
levy or sale on execution, or any part of the proceeds arising from the sale
thereof, and all benefit of stay of execution or other process.
6.5 Cumulative Rights. No remedy conferred upon or reserved to the
Issuer or its assignee by this Agreement is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No
waiver by the Issuer or its assignee of any breach by the Company of any of its
obligations, agreements or covenants hereunder shall be a waiver of any
subsequent breach, and no delay or omission to exercise any right or power shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient.
VII. Miscellaneous.
7.1 Receipt of Indenture. The Company hereby acknowledges that it
has received an executed copy of the Indenture and is familiar with its
provisions, and agrees that it will take all such actions as are required or
contemplated of it under the Indenture to preserve and protect the rights of the
Trustee and of the Bondholders thereunder and that it will not take any action
which would cause a default thereunder. It is agreed by the Company and the
Issuer that any redemption of Bonds prior to maturity shall be effected as
provided in the Indenture.
7.2 Limitation of Liability of the Issuer. In the event of any
default by the Issuer hereunder, the liability of the Issuer to the Company
shall be enforceable only out of its interest in the Project Facilities and
under this Agreement and there shall be no other
23
<PAGE> 29
recourse for damages by the Company against the Issuer, its officers, members,
agents and employees, or any of the property now or hereafter owned by it or
them.
7.3 Notices. Notice hereunder shall be effective upon receipt and
shall be given by personal service or by certified or registered mail, return
receipt requested, to:
The Issuer - Philadelphia Authority For
Industrial Development
2600 Centre Square West
1500 Market Street
Philadelphia, Pennsylvania 19102
Attn: Chairman
The Company or - SLT Realty Limited Partnership
Guarantor c/o Starwood Lodging Trust
2231 East Camelback Road
Suite 410
Phoenix, Arizona 85016
Attn: Chief Financial Officer
The Trustee - First Union National Bank
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attn: Corporate Trust Administration
Any notices to the Issuer or the Company hereunder shall be
effective only if copies have been sent in a similar manner to the Trustee.
7.4 Severability. If any provision hereof is found by a court of
competent jurisdiction to be prohibited or unenforceable, it shall be
ineffective only to the extent of such prohibition or unenforceability, and such
prohibition or unenforceability shall not invalidate the balance of such
provision to the extent it is not prohibited or unenforceable, nor invalidate
the other provisions hereof, all of which shall be liberally construed in favor
of the Issuer or its assignee in order to effect the provisions of this
Agreement.
7.5 Applicable Law. This Agreement shall be deemed to be a contract
made in Pennsylvania and governed by Pennsylvania law.
7.6 Assignment. The Company shall not assign this Agreement or any
interest of the Company herein, either in whole or in part, except with the
prior written approvals of the Issuer and the Trustee (which approvals shall be
given if the following conditions are fulfilled: (i) the assignee assumes in
writing all of the obligations of the
24
<PAGE> 30
Company hereunder; (ii) neither the validity nor the enforceability of this
Agreement shall be adversely affected by such assignment; (iii) the Project
Facilities shall continue in the opinion of nationally-recognized bond counsel
to be a "project" as such term is defined in the Act after such assignment; (iv)
such assignment shall not, in the opinion of nationally recognized bond counsel,
have an adverse effect on the tax-exempt status of the Bonds; and (v) such
assignment shall be approved by the Issuer which approval shall not be
unreasonably withheld if the proposed assignee is of good character and
integrity. No change in the composition of the general or limited partners of
the Company permitted under Section 5.2 hereof shall be deemed an assignment for
purposes of this Section 7.6.
This Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective successors and assigns, and the
terms "Issuer" and "Company" shall, where the context requires, include the
parties and their respective successors and assigns and any entity resulting
from any acquisition, merger, consolidation, dissolution or other change in the
corporate form of the Issuer or the Trustee.
7.7 Amendments. This Agreement may not be amended except by an
instrument in writing signed by the Issuer and the Company and, if such
amendment occurs after the issuance of any of the Bonds, consented to by the
Trustee as authorized by Section 11.03 of the Indenture.
7.8 Term of Agreement. This Agreement and the respective obligations
of the parties hereto shall be in full force and effect from the date hereof
until (i) the principal or redemption price of, and premium, if any, and all
interest on, the Bonds shall have been paid, or provision for such payment shall
have been made pursuant to the term of the Indenture, (ii) the Indenture shall
have been released pursuant to Section 12.01 thereof, and (iii) the Company and
the Issuer shall have satisfied their respective obligations under Section 4.6
hereof.
7.9 No Warranty of Condition or Suitability by the Issuer. The
Issuer makes no warranty, either express or implied, as to the condition of the
Project Facilities or any part thereof or that they will be suitable for the
Company's purposes or needs. The Company acknowledges and agrees that the Issuer
is not a dealer in property of such kind, and that the Issuer has not made, and
does not hereby make any representation or warranty or covenant, except as
otherwise set forth herein, with respect to the condition or suitability of the
Project Facilities in any respect or in connection with or for the purposes and
uses of the Company, or any representation or warranty or covenant of any kind
or character, express or implied, with respect thereto.
7.10 Adjustments. The Company agrees to pay all charges and costs
which are required and whenever required in connection with the Issuer's
acquisition of the Project Facilities and in connection with the conveyance of
the Project Facilities from the Issuer to
25
<PAGE> 31
the Company. The Company agrees that the Issuer shall not be responsible for any
inaccuracies in any settlement sheet in connection with the foregoing.
7.11 Zoning. The Issuer makes no representations as to the zoning of
the Premises.
7.12 Company's Federal Income Taxation. Consistent with the terms
and conditions of this Agreement, the Issuer agrees that the Company shall be
deemed the owner of the Project Facilities for Federal income tax purposes and
further agrees to cooperate fully with the Company in obtaining favorable
Federal income tax treatment of this sale and the Project Facilities subject
hereto. For such purposes, the parties acknowledge their intent to create a
valid installment purchase agreement herein, with legal title to the Project
Facilities held by Issuer prior to transfer of such title to Company upon
completion of its obligations hereunder.
7.13 Amounts Remaining in Debt Service Fund. It is agreed by the
parties that any amounts remaining in the Debt Service Fund or any other fund
established under the Indenture, after payment in full of the Bonds (or
provision for payment thereof having been made in accordance with the provisions
of the Indenture) and of the fees, charges and expenses of the Trustee and the
Issuer in accordance with the Indenture, shall, upon release of the Indenture
pursuant to Section 12.01 thereof, be paid to the Company by the Trustee as
overpayment of the Purchase Price.
7.14 Survival of Covenants, Conditions and Representations. All
covenants, conditions and representations of the Company contained herein which,
by nature, impliedly or expressly involve performance in any particular manner
after the delivery of the Issuer's deed or which cannot be ascertained to have
been performed until after the said delivery, shall survive said delivery.
7.15 Headings. The captions or headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provision hereof.
7.16 Exculpatory Clause. Notwithstanding any provision of this
Agreement to the contrary, the liability of the Company under this Agreement
shall be limited to its interest in the Project Facilities.
7.17 Waiver of Distraint. The Issuer waives any statutory or common
law right it may have to distrain upon or place a lien against any equipment,
machinery, furniture or other personal property now or hereafter located on or
in the Project Facilities which is owned by any party other than the Company.
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<PAGE> 32
7.18 Survival of Agreement. This Agreement and the obligations and
rights of the Company and the Issuer hereunder shall bind and inure to the
benefit of, the successors and assigns of the Company and the Issuer hereunder.
27
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have caused this Agreement to be executed and delivered as of the date
first written above.
PHILADELPHIA AUTHORITY FOR
INDUSTRIAL DEVELOPMENT
[SEAL]
Attest /s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
____________________ ___________________________
Secretary (Vice) Chairman
SLT REALTY LIMITED PARTNERSHIP
By: STARWOOD LODGING TRUST*, a
Maryland real estate
investment trust, its sole
general partner
By: /s/ Ronald C. Brown
--------------------------------
Ronald C. Brown
Senior Vice President and
Chief Financial Officer
- --------
* The name "Starwood Lodging Trust" is a designation of Starwood Lodging
Trust, a Maryland real estate investment trust ("Starwood") and its
trustee (as trustee but not personally) under the Declaration of Trust of
Starwood Lodging Trust dated August 25, 1969, as amended and restated as
of June 6, 1988, and further amended as of February 1, 1995 and as the
same may be further amended, modified, supplemented, reinstated or
superseded from time to time. All persons dealing with Starwood shall look
solely to Starwood's assets for the enforcement of any claims against
Starwood and the trustee, officers, agents and security holders of
Starwood assume no personal liability for obligations entered into on
behalf of Starwood, and their respective individual assets shall not be
subject to the claims of any person relating to such obligation.
28
<PAGE> 34
Exhibit A
Description of Project Facilities
The Project Facilities consist of (i) the real property fronting on,
or having irrevocable access to, Island Avenue and otherwise abutting a loop
egress ramp currently under construction from Interstate 95 in Philadelphia,
Pennsylvania and more fully described on the Real Estate Description attached
hereto, together with an eight-story, approximately two hundred fifty-one (251)
key suite hotel, and (ii) all accounts, licenses, permits, fixtures, fittings,
furnishings, furniture, machinery, appliances, apparatus and equipment now
existing and hereafter acquired and used in the operation of such facility.
A-1
<PAGE> 35
Exhibit A
(continued)
PREMISES "A" BLOCK 56 S 3 LOT 127
ALL THAT CERTAIN parcel or tract of land.
SITUATE in the City of Philadelphia, County of Philadelphia and Commonwealth of
Pennsylvania as shown on Drawing Number 6, entitled "Topographic and Boundary
Survey The Beacon Companies", prepared by Pennoni Associates Inc., dated
September 8, 1983, last revised October 20, 1983, being more particularly
bounded as follows:
BEGINNING at a point in the Easterly line of Island Avenue, L.R. 67281 (138 feet
wide) said point being located the following course and distances as measured
along said Easterly line form the intersection of the Southerly line of
Interstate 95, L.R. 795 and the aforementioned Easterly line of Island Avenue,
South 22 degrees 41 minutes 49 seconds East a distance of 255.51 feet to the
beginning point of the herein described Parcel; thence (1) leaving the Easterly
line of said Island Avenue along land designated as Parcel H1 North 31 degrees
26 minutes 33 seconds East a distance of 133.66 feet to a point; thence (2)
along same south 58 degrees 33 minutes 27 seconds East a distance of 268.46 feet
to a point; thence (3) along same South 6 degrees 12 minutes 20 seconds East a
distance of 19.77 feet to a point; thence (4) along same and partly crossing
former Essington Avenue, reserved as a right of way for drainage, water main and
public utility purposes, South 58 degrees 33 minutes 27 seconds East a distance
of 99.66 feet to a point; thence (5) still along same and passing through said
former Essington Avenue and said right of way, South 31 degrees 26 minutes 33
seconds West a distance of 312.91 feet to a point in the curved Northerly line
of Penrose Avenue, L.R. 67053 (170 feet wide); thence (6) along said Northerly
line of Penrose Avenue along a curve to the right having a radius of 572.65 feet
for an arc distance of 114.77 feet to a point, said curve having a chord bearing
of North 41 degrees 45 minutes 36 seconds West for a chord distance of 114.58
feet; thence (7) along same along another curve to the right having a radius of
107.92 feet for an arc distance of 51.02 feet to the end of a non-tangent curve,
said curve having a chord bearing of North 55 degrees 26 minutes 13 seconds West
for a chord distance of 50.55 feet; thence (8) along the Easterly line of Island
Avenue North 22 degrees 41 minutes 49 seconds West a distance of 271.49 feet to
the first mentioned point and place of beginning.
TOGETHER with a right a way, the former Essington Avenue reserved for drainage,
water main and public utility purposes.
A-2
<PAGE> 36
PREMISES "B" BLOCK 56 S 7 LOT 118
BLOCK 56 S 3 LOT 128
ALL THAT CERTAIN parcel or tract of land.
SITUATE in the City of Philadelphia, County of Philadelphia and Commonwealth of
Pennsylvania as shown on Drawing Number 6, entitled "Topographic and Boundary
Survey The Beacon Companies", prepared by Pennoni Associates, Inc., dated
September 8, 1983, last revised October 20, 1983, being more particularly
bounded and described as follows:
BEGINNING at a point in the Easterly line of Island Avenue, L.R. 67281 (138 feet
wide) said point being located the following course and distance as measured
along said Easterly line from the Intersection of the Southerly line of
Interstate 95, L.R. 795 and the aforementioned Easterly line of Island Avenue,
South 22 degrees 41 minutes 49 seconds East, a distance of 106.79 feet to the
beginning point of the herein described parcel; thence (1) leaving the Easterly
line of said Island Avenue along land designated as Parcel H2 North 67 degrees
18 minutes 11 seconds East a distance of 105.01 feet to a point; thence (2)
along same crossing former Essington Avenue reserved as the right of way for
drainage, water main and public utility purposes, South 58 degrees 33 minutes 27
seconds East a distance of 679.64 feet to a point; (3) North 31 degrees 26
minutes 33 seconds East along same a distance of 49.90 feet to a point common
with land designated as Parcel H4; thence (4) along said land of Parcel H4 North
76 degrees 26 minutes 33 seconds East a distance of 138.81 feet to a point;
thence (5) along same, South 58 degrees 33 minutes 27 seconds East a distance of
308.43 feet to a point in the curved Westerly line of Ramp X Interstate 95, L.R.
795 (variable width); thence (6) along the Westerly line of said Interstate 95,
L.R. 795 along a curve to the right having a radius of 358.80 feet for an arc
distance of 207.09 feet to a non-tangent point, said curve having a chord
bearing South 33 degrees 3 minutes 46 seconds West for a chord distance of
204.22 feet; thence (7) along same South 59 degrees 40 minutes 9 seconds West a
distance of 171.49 feet to a point; thence (8) along same South 86 degrees 55
minutes 46 seconds West a distance of 136.34 feet to a point; thence (9) along
same, North 75 degrees 49 minutes 42 seconds West a distance of 137.73 feet to a
point; thence (10) along same South 14 degrees 10 minutes 18 seconds West a
distance of 9.98 feet to a point in the Northerly line of Penrose Avenue, L.R.
