<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 SEPTEMBER 30, 1998
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 HOTELS & RESORTS STARWOOD HOTELS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS & RESORTS
CHARTER) WORLDWIDE, INC.
(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.)
777 WESTCHESTER AVENUE 777 WESTCHESTER AVENUE
WHITE PLAINS, NY 10604 WHITE PLAINS, NY 10604
(ADDRESS OF PRINCIPAL EXECUTIVE (ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES, INCLUDING ZIP CODE) OFFICES, INCLUDING ZIP CODE)
(914) 640-8100 (914) 640-8100
(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.
175,521,662 common shares of beneficial interest, par value $0.01 per
share, of Starwood Hotels & Resorts paired with 175,521,662 shares of common
stock, par value $0.01 per share, of Starwood Hotels & Resorts Worldwide, Inc.,
outstanding as of November 5, 1998.
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<PAGE> 2
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
1. Financial Statements
Starwood Hotels & Resorts and Starwood Hotels & Resorts
Worldwide, Inc.:
Combined Consolidated Balance Sheets as of September 30,
1998 and December 31, 1997............................. 3
Combined Consolidated Statements of Income for the Three and
Nine Months Ended September 30, 1998 and 1997.......... 4
Combined Consolidated Statements of Comprehensive Income for
the Three and Nine Months Ended September 30, 1998 and
1997................................................... 5
Combined Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1998 and 1997............... 6
Starwood Hotels & Resorts:
Consolidated Balance Sheet as of September 30, 1998......... 7
Consolidated Statements of Income for the Three Months Ended
September 30, 1998 and for the Period from February 23,
1998 to September 30, 1998............................. 8
Consolidated Statement of Cash Flows for the Period from
February 23, 1998 to September 30, 1998................ 9
Starwood Hotels & Resorts Worldwide, Inc.:
Consolidated Balance Sheet as of September 30, 1998......... 10
Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 1998........................ 11
Consolidated Statements of Comprehensive Income for the
Three and Nine Months Ended September 30, 1998......... 12
Consolidated Statement of Cash Flows for the Nine Months
Ended September 30, 1998............................... 13
Notes to Financial Statements............................... 14
Unaudited Condensed Combined Consolidated Pro Forma
Statements of Income for the Three and Nine Months
Ended September 30, 1998............................... 27
Notes to Unaudited Condensed Combined Consolidated Pro Forma
Statements of Income................................... 29
Unaudited Funds from Operations............................. 30
Management's Discussion and Analysis of Financial Condition
2. and Results of Operations.............................. 31
PART II. OTHER INFORMATION
1. Legal Proceedings........................................... 46
2. Changes in Securities and Use of Proceeds................... 46
6. Exhibits and Reports on Form 8-K............................ 46
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited financial statements of Starwood Hotels & Resorts
(the "Trust") and Starwood Hotels & Resorts Worldwide, Inc. (the "Corporation"
and, together with the Trust, "Starwood Hotels" or the "Company") are provided
pursuant to the requirements of this Item. In the opinion of management, all
adjustments necessary for fair presentation, consisting of normal recurring
adjustments and the adjustment for restructuring and other special charges as
disclosed in Note 6, have been included. The financial statements presented
herein have been prepared in accordance with the accounting policies described
in the Trust's and the Corporation's Joint Annual Report on Form 10-K for the
year ended December 31, 1997 and the accounting policies described in the notes
to ITT Corporation's historical financial statements included in the Company's
Current Report on Form 8-K filed April 27, 1998 (see Note 3) and should be read
in conjunction therewith. See Note 1 in the Notes to Financial Statements for
the basis of presentation. The financial statements should be read in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein. Results for the
three and nine months ended September 30, 1998 are not necessarily indicative of
results to be expected for the full fiscal year ending December 31, 1998.
2
<PAGE> 4
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
COMBINED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(AUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 260 $ 201
Accounts receivable, net.................................. 640 424
Inventories............................................... 67 63
Prepaid expenses and other................................ 228 105
------- ------
Total current assets............................... 1,195 793
Plant, property and equipment, net.......................... 9,853 4,832
Investment in Madison Square Garden......................... 43 85
Other investments........................................... 317 368
Long-term receivables, net.................................. 408 281
Other assets................................................ 381 450
Goodwill, net............................................... 3,602 1,257
Net assets held for sale.................................... 394 386
Net assets of discontinued operations....................... 34 73
------- ------
$16,227 $8,525
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 271 $ 273
Accrued expenses.......................................... 1,112 1,078
Notes payable and current maturities of long-term debt.... 982 898
Other current liabilities................................. 200 161
------- ------
Total current liabilities.......................... 2,565 2,410
Long-term debt.............................................. 7,436 1,070
Deferred income taxes....................................... 585 97
Other liabilities........................................... 450 423
Net liabilities of discontinued operations.................. -- 1,600
Minority interest........................................... 583 181
------- ------
11,619 5,781
------- ------
Equity put options and forward equity contracts............. 430 --
------- ------
Class B exchangeable preferred shares, at redemption
value..................................................... 153 --
------- ------
Commitments and contingencies
Stockholders' equity:
Class A exchangeable preferred shares..................... 5 --
Corporation common stock at September 30, 1998 and
December 31, 1997; $0.01 par value; authorized
1,050,000,000 and 308,600,000 shares; outstanding
182,837,403 and 126,653,880 at September 30, 1998 and
December 31, 1997, respectively......................... 2 1
Trust common shares of beneficial interest at September
30, 1998 and December 31, 1997; $0.01 par value;
authorized 1,200,000,000 and 308,600,000 shares;
outstanding 182,837,403 and 126,653,880 at September 30,
1998 and December 31, 1997, respectively................ 2 1
Additional paid-in capital................................ 2,500 2,934
Cumulative translation and marketable securities
adjustment.............................................. (103) (135)
Retained earnings (accumulated deficit)................... 1,619 (57)
------- ------
Total stockholders' equity......................... 4,025 2,744
------- ------
$16,227 $8,525
======= ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
3
<PAGE> 5
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------- ------------------
1998 1997 1998 1997
------ ------ ------- -------
<S> <C> <C> <C> <C>
Revenues.................................................... $2,286 $1,458 $6,296 $4,273
Costs and expenses:
Salaries, benefits and other operating.................... 1,657 1,110 4,614 3,242
Selling, general and administrative....................... 231 151 676 485
Restructuring and other special charges................... 310 -- 310 58
Depreciation and amortization............................. 143 64 414 198
------ ------ ------ ------
2,341 1,325 6,014 3,983
------ ------ ------ ------
(55) 133 282 290
Interest expense, net of interest income of $5 and $4 for
the three months ended September 30, 1998 and 1997,
respectively, and $22 and $13 for the nine months ended
September 30, 1998 and 1997, respectively................. (156) (27) (399) (70)
Gain on sale of Alcatel Alsthom shares...................... -- -- -- 183
Gain on investment in Madison Square Garden................. -- -- 31 200
Miscellaneous income (expense), net......................... (3) (14) 6 (33)
------ ------ ------ ------
(214) 92 (80) 570
Income tax (expense) benefit................................ 109 (46) 79 (246)
Minority equity............................................. 4 (3) (2) (3)
------ ------ ------ ------
Income (loss) from continuing operations.................... (101) 43 (3) 321
Discontinued operations:
Net income (loss) from operations, net of taxes and
minority interest of $1 and $27 for the three months
ended September 30, 1998 and 1997, respectively, and $5
and $39 for the nine months ended September 30, 1998 and
1997, respectively...................................... -- 15 (9) 14
Gain on sale of Educational Services, Inc. shares, net of
taxes and minority interest of $100..................... -- -- 153 --
Gain on disposition of World Directories, net of taxes and
minority interest of $15 and $543 for the three and nine
months ended September 30, 1998, respectively........... 24 -- 972 --
Cumulative effect of accounting change, net of tax
benefit of $6............................................. -- -- -- (11)
------ ------ ------ ------
Net income (loss)........................................... $ (77) $ 58 $1,113 $ 324
====== ====== ====== ======
Basic earnings per Paired Share:
Income (loss) from continuing operations.................. $(0.56) $ 0.34 $(0.10) $ 2.55
Income from discontinued operations....................... 0.13 0.12 5.97 0.11
Cumulative effect of accounting change.................... -- -- -- (0.09)
------ ------ ------ ------
Net income (loss)........................................... $(0.43) $ 0.46 $ 5.87 $ 2.57
====== ====== ====== ======
Diluted earnings per Paired Share:
Income (loss) from continuing operations.................. $(0.56) $ 0.34 $(0.10) $ 2.51
Income from discontinued operations....................... 0.13 0.11 5.97 0.11
Cumulative effect of accounting change.................... -- -- -- (0.09)
------ ------ ------ ------
Net income (loss)........................................... $(0.43) $ 0.45 $ 5.87 $ 2.53
====== ====== ====== ======
Weighted average number of Paired Shares.................... 188 126 187 126
====== ====== ====== ======
Weighted average number of equivalent Paired Shares......... 188 128 187 128
====== ====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
4
<PAGE> 6
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
COMBINED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1998 1997 1998 1997
----- ----- ------ -----
<S> <C> <C> <C> <C>
Net income (loss).............................. $(77) $ 58 $1,113 $ 324
Other comprehensive income:
Foreign currency translation adjustments --
Foreign currency translation arising during
the period................................ 46 (51) -- (126)
Reclassification adjustment for losses
included in net income.................... -- -- 33 --
Unrealized gains on securities --
Unrealized holding gains (losses) arising
during the period......................... -- -- (1) 176
Reclassification adjustment for gains
included in net income.................... -- -- -- (114)
---- ---- ------ -----
46 (51) 32 (64)
---- ---- ------ -----
Comprehensive income (loss).................... $(31) $ 7 $1,145 $ 260
==== ==== ====== =====
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
5
<PAGE> 7
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1998 1997
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 1,113 $ 324
Exclude:
Discontinued operations --
Net (income) loss from operations......................... 9 (14)
Gain on sale of World Directories and Educational
Services, Inc........................................... (1,125) --
Cumulative effect of accounting change...................... -- 11
------- -------
Income (loss) from continuing operations.................... (3) 321
Adjustments to income (loss) from continuing operations:
Depreciation and amortization............................. 414 198
Amortization of deferred loan costs....................... 15 --
Non-cash portion of restructuring and other special
charges................................................. 150 --
Provision for doubtful receivables........................ 31 28
Minority equity in net income............................. 2 3
Equity income, net of dividends received.................. (17) --
Gain on sale of real estate and investments -- pretax..... (58) (410)
Changes in working capital:
Accounts receivable....................................... (93) (30)
Inventories............................................... 2 (2)
Accounts payable.......................................... 15 (30)
Accrued expenses.......................................... (279) 119
Accrued and deferred income taxes........................... (111) 10
Other, net.................................................. (40) (24)
------- -------
Cash from continuing operations........................... 28 183
------- -------
Cash used for discontinued operations..................... -- (10)
------- -------
Cash from operating activities............................ 28 173
------- -------
INVESTING ACTIVITIES
Additions to plant, property and equipment.................. (694) (762)
Proceeds from sale of real estate and investments........... 2,811 1,618
Collection of Cablevision note receivable................... -- 169
Acquisitions, net of acquired cash.......................... (60) (284)
Employee benefit trust...................................... 146 (119)
Other, net.................................................. (286) (20)
------- -------
Cash from investing activities............................ 1,917 602
------- -------
FINANCING ACTIVITIES
Short-term debt, net........................................ 504 (154)
Long-term debt issued....................................... 2,454 665
Long-term debt repaid....................................... (1,481) (1,088)
Proceeds from equity offering............................... 245 --
Dividends paid.............................................. (3,249) --
Stock repurchases........................................... (343) --
Other, net.................................................. (16) 25
------- -------
Cash used for financing activities........................ (1,886) (552)
------- -------
Exchange rate effect on cash and cash equivalents........... -- (5)
------- -------
Increase in cash and cash equivalents....................... 59 218
Cash and cash equivalents -- beginning of period............ 201 205
------- -------
Cash and cash equivalents -- end of period.................. $ 260 $ 423
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for --
Interest.................................................. $ 352 $ 39
======= =======
Income taxes, net of refunds.............................. $ 47 $ 231
======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
6
<PAGE> 8
STARWOOD HOTELS & RESORTS
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 9
Accounts receivable, net.................................. 13
Receivable, Corporation................................... 251
Prepaid expenses and other................................ 75
------
Total current assets.............................. 348
Plant, property and equipment, net.......................... 4,275
Other investments, Corporation.............................. 849
Other investments........................................... 31
Long-term receivables, net.................................. 159
Long-term receivables, Corporation.......................... 2,477
Other assets................................................ 10
Goodwill, net............................................... 177
Net assets held for sale.................................... 7
------
$8,333
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 15
Accrued expenses.......................................... 145
Notes payable and current maturities of long-term debt.... 288
------
Total current liabilities......................... 448
Long-term debt.............................................. 316
Minority interest........................................... 426
------
1,190
------
Equity put options and forward equity contracts............. 301
------
Class B exchangeable preferred shares, at redemption
value..................................................... 153
------
Commitments and contingencies
Stockholders' equity:
Class A exchangeable preferred shares..................... 5
Trust common shares of beneficial interest; $0.01 par
value; authorized 1,200,000,000 shares; outstanding
182,837,403............................................ 2
Additional paid-in capital................................ 6,721
Accumulated deficit....................................... (39)
------
Total stockholders' equity........................ 6,689
------
$8,333
======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
7
<PAGE> 9
STARWOOD HOTELS & RESORTS
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
THREE MONTHS ENDED FEBRUARY 23, 1998
SEPTEMBER 30, 1998 TO SEPTEMBER 30, 1998
------------------ ---------------------
<S> <C> <C>
Revenues................................................ $ 1 $ 2
Rent and interest, Corporation.......................... 180 435
Costs and expenses:
Selling, general and administrative................... 6 12
Depreciation and amortization......................... 34 109
----- -----
40 121
----- -----
141 316
Interest expense, net of interest income of $4 and $7... (4) (12)
----- -----
137 304
Income tax expense...................................... -- (1)
Minority equity......................................... (9) (18)
----- -----
Net income.............................................. $ 128 $ 285
===== =====
Basic net income per share.............................. $0.65 $1.44
===== =====
Diluted net income per share............................ $0.64 $1.43
===== =====
Weighted average number of shares....................... 188 187
===== =====
Weighted average number of equivalent shares............ 199 189
===== =====
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
8
<PAGE> 10
STARWOOD HOTELS & RESORTS
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 23, 1998
TO SEPTEMBER 30, 1998
---------------------
<S> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 285
Adjustments to net income:
Depreciation and amortization............................. 109
Minority equity in net income............................. 18
Changes in working capital:
Accounts receivable....................................... (8)
Accounts payable.......................................... 10
Accrued expenses.......................................... (13)
Other, net................................................ 2
-----
Cash from operating activities............................ 403
-----
INVESTING ACTIVITIES
Additions to plant, property and equipment.................. (139)
Proceeds from divestments................................... 250
Acquisitions, net of acquired cash.......................... (13)
Notes receivable, Corporation............................... 45
Other, net.................................................. (275)
-----
Cash used for investing activities........................ (132)
-----
FINANCING ACTIVITIES
Long-term debt issued, net.................................. 12
Proceeds from equity offering............................... 171
Dividends paid.............................................. (213)
Stock repurchase............................................ (240)
Other, net.................................................. 8
-----
Cash used in financing activities......................... (262)
-----
Increase in cash and cash equivalents....................... 9
Cash and cash equivalents -- beginning of period............ --
-----
Cash and cash equivalents -- end of period.................. $ 9
=====
Supplemental disclosures of cash flow information:
Cash paid during the period for --
Interest.................................................. $ 15
=====
Income taxes.............................................. $ 1
=====
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
9
<PAGE> 11
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 251
Accounts receivable, net.................................. 627
Inventories............................................... 67
Prepaid expenses and other................................ 153
-------
Total current assets.............................. 1,098
Plant, property and equipment, net.......................... 5,578
Investment in Madison Square Garden......................... 43
Other investments........................................... 286
Long-term receivables, net.................................. 249
Other assets................................................ 371
Goodwill, net............................................... 3,425
Net assets held for sale.................................... 387
Net assets of discontinued operations....................... 34
-------
$11,471
=======
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 256
Accrued expenses.......................................... 967
Notes payable and current maturities of long-term debt.... 694
Notes payable and current maturities of long-term debt,
Trust.................................................. 251
Other current liabilities................................. 200
-------
Total current liabilities......................... 2,368
Long-term debt.............................................. 7,120
Long-term debt, Trust....................................... 2,477
Deferred income taxes....................................... 585
Other liabilities........................................... 450
Minority interest........................................... 1,006
-------
14,006
-------
Equity put options and forward equity contracts............. 129
-------
Commitments and contingencies
Stockholders' deficit:
Corporation common stock; $0.01 par value; authorized
1,050,000,000 shares; outstanding 182,837,403.......... 2
Additional paid-in capital................................ (4,221)
Cumulative translation and marketable securities
adjustment............................................. (103)
Retained earnings......................................... 1,658
-------
Total stockholders' deficit....................... (2,664)
-------
$11,471
=======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
10
<PAGE> 12
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
Revenues................................................. $2,285 $6,294
Costs and expenses:
Salaries, benefits and other operating................. 1,657 4,614
Selling, general and administrative.................... 225 664
Rent and interest, Trust............................... 180 435
Restructuring and other special charges................ 310 310
Depreciation and amortization.......................... 109 305
------ ------
2,481 6,328
------ ------
(196) (34)
Interest expense, net of interest income of $1 and $15... (152) (387)
Gain on sale of Madison Square Garden.................... -- 31
Miscellaneous income (expense)........................... (3) 6
------ ------
(351) (384)
Income tax benefit....................................... 109 80
Minority equity.......................................... 13 16
------ ------
Loss from continuing operations.......................... (229) (288)
Discontinued operations:
Net loss from operations, net of taxes and minority
interest of $1 and $5............................... -- (9)
Gain on sale of Educational Services, Inc. shares, net
of taxes and minority interest of $100.............. -- 153
Gain on disposition of World Directories, net of taxes
and minority interest of $15 and $543 for the three
and nine months ended September 30, 1998,
respectively........................................ 24 972
------ ------
Net income (loss)........................................ $ (205) $ 828
====== ======
Basic earnings per share:
Loss from continuing operations........................ $(1.22) $(1.54)
Income from discontinued operations.................... 0.13 5.97
------ ------
Net income (loss)........................................ $(1.09) $ 4.43
====== ======
Diluted earnings per share:
Loss from continuing operations........................ $(1.22) $(1.54)
Income from discontinued operations.................... 0.13 5.97
------ ------
Net income (loss)........................................ $(1.09) $ 4.43
====== ======
Weighted average number of shares........................ 188 187
====== ======
Weighted average number of equivalent shares............. 188 187
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
11
<PAGE> 13
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
Net income (loss)........................................ $(205) $828
Other comprehensive income:
Foreign currency translation adjustments --
Foreign currency translation arising during the
period.............................................. 46 --
Reclassification adjustment of losses included in net
income.............................................. -- 33
Unrealized gains on securities --
Unrealized holding losses arising during the period.... -- (1)
----- ----
46 32
----- ----
Comprehensive income (loss).............................. $(159) $860
===== ====
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statements.
12
<PAGE> 14
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
<S> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 828
Exclude:
Discontinued operations --
Net loss from operations.................................. 9
Gain on sale of World Directories and Educational
Services, Inc........................................... (1,125)
-------
Loss from continuing operations............................. (288)
Adjustments to loss from continuing operations:
Depreciation and amortization............................. 305
Amortization of deferred loan costs....................... 15
Non-cash portion of restructuring and other special
charges................................................. 150
Provision for doubtful receivables........................ 31
Minority equity in net income............................. (16)
Equity income, net of dividends received.................. (17)
Gain on divestments -- pretax............................. (58)
Changes in working capital:
Accounts receivable....................................... (85)
Inventories............................................... 2
Accounts payable.......................................... 5
Accrued expenses.......................................... (266)
Accrued and deferred taxes................................ (111)
Other, net................................................ (42)
-------
Cash used for operating activities........................ (375)
-------
INVESTING ACTIVITIES
Additions to plant, property and equipment.................. (555)
Proceeds from divestments................................... 2,561
Acquisitions, net of acquired cash.......................... (47)
Employee benefit trust...................................... 146
Other, net.................................................. (11)
-------
Cash from investing activities............................ 2,094
-------
FINANCING ACTIVITIES
Short-term debt, net........................................ 504
Long-term debt issued, net.................................. 2,442
Long-term debt repaid....................................... (1,481)
Notes payable, Trust........................................ (45)
Proceeds from equity offering............................... 74
Dividends paid.............................................. (3,036)
Stock repurchases........................................... (103)
Other, net.................................................. (24)
-------
Cash used for financing activities........................ (1,669)
-------
Increase in cash and cash equivalents....................... 50
Cash and cash equivalents -- beginning of period............ 201
-------
Cash and cash equivalents -- end of period.................. $ 251
=======
Supplemental disclosures of cash flow information:
Cash paid during the period for --
Interest.................................................. $ 337
=======
Income taxes, net of refunds.............................. $ 46
=======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
statement.
13
<PAGE> 15
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying balance sheets as of September 30, 1998 and statements of
income and comprehensive income for the three months ended September 30, 1998
include the accounts of Starwood Hotels & Resorts and its subsidiaries (the
"Trust") and Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries (the
"Corporation" and, together with the Trust, "Starwood Hotels" or the "Company"),
inclusive of ITT Corporation and its subsidiaries ("ITT") (see Note 3). Because
the Company's acquisition of ITT (the "ITT Merger") is treated as a reverse
purchase for financial accounting purposes, the statements of income,
comprehensive income and cash flows for the nine months ended September 30, 1998
include the accounts of the Trust and the Corporation for the period from the
closing of the ITT Merger on February 23, 1998 through September 30, 1998 and
the accounts of ITT for the nine months ending September 30, 1998. Additionally,
the historical financial statements for the three and nine months ending
September 30, 1997 and as of December 31, 1997 represent the results of ITT.
The Trust was formed in 1969 and elected to be taxed as a real estate
investment trust ("REIT") under the Internal Revenue Code. In 1980, the Trust
formed the Corporation and made a distribution to the Trust's shareholders of
one share of common stock, par value $0.01 per share, of the Corporation (a
"Corporation Share") for each common share of beneficial interest, par value
$0.01 per share, of the Trust (a "Trust Share"). Trust Shares and Corporation
Shares are paired on a one-for-one basis and, pursuant to an agreement between
the Trust and the Corporation, may be held or transferred only in units ("Paired
Shares") consisting of one Trust Share and one Corporation Share.
The Company is one of the largest hotel and gaming companies in the world
and the Trust is one of the largest REITs in the United States. The Company's
principal lines of business are hotels and gaming. The hotels segment is
comprised of a worldwide hospitality network of approximately 650 full-service
hotels primarily serving three markets: luxury, upscale and mid-price. The
Company's hotel operations are represented on every continent and in nearly
every major world market. The Company's gaming operations are located in several
key domestic jurisdictions. The Company also operates various hotel/casino
ventures outside the United States.
Starwood Hotels is currently a "paired share REIT." Under provisions of the
Internal Revenue Code, a REIT and a non-REIT whose shares are paired are treated
as one entity for purposes of determining whether either entity qualifies as a
REIT. If these provisions applied to the Company, the Trust would not qualify as
a REIT. Starwood Hotels is not subject to these provisions since it is one of
the paired share REITs that were "grandfathered" when these provisions were
enacted. Recently, Congress enacted tax legislation that has the effect of
eliminating this grandfathering for certain interests in real property acquired
after March 26, 1998. With respect to certain interests in real property
acquired after March 26, 1998, this new legislation treats "grandfathered paired
share REITs" as one entity for REIT qualification purposes. In response to this
legislation, the Company has proposed a restructuring of the Trust and the
Corporation (the "Restructuring"). After completion of the proposed
Restructuring, the Company would no longer be a "grandfathered paired share
REIT." In the Restructuring, the Trust would become a subsidiary of the
Corporation, which would hold all outstanding shares of the new Class A shares
of beneficial interest in the Trust. Each outstanding Trust Share would be
converted into one share of the new non-voting Class B shares of beneficial
interest in the Trust. The Restructuring would be accounted for as a
reorganization of two companies under common control. As such, there would be no
revaluation of the assets and liabilities of the combining companies. If the
Restructuring occurs, the Company is expected to take a one-time charge of
approximately $1 billion at the time of the Restructuring, primarily related to
a deferred tax liability that will result from the Restructuring.
The Corporation, through its subsidiaries, is the general partner of, and
holds an aggregate 95.2% partnership interest in, SLC Operating Limited
Partnership (the "Operating Partnership") as of Septem-
14
<PAGE> 16
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
ber 30, 1998. The Trust, through its subsidiaries, is the general partner of,
and owns an aggregate 95.3% partnership interest in, SLT Realty Limited
Partnership (the "Realty Partnership" and, together with the Operating
Partnership, the "Partnerships") as of September 30, 1998. The Realty
Partnership principally owns, directly or indirectly, fee, ground lease and
mortgage loan interests in hotel properties. The Operating Partnership, directly
or indirectly, principally leases hotel properties from the Realty Partnership
and also owns fee interests in other hotel properties and manages hotels for
third parties.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income, which establishes standards for the reporting and display
of comprehensive income and its components. SFAS No. 130 requires a separate
statement to report the components of comprehensive income for each period
reported. The Company adopted SFAS No. 130 on January 1, 1998 and, as such, has
included the required statement of comprehensive income and the expanded
disclosure in the accompanying financial statements for the Company and the
Corporation.