67053 (170 feet wide); thence (11) along said Northerly line of Penrose Avenue
North 75 degrees 49 minutes 42 seconds West a distance of 115.32 feet to the
beginning of a non-tangent curve; thence (12) along a curve to the right having
a radius of 572.65 feet for an arc distance of 210.32 feet to a point common
with land designated as Parcel H3, said curve having a chord bearing North 58
degrees 1 minute 25 seconds West for a chord distance of 209.14 feet; thence
(13) leaving the Northerly line of said Penrose Avenue along land designated as
Parcel H3 and passing through said former Essington Avenue and said right of
way, North 31 degrees 26 minutes 33 seconds East a distance of 312.91 feet to a
point; thence (14) along same and partly crossing said former Essington Avenue
and said right of way North 58 degrees 33 minutes
A-3
<PAGE> 37
27 seconds West a distance of 99.66 feet to a point; thence (15) along same
North 6 degrees 12 minutes 20 seconds West a distance of 19.77 feet to a point;
thence (16) along same North 58 degrees 33 minutes 27 seconds West a distance of
268.46 feet to a point; thence (17) still along same
South 31 degrees 26 minutes 33 seconds West a distance of 133.66 feet to a point
in the Easterly line of said Island Avenue; thence (18) along the Easterly line
of Island Avenue North 22 degrees 41 minutes 49 seconds West a distance of
148.72 feet to the first mentioned point and place of beginning.
TOGETHER with a right a way, the former Essington Avenue reserved for drainage,
water main and public utility purposes.
A-4
<PAGE> 38
COMMONWEALTH OF PENNSYLVANIA :
: ss.
COUNTY OF PHILADELPHIA :
On this, the 19th day of February, 1997, before me, the undersigned notary
public, personally appeared James F. McManus, who acknowledged himself to be the
Chairman of PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT, and that he as
such Officer, being authorized to do so, executed the foregoing instrument for
the purpose therein contained by signing the name of said authority by himself
as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Laura L. Dillon
--------------------------
Notary Public
My Commission Expires:
[NOTARIAL SEAL]
- ------------------------------------
NOTARIAL SEAL
LAURA L. DILLON. Notary Public
City of Philadelphia, Phila, County
My Commission Expires April 5, 1997
- ------------------------------------
<PAGE> 39
STATE OF ARIZONA :
: ss.
COUNTY OF MARICOPA :
On this, the 17th day of February, 1997, before me, the undersigned notary
public, personally appeared Ronald C. Brown, who acknowledged himself to be the
Senior Vice President and Chief Financial Officer of Starwood Lodging Trust, a
Maryland real estate investment trust, the general partner of SLT REALTY LIMITED
PARTNERSHIP, a Delaware limited partnership, and that he as such officer, being
authorized to do so, executed the foregoing instrument for the purposes therein
contained by signing the name of said limited partnership by himself as such
general partner.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Gail L. Jackson
-------------------------
Notary Public
My Commission Expires:
[NOTARIAL SEAL]
- ------------------------------------
NOTARY PUBLIC
STATE OF ARIZONA
Maricopa County
Gail L. Jackson
My Commission Expires July 17, 2000
- -----------------------------------
<PAGE> 40
Closing Item No. A-3
MEMORANDUM OF AMENDED AND RESTATED
INSTALLMENT SALE AGREEMENT
KNOWN ALL MEN BY THESE PRESENTS, that PHILADELPHIA AUTHORITY FOR
INDUSTRIAL DEVELOPMENT, a public instrumentality of the Commonwealth of
Pennsylvania and a body corporate and politic organized and existing under the
Pennsylvania Economic Development Financing Law, Act of August 23, 1967, P.L.
251, as amended and supplemented, 73 P.S. Sections 371 et seq., with
offices at 1500 Market Street, Philadelphia, Pennsylvania, as seller (the
"Authority"), has entered into a certain Amended and Restated Installment Sale
Agreement dated as of February 1, 1997 (the "Agreement"), with SLT REALTY
LIMITED PARTNERSHIP, a Delaware limited partnership, as buyer (the "Company"),
with offices at 2231 E. Camelback Road, Suite 410, Phoenix, Arizona, covering
the purchase of the premises situate in Philadelphia, Pennsylvania, as more
fully described in Exhibit "A" attached hereto, the purchase price for which is
to be paid in installment amounts equal to pay the debt service on the
Authority's Commercial Development Revenue Refunding Bonds (Doubletree Guest
Suites Project), Series 1997A.
TOGETHER with the buildings and improvements thereon erected or to
be erected thereon, and together with all easements, tenements, appurtenances,
hereditaments, fixtures, rights and privileges belonging to or in any way
pertaining or beneficial to the premises.
UNDER AND SUBJECT to all exceptions, covenants, and restrictions
against the title as acquired by Philadelphia Authority for Industrial
Development on even date with that of the Agreement, as well as all other
restrictions, covenants, and conditions created by the Agreement.
This Memorandum is intended for recording purposes only and does not
supersede, diminish, add or change the terms of the Agreement.
All of the terms, conditions, provisions, and covenants of the
Agreement are incorporated in this Memorandum of Installment Sale Agreement by
reference as though fully set forth herein, and the Agreement and this
Memorandum of Installment Sale Agreement shall be deemed to constitute a single
instrument or document; provided, however, that in the event of a conflict
between this Memorandum of Installment Sale Agreement and the Agreement, the
terms and conditions of the Agreement shall govern.
The liability of the Authority pursuant to the terms of the
Agreement is limited to the rights, title and interest of the Authority in and
to the facilities constituting the Project Facilities as defined in the
Agreement.
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be executed under seal as of this 20th day of February 1997.
ATTEST: PHILADELPHIA AUTHORITY FOR
[SEAL] INDUSTRIAL DEVELOPMENT
By: /s/ [ILLEGIBLE] BY: /s/ [ILLEGIBLE]
_______________________ ___________________________
Secretary Chairman
SLT REALTY LIMITED PARTNERSHIP
By: STARWOOD LODGING TRUST*, a
Maryland real estate investment trust,
its sole general partner
By: /s/ Ronald C. Brown
----------------------------------
Ronald C. Brown
Senior Vice President and
Chief Financial Officer
- --------
* The name "Starwood Lodging Trust" is a designation of Starwood Lodging
Trust, a Maryland real estate investment trust ("Starwood") and its
trustee (as trustee but not personally) under the Declaration of Trust of
Starwood Lodging Trust dated August 25, 1969, as amended and restated as
of June 6, 1988, and further amended as of February 1, 1995 and as the
same may be further amended, modified, supplemented, reinstated or
superseded from time to time. All persons dealing with Starwood shall look
solely to Starwood's assets for the enforcement of any claims against
Starwood and the trustee, officers, agents and security holders of
Starwood assume no personal liability for obligations entered into on
behalf of Starwood, and their respective individual assets shall not be
subject to the claims of any person relating to such obligation.
2
<PAGE> 42
EXHIBIT A
PREMISES "A" BLOCK 56 S 3 LOT 127
ALL THAT CERTAIN parcel or tract of land.
SITUATE in the City of Philadelphia, County of Philadelphia and Commonwealth of
Pennsylvania as shown on Drawing Number 6, entitled "Topographic and Boundary
Survey The Beacon Companies", prepared by Pennoni Associates Inc., dated
September 8, 1983, last revised October 20, 1983, being more particularly
bounded as follows:
BEGINNING at a point in the Easterly line of Island Avenue, L.R. 67281 (138 feet
wide) said point being located the following course and distance as measured
along said Easterly line form the intersection of the Southerly line of
Interstate 95, L.R. 795 and the aforementioned Easterly line of Island Avenue,
South 22 degrees 41 minutes 49 seconds East a distance of 255.51 feet to the
beginning point of the herein described Parcel; thence (1) leaving the Easterly
line of said Island Avenue along land designated as Parcel H1 North 31 degrees
26 minutes 33 seconds East a distance of 133.66 feet to a point; thence (2)
along same south 58 degrees 33 minutes 27 seconds East a distance of 268.46 feet
to a point; thence (3) along same South 6 degrees 12 minutes 20 seconds East a
distance of 19.77 feet to a point; thence (4) along same and partly crossing
former Essington Avenue, reserved as a right of way for drainage, water main and
public utility purposes, South 58 degrees 33 minutes 27 seconds East a distance
of 99.66 feet to a point; thence (5) still along same and passing through said
former Essington Avenue and said right of way, South 31 degrees 26 minutes 33
seconds West a distance of 312.91 feet to a point in the curved Northerly line
of Penrose Avenue, L.R. 67053 (170 feet wide); thence (6) along said Northerly
line of Penrose Avenue along a curve to the right having a radius of 572.65 feet
for an arc distance of 114.77 feet to a point, said curve having a chord bearing
of North 41 degrees 45 minutes 36 seconds West for a chord distance of 114.58
feet; thence (7) along same along another curve to the right having a radius of
107.92 feet for an arc distance of 51.02 feet to the end of a non-tangent curve,
said curve having a chord bearing of North 55 degrees 26 minutes 13 seconds West
for a chord distance of 50.55 feet; thence (8) along the Easterly line of Island
Avenue North 22 degrees 41 minutes 49 seconds West a distance of 271.49 feet to
the first mentioned point and place of beginning.
TOGETHER with a right-of-way, the former Essington Avenue reserved for drainage,
water main and public utility purposes.
CONTAINING 2.1726 Acres of Land.
A-1
<PAGE> 43
PREMISES "B" BLOCK 56 S 7 LOT 118
ALL THAT CERTAIN parcel or tract of land.
SITUATE in the City of Philadelphia, County of Philadelphia and Commonwealth of
Pennsylvania as shown on Drawing Number 6, entitled "Topographic and Boundary
Survey The Beacon Companies", prepared by Pennoni Associates, Inc., dated
September 8, 1983, last revised October 20, 1983, being more particularly
bounded and described as follows:
BEGINNING at a point in the Easterly line of Island Avenue, L.R. 67281 (138 feet
wide) said point being located the following course and distance as measured
along said Easterly line from the Intersection of the Southerly line of
Interstate 95, L.R. 795 and the aforementioned Easterly line of Island Avenue,
South 22 degrees 41 minutes 49 seconds East, a distance of 106.79 feet to the
beginning point of the herein described parcel; thence (1) leaving the Easterly
line of said Island Avenue along land designated as Parcel H2 North 67 degrees
18 minutes 11 seconds East a distance of 105.01 feet to a point; thence (2)
along same crossing former Essington Avenue reserved as the right of way for
drainage, water main and public utility purposes, South 58 degrees 33 minutes 27
seconds East a distance of 679.64 feet to a point; thence (3) North 31 degrees
26 minutes 33 seconds East along same a distance of 49.90 feet to a point common
with land designated as Parcel H4; thence (4) along said land of Parcel H4 North
76 degrees 26 minutes 33 seconds East a distance of 138.81 feet to a point;
thence (5) along same, South 58 degrees 33 minutes 27 seconds East a distance of
308.43 feet to a point in the curved Westerly line of Ramp X Interstate 95, L.R.
795 (variable width); thence (6) along the Westerly line of said Interstate 95,
L.R. 795 along a curve to the right having a radius of 358.80 feet for an arc
distance of 207.09 feet to a non-tangent point, said curve having a chord
bearing South 33 degrees 3 minutes 46 seconds West for a chord distance of
204.22 feet; thence (7) along same South 59 degrees 40 minutes 9 seconds West a
distance of 171.49 feet to a point; thence (8) along same South 86 degrees 55
minutes 46 seconds West a distance of 136.34 feet to a point; thence (9) along
same, North 75 degrees 49 minutes 42 seconds West a distance of 137.73 feet to a
point; thence (10) along same South 14 degrees 10 minutes 18 seconds West a
distance of 9.98 feet to a point in the Northerly line of Penrose Avenue, L.R.
67053 (170 feet wide); thence (11) along said Northerly line of Penrose Avenue
North 75 degrees 49 minutes 42 seconds West a distance of 115.32 feet to the
beginning of a non-tangent curve; thence (12) along a curve to the right having
a radius of 572.65 feet for an arc distance of 210.32 feet to a point common
with land designated as Parcel H3, said curve having a chord bearing North 58
degrees 1 minute 25 seconds West for a chord distance of 209.14 feet; thence
(13) leaving the Northerly line of said Penrose Avenue along land designated as
Parcel H3 and passing through said former Essington Avenue and said right of
way, North 31 degrees 26 minutes 33 seconds East a distance of 312.91 feet to a
point; thence (14) along same, and partly crossing said former Essington Avenue
and said right of way North 58 degrees 33 minutes 27 seconds West a distance of
99.66 feet to a point; thence (15) along same North 6 degrees 12 minutes 20
seconds West a distance of 19.77 feet to a point; thence (16) along same North
58 degrees 33 minutes 27 seconds West a distance of 268.46 feet to a point;
thence
A-2
<PAGE> 44
(17) still along same South 31 degrees 26 minutes 33 seconds West a distance of
133.66 feet to a point in the Easterly line of said Island Avenue; thence (18)
along the Easterly line of Island Avenue North 22 degrees 41 minutes 49 seconds
West a distance of 148.72 feet to the first mentioned point and place of
beginning.
TOGETHER with a right-of-way, the former Essington Avenue reserved for drainage,
water main and public utility purposes.
CONTAINING 6.4473 Acres of Land.
A-3
<PAGE> 45
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF PHILADELPHIA )
On this 20th day of February, 1997, before me the subscriber, the
Notary Public, in and for the Commonwealth of Pennsylvania, personally appeared
James F. McManus who acknowledged himself to be the Vice Chairman of the
PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT, a Pennsylvania nonprofit
corporation, and that they, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of said
corporation by himself as such officer.
WITNESS my hand and seal the day and year aforesaid.
/s/ Laura L. Dillon
---------------------------------
Notary Public
My Commission Expires:
[SEAL]
- ------------------------------------
NOTARIAL SEAL
LAURA L. DILLON. Notary Public
City of Philadelphia. Phila, County
My Commission Expires April 5, 1997
- -----------------------------------
4
<PAGE> 46
STATE OF ARIZONA )
) SS:
COUNTY OF MARICOPA )
On this 17th day of February, 1997, before me the subscriber, a
Notary Public, in and for the State of Arizona, personally appeared Ronald C.
Brown who acknowledged himself to be the Senior Vice President and Chief
Financial Officer of STARWOOD LODGING TRUST, a Maryland real estate investment
trust, and the sole general partner of SLT Realty Limited Partnership, a
Delaware limited partnership, and that he, being authorized to do so, executed
the foregoing instrument for the purposes therein contained by signing the name
of said limited partnership by himself as such officer.
WITNESS my hand and seal the day and year aforesaid.
/s/ Gail L. Jackson
-----------------------------------
Notary Public
My Commission Expires:
[SEAL]
- ------------------------------------
NOTARY PUBLIC
STATE OF ARIZONA
Maricopa County
GAIL L. JACKSON
My commission Expires July 17, 2000
- -----------------------------------
<PAGE> 47
Closing Item No. A-4
- --------------------------------------------------------------------------------
GUARANTY AGREEMENT
Dated as of February 1, 1997
by
SLT REALTY LIMITED PARTNERSHIP,
as Guarantor
to
FIRST UNION NATIONAL BANK,
as Trustee
- --------------------------------------------------------------------------------
Securing
$27,820,000
Philadelphia Authority for Industrial Development
Commercial Development Revenue Refunding Bonds
(Doubletree Guest Suites Project)
Series 1997A
<PAGE> 48
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "Guaranty") made as of February 1,
1997, by SLT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Guarantor"), to and for the benefit of FIRST UNION NATIONAL BANK, a national
banking association, acting as trustee (the "Trustee") under an Amended and
Restated Mortgage and Trust Indenture (the "Indenture") dated as of February 1,
1997 between Philadelphia Authority for Industrial Development (the "Authority")
and the Trustee.
BACKGROUND
The Authority is issuing its Commercial Development Revenue
Refunding Bonds (Doubletree Guest Suites Project) Series 1997A in the aggregate
principal amount of $27,820,000 (the "Bonds") pursuant to the Indenture. The
proceeds of the Bonds will be used by the Authority to refund $27,275,000
aggregate principal amount of the Authority's Commercial Development Revenue
Bonds (Suite Hotel Project) Series A (the "Prior Bonds"). The proceeds of the
Prior Bonds were previously issued to finance the costs of a project (the
"Project Facilities") consisting of the acquisition, construction and equipping
of an approximately 251-key suite hotel which is currently known as the
Doubletree Guest Suites and is located adjacent to the Philadelphia
International Airport in the City of Philadelphia, Pennsylvania, as more fully
described in the Indenture. Under the terms of an Amended and Restated
Installment Sale Agreement (the "Agreement") dated as of February 1, 1997,
between the Authority and SLT Realty Limited Partnership, a Delaware limited
partnership (the "Company"), the Company will make payments sufficient to pay
the principal or redemption price of and interest on the Bonds, when due, which
payments will be made directly to the Trustee. The Company's obligations under
the Agreement are non-recourse and are secured solely by the Company's interest
in the Project Facilities. Capitalized terms used and not otherwise defined
herein shall have the meaning set forth in the Indenture.
The Guarantor is willing to enter into this Guaranty in order to
provide further security for the Bonds.
NOW, THEREFORE, in consideration of the issuance of the Bonds by the
Authority and in order to induce potential investors to purchase the Bonds, and
intending to be legally bound hereby, the Guarantor hereby covenants and agrees
as follows:
Section 1. (a) The Guarantor hereby guarantees for the equal
protection and benefit of all registered owners of the Bonds: (i) the full and
prompt payment of the principal of the Bonds when and as the same shall become
due, whether at the stated maturity thereof, at redemption prior to maturity or
otherwise; (ii) the full and prompt payment of any interest on the Bonds when
and as the same shall become due; (iii) the full and prompt payment of the
premium (if any) upon redemption, of any Bonds; (iv) the purchase price of the
Bonds upon mandatory purchase on a Purchase Date pursuant to the terms of the
Indenture; and (v) the payment, at the times required under Section 4.3 of the
<PAGE> 49
Agreement, of such amounts as are required to make up any deficiency which may
occur in the Debt Service Fund established under the Indenture.
(b) In addition to payments made under paragraph (a) above,
the Guarantor agrees to pay all expenses and charges (including court costs and
attorneys' fees) paid or incurred by the Trustee in realizing any of the
payments hereby guaranteed or, to the extent permitted by law, in enforcing this
Guaranty.
(c) All payments by the Guarantor shall be paid in lawful
money of the United States of America. Each and every default in payment of the
principal of, premium (if any) or interest on the Bonds or of any payment
required under Section 4.3 of the Agreement shall give rise to a separate cause
of action hereunder and separate suits may be brought hereunder as each cause of
action arises.
Section 2. This Guaranty is a contract of suretyship and is an
independent, absolute, irrevocable and unconditional present and continuing
guaranty of payment and not of collection which shall remain in full force and
effect until terminated pursuant to Section 6 hereof. The obligations of
Guarantor hereunder shall not be affected, modified or impaired upon the
happening from time to time of any event, including without limitation any of
the following, whether or not with notice to, or the consent of, the Guarantor:
(a) the failure by the Guarantor to continue to have its
facilities operated or the failure to perform any obligation contained in the
Agreement or in any other agreement, for any reason whatsoever including,
without limiting the generality of the foregoing, insufficiency of funds,
negligence or willful misconduct on the part of the Company, the Guarantor,
their agents or independent contractors, including any lessees, legal action of
any nature which prohibits operation of the Guarantor's facilities, labor
disputes, war, insurrection, natural catastrophe or laws, rules or regulations
of any body, governmental or otherwise;
(b) the compromise, settlement, release or termination of any
or all of the obligations, covenants or agreements of the Authority under the
Agreement;
(c) the failure to give notice to the Guarantor of the
occurrence of an event of default under the terms and provisions of this
Guaranty or the Agreement;
(d) the waiver of the payment, performance or observance by
the Authority, the Guarantor or the Company of any of the obligations and
covenants of any of them contained in the Agreement;
(e) the extension of the time for payment of any principal of,
premium (if any) or interest on the Bonds or of the time for performance of any
other obligations, covenants or agreements under or arising out of the
Agreement;
2
<PAGE> 50
(f) the modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth in the Agreement,
except as such amendment shall affect the Guarantor's obligation to make payment
hereunder;
(g) the taking or the omission of any of the actions referred
to in the Agreement;
(h) any failure, omission or delay on the part of the
Authority or the Trustee to enforce, assert or exercise any right, power or
remedy conferred on the Authority or the Trustee in this Guaranty or the
Agreement, or any other act or acts on the part of the Authority or the Trustee;
(i) the validity, regularity or enforceability of the Bonds or
the Agreement;
(j) the voluntary or involuntary liquidation, dissolution,
sale or other disposition of all or substantially all the assets, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with creditors or
readjustment of, or other similar proceedings affecting the Company, the
Guarantor or the Authority or any of the assets of any of them or any allegation
or contest of the validity of this Guaranty in any such proceeding;
(k) to the extent permitted by law, the release or discharge
of the Guarantor from the performance or observance of any obligation, covenant
or agreement contained in this Guaranty by operation of law;
(l) the default or failure of the Guarantor fully to perform
any of its obligations set forth in this Guaranty; or
(m) the damage or partial or total destruction of the
Guarantor's or the Company's facilities or the Project Facilities or any part
thereof, or the taking of title to the temporary use of the Guarantor's or the
Company's facilities or the Project Facilities or any part thereof, by any
lawful authority.
Section 3. No set-off, counterclaim, reduction, or diminution of an
obligation, or any defense of any kind or nature which the Guarantor has or may
come to have against the Company, the Authority or the Trustee shall be
available hereunder to the Guarantor; provided that nothing contained herein
shall prohibit the Guarantor from asserting any claim against the Company, the
Authority or the Trustee in a separate proceeding, which proceeding shall in no
way delay the prompt performance by the Guarantor of its obligations hereunder.
Section 4. In the event of a default: (a) in the payment of
principal of the Bonds when and as the same shall become due, whether at the
stated maturity thereof, by
3
<PAGE> 51
redemption prior to maturity or otherwise; (b) in the payment of any interest on
the Bonds when and as the same shall become due; (c) in the payment of the
premium (if any) upon the redemption of any of the Bonds; or (d) in the payment
of the purchase price of Bonds subject to mandatory purchase on a Purchase Date;
and regardless of the reason for any such default, or in the event the Guarantor
receives notice from the Trustee of a deficiency in the Debt Service Fund and
the failure of the Company to deposit an amount sufficient to cure such
deficiency, the Guarantor shall forthwith upon demand by the Trustee, pay the
full amount in default or the full amount of such deficiency, to the Trustee.
The Trustee, in its sole discretion, shall have the right to proceed first and
directly against the Guarantor under this Guaranty without proceeding against or
exhausting any other remedies which it may have and without resorting to any
other security held by the Authority or the Trustee. The Guarantor agrees to pay
all costs, expenses and fees, including all reasonable attorneys' fees, which
may be incurred by the Trustee in enforcing this Guaranty following any default
on the part of the Guarantor hereunder, whether the same shall be enforced by
suit or otherwise.
Section 5. (a) This Guaranty shall terminate automatically:
(i) upon payment in full of the Bonds or the defeasance of the
Bonds in accordance with Section 12.01 of the Indenture; or
(ii) in the event that the Guarantor owns all of the
outstanding Bonds, upon election by the Guarantor to terminate this
Guaranty; or
(iii) upon the sale of the Project Facilities by the Company
to a third party and/or the purchase of the Bonds pursuant to the
mandatory tender provisions of the Indenture.
(b) Upon termination of this Guaranty, the Guarantor
shall have no further obligations hereunder, except as provided herein with
respect to expenses incurred in connection with the enforcement hereof.
Section 6. Any right of the Guarantor by subrogation to the rights
of the Trustee shall be subordinate to all rights and claims of the Trustee and
the prior payment in full of the Bonds and the interest thereon.
Section 7. The Guarantor covenants that so long as this Guaranty
shall remain in effect, it will maintain its corporate existence, will not merge
or consolidate with another corporation or dissolve or otherwise dispose of all
or substantially all of its assets, unless the following conditions shall be
met:
(a) the successor corporation (if other than the
Guarantor) agrees in writing to assume all obligations of the Guarantor under
this Guaranty;
4
<PAGE> 52
(b) the aggregate of the unrestricted fund balance and
restricted fund balance of the Guarantor (or such successor corporation)
immediately following such merger, consolidation or transfer shall be not less
than that immediately prior to the merger, consolidation or transfer;
(c) the Authority and the Trustee shall have received (i) an
opinion of Bond Counsel (as defined in the Agreement) satisfactory to each of
them that the validity and exemption from federal income tax of the interest on
the Bonds will not be adversely affected by such merger, consolidation or
transfer and (ii) an opinion of counsel to the Guarantor that all consents and
approvals required to be obtained from any federal, state or local government,
department, agency, authority or instrumentality (other than the Authority
acting in its capacity as seller pursuant to the Agreement) and any other public
or private body, including accrediting organizations, having regulatory
jurisdiction and authority over the Guarantor have been received; and
Section 8. No remedy herein conferred upon or reserved to the
Trustee is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be cumulative and shall be in addition to
every other remedy given under this Guaranty or now or hereafter existing at law
or in equity. No delay or omission to exercise any right or power accruing upon
any default, omission or failure or performance hereunder shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Trustee to exercise any remedy reserved to it
in this Guaranty, it shall not be necessary to give any notice to the Guarantor
prior to the demand for payment. In the event any provision contained in this
Guaranty should be breached by the Guarantor and thereafter duly waived by the
Trustee, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder. No waiver, amendment,
release or modification of this Guaranty shall be established by conduct, custom
or course of dealing.
Section 9. The invalidity or unenforceability of any one or more
provisions in this Guaranty shall not affect the validity or enforceability of
the remaining portions of this Guaranty, or any part thereof.
Section 10. The Guarantor hereby covenants to comply with the rules
and regulations of the Pennsylvania Securities Commission contained in 64 Pa.
Code Chapter 202, Section 202.092, as the same may be amended or supplemented
from time to time (the "Guaranty Regulations"), including the following: (1) to
file with the Trustee a copy of the Guarantor's certified balance sheet and
profit and loss statement within 150 days after the completion of each of the
Guarantor's fiscal years; (2) to reimburse the Trustee the cost of distributing
to Bondholders who so request copies of the certified balance sheets and profit
and loss statements specified in clause (1) and the costs of notifying the
Bondholders of the occurrence of any of the events, and distributing the
Bondholders list, described in Section
5
<PAGE> 53
202.092 (8)(a)(iii) of the Guaranty Regulations; and (3) to notify the Trustee
within 24 hours after the Guarantor becomes "insolvent" as that term is defined
in the next paragraph.
"Insolvent" for the purpose hereof shall mean the inability of the
Guarantor to pay its debts as they fall due in the usual course of business, or
having liabilities in excess of the fair market value of assets. For purposes of
this definition, the Guarantor will not be considered insolvent if the auditor's
report to the Guarantor's certified balance sheet and profit and loss statement
did not contain a "going concern qualification". A "going concern qualification"
for the purposes hereof shall mean a qualification contained in the auditor's
report based upon the criteria contained in the Statement on Auditing Standard
34 promulgated by the American Institute of Certified Public Accountants, Inc.
Section 11. (a) This Guaranty may be amended or supplemented by the
parties hereto at any time and from time to time, in writing signed by all the
parties hereto, without the consent of the Bondholders (1) to add additional
covenants of the Guarantor for the security of Bondholders; or (2) to cure any
ambiguity or to cure, correct or supplement any provision of this Guaranty in
such manner as shall not be inconsistent with this Guaranty and shall not impair
the security hereof or materially adversely affect the Bondholders.
(b) This Guaranty may be amended or supplemented by the
parties hereto at any time and from time to time, in writing signed by all the
parties hereto, but only after approval by the registered owners of at least a
majority in aggregate principal amount of the Bonds outstanding under the
Agreement; provided, that (i) no amendment shall be made which materially
adversely affects some but less than all of the Bonds outstanding under the
Agreement without the consent of the registered owners of at least a majority in
aggregate principal amount of the Bonds so affected; and (ii) no amendment which
materially adversely affects the security for the Bonds may be made without the
consent of the registered owners of 100% of the Bonds outstanding under the
Agreement. Notwithstanding the provisions of the preceding sentence, no
amendments may be made to this Guaranty with respect to (1) the interest payable
upon any Bonds, (2) the dates of maturity or redemption provisions of any Bonds,
and (3) this Section 11 or any provision requiring the consent of the registered
owners of 100% of the Bonds outstanding under the Agreement, without the consent
of the registered owners of 100% of the Bonds outstanding under the Agreement.
Section 12. This Guaranty shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
Section 13. The liability of the Guarantor hereunder shall be an
absolute and unconditional general obligation of the Guarantor and there shall
be no recourse against any assets of the limited partners or the general partner
of the Guarantor other than against their respective partnership interests in
the Guarantor with respect to the Guarantor's obligations hereunder.
6
<PAGE> 54
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and delivered to the Trustee in its name and behalf as of the date
first above written.