During the nine months ended September 30, 1997, the Company recorded
foreign currency translation adjustments of approximately $126 million. In
addition, during the nine months ended September 30, 1998 and 1997, the Company
held securities classified as available-for-sale which had unrealized net gains
(losses) during the period of approximately $(1) million and $176 million,
respectively. ITT sold certain securities during the nine months ended September
30, 1997 recognizing a gain of $114 million.
Derivatives
The Company enters into interest rate swap agreements to manage interest
rate exposure. The differential to be paid or received under these agreements is
accrued consistent with the terms of the agreements and market interest rates
and is recognized in interest expense over the term of the related debt using
the effective interest method (the accrual accounting method). The related
amounts payable to or receivable from counterparties are included in other
liabilities or assets. The fair value of the swap agreements and changes in the
fair value as a result of changes in market interest rates are not recognized in
the financial statements.
The Company enters into foreign currency forward contracts and foreign
currency swaps as a means of hedging exposure to foreign currency. Foreign
currency forward contracts and foreign currency swaps are accounted for in
accordance with SFAS No. 52, Foreign Currency Translation. Changes in the value
of the derivative instruments designated as hedges of foreign currency
denominated assets and liabilities are classified in the same manner as the
classification of the changes in the underlying assets and liabilities.
The Company does not enter into these derivative financial instruments for
speculative purposes and closely monitors the financial stability and credit
standing of its counterparties. When a derivative is deemed to no longer
effectively correlate with its underlying assets or liabilities, it is the
Company's policy to mark to market these derivatives.
NOTE 3. ACQUISITIONS
Hotel Acquisitions
In July 1998, the Company acquired a 95% non-controlling interest in the
760-room Westin Maui in Maui, Hawaii for approximately $132 million.
In May 1998, the Company acquired the 242-room Danbury Hilton Hotel in
Danbury, Connecticut for approximately $20 million.
15
<PAGE> 17
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In January 1998, the Company completed the acquisition of four
full-service, luxury properties located in Aspen, Colorado; New York, New York;
Washington, D.C.; and Houston, Texas for a total consideration of approximately
$348 million, consisting of $164 million in cash and 3.7 million Paired Shares
valued for purposes of this transaction at approximately $184 million.
Acquisition of ITT
On February 23, 1998, pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of November 12, 1997 (the "ITT Merger Agreement"),
among the Corporation, Chess Acquisition Corp. ("Merger Sub"), the Trust and
ITT, the Company acquired ITT.
Pursuant to the terms of the ITT Merger Agreement, Merger Sub, a newly
formed Nevada corporation, was merged with and into ITT (the "ITT Merger"),
whereupon the separate corporate existence of Merger Sub ceased and ITT
continued as the surviving corporation. As a result of the ITT Merger, ITT was
owned jointly by the Trust and the Corporation. Immediately after the effective
time of the ITT Merger, the Corporation purchased all of the common stock, no
par value, of ITT ("ITT Common Stock") owned by the Trust for a combination of
cash and notes. After such purchase, ITT became a wholly owned subsidiary of the
Corporation.
Under the terms of the ITT Merger Agreement, each outstanding share of ITT
Common Stock, together with the associated right to purchase shares of Series A
Participating Cumulative Preferred Stock of ITT (the "Rights" and, together with
the ITT Common Stock, "ITT Shares"), other than those that were converted into
cash pursuant to a cash election by the holder (and other than ITT Shares owned
directly or indirectly by ITT or Starwood Hotels, which shares were canceled),
was converted into 1.543 Paired Shares. Pursuant to cash election procedures,
approximately 35 million ITT Shares, representing approximately 30% of the
outstanding ITT Shares, were converted into $85 in cash per share. In addition,
each ITT Share was converted into additional cash consideration in the amount of
$0.37493151, which amount represents the interest that would have accrued
(without compounding) on $85 at an annual rate of 7% during the period from and
including January 31, 1998 to but excluding the date of the closing of the ITT
Merger (February 23, 1998). The aggregate value of the ITT acquisition in cash,
Paired Shares and assumed debt was approximately $14.6 billion.
On February 23, 1998, the Company obtained two credit facilities ($5.6
billion in total) with Lehman Commercial Paper Inc., Bankers Trust Company and
The Chase Manhattan Bank to fund the cash portion of the ITT Merger
consideration, to refinance a portion of the Company's existing indebtedness
(including indebtedness outstanding under the $2.2 Billion Facility, as defined
below) and to provide funds for general corporate purposes. These facilities are
comprised of a $3.1 billion senior secured credit facility (the "$3.1 Billion
Facility") and a $2.5 billion, five-year secured increasing rate notes facility
(the "IRN Facility").
The $3.1 Billion Facility has three tranches: a $1.0 billion, one-year term
loan; a $1.0 billion, five-year term loan; and a $1.1 billion, five-year
revolving credit facility. The Corporation, the Trust and certain of their
respective direct and indirect subsidiaries may be designated as borrowers or
co-borrowers under all or a portion of the $3.1 Billion Facility. The interest
rate for the $3.1 Billion Facility was one-, two- or three-month LIBOR, at the
Company's option, plus a margin which was 187.5 basis points for the six months
ended August 24, 1998. The margin is determined pursuant to a pricing "grid"
with rates based on the Company's leverage and/or senior unsecured debt rating.
Quarterly amortization of the five-year term loan begins in the third year, with
total amortization of 10%, 20% and 70% of the principal amount over the third,
fourth and fifth year, respectively. Repayment of amounts borrowed under the
$3.1 Billion Facility is guaranteed by the Trust, the Corporation and
substantially all their respective significant subsidiaries (including the
Partnerships, as defined below) other than gaming and foreign subsidiaries and
joint venture entities (the "Guarantor Subsidiaries"), to the extent such
entities are not borrowers or co-borrowers, and is secured by a pledge of all
the capital stock, partnership interests and other equity interests of the
Guarantor Subsidiaries.
16
<PAGE> 18
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The IRN Facility consists of a single drawdown, senior increasing rate,
non-amortizing five-year term loan for $2.5 billion. The Corporation is the
borrower under the IRN Facility; the Trust and all Guarantor Subsidiaries are
guarantors of the IRN Facility. The IRN Facility is secured equally and ratably
by all the collateral securing the $3.1 Billion Facility and is pari passu in
right of payment with all other senior indebtedness of the borrower and the
Guarantor Subsidiaries, including the $3.1 Billion Facility. Amounts borrowed
under the IRN Facility bore interest at one-, two- or three-month LIBOR plus 175
basis points for the three months ending May 24, 1998, with the interest rate
increasing by 50 basis points every three months thereafter, up to a maximum
rate of one-, two- or three-month LIBOR plus 375 basis points.
The Company accounted for the ITT Merger as a reverse purchase in
accordance with Accounting Principles Board Opinion No. 16. Purchase accounting
for a combination is similar to the accounting treatment used in the acquisition
of any asset group. Although the Trust and the Corporation issued Paired Shares
to ITT stockholders and survived the ITT Merger, the Trust and the Corporation
are considered the acquired companies for accounting purposes since the prior
ITT stockholders held a majority of the outstanding Paired Shares immediately
after the ITT Merger was consummated. The fair market value of the Paired Shares
outstanding and available upon conversion of the Partnership units held by the
Starwood Hotels' stockholders prior to the ITT Merger and the Partnerships' unit
holders, respectively (using the stock price of $54.31 per Paired Share, based
on the average of the high and low prices per Paired Share of Starwood Hotels as
reported on the New York Stock Exchange (the "NYSE") on November 12, 1997), is
used as the valuation basis for the combination. The fair market value of the
Paired Shares outstanding on February 23, 1998 (the ITT Merger closing date)
immediately prior to giving effect to the ITT Merger in excess of the net book
value of the assets and liabilities of Starwood Hotels has been allocated on a
preliminary basis to plant, property and equipment and goodwill. The goodwill is
being amortized over a 40-year period. The allocation of the excess of fair
market value of the assets and liabilities will be finalized when the Company
completes its valuation of the assets acquired and liabilities assumed. The
calculation of the excess of the fair market value of the Paired Shares over the
book value of the Company's assets and liabilities at February 23, 1998 is as
follows (in millions):
<TABLE>
<S> <C>
Total Paired Shares and Partnership units outstanding prior
to the ITT Merger......................................... 80
Fair market value of the Company's Paired Shares using the
stock price of $54.31 (based on the average of the high
and low prices per Paired Share of Starwood Hotels as
reported on the NYSE on November 12, 1997)................ $ 4,350
Book value of the Company's combined consolidated equity.... (1,775)
Transaction-related fees and expenses....................... 37
Minority interest related to the Partnerships............... (152)
-------
Excess of fair market value of Paired Shares over the book
value of net assets....................................... $ 2,460
=======
</TABLE>
Because the acquisition of ITT is treated as a reverse purchase for
financial accounting purposes, the statements of income, comprehensive income
and cash flows for the nine months ended September 30, 1998 include the accounts
of the Trust and the Corporation for the period from the closing of the ITT
Merger on February 23, 1998 through September 30, 1998 and the accounts of ITT
for the nine months ending September 30, 1998. The financial statements for the
Company as of and for the three months ended September 30, 1998 include the
accounts of the Trust, the Corporation and ITT. Historical stockholders' equity
of the Company prior to the ITT Merger has been retroactively restated for the
equivalent number of shares received in the ITT Merger after giving effect to
the difference in par value between Starwood Hotels' and ITT's stock. Unless
otherwise indicated, all references herein to the number of Paired Shares and
per share amounts have been restated to reflect the impact of the reverse
acquisition at the conversion factor of 1.543 Paired Shares for each ITT Share
acquired. Certain reclassifications have been made to the Company's
17
<PAGE> 19
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
balance sheet in the current year to conform to the presentation of the ITT
balance sheet as of December 31, 1997. See Note 14 and the Combined Consolidated
Pro Forma Statements of Unaudited Income included therein for the pro forma
information giving effect to the ITT Merger.
Acquisition of Westin
On January 2, 1998, pursuant to a Transaction Agreement dated as of
September 8, 1997 (the "Westin Transaction Agreement"), among WHWE L.L.C.
("WHWE"), Woodstar Investor Partnership ("Woodstar"), Nomura Asset Capital
Corporation ("Nomura"), Juergen Bartels (Mr. Bartels, together with WHWE,
Woodstar and Nomura, the "Members"), Westin Hotels & Resorts Worldwide, Inc.
("Westin Worldwide"), W&S Lauderdale Corp. ("Lauderdale"), W&S Seattle Corp.
("Seattle"), Westin St. John Hotel Company, Inc. ("St. John"), W&S Denver Corp.
("Denver"), W&S Atlanta Corp. ("Atlanta" and, together with Westin Worldwide,
Lauderdale, Seattle, St. John and Denver, "Westin"), W&S Hotel L.L.C. ("W&S LLC"
and, together with Westin, the "Westin Companies" or "Westin"), the Trust, the
Corporation and the Partnerships, Starwood Hotels acquired Westin.
Pursuant to the terms of the Transaction Agreement,
(i) Westin Worldwide merged into the Trust (the "Westin Merger"). In
connection with the Westin Merger, all the issued and outstanding shares of
capital stock of Westin Worldwide (other than shares held by Westin
Worldwide and its subsidiaries or by the Company) were converted into an
aggregate of 6,285,783 Class A Exchangeable Preferred Shares, par value
$0.01 per share (the "Class A EPS"), of the Trust and 5,294,783 Class B
Exchangeable Preferred Shares, liquidation value $38.50 per share (the
"Class B EPS" and, together with the Class A EPS, the "EPS"), of the Trust
and cash in the amount of $177.9 million;
(ii) The stockholders of Lauderdale, Seattle and Denver contributed
all the outstanding shares of such companies to the Realty Partnership. In
exchange for such contribution and after giving effect to the deemed
exchange of certain units, the Realty Partnership issued to such
stockholders an aggregate of 470,309 limited partnership units of the
Realty Partnership and the Trust issued to such stockholders an aggregate
of 127,534 shares of Class B EPS. In addition, in connection with the
foregoing share contribution, the Realty Partnership assumed, repaid or
refinanced the indebtedness of Lauderdale, Seattle and Denver and assumed
$84.2 million of indebtedness incurred by the Members prior to such
contributions; and
(iii) The stockholders of Atlanta and St. John contributed all the
outstanding shares of such companies to the Operating Partnership. In
exchange for such contribution and after giving effect to the deemed
exchange of certain units, the Operating Partnership issued to such
stockholders an aggregate of 312,741 limited partnership units of the
Operating Partnership and the Trust issued to such stockholders an
aggregate of 80,415 shares of Class B EPS. In addition, in connection with
the foregoing share contributions, the Operating Partnership assumed,
repaid or refinanced indebtedness of Atlanta and St. John and assumed $3.4
million of indebtedness incurred by the Members prior to such
contributions.
The aggregate principal amount of debt assumed or incurred by the Company
pursuant to the Westin Transaction Agreement was approximately $1.0 billion.
The shares of Class A EPS, the shares of Class B EPS and the limited
partnership interests issued in connection with the Westin Merger and the
contribution of Seattle, Lauderdale, Denver, St. John and Atlanta to the
Partnerships are directly or indirectly exchangeable on a one-for-one basis
(subject to certain adjustments) for Paired Shares (subject to the right of the
Company to elect to pay cash in lieu of issuing such shares). The limited
partnership interests also are exchangeable on a one-for-one basis for shares of
Class B EPS. The shares of Class B EPS have a liquidation preference of $38.50
per share and provide the
18
<PAGE> 20
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
holders with the right, from and after the fifth anniversary of the closing date
of the Westin Merger, to require the Trust to redeem such shares at a price of
$38.50.
On January 2, 1998, the Company obtained a $2.265 billion credit facility
(the "$2.2 Billion Facility") from a group of lenders led by Bankers Trust
Company and The Chase Manhattan Bank to fund the cash portion of the purchase of
Westin for approximately $178 million and to repay an aggregate of approximately
$1.0 billion of outstanding debt of Westin and of the Company under a $1.2
billion facility. The $2.2 Billion Facility was refinanced on February 23, 1998
with proceeds from the $3.1 Billion Facility and the IRN Facility.
NOTE 4. DISPOSITIONS AND DISCONTINUED OPERATIONS
In June 1998, the Company sold the 151-room Bay Valley Hotel and Resort in
Bay City, Michigan for approximately $5 million and its remaining interest in
the King 8 Hotel and Casino in Las Vegas, Nevada for approximately $3 million.
In June 1998, the Company sold approximately 13 million shares of ITT
Educational Services, Inc. ("Educational Services") in a public offering for
total gross proceeds of approximately $315 million. The Company continues to
explore its options regarding the disposition of its remaining 35% ownership
interest in Educational Services. The assets and liabilities of Educational
Services are included in net assets of discontinued operations in the Company's
financial statements.
The Company disposed of the following eight properties in May 1998 for a
total of approximately $245 million in cash: the 229-room Embassy Suites Phoenix
Airport in Phoenix, Arizona; the 224-room Tempe Embassy Suites in Tempe,
Arizona; the 198-room Palm Desert Embassy Suites in Palm Desert, California; the
233-room Embassy Suites Hotel in Atlanta, Georgia; the 297-room St. Louis
Embassy Suites in St. Louis, Missouri; the 308-room Doubletree Guest Suites in
Dallas-Ft. Worth International Airport, Texas; the 254-room Doubletree Guest
Suites Cypress Creek in Ft. Lauderdale, Florida; and the 155-room Doubletree
Guest Suites in Lexington, Kentucky.
In May 1998, the Company sold a Gulfstream V corporate aircraft for
approximately $39 million in cash.
In March 1998, ITT and Dow Jones & Company, Inc. sold WBIS+, Channel 31 in
New York City, to Paxson Communications Corporation ("Paxson") for a total cash
purchase price of approximately $258 million; approximately $128 million was
received by ITT.
In February 1998, ITT disposed of ITT World Directories ("WD"), the
subsidiary through which ITT conducted its telephone directories publishing
business, to VNU, a leading international publishing and information company
based in the Netherlands, for gross consideration to ITT of $2.1 billion.
Company interest expense and debt related to the disposition of WD was allocated
to discontinued operations based upon the amount of debt repaid with the
proceeds from this disposition. The assets and liabilities of WD are included in
net liabilities of discontinued operations in the Company's financial
statements.
In June 1997, ITT sold a 38.5% ownership interest in Madison Square Garden,
L.P. ("MSG") to Cablevision Systems Corporation ("Cablevision") for
approximately $493.5 million and recorded a pretax gain of approximately $200
million. ITT also had two "put" options each allowing ITT to require Cablevision
or MSG to purchase one-half of ITT's then continuing 7.81% interest in MSG for
$75 million. In addition, ITT contributed to MSG an ITT-owned aircraft which MSG
had used for the New York Knickerbockers basketball team and the New York
Rangers hockey team. In consideration of the aircraft contribution, Cablevision
agreed to increase the exercise price of each of ITT's "put" options by $19
million. ITT exercised one "put" option in April 1998 for total consideration of
approximately $94 million, and the remaining "put" option is exercisable in June
1999.
19
<PAGE> 21
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
During February and March 1997, ITT sold its interest in the capital stock
of Alcatel Alsthom. Total proceeds from these sales were approximately $830
million, resulting in an after-tax gain of $106 million ($183 million pretax).
In April 1997, ITT received the remaining balance of $533 million from these
sales.
NOTE 5. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1997, ITT changed its method of accounting for
start-up costs on major hospitality and gaming projects to expense these costs
as incurred. Prior to 1997, ITT capitalized these costs and amortized them over
a three-year period. The 1997 results were restated to record a pretax charge of
$17 million ($11 million after taxes) as the cumulative effect of this
accounting change. In connection with the ITT Merger, the Company elected to
follow ITT's accounting treatment regarding start-up costs and, therefore, is
expensing start-up costs as incurred.
NOTE 6. RESTRUCTURING AND OTHER SPECIAL CHARGES
During the third quarter of 1998, the Company recorded pretax charges
totaling approximately $310 million relating to restructuring and other special
charges. The charges represent a portion of the approximate $1.2 billion
restructuring and other special charges that the Company announced in August
1998.
The third quarter 1998 restructuring and other special charges consist of
the following:
<TABLE>
<CAPTION>
NON-CASH CASH EXPENDITURES
CHARGES EXPENDITURES ACCRUED TOTAL
-------- ------------ ------------ -----
<S> <C> <C> <C> <C>
Write-down of assets..................... $115 $-- $ -- $115
ITT Merger-related costs................. 20 20 85 125
Other non-recurring costs................ 15 40 15 70
---- --- ---- ----
Total.......................... $150 $60 $100 $310
==== === ==== ====
</TABLE>
Write-Down of Assets
The restructuring and special charges include the write-down of assets that
include investments in a hotel in Kuala Lampur, Malaysia; a mortgage note
receivable secured by a hotel in Paris, France; an investment in a shared
services center established by ITT in 1997 which was closed by the Company
following the ITT Merger; and certain receivable balances in the Company's
gaming division primarily related to Asian customers. These assets were
primarily ITT assets and were written down primarily as a result of certain
worldwide economic conditions indicating a reduced value for these assets.
ITT Merger Related Costs
The restructuring and special charges include costs related to the ITT
Merger consisting primarily of severance payments and relocation costs for ITT
employees and certain costs to integrate the companies, including costs to
integrate the Company's frequent guest programs and to close down duplicate
facilities.
Other
The restructuring and special charges include other non-recurring costs
consisting primarily of the costs associated with the settlement of certain
forward interest rate swap transactions (see Note 10) and the vesting, during
the quarter, of certain restricted stock granted earlier in the year to the
President and Chief Executive Officer of the Corporation.
20
<PAGE> 22
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During the first quarter of 1997, ITT recorded pretax charges totaling $58
million to restructure and rationalize operations at its World Headquarters. Of
the total pretax charge, approximately $28 million represented severance and
other related employee termination costs associated with the elimination of
nearly 115 positions worldwide. The balance of the restructuring charge ($30
million pretax) related primarily to asset write-offs, lease commitments and
termination penalties. With the exception of the remaining lease commitments,
substantially all of these costs have been paid.
NOTE 7. NET ASSETS HELD FOR SALE
At September 30, 1998, the Company's hotel portfolio included two hotel
properties held for sale: the 155-room Tyee Hotel in Olympia, Washington and the
155-room Four Points Hotel in Wichita, Kansas. These properties were included in
net assets held for sale as of September 30, 1998.
In April 1997, ITT announced its intention to sell one of its gaming
properties, the Desert Inn in Las Vegas, Nevada. For financial reporting
purposes, the assets and liabilities attributable to this property have been
included in net assets held for sale as of September 30, 1998.
There can be no assurance that these sales will occur or, if they occur, as
to the timing of such sales. Management will evaluate its alternatives in the
event a decision is made to change its current intention to sell these
properties.
NOTE 8. EARNINGS PER SHARE
Earnings per share for the three and nine months ended September 30, 1997,
as previously reported by ITT, has been restated to give effect to the reverse
purchase accounting for the ITT Merger and to conform to the presentation
required by SFAS No. 128, Earnings Per Share. The following is a reconciliation
of basic earnings per Paired Share to diluted earnings per Paired Share for
income (loss) from continuing operations (in millions, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1998 1997
----------------------------- -----------------------------
EARNINGS SHARES PER SHARE EARNINGS SHARES PER SHARE
-------- ------ --------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations............................ $(101) $43
Dividends on Class A and Class B EPS.... (4) --
----- ---
Basic earnings (loss) per Paired
Share................................. (105) 188 $(0.56) 43 126 $0.34
Effect of dilutive securities:
Paired Share options.................. -- 2
--- ---
Diluted earnings (loss) per Paired
Share................................. $(105) 188 $(0.56) $43 128 $0.34
===== === ====== === === =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1998 1997
----------------------------- -----------------------------
EARNINGS SHARES PER SHARE EARNINGS SHARES PER SHARE
-------- ------ --------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations............................ $ (3) $321
Dividends on Class A and Class B EPS.... (15) --
---- ----
Basic earnings (loss) per Paired
Share................................. (18) 187 $(0.10) 321 126 $2.55
Effect of dilutive securities:
Paired Share options.................. -- 2
--- ---
Diluted earnings (loss) per Paired
Share................................. $(18) 187 $(0.10) $321 128 $2.51
==== === ====== ==== === =====
</TABLE>
21
<PAGE> 23
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Class A and Class B EPS, outstanding options to purchase Paired Shares,
equity put options and forward equity contract security settlements were not
included in the computation of diluted earnings per Paired Share for the three
and nine months ended September 30, 1998 as the effects were anti-dilutive.
NOTE 9. STOCKHOLDERS' EQUITY
During the nine months ended September 30, 1998, the Trust consented to the
conversion of 1,360,403 shares of Class B EPS by certain stockholders into an
equal number of shares of Class A EPS; stockholders thereafter converted
2,889,106 shares of Class A EPS into an equal number of Paired Shares.
Pursuant to the Company's share repurchase program, the Company repurchased
approximately 7.143 million Paired Shares in the open market at an average
purchase price of $34.59 during the three months ended September 30, 1998.
During the nine months ended September 30, 1998, the Company had repurchased
approximately 9.124 million Paired Shares in the open market at an average
purchase price of $37.67 per Paired Share.
As a part of its share repurchase program, the Company sold equity put
options during the third quarter of 1998 that entitle the holder, at the
expiration date, to sell Paired Shares to the Company at contractually specified
prices. The Company issued put options for the purchase of one million Paired
Shares for $1.8 million in premiums which was included in additional paid-in
capital. As of September 30, 1998, none of the equity put options had been
exercised and equity put options with an aggregate exercise price of
approximately $32 million for one million Paired Shares remained outstanding at
strike prices ranging from $31.11 to $32.85 with expiration dates ranging from
December 1998 through March 1999. In the event the options are exercised, the
Company is required to deliver the full stated amount of cash to the put holder
for the full stated number of Paired Shares. The Company may elect, under
certain circumstances, to pay the put holder in cash or shares equal to fair
market value of the difference between the strike price and the market price of
the Paired Shares.
NOTE 10. DERIVATIVES
The Company enters into interest rate swap agreements to manage interest
rate fluctuations on its variable rate debt. The Company currently has five
outstanding forward interest rate swap agreements under which the Company pays a
fixed rate and receives variable rates of interest. The aggregate notional
amount of these forward interest rate swaps was approximately $1.030 billion and
the estimated unrealized loss on these interest rate swaps was approximately $50
million at September 30, 1998. Four of these five forward interest rate swap
agreements, representing $1 billion of the total notional amount, are required
by the terms of the Company's existing credit facilities. The unrealized loss
represents the amount the Company would pay to terminate the swap agreements
based on current interest rates.
The Company enters into forward foreign exchange contracts to hedge the
foreign currency exposure associated with the Company's foreign currency
denominated assets and liabilities. The Company currently has two forward
foreign exchange contracts outstanding with a dollar equivalent of the
contractual amounts of these hedges at September 30, 1998 of approximately $54.9
million. These contracts mature on January 8, 1999.
A long-term debt offering that the Company was contemplating was delayed
due to market conditions and the Restructuring. As a result, certain of the
Company's interest rate swaps with a notional amount of $500 million no longer
correlated with this anticipated indebtedness. In accordance with the Company's
accounting policies, these interest rate swaps were marked to market by the
Company and, as such, the Company recognized a loss of $40 million, which is
included in the restructuring and other special charges in the third quarter of
1998 (see Note 6). These contracts were terminated by the Company.
22
<PAGE> 24
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
NOTE 11. COMMITMENTS AND CONTINGENCIES
Pursuant to a Purchase Agreement dated October 10, 1997, the Company sold
to UBS Limited ("UBS Ltd.") 2.185 million Paired Shares ("UBS Shares") at a cash
price of $57.25 per share, and paid to Warburg Dillon Read LLC (formerly UBS
Securities LLC), an affiliate of UBS Ltd., a placement fee equal to 2.5% of the
gross proceeds to the Company from such sale of shares. Concurrently therewith,
the Company entered into a Forward Stock Contract dated October 13, 1997, with
Union Bank of Switzerland, London Branch ("UBS/LB") (the "UBS Price Adjustment
Agreement"). The UBS Price Adjustment Agreement provided for a settlement
payment to be made, in the form of Paired Shares or cash, by the Company to
UBS/LB, or by UBS/LB to the Company, based on the market price of the Paired
Shares over a specified unwind period, as compared to a "Forward Price" (as
defined, but essentially equal to $57.25 per Paired Share, plus an implicit
interest factor less dividends paid on the UBS Shares, in each case during the
term of the UBS Price Adjustment Agreement). If prior to final settlement the
market price of the Paired Shares fell below the Forward Price, the Company was
obligated to deliver, at quarterly intervals, additional Paired Shares to UBS/
LB. In the event the market price of the Paired Shares exceeded the Forward
Price on a quarterly settlement date, UBS/LB was obligated to deliver to the
Company a portion of the UBS Shares to account for the differential.
The Company had the right at any time prior to October 10, 1998 to elect to
deliver or receive Paired Shares in settlement of the UBS Price Adjustment
Agreement. The Company had the further right, but not the obligation, to settle
the Company's obligations under the contract by repurchasing for cash at the
Forward Price a number of Paired Shares equal to the UBS Shares. The Company had
the obligation to settle the UBS Price Adjustment Agreement on October 10, 1998
unless UBS/LB agreed to extend such agreement's terms. The Company settled the
UBS Price Adjustment Agreement in September 1998 by repurchasing the UBS Shares
for approximately $130.3 million in cash. As a result of the settlement of the
UBS Price Adjustment Agreement, the Company has no further obligations under
this agreement and Paired Shares outstanding were reduced by 2.185 million.
On February 24, 1998, the Trust and the Corporation sold an aggregate of
4.641 million Paired Shares to Merrill Lynch International, NMS Services, Inc.,
Lehman Brothers Inc. and certain affiliates (collectively, the "February
Purchasers" and together with UBS Ltd., the "Purchasers") for a cash purchase
price per Paired Share of $52.798, which price reflected a 2% discount from the
last reported sale price of the Paired Shares on the date of the purchase.
Concurrently with these sales, the Trust and the Corporation entered into
three separate agreements (the "February Price Adjustment Agreements") with the
February Purchasers and/or certain of their affiliates pursuant to which each of
the February Purchasers or their respective affiliates agreed to sell, as
directed by the Trust and the Corporation and on or before February 24, 1999, in
an underwritten fixed price offering or another method specified in the February
Price Adjustment Agreements, a sufficient number of the purchased Paired Shares
to achieve net sales proceeds equal to the aggregate market value of the Paired
Shares purchased by such February Purchasers in February 1998, plus a forward
accretion component, minus an adjustment for dividends paid on the purchased
Paired Shares. In addition, each February Purchaser had the right to cause a
sale of all or a portion of the purchased Paired Shares in the event the market
prices of the Paired Shares declined below certain levels. The precise numbers
of Paired Shares that were required to be sold pursuant to the February Price
Adjustment Agreements would have depended primarily on the market prices of the
Paired Shares at the time of settlement. If the number of Paired Shares required
to be sold was greater than the number of Paired Shares purchased by the
February Purchasers as a result of a decrease in the market prices of the Paired
Shares, the Trust and the Corporation were required to issue additional Paired
Shares to the February Purchasers at a cash price of $0.01 per share. If the
number of Paired Shares required to be sold was less than the number of Paired
Shares purchased by the February Purchasers on February 24,
23
<PAGE> 25
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
1998 as a result of an increase in the market prices of the Paired Shares, the
February Purchasers were required to deliver to the Trust and the Corporation a
specified number of Paired Shares. The effect of the February Price Adjustment
Agreements was to cause the February Purchasers to receive and retain an amount
equal to the purchase price paid by the February Purchasers for the Paired
Shares plus an annual rate of return on that purchase price equal to the
three-month LIBOR for a specified period plus 1.75%, subject to adjustment under
certain circumstances.
In the event that the cash purchase price of the aggregate Paired Shares
purchased by the February Purchasers less $5 million was in excess of the
aggregate closing price of those Paired Shares on certain dates during the term
of the February Price Adjustment Agreements, the Company was obligated to
deliver additional Paired Shares to the February Purchasers as security for the
Company's settlement obligations. As of September 30, 1998, the Company had
delivered approximately 2.738 million Paired Shares in accordance with this
security requirement.
In October 1998, the Company settled the February Price Adjustment
Agreements by repurchasing all of the Paired Shares issued to the February
Purchasers for an aggregate of approximately $255 million in cash. As a result
of this settlement, the Company has no further obligations under these
agreements and Paired Shares outstanding were reduced by approximately 7.379
million (4.641 million original shares issued and 2.738 million shares
previously issued as security).
NOTE 12. GAMING OPERATIONS
Casino revenues represent the net win from gaming wins and losses. Revenues
exclude the retail value of rooms, food, beverage, entertainment and other
promotional allowances provided on a complimentary basis to customers. The
estimated retail value of such promotional allowances was $52 million and $40
million for the three months ended September 30, 1998 and 1997, respectively,
and $148 million and $115 million for the nine months ended September 30, 1998
and 1997, respectively. The estimated cost of such promotional allowances was
$37 million and $31 million for the three months ended September 30, 1998 and
1997, respectively, and $104 million and $90 million for the nine months ended
September 30, 1998 and 1997, respectively, and has been included in costs and
expenses.
Revenues and costs and expenses of the gaming operations, excluding the
King 8 Hotel & Casino, which was sold in June 1998, are comprised of the
following (in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
1998 1997
--------------------- ---------------------
COSTS AND COSTS AND
REVENUES EXPENSES REVENUES EXPENSES
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Gaming...................................... $ 285 $159 $242 $149
Rooms....................................... 32 10 17 7
Food and beverage........................... 27 26 19 18
Other operations............................ 47 26 30 15
Selling, general and administrative......... -- 60 -- 44
Preopening costs............................ -- 9 -- 5
Restructuring and other special charges..... -- 55 -- --
Depreciation and amortization............... -- 39 -- 18
Provision for doubtful accounts............. -- 5 -- 8
------ ---- ---- ----
Total............................. $ 391 $389 $308 $264
====== ==== ==== ====
</TABLE>
24
<PAGE> 26
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
1998 1997
--------------------- ---------------------
COSTS AND COSTS AND
REVENUES EXPENSES REVENUES EXPENSES
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Gaming...................................... $ 753 $437 $715 $445
Rooms....................................... 94 31 50 19
Food and beverage........................... 84 76 55 52
Other operations............................ 108 57 83 43
Selling, general and administrative......... -- 165 -- 135
Preopening costs............................ -- 35 -- 8
Restructuring and other special charges..... -- 55 -- --
Depreciation and amortization............... -- 106 -- 59
Provision for doubtful accounts............. -- 26 -- 22
------ ---- ---- ----
Total............................. $1,039 $988 $903 $783
====== ==== ==== ====
</TABLE>
NOTE 13. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
SFAS No. 133
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement requires that changes in the fair value of the derivative be
recognized currently in earnings unless specific hedge accounting criteria are
met. If specific hedge accounting criteria are met, changes in the fair value of
derivatives will either be offset against the change in the fair value of the
hedged assets, liabilities, or firm commitments through earnings, or recognized
in other comprehensive income until the hedged item is recognized in earnings.
The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. The Company expects to adopt SFAS No. 133
effective January 1, 2000. Management has not yet quantified the impact of
adopting SFAS No. 133 on the Company's financial statements.
EITF 98-9
In May 1998, the Emerging Issues Task Force ("EITF") of the FASB reached a
consensus on EITF 98-9, Accounting for Contingent Rent in Interim Financial
Periods. EITF 98-9 provides that a lessor shall defer recognition of contingent
rental income in interim periods until specified targets that trigger the
contingent income are met. EITF 98-9 provides that a lessee shall accrue
contingent rental expense when it is probable that the targets will be achieved.
Management has reviewed the terms of its leases and has determined that the
provisions of EITF 98-9 will have an immaterial impact on the Company's rental
revenue and expense recognition on an interim and annual basis. The Company has
adopted the provisions of EITF 98-9 effective May 1998 and elected to apply the
provisions of the new pronouncement on a prospective basis.
EITF 97-2
In November 1997, the EITF reached a consensus on EITF 97-2, Application of
SFAS No. 94 and APB Opinion No. 16 to Physician Practice Management Entities and
Certain Other Entities with Contractual Management Arrangements. EITF 97-2
addresses the circumstances in which a management entity may include the
revenues and expenses of a managed entity in its financial statements. As a
result of EITF 97-2,
25
<PAGE> 27
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
the Company intends to change its accounting policy for its managed hotels
beginning in the fourth quarter of 1998. Application of EITF 97-2 for the nine
months ended September 30, 1998 and 1997 would have reduced each of revenues and
operating expenses by approximately $2.8 billion and $2.2 billion, respectively.
There would be no impact on operating income, net income, working capital,
earnings per Paired Share or stockholders' equity as a result of this change in
accounting policy.
SFAS No. 131
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, which establishes standards for the way
public business enterprises report information about operating segments in
annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. This statement is effective for financial statements for fiscal
years beginning after December 15, 1997. The expanded disclosures required by
this statement will be included in the Company's 1998 annual financial
statements.
NOTE 14. PRO FORMA RESULTS
Due to the impact of the ITT Merger and the acquisition of Westin during
the nine months ended September 30, 1998, the unaudited condensed combined
consolidated pro forma statements of income of Starwood Hotels & Resorts and
Starwood Hotels & Resorts Worldwide, Inc. for the three and nine months ended
September 30, 1998 are included herein and the following pro forma data is
presented to supplement the historical statements of income. This information
reflects the ITT Merger, the acquisition of Westin and certain asset sales (see
the unaudited condensed combined consolidated pro forma statements of income and
the notes thereto for the three and nine months ended September 30, 1998
beginning on page 27) as if they occurred on January 1, 1997 and does not
purport to present what actual results would have been had such transactions, in
fact, occurred at January 1, 1997, or to project results for any future period
(in millions, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues........................................ $2,259 $2,048 $6,646 $5,953
Income (loss) from continuing operations........ $ (75) $ 93 $ 43 $ 344
Net income (loss)............................... $ (51) $ 108 $1,159 $ 347
Basic income (loss) from continuing operations
per Paired Share.............................. $(0.38) $ 0.52 $ 0.15 $ 1.97
Diluted income (loss) from continuing operations
per Paired Share.............................. $(0.38) $ 0.49 $ 0.14 $ 1.83
</TABLE>
NOTE 15. SUBSEQUENT EVENT
Subsequent to September 30, 1998, the Company repurchased in the open
market approximately 985,000 of its Paired Shares at an average purchase price
of $27.77 and, as of the date of this filing, the Company had repurchased a
total of 10.109 million Paired Shares during 1998 in the open market at an
average purchase price of $36.70.
26
<PAGE> 28
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
UNAUDITED CONDENSED COMBINED CONSOLIDATED
PRO FORMA STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
The following unaudited condensed combined consolidated pro forma statement
of income for the three months ended September 30, 1998 gives effect as of
January 1, 1998 to the ITT Merger, the acquisition of Westin and certain asset
sales. The pro forma information is based upon historical information as
described in Note 1 of the Notes to Financial Statements and does not purport to
present what actual results would have been had such transactions, in fact,
occurred at January 1, 1998, or to project results for any future period.
Historical results are for the three months ended September 30, 1998.
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------
DESERT PRO
HISTORICAL INN(B) OTHERS FORMA
---------- ------ ------ -----
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues......................................... $2,286 $(27) $ -- $2,259
Costs and expenses:
Salaries, benefits and other operating......... 1,657 (28) -- 1,629
Selling, general and administrative............ 231 -- (22)(i) 209
Restructuring and other special charges........ 310 -- -- 310
Depreciation and amortization.................. 143 (5) -- 138
------ ---- ----- ------
2,341 (33) (22) 2,286
------ ---- ----- ------
(55) 6 22 (27)
Interest expense, net............................ (156) -- 13(d) (138)
5(f)
Miscellaneous expense, net....................... (3) -- -- (3)
------ ---- ----- ------
(214) 6 40 (168)
Income tax benefit (expense)..................... 109 (2) (18) 89
Minority equity.................................. 4 -- -- 4
------ ---- ----- ------
Income (loss) from continuing operations......... $ (101) $ 4 $ 22 $ (75)
====== ==== ===== ======
Basic earnings per Paired Share:
Loss from continuing operations................ $(0.56) $(0.38)
====== ======
Diluted earnings per Paired Share:
Loss from continuing operations................ $(0.56) $(0.38)
====== ======
Weighted average number of Paired Shares......... 188 188
====== ======
Weighted average number of equivalent Paired
Shares......................................... 188 188
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
pro forma statement.
27
<PAGE> 29
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
UNAUDITED CONDENSED COMBINED CONSOLIDATED
PRO FORMA STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
The following unaudited condensed combined consolidated pro forma statement
of income for the nine months ended September 30, 1998 gives effect as of
January 1, 1998 to the ITT Merger, the acquisition of Westin and certain asset
sales. The pro forma information is based upon historical information as
described in Note 1 of the Notes to Financial Statements and does not purport to
present what actual results would have been had such transactions, in fact,
occurred at January 1, 1998, or to project results for any future period.
Historical results are for the nine months ended September 30, 1998.
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------
STARWOOD DESERT
HISTORICAL HOTELS(A) INN(B) OTHERS PRO FORMA
---------- --------- ------ ------ ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................................. $6,296 $437 $ (87) $ -- $6,646
Costs and expenses:
Salaries, benefits and other
operating........................... 4,614 325 (92) -- 4,847
Selling, general and administrative.... 676 42 -- (31)(h)(i) 687
Restructuring and other special
charges............................. 310 -- -- -- 310
Depreciation and amortization.......... 414 43 (12) 13(g) 458
------ ---- ----- ---- ------
6,014 410 (104) (18) 6,302
------ ---- ----- ---- ------
282 27 17 18 344
Interest expense, net.................... (399) (25) -- (39)(c) (394)
57(d)
3(e)
9(f)
Gain on investment in Madison Square
Garden................................. 31 -- -- -- 31
Miscellaneous income, net................ 6 4 2 -- 12
------ ---- ----- ---- ------
(80) 6 19 48 (7)
Income tax benefit (expense)............. 79 (2) (6) (20) 51
Minority equity.......................... (2) 1 -- -- (1)
------ ---- ----- ---- ------
Income (loss) from continuing
operations............................. $ (3) $ 5 $ 13 $ 28 $ 43
====== ==== ===== ==== ======
Basic earnings per Paired Share:
Income (loss) from continuing
operations.......................... $(0.10) $ 0.15
====== ======
Diluted earnings per Paired Share:
Income (loss) from continuing
operations.......................... $(0.10) $ 0.15
====== ======
Weighted average number of Paired
Shares................................. 187 187
====== ======
Weighted average number of equivalent
Paired Shares.......................... 187 189
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of the above
pro forma statement.
28
<PAGE> 30
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO UNAUDITED CONDENSED COMBINED CONSOLIDATED
PRO FORMA STATEMENTS OF INCOME
(a) Represents the historical results of Starwood Hotels & Resorts and Starwood
Hotels & Resorts Worldwide, Inc., including Westin, for the period from
January 1, 1998 through the closing of the ITT Merger on February 23, 1998.
(b) Represents the elimination of Desert Inn from continuing operations. The
Company has announced its intention to sell the Desert Inn and, as a result,
has excluded its results from continuing operations.
(c) Represents interest expense as if the ITT Merger had occurred on January 1,
1998, using an average rate of 7.5%, on the additional debt incurred to
finance (i) the $2.991 billion cash portion of the purchase price of the ITT
Shares acquired from the ITT stockholders; (ii) the $312 million in cash
used to retire ITT stock options; and (iii) the $102 million of fees and
expenses incurred in connection with the ITT Merger including amounts paid
as commitment fees for advisory services and finders fees.
(d) Represents reduction of interest expense, using an average rate of 7.5%, for
the paydown of the term loans with proceeds from actual or planned asset
dispositions as if the dispositions had occurred on January 1, 1998. The
actual dispositions include the disposition of WD for gross proceeds of $2.1
billion to VNU in February 1998; the sale of ITT's interest in WBIS+,
Channel 31 in New York City, to Paxson for gross proceeds of $128 million in
March 1998; the exercise of one of the two "put" options in April 1998
pursuant to which Cablevision purchased one-half of ITT's 7.81% interest in
MSG for gross proceeds of $94 million; the sale of an aircraft for gross
proceeds of $39 million in April 1998; and the sale of approximately 13
million shares of Educational Services for gross proceeds of $315 million in
June 1998. The planned asset dispositions include the exercise of the
remaining "put" option with Cablevision or MSG, the sale of the Company's
remaining 35% interest in Educational Services and the sale of the Desert
Inn. The pro forma net proceeds of the planned dispositions, after certain
costs and income taxes, would reduce debt by approximately $735 million.
(e) Represents the reduction of interest expense, using an average rate of 7.5%,
for the paydown of term loans with the proceeds of $245 million, net of
costs of $6 million, from the sale of 4.6 million Paired Shares on February
24, 1998 as if such offering had taken place on January 1, 1998 (see Note 11
to the unaudited combined consolidated financial statements on page 23).
(f) Represents a reduction of the amortization recognized on the deferred loan
fees which were incurred in connection with the one-year $1.0 billion term
loan facility (see Note 3) as if the asset dispositions had occurred on
January 1, 1998. This reduction is net of the increased amortization on
deferred loan fees recognized for the period of January 1, 1998 through the
closing of the ITT Merger on February 23, 1998 for the costs incurred in
connection with the additional debt (see Note (c) above).
(g) Represents the depreciation and amortization expense related to the excess
value recorded as a result of the purchase consideration exceeding the fair
market value of the combined net assets of Starwood Hotels and Westin as if
the transactions had taken place on January 1, 1998.
(h) Represents effects of termination of certain executives under contractual
severance agreements, net of additional costs for new executives under
employment contracts, removal of duplicate third-party consulting fees and
termination of certain advertising contracts and rental agreements, less
related termination fees.
(i) Represents the effects of the combination of certain identified benefit
plans as a result of the ITT Merger as if the new combined plans had been in
place as of January 1, 1998.
29
<PAGE> 31
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
UNAUDITED FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") (as defined by the
National Association of Real Estate Investment Trusts)(1) is one measure of
financial performance of an equity REIT such as the Trust. Because ITT was never
an equity REIT, it did not calculate FFO. Accordingly, set forth below is a
comparison of pro forma FFO for the three- and nine-month periods ended
September 30, 1998 (see the unaudited condensed combined consolidated pro forma
statements of income and the notes thereto beginning on page 28 for an
explanation of the pro forma adjustments) and the combined historical FFO of
Starwood Hotels for the same periods in 1997.
Combined pro forma FFO for the three months ended September 30, 1998 grew
by 502% to $295 million, compared to combined historical FFO of $49 million as
reported by Starwood Hotels for the corresponding period in 1997. Combined pro
forma FFO for the nine months ended September 30, 1998 grew by 422% to $700
million compared to combined historical FFO of $134 million as reported by
Starwood Hotels for the corresponding period of 1997. The following table shows
the calculation of pro forma combined FFO for the three and nine months ended
September 30, 1998 and historical combined FFO as reported by Starwood Hotels
for the three and nine months ended September 30, 1997 (in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1998 1997 1998 1997
--------- ---------- --------- ----------
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Income (loss) from continuing operations
before minority interest............... $(79) $ 3 $ 44 $ 39
Minority interest in consolidated joint
ventures............................... (3) (4) (7) (6)
Depreciation and amortization............ 138 50 458 101
Depreciation and amortization for
unconsolidated joint ventures.......... 2 -- -- --
Deferred taxes........................... (78) -- (77) --
Gain on sale of real estate and
investments............................ (1) -- (50) --
Preopening costs......................... 9 -- 35 --
Restructuring and other special
charges................................ 310 -- 310 --
Other non-recurring items, net........... (3) -- (13) --
---- --- ---- ----
Funds from Operations.................... $295 $49 $700 $134
==== === ==== ====
</TABLE>
- ---------------
(1) Management and industry analysts generally consider FFO to be one measure of
the financial performance of an equity REIT that provides a relevant basis
for comparison among REITs, and FFO is presented to assist investors in
analyzing the performance of the Company. FFO is defined as income (computed
in accordance with generally accepted accounting principles), excluding
gains (losses) from debt restructuring and sales of property, real estate
related depreciation and amortization (excluding amortization of financing
costs) and other non-recurring items. 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.
30
<PAGE> 32
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This report contains certain statements that may be deemed "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
contained herein include, but are not limited to, statements relating to the
Company's objectives, strategies and plans, and all statements (other than
statements of historical fact) that address actions, events or circumstances
that the Company or its management expects, believes or intends will occur in
the future. Forward-looking statements are not guarantees of future performance
and involve risks and uncertainties that could cause actual results to differ
materially from historical results or those anticipated at the time the
forward-looking statements are made, including, without limitation, risks and
uncertainties associated with the following: the Restructuring; the Trust's
continued ability to qualify for taxation as a REIT; the Company's integration
of the assets and operations of ITT and Westin; completion of future
acquisitions and dispositions; the availability of capital for acquisitions and
for renovations; execution of hotel and casino renovation and expansion
programs; the ability to maintain existing management, franchise or
representation agreements and to obtain new agreements on current terms;
competition within the lodging industry and the gaming industry; the cyclicality
of the real estate business, the hotel business and the gaming business; foreign
exchange fluctuations; general real estate and national and international
economic conditions; political, financial and economic conditions and
uncertainties in countries in which the Company owns property or operates; the
ability of the Company, owners of properties it manages or franchises and others
with which it does business to address the Year 2000 issue, and the costs
associated therewith; the adoption by several European countries of the euro as
their national currency; and the other risks and uncertainties set forth in the
annual, quarterly and current reports and proxy statements of the Trust and the
Corporation. The Company undertakes no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information, future
events or otherwise.
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997
To facilitate a meaningful comparison between periods, this Management's
Discussion and Analysis focuses on pro forma information for the periods
covered, which management believes provides the most meaningful comparison among
periods presented. The pro forma information reflects the ITT Merger, the Westin
acquisition and certain asset dispositions as if they had occurred on January 1,
1997. In addition, the following pro forma data for the periods ended September
30, 1997 reflects the 44 hotel properties acquired by Starwood Hotels in 1997
and two hotel properties acquired by Westin in 1997 (the "1997 Acquisitions")
and the sale, by ITT, of five hotel properties during 1997 (the "1997
Dispositions"), as if all such transactions had occurred on January 1, 1997.
Period-to-period comparisons of the Company's historical information are, in
management's view, less relevant to an understanding of the Company due to the
significance of the ITT Merger and the acquisition of Westin.
The following combined, consolidated, comparative operating data for the
Company is presented on a historical reporting basis for the three and nine
months ended September 30, 1998 and 1997 excluding preopening costs,
non-recurring items and the operations of the Desert Inn in Las Vegas, which was
held for sale at September 30, 1998. The pro forma data includes the historical
results of Starwood Hotels and Westin prior to the ITT Merger and certain pro
forma adjustments as more fully described in the notes to the unaudited combined
consolidated pro forma statements of income (see page 30). The pro forma data is
not necessarily indicative of the results that would have been achieved had such
transactions actually occurred on January 1, 1997, nor are they necessarily
indicative of the Company's future results.
31
<PAGE> 33
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
1998 1998 1997 1997
---------- --------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
REVENUES
Hotel
Owned.......................................... $ 757 $ 757 $337 $ 706
Managed........................................ 1,042 1,042 736 1,021
Other.......................................... 48 48 36 38
Gaming........................................... 365 365 283 283
Other............................................ 20 20 -- 14
COSTS AND EXPENSES
Salaries, benefits and other operating:
Hotel
Owned.......................................... $ 425 $ 425 $188 $ 401
Managed........................................ 988 988 697 979
Other.......................................... (6) (6) (7) (7)
Gaming........................................... 204 204 173 173
Other............................................ -- -- -- 4
Selling, general and administrative:
Hotel
Owned.......................................... $ 101 $ 101 $ 54 $ 97
Managed........................................ -- -- -- --
Other.......................................... 39 39 40 40
Gaming........................................... 56 56 39 39
Other............................................ 20 (2) 11 23
EBITDA(1)
Hotel
Owned.......................................... $ 231 $ 231 $ 95 $ 208
Managed........................................ 54 54 39 42
Other.......................................... 6 6 3 5
Gaming........................................... 105 105 71 71
Other............................................ 9 31 (11) (13)
</TABLE>
- ---------------
(1) EBITDA is defined as income before minority interest, interest expense,
taxes and depreciation and amortization. Non-recurring items and gains and
losses from sales of property are also excluded from EBITDA as these items
do not impact operating results on a recurring basis. Management considers
EBITDA to be one measure of the cash flows from operations of the Company
before debt service that provides a relevant basis for comparison among real
estate companies, and EBITDA is presented to assist investors in analyzing
the performance of the Company. This information should not be considered as
an alternative to any measure of performance as promulgated under generally
accepted accounting principles, nor should it be considered as an indicator
of the overall financial performance of the Company. The Company's
calculation of EBITDA may be different from the calculation used by other
companies and, therefore, comparability may be limited.