SLT REALTY LIMITED PARTNERSHIP
By: STARWOOD LODGING TRUST*, a
Maryland real estate investment
trust, its sole general partner
By: /s/ Ronald C. Brown
--------------------------------
Ronald C. Brown
Senior Vice President and
Chief Financial Officer
Accepted:
FIRST UNION NATIONAL BANK,
as Trustee
By: /s/ [ILLEGIBLE]
______________________________
Title: Vice President
-----------------------------
- --------
* The name "Starwood Lodging Trust" is a designation of Starwood Lodging
Trust, a Maryland real estate investment trust ("Starwood") and its
trustee (as trustee but not personally) under the Declaration of Trust of
Starwood Lodging Trust dated August 25, 1969, as amended and restated as
of June 6, 1988, and further amended as of February 1, 1995 and as the
same may be further amended, modified, supplemented, reinstated or
superseded from time to time. All persons dealing with Starwood shall look
solely to Starwood's assets for the enforcement of any claims against
Starwood and the trustee, officers, agents and security holders of
Starwood assume no personal liability for obligations entered into on
behalf of Starwood, and their respective individual assets shall not be
subject to the claims of any person relating to such obligation.
7
<PAGE> 55
STATE OF ARIZONA :
: ss.
COUNTY OF MARICOPA :
On this, the 17th day of February, 1997, before me, the undersigned notary
public, personally appeared Ronald C. Brown, who acknowledged himself to be the
Senior Vice President and Chief Financial Officer of Starwood Lodging Trust, a
Maryland real estate investment trust, the general partner of SLT REALTY LIMITED
PARTNERSHIP, a Delaware limited partnership, and that he as such officer, being
authorized to do so, executed the foregoing instrument for the purposes therein
contained by signing the name of said limited partnership by himself as such
general partner.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Gail L. Jackson
-------------------------
Notary Public
My Commission Expires:
[NOTARIAL SEAL]
- ------------------------------------
NOTARY PUBLIC
STATE OF ARIZONA
Maricopa County
GAIL L. JACKSON
My commission Expires July 17, 2000
- -----------------------------------
<PAGE> 56
PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT
$27,820,000
COMMERCIAL DEVELOPMENT REVENUE REFUNDING BONDS
(DOUBLETREE GUEST SUITES PROJECT)
SERIES 1997A
AND
$11,650,000
COMMERCIAL DEVELOPMENT REVENUE REFUNDING BONDS
(DAYS INN PROJECT)
SERIES 1997B
BOND PURCHASE AGREEMENT
February 14, 1997
Philadelphia Authority for
Industrial Development
2600 Centre Square
1500 Market Street
Philadelphia, PA 19102
SLT Realty Limited Partnership
c/o Starwood Lodging Trust
2231 E. Camelback Road
Suite 410
Phoenix, AZ 85016
Goldman, Sachs & Co. ("Underwriter") hereby offers to enter into this
Bond Purchase Agreement ("Purchase Agreement") with the Philadelphia Authority
for Industrial Development ("Authority") and SLT Realty Limited Partnership
("SLT"). Upon execution of this Purchase Agreement by the Underwriter, the
Authority and SLT, this Purchase Agreement will be binding upon the Authority,
SLT and the Underwriter. This offer is made subject to your acceptance of this
Purchase Agreement on or before 6:00 P.M., Philadelphia, Pennsylvania time,
February 14, 1997, or such later date as the parties may agree and, if not so
accepted, will be subject to withdrawal by the Underwriter upon notice delivered
to your office at any time prior to the acceptance hereof by you.
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1. Introduction. The Authority is authorized to issue its $27,820,000,
aggregate principal amount, Commercial Development Revenue Refunding Bonds
(Doubletree Guest Suites Project), Series 1997A ("1997A Bonds"), and its
$11,650,000, aggregate principal amount, Commercial Development Revenue
Refunding Bonds (Days Inn Project), Series 1997B ("1997B Bonds"; together with
the 1997A Bonds, the "Bonds"), pursuant to the Pennsylvania Economic Development
Financing Law, Act of August 23, 1967, P.L. 251, as amended and supplemented
("Act"), resolution of the Authority adopted January 21, 1997, as amended and
supplemented by a resolution to be adopted February 18, 1997 (collectively, the
"Resolution"). The 1997A Bonds are issued under and pursuant to an Amended and
Restated Mortgage and Trust Indenture, dated as of February 1, 1997 ("1997A
Indenture"), by and between the Authority and First Union National Bank, as
trustee ("1997A Trustee"). The 1997B Bonds are issued under and pursuant to an
Amended and Restated Mortgage and Trust Indenture, dated as of February 1, 1997
("1997B Indenture"), by and between the Authority and First Union National Bank,
as trustee ("1997B Trustee"). The 1997A and 1997B Indentures are collectively
referred to herein as the "Indentures". The 1997A Trustee and the 1997B Trustee
are collectively referred to herein as the "Trustee". Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed thereto in the
Indentures.
The 1997A Bonds are being issued by the Authority to effect the
refunding of the Authority's $27,275,000, aggregate principal amount, Commercial
Development Revenue Bonds (Suite Hotel Project), Series A ("Suite Hotel Bonds"),
and the 1997B Bonds are being issued to effect the refunding of the Authority's
$9,725,000, aggregate principal amount, Commercial Development Revenue Bonds
(Economy Inn Project), Series A, and its $1,700,000, aggregate principal amount,
Commercial Development Revenue Bonds, (Economy Inn Project), Series B
(collectively, the "Economy Inn Bonds"). The Suite Hotel Bonds and the Economy
Inn Bonds are collectively referred to herein as the "Prior Bonds". The Prior
Bonds were issued to finance the costs of the acquisition, construction and
equipping of two hotels located adjacent to the Philadelphia International
Airport, in Philadelphia, Pennsylvania, which are now a Doubletree Guest Suites
hotel and a Days Inn hotel.
Equitable ownership of the Doubletree Guest Suites hotel was acquired
by SLT as of June 3, 1996, and equitable ownership of the Days Inn hotel was
acquired by SLT as of July 1, 1996. Starwood Lodging Trust, a Maryland real
estate investment ("Starwood"), is the sole general partner of SLT.
The 1997A Bonds are special and limited obligations of the Authority
and will be payable solely from revenues derived by the Authority under an
Amended and Restated Installment Sale Agreement, dated as of February 1, 1997,
by and between the Authority and SLT ("1997A Installment Sale Agreement"). The
1997B Bonds are special limited obligations of the Authority and are payable
solely from revenues derived by the Authority under an Amended and Restated
Installment Sale Agreement, dated as of February 1, 1997 ("1997B Installment
Sale Agreement"; together with the 1997A Installment Sale Agreement, the
"Installment Sale Agreements"). Under each Installment Sale Agreement, the
Authority is selling to SLT the real estate and improvements comprising, in the
case of the 1997A Installment Sale Agreement, a Doubletree Guest Suites hotel
("1997A Project Facilities"), and in the case of the 1997B Installment Sale
Agreement, the real estate and improvements comprising a Days Inn hotel ("1997B
Project Facilities", together with the 1997A Project Facilities, the "Project
Facilities"). Under each Indenture, the Authority will assign to the applicable
Trustee all of its right, title and interest in the applicable Installment Sale
Agreement (except for its rights to receive certain fees and indemnification).
SLT's obligations under each Installment Sale Agreement are non-recourse
obligations of SLT and are limited to SLT's interests
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in the respective Project Facilities. SLT has agreed in each Installment Sale
Agreement to make payments in amounts and at times sufficient to timely pay in
full all principal of and interest on the applicable Series of Bonds. Each
Indenture creates a mortgage lien on the applicable Project Facilities in favor
of the applicable Trustee.
The Bonds are special and limited obligations of the Authority and each
series of Bonds is payable solely from the revenues pledged under the applicable
Indenture for their payment and are not obligations of the City of Philadelphia,
the Commonwealth of Pennsylvania or any other political subdivision thereof.
Neither the general credit of the Authority, nor the credit or taxing power of
the City of Philadelphia, the Commonwealth of Pennsylvania or any other
political subdivision thereof is pledged to the payment of the principal of the
Bonds or interest thereon or any premium or other cost incident thereto. The
Authority has no taxing power.
Payment of principal of, redemption premium, if any, mandatory purchase
price and interest on each Series of Bonds when due has been unconditionally
guaranteed by SLT pursuant to a separate Guaranty Agreement (each, a
"Guaranty"), each dated as of February 1, 1997, from SLT to the applicable
Trustee. Each Guaranty is a general full recourse obligation of SLT.
2. Purchase, Sale and Delivery of Bonds. On the basis of the
representations, warranties, covenants and agreements contained herein, but
subject to the terms and conditions herein act forth, the Underwriter hereby
agrees to purchase from the Authority and the Authority hereby agrees to sell to
the Underwriter, all but not less than all of the 1997A Bonds at a purchase
price of $27,264,712.80, plus accrued interest from February 1, 1997, and all
but not less than all of the 1997B Bonds at a purchase price of $11,417,466,
plus accrued interest from February 1, 1997. The Bonds will mature on the dates
and in the amounts, and will bear interest at the rates, set forth on Schedule I
attached hereto and incorporated herein by reference. As compensation for acting
as Underwriter, the Underwriter shall be paid a fee for the 1997A Bonds in the
amount of $495,752.40, and a fee for the 1997B Bonds of $207,603.00, both on the
Closing Date, by a wire transfer of immediately available, federal funds by SLT.
Pursuant to and subject to the terms of this Purchase Agreement, the
Authority shall be obligated to sell simultaneously all of the Bonds to the
Underwriter and the Underwriter shall be obligated to purchase all of the Bonds,
and all of the Bonds shall be delivered by the Authority and accepted and paid
for by the Underwriter on the Closing Date (hereinafter defined). The Authority
will deliver the Bonds, or cause the Bonds to be delivered to The Depository
Trust Company, New York, New York ("DTC"), in definitive form against payment of
the purchase price in immediately available funds for the account of the
Authority on February 20, 1997, or at such other date or place as the
Underwriter, the Authority and SLT agree upon (such date being herein referred
to as the "Closing Date").
The Bonds shall be issuable initially in minimum denominations of
$100,000, and integral multiples of $5,000 above such amount.
3. Preliminary and Final Official Statements. The Authority has
previously provided the Underwriter with copies of its Preliminary Official
Statement dated February 3, 1997 relating to the Bonds (the "Preliminary
Official Statement"). As of its date, the Preliminary Official Statement was
"deemed final" by the Authority and SLT for purposes of paragraph b(1) of Rule
15c2-12 of the Securities and Exchange Commission ("Rule"), except for the
omission of no more than the following
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information: the offering price, interest rate, underwriting compensation,
aggregate principal amount, principal amount per year of sinking fund
redemption, if any, and other terms of the Bonds depending on such matters. The
Authority shall deliver or cause to be delivered to the Underwriter, promptly
after the acceptance by SLT and the Authority of this Purchase Agreement, a copy
of the Official Statement dated February 18, 1997, relating to the Bonds (the
"Official Statement"). As soon as practicable after the date hereof, but in any
event within seven (7) business days from the date hereof, the Authority shall
deliver or cause to be delivered to the Underwriter a sufficient number of
printed copies of the Official Statement as the Underwriter may reasonably
request so as to enable the Underwriter to comply with the provisions of
Paragraph (b)(4) of the Rule, and with Rules G-32 and G-36 and all other
applicable rules of the Municipal Securities Rulemaking Board. The Authority
shall be under no obligation to determine what number of copies of the Official
Statement requested by the Underwriter pursuant to the preceding sentence shall
be sufficient to enable the Underwriter to comply with the requirements of the
Rule.
The Authority and SLT (a) authorize the use and distribution of copies
of the Official Statement (including all amendments thereof and supplements
thereto), the Indentures, the Installment Sale Agreements, the Guaranties and
any other related documents and certificates in connection with the public
offering and sale of the Bonds, and (b) approve of and ratify the use and
distribution by the Underwriter, prior to the date hereof, of the Preliminary
Official Statement in connection with the offering of the Bonds.
The Authority will provide to the Underwriter such number of copies of
the Resolution as the Underwriter shall reasonably request.
4. Representations, Warranties and Covenants by the Authority. By its
execution hereof, the Authority represents and warrants to, and agrees with, the
Underwriter that the Authority is and will be on the Closing Date validly
existing as a body corporate and politic established as an instrumentality of
the Commonwealth of Pennsylvania ("Commonwealth") pursuant to the Act, and has,
and at the Closing Date will have, full legal right, power and authority (i) to
enter into this Purchase Agreement, (ii) to adopt the Resolution and cause the
delivery of the Bonds to the Underwriter pursuant to the Resolution and the
Indentures as provided herein, and (iii) to carry out and consummate the
transactions contemplated by this Purchase Agreement, the Resolution, the
Indentures, and the Installment Sale Agreements and as described in the Official
Statement.
The Authority hereby further represents, warrants and agrees as
follows:
(a) The Authority, with respect to the Bonds, has complied
with, and will at the Closing Date be in compliance in all material
respects with, the Resolution, the Indentures and the Act.
(b) Prior to or simultaneously with the acceptance hereof, the
Authority has duly adopted the Resolution, has duly authorized and
approved the Indentures, the Installment Sale Agreements and the
Official Statement, and has duly authorized and approved the execution
and delivery of, and the performance by the Authority of the
obligations contained in, the Resolution, the Bonds, this Purchase
Agreement, the Installment Sale Agreements and the Indentures and the
consummation by it of all other transactions contemplated by the
Official Statement.
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(c) The Authority, with respect to the Bonds, is not in
material breach of or default under any applicable law or
administrative regulation of the Commonwealth, any department,
division, agency or instrumentality thereof, or the United States of
America or any applicable judgment or decree or any loan agreement,
note, resolution, certificate, agreement or other instrument to which
the Authority is a party or is otherwise subject; and the adoption of
the Resolution and the execution and delivery of this Purchase
Agreement, the Bonds, the Indentures, the Installment Sale Agreements
and compliance with the provisions thereof will not conflict with or
constitute a material breach of or default under any applicable law or
administrative regulation of the Commonwealth, any department,
division, agency or instrumentality thereof, or the United States of
America or any applicable judgment or decree or any loan agreement,
note resolution, certificate, agreement or other instrument to which
the Authority is a party or is otherwise subject.
(d) All approvals, consents and orders of any governmental
authority, board, agency or commission having jurisdiction which would
constitute a condition precedent to the performance by the Authority or
its obligations hereunder and under the Resolution, the Indentures and
the Bonds have been obtained, except that no representation is made as
to any approvals, consents or orders applicable under federal or state
securities laws.