32
<PAGE> 34
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
1998 1998 1997 1997
---------- --------- ---------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
REVENUES
Hotel
Owned.......................................... $2,056 $2,270 $ 987 $2,082
Managed........................................ 2,950 3,137 2,153 2,990
Other.......................................... 123 125 100 106
Gaming........................................... 957 952 839 839
Other............................................ 38 48 -- 40
COSTS AND EXPENSES
Salaries, benefits and other operating:
Hotel
Owned.......................................... $1,124 $1,253 $ 543 $1,185
Managed........................................ 2,807 2,988 2,043 2,868
Other.......................................... (41) (41) (22) (22)
Gaming........................................... 555 549 509 509
Other............................................ (8) (8) -- 10
Selling, general and administrative:
Hotel
Owned.......................................... $ 282 $ 312 $ 163 $ 296
Managed........................................ -- -- -- --
Other.......................................... 145 145 132 132
Gaming........................................... 152 152 121 121
Other............................................ 75 54 51 86
EBITDA
Hotel
Owned.......................................... $ 650 $ 705 $ 281 $ 601
Managed........................................ 143 149 110 122
Other.......................................... 19 21 (10) (4)
Gaming........................................... 250 251 209 209
Other............................................ (29) 2 (51) (56)
</TABLE>
33
<PAGE> 35
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
Revenues
Pro Forma:
Revenues for properties owned, leased or managed by the Company increased
4.2% and 6.6% to $1.8 billion and $5.4 billion for the three and nine months
ended September 30, 1998, respectively, when compared to the corresponding
periods of 1997. The increase in revenues was primarily due to an increase in
revenues for owned, leased and consolidated joint venture hotels of 7.2% and
9.0% to $757 million and $2.3 billion in the three and nine months ended
September 30, 1998, respectively, when compared to the 1997 periods. The
increase in hotel revenues at the Company's 172 owned, leased and consolidated
joint venture hotels resulted from an increase in revenue per available room
("REVPAR") of 5.6% and 7.1% to $99 and $99 for the three and nine months ended
September 30, 1998, respectively, when compared to the same periods of 1997; an
increase in average daily rate ("ADR") of 7.6% and 8.1% to $139 and $141 for the
three and nine months ended September 30, 1998, respectively, when compared to
the corresponding 1997 periods; and a decrease of 1.3 percentage points in
occupancy rates to 71% for the three months ended September 30, 1998 and a
decrease of less than one percentage point to 70% for the nine months ended
September 30, 1998 when compared to the same periods of 1997. REVPAR at the
Company's international owned, leased and consolidated joint venture hotels
increased 7.6% and 9.2% for the three and nine months ended September 30, 1998,
respectively, when compared to the same periods of 1997. REVPAR at owned, leased
and consolidated joint venture properties in North America increased 4.6% and
6.1% for the three and nine months ended September 30, 1998, respectively, when
compared to the same periods of 1997.
Hotel revenues for properties managed by the Company for third-party owners
increased 2.1% and 4.9% to $1.0 billion and $3.1 billion for the three and nine
months ended September 30, 1998, respectively, when compared to the same periods
of 1997. Management fees and equity earnings from these hotels increased 28.6%
and 22.1% to $54 million and $149 million for the three and nine months ended
September 30, 1998, respectively, when compared to the same periods of 1997.
Gaming revenues, excluding the results of the Desert Inn in Las Vegas,
Nevada (which is held for disposition), increased 29.0% and 13.5% to $365
million and $952 million for the three and nine months ended September 30, 1998,
respectively, when compared to the same periods of 1997. The increase in
revenues from the additional 1,130 rooms and 110,000 square feet of convention
space at Caesars Palace in Las Vegas, Nevada was partially offset by the adverse
impact on high-end baccarat play of the declines in the Asian financial markets.
Historical:
On an historical basis, revenues for properties owned, leased or managed by
the Company increased 67.7% and 59.4% to $1.8 billion and $5.0 billion for the
three and nine months ended September 30, 1998, respectively, when compared to
the corresponding periods of 1997. Since the ITT Merger is accounted for as a
reverse purchase and the reflected amounts accordingly are those of ITT, the
increase in hotel revenues was due primarily to the inclusion beginning February
23, 1998 of the results of approximately 160 hotels owned, leased or managed by
Starwood Hotels, including those acquired as a result of the Westin acquisition.
For discussion of gaming revenues, see the pro forma discussion above.
Costs and Expenses
Pro Forma:
Pro forma salaries, benefits and other operating costs increased 3.9% and
4.2% in the three and nine months ended September 30, 1998, respectively, to
$1.6 billion and $4.7 billion when compared to the same periods of 1997. The
increase in costs is due primarily to the reopening of hotel properties in 1998
which were
34
<PAGE> 36
closed for renovations in 1997, the inclusion of new managed hotel properties
and the inclusion of the operating costs associated with the tower at Caesars
Palace, which was opened at the end of 1997.
Pro forma selling, general and administrative expenses decreased 2.5% and
increased 4.4% in the three and nine months ended September 30, 1998,
respectively, to $194 million and $663 million when compared to the same periods
of 1997. The decrease in selling, general and administrative expenses for the
quarter was primarily related to the $22 million pro forma adjustment to reflect
the identified savings from the combination of certain benefit plans (see note
(i) to the notes to the unaudited condensed combined pro forma statement of
income on page 29).
Historical:
Historical salaries, benefits and other operating costs increased 53.3% and
44.4% to $1.6 billion and $4.4 billion for the three and nine months ended
September 30, 1998, respectively, when compared to the same periods in 1997.
Historical selling, general and administrative expenses increased 50.0% and
40.0% to $216 million and $654 million for the three and nine months ended
September 30, 1998, respectively, when compared to the same periods in 1997. The
increase in salaries, benefits and other operating costs and the increase in
selling, general and administrative expenses for the three and nine months ended
September 30, 1998, when compared to the same periods of 1997, was due primarily
to the reverse purchase accounting treatment and the inclusion beginning
February 23, 1998 of the results of approximately 160 hotels owned, leased or
managed by Starwood Hotels.
EBITDA
Pro Forma:
On a pro forma basis, the Company's EBITDA, excluding the Desert Inn in Las
Vegas, Nevada (which is held for disposition), hotels sold during 1998 and 1997
and discontinued operations, increased 36.4% and 29.4% to $427 million and $1.1
billion in the three and nine months ended September 30, 1998, respectively,
when compared to the same periods of 1997. The increase was primarily due to the
improved results at the Company's owned, leased and consolidated joint venture
hotels. These hotels benefited from an increase in EBITDA of $23 million and
$104 million to $231 million and $705 million in the three and nine months ended
September 30, 1998, respectively, when compared to the same periods of 1997. The
EBITDA improvement at these hotels of 11.1% and 17.3% in the three and nine
months ended September 30, 1998, respectively, was due primarily to an increase
in ADR discussed above. EBITDA margins for these hotels increased 1.6 and 2.4
percentage points to 30.8% and 31.2% in the three and nine months ended
September 30, 1998, respectively, when compared to the same periods of 1997. The
Company believes that the improvement to EBITDA margin is attributable in part
to the continued implementation of cost containment steps and its ability to
realize purchasing synergies as a result of the ITT Merger.
Excluding the Desert Inn in Las Vegas, Nevada (which is held for
disposition) and preopening costs, gaming EBITDA for the three and nine months
ended September 30, 1998 was $105 million and $251 million, respectively,
compared to $71 million and $209 million in the same periods of 1997. The
increase in gaming EBITDA resulted from positive results at Caesars Palace and
Caesars Atlantic City. EBITDA at Caesars Palace was $43 million and $99 million
in the three and nine months ended September 30, 1998, respectively, compared to
$21 million and $80 million in the same periods of 1997, as the addition of
1,130 rooms and 110,000 square feet of meeting space had a positive effect on
all areas of the casino and hotel operations. EBITDA at Caesars Atlantic City
was $40 million and $104 million in the three and nine months ended September
30, 1998, respectively, compared to $31 million and $84 million in the same
periods of 1997, as the addition of 620 new rooms and 30,000 square feet of
casino space had a positive effect on all areas of the casino and hotel
operations.
Historical:
On an historical basis, the Company's EBITDA increased 105.6% and 91.7% to
$405 million and $1.0 billion in the three and nine months ended September 30,
1998, respectively, when compared to the same
35
<PAGE> 37
periods of 1997, due primarily to the reverse purchase accounting treatment and
the inclusion beginning February 23, 1998 of the results of the hotels owned and
managed by Starwood Hotels.
For the discussion of gaming EBITDA, see the pro forma discussion above.
Depreciation and Amortization
On an historical basis, depreciation and amortization expense increased to
$143 million and $414 million in the three and nine months ended September 30,
1998, respectively, when compared to $63 million and $198 million in the same
periods of 1997. The increase was primarily due to depreciation expense on
approximately 160 hotels owned, leased or managed by Starwood Hotels beginning
February 23, 1998, the amortization of goodwill related to the ITT Merger and
the commencement of depreciation on certain newly completed hotel and gaming
projects.
Net Interest Expense
Net interest expense for the three and nine months ended September 30, 1998
increased to $156 million and $399 million, respectively, when compared to $27
million and $70 million in the same periods of 1997. The increase relates
primarily to the debt incurred to finance the ITT Merger. See "Liquidity and
Capital Resources."
RESTRUCTURING AND OTHER SPECIAL CHARGES
During the third quarter of 1998, the Company recorded pretax charges of
approximately $310 million relating to restructuring and other special charges.
The charges consist of costs relating to the write-down of assets, the ITT
Merger and other non-recurring costs (see Note 6 to unaudited combined
consolidated financial statements on page 20).
DISPOSITIONS
The Desert Inn in Las Vegas, Nevada, the gaming property held for
disposition, experienced a $683,000 and $4 million EBITDA loss in the three and
nine months ended September 30, 1998, respectively, compared to a $5 million
EBITDA loss and a $23 million EBITDA loss in the same periods of 1997. The
improved performance was due to a normalized hold percentage in baccarat and a
significantly higher ADR due to improvements made to the property in 1997. These
improvements were offset by the Asian economic crisis, which negatively impacted
results at the Desert Inn by significantly reducing the amount of high-end
baccarat volume.
DISCONTINUED OPERATIONS
The net loss from discontinued operations for the three and nine months
ended September 30, 1998 was $-- and $9 million, respectively, compared to net
income of $15 million and $14 million in the same periods of 1997. The decrease
in net income results from the sale of the WD subsidiary in February 1998. Gains
from the disposition of WD and the sale of shares of Educational Services for
the three and nine months ended September 30, 1998 were $24 million and $1,125
million, respectively, net of $15 million and $643 million of taxes and minority
interest, respectively.
MADISON SQUARE GARDEN
In April 1997, ITT entered into a Partnership Interest Transfer Agreement
with Cablevision. Pursuant to this agreement, Cablevision paid ITT $500 million
in cash on June 17, 1997 for a 38.5% ownership interest in MSG and ITT received
two "put" options to require Cablevision or MSG to purchase half of ITT's
continuing interest in MSG for $75 million on June 17, 1998 and the other half
of this continuing interest for an additional $75 million on June 17, 1999 (or,
if the first option were not exercised, the entire continuing interest for $150
million). In addition, ITT agreed to contribute to MSG an ITT-owned aircraft
which MSG had used for the New York Knickerbockers and the New York Rangers. In
consideration of the aircraft contribution, an
36
<PAGE> 38
additional $19 million was added to the exercise price of each of ITT's "put"
options. In April 1998, the Company exercised its first "put" option on one-half
of its interest in MSG and received a payment of $94 million in June 1998.
EXTERNAL GROWTH
During the first quarter of 1998, in addition to the ITT Merger and the
Westin acquisition, the Company acquired four full-service, luxury hotel
properties located in Aspen, Colorado; New York City, New York; Washington,
D.C.; and Houston, Texas for a total purchase price of approximately $348
million consisting of $164 million in cash and 3.7 million Paired Shares (which
shares were valued for purposes of the acquisition at approximately $184
million). Also in May 1998, the Company acquired the 242-room Danbury Hilton in
Danbury, Connecticut for approximately $20 million in cash. In August 1998, the
Company acquired a 95% non-controlling interest in the 760-room Westin Maui in
Maui, Hawaii for approximately $132 million.
INTERNAL GROWTH
The following tables summarize average occupancy, ADR and REVPAR on a
year-to-year basis for the Company's comparable, owned hotel properties for the
three and nine months ended September 30, 1998. The results for the three months
represent results for 157 owned hotels (excluding two hotels held for sale at
September 30, 1998, seven hotels under significant renovation during the third
quarter of 1998 and six hotels under renovation during the third quarter of
1997). The results for the nine months represent results for 153 owned hotels
(excluding two hotels held for sale at September 30, 1998, 11 hotels under
significant renovation during the nine months ended September 30, 1998 and six
hotels under significant renovation during the nine months ended September 30,
1997).
OWNED, LEASED AND CONSOLIDATED JOINT VENTURE HOTELS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------ PERCENTAGE
1998 1997 VARIANCE
------- ------- ----------
<S> <C> <C> <C>
WORLDWIDE
ALL HOTELS
Number of hotels............................................ 157 157
Number of rooms............................................. 51,103 51,103
REVPAR...................................................... $101.78 $ 95.50 6.6%
ADR......................................................... $139.87 $130.36 7.3%
Occupancy................................................... 72.8% 73.3% (0.5)%
SHERATON
Number of hotels............................................ 87 87
Number of rooms............................................. 29,444 29,444
REVPAR...................................................... $111.07 $103.36 7.5%
ADR......................................................... $153.22 $142.72 7.4%
Occupancy................................................... 72.5% 72.4% 0.1%
WESTIN
Number of hotels............................................ 26 26
Number of rooms............................................. 10,543 10,543
REVPAR...................................................... $ 90.74 $ 85.65 5.9%
ADR......................................................... $124.41 $116.20 7.1%
Occupancy................................................... 72.9% 73.7% (0.8)%
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------ PERCENTAGE
1998 1997 VARIANCE
------- ------- ----------
<S> <C> <C> <C>
OTHER(1)
Number of hotels............................................ 44 44
Number of rooms............................................. 11,116 11,116
REVPAR...................................................... $ 87.19 $ 83.87 4.0%
ADR......................................................... $118.86 $111.73 6.4%
Occupancy................................................... 73.4% 75.1% (1.7)%
NORTH AMERICA
ALL HOTELS
Number of hotels............................................ 110 110
Number of rooms............................................. 37,996 37,996
REVPAR...................................................... $ 95.98 $ 90.68 5.8%
ADR......................................................... $130.78 $121.96 7.2%
Occupancy................................................... 73.4% 74.4% (1.0)%
SHERATON
Number of hotels............................................ 44 44
Number of rooms............................................. 17,377 17,377
REVPAR...................................................... $104.06 $ 97.85 6.3%
ADR......................................................... $142.12 $132.62 7.2%
Occupancy................................................... 73.2% 73.8% (0.6)%
WESTIN
Number of hotels............................................ 22 22
Number of rooms............................................. 9,503 9,503
REVPAR...................................................... $ 91.11 $ 85.32 6.8%
ADR......................................................... $123.52 $114.40 8.0%
Occupancy................................................... 73.8% 74.6% (0.8)%
OTHER
Number of hotels............................................ 44 44
Number of rooms............................................. 11,116 11,116
REVPAR...................................................... $ 87.19 $ 83.87 4.0%
ADR......................................................... $118.86 $111.73 6.4%
Occupancy................................................... 73.4% 75.1% (1.7)%
INTERNATIONAL
ALL HOTELS
Number of hotels............................................ 47 47
Number of rooms............................................. 13,107 13,107
REVPAR...................................................... $118.50 $109.46 8.3%
ADR......................................................... $166.97 $156.20 6.9%
Occupancy................................................... 71.0% 70.1% 0.9%
SHERATON
Number of hotels............................................ 43 43
Number of rooms............................................. 12,067 12,067
REVPAR...................................................... $121.30 $111.40 8.9%
ADR......................................................... $169.81 $158.18 7.4%
Occupancy................................................... 71.4% 70.4% 1.0%
WESTIN
Number of hotels............................................ 4 4
Number of rooms............................................. 1,040 1,040
REVPAR...................................................... $ 87.59 $ 88.45 (1.0)%
ADR......................................................... $132.95 $133.39 (0.3)%
Occupancy................................................... 65.9% 66.3% (0.4)%
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C>
(1) Represents owned, leased or consolidated joint venture hotels that are not flagged under
one of the Company's proprietary brands.
</TABLE>
38
<PAGE> 40
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------ PERCENTAGE
1998 1997 VARIANCE
------- ------- ----------
<S> <C> <C> <C>
WORLDWIDE
ALL HOTELS
Number of hotels............................................ 153 153
Number of rooms............................................. 49,253 49,253
REVPAR...................................................... $100.80 $ 93.29 8.1%
ADR......................................................... $141.27 $131.40 7.5%
Occupancy................................................... 71.4% 71.0% 0.4%
SHERATON
Number of hotels............................................ 85 85
Number of rooms............................................. 28,113 28,113
REVPAR...................................................... $108.56 $101.06 7.4%
ADR......................................................... $153.49 $142.67 7.6%
Occupancy................................................... 70.7% 70.8% (0.1)%
WESTIN
Number of hotels............................................ 25 25
Number of rooms............................................. 10,173 10,173
REVPAR...................................................... $ 97.50 $ 89.16 9.4%
ADR......................................................... $131.73 $122.75 7.3%
Occupancy................................................... 74.0% 72.6% 1.4%
OTHER
Number of hotels............................................ 43 43
Number of rooms............................................. 10,967 10,967
REVPAR...................................................... $ 83.64 $ 77.35 8.1%
ADR......................................................... $118.67 $110.68 7.2%
Occupancy................................................... 70.5% 69.9% 0.6%
NORTH AMERICA
ALL HOTELS
Number of hotels............................................ 106 106
Number of rooms............................................. 36,146 36,146
REVPAR...................................................... $ 96.86 $ 89.62 8.1%
ADR......................................................... $135.32 $125.12 8.2%
Occupancy................................................... 71.6% 71.6% --
SHERATON
Number of hotels............................................ 42 42
Number of rooms............................................. 16,046 16,046
REVPAR...................................................... $106.07 $ 99.14 7.0%
ADR......................................................... $149.75 $137.62 8.8%
Occupancy................................................... 70.8% 72.0% (1.2)%
WESTIN
Number of hotels............................................ 21 21
Number of rooms............................................. 9,133 9,133
REVPAR...................................................... $ 96.11 $ 87.48 9.9%
ADR......................................................... $129.49 $119.86 $8.0%
Occupancy................................................... 74.2% 73.0% 1.2%
OTHER
Number of hotels............................................ 43 43
Number of rooms............................................. 10,967 10,967
REVPAR...................................................... $ 83.64 $ 77.35 8.1%
ADR......................................................... $118.67 $110.68 7.2%
Occupancy................................................... 70.5% 69.9% 0.6%
</TABLE>
39
<PAGE> 41
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------ PERCENTAGE
1998 1997 VARIANCE
------- ------- ----------
<S> <C> <C> <C>
INTERNATIONAL
ALL HOTELS
Number of hotels............................................ 47 47
Number of rooms............................................. 13,107 13,107
REVPAR...................................................... $111.63 $103.63 7.7%
ADR......................................................... $157.81 $149.70 5.4%
Occupancy................................................... 70.7% 69.2% 1.5%
SHERATON
Number of hotels............................................ 43 43
Number of rooms............................................. 12,067 12,067
REVPAR...................................................... $111.93 $103.71 7.9%
ADR......................................................... $158.57 $149.93 5.8%
Occupancy................................................... 70.6% 69.2% 1.4%
WESTIN
Number of hotels............................................ 4 4
Number of rooms............................................. 1,040 1,040
REVPAR...................................................... $108.47 $102.83 5.5%
ADR......................................................... $149.92 $147.37 1.7%
Occupancy................................................... 72.4% 69.8% 2.6%
</TABLE>
SEASONALITY AND DIVERSIFICATION
The hotel and gaming industries are seasonal in nature; however, the
periods during which the Company's properties experience higher hotel revenues
or gaming activities vary from property to property and depend principally upon
location. Although the Company's revenues historically have been lower in the
first quarter than in the second, third or fourth quarters, the acquisitions of
Westin and ITT are affecting, and future acquisitions may further affect,
seasonal fluctuations in revenues and cash flows.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Cash flow from operating activities is 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. The Company
anticipates that cash flow provided by operating activities will be sufficient
to service short- and long-term indebtedness, fund maintenance requirements and
capital expenditures and meet operating cash requirements, including all
distributions to shareholders by the Trust.
During the first quarter of 1998, the Trust paid a distribution of $0.48
per share for the fourth quarter of 1997. During each of the second, third and
fourth quarters of 1998, the Trust paid a distribution of $0.52 per share for
the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998. In
connection with the Restructuring, the Company has announced that, commencing
with the quarter ending December 31, 1998, it expects to reduce its dividend to
be paid by the Trust to $0.15 per Paired Share. The Corporation does not expect
to pay a dividend in the foreseeable future.
CASH FLOW 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 its credit facilities described below, through
dispositions of certain non-core assets, through additional lines of credit and,
when market conditions warrant, through the issuance of additional equity or
debt securities.
40
<PAGE> 42
Loans and Credit Facilities
At December 31, 1997, ITT had total debt outstanding of approximately $2.0
billion comprised of bank loans and other short-term facilities of $258 million
and long-term facilities of approximately $3.0 billion, less net debt allocated
to discontinued operations of approximately $1.3 billion. The weighted average
interest rate for bank loans and other short-term borrowings was 6.71% at
December 31, 1997. The weighted average interest rate on the long-term
facilities was 6.98% at December 31, 1997.
At December 31, 1997, Starwood Hotels had total debt outstanding of
approximately $1.6 billion comprised of revolving lines of credit and other
short-term notes and mortgages payable of approximately $1.5 billion and
long-term notes and mortgages payable of $97 million. The weighted average
interest rate for the revolving lines of credit and other short-term notes and
mortgages payable was 7.37% at December 31, 1997. The weighted average interest
rate for the long-term notes and mortgages payable was 7.46% at December 31,
1997.
The weighted average interest rates are comprised of interest rates on both
U.S. dollar and non-U.S. dollar denominated indebtedness.
On January 2, 1998, Starwood Hotels obtained the $2.2 Billion Facility from
a group of lenders led by Bankers Trust Company and The Chase Manhattan Bank to
fund the cash portion of the purchase of Westin for approximately $178 million
and to repay an aggregate of approximately $1.0 billion of outstanding debt of
Westin and of the Company under the $1.2 Billion Facility.
On February 23, 1998, Starwood Hotels obtained two additional credit
facilities ($5.6 billion in total) with Lehman Brothers, Bankers Trust Company
and The Chase Manhattan Bank to fund the cash portion of the ITT Merger, to
refinance a portion of Starwood Hotels' existing indebtedness (including
indebtedness outstanding under the $2.2 Billion Facility) and to provide funds
for general corporate purposes. These facilities are comprised of the $3.1
Billion Facility and the IRN Facility.
The $3.1 Billion Facility has three tranches: a $1.0 billion, one-year term
loan; a $1.0 billion, five-year term loan; and a $1.1 billion, five-year
revolving credit facility. The Corporation, the Trust and certain of their
respective direct and indirect subsidiaries may be designated as borrowers or
co-borrowers under all or a portion of the $3.1 Billion Facility. The interest
rate for the $3.1 Billion Facility was one-, two- or three-month LIBOR, at the
Company's option, plus 187.5 basis points for the six months ending August 24,
1998, and since that date has been determined pursuant to a pricing "grid" with
rates based on Starwood Hotels' leverage and/or senior unsecured debt rating.
Quarterly amortization of the five-year term loan begins in the third year, with
total amortization of 10%, 20% and 70% of the principal amount over the third,
fourth and fifth years, respectively. Repayment of amounts borrowed under the
$3.1 Billion Facility is guaranteed by the Trust and the Corporation and
substantially all of their respective significant subsidiaries (including the
Partnerships) other than gaming and foreign subsidiaries and joint venture
entities, to the extent such entities are not borrowers or co-borrowers, and is
secured by a pledge of all the capital stock, partnership interests and other
equity interests of the guarantor subsidiaries.
The IRN Facility consists of a single drawdown, senior increasing rate,
non-amortizing five-year term loan for $2.5 billion. The Corporation is the
borrower under the IRN Facility; the Trust and all subsidiaries of the
Corporation and the Trust that are borrowers or guarantors of the $3.1 Billion
Facility are guarantors of the IRN Facility. The IRN Facility is secured equally
and ratably by all the collateral securing the $3.1 Billion Facility and is pari
passu in right of payment with all other senior indebtedness of the borrower and
the guarantors, including the $3.1 Billion Credit Facility. Amounts borrowed
under the IRN Facility bear interest at one-, two- or three-month LIBOR plus 175
basis points for the three months ending May 24, 1998, with the interest rate
increasing by 50 basis points every three months thereafter, up to a maximum
rate of one-, two- or three-month LIBOR plus 375 basis points.
During the quarter ended September 30, 1998, the Company entered into a new
$1 billion, five-year term borrowing facility ("$1 Billion IRN Facility") with
Lehman Brothers to facilitate share repurchases and enhance its financial
flexibility. The new facility bears interest at one-, two- or three-month LIBOR
plus 275 basis points.
41
<PAGE> 43
Following is a summary of the Company's debt portfolio as of September 30,
1998.
Floating Rate Credit Facilities:
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING
AT SEPTEMBER 30, 1998 INTEREST RATE AT AVERAGE
FACILITY (IN MILLIONS) INTEREST TERMS SEPTEMBER 30, 1998 MATURITY
- -------- --------------------- -------------- ------------------ ----------
<S> <C> <C> <C> <C>
$1.1 billion bank revolver... $ 878 LIBOR+1.25% 6.56% 4.3 years
Asset sale bridge............ 542 LIBOR+1.25% 6.56% 0.3 years
Five-year term loan.......... 1,000 LIBOR+1.25% 6.56% 4.3 years
------ ---- ----------
Total/average...... $2,420 6.56% 3.4 years
====== ==== ==========
</TABLE>
Floating Rate Debt:
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING
AT SEPTEMBER 30, 1998 INTEREST RATE AT AVERAGE
FACILITY/LENDER (IN MILLIONS) INTEREST TERMS SEPTEMBER 30, 1998 MATURITY
- --------------- --------------------- -------------- ------------------ ----------
<S> <C> <C> <C> <C>
IRN Facility................. $2,500 LIBOR+2.75% 8.06% 4.3 years
$1 billion IRN Facility...... 250 LIBOR+2.75% 8.06% 4.3 years
Mortgage and other........... 804 Various 6.78% 2.8 years
Starwood interest rate
swaps...................... (1,000) N/A 6.56% --
------ ---- ----------
Total/average...... $2,554 7.43% 3.8 years
====== ==== ==========
</TABLE>
Fixed Rate Debt:
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING
AT SEPTEMBER 30, 1998 INTEREST RATE AT AVERAGE
FACILITY/LENDER (IN MILLIONS) INTEREST TERMS SEPTEMBER 30, 1998 MATURITY
- --------------- --------------------- -------------- ------------------ ----------
<S> <C> <C> <C> <C>
ITT public debt.............. $2,000 N/A 6.79% 8.6 years
Caesars public debt.......... 150 N/A 8.88% 3.8 years
Mortgage and other........... 294 N/A 8.24% 17.8 years
Starwood interest rate
swaps...................... 1,000 N/A 7.26% --
------ ---- ----------
Total/average...... $3,444 7.14% 9.4 years
====== ==== ==========
Total Debt and Average
Terms:..................... $8,418 7.31% 5.4 years
====== ==== ==========
</TABLE>
Stock Sales and Repurchases
At December 31, 1997, ITT had 180 million shares outstanding.
On February 23, 1998, Starwood Hotels completed the acquisition of ITT.
Each outstanding ITT Share, other than those that were converted into cash
pursuant to a cash election by the holder (and other than ITT Shares owned
directly or indirectly by ITT or Starwood Hotels, which shares were canceled),
was converted into 1.543 Paired Shares. Pursuant to cash election procedures,
approximately 35 million (pre-reverse acquisition) ITT Shares of ITT's common
stock, representing approximately 30% of the outstanding ITT Shares prior to the
ITT Merger, were converted into $85 in cash per share. In addition, each ITT
Share of ITT's common stock was converted into additional cash consideration in
the amount of $0.37493151, which amount represents the interest that would have
accrued (without compounding) on $85 at an annual rate of 7% during the period
from and including January 31, 1998 to but excluding the date of the closing
(February 23, 1998). For additional information with respect to the Company's
accounting for the ITT Merger, see Note 3 of the Notes to Financial Statements.
Pursuant to a Purchase Agreement dated as of October 10, 1997, the Company
sold to UBS Ltd. 2.185 million UBS Shares at a cash price of $57.25 per share,
and paid to Warburg Dillon Read LLC, an affiliate of
42
<PAGE> 44
UBS Ltd., a placement fee equal to 2.5% of the gross proceeds to the Company
from such sale of shares. Concurrently therewith, the Company entered into the
UBS Price Adjustment Agreement with UBS/LB. The UBS Price Adjustment Agreement
provided for a settlement payment to be made, in the form of Paired Shares or
cash, by the Company to UBS/LB, or by UBS/LB to the Company, based on the market
price of the Paired Shares over a specified unwind period, as compared to a
"Forward Price" (as defined, but essentially equal to $57.25 per Paired Share,
plus an implicit interest factor less dividends paid on the UBS Shares, in each
case during the term of the UBS Price Adjustment Agreement). If prior to final
settlement the market price of the Paired Shares fell below the Forward Price,
the Company was obligated to deliver, at quarterly intervals, additional Paired
Shares to UBS/LB. In the event the market price of the Paired Shares exceeded
the Forward Price on a quarterly settlement date, UBS/LB was obligated to
deliver to the Company a portion of the UBS Shares to provide for the
differential.
The Company had the right at any time prior to October 10, 1998 to elect to
deliver or receive Paired Shares in settlement of the UBS Price Adjustment
Agreement. The Company had the further right, but not the obligation, to settle
the Company's obligations under the contract by repurchasing for cash at the
Forward Price a number of Paired Shares equal to the UBS Shares. The Company had
the obligation to settle the UBS Price Adjustment Agreement on October 10, 1998
unless UBS/LB agreed to extend such agreement's terms. The Company settled this
agreement in September 1998 by repurchasing the UBS Shares for approximately
$130.3 million in cash. As a result of the settlement of the UBS Price
Adjustment Agreement, Paired Shares outstanding were reduced by 2.185 million.
On February 24, 1998, the Trust and the Corporation sold an aggregate of
4.641 million Paired Shares to Merrill Lynch International, NMS Services, Inc.,
Lehman Brothers Inc. and certain of their affiliates for a cash purchase price
per Paired Share of $52.798, which price reflected a 2% discount from the last
reported sale price of the Paired Shares on the date of the purchase.
Concurrently with these sales, the Trust and the Corporation entered into
the February Price Adjustment Agreements with the February Purchasers and/or
certain of their affiliates pursuant to which each of the February Purchasers or
their respective affiliates agreed to sell, as directed by the Trust and the
Corporation and on or before February 24, 1999, in an underwritten fixed price
offering or another method specified in the February Price Adjustment
Agreements, a sufficient number of the purchased Paired Shares to achieve net
sales proceeds equal to the aggregate market value of the Paired Shares
purchased by such February Purchasers in February 1998, plus a forward accretion
component, minus an adjustment for dividends paid on the purchased Paired
Shares. In addition, each February Purchaser had the right to cause a sale of
all or a portion of the purchased Paired Shares in the event the market prices
of the Paired Shares declined below certain levels. The precise numbers of
Paired Shares that were required to be sold pursuant to the February Price
Adjustment Agreements would have depended primarily on the market prices of the
Paired Shares at the time of settlement. If the number of Paired Shares required
to be sold was greater than the number of Paired Shares purchased by the
February Purchasers as a result of a decrease in the market prices of the Paired
Shares, the Trust and the Corporation were required to issue additional Paired
Shares to the February Purchasers at a cash price of $0.01 per share. If the
number of Paired Shares required to be sold was less than the number of Paired
Shares purchased by the February Purchasers on February 24, 1998 as a result of
an increase in the market prices of the Paired Shares, the February Purchasers
were required to deliver to the Trust and the Corporation a specified number of
Paired Shares. The effect of the February Price Adjustment Agreements was to
cause the February Purchasers to receive and retain an amount equal to the
purchase price paid by the February Purchasers for the Paired Shares plus an
annual rate of return on that purchase price equal to the three-month LIBOR for
a specified period plus 1.75%, subject to adjustment under certain
circumstances.
In the event that the cash purchase price of the aggregate Paired Shares
purchased by the February Purchasers less $5 million was in excess of the
aggregate closing price of those Paired Shares on certain dates during the term
of the February Price Adjustment Agreements, the Company was obligated to
deliver additional Paired Shares to the February Purchasers as security for the
Company's settlement obligations. As of September 30, 1998, the Company had
delivered approximately 2.738 million Paired Shares in accordance with this
security requirement.
43
<PAGE> 45
In October 1998, the Company settled the February Price Adjustment
Agreements by repurchasing all of the Paired Shares issued to the February
Purchasers for an aggregate of approximately $255 million in cash. As a result
of this settlement, the Company has no further obligations under these
agreements and Paired Shares outstanding were reduced by approximately 7.379
million (4.641 million original shares issued and 2.738 million shares
previously issued as security).
Pursuant to the Company's share repurchase program, the Company repurchased
approximately 7.143 million Paired Shares in the open market at an average
purchase price of $34.59 during the three months ended September 30, 1998.
During the nine months ended September 30, 1998, the Company had repurchased
approximately 9.124 million Paired Shares in the open market at an average
purchase price of $37.67 per Paired Share.
OTHER MATTERS
IMPACT OF RECENTLY ENACTED TAX LEGISLATION
Section 269B(a)(3) of the Code treats, under certain circumstances, a REIT
and a paired non-REIT whose shares were not paired on or before June 30, 1983 as
one entity for purposes of determining whether either company qualifies as a
REIT. Section 269(a)(3) has not applied to the Company because the Trust Shares
and the Corporation Shares were paired prior to that date.
The Internal Revenue Service Restructuring and Reform Act of 1998 (H.R.
2676) which was enacted on July 22, 1998 severely limits the ability of paired
share REITs, such as the Company, to acquire interests in real property and
continue to meet the tests under the code for qualification as a REIT. Under
H.R. 2676, for purposes of the gross income tests for qualification as a REIT,
the Corporation and the Trust generally would be treated as a single entity with
respect to interests in real property acquired directly or indirectly after
March 26, 1998 by the Trust or the Corporation, or a subsidiary or partnership
in which a 10% or greater interest is owned by the Trust or the Corporation
(collectively, the "REIT Group"). H.R. 2676 also provides that an interest in
real property held by the REIT Group that is not subject to the anti-pairing
rules of Section 269B(a)(3) of the Code would become subject to such rules in
the event an improvement to such interest in real property is placed in service
after December 31, 1999 that changes the use of the property and the cost of
which is greater than 200 percent of (x) the undepreciated cost of the property
(prior to the improvement) or (y) in the case of property acquired where there
is a substituted basis, the fair market value of the property on the day it was
acquired by the REIT Group. There is an exception for improvements placed in
service before January 1, 2004 pursuant to a binding contract in effect as of
December 31, 1999 and at all times thereafter.
If the Restructuring occurs, the restrictions of H.R. 2676 will no longer
apply to Starwood Hotels, and thus will not prevent the Company from acquiring
additional interests in real property. Prior to the completion of the
Restructuring, the Company will monitor the acquisition of interests in real
property by the REIT Group to ensure that such acquisitions do not prevent the
Trust from qualifying for taxation as a REIT.
RISKS RELATING TO YEAR 2000
Many computer systems were originally designed to recognize calendar years
by the last two digits in the date code field. Beginning in the year 2000, these
date code fields will need to accept four-digit entries to distinguish
twenty-first century dates from twentieth century dates. As a result, in less
than two years, the computerized systems, which include information and
non-information technology systems, and applications used by the Company will
need to be reviewed, evaluated and modified or replaced, if necessary, to ensure
all such financial, information and operational systems are Year 2000 compliant.
State of Readiness
The Company is addressing the Year 2000 compliance issue by separately
focusing on its central facilities, which include all of its non-operating
facilities, and on its gaming and hotel properties.
44
<PAGE> 46
The Company has identified the critical central facility business
applications that will be affected by the Year 2000, conducted the discovery and
assessment stages of the reservations and communication system applications and
assembled a team to implement modifications or upgrades, as necessary, and to
test results. The majority of the central facility applications passed the final
testing, which was performed by internal personnel and independent third parties
in the second quarter of 1998. The Company is in the process of communicating
with others with whom it does significant business to determine their readiness
of Year 2000 compliance and during the third quarter of 1998 successfully
completed a validation process with a third-party reservation information
service provider with which the Company has a material relationship. The Company
is in the phase of assessing its hardware components at its central facilities,
all of which are expected to be modified or upgraded, as necessary, to ensure
Year 2000 compliance by the second quarter of 1999.
The Company has entered into a consulting agreement with an independent
third party to perform an inventory and assessment of all of its computerized
systems and applications for its gaming operations. This inventory and
assessment will determine the resources needed, necessary modifications or
upgrades, vendor Year 2000 compliance, remediation plan and the time frame for
the gaming operations to become Year 2000 compliant, and is expected to be
completed in 1998.
The Company has completed the initial assessment of the applications and
hardware at its owned, leased, managed and joint venture hotel properties. In
the third quarter of 1998, validation tools and resources were deployed to the
hotel properties. Once the test statistics for the hotel property applications
and hardware are collected, the information will be sent to an independent third
party for Year 2000 compliance verification. Based on the results of the
compliance verification, the company expects to address remediation efforts by
the third quarter of 1999.
Year 2000 Project Costs
The Company estimates that total costs for the Year 2000 compliance review,
evaluation, assessment and remediation efforts for the central facilities and
owned hotel and gaming properties should not exceed $20 million, although there
can be no assurance that actual costs will not exceed this amount. Of this
amount, $1.5 million had been expended as of September 30, 1998, and an
additional $3.5 million is expected to be spent in the remainder of 1998.
Starwood Year 2000 Risks
Since all major computerized central facilities reservation systems and
applications have been tested and reservations for the year 2000 have been
accepted, the Company believes that it has addressed all material risks related
to its reservation function. The remaining risks relate to the non-critical
business applications, support hardware for the central facilities and embedded
systems at the properties owned or managed by the Company. A failure of certain
of these systems to become Year 2000 compliant could disrupt the timeliness or
the accuracy of management information provided by the central facilities.
There can be no assurance that the efforts related to the gaming and hotel
properties will be sufficient to make these properties' computerized systems and
applications Year 2000 compliant in a timely manner or that the allocated
resources will be sufficient. A failure to become Year 2000 compliant could
affect the integrity of the gaming and hotel property guest check-in, billing
and accounting functions. Certain physical hotel property machinery and
equipment could also fail resulting in safety risks and customer
dissatisfaction. Additionally, failure of the gaming properties' systems to
become Year 2000 compliant could result in the inefficient processing of
operational gaming information and the malfunction of computerized gaming
machines.
The Company has asked substantially all of its significant vendors and
service providers to provide reasonable assurances as to those parties' Year
2000 state of readiness. Risk assessments and contingency plans, where required,
will be finalized in the first six months of 1999. To the extent that vendors
and service providers do not provide satisfactory evidence that their products
and services are Year 2000 compliant, the Company will seek to obtain the
necessary products and services from alternative sources. There can be no
assurance, however, that Year 2000 remediation by vendors and service providers
will be completed timely or
45
<PAGE> 47
that qualified replacement vendors and service providers will be available, and
any failure of such third parties' systems could have a material adverse impact
on the Company's computer systems and operations.
Contingency Plan
The Company is in the process of developing its contingency plan for the
central facilities and the gaming and hotel properties to provide for the most
reasonably likely worst case scenarios regarding Year 2000 compliance. This
contingency plan is expected to be completed in 1999.
EUROPEAN UNION CURRENCY CONVERSIONS
On January 1, 1999, 11 of the 15 member countries of the European Union
(the "Participating Countries") are scheduled to establish fixed conversion
rates between their existing sovereign currencies and the euro. Following the
introduction of the euro, the legacy currencies of the Participating Countries
will remain legal tender during a transition period ending on January 1, 2002.
During the transition period, both the legacy currency and the euro will be
legal tender in the respective Participating Countries. During the transition
period, currency conversions will be computed by a triangulation with reference
to conversion rates between the respective currencies and the euro. The Company
currently operates in ten of the 11 Participating Countries. The effect on the
Company of the adoption of the euro by the Participating Countries in which it
operates is currently uncertain. However, it is possible that the euro adoption
will result in increased competition in the European market. In addition, a
number of the Company's information systems are not currently euro compliant.
The Company is currently evaluating and updating its information systems to make
them euro compliant; however, there is no assurance that the Company or
third-party vendors of applications utilized by the Company will successfully
bring all of its systems into compliance by the beginning of the transition
period. Failure of the Company to do so could result in disruptions in the
processing of transactions in euros or computed by reference to the euro.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various claims and lawsuits arising in the
ordinary course of business, none of which, in the opinion of management, is
expected to have a material adverse effect on the Company's consolidated
financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In the third quarter of 1998, the Company sold put options for an aggregate
of one million Paired Shares to BT Alex.Brown Incorporated for an aggregate cash
price of $1.8 million. Each such option entitles the holder to sell to the
Company, at the option's expiration date, a specified number of Paired Shares at
a specified strike price. The expiration dates of these options ranged from
December 1998 through March 1999; the strike prices ranged from $31.11 to
$32.85. No underwriter was involved in these transactions. The offer and sale of
these options was exempt from registration under the Securities Act of 1933
pursuant to Section 4(2) thereof.
During the nine months ended September 30, 1998, the Trust consented to the
conversion of 1,360,403 shares of Class B EPS by certain stockholders into an
equal number of shares of Class A EPS; stockholders thereafter converted
2,889,106 shares of Class A EPS into an equal number of Paired Shares.
In the third quarter of 1998, the Company converted approximately 412,000
units of the Partnerships held by third parties into Paired Shares on a
one-for-one basis.
46
<PAGE> 48
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Restructuring dated as of September
16, 1998, among the Corporation, ST Acquisition Trust and
the Trust.
3.1 Declaration of Trust of the Trust, amended and restated as
of June 6, 1988, as amended through February 23, 1998
(incorporated by reference to Exhibit 3.1 to the Trust's and
the Corporation's Joint Annual Report on Form 10-K for the
year ended December 31, 1997 (the "1997 Form 10-K")).
3.2 Articles of Incorporation of the Corporation, amended and
restated as of February 1, 1995, as amended through March
19, 1998 (incorporated by reference to Exhibit 3.2 to the
1997 Form 10-K).
3.3 Amended and Restated Trustees' Regulations of the Trust, as
amended through June 25, 1998 (incorporated by reference to
Exhibit 3.3 to the Trust's and the Corporation's Joint
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998 (the "June 1998 Form 10-Q")).
3.4 Amended and Restated Bylaws of the Corporation, as amended
through June 25, 1998 (incorporated by reference to Exhibit
3.4 to the June 1998 Form 10-Q).
4.1 Pairing Agreement, dated June 25, 1986, between the Trust
and the Corporation (incorporated by reference to Exhibit
4.1 to the Trust's and the Corporation's Joint Annual Report
on Form 10-K for the year ended December 31, 1994).
4.2 Amendment No. 1 to the Pairing Agreement, dated as of
February 1, 1995, between the Trust and the Corporation
(incorporated by reference to Exhibit 4.2 to the Trust's and
the Corporation's Joint Annual Report on Form 10-K for the
year ended December 31, 1995).
4.3 Amendment No. 2 to the Pairing Agreement, dated as of
January 2, 1998, between the Trust and the Corporation
(incorporated by reference to Exhibit 4.3 to the 1997 Form
10-K).
10.1 Indemnification Agreement dated as of August 24, 1998,
between the Corporation and Thomas C. Janson, Jr., as
amended by Amendment Nos. 1 and 2 thereto.
10.2 Fifth Amendment to Credit Agreement dated as of August 26,
1998, among the Trust, Realty Partnership, the Corporation,
ITT, the lenders named therein, Bankers Trust Company and
the Chase Manhattan Bank, as Administrative Agents, and
Lehman Brothers and Bank of Montreal, as Syndication Agents.
10.3 Amended and Restated Senior Secured Note Agreement dated
August 27, 1998, among the Corporation, the Trust, the
guarantors listed therein, the lenders listed therein and
Lehman Commercial Paper Inc., as Arranger and Administrative
Agent, BT Alex.Brown Incorporated and Chase Securities Inc.,
as Syndication Agents.
10.4 Aircraft Dry Lease Agreement entered into as of February 6,
1998, between Star Flight, L.L.C. and ITT Flight Operation,
Inc., as amended by First Amendment thereto, dated as of
August 25, 1998.
27.1 Financial Data Schedule, Starwood Hotels & Resorts
Worldwide, Inc.
27.2 Financial Data Schedule, Starwood Hotels & Resorts.
</TABLE>
(b) REPORTS ON FORM 8-K
During the third quarter of 1998, the Trust and the Corporation filed a
Joint Current Report on Form 8-K dated August 26, 1998, reporting under Item 5
the approval by the Board of Trustees of the Trust and the Board of Directors of
the Corporation of a proposal to restructure the Trust and the Corporation.
47
<PAGE> 49
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.
<TABLE>
<S> <C>
STARWOOD HOTELS & RESORTS STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
/s/ BARRY STERNLICHT /s/ RONALD C. BROWN
- -------------------------------------------- --------------------------------------------
Barry Sternlicht Ronald C. Brown
Chairman and Chief Executive Officer Executive Vice President and
Chief Financial Officer
</TABLE>
Date: November 6, 1998
48
<PAGE> 50
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Restructuring dated as of September
16, 1998, among the Corporation, ST Acquisition Trust and
the Trust.
3.1 Declaration of Trust of the Trust, amended and restated as
of June 6, 1988, as amended through February 23, 1998
(incorporated by reference to Exhibit 3.1 to the Trust's and
the Corporation's Joint Annual Report on Form 10-K for the
year ended December 31, 1997 (the "1997 Form 10-K")).
3.2 Articles of Incorporation of the Corporation, amended and
restated as of February 1, 1995, as amended through March
19, 1998 (incorporated by reference to Exhibit 3.2 to the
1997 Form 10-K).
3.3 Amended and Restated Trustees' Regulations of the Trust, as
amended through June 25, 1998 (incorporated by reference to
Exhibit 3.3 to the Trust's and the Corporation's Joint
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998 (the "June 1998 Form 10-Q")).
3.4 Amended and Restated Bylaws of the Corporation, as amended
through June 25, 1998 (incorporated by reference to Exhibit
3.4 to the June 1998 Form 10-Q).
4.1 Pairing Agreement, dated June 25, 1986, between the Trust
and the Corporation (incorporated by reference to Exhibit
4.1 to the Trust's and the Corporation's Joint Annual Report
on Form 10-K for the year ended December 31, 1994).
4.2 Amendment No. 1 to the Pairing Agreement, dated as of
February 1, 1995, between the Trust and the Corporation
(incorporated by reference to Exhibit 4.2 to the Trust's and
the Corporation's Joint Annual Report on Form 10-K for the
year ended December 31, 1995).
4.3 Amendment No. 2 to the Pairing Agreement, dated as of
January 2, 1998, between the Trust and the Corporation
(incorporated by reference to Exhibit 4.3 to the 1997 Form
10-K).
10.1 Indemnification Agreement dated as of August 24, 1998,
between the Corporation and Thomas C. Janson, Jr., as
amended by Amendment Nos. 1 and 2 thereto.
10.2 Fifth Amendment to Credit Agreement dated as of August 26,
1998, among the Trust, Realty Partnership, the Corporation,
ITT, the lenders named therein, Bankers Trust Company and
the Chase Manhattan Bank, as Administrative Agents, and
Lehman Brothers and Bank of Montreal, as Syndication Agents.
10.3 Amended and Restated Senior Secured Note Agreement dated
August 27, 1998, among the Corporation, the Trust, the
guarantors listed therein, the lenders listed therein and
Lehman Commercial Paper Inc., as Arranger and Administrative
Agent, BT Alex.Brown Incorporated and Chase Securities Inc.,
as Syndication Agents.
10.4 Aircraft Dry Lease Agreement entered into as of February 6,
1998, between Star Flight, L.L.C. and ITT Flight Operation,
Inc., as amended by First Amendment thereto, dated as of
August 25, 1998.
27.1 Financial Data Schedule, Starwood Hotels & Resorts
Worldwide, Inc.