(e) The Bonds, the Resolution and the Indentures shall conform
to the descriptions thereof contained in the Official Statement; and
the Bonds, when validly issued, authenticated and delivered in
accordance with the Resolution and the Indentures and sold to the
Underwriter as provided therein, will be validly issued and outstanding
special and limited obligations of the Authority entitled to the
benefits of the applicable Indenture.
(f) The Indentures, the Bonds, this Purchase Agreement, and
the Installment Sale Agreements, shall constitute valid and binding
obligations of the Authority enforceable in accordance with their
terms, subject to any applicable bankruptcy, insolvency, reorganization
or similar laws or legal or equitable principles affecting the
enforcement of creditors' rights generally.
(g) The statements and information contained in the Official
Statement with respect to the Authority under the captions
"INTRODUCTION-Philadelphia Authority for Industrial Development," "THE
AUTHORITY", and "ABSENCE OF LITIGATION-The Authority" are true, correct
and complete in all material respects, and with respect to such
statements and information, the Official Statement does not contain any
untrue statement of a material fact and does not omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The Authority consents to the use of such
statements and information in the Official Statement.
(h) At the Closing Date, the information describing the
Authority contained in the Official Statement under the captions
"INTRODUCTION-Philadelphia Authority for Industrial Development", "THE
AUTHORITY", and "ABSENCE OF LITIGATION-The Authority" shall not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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(i) No litigation is pending or, to the best knowledge of the
Authority, threatened in any court in any way affecting the existence
of the Authority or the title of any member of the Authority or
employee of the Authority to the office held by such member or
employee, or seeking to restrain or enjoin the issuance, sale or
delivery of the Bonds or the collection of revenues of the Authority
pledged or to be pledged to pay the principal of and interest on the
Bonds, or the pledge thereof, or in any way contesting or affecting the
validity or enforceability of the Bonds, the Resolution, the
Indentures, this Purchase Agreement, the Installment Sale Agreements,
or contesting the completeness or accuracy of the Official Statement or
contesting the powers of the Authority or its authority with respect to
the Bonds, the Resolution, the Indentures, this Purchase Agreement or
the Installment Sale Agreements.
(j) The Authority will apply the proceeds of the Bonds in
accordance with the Resolution and the Indentures and as described in
the Official Statement.
(k) If between the date of this Purchase Agreement and the
date ninety (90) days after the end of the "underwriting period" (as
defined in the Rule), an event occurs affecting the Authority which, in
the opinion of the Underwriter, could cause the Official Statement to
contain an untrue statement of a material fact or to omit to state a
material fact which should be included therein for the purposes for
which the Official Statement was to be used or which is necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, the Authority will amend or
supplement the Official Statement in a form and in a manner reasonably
acceptable to the Underwriter and shall provide the Underwriter with
such amendment or supplement in such numbers as the Underwriter shall
reasonably request. For the purposes hereof, the "underwriting period"
shall end on the Closing Date unless the Underwriter otherwise notifies
the Authority in writing.
(l) The Authority will furnish such information, execute such
instruments and take such other action in cooperation with the
Underwriter as the Underwriter may reasonably request to qualify the
Bonds for offer and sale under the Blue Sky or other securities laws
and regulations of such states and other jurisdictions of the United
States of America as the Underwriter may designate; provided, however,
the Authority shall not be required to register as a dealer or broker
in any such state or jurisdiction nor shall it be required to qualify
to do business in or consent to the jurisdiction of such state or
jurisdiction.
Any certificate relating to the issuance and delivery of the Bonds
signed by an authorized member or officer of the Authority and delivered to the
Underwriter at or prior to the Closing Date shall be deemed a representation and
warranty by the Authority in connection with this Purchase Agreement to the
Underwriter as to the statements made therein.
The Authority agrees that all representations, warranties and covenants
made by it herein, and in certificates, agreements or other instruments
delivered pursuant hereto or in connection herewith, shall be deemed to have
been relied upon by the Underwriter, and that all representations, warranties
and covenants made by the Authority herein and therein and all the Underwriters'
rights hereunder and thereunder shall survive the delivery of the Bonds.
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5. Representations, Warranties and Covenants by SLT. SLT represents,
warrants and agrees as follows:
(a) SLT is duly organized, validly existing and in good
standing as a Delaware limited partnership qualified to do business in
the Commonwealth and has all necessary power and authority to own and
cause the operation of the Project Facilities and to conduct all its
other business and affairs, as presently conducted in the State of
Delaware, in the Commonwealth and elsewhere.
(b) The statements and information contained in the Official
Statement with respect to SLT, its affiliates and the Project
Facilities, including the statements contained in the Official
Statement under the captions "INTRODUCTION," "ESTIMATED SOURCES AND
USES OF FUNDS," "SLT REALTY LIMITED PARTNERSHIP," "PROJECT FACILITIES
OPERATING DATA", "THE PROJECT FACILITIES," "CERTAIN BONDHOLDERS' RISKS"
AND "ABSENCE OF LITIGATION-SLT" and in Appendix A to the Official
Statement are true, correct and complete in all material respects, and
with respect to such statements and information, the Official Statement
does not contain any untrue statement of a material fact and does not
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. SLT consents to the use of
such statements and information in the Official Statement.
(c) At the Closing Date, the information describing SLT, its
affiliates and the Project Facilities contained in the Official
Statement, including statements contained in the Official Statement
under the captions "INTRODUCTION," "ESTIMATED SOURCES AND USES OF
FUNDS," "SLT REALTY LIMITED PARTNERSHIP," "THE PROJECT FACILITIES,"
"PROJECT FACILITIES OPERATING DATA", "CERTAIN BONDHOLDERS' RISKS" AND
"ABSENCE OF LITIGATION-SLT" and in Appendix A to the Official Statement
shall not contain any untrue statement of a material fact and or omit
to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) The execution and delivery of this Purchase Agreement, the
Installment Sale Agreements, the Guaranties, the Continuing Disclosure
Agreement for each Series of Bonds, dated as of February 1, 1997, by
and between SLT and First Union National Bank, as Dissemination Agent
(collectively, the "Disclosure Agreements") and all other documents to
be executed and delivered by SLT in connection with the Bonds
(collectively, the "SLT Documents"), the consummation of the
transactions contemplated in the SLT Documents and the compliance by
SLT with the provisions thereof will not result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, the certificate of limited partnership or limited partnership
agreement of SLT, any indenture, mortgage or other agreement or
instrument to which SLT is a party or by which it is bound or any
existing law, administrative regulation or rule, judgment, court order
or consent decree to which it is subject.
(e) SLT has full right, power and authority to enter into,
execute and deliver the SLT Documents and to perform its obligations
thereunder.
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(f) SLT has obtained, or will obtain prior to the issuance of
the Bonds, all consents, approvals, authorizations and orders of
governmental or regulatory authorities that are required to be obtained
by SLT (i) as a condition precedent to the execution by SLT of the SLT
Documents, or (ii) as of the date of issuance of the Bonds to
effectuate the transactions described in the Official Statement, or
(iii) to own and cause the operation of the Project Facilities.
(g) SLT is not in default in the payment of the principal of
or interest on any of its indebtedness for borrowed money and is not in
default in any material respect under any agreement under and subject
to which any indebtedness for borrowed money has been incurred, and no
event has occurred and is continuing under the provisions of any such
agreement that constitutes or, with the lapse of time or the giving of
notice or both, would constitute such a default thereunder.
(h) There is no litigation at law or in equity or any
proceeding before any court or governmental agency involving SLT
pending or, to the best knowledge of SLT, threatened in which any
liability of SLT is not adequately covered by insurance or in which any
unfavorable judgment or order would have a material adverse effect upon
the business or assets of SLT or would adversely affect SLT's existence
or authority to do business, the validity, execution or delivery of the
SLT Documents, or the performance of SLT's obligations thereunder.
(i) SLT has not taken or omitted to take, and shall not take
or omit to take, any action which action or omission will cause SLT to
breach, violate or default under any provision of the SLT Documents.
(j) Subsequent to the date of any financial statements
included in the Official Statement or incorporated by reference
therein, SLT has not incurred any material liabilities, direct or
contingent, which are not disclosed in the Official Statement, nor has
there been any material adverse change in the financial position,
results of operations or conditions, financial or otherwise, of SLT,
whether or not arising from transactions in the ordinary course of
business.
(k) SLT will furnish such information, execute such
instruments and take such other action in cooperation with the
Underwriter as the Underwriter may reasonably request (i) to qualify
the Bonds for offer and sale under the Blue Sky or other securities
laws and regulations of such states and other jurisdictions of the
United States of America as the Underwriter may designate, provided,
however, that SLT shall not be required to register as a dealer or
broker in any such state or jurisdiction or be required to file a
general consent to service of process or become subject to service of
process in any jurisdiction in which SLT is not subject to service of
process, (ii) to determine the eligibility of the Bonds for investment
under the laws of such states and other jurisdictions, and (iii) to
continue such qualifications in effect so long as may be required for
the distribution of the Bonds.
(l) From the date hereof until the date ninety (90) days after
the end of the "underwriting period" (as defined in the Rule), SLT will
notify the Authority and the Underwriter upon the occurrence of any
material event affecting SLT, its operations, assets or facilities, the
SLT Documents or the Project Facilities.
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(m) (i) SLT shall indemnify and hold harmless the Authority,
its governing body, agents, attorneys, officers and employees, past,
present and future (together, the "Authority Indemnified Parties"), to
the full extent permitted by law against any and all losses, claims,
damages, liabilities or expenses asserted against any Authority
Indemnified Party arising in connection with the issuance sale and
delivery of the Bonds, including any and all losses, claims, damages
and liabilities or expenses asserted against any Authority Indemnified
Party caused by any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Official Statement, the
Official Statement and any amendments or supplements thereto, or the
omission or alleged omission therein of a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
Underwriter shall indemnify and hold harmless the Authority Indemnified
Parties to the same extent as the foregoing indemnity from SLT to the
Authority, but only with reference to written information relating to
the Underwriter furnished by it in writing specifically for use in the
preparation of the Official Statement. This indemnity agreement will be
in addition to any liability which the Underwriter may otherwise have.
The Authority and SLT acknowledge that the statements set forth under
the heading "UNDERWRITING" in the Official Statement constitute the
only information furnished in writing by or on behalf of the
Underwriter for inclusion in the Official Statement.
(ii) SLT hereby indemnifies and holds harmless (with respect
to the portions of the Preliminary Official Statement and Official
Statement set forth hereafter) the Underwriter and each person, if any,
who controls the Underwriter within the meaning of the Securities Act
of 1933 as amended (together, the "Underwriter Indemnified Parties")
against any losses, claims, damages or liabilities, joint or several,
to which the Underwriter or such controlling persons may become subject
under such act or otherwise insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or misleading statement or allegedly
misleading statement of a material fact contained in the Preliminary
Official Statement or Official Statement or caused by any omission or
alleged omission from the Preliminary Official Statement or Official
Statement of any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading to the extent such losses, claims, damages,
liabilities or expenses are caused by any such untrue or misleading
statement or omission or allegedly untrue or misleading statement or
omission in the information contained in the Preliminary Official
Statement or the Official Statement under the captions "SLT REALTY
LIMITED PARTNERSHIP", "ESTIMATED SOURCES AND USES OF FUNDS", "PROJECT
FACILITIES OPERATING DATA", "THE PROJECT FACILITIES", "CERTAIN
BONDHOLDERS' RISKS", and "ABSENCE OF LITIGATION-SLT", and Appendix A.
In case any action shall be brought against the Underwriter or any
controlling person of the Underwriter in respect to which indemnify
may be sought under this subparagraph, the Underwriter shall promptly
notify SLT in writing and SLT shall promptly assume the defense
thereof, including the employment of counsel and the payment of all
expenses. Any one or more of the Underwriter or controlling persons of
the Underwriter shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such party unless
employment of such counsel has been specifically authorized by SLT or
unless the named parties to such action (including any impleaded
parties) include both SLT and the Underwriter and the Underwriter shall
have been advised by counsel that a conflict of interest
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may arise and for this reason it is not desirable for the same counsel
to represent SLT and the Underwriter. SLT shall not be liable for any
settlement of any such action effected by the Underwriter or the
controlling persons of the Underwriter, without the consent of SLT. If
an action is settled with the consent of the Underwriter and SLT or if
there shall be a final judgment for the plaintiff in any such action
against SLT or the Underwriter, with or without the consent of SLT, SLT
agrees to indemnify and hold harmless the Underwriter to the extent
provided in this Purchase Agreement.
(iii) The Underwriter shall indemnify and hold harmless (with
respect to the portion of the Preliminary Official Statement or
Official Statement as set forth hereafter) SLT and each person, if any,
who controls SLT within the meaning of the Securities Act of 1933 as
amended (together, the "SLT Indemnified Parties'), against any losses,
claims, damages or liabilities, joint or several, to which SLT or such
controlling persons may become subject under such act or otherwise
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
misleading statement or allegedly misleading statement of a material
fact contained in the Preliminary Official Statement or Official
Statement or caused by any omission or alleged omission from the
Preliminary Official Statement or Official Statement of any material
fact necessary in order to make the statement made therein, in light of
the circumstances under which they were made, not misleading to the
extent such losses, claims, damages, liabilities or expenses are caused
by any such untrue or misleading statement or omission or allegedly
untrue or misleading statement or omission in the information contained
in the Preliminary Official Statement or the Official Statement under
the caption "UNDERWRITING". In case any action shall be brought against
SLT or any controlling person of SLT in respect to which indemnity may
be sought under this subparagraph, SLT shall promptly notify the
Underwriter in writing and the Underwriter shall promptly assume the
defense thereof, including the employment of counsel and the payment of
all expenses. Any one or more of SLT or controlling persons of SLT
shall have the right to employ separate counsel in any such action and
to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such party unless employment of
such counsel has been specifically authorized by the Underwriter or
unless the named parties to such action (including any impleaded
parties) include both the Underwriter and SLT and SLT shall have been
advised by counsel that a conflict of interest may arise and for this
reason it is not desirable for the same counsel to represent the
Underwriter and SLT. The Underwriter shall not be liable for any
settlement of any such action effected by SLT or the controlling
persons of SLT, without the consent of the Underwriter. If any action
is settled with the consent of SLT and the Underwriter, or if there
shall be a final judgment for the plaintiff in any such action against
the Underwriter or SLT, with or without the consent of the Underwriter,
the Underwriter agrees to indemnify and hold harmless SLT to the extent
provided in this Purchase Agreement.