27.2 Financial Data Schedule, Starwood Hotels & Resorts.
</TABLE>
49
<PAGE> 1
EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF RESTRUCTURING
AMONG
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
ST ACQUISITION TRUST
AND
STARWOOD HOTELS & RESORTS
DATED AS OF SEPTEMBER 16, 1998
<PAGE> 2
AGREEMENT AND PLAN OF RESTRUCTURING
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I.....................................................................2
THE MERGER...........................................................2
Section 1.1 The Merger.........................................2
Section 1.2 Effective Time.....................................2
Section 1.3 Effects of the Merger..............................2
Section 1.4 Charter and Bylaws; Trustees and Officers..........2
Section 1.5 Conversion of Securities...........................3
Section 1.6 Parent to Make Certificates Available;
Transfer Taxes.....................................3
Section 1.7 Dividends..........................................4
Section 1.8 Return of Exchange Fund............................5
Section 1.9 No Further Ownership Rights in Trust Shares........5
Section 1.10 Closing of Company Transfer Books..................5
Section 1.11 Lost Certificates..................................5
Section 1.12 Further Assurances.................................6
Section 1.13 Closing............................................6
ARTICLE II....................................................................6
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.....................6
Section 2.1 Organization, Standing and Power...................6
Section 2.2 Capital Structure..................................7
Section 2.3 Authority..........................................8
Section 2.4 Consents and Approvals; No Violation...............9
Section 2.5 SEC Documents and Other Reports...................10
Section 2.6 Registration Statement and Joint Proxy
Statement.........................................11
Section 2.7 Absence of Certain Changes or Events..............11
Section 2.8 Permits and Compliance............................12
Section 2.9 Tax Matters.......................................12
Section 2.10 Actions and Proceedings...........................13
Section 2.11 Compliance with Worker Safety and
Environmental Laws................................14
Section 2.12 Intellectual Property.............................14
Section 2.13 Required Vote of Parent Stockholders..............15
Section 2.14 State Takeover Statutes...........................15
ARTICLE III..................................................................15
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................15
Section 3.1 Organization, Standing and Power..................15
Section 3.2 Capital Structure.................................16
Section 3.3 Authority.........................................16
Section 3.4 Consents and Approvals; No Violation..............17
Section 3.5 SEC Documents and Other Reports...................18
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<PAGE> 3
AGREEMENT OF PLAN AND MERGER
TABLE OF CONTENTS
SECTION PAGE
Section 3.6 Registration Statement and Joint Proxy
Statement........................................18
Section 3.7 Absence of Certain Changes or Events.............19
Section 3.8 Permits and Compliance...........................19
Section 3.9 Tax Matters......................................20
Section 3.10 Actions and Proceedings..........................21
Section 3.11 Compliance with Worker Safety and
Environmental Laws...............................21
Section 3.12 Intellectual Property............................21
Section 3.13 Required Vote of Company Shareholders............22
Section 3.14 State Takeover Statutes..........................22
ARTICLE IV..................................................................22
COVENANTS RELATING TO CONDUCT OF BUSINESS..........................22
Section 4.1 Conduct of Business by the Company Pending
the Merger.......................................22
Section 4.2 Conduct of Business by Parent Pending the
Merger...........................................22
ARTICLE V...................................................................23
ADDITIONAL AGREEMENTS..............................................23
Section 5.1 Stockholder Meetings.............................23
Section 5.2 Preparation of the Registration Statement
and the Joint Proxy Statement....................23
Section 5.3 Actions Prior to Closing.........................24
Section 5.4 Compliance with the Securities Act...............24
Section 5.5 Stock Exchange Listings..........................24
Section 5.6 Stock Options....................................24
Section 5.7 Reasonable Best Efforts..........................25
Section 5.8 Public Announcements.............................25
Section 5.9 Real Estate Transfer and Gains Tax...............25
Section 5.10 State Takeover Laws..............................26
Section 5.11 Indemnification..................................26
Section 5.12 Notification of Certain Matters..................26
Section 5.13 Employee Benefit Plans and Agreements............26
ARTICLE VI..................................................................27
CONDITIONS PRECEDENT TO THE MERGER.................................27
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger................................27
Section 6.2 Conditions to Obligation of the Company to
Effect the Merger................................28
Section 6.3 Conditions to Obligations of Parent and Sub
to Effect the Merger.............................28
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<PAGE> 4
AGREEMENT OF PLAN AND MERGER
TABLE OF CONTENTS
SECTION PAGE
ARTICLE VII................................................................29
TERMINATION, AMENDMENT AND WAIVER.................................29
Section 7.1 Termination.....................................29
Section 7.2 Effect of Termination...........................30
Section 7.3 Amendment.......................................30
Section 7.4 Waiver..........................................30
ARTICLE VIII...............................................................30
GENERAL PROVISIONS................................................30
Section 8.1 Non-Survival of Representations and
Warranties......................................30
Section 8.2 Notices.........................................31
Section 8.3 Interpretation..................................31
Section 8.4 Counterparts....................................32
Section 8.5 Entire Agreement; No Third-Party
Beneficiaries...................................32
Section 8.6 Governing Law...................................32
Section 8.7 Assignment......................................32
Section 8.8 Severability....................................32
Section 8.9 Enforcement of this Agreement...................32
Section 8.10 Trust...........................................33
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<PAGE> 5
AGREEMENT AND PLAN OF RESTRUCTURING
AGREEMENT AND PLAN OF RESTRUCTURING dated as of September 16,
1998 (this "Agreement"), among Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation ("Parent"), ST Acquisition Trust, a Maryland real estate
investment trust and a wholly owned subsidiary of Parent ("Sub"), and Starwood
Hotels & Resorts, a Maryland real estate investment trust (the "Company") (Sub
and the Company being hereinafter collectively referred to as the "Constituent
Trusts").
W I T N E S S E T H:
WHEREAS the Board of Directors of Parent and the respective
Boards of Trustees of Sub and of the Company have approved and declared
advisable the merger of Sub and the Company (the "Merger"), upon the terms and
subject to the conditions set forth herein, whereby each issued and outstanding
common share of beneficial interest, par value $0.01 per share, of the Company
("Trust Shares") not owned directly or indirectly by Parent or the Company will
be converted into Class B shares of beneficial interest, par value $.01 per
share, in the Surviving Trust (as hereinafter defined), having substantially the
terms specified in the Declaration of Trust of the Trust as it is proposed to be
amended and restated at the Effective Time (as hereinafter defined) pursuant to
Section 1.4 hereof or as otherwise agreed to by the parties ("Class B Shares");
WHEREAS the Board of Directors of Parent and the Board of
Trustees of the Company have determined that the Merger is in furtherance of and
consistent with their respective long-term business strategies and is in the
best interest of their respective stockholders or shareholders, as the case may
be; and
WHEREAS for federal income tax purposes, it is intended that
the Merger shall qualify in part as a recapitalization within the meaning of
Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the
"Code"), and in part as a contribution by the holders of Trust Shares to the
capital of Parent in a transaction qualifying under Section 351(a) of the Code.
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained, the parties agree
as follows:
<PAGE> 6
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the Maryland General Corporation Law,
as amended (the "MGCL"), Sub shall be merged with and into the Company at the
Effective Time (as hereinafter defined). Following the Merger, the separate
trust existence of Sub shall cease and the Company shall continue as the
surviving trust (the "Surviving Trust") and shall succeed to and assume all the
rights and obligations of Sub in accordance with the MGCL.
Section 1.2 Effective Time. The Merger shall become effective
when Articles of Merger (the "Articles of Merger"), executed in accordance with
the relevant provisions of the MGCL, are filed with and accepted for record by
the State Department of Assessments and Taxation of Maryland; provided, however,
that, upon mutual consent of the Constituent Trusts, the Articles of Merger may
provide for a later date of effectiveness of the Merger not more than 30 days
after the date the Articles of Merger are filed and accepted for record. When
used in this Agreement, the term "Effective Time" shall mean the date and time
at which the Articles of Merger are accepted for record or such later time
provided for by the Articles of Merger. The filing of the Articles of Merger
shall be made on the date of the Closing (as defined in Section 1.13).
Section 1.3 Effects of the Merger. The Merger shall have the
effects set forth in Section 8-501.1(n) of the MGCL and this Agreement.
Section 1.4 Charter and Bylaws; Trustees and Officers. (a) At
the Effective Time, the Declaration of Trust of the Company shall be amended and
restated in its entirety to read as set forth on Exhibit 1.4 hereto or as
otherwise agreed to by the parties hereto, and such Declaration of Trust, as so
amended and restated, shall be the Declaration of Trust of the Surviving Trust
until thereafter changed or amended as provided therein or by applicable law. At
the Effective Time, the Trustees' Regulations of the Company, as in effect
immediately prior to the Effective Time, shall be the Trustees' Regulations of
the Surviving Trust until thereafter changed or amended as provided therein or
by the Declaration of Trust of the Surviving Trust.
(b) The trustees of the Company at the Effective Time of the
Merger shall be the trustees of the Surviving Trust until the next annual
meeting of shareholders and until their respective successors are duly elected
and qualified, as the case may be, subject to their earlier resignation or
removal. The officers of the Company at the Effective Time of the Merger shall
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<PAGE> 7
be the officers of the Surviving Trust until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
Section 1.5 Conversion of Securities. As of the Effective
Time, by virtue of the Merger and without any action on the part of Sub, the
Company or the holders of any securities of the Constituent Trusts:
(a) Each issued and outstanding common share of beneficial
interest, par value $.01 per share, of Sub shall be converted into one validly
issued, fully paid and nonassessable Class A share of beneficial interest, par
value $.01 per share, of the Surviving Trust ("Class A Shares").
(b) All Trust Shares that have been acquired by the Company or
by any wholly owned Subsidiary (as defined in Section 2.1) of the Company and
any Trust Shares owned by Parent or any wholly owned Subsidiary of Parent shall
no longer be outstanding and shall automatically be cancelled and restored to
the status of authorized and unissued shares of beneficial interest and no
shares of beneficial interest of the Company or other consideration shall be
delivered in exchange therefor.
(c) Each Trust Share issued and outstanding immediately prior
to the Effective Time (other than shares to be cancelled in accordance with
Section 1.5(b)) shall be converted into one validly issued, fully paid and
nonassessable Class B Share.
(d) Each Trust Share (other than shares to be cancelled in
accordance with Section 1.5(b)), when converted as provided in Section 1.5(c),
shall no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each holder of a Certificate (as defined in
Section 1.6(b)) theretofore evidencing any such shares shall cease to have any
rights with respect thereto, except the right to receive, upon the surrender of
such Certificate in accordance with Section 1.6, certificates evidencing the
Class B Shares (as well as the shares of common stock, par value $0.01 per share
("Parent Common Stock"), of Parent associated therewith pursuant to the Pairing
Agreement (as hereinafter defined) and Article VI, Section 6.14 of the Company's
Declaration of Trust) into which such shares are converted pursuant to Section
1.5(c).
Section 1.6 Parent to Make Certificates Available; Transfer
Taxes. (a) Parent shall authorize such person or persons as shall be acceptable
to Parent and the Company to act as Exchange Agent hereunder (the "Exchange
Agent"). As soon as practicable after the Effective Time, the Surviving Trust
and Parent shall deposit with the Exchange Agent, in trust for the holders of
Trust Shares converted in the Merger and the shares of Parent Common Stock
evidenced by the Certificates (as hereinafter
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<PAGE> 8
defined), certificates evidencing the Class B Shares issuable pursuant to
Section 1.5(c) and the shares of Parent Common Stock evidenced by Certificates
to be surrendered pursuant to this Article I (such Class B Shares being
hereinafter referred to as the "Exchange Fund"). As soon as practicable after
the Effective Time, the Exchange Agent shall deliver the Class B Shares
contemplated to be issued pursuant to Section 1.5(c) out of the Exchange Fund as
contemplated hereby. As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each record holder of a certificate or certificates
which immediately prior to the Effective Time evidenced outstanding Trust Shares
converted in the Merger and shares of Parent Common Stock (the "Certificates")
(A) a letter of transmittal in form reasonably acceptable to the Company and
Parent (which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon actual delivery of the
Certificates to the Exchange Agent) and (B) instructions for use in effecting
the surrender of the Certificates.
(b) Upon surrender for cancellation to the Exchange Agent of a
Certificate, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate evidencing that number of whole Class B Shares into which the Trust
Shares evidenced by the surrendered Certificate shall have been converted at the
Effective Time pursuant to this Article I and that number of shares of Parent
Common Stock evidenced by the surrendered Certificate, and any Certificate so
surrendered shall forthwith be cancelled. Each Class B Share into which a Trust
Share shall be converted shall be deemed to have been issued at the Effective
Time. If any certificate evidencing Class B Shares and shares of Parent Common
Stock or cash or other property is to be issued or delivered in a name other
than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates for
such Class B Shares and shares of Parent Common Stock in a name other than that
of the registered holder of the Certificate surrendered, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
Section 1.7 Dividends. Subject to the effect of applicable
law, all dividends or other distributions that are declared on or after the
Effective Time on Class B Shares, or are payable to the holders of record
thereof on or after the Effective Time, will be paid, at the appropriate payment
date or as promptly as practicable thereafter, (i) in the case of Class B Shares
for which certificates have already been issued, to the holders of record of
such Class B Shares as of the record date(s)
-4-
<PAGE> 9
established for such dividends or distributions, or (ii) in the case of Class B
Shares for which certificates have not been issued, to the holder of record of
the Certificate(s) evidencing the Trust Shares converted into such Class B
Shares in the Merger. In no event shall the person entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions.
Section 1.8 Return of Exchange Fund. Any portion of the
Exchange Fund that remains undistributed to the former shareholders of the
Company for six months after the Effective Time shall be delivered to Parent and
any such former shareholders who have not theretofore complied with this Article
I shall thereafter look only to Parent for payment of their claim for Class B
Shares. Neither Parent nor the Surviving Trust shall be liable to any former
holder of Trust Shares for any such Class B Shares that are delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 1.9 No Further Ownership Rights in Trust Shares. All
Class B Shares issued upon the surrender for exchange of Certificates in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to the Trust Shares evidenced by such
Certificates, subject, however, to the Surviving Trust's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such Trust
Shares and which remain unpaid at the Effective Time.
Section 1.10 Closing of Company Transfer Books. At the
Effective Time, the transfer books for the Trust Shares shall be closed and no
transfer of Trust Shares shall thereafter be made on the records of the Company.
If, after the Effective Time, Certificates are presented to the Surviving Trust,
the Exchange Agent or Parent, such Certificates shall be cancelled and exchanged
as provided in this Article I.
Section 1.11 Lost Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Trust, Parent or the Exchange Agent, the posting by
such person of a bond, in such reasonable amount as the Surviving Trust, Parent
or the Exchange Agent may direct as indemnity against any claim that may be made
against them with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Class B Shares
issuable pursuant to Section 1.5(c) and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.7.
-5-
<PAGE> 10
Section 1.12 Further Assurances. If at any time after the
Effective Time the Surviving Trust shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Trust its right, title or interest in, to or under
any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Trusts or (b) otherwise to carry out the purposes of
this Agreement, the Surviving Trust and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Trusts, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Trust, all such other acts and things as may be necessary, desirable
or proper to vest, perfect or confirm the Surviving Trust's right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Trust and otherwise to carry out the
purposes of this Agreement.
Section 1.13 Closing. The closing of the Merger (the
"Closing") and all actions contemplated by this Agreement to occur at the
Closing shall take place at the offices of Sidley & Austin, 875 Third Avenue,
New York, New York, at 10:00 a.m., local time, on the later of (i) January 5,
1999 or (ii) the second business day following the day on which the last of the
conditions set forth in Article VI shall have been fulfilled or waived or at
such other time and place as Parent and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
Section 2.1 Organization, Standing and Power. Each of Parent
and Sub is a corporation or a real estate investment trust, as the case may be,
duly organized, validly existing and in good standing under the laws of Maryland
and has the requisite power and authority to carry on its business as now being
conducted. All of Sub's outstanding shares of beneficial interest are owned
directly by Parent. Each Subsidiary (as hereinafter defined) of Parent is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate (in the
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power or authority,
individually or in
-6-
<PAGE> 11
the aggregate, has not had, and would not reasonably be expected to have, a
Material Adverse Effect (as hereinafter defined) on Parent. Parent and each of
its Subsidiaries are duly qualified to do business, and are in good standing, in
each jurisdiction where the character of their properties owned or held under
lease or the nature of their activities makes such qualification necessary,
except where the failure to be so qualified, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect on Parent.
For purposes of this Agreement, any reference to any state of
facts, event, change or effect having a "Material Adverse Effect" on or with
respect to Parent or the Company, as the case may be, means such state of facts,
event, change or effect which has had or would reasonably be expected to have, a
materially adverse effect on the business, properties, results of operations or
financial condition of Parent and its Subsidiaries, taken as a whole, or the
Company and its Subsidiaries, taken as a whole, as the case may be. For purposes
of this Agreement, "Subsidiary" means any corporation, partnership, limited
liability company, joint venture or other legal entity of which Parent or the
Company, as the case may be (either alone or through or together with any other
Subsidiary), (i) owns, directly or indirectly, more than 50% of the stock or
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation, partnership, limited liability company, joint venture or other
legal entity, (ii) is the general partner, trustee or other entity performing
similar functions or (iii) owns, directly or indirectly, stock or other equity
interests representing more than 50% of the economic interests of such
corporation, partnership, limited liability company, joint venture or other
legal entity.
Section 2.2 Capital Structure. At the date hereof, the
authorized stock of Parent consists of (i) 1,000,000,000 shares of Parent Common
Stock, (ii) 200,000,000 shares of preferred stock, par value $0.01 per share
(the "Parent Preferred Stock"), (iii) 50,000,000 shares of excess common stock,
par value $0.01 per share ("Parent Excess Common Stock"), and (iv) 100,000,000
shares of excess preferred stock, par value $0.01 per share ("Parent Excess
Preferred Stock"). At the close of business on August 15, 1998, 188,569,988
shares of Parent Common Stock were issued and outstanding and no shares of
Parent Preferred Stock, Parent Excess Common Stock or Parent Excess Preferred
Stock were outstanding. All the outstanding shares of Parent Common Stock are
validly issued, fully paid and nonassessable and free of preemptive rights. As
of the date of this Agreement, except as otherwise previously disclosed by
Parent to the Company, and except for (a) stock options issued pursuant to the
Incentive and Non-Qualified Shares Option Plan
-7-
<PAGE> 12
(1986) of the Company, the Corporation Stock Non-Qualified Stock Option Plan
(1986) of the Company, the Stock Option Plan (1986) of Parent, the Trust Shares
Option Plan (1986) of Parent, the 1995 Long-Term Incentive Plan of the Company
and the 1995 Long-Term Incentive Plan of Parent (collectively, the "Starwood
Stock Plans") covering not in excess of 19,529,390 shares of Parent Common Stock
(collectively, the "Parent Stock Options"), (b) 11,899,314 shares of Parent
Common Stock issuable upon the exchange of units ("SLT Units") in SLT Realty
Limited Partnership (the "Realty Partnership") and units ("SLC Units") in SLC
Operating Limited Partnership (the "Operating Partnership") and (c) 5,519,380
shares of Parent Common Stock issuable pursuant to the Forward Purchase Contract
dated as of October 13, 1997 (the "Forward Purchase Contract") with an affiliate
of Union Bank of Switzerland or certain similar forward purchase contracts,
there are no options, warrants, calls, rights or agreements to which Parent is a
party or by which it is bound obligating Parent to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of stock of Parent or
obligating Parent to grant, extend or enter into any such option, warrant, call,
right or agreement. At the date hereof, the total number of shares of beneficial
interest which Sub has authority to issue is 1,000, consisting of 1,000 Common
Shares, $0.01 par value per share ("Sub Shares"). At the close of business on
September 15, 1998, 100 Sub Shares were issued and outstanding. All the
outstanding Sub Shares are validly issued, fully paid and nonassessable and free
of preemptive rights. As of the date of this Agreement, there are no options,
warrants, calls, rights or agreements to which Sub is a party or by which it is
bound obligating Sub to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of beneficial interest in Sub or obligating Sub to
grant, extend or enter into any such option, warrant, call, right or agreement.
All the Class B Shares issuable in exchange for Trust Shares at the Effective
Time in accordance with this Agreement will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights.
Section 2.3 Authority. The Board of Directors of Parent and
the Board of Trustees of Sub have duly approved and adopted this Agreement. The
Board of Directors of Parent has declared advisable the amendment and
restatement of the Pairing Agreement, dated as of June 25, 1980, as amended (the
"Pairing Agreement"), between Parent and the Company to read in its entirety as
set forth on Exhibit 2.3 hereto or as otherwise agreed to by the parties (the
"Pairing Agreement Amendment and Restatement"). The Board of Directors of Parent
has resolved to recommend the approval of the Pairing Agreement Amendment and
Restatement by its stockholders. Each of Parent and Sub has all requisite power
and authority to enter into this Agreement, and, subject to approval by the
stockholders of Parent of the Pairing Agreement Amendment and Restatement, to
consummate the
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<PAGE> 13
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of Parent and Sub, subject to approval by the stockholders of Parent of the
Pairing Agreement Amendment and Restatement. This Agreement has been duly
executed and delivered by Parent and Sub and (assuming the valid authorization,
execution and delivery of this Agreement by the Company and the validity and
binding effect hereof on the Company) constitutes the valid and binding
obligation of Parent and Sub enforceable against each of them in accordance with
its terms. The Pairing Agreement Amendment and Restatement has been duly
authorized by Parent's Board of Directors.
Section 2.4 Consents and Approvals; No Violation. Assuming
that all consents, approvals, authorizations and other actions described in this
Section 2.4 have been obtained and all filings and obligations described in this
Section 2.4 have been made, and except as otherwise previously disclosed by
Parent to the Company, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default or loss of a
material benefit (with or without notice or lapse of time, or both) under, or
give to others a right of termination, cancellation or acceleration of any
obligation under, or result in the creation of any security interests, liens,
claims, pledges, mortgages, options, rights of first refusal, agreements,
charges or other encumbrances of any nature whatsoever (each, a "Lien") upon any
of the properties, assets or operations of Parent or any of its Subsidiaries
under, any provision of (i) the charter or the Amended and Restated Bylaws of
Parent, (ii) any provision of the comparable charter or organizational documents
of any of Parent's Subsidiaries, (iii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent or any of its Subsidiaries or (iv) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or any of its Subsidiaries or any of their respective properties,
assets or operations other than, in the case of clauses (ii), (iii) or (iv), any
such violations, defaults, losses, rights or Liens that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Parent, materially impair the ability of Parent or Sub to perform their
respective obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any domestic (federal or state), foreign
or supranational court, commission, governmental body, regulatory agency,
authority or tribunal (a "Governmental Entity") is required by or with respect
to Parent or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by Parent or Sub or is necessary for
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the consummation of the Merger and the other transactions contemplated by this
Agreement, except (i) in connection, or in compliance, with the provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act of 1933, as amended (together with the rules and
regulations promulgated thereunder, the "Securities Act"), and the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "Exchange Act"), (ii) the filing and acceptance for
record of the Articles of Merger with and by the State Department of Assessments
and Taxation of Maryland and appropriate documents with the relevant authorities
of other states in which Parent, the Company or any of their respective
Subsidiaries is qualified to do business, (iii) such filings and consents as may
be required under any environmental, health or public or worker safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or by the transactions contemplated by this Agreement,
(iv) such filings as may be required in connection with the taxes described in
Section 5.9, (v) applicable requirements, if any, of state securities or "blue
sky" laws ("Blue Sky Laws") and The New York Stock Exchange, Inc. (the "NYSE"),
(vi) as may be required under foreign laws, (vii) filings with and approvals by
any regulatory authority with jurisdiction over Parent's and/or its
Subsidiaries' gaming operations required under any Federal, state, local or
foreign statute, ordinance, rule, regulation, permit, consent, approval,
license, judgment, order, decree, injunction or other authorization governing or
relating to the current or contemplated casino and gaming activities and
operations of the Company, including the New Jersey Casino Control Act and the
rules and regulations promulgated thereunder, the Nevada Gaming Control Act and
the rules and regulations promulgated thereunder, the Mississippi Gaming Control
Act and the rules and regulations promulgated thereunder, the Clark County
governmental authorities and the rules and regulations promulgated thereby, the
Indiana Gaming Control Act and the rules and regulations promulgated thereunder,
the Nova Scotia Gaming Control Act and the rules and regulations promulgated
thereunder, and the Ontario-Gaming Control Act and the rules and regulations
promulgated thereunder (collectively, the "Gaming Laws"), (viii) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings as Parent has previously disclosed to the Company and (ix) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on Parent,
materially impair the ability of Parent or Sub to perform its respective
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 2.5 SEC Documents and Other Reports. Parent has filed
all required documents with the SEC since January 1,
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1998 (the "Parent SEC Documents"). As of their respective dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 2.6 Registration Statement and Joint Proxy Statement.
None of the information to be supplied by Parent or Sub for inclusion or
incorporation by reference in the Registration Statement or the joint proxy
statement/prospectus included therein (together with any amendments or
supplements thereto, the "Joint Proxy Statement") relating to the Stockholder
Meetings (as defined in Section 5.1) will (i) in the case of the Registration
Statement, at the time it becomes effective and at the Effective Time, contain
any untrue statement of a material fact or 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 are made, not misleading
or (ii) in the case of the Joint Proxy Statement, at the time of the mailing of
the Joint Proxy Statement and at the time of each of the Stockholder Meetings,
contain any untrue statement of a material fact or 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 are made, not
misleading. If at any time prior to the Effective Time any event with respect to
Parent, its officers and directors or any of its Subsidiaries shall occur that
is required to be described in the Joint Proxy Statement or the Registration
Statement, such event shall be so described, and an appropriate amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of Parent and shareholders of the Company. The
Joint Proxy Statement will comply (with respect to Parent) as to form in all
material respects with the provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as
disclosed in Parent SEC Documents filed prior to the date of this Agreement,
since December 31, 1997, (A) Parent and its Subsidiaries have not sustained any
loss or interference with their business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance)
that, individually or in the aggregate, has had, or would reasonably be expected
to have, a Material Adverse Effect on Parent and (B) there have not been any
events, changes or developments that, individually or in the aggregate, have
had, or would reasonably be expected to have, a Material Adverse Effect on
Parent.
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Section 2.8 Permits and Compliance. Each of Parent and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for Parent or any of
its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Parent Permits"), except where the
failure to have any of the Parent Permits, individually or in the aggregate, has
not had, and would not reasonably be expected to have, a Material Adverse Effect
on Parent, and, as of the date of this Agreement, no suspension or cancellation
of any of the Parent Permits is pending or, to the Knowledge of Parent (as
hereinafter defined), threatened, except where the suspension or cancellation of
any of the Parent Permits, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect on Parent.
Neither Parent nor any of its Subsidiaries is in violation of (A) its charter,
by-laws or other organizational documents, (B) any applicable law, ordinance,
administrative or governmental rule or regulation or (C) any order, decree or
judgment of any Governmental Entity having jurisdiction over Parent or any of
its Subsidiaries, except, in the case of clauses (A), (B) and (C), for any
violations that, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect on Parent. Except as
disclosed in the Parent SEC Documents filed prior to the date of this Agreement,
as of the date hereof, there is no contract or agreement that is material to the
business, properties, results of operations or financial condition of Parent and
its Subsidiaries, taken as a whole. No event of default or event that, but for
the giving of notice or the lapse of time or both, would constitute an event of
default exists under any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any lease, contractual license or other
agreement or instrument to which Parent or any of its Subsidiaries is a party or
by which Parent or any such Subsidiary is bound or to which any of the
properties, assets or operations of Parent or any such Subsidiary is subject,
other than any defaults that, individually or in the aggregate, have not had,
and would not reasonably be expected to have, a Material Adverse Effect on
Parent. For purposes of this Agreement, the term "Knowledge" when used with
respect to Parent means the actual knowledge of the senior executive officers of
Parent.
Section 2.9 Tax Matters. Except as otherwise previously
disclosed by Parent to the Company, (i) Parent and each of its Subsidiaries have
filed all material federal, state, local, foreign and provincial Tax Returns
required to have been filed on or prior to the date hereof, or appropriate
extensions therefor have been properly obtained, and such Tax Returns are
correct and complete, except to the extent that any failure to so
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<PAGE> 17
file or any failure to be correct and complete, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a Material
Adverse Effect on Parent; (ii) all Taxes shown to be due on such Tax Returns
have been timely paid or extensions for payment have been properly obtained, or
such Taxes (as defined below) are being timely and properly contested; (iii)
Parent and each of its Subsidiaries have complied in all material respects with
all rules and regulations relating to the withholding of Taxes except to the
extent that any failure to comply with such rules and regulations, individually
or in the aggregate, has not had, and would not reasonably be expected to have,
a Material Adverse Effect on Parent; (iv) neither Parent nor any of its
Subsidiaries has waived any statute of limitations in respect of its federal,
state, local, foreign or provincial income or franchise Taxes, except to the
extent that any such waiver, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect on Parent;
(v) all federal income Tax Returns referred to in clause (i) for all years
through 1994 have been examined by and settled with the Internal Revenue Service
or the period for assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired; (vi) no material issues that have been
raised in writing by the relevant taxing authority in connection with the
examination of the Tax Returns referred to in clause (i) are currently pending;
and (vii) all material deficiencies asserted or material assessments made as a
result of any examination of such Tax Returns referred to in clause (i) by any
taxing authority have been paid in full or are being timely and properly
contested. For purposes of this Agreement: (i) "Taxes" means any federal, state,
local, foreign or provincial income, gross receipts, property, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or add
on minimum, ad valorem, value-added, transfer or excise tax, or other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty imposed by any Governmental
Entity, and (ii) "Tax Return" means any return, report or similar statement
(including the attached schedules) required to be filed with respect to any Tax,
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
Section 2.10 Actions and Proceedings. Except as set forth in
the Parent SEC Documents filed prior to the date of this Agreement, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving Parent or any of its Subsidiaries, or
against or involving any of the directors, officers or employees of Parent or
any of its Subsidiaries, as such, or any of its or their properties, assets or
business that, individually or in the aggregate, have had, or would reasonably
be expected to have, a Material Adverse Effect on Parent. As of the date of this
Agreement, there are no actions, suits or claims or legal,
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<PAGE> 18
administrative or arbitrative proceedings or investigations pending or, to the
Knowledge of Parent, threatened against or involving Parent or any of its
Subsidiaries or any of their directors, officers or employees, as such, or any
of its or their properties, assets or business that, individually or in the
aggregate, have had, or would reasonably be expected to have, a Material Adverse
Effect on Parent. As of the date hereof, there are no actions, suits, labor
disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of Parent, threatened
against or affecting Parent or any of its Subsidiaries or any of their officers,
directors or employees, as such, or any of their properties, assets or business
relating to the transactions contemplated by this Agreement.
Section 2.11 Compliance with Worker Safety and Environmental
Laws. The properties, assets and operations of Parent and its Subsidiaries are
in compliance with all applicable federal, state, local and foreign laws, rules
and regulations, orders, decrees, judgments, permits and licenses relating to
public and worker health and safety (collectively, "Worker Safety Laws") and the
protection and clean-up of the environment and activities or conditions related
thereto, including, without limitation, those relating to the generation,
handling, disposal, transportation or release of hazardous materials
(collectively, "Environmental Laws"), except for any violations that,
individually or in the aggregate, have not had, or would not reasonably be
expected to have, a Material Adverse Effect on Parent. With respect to such
properties, assets and operations, including any previously owned, leased or
operated properties, assets or operations, there are no events, conditions,
circumstances, activities, practices, incidents, actions or plans of Parent or
any of its Subsidiaries that may interfere with or prevent compliance or
continued compliance with applicable Worker Safety Laws and Environmental Laws,
other than any such interference or prevention that, individually or in the
aggregate, has not had, or would not reasonably be expected to have, a Material
Adverse Effect on Parent.
Section 2.12 Intellectual Property. Parent and its
Subsidiaries own or have the right to use all patents, trademarks, trade names,
service marks, trade secrets, copyrights and other proprietary intellectual
property rights (collectively, "Intellectual Property Rights") as are necessary
in connection with the business of Parent and its Subsidiaries, taken as a
whole, except where the failure to have such Intellectual Property Rights has
not had, and would not reasonably be expected to have, a Material Adverse Effect
on Parent. Neither Parent nor any of its Subsidiaries has infringed any
Intellectual Property Rights of any third party other than any infringements
that, individually or in the aggregate, have not had, and would not
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<PAGE> 19
reasonably be expected to have, a Material Adverse Effect on Parent.
Section 2.13 Required Vote of Parent Stockholders. The
affirmative vote of a majority of the outstanding shares of Parent Common Stock
is required to approve the Pairing Agreement Amendment and Restatement. No other
vote of the stockholders of Parent is required by law, the NYSE, the charter or
the Amended and Restated By-Laws of Parent or otherwise in order for Parent to
consummate the Merger and the transactions contemplated hereby.
Section 2.14 State Takeover Statutes. The Board of Directors
of Parent has, to the extent such statutes are applicable, taken all action
(including appropriate approvals of the Board of Directors of Parent) necessary
to exempt Parent, its Subsidiaries and affiliates, the Merger, this Agreement
and the transactions contemplated hereby from Sections 3-601 through 3- 603 and
Sections 3-701 through 3-709 of the MGCL or to satisfy the requirements thereof.
To the Knowledge of Parent, no other state takeover statutes are applicable to
the Merger, this Agreement and the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
Section 3.1 Organization, Standing and Power. The Company is a
real estate investment trust duly organized, validly existing and in good
standing under the laws of the State of Maryland and has the requisite trust
power and authority to carry on its business as now being conducted. Each
Subsidiary of the Company is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite corporate (in the case of a Subsidiary that is a corporation) or other
power and authority to carry on its business as now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power or authority, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect on the
Company. The Company and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company.
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<PAGE> 20
Section 3.2 Capital Structure. As of the date hereof, the
authorized beneficial interest of the Company consists of (i) 1,000,000,000
Trust Shares, (ii) 200,000,000 Excess Trust Shares, par value $0.01 per share
("Excess Trust Shares"), (iii) 100,000,000 Trust Preferred Shares, par value
$0.01 per share ("Trust Preferred Shares"), and (iv) 50,000,000 Excess Preferred
Shares, par value $0.01 per share ("Excess Trust Preferred Shares"). Pursuant to
Exhibit A to Articles of Merger dated January 2, 1998, 30,000,000 shares of
beneficial interest were classified and designated as Class A Exchangeable
Preferred Shares, par value $0.01 per share ("Class A EPS"), and 15,000,000
shares of beneficial interest were classified and designated as Class B
Exchangeable Preferred Shares, par value $0.01 per share ("Class B EPS"). At the
close of business on August 15, 1998, (i) 188,569,988 Trust Shares were issued
and outstanding, (ii) 4,901,261 shares of Class A EPS were issued and
outstanding and (iii) 4,405,126 shares of Class B EPS were issued and
outstanding and (iv) no excess Trust Shares or Excess Trust Preferred Shares
were outstanding. All the outstanding Trust Shares, Class A EPS and Class B EPS
are validly issued, fully paid and non-assessable and free of preemptive rights.
As of the date of this Agreement, except as otherwise previously disclosed by
the Company to Parent, and except for (a) this Agreement, (b) stock options
issued pursuant to the Starwood Stock Plans covering not in excess of 19,529,390
Trust Shares (collectively, the "Company Stock Options"), (c) 16,800,575 Trust
Shares issuable upon the exchange of SLT Units, SLC Units and Class A EPS, (d)
4,405,126 Class A EPS issuable upon the conversion of Class B EPS, (e) 783,050
Class B EPS issuable upon the exchange of SLT Units and SLC Units and (f)
5,519,380 Trust Shares issuable pursuant to the Forward Purchase Contract or
certain similar forward purchase contracts, there are no options, warrants,
calls, rights or agreements to which the Company is a party or by which it is
bound obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of beneficial interest of the Company or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right or agreement.
Section 3.3 Authority. The Board of Trustees of the Company
has duly approved and adopted this Agreement and has declared advisable this
Agreement, the Merger and the Pairing Agreement Amendment and Restatement. The
Board of Trustees of the Company has resolved to recommend the approval of this
Agreement and the Pairing Agreement Amendment and Restatement by its
shareholders. The Company has all requisite trust power and authority and,
subject to approval by the shareholders of the Company of this Agreement and the
Pairing Agreement Amendment and Restatement, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary trust action on
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the part of the Company, subject to approval by the shareholders of the Company
of this Agreement and the Pairing Agreement Amendment and Restatement. This
Agreement has been duly executed and delivered by the Company and (assuming the
valid authorization, execution and delivery of this Agreement by Parent and Sub
and the validity and binding effect hereof on Parent and Sub) constitutes the
valid and binding obligation of the Company enforceable against it in accordance
with its terms. This Agreement and the Pairing Agreement Amendment and
Restatement have been duly authorized by the Company's Board of Trustees.
Section 3.4 Consents and Approvals; No Violation. Assuming
that all consents, approvals, authorizations and other actions described in this
Section 3.4 have been obtained and all filings and obligations described in this
Section 3.4 have been made, and except as otherwise disclosed by the Company to
Parent, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default or loss of a
material benefit (with or without notice or lapse of time, or both) under, or
give to others a right of termination, cancellation or acceleration of any
obligation under, or result in the creation of any Lien upon any of the
properties, assets or operations of the Company or any of its Subsidiaries
under, any provision of (i) the Declaration of Trust or the Amended and Restated
Trustees' Regulations of the Company, (ii) any provision of the comparable
charter or organizational documents of any of the Company's Subsidiaries, (iii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
the Company or any of its Subsidiaries or (iv) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or any of their respective properties, assets or operations
other than, in the case of clauses (ii), (iii) or (iv), any such violations,
defaults, losses, rights or Liens that, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on the Company,
materially impair the ability of the Company to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby. No filing or registration with, or authorization, consent or approval
of, any Governmental Entity is required by or with respect to the Company or any
of its Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or is necessary for the consummation of the Merger and
the other transactions contemplated by this Agreement, except (i) in connection,
or in compliance, with the provisions of the HSR Act, the Securities Act and the
Exchange Act, (ii) the filing and acceptance for record of the Articles of
Merger with and by the State Department of Assessments and Taxation of Maryland
and appropriate documents with the relevant authorities of other states in which
Parent,
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the Company or any of their respective Subsidiaries is qualified to do business,
(iii) such filings and consents as may be required under any environmental,
health or public or worker safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, (iv) such filings as may be
required in connection with the taxes described in Section 5.9, (v) applicable
requirements, if any, of Blue Sky Laws and the NYSE, (vi) as may be required
under foreign laws, (vii) filings with and approvals by any regulatory authority
with jurisdiction over Parent's and/or its Subsidiaries' gaming operations
required under any Gaming Law, (viii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as the Company has
previously disclosed to Parent and (ix) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company, materially impair the
ability of the Company to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
Section 3.5 SEC Documents and Other Reports. The Company has
filed all required documents with the SEC since January 1, 1998 (the "Company
SEC Documents"). As of their respective dates, the Company SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and, at the respective times they were
filed, none of the Company SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Section 3.6 Registration Statement and Joint Proxy Statement.
None of the information to be supplied by the Company for inclusion or
incorporation by reference in the Registration Statement or the Joint Proxy
Statement will (i) in the case of the Registration Statement, at the time it
becomes effective and at the Effective Time, contain any untrue statement of a
material fact or 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 are made, not misleading or (ii) in the case of
the Joint Proxy Statement, at the time of the mailing of the Joint Proxy
Statement and at the time of each of the Stockholder Meetings, contain any
untrue statement of a material fact or 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 are made, not misleading. If at any
time prior to the Effective Time any event with respect to the Company, its
officers and directors or any of its Subsidiaries shall occur
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<PAGE> 23
that is required to be described in the Joint Proxy Statement or the
Registration Statement, such event shall be so described, and an appropriate
amendment or supplement shall be promptly filed with the SEC and, as required by
law, disseminated to the stockholders of Parent and shareholders of the Company.
The Registration Statement will comply (with respect to the Company) as to form
in all material respects with the provisions of the Securities Act, and the
Joint Proxy Statement will comply (with respect to the Company) as to form in
all material respects with the provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Documents filed prior to the date of this Agreement, since
December 31, 1997, (A) the Company and its Subsidiaries have not sustained any
loss or interference with their business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance)
that, individually or in the aggregate, has had, or would reasonably be expected
to have, a Material Adverse Effect on the Company and (B) there have not been
any events, changes or developments that, individually or in the aggregate, have
had, or would reasonably be expected to have, a Material Adverse Effect on the
Company.
Section 3.8 Permits and Compliance. Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect on the Company, and, as of the date of this Agreement, no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
the Company (as hereinafter defined), threatened, except where the suspension or
cancellation of any of the Company Permits, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries is in
violation of (A) its charter, by-laws or other organizational documents, (B) any
applicable law, ordinance, administrative or governmental rule or regulation or
(C) any order, decree or judgment of any Governmental Entity having jurisdiction
over the Company or any of its Subsidiaries, except, in the case of clauses (A),
(B) and (C), for any violations that, individually or in the aggregate, have not
had, and would not reasonably be expected to have, a Material Adverse Effect on
the Company. Except as disclosed in the Company SEC Documents filed prior to the
date of this Agreement, as of the date hereof, there is no contract or agreement
that is material
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to the business, properties, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole. No event of default or event
that, but for the giving of notice or the lapse of time or both, would
constitute an event of default exists under any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed money, any
guarantee of any agreement or instrument for borrowed money or any lease,
contractual license or other agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company or any such Subsidiary is
bound or to which any of the properties, assets or operations of the Company or
any such Subsidiary is subject, other than any defaults that, individually or in
the aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect on the Company. For purposes of this Agreement, the term
"Knowledge" when used with respect to the Company means the actual knowledge of
the senior executive officers of the Company.
Section 3.9 Tax Matters. Except as otherwise previously disclosed by
the Company to Parent, (i) the Company and each of its Subsidiaries have filed
all material federal, state, local, foreign and provincial Tax Returns required
to have been filed on or prior to the date hereof, or appropriate extensions
therefor have been properly obtained, and such Tax Returns are correct and
complete, except to the extent that any failure to so file or any failure to be
correct and complete, individually or in the aggregate, has not had, and would
not reasonably be expected to have, a Material Adverse Effect on the Company;
(ii) all Taxes shown to be due on such Tax Returns have been timely paid or
extensions for payment have been properly obtained, or such Taxes are being
timely and properly contested; (iii) the Company and each of its Subsidiaries
have complied in all material respects with all rules and regulations relating
to the withholding of Taxes except to the extent that any failure to comply with
such rules and regulations, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect on the
Company; (iv) neither the Company nor any of its Subsidiaries has waived any
statute of limitations in respect of its federal, state, local, foreign or
provincial income or franchise Taxes, except to the extent that any such waiver,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company; (v) all federal
income Tax Returns referred to in clause (i) for all years through 1994 have
been examined by and settled with the Internal Revenue Service or the period for
assessment of the Taxes in respect of which such Tax Returns were required to be
filed has expired; (vi) no material issues that have been raised in writing by
the relevant taxing authority in connection with the examination of the Tax
Returns referred to in clause (i) are currently pending; and (vii) all material
deficiencies asserted or material assessments made as a result of any
examination of such Tax Returns referred to in
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Clause (i) by any taxing authority have been paid in full or are being timely
and properly contested.
Section 3.10 Actions and Proceedings. Except as set forth in the
Company SEC Documents filed prior to the date of this Agreement, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its Subsidiaries,
or against or involving any of the directors, officers or employees of the
Company or any of its Subsidiaries, as such, or any of its or their properties,
assets or business that, individually or in the aggregate, have had, or would
reasonably be expected to have, a Material Adverse Effect on the Company. As of
the date of this Agreement, there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations pending or, to the
Knowledge of the Company, threatened against or involving the Company or any of
its Subsidiaries or any of their directors, officers or employees, as such, or
any of their properties, assets or business that, individually or in the
aggregate, have had, or would reasonably be expected to have, a Material Adverse
Effect on the Company. As of the date hereof, there are no actions, suits, labor
disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
their officers, directors or employees, as such, or any of their properties,
assets or business relating to the transactions contemplated by this Agreement.
Section 3.11 Compliance with Worker Safety and Environmental Laws. The
properties, assets and operations of the Company and its Subsidiaries are in
compliance with all applicable Worker Safety Laws and Environmental Laws, except
for any violations that, individually or in the aggregate, have not had, and
would not reasonably be expected to have, a Material Adverse Effect on the
Company. With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there are
no events, conditions, circumstances, activities, practices, incidents, actions
or plans of the Company or any of its Subsidiaries that may interfere with or
prevent compliance or continued compliance with applicable Worker Safety Laws
and Environmental Laws, other than any such interference or prevention that,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company.
Section 3.12 Intellectual Property. The Company and its Subsidiaries
own or have the right to use all Intellectual Property Rights as are necessary
in connection with the business of the Company and its Subsidiaries, taken as a
whole, except where the failure to have such Intellectual Property Rights has
not had, and would not reasonably be expected to have, a Material
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Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries
has infringed any Intellectual Property Rights of any third party other than any
infringements that, individually or in the aggregate, have not had, and would
not reasonably be expected to have, a Material Adverse Effect on the Company.
Section 3.13 Required Vote of Company Shareholders. The affirmative
vote of the holders of a majority of the outstanding Trust Shares, Class A EPS
and Class B EPS (voting together as a single class) is required to adopt this
Agreement and the Pairing Agreement Amendment and Restatement. No other vote of
the shareholders of the Company is required by law, the NYSE, the Declaration of
Trust or the Amended and Restated Trustees' Regulations of the Company or
otherwise in order for the Company to consummate the Merger and the transactions
contemplated hereby.
Section 3.14 State Takeover Statutes. The Board of Trustees of the
Company has, to the extent such statutes are applicable, taken all action
(including appropriate approvals of the Board of Trustees of the Company)
necessary to exempt the Company, its Subsidiaries and affiliates, the Merger,
this Agreement and the transactions contemplated hereby from Sections 3-601
through 3-603 and Sections 3-701 through 3-709 of the MGCL or to satisfy the
requirements thereof. To the Knowledge of the Company, no other state takeover
statutes are applicable to the Merger, this Agreement and the transactions
contemplated hereby.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business by the Company Pending the Merger.
Except with the prior consent of Parent, during the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause each of its
Subsidiaries to, in all material respects carry on its business in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent therewith, use reasonable efforts to
keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers, licensors and lessors and others
having business dealings with it to the end that its goodwill and ongoing
business shall be unimpaired at the Effective Time.
Section 4.2 Conduct of Business by Parent Pending the Merger. Except
with the prior consent of the Company, during the period from the date of this
Agreement to the Effective Time, Parent shall, and shall cause each of its
Subsidiaries to, in all
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material respects carry on its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use reasonable efforts to keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers, licensors and lessors and others having business
dealings with it to the end that its goodwill and ongoing business shall be
unimpaired at the Effective Time.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings. Parent and the Company each shall, as
soon as practicable following the date of this Agreement, duly call, give notice
of, convene and hold a meeting of its stockholders or shareholders
(respectively, the "Parent Stockholder Meeting" and the "Company Shareholder
Meeting" and, collectively, the "Stockholder Meetings") for the purpose of
considering the approval of this Agreement and the Merger (in the case of the
Company) and the Pairing Agreement Amendment and Restatement (in the case of
Parent and the Company). The Company and Parent will, through their respective
Board of Trustees or Board of Directors, recommend to their respective
shareholders or stockholders, as the case may be, approval of such matters and
shall not withdraw such recommendation except as, and to the extent, required by
their fiduciary obligations. The Company and Parent shall coordinate and
cooperate with respect to the timing of such meetings and shall use their
reasonable best efforts to hold such meetings on the same day.
Section 5.2 Preparation of the Registration Statement and the Joint
Proxy Statement. The Company and Parent shall promptly prepare and file with the
SEC the Joint Proxy Statement and the Company shall prepare and file with the
SEC the Registration Statement, in which the Joint Proxy Statement will be
included as a prospectus. Each of Parent and the Company shall use reasonable
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing. As promptly as
practicable after the Registration Statement shall have become effective, each
of Parent and the Company shall mail the Joint Proxy Statement to its respective
stockholders or shareholders. The Company shall also take any action reasonably
required to be taken under any applicable state securities laws in connection
with the issuance of Class B Shares in the Merger and upon the exercise of the
Substitute Options (as defined in Section 5.6), and the Company shall furnish
all information concerning the Company and the holders of Trust Shares as may be
reasonably requested in connection with any such action.
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Section 5.3 Actions Prior to Closing. Prior to or after the Closing,
Parent and Company shall use their reasonable best efforts to transfer a
sufficient number of the leases relating to real property leased from the
Company, the Realty Partnership or any of their respective Subsidiaries to
Parent so as to avoid the termination of the Trust's status as a "real estate
investment trust" under the Code, to amend and restate the limited partnership
agreements of the Realty Partnership and the Operating Partnership in connection
with the transactions contemplated hereby, and to recapitalize certain corporate
Subsidiaries of which Parent holds 95% of the voting securities and the Company
owns the remaining 5% of the voting securities; however, such actions shall not
be a condition to the Closing.
Section 5.4 Compliance with the Securities Act. Prior to the Effective
Time, the Company shall cause to be prepared and delivered to Parent a list
(reasonably satisfactory to counsel for Parent) identifying all persons who, at
the time of the Company Shareholder Meeting, in the Company's reasonable
judgment may be deemed to be "affiliates" of the Company as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act. The Company shall
use its reasonable best efforts to enter into a written agreement in
substantially the form of Exhibit 5.4 hereto prior to the Effective Time with
each of such persons identified in the foregoing list.
Section 5.5 Stock Exchange Listings. The Company and Parent shall use
their reasonable best efforts to list on the NYSE, upon official notice of
issuance, the Class B Shares to be issued in connection with the Merger, such
Class B Shares to trade together as a unit with shares of Parent Common Stock.
Section 5.6 Stock Options. As of the Effective Time, each stock option
(a "Starwood Stock Option") that is outstanding immediately prior to the
Effective Time pursuant to the Starwood Stock Plans shall become and represent
an option to purchase (a "Substitute Option") the number of Class B Shares equal
to the number of Trust Shares subject to such Starwood Stock Option immediately
prior to the Effective Time and the number of shares of Parent Common Stock
equal to the number of shares of Parent Common Stock subject to such Starwood
Stock Option immediately prior to the Effective Time. After the Effective Time,
except as provided above in this Section 5.6, each Substitute Option shall be
exercisable upon the same terms and conditions as were applicable under the
related Starwood Stock Option immediately prior to or at the Effective Time.
Parent and the Company shall use all reasonable efforts to obtain any necessary
consents of holders of Starwood Stock Options and take such other actions as may
be necessary to effect this Section 5.6.
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Section 5.7 Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, as
soon as practicable, the Merger and the other transactions contemplated by this
Agreement, including, but not limited to: (i) the obtaining of all necessary
actions or non-actions, waivers, consents and approvals from all Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity (including those in connection with the
HSR Act, state takeover statutes and Gaming Laws), (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity with respect to the Merger or
this Agreement vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by
this Agreement.
Section 5.8 Public Announcements. Parent and the Company will not issue
any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to such
transactions without prior consultation with the other party, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange.
Section 5.9 Real Estate Transfer and Gains Tax. Parent and the Company
agree that either the Company or the Surviving Trust will pay any Federal,
state, local, foreign or provincial tax which is attributable to the transfer of
the beneficial ownership of the Company's or its Subsidiaries' real property, if
any (collectively, the "Gains Taxes"), and any penalties or interest with
respect to the Gains Taxes, payable in connection with the consummation of the
Merger. The Company and Parent agree to cooperate with the other in the filing
of any returns with respect to the Gains Taxes, including supplying in a timely
manner a complete list of all real property interests held by the Company and
its Subsidiaries and any information with respect to such property that is
reasonably necessary to complete such returns. The portion of the consideration
allocable to the real property of the Company and its Subsidiaries shall be
determined by Parent in its reasonable discretion.