(iv) If any of the Authority Indemnified Parties, Underwriter
Indemnified Parties or SLT Indemnified Parties (each an "Indemnified
Party") is advised in an opinion of counsel that there may be
conflicting interests between the party obligated hereunder to provide
indemnity (here an "Indemnifying Party") and the Indemnified Party or
legal defenses available to the Indemnified Party which are different
from or in addition to those available to the Indemnifying Party or if
the Indemnifying Party shall, after this notice and within a period of
time necessary to preserve any and all defenses to any claim asserted,
fail to assume
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the defense or to employ counsel for that purpose reasonably
satisfactory to the Indemnified Party, the Indemnified Party shall have
the right, but not the obligation, to undertake the defense of, and to
compromise or settle the claim or other matter on behalf of, for the
account of, and at the risk of, the Indemnifying Party.
(n) Obligations of SLT Nonrecourse. Anything in this Purchase
Agreement to the contrary notwithstanding, other than the provisions of
Section 5(m)(i) or (ii) hereof (for which recourse may be had against
the general assets of SLT but not assets of Starwood which do not
consist of partnership interests in SLT) irrespective of any breach,
incompleteness or inaccuracy of any statement, certification,
representation, warranty, covenant, agreement or understanding of any
nature whatsoever made by SLT, no recourse shall be had for the payment
of any claim based on or in respect of this Purchase Agreement against
SLT or any partner of SLT, either directly or through any successor or
assign of SLT or any partner of SLT, or under any rule of law, statute
or constitution, or by the enforcement of any assessment or penalty, or
otherwise, it being expressly understood that, except as provided
above, all obligations of SLT under this Purchase Agreement are solely
nonrecourse obligations of SLT limited solely to SLT's interest in the
Project Facilities and that all such liability of SLT is and is to be,
by the acceptance of this Purchase Agreement by the Authority and the
Underwriter, expressly waived and released as a condition of, and as
consideration for, the execution and delivery of this Purchase
Agreement; provided, however, that nothing contained herein shall
constitute a waiver of the obligations of SLT to indemnify the
Authority and the Underwriter hereunder or shall be taken to prevent
the enforcement, by way of specific performance of all liabilities,
obligations and undertakings of SLT contained in this Purchase
Agreement; provided further, however, that in no event shall any
deficiency judgment or other type of personal monetary judgment be
sought or secured against assets of SLT other than the Project
Facilities (other than with respect to the provisions of Section
5(m)(i) or (ii) hereof).
(o) SLT shall not take any action or omit to take any action,
which action or omission would adversely affect the exclusion of
interest on any Bond from gross income for federal income tax purposes.
Any certificate relating to the issuance and delivery of the Bonds
signed by an authorized member or officer of SLT and delivered to the
Underwriter at or prior to the Closing Date shall be deemed a representation and
warranty by SLT in connection with this Purchase Agreement to the Underwriters
as to the statements made therein.
SLT agrees that all representations, warranties and covenants made by
SLT herein, and in certificates, agreements or other instruments delivered
pursuant hereto or in connection herewith, shall be deemed to have been relied
upon by the Underwriter and the Authority and that all representations,
warranties and covenants made by SLT herein and therein and all the
Underwriter's and Authority's rights hereunder and thereunder shall survive the
delivery of the Bonds.
6. Termination. The Underwriter may terminate its obligations hereunder
by written notice to the Authority and SLT if, at any time subsequent to the
date hereof and on or prior to the Closing Date:
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<PAGE> 67
(a) in the Congress of the United States legislation shall be
introduced or enacted or approved by the President, or a decision by a
court of the United States shall be rendered, or a ruling, regulation,
proposed regulation or statement by or on behalf of the Treasury
Department of the Internal Revenue Service of the United States, with
respect to federal taxation upon revenues or other income of the
general character to be derived by the Authority or upon interest
received on the Bonds or on obligations of the general character of the
Bonds which, in the opinion of the Underwriter, materially and
adversely affects the marketability of the Bonds; or
(b) legislation shall be enacted or any action shall be taken
by the Securities and Exchange Commission which, in the opinion of
counsel to the Underwriter, has the effect of requiring the offer or
sale of the Bonds to be registered under the Securities Act of 1933, as
amended or the Indenture to be qualified as an indenture under the
Trust Indenture Act of 1939, as, amended, or any event shall have
occurred or shall exist which, in the reasonable judgment of the
Underwriter, makes untrue or incorrect in any material respect any
statement or information contained in the Official Statement or is not
reflected in the Official Statement but should be reflected therein in
order to make the statements or information contained therein, in light
of the circumstances under which such statements were made, not
misleading in any material respect; or
(c) (i) in the Underwriter's reasonable judgment, the market
price of the Bonds is adversely affected because: (a) additional
material restrictions not in force as of the effective date hereof
shall have been imposed upon trading in securities generally by any
governmental authority or by any national securities exchange; (b) the
New York Stock Exchange or other national securities exchange, or any
governmental authority, shall impose, as to the Bonds or similar
obligations, any material restrictions not now in force, or increase
materially those now in force, with respect to the extension of credit
by, or the charge to the net capital requirements of, underwriters; (c)
a general banking moratorium shall have been established by federal,
New York or Commonwealth authorities; or (d) a war involving the United
States of America shall have been declared, or any other national or
international calamity shall have occurred (economic or otherwise), or
any conflict involving the armed forces of the United States of America
shall have escalated to such a magnitude as to materially affect the
Underwriter's ability to market the Bonds; (ii) there shall have
occurred any material change, or any other event which in the
Underwriter's opinion materially adversely affects the marketability of
the Bonds, or any material development involving a prospective change
in, or affecting particularly the affairs of SLT, the hotel and
hospitality industry, or the economy of the Commonwealth generally or
the City of Philadelphia, which, in the Underwriter's reasonable
judgment, materially impairs the investment quality of the Bonds or the
ability of the Underwriter to market the Bonds; or (iii) any litigation
shall be instituted, pending or threatened to restrain or enjoin the
issuance, sale or delivery of the Bonds or in any way contesting or
affecting any authority for or the validity of the Bonds, any of the
proceedings of the Authority taken with respect to the issuance or sale
thereof, the pledge or application of any revenues provided for the
payment of the Bonds or the existence or powers of the Authority; or
(d) there shall have occurred any change which, in the
reasonable judgment of the Underwriter, makes unreasonable or
unreliable any of the assumptions upon which payment of debt service on
the Bonds is predicated.
12
<PAGE> 68
7. Conditions to Obligations of Underwriter. The obligations of the
Underwriter to purchase and pay for the Bonds on the Closing Date are subject to
the accuracy of the representations and warranties of the Authority and SLT
herein as of the date hereof and as of the Closing Date, to the accuracy of
statements to be made on behalf of the Authority and SLT hereunder, to the
performance by the Authority and SLT of their obligations hereunder, and to the
following additional conditions precedent;
(a) Copies of Documents. At or prior to the Closing Date, the
Underwriter shall have received:
(i) one certified copy of the Resolution; and
(ii) one executed copy of each of the Indentures, the
Installment Sale Agreements, the Guaranties and the Continuing
Disclosure Agreements.
(b) Effectiveness of Documents. The Resolution, the
Indentures, the Installment Sale Agreements, the Guaranties, this
Purchase Agreement and the Disclosure Agreements and all official
action of the Authority and all partnership action of SLT relating
thereto, shall be in full force and effect and shall not have been
amended, modified or supplemented, except as may have been agreed to in
writing by the Underwriter, and the Official Statement shall have been
executed and shall not have been amended or supplemented except as may
have been agreed to in writing by the Underwriter.
(c) Approving Opinion of Bond Counsel. The Authority shall
have received the approving opinions of Ballard Spahr Andrews &
Ingersoll, Philadelphia, Pennsylvania ("Bond Counsel") dated the
Closing Date and substantially in the form attached to the Official
Statement as Appendix C thereto; the Underwriter shall have received a
letter of Bond Counsel, dated the Closing Date, and addressed to the
Underwriter to the effect that the approving opinion may be relied upon
by the Underwriter to the same extent as if such opinion were addressed
to it.
(d) Opinion of Counsel to the Authority. The Underwriter shall
have received an opinion of Philip Brandt, Esquire, Counsel to the
Authority, dated the Closing Date and addressed to the Underwriter and
the Authority, to the effect that (i) no litigation before any court of
the United States of America sitting in the Commonwealth or of the
Commonwealth is pending or, to his knowledge, threatened in any way
affecting the existence of the Authority or the titles of its members
to their respective offices, or seeking to restrain or to enjoin the
issuance, sale or delivery of the Bonds, the application of the
proceeds thereof in accordance with the Indentures, or the collection
or application of revenues of the Authority pledged or to be pledged to
pay the principal of and interest on the Bonds, or the pledge thereof
or of the proceeds of the Bonds, or in any way contesting or affecting
the validity or enforceability of the Bonds, the Indentures, the
Resolution, the Installment Sale Agreements, this Purchase Agreement,
or any action of the Authority contemplated by any of said documents,
or in any way contesting the completeness or accuracy of the Official
Statement or the powers of the Authority or its authority with respect
to the Bonds, the Indentures, the Resolution, the Installment Sale
Agreements, this Purchase Agreement or any action on the part of the
Authority contemplated by any of said documents or the Official
Statement; (ii) the Authority is a duly organized and existing public
body corporate and politic of the
13
<PAGE> 69
Commonwealth, acting pursuant to the Act, with full legal right, power
and authority to perform all of its obligations under this Purchase
Agreement, the Bonds, the Resolution, the Indentures and the
Installment Sale Agreements, and the Authority has duly adopted the
Resolution, which Resolution is now in full force and effect, and has
duly authorized, executed and delivered this Purchase Agreement, and
duly authorized, executed and delivered, or causes to be delivered the
Indentures, the Bonds, the Installment Sale Agreements, and the
Official Statement, and (assuming due authorization, execution and
delivery by the other parties thereto, where necessary) the Indentures,
the Installment Sale Agreements, this Purchase Agreement and the Bonds
constitute legal, valid and binding agreements of the Authority; (iii)
the adoption of the Resolution, and the execution and delivery of the
Indentures, the Bonds, the Installment Sale Agreements, this Purchase
Agreement and the other instruments contemplated by any of such
documents to which the Authority is a party, and compliance with the
provisions of each thereof, will not conflict with or constitute a
breach of or default under any applicable law or administrative rule or
regulation of the Commonwealth, the United States of America, or of any
department, division, agency or instrumentality of either thereof, or
any applicable court or administrative decree or order or any loan
agreement, note, ordinance, resolution, indenture, contract, agreement
or other instrument to which the Authority is a party or is otherwise
subject or bound; (iv) notice of the issuance of the Bonds has been
given to the Department of Community and Economic Development of the
Commonwealth; (v) the approval of the Mayor of the City of
Philadelphia, which approval is a condition precedent to the
Authority's issuance of the Bonds, has been obtained; and (vi) the
statements contained in the Official Statement under the captions
"INTRODUCTION-Philadelphia Authority for Industrial Development, "THE
AUTHORITY," and "ABSENCE OF LITIGATION-Authority"; insofar as such
statements purport to describe the Authority are true and correct in
all material respects.
(e) Supplemental Opinion of Bond Counsel. The Underwriter
shall have received a supplemental opinion of Bond Counsel, dated the
Closing Date and addressed to the Underwriter, to the effect that (i)
this Purchase Agreement has been duly authorized, executed and
delivered by the Authority and is a valid and binding obligation of the
Authority enforceable against it in accordance with its terms (except
as enforcement may be limited by bankruptcy, insolvency, reorganization
or similar laws or equitable principles relating to or limiting
creditors' rights generally); (ii) the Bonds are exempt from
registration under the Securities Act of 1933, as amended, and the
Indentures do not have to be qualified under the Trust Indenture Act of
1939, as amended; and (iii) the statements contained in the Official
Statement under the captions "INTRODUCTION," "THE BONDS", "SECURITY AND
SOURCES OF PAYMENT FOR THE BONDS" and in Appendix B insofar as such
statements describe the Bonds, the Indentures, the Installment Sale
Agreements and the Guaranties, and under the caption "TAX EXEMPTION",
present a fair and accurate summary of the provisions of such documents
and as to the legal matters set forth or described therein.
(f) Certificate of the Trustee. The Underwriter shall have
received a certificate, dated the Closing Date and signed by an
authorized officer of the Trustee to the effect that:
(i) the Trustee is a national banking association
duly organized, validly existing and in good standing under
the laws of the United States, is duly
14
<PAGE> 70
qualified to do business and to exercise trust powers in all
jurisdictions where the nature of its operations as
contemplated by the Indentures legally requires such
qualification and has the corporate power to take all action
required or permitted of it under the Indentures;
(ii) the execution, delivery and/or performance by
the Trustee of its duties and obligations under the
Indentures, and the performance by the Trustee of its duties
and obligations under the Indentures have been duly authorized
by all necessary corporate action on the part of the Trustee,
and under present law do not and will not contravene the
Articles of Association or ByLaws of the Trustee or conflict
with or constitute a breach of or default under any law,
administrative regulation, court decree or any agreement or
instrument to which the Trustee is subject;
(iii) all approvals, consents and orders of any
governmental authority or agency having jurisdiction in the
matter which would constitute a condition precedent to the
performance by the Trustee of its duties and obligations under
the Indentures have been obtained and are in full force and
effect;
(iv) the Indentures have been duly entered into and
delivered by the Trustee and constitute the legal, valid and
binding obligations of the Trustee, enforceable against the
Trustee in accordance with their respective terms, except as
the enforceability thereof may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights or by general principles of
equity;
(v) no litigation is pending or, to the best of such
officer's knowledge, threatened in any way contesting or
affecting the existence or powers (including trust powers) of
the Trustee or the Trustee's ability to fulfill its duties and
obligations under the Indentures; and
(vi) the Bonds have been authenticated and the
Indentures have been executed and delivered by authorized
officers of the Trustee.
(g) Certificate of the Authority. The Underwriter shall have
received a certificate, dated the Closing Date and signed by a duly
authorized officer of the Authority to the effect that:
(i) there is no action, suit proceeding,
investigation at law or in equity before or by any court,
public board or body pending or, to the knowledge of the
Authority, threatened, wherein an unfavorable decision, ruling
or finding would: (a) affect the existence of the Authority or
the titles of its members to their respective offices, (b)
restrain or enjoin the issuance, sale and delivery of the
Bonds, or the revenues of the Authority pledged or to be
pledged to pay the principal of, redemption premium, if any,
and interest on the Bonds or the pledge thereof, (c) contest
or affect the validity or enforceability of the Bonds, the
Resolution, the Indentures, the Installment Sale Agreements or
this Purchase Agreement, (d) contest the completeness or
accuracy of the
15
<PAGE> 71
Official Statement or (e) contest the powers of the Authority
or its authority with respect to the Bonds, the Resolution,
the Indentures, the Installment Sale Agreements, or this
Purchase Agreement;
(ii) the Authority has complied or will comply with
all agreements, covenants and arrangements and has satisfied
or will satisfy all conditions on its part to be complied
with, performed or satisfied at or prior to the Closing Date;
(iii) the representations and warranties of the
Authority contained herein and in the Indentures are true,
complete and correct in all material respects as of the
Closing Date;
(iv) the Preliminary Official Statement as to the
Authority was deemed final as of its date by the Authority
within the meaning of the Rule.
(h) Defeasance Opinion of Bond Counsel. The Underwriter shall
have received an opinion of Bond Counsel addressed to the Underwriter
and the Authority to the effect that the Prior Bonds are deemed to have
been paid within the meaning and with the effect expressed in the
Original Indentures and that the liens of the Indentures have been
discharged with respect to the Prior Bonds.
(i) Opinions of SLT's Counsel. The Underwriter, Bond Counsel
and the Authority shall have received the opinions of Kutak Rock,
Phoenix, Arizona, counsel to SLT, and other counsel to SLT, in form and
substance satisfactory to the Underwriter, as to the matters set forth
in Exhibit A attached hereto and incorporated herein by reference.
(j) Certificate of SLT. A certificate signed by an authorized
officer of Starwood, as General Partner of SLT, to the effect that (i)
the representations and warranties of SLT set forth herein and in the
Installment Sale Agreements are true and correct as of the Closing
Date; (ii) SLT has performed all of its obligations hereunder and
satisfied all conditions on its part to be satisfied hereunder on or
prior to the Closing Date, and (iii) the statements and information
contained in the Official Statement (including statistical and
financial information therein) under the headings "INTRODUCTION,"
"ESTIMATED SOURCES AND USES OF FUNDS," "SLT REALTY LIMITED
PARTNERSHIP," "THE PROJECT FACILITIES," "PROJECT FACILITIES OPERATING
DATA," "CERTAIN BONDHOLDERS' RISKS," "ABSENCE OF LITIGATION-SLT" and in
Appendix A to the Official Statement, to the extent that such
statements and information relate to SLT, its affiliates, operations,
assets and facilities, the Project Facilities, SLT's participation in
the transactions contemplated by and described in the Official
Statement and the plan of financing, are true, correct and complete in
all material respects; and, with respect to such statements and
information, the Official Statement does not contain any untrue
statement of a material fact and does not omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading; and (iv) SLT has deemed the Preliminary Official
Statement "final" as of its date within the meaning of the Rule.
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<PAGE> 72
(k) Opinion of General Partner's Counsel. The Underwriter,
Bond Counsel and the Authority shall have received the opinion of
Starwood's Counsel, Sidley & Austin, Los Angeles, California, as to the
matters set forth in Exhibit B attached hereto and incorporated herein
by reference.
(1) Certificate of General Partner. A certificate signed by an
authorized officer of Starwood as to the matters set forth in Exhibit C
attached hereto and incorporated herein by reference.
(m) Non-Arbitrage Certificate. A certificate executed by
authorized officers of the Authority and on behalf of SLT by an
authorized officer of Starwood, as General Partner of SLT, in form and
substance satisfactory to Bond Counsel, as to the facts, circumstances
and reasonable expectations of the Authority and SLT with respect to
the Bonds and the application of the proceeds thereof and such other
matters as are necessary to establish the excludability of interest on
the Bonds from gross income for federal income tax purposes;
(n) Form 8038. A completed and executed Form 8038 and evidence
of filing thereof with the Internal Revenue Service;
(o) Title Insurance. Policies of title insurance issued by
Commonwealth Land Title Insurance Company insuring the title of the
Authority and SLT in the Project Facilities and the priority of the
mortgage liens created by the Indentures written in the aggregate
principal amount of the Bonds, in form and substance satisfactory to
the Underwriter.
(p) UCC-1s. Uniform Commercial Code Financing Statements on
Form UCC-1 executed by the Authority and SLT with respect to the
security interests granted by the Authority and SLT, in form and
substance satisfactory to the Underwriter.
(q) Audited Financial Statements of SLT for the year ended
December 31, 1995.
(r) Evidence of payment of the redemption price of the Prior
Bonds, including accrued interest thereon.
(s) Other Opinions, etc. Such additional legal opinions,
certificates, proceedings, instruments and other documents as the
Underwriter or Bond Counsel may reasonably request.
All the opinion letters, certificates, instruments and other documents
mentioned above or elsewhere in this Purchase Agreement shall be deemed to be in
compliance with the provisions hereof if, but only if, they are in form and
substance reasonably satisfactory to the Underwriter. The Underwriter shall have
the right to waive any condition set forth in this Section 7.
8. Expenses. If the Closing occurs hereunder, the Underwriter shall be
under no obligation to pay, and SLT shall pay from moneys furnished by SLT, any
expense incident to the performance of SLT's or the Authority's obligations
hereunder, including, but not limited to, the fees and expenses of the
Authority, printing costs (including the printing and delivery of the
preliminary and final Official Statements), costs of filing and recording fees,
title insurance premiums, initial fees
17
<PAGE> 73
and charges of the Trustee, legal fees and charges of SLT and the Authority
(including fees and disbursements of Bond Counsel and Counsel to the Authority),
fees and charges for execution of the Bonds, transportation, printing and
safekeeping of Bonds, the fees and expenses of Underwriter's counsel, and any
other similar costs, charges and fees in connection with the foregoing, all as
set forth as Closing Costs on a Closing Statement to be approved in writing by
SLT. The Authority shall have no liability hereunder for any such expenses.
9. Limited Liability of Autbority. SLT's and the Underwriter's remedies
against the Authority hereunder shall be limited to specific performance or
other appropriate remedy to enforce the Authority's obligations hereunder and,
notwithstanding any provision to the contrary herein set forth, no provision of
this Purchase Agreement shall be construed so as to give rise to a pecuniary
liability of the Authority or its members, officers or employees or to give rise
to a charge upon the general credit of the Authority or such members, officers
or employees; and any pecuniary liability hereunder of the Authority shall be
limited to its interests in the Project Facilities and the lien of any judgment
shall be restricted thereto. The Authority shall not be required to do any act
whatsoever to mitigate the damages to the other parties if any breach or default
shall occur hereunder.
10. Notices. Any notice or other communication to be given to SLT or
the Authority under this Purchase Agreement may be given by delivering the same
in writing to SLT or the Authority at its address set forth above, and any
notice or other communication to be given to the Underwriter under this
Purchase Agreement may be given by delivering the same in writing to Goldman,
Sachs & Co., 85 Broad Street, 24th Floor, New York, NY 10004, attention: Kenneth
C. Rogozinski. The approval of other action or exercise of judgment by the
Underwriter shall be evidenced by a writing signed on behalf of the Underwriter
by Goldman, Sachs & Co. and delivered to the Authority.
11. Successors. This Purchase Agreement is made solely for the benefit
of the Authority, the Underwriter and SLT (including their successors or
assigns) and no other person shall acquire or have any right hereunder or by
virtue hereof. All the representations, warranties, covenants, and agreements
contained herein shall remain operative and in full force and effect and shall
survive delivery of any payment for the Bonds hereunder, regardless of any
investigation made by the Underwriter or on its behalf.
12. Governing Law. This Purchase Agreement shall be governed by the
laws of the Commonwealth.
13. Counterparts. The Purchase Agreement may be executed and delivered
in any number of counterparts, and such counterparts taken together shall
constitute one and the same instrument.
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<PAGE> 74
14. Effectiveness. This Purchase Agreement shall become effective by
and among the Underwriter, SLT and the Authority upon the execution of the
acceptance hereof by SLT and the Authority.
Very truly yours,
GOLDMAN, SACHS & CO.
By: /s/ Goldman, Sachs & Co.
--------------------------------------------
Accepted this 14th day of February, 1997
SLT REALTY LIMITED PARTNERSHIP
By: STARWOOD LODGING TRUST,
as General Partner*
By: /s/ Ronald C. Brown
-------------------------------
Name: RONALD C. BROWN
Title: Senior Vice President and Chief Financial Officer
Accepted this 14th day of February, 1997
PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT
By:
------------------------------
Name:
------------------------------
Its:
------------------------------
* The name "Starwood Lodging Trust" is a designation of Starwood Lodging
Trust, a Maryland real estate investment trust ("Starwood") and its
trustee (as trustee but not personally) under the Declaration of Trust
of Starwood Lodging Trust dated August 25, 1969, as amended and
restated as of June 6, 1988, as further amended as of February 1, 1995,
and as the same may be further amended, modified, supplemented,
reinstated or superseded from time to time. All persons dealing with
Starwood shall look solely to Starwood's assets for the enforcement of
any claims against Starwood and the trustee, officers, agents and
security holders of Starwood assume no personal liability for
obligations entered into on behalf of Starwood, and their respective
individual assets shall not be subject to the claims of any person
relating to such obligation.
19
<PAGE> 75
Schedule I
<TABLE>
<CAPTION>
Bonds Maturity Interest Rate Yield
----- -------- ------------- -----
<S> <C> <C> <C>
$27,820,000 Commercial October 1, 2027 6.50% 6.70%
Development Revenue
Refunding Bonds.
(Doubletree Guest Suites
Project), Series 1997A
$11,650,000 Commercial October 1, 2027 6.50% 6.70%
Development Revenue
Refunding Bonds (Days
Inn Project) Series 1997B
</TABLE>
Initial Term Rate Period
February 1, 1997 to but
not including October 1, 2013
<PAGE> 76
EXHIBIT A
MATTERS TO BE COVERED IN THE OPINION
OF SLT'S COUNSEL
1. SLT duly organized, validly existing and in good standing as a
Delaware limited partnership and is qualified to transact business in the
Commonwealth, with full power to own its properties and conduct its business as
described in the Preliminary Official Statement and the Official Statement.
2. SLT has duly executed and delivered the Bond Purchase Agreement and
has duly authorized the distribution of the Preliminary Official Statement and
has duly approved the Official Statement.
3. SLT has full power and authority to enter into the SLT Documents,
and each of the SLT Documents has been duly authorized, executed and delivered
by SLT and is valid and binding agreement of SLT, enforceable in accordance with
its terms.
4. Except as may be set forth in the Preliminary Official Statement and
in the Official Statement, to such counsel's knowledge after due inquiry, and
except with respect to claims, if any, which are covered by SLT's insurance
carriers, there is no action, suit, proceeding or investigation at law or in
equity before or by any court, public board or body pending or threatened
against or affecting SLT, or to which SLT is a party or of which property of SLT
is subject, wherein an unfavorable decision, ruling or finding would materially
and adversely affect SLT, or which would materially and adversely affect the
transactions contemplated by the SLT Documents and described in the Preliminary
Official Statement and in the Official Statement, or which would adversely
affect the validity of the Bonds or the SLT Documents or which would materially
and adversely affect the financial condition or operations of SLT. With respect
to negligence claims, if any, such counsel is not aware of any claim which may
reasonably be expected to result in any judgment against SLT in excess of SLT's
insurance coverage limitations.
5. The approval by SLT of the Preliminary Official Statement and the
Official Statement, and the execution and delivery by SLT of the Bond Purchase
Agreement and the SLT Documents, and other agreements contemplated thereby, the
terms and provisions thereof, the approval by SLT of the Indentures, compliance
by SLT with the provisions of the SLT Documents, fulfillment by SLT of the terms
thereof and consummation by SLT of the transactions contemplated thereby (under
the circumstances contemplated thereby), do not and will not in any respect
conflict with or constitute, on the part of SLT a breach or violation or default
under its partnership agreement and do not in any material respect constitute on
the part of SLT a breach or violation or default under any agreement, indenture,
mortgage, deed of trust, lease or other instrument to which SLT is a party, or
by which it is or may be bound, or any existing laws, regulations,
administrative or court order or decree to which SLT is or may be subject.
6. SLT has complied in all material respects with all applicable
requirements of the Commonwealth and its respective agencies and
instrumentalities to operate the Project Facilities substantially as they are
being operated and is qualified under such requirements to conduct its business
as it is presently being conducted.
<PAGE> 77
7. SLT has obtained all necessary licenses, approvals and permits which
are required to enable SLT to own and operate the Project Facilities as
described in the Official Statement, and all approvals, consents and orders of
any governmental authority, board, agency or commission having jurisdiction
which would constitute a condition precedent to the performance by SLT of its
obligations under the SLT Documents.
8. The statements contained in the Preliminary Official Statement and
the Official Statement (except for financial and statistical data, as to which
no statement need be made) are true and correct insofar as they relate to SLT,
Starwood and its affiliates, and the Project Facilities, and do not omit to
state any fact necessary to make the statements therein, insofar as they relate
to SLT, Starwood and its affiliates, and the Project Facilities, in light of the
circumstances under which they were made, not misleading. Without having
undertaken to determine independently the accuracy or completeness of, or to
verify the information contained in, the Preliminary Official Statement and the
Official Statement (except for the inquiry necessary to make the statement in
the preceding sentence), nothing has come to such counsel's attention which
would lead it to believe that the Preliminary Official Statement and the
Official Statement (except for the financial statements appearing in Appendix A,
and other financial and statistical material included elsewhere in the
Preliminary Official Statement and the Official Statement, as to which no
opinion need be expressed) contains any untrue statement of a material fact or
omits to state a material fact with respect thereto necessary to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
9. The Indentures create a valid security interest in the mortgaged
property described therein and pledged to secure the obligations thereunder in
which a security interest may be created under the Pennsylvania Uniform
Commercial Code as enacted and construed on the date hereof, which security
interest, upon the filing of financing statements on Form UCC-1, in the offices
of the Secretary of the Commonwealth and the Office of the Prothonotary and the
Recorder of Deeds for Philadelphia, Pennsylvania, will be perfected to the
extent that perfection can be achieved by filing, subject to timely filing of
appropriate continuation statements.
<PAGE> 78
EXHIBIT B TO
BOND PURCHASE AGREEMENT
MATTERS TO BE COVERED IN THE OPINION OF STARWOOD COUNSEL
1. Starwood is a real estate investment trust validly existing in good
standing under the laws of the State of Maryland, with full legal right, power
and authority to execute and deliver the SLT Documents on behalf of SLT.
2. Starwood has, by all necessary corporate action, duly authorized the
execution and delivery of the SLT Documents by Starwood, on behalf of SLT.
3. No consent, approval, authorization or order of, or filing,
registration or declaration with, any court or governmental body is required by
or on behalf of Starwood for the execution and delivery of the SLT Documents by
Starwood on behalf of SLT.
4. The execution and delivery of the SLT Documents by Starwood, on
behalf of SLT, do not violate Starwood's Declaration of Trust or by-laws, or any
court order by which Starwood is bound and such actions do not constitute a
default under any agreement, indenture, mortgage, lease, note or other
obligation or instrument to which Starwood is a party or by which it or its
properties is bound.
5. There is no legal action, suit, proceeding, inquiry or investigation
at law or in equity (before or by any court, agency, arbitrator, public board or
body or other entity or person) pending or, to our knowledge, threatened against
Starwood or any basis therefor: (a) in any way contesting the existence of the
Starwood; (b) in any way contesting the authority of the officers of Starwood to
act on behalf of SLT; or (c) wherein an unfavorable decision, ruling or finding
would have a material adverse effect on the operations of Starwood or the
transactions on the part of SLT contemplated by the SLT Documents.
<PAGE> 79
EXHIBIT C TO
BOND PURCHASE AGREEMENT
MATTERS TO BE COVERED IN THE CERTIFICATE OF STARWOOD
1. Starwood is a real estate investment trust validly existing in good
standing under the laws of the State of Maryland, with full legal right, power
and authority to execute and deliver the SLT Documents on behalf of SLT.
2. Starwood has, by all necessary corporate action, duly authorized the
execution and delivery of the SLT Documents by Starwood, on behalf of SLT.
3. No consent, approval, authorization or order of, or filing,
registration or declaration with, any court or governmental body is required by
or on behalf of Starwood for the execution and delivery of the SLT Documents by
Starwood on behalf of SLT.
4. The execution and delivery of the SLT Documents by Starwood, on
behalf of SLT, do not violate Starwood's Declaration of Trust or by-laws, or any
court order by which Starwood is bound and such actions do not constitute a
default under any agreement, indenture, mortgage, lease, note or other
obligation or instrument to which Starwood is a party or by which it or its
properties is bound.
5. There is no legal action, suit, proceeding, inquiry or investigation
at law or in equity (before or by any court, agency, arbitrator, public board or
body or other entity or person) pending or, to our knowledge, threatened against
Starwood or any basis therefor: (a) in any way contesting the existence of the
Starwood; (b) in any way contesting the authority of the officers of Starwood to
act on behalf of SLT; or (c) wherein an unfavorable decision, ruling or finding
would have a material adverse effect on the operations of Starwood or the
transactions on the part of SLT contemplated by the SLT Documents.
6. Starwood has approved on behalf of SLT the distribution and use of
the Preliminary Official Statement dated February 3, 1997 and the Official
Statement dated February , 1997 (together, the "Offering Document") in
connection with the offering and sale of the Bonds.
7. After review of the Offering Document and such investigation as
Starwood has deemed necessary, with respect to factual matters contained in the
description of Starwood, SLT, any affiliates thereof (including, but not limited
to SLC Operating Limited Partnership and Starwood Lodging Corporation) and the
Project Facilities (as defined in the Offering Document) and their respective
operations, there exists in the Offering Document no untrue statement of a
material fact or omission to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
<PAGE> 1
Exhibit 10.6
[Starwood Lodging Trust Letterhead]
February 4, 1997
Mr. Ronald C. Brown
6026 E. Cholla Lane
Scottsdale, AZ 85253
Dear Ron,
We are very pleased to confirm our understanding of your full-time
employment by Starwood Lodging Trust ("The Trust") as the Senior Vice
President and Chief Financial Officer. As you know, shares of the Trust trade
on the NYSE as paired shares with those of Starwood Lodging Corporation, ("The
Corporation"). The following will serve to confirm the principal attributes of
your employment.
1. START DATE: Your employment with the Trust commenced on July
10, 1995.
2. DUTIES: You have been employed as the Senior Vice President
and Chief Financial Officer of the Trust and shall perform such duties and
services as may be assigned to you from time to time by the Chief Executive
Officer and/or the Board of Trustees. You shall devote your full time and
attention to the affairs of the Trust and to your duties as Senior Vice
President and Chief Financial Officer.
3. BASE SALARY: Your base salary is expressed in annualized
terms, will be $200,000 per year, payable bi-weekly and subject to the usual
withholdings for FICA, 401 (k) contributions (to the extent the Trust has or
adopts a 401 (k) program), state and federal unemployment tax and Medicare.
4. BONUS: You are eligible to receive a performance bonus based
upon achieving specified performance criteria which will be established and
approved.
5. EMPLOYEE BENEFITS: You are eligible to participate in all
employee benefit programs of the Trust as are generally available to other
executives of the Trust.
6. OPTIONS: You have received several grants of stock options for
paired shares in the Company. Such options were granted at the fair market
value (i.e., closing price) of the paired shares on the NYSE on such date. Such
options have and will vest one-third annually on each anniversary of the date
of grant of such options, with the exception of certain options granted, which
have a five year vesting period. The contingencies to vesting and any
acceleration of vesting will be the same as are those generally applicable to
other senior executives of the Trust and the Corporation. At the same time
shares are delivered pursuant to the exercise of your options, such shares
shall be subject to resale pursuant to the requirements of Rule 144.
7. RESTRICTED STOCK: You received an initial award of 15,000
paired shares of stock pursuant to a long-term Incentive Program, the details
of which are contained in the proxy statement of the Trust dated November 25,
1996 ("the proxy statement"). The performance criteria and other contingencies
associated with such stock or other securities shall be the same as those
generally applicable to other senior executives of the Trust and Corporation.
In no event will the vesting period for such restricted stock exceed three
years and you will be entitled to receive dividends on your restricted stock
even though the same are not fully vested (subject to prospective forfeiture in
the event and to the extent that the restricted stock grant fails to vest in
whole or in part.) You are entitled to certain performance awards as set
forth in the proxy statement.
8. TERMINATION/SEVERANCE: The trust reserves the right to
terminate your employment with or without cause at any time. In the event of
an involuntary termination without cause or in the event of any breach by the
Trust of your employment agreement entitling you to terminate same (after
expiration of applicable notice and cure periods for the benefit of the Trust),
you shall receive, as your sole right, exclusive remedy and liquidated
2231 East Camelback Road - Suite 410 - Phoenix, Arizona 85016 - Telephone
602.852.3900 - Facsimile 602.852.0984
<PAGE> 2
February 4, 1997
Page 2
damages, a termination package equal to twelve (12) months base salary and the
vesting of your options and restricted stock shall be accelerated to the date
of such termination. The Trust will also continue to provide medical benefits
coverage during the 12 month period subsequent to the termination of your
employment. A change of control in the Company as outlined in the proxy
statement will be treated in the same manner as a termination without cause.
No severance shall be due in the event that you are terminated for cause
or in the event that you leave the full-time employ of the Trust voluntarily.
In the event of any disputes with respect to your employment by the
Trust, then you and the Trust agree that the same shall be resolved through
binding arbitration in the jurisdiction of the Trust's headquarters and in
accordance with the rules and procedures from time to time of the American
Arbitration Association.
This letter represents the entirety of our agreement with respect to
your employment and any prior discussions or negotiations are hereby merged
herein.
If this offer is acceptable to you, then please sign this letter in
the space provided below and return a copy of this letter to me.
Very truly yours,
STARWOOD LODGING TRUST
By /s/ Barry Sternlicht
-----------------------
Barry Sternlicht, Chairman and Chief Executive Officer
ACCEPTED AND AGREED TO:
/s/ Ronald C. Brown
- ----------------------
Ronald C. Brown
<PAGE> 1
Exhibit 10.7
[Starwood Lodging Trust Letterhead]
February 4, 1997
Mr. Steven R. Goldman
6900 Berneil Lane
Paradise Valley, AZ 85253
Dear Steve,
We are very pleased to confirm our understanding of your full-time
employment by Starwood Lodging Trust ("The Trust") as the Senior Vice
President and Director of Acquisitions. As you know, shares of the Trust trade
on the NYSE as paired shares with those of Starwood Lodging Corporation, ("The
Corporation"). The following will serve to confirm the principal attributes of
your employment.
1. START DATE: Your employment with the Trust commenced on
September 25, 1996.
2. DUTIES: You have been employed as the Senior Vice President
and Director of Acquisitions of the Trust and shall perform such duties and
services as may be assigned to you from time to time by the Chief Executive
Officer and/or the Board of Trustees. You shall devote your full time and
attention to the affairs of the Trust and to your duties as Senior Vice
President and Director of Acquisitions.
3. BASE SALARY: Your base salary is expressed in annualized
terms, will be $200,000 per year, payable bi-weekly and subject to the usual
withholdings for FICA, 401 (k) contributions (to the extent the Trust has or
adopts a 401 (k) program), state and federal unemployment tax and Medicare.
4. BONUS: You are eligible to receive a performance bonus based
upon achieving specified performance criteria which will be established and
approved.
5. EMPLOYEE BENEFITS: You are eligible to participate in all
employee benefit programs of the Trust as are generally available to other
executives of the Trust.
6. OPTIONS: You have received several grants of stock options for
paired shares in the Company. Such options were granted at the fair market
value (i.e., closing price) of the paired shares on the NYSE on such date. Such
options have and will vest one-third annually on each anniversary of the date
of grant of such options, with the exception of certain options granted, which
have a five year vesting period. The contingencies to vesting and any
acceleration of vesting will be the same as are those generally applicable to
other senior executives of the Trust and the Corporation. At the same time
shares are delivered pursuant to the exercise of your options, such shares
shall be subject to resale pursuant to the requirements of Rule 144.
7. RESTRICTED STOCK: You received an initial award of 25,000
paired shares of stock pursuant to a long-term Incentive Program, the details
of which are contained in the proxy statement of the Trust dated November 25,
1996 ("the proxy statement"). The performance criteria and other contingencies
associated with such stock or other securities shall be the same as those
generally applicable to other senior executives of the Trust and Corporation.
In no event will the vesting period for such restricted stock exceed three
years and you will be entitled to receive dividends on your restricted stock
even though the same are not fully vested (subject to prospective forfeiture in
the event and to the extent that the restricted stock grant fails to vest in
whole or in part.) You are entitled to certain performance awards as set
forth in the proxy statement.
8. TERMINATION/SEVERANCE: The trust reserves the right to
terminate your employment with or without cause at any time. In the event of
an involuntary termination without cause or in the event of any breach by the
Trust of your employment agreement entitling you to terminate same (after
expiration of applicable notice and cure periods for the benefit of the Trust),
you shall receive, as your sole right, exclusive remedy and liquidated
2231 East Camelback Road - Suite 410 - Phoenix, Arizona 85016 -
Telephone 602.852.3900 - Facsimile 602.852.0984
<PAGE> 2
February 4, 1997
Page 2
damages, a termination package equal to twelve (12) months base salary and the
vesting of your options and restricted stock shall be accelerated to the date
of such termination. The Trust will also continue to provide medical benefits
coverage during the 12 month period subsequent to the termination of your
employment. A change of control in the Company as outlined in the proxy
statement will be treated in the same manner as a termination without cause.
No severance shall be due in the event that you are terminated for cause
or in the event that you leave the full-time employ of the Trust voluntarily.
In the event of any disputes with respect to your employment by the
Trust, then you and the Trust agree that the same shall be resolved through
binding arbitration in the jurisdiction of the Trust's headquarters and in
accordance with the rules and procedures from time to time of the American
Arbitration Association.
This letter represents the entirety of our agreement with respect to
your employment and any prior discussions or negotiations are hereby merged
herein.
If this offer is acceptable to you, then please sign this letter in
the space provided below and return a copy of this letter to me.
Very truly yours,
STARWOOD LODGING TRUST
By /s/ Barry Sternlicht
-----------------------
Barry Sternlicht, Chairman and Chief Executive Officer
ACCEPTED AND AGREED TO:
/s/ Steven R. Goldman
- ----------------------
Steven R. Goldman
<PAGE> 1
EXHIBIT 11
STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION
UNAUDITED COMBINED COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
-------- -------
<S> <C> <C>
Net income ........................................................... $ 7,786 $ 4,090
======== =======
Weighted average number of paired shares outstanding
during the period ................................................. 41,773 20,697
Stock option equivalents ........................................ 2,025 --
Restricted stock equivalents .................................... 514 --
Deferred stock equivalents ...................................... 1 --
-------- -------
Paired shares used for computation of primary earnings per share ..... 44,313 20,697
Reduction in stock option equivalents ............................. (123) --
-------- -------
Paired shares used for computation of fully diluted earnings
per share.......................................................... 44,190 20,697
======== =======
EARNINGS PER PAIRED SHARE:
Primary ........................................................... $ 0.18 $ 0.20
======== =======
Fully Diluted ..................................................... $ 0.18 $ 0.20
======== =======
</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 FORM 10K.
</LEGEND>
<CIK> 0000316206
<NAME> STARWOOD LODGING CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 23,897,000
<SECURITIES> 0
<RECEIVABLES> 43,299,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,337,000
<PP&E> 120,714,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 199,247,000
<CURRENT-LIABILITIES> 44,083,000
<BONDS> 0
0
0
<COMMON> 416,000
<OTHER-SE> 27,924,000
<TOTAL-LIABILITY-AND-EQUITY> 199,247,000
<SALES> 167,113,000
<TOTAL-REVENUES> 167,113,000
<CGS> 0
<TOTAL-COSTS> 121,811,000
<OTHER-EXPENSES> 48,867,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,574,000
<INCOME-PRETAX> (4,397,000)
<INCOME-TAX> (4,397,000)
<INCOME-CONTINUING> (4,397,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,397,000)
<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 FORM 10K.
</LEGEND>
<CIK> 0000048595
<NAME> STARWOOD LODGING TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 124,272,000
<SECURITIES> 0
<RECEIVABLES> 231,243,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,995,000
<PP&E> 1,453,065,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,822,575,000
<CURRENT-LIABILITIES> 32,357,000
<BONDS> 0
0
0
<COMMON> 416,000
<OTHER-SE> 1,069,073,000
<TOTAL-LIABILITY-AND-EQUITY> 1,822,575,000
<SALES> 0
<TOTAL-REVENUES> 49,087,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 22,447,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,459,000
<INCOME-PRETAX> 12,183,000
<INCOME-TAX> 12,183,000
<INCOME-CONTINUING> 12,183,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,183,000
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0
</TABLE>