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Section 5.10 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Board of Directors and Board of
Trustees shall use all reasonable efforts to grant such approvals and take such
actions as are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
shall otherwise act to minimize the effects of any such statute or regulation on
the transactions contemplated hereby.
Section 5.11 Indemnification. For six years from and after the
Effective Time, Parent agrees to cause the Surviving Trust to, and shall
guarantee the obligation of the Surviving Trust to, indemnify and hold harmless
all past and present officers and trustees of the Company and of its
Subsidiaries to the same extent such persons are indemnified as of the date of
this Agreement by the Company pursuant to the Company's Declaration of Trust,
Amended and Restated Trustees' Regulations or agreements in existence on the
date hereof for acts or omissions occurring at or prior to the Effective Time.
Section 5.12 Notification of Certain Matters. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which it is aware and which would be reasonably likely to
cause (x) any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied in
all material respects, (ii) any failure of Parent or the Company, as the case
may be, to comply in a timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder or (iii) any event,
change or development that has had, or would reasonably be expected to have, a
Material Adverse Effect on Parent or the Company, as the case may be; provided,
however, that the delivery of any notice pursuant to this Section 5.12 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 5.13 Employee Benefit Plans and Agreements. Parent agrees that
it will cause the Surviving Trust to maintain for a period of twelve months
immediately following the Effective Time, employee benefit plans, programs,
agreements, policies and arrangements for employees of the Company and its
Subsidiaries which in the aggregate are no less favorable than the employee
benefit plans, programs, agreements, policies and arrangements of the Company
and its Subsidiaries in effect on the Effective Time,
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and that it will cause the Surviving Trust to honor all employment agreements
entered into by the Company prior to the date hereof; provided, however, that
nothing in this Agreement shall be interpreted as limiting the power of Parent
or the Surviving Trust to amend or terminate any employee benefit plan, program,
agreement, policy or arrangement or as requiring Parent or the Surviving Trust
to offer to continue (other than as required by its terms) any written
employment contract.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement, the Merger and the Pairing
Agreement Amendment and Restatement shall have been duly approved by the
requisite vote of shareholders of the Company in accordance with applicable law
and the Declaration of Trust and Amended and Restated Trustees' Regulations of
the Company and the Pairing Agreement (in the case of the Pairing Agreement
Amendment and Restatement), and the Pairing Agreement Amendment and Restatement
shall have been approved by the requisite vote of the stockholders of Parent in
accordance with the terms of the Pairing Agreement, applicable law and the
charter and Amended and Restated By-Laws of Parent.
(b) Stock Exchange Listings. The Class B Shares issuable in the Merger
shall have been authorized for listing on the NYSE, subject to official notice
of issuance.
(c) HSR and Other Approvals. (i) The waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
(ii) All consents, approvals, orders or authorizations of or
registrations, declarations or filings with any Governmental Entity, which the
failure to obtain, make or occur would reasonably be expected to have a Material
Adverse Effect on Parent or the Company (assuming the Merger had taken place),
shall have been obtained, shall have been made or shall have occurred, and shall
be in full force and effect.
(d) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have
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been initiated or, to the Knowledge of Parent or the Company, threatened by the
SEC. All necessary state securities or blue sky authorizations shall have been
received.
(e) No Order. No court or other Governmental Entity having jurisdiction
over the Company or Parent, or any of their respective Subsidiaries, shall
(after the date of this Agreement) have enacted, issued, promulgated, enforced
or entered any law, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making the Merger or any of the transactions
contemplated hereby illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the additional condition
that each of Parent and Sub shall have performed in all material respects each
of its agreements contained in this Agreement required to be performed at or
prior to the Effective Time, each of the representations and warranties of
Parent and Sub contained in this Agreement that is qualified by materiality
shall be true and correct at and as of the Effective Time as if made at and as
of such time (other than representations and warranties which address matters
only as of a certain date, which shall be true and correct as of such certain
date) and each of the representations and warranties that is not so qualified
shall be true and correct in all material respects at and as of the Effective
Time as if made at and as of such time (other than representations and
warranties which address matters only as of a certain date, which shall be true
and correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and the Company shall
have received certificates signed on behalf of each of Parent and Sub by its
Chief Executive Officer and its Chief Financial Officer to such effect.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the additional condition
that the Company shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed at or prior to
the Effective Time, each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality shall be true and
correct at and as of the Effective Time as if made at and as of such time (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Effective Time as if made at
and as of such time (other than representations and warranties which address
matters
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only as of a certain date which shall be true and correct in all material
respects as of such certain date), in each case except as contemplated or
permitted by this Agreement, and Parent shall have received a certificate signed
on behalf of the Company by its Chief Executive Officer and its Chief Financial
Officer to such effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the shareholders of the Company or
the stockholders of Parent:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if there has been a material breach
of the representations, warranties, covenants and agreements on the part of the
other set forth in this Agreement, which breach has not been cured within 20
business days following receipt by the breaching party of notice of such breach
from the non-breaching party;
(c) by Parent or the Company if: (i) the Merger has not been effected
on or prior to the close of business on June 30, 1999; provided, however, that
the right to terminate this Agreement pursuant to this Section 7.1(c)(i) shall
not be available to any party whose failure to fulfill any of its obligations
contained in this Agreement has been the cause of, or resulted in, the failure
of the Merger to have occurred on or prior to the aforesaid date; or (ii) any
court or other Governmental Entity having jurisdiction over a party hereto or
any of their respective Subsidiaries shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order or taken any other action permanently enjoining,
restraining or otherwise prohibiting or making illegal the transactions
contemplated by this Agreement and such law, rule, regulation, executive order,
decree, injunction or other order or other action shall have become final and
nonappealable;
(d) by Parent or the Company if the shareholders of the Company do not
approve this Agreement, the Merger or the Pairing Agreement Amendment and
Restatement at the Company Shareholder Meeting or at any adjournment or
postponement thereof; or
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(e) by Parent or the Company if the stockholders of Parent do not
approve the Pairing Agreement Amendment and Restatement at the Parent
Stockholder Meeting or at any adjournment or postponement thereof.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers, directors
or trustees; provided, however, that nothing contained in this Section 7.2 shall
relieve any party hereto from any liability for any willful breach of a
representation or warranty contained in this Agreement or the breach of any
covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their Board of Directors or Board of
Trustees, as the case may be, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of Parent
and the shareholders of the Company, but, after any such approval, no amendment
shall be made which by law requires further approval by such stockholders or
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing duly executed by each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing duly executed by such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
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Section 8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, one day
after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) or delivered by hand to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent or Sub, to
Starwood Hotels & Resorts Worldwide, Inc.
777 Westchester Avenue
White Plains, New York 10604
Attention: Richard D. Nanula
Facsimile No.: (914) 640-8310
with a copy to:
Sidley & Austin
555 W. Fifth St.
40th Floor
Los Angles, California 90013
Attention: Sherwin L. Samuels, Esq.
Facsimile No.: (213) 896-6600
(b) if to the Company, to
Starwood Hotels & Resorts
777 Westchester Avenue
White Plains, New York 10604
Attention: Barry S. Sternlicht
Facsimile No.: (914) 640-8310
with a copy to:
Sidley & Austin
555 W. Fifth St.
40th Floor
Los Angeles, California 90013
Attention: Sherwin L. Samuels, Esq.
Facsimile No.: (213) 896-6600
Section 8.3 Interpretation. When a reference is made in this Agreement
to a Section or Article, such reference shall be to a Section or Article of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
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Section 8.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof. Except for the provisions of Sections 5.6 and 5.11, and
injunctive relief in respect of Section 5.9, this Agreement is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
Section 8.6 Governing Law. Except to the extent that the laws of the
State of Maryland are mandatorily applicable to the Merger, this Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties except that Sub may assign, in its sole discretion,
any or all of its rights, interests and obligations under this Agreement to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. This
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 8.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement may be
consummated as originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific wording or
were
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otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, such remedy being in addition to
any other remedy to which any party is entitled at law or in equity.
Section 8.10 Trust. The name "Starwood Hotels & Resorts" is the
designation of the Company 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 the Company must look solely to the Company's property
for the enforcement of any claims against the Company, as the Trustees,
officers, agents and security holders of the Company assume no personal
obligations of the Company, and their respective properties shall not be subject
to claims of any person relating to such obligation.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
By: /s/ Richard D. Nanula
------------------------
Name: Richard D. Nanula
Title: President and Chief
Executive Officer
ST ACQUISITION TRUST
By: /s/ Barry S. Sternlicht
------------------------
Name: Barry S. Sternlicht
Title: President
STARWOOD HOTELS & RESORTS
By: /s/ Barry S. Sternlicht
------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief
Executive Officer
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EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") is made as of the
24th day of August, 1998 between Starwood Hotels & Resorts Worldwide, Inc. a
Maryland corporation (the "Corporation") and Thomas C. Janson, Jr.
("Indemnitee"), with reference to the following facts and objectives:
A. Indemnitee is a Director or officer of the Corporation or one or
more of its subsidiaries or has been elected or appointed a Director or officer
of the Corporation or one or more of its subsidiaries to take effect on a later
date.
B. Article Tenth of the Amended and Restated Articles of Incorporation
of the Corporation (the "Corporation Articles") provides for the indemnification
of directors ("Directors"), officers, employees and other agents of the
Corporation to the fullest extent required or permitted under the Maryland
General Corporation Law (the "MGCL").
C. Each of Section 2-418 of the MGCL and Article Tenth of the
Corporation Articles specifically provides that the indemnification provided for
therein is not exclusive, and thereby contemplates that agreements or other
financial arrangements may be entered into between the Corporation, on the one
hand, and the Corporation's Directors and officers, on the other hand, with
respect to the indemnification of and advancement of expenses to such persons.
D. In recognition of Indemnitee's need for substantial protection
against personal liability in order to maintain Indemnitee's continued service
to the Corporation in an effective manner and Indemnitee's reliance on the
Corporation Articles, and in part to provide Indemnitee with specific
contractual assurance that the protection promised by the Corporation Articles
will be available to Indemnitee (regardless of, among other things, any
limitation or other amendment or revocation of Article Tenth of the Corporation
Articles or any change in the composition of the Corporation's Board of
Directors (the "Board of Directors")), the Corporation desires to provide in
this Agreement for the indemnification of and the advancing of expenses to
Indemnitee to the full extent (whether partial or complete) permitted by law, as
set forth in this Agreement, and, to the extent directors' and officers'
insurance is maintained by the Corporation, for the continued coverage of
Indemnitee under such policy or policies.
NOW, THEREFORE, in consideration of the premises and of
Indemnitee's continuing to serve the Corporation directly or, at its request,
another enterprise, the Corporation and Indemnitee hereby agree as follows:
1. D&O Liability Insurance.
(a) Subject only to the provisions of Section 1(b) hereof, so
long as Indemnitee shall continue to serve as a Director and/or officer of the
Corporation (or shall continue at the request of the Corporation to serve as a
director, trustee, officer, partner, employee or agent of another business
trust, corporation, partnership, joint venture or other enterprise or an
employee benefit plan), and thereafter so long as Indemnitee shall be subject to
any possible claim or threatened, pending or completed action, suit or
proceeding, whether
<PAGE> 2
civil, criminal, administrative or investigative, by reason of the fact that
Indemnitee was a Director and/or officer of the Corporation or served in any of
said other capacities, the Corporation shall purchase and maintain in effect,
including through the obtaining or exercise of appropriate "tail" coverage, one
or more valid, binding and enforceable insurance policies issued by a reputable
insurer or insurers protecting Directors and Corporation officers (subject to
customary limitations and exceptions) against losses, costs and expenses arising
out of any such claim, action, suit or proceeding ("D&O Insurance"), which D&O
Insurance shall provide coverage in all respects at least comparable to that
presently provided, and shall cause Indemnitee to be covered by such policy or
policies.
The Corporation shall not be required to maintain in effect the
policy or policies of D&O Insurance contemplated by the first paragraph of this
Section 1(a) at any time at which (i) said insurance is not generally available,
or (ii) in the reasonable business judgment of the persons then constituting the
Board of Directors, either (I) the premium cost for such insurance is
substantially disproportionate to the amount of coverage afforded, or (II) the
coverage provided by such insurance is so limited and/or subject to such
exclusions that there is insufficient benefit to the Corporation from such
insurance; provided, however, that to the extent that the Corporation maintains
any D&O Insurance, Indemnitee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Director or Corporation officer under such policy or policies,
and, further, that in the event the Corporation does not purchase and maintain
in effect the policy or policies of D&O Insurance contemplated by this Section
1(a), the Corporation shall indemnify Indemnitee to the full extent of the
coverage that would otherwise have been provided for the benefit of Indemnitee
pursuant to such D&O Insurance.
(b) The Corporation's obligation under this Section 1 shall
terminate as of the fifth anniversary of the date on which Indemnitee ceases to
render any service or to act in any capacity specified in Section 3 hereof.
2. Basic Indemnity. The Corporation hereby indemnifies Indemnitee,
whether or not he is then an officer, to the fullest extent permitted by the
provisions of Section 2-418 of the MGCL or any amendment thereof or by any other
statute permitting such indemnification that is adopted after the date hereof.
3. Additional Indemnity. Subject only to the limitations and
exclusions set forth in Section 5 hereof, and without limiting the provisions of
the foregoing Section 2, the Corporation hereby also expressly agrees that in
the event Indemnitee is or becomes a party to or witness or other participant
in, or is threatened to be made a party to or witness or other participant in,
any action, suit or proceeding, whether pending, threatened or completed,
whether civil, criminal or administrative, and whether instituted by or in the
name of the Corporation or any other party, or any investigation or inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit or proceeding, by reason of (or arising in
part out of) the fact that Indemnitee is or was a Director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, trustee, officer, partner, employee, agent or fiduciary of
another business trust,
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<PAGE> 3
corporation, partnership, joint venture or other enterprise or an employee
benefit plan, or by reason of anything done or not done by Indemnitee in any
such capacity (any such threatened, pending or completed action, suit or
proceeding, or any such inquiry or investigation, a "Claim"), the Corporation
shall indemnify Indemnitee against any and all judgments, fines, penalties and
amounts paid in settlement (including all interest, assessments and other
charges paid or payable in connection with or in respect of such judgments,
fines, penalties or amounts paid in settlement), and any and all reasonable
expenses, actually paid or incurred by Indemnitee in connection with or in
respect of such Claim.
4. Advancing of Expenses. If so requested by Indemnitee, and
subject only to the limitations and exclusions of Section 5 hereof, the
Corporation shall pay to Indemnitee or reimburse Indemnitee for any and all
expenses actually and reasonably incurred by Indemnitee in connection with or in
respect of any Claim (an "Expense Advance") in advance of the final
determination thereof, in the manner provided in Section 11(a) hereof.
For purposes of this Agreement, "expenses" shall include attorneys'
fees and all other costs, charges and obligations paid or incurred in connection
with investigating, defending, being a witness in or participating in (including
an appeal), or preparing to defend, be a witness in or participate in, any
Claim.
5. Limitation on Additional Indemnity and Advance Payment of
Expense Advances. No indemnity pursuant to Section 3 hereof shall be paid by the
Corporation, nor shall the Corporation be required to make Expense Advances
under Section 4 hereof:
(a) For which and to the extent that payment or reimbursement
of such amount is made to Indemnitee under any D&O Insurance;
(b) For which and to the extent that Indemnitee is
indemnified, receives a recovery or is reimbursed other than pursuant to a
policy of insurance or this Agreement;
(c) On account of any action, suit or proceeding for which and
to the extent that judgment is rendered against Indemnitee (i) for an accounting
of profits made from the purchase or sale by Indemnitee of securities of the
Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Securities Exchange Act"), or any similar
provisions of any Federal, state or local statutory law, or (ii) for a violation
of any provision of the Securities Act of 1933, as amended, in connection with
the offer or sale of securities of the Corporation pursuant to a registration
statement under said statute, unless either (I) in the opinion of counsel for
the Corporation, Indemnitee is entitled to such indemnification by controlling
precedent, or (II) a final adjudication by a court of competent jurisdiction
holds that such indemnification is not against public policy as expressed in
such statute;
(d) On account of any action, suit or proceeding in which a
court of competent jurisdiction shall enter a final judgment that:
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<PAGE> 4
(i) The act or omission of Indemnitee was material to the
matter giving rise to the proceeding and (I) was committed in bad faith; or (II)
was that result of active and deliberate dishonesty; or
(ii) Indemnitee actually received an improper personal
benefit in money, property or services; or
(iii) In the case of any criminal proceeding, Indemnitee
had reasonable cause to believe that the act or omission was unlawful;
(e) On account of any action, suit or proceeding in which a
court of competent jurisdiction shall enter a final judgment in a proceeding by
or in the right of the Corporation that Indemnitee is liable to the Corporation;
or
(f) If such payment by the Corporation under this Agreement is
not otherwise permitted by applicable law.
In addition, if Maryland law in effect at the time so requires, (i)
the obligations of the Corporation under Sections 3 and 4 hereof shall be
subject to the condition that any "Determining Party" (as hereinafter defined)
shall not have determined (in a written opinion in any case in which the
"Independent Legal Counsel" (as defined in Section 6 hereof) is involved) that
indemnification of Indemnitee is not permitted under applicable law or the
expenses as to which Indemnitee requests payment or reimbursement are not
reasonable, and (ii) the obligation of the Corporation to make an Expense
Advance pursuant to Section 4 hereof shall be subject to the condition that if,
when and to the extent that any Determining Party determines that Indemnitee
would not be permitted to be so indemnified under applicable law, Indemnitee
shall reimburse the Corporation for all expenses paid; provided, however, that
if as of the time any determination is made by the Determining Party that
Indemnitee is under certain circumstances not permitted to be indemnified and/or
that certain expenses are not reasonable, Indemnitee has commenced or thereafter
commences legal proceedings in a court of competent jurisdiction to secure a
final determination that Indemnitee should or may be indemnified under
applicable law and/or that any expenses are not reasonable shall not be binding,
and Indemnitee shall not be required to reimburse the Corporation for any such
expense until a final judicial determination is made with respect thereto (as to
which all rights of appeal therefrom have been exhausted or lapsed).
If there has not been a Change in Control (as hereinafter defined),
or if such Change in Control was approved by a majority of the Board of
Directors who were Directors immediately prior to such Change in Control, the
"Determining Party" shall be such members of the Board of Trustees, such
Independent Legal Counsel (other than with respect to the reasonableness of
expenses), or such other person or persons as MGCL Section 2-418 (or any
successor provisions) shall require. If, on the other hand, there has been a
Change in Control not approved by such majority of the Board, the Determining
Party shall be (i) as to whether indemnification is permitted under applicable
law, the Independent Legal Counsel referred to in Section 6 hereof, and (ii) as
to the reasonableness of expenses, such members of the Board
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<PAGE> 5
of Directors or such other person(s) as MGCL Section 2-418 (or any successor
provision) shall require.
For purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act, other than a director or other
fiduciary holding securities under an employee benefit plan of the Corporation
or another business trust or corporation owned directly or indirectly by the
shareholders of the Corporation in substantially in the same proportions as
their ownership shares of beneficial interest of the Corporation, becomes,
directly or indirectly, the "beneficial owner" (as defined in Rule 13(d)-3 under
the Securities Exchange Act) of securities of the Corporation evidencing 8% or
more of the total voting power evidenced by the Corporation's then outstanding
securities that vote generally in the election of Directors ("Voting
Securities"), or (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors and any
new Director whose election by the Board of Directors or nomination for election
by the Corporation's stockholders was approved by the vote of at least
two-thirds of the Directors then still in office who were either Directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority of the
Board of Directors, or (iii) the stockholders of the Corporation approve a
merger or consolidation of the Corporation with any other business corporation,
trust or other entity, other than a merger or consolidation that would result in
the holders of Voting Securities outstanding immediately prior to such merger or
consolidation continuing to have (by virtue of such Voting Securities either
remaining outstanding or being converted into securities entitled to vote
generally in the election of directors or trustees of the surviving entity) at
least 80% of the total voting power evidenced by the Voting Securities or the
voting securities of such surviving entity outstanding immediately after such
merger or consolidation, or (iv) the stockholders of the Corporation approve a
plan of complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of (in one transaction or a series of affiliated
transactions) all or substantially all of the Corporation's assets.
If within 15 business days after Indemnitee submits a request for
indemnification or for a payment or reimbursement of expenses hereunder, there
has been no determination by the Determining Party, or if the Determining Party
determines that Indemnitee is not permitted to be indemnified in whole or in
part under applicable law and/or that the expenses as to which payment or
reimbursement has been requested are not reasonable, Indemnitee shall have the
right to commence litigation in any court in the States of Maryland or Arizona
having subject matter jurisdiction thereof and in which venue is proper, seeking
an initial determination by the court or challenging any such determination by
the Determining Party or any aspect thereof, including the legal or factual
bases therefor, and the Corporation hereby consents to service of process and to
appear in any such proceeding.
6. Independent Legal Counsel. In the event that there is a Change
in Control (other than a Change in Control that has been approved by a majority
of the Board of Directors immediately prior to such Change in Control), the
Corporation shall seek legal advice with respect to any and all matters
thereafter arising concerning the rights of Indemnitee
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<PAGE> 6
to indemnity payments and payment or reimbursement of expenses under this
Agreement or any other agreement or financial arrangement or the Corporation
Articles as now or hereafter in effect only from an attorney or firm of
attorneys (the "Independent Legal Counsel") proposed by Indemnitee and selected
by the Board of Directors (or a committee thereof), or such other person(s) as
MGCL Section 2-418 (or any successor provision) may require. Such Independent
Legal Counsel, among other things, shall render its written opinion to the
Corporation and Indemnitee as to whether and to what extent Indemnitee would be
permitted to be indemnified under applicable law. The Corporation shall pay the
reasonable fees and expenses of the Independent Legal Counsel and shall fully
indemnify such counsel against all expenses, claims, liabilities, losses and
damages arising out of or relating to this Agreement or such counsel's
engagement pursuant hereto.
7. Indemnification for Additional Expenses. To the full extent
permitted by law, the Corporation shall indemnify Indemnitee against any and all
expenses and, if requested by Indemnitee, shall (within 10 business days of such
request) advance such expenses to Indemnitee, that are incurred by Indemnitee in
connection with any Claim asserted against or action, suit or proceeding brought
by Indemnitee for (i) indemnification or payment or reimbursement of expenses by
the Corporation and this Agreement, or any other agreement or the Corporation
Articles each as now or hereafter in effect, relating to claims for
indemnification or advancement of expenses, and/or (ii) recovery under any D&O
Insurance policy or policies maintained by the Corporation, if Indemnitee
ultimately is determined to be entitled to such indemnification, advance expense
payment or insurance recovery, as the case may be.
8. Partial Indemnity. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Corporation for some or a portion of
the expenses, judgments, fines, penalties and amounts paid in settlement or
incurred by Indemnitee in respect of a Claim, but not, however, for all of such
amount, the Corporation nevertheless shall indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled. Moreover, notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has been successful
in the merits or otherwise in defense of any Claim, issue or matter, including
dismissal without prejudice, Indemnitee shall be indemnified against all
expenses incurred in connection with such defense.
9. No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any action, suit or proceeding by judgment, order
or settlement (with or without court approval) shall not, of itself, create a
presumption that Indemnitee's conduct was such that indemnity is not available
pursuant to Section 3 hereof; provided, however, that the termination of any
action, suit or proceeding by conviction, or upon a plea of nolo contendere or
its equivalent, or an entry of an order of probation prior to judgment, shall
create a rebuttable presumption, and that the termination of any action, suit or
proceeding by a settlement entered into by the Indemnitee at the request of the
Corporation shall create a rebuttable presumption that Indemnitee is entitled to
indemnity hereunder.
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<PAGE> 7
Except as provided by the immediately preceding sentence, in
connection with any determination by the Determining Party or otherwise as to
whether Indemnitee is entitled to be indemnified hereunder, the burden of proof
shall be on the Corporation to establish that Indemnitee is not so entitled. In
addition, any attorneys' fees as to which Indemnitee requests indemnification or
advancement shall be rebuttably presumed reasonable if and to the extent that
such fees, if charged at an hourly rate, do not exceed the hourly rates then
regularly charged by such attorney or attorneys.
10. Notification and Defense of Claims. Promptly after receipt by
Indemnitee of notice of the commencement of any Claim, Indemnitee shall notify
the Corporation of the commencement thereof; provided, however, that the failure
so to notify the Corporation shall relieve the Corporation from any obligation
or liability that the Corporation may have to Indemnitee under this Agreement
only if and to the extent that the Corporation's rights hereunder are prejudiced
by such omission. If, at the time the Corporation receives such notice, the
Corporation has D&O Insurance in effect, the Corporation shall give prompt
notice of the commencement of Claim to the insurer(s) in accordance with the
procedures set forth in the policy or policies in favor of Indemnitee. The
Corporation thereafter shall take all necessary or desirable action to cause
such insurer(s) to pay, or advance, to or on behalf of Indemnitee, all losses,
costs and expenses payable as a result of such Claim in accordance with the
terms of such policy or policies. The provisions of this Agreement shall in no
way relieve or modify any obligation(s) or liability or liabilities of any
insurer under any D&O Insurance or other applicable insurance policy.
With respect to any Claim as to which Indemnitee notifies the
Corporation of the commencement thereof:
(a) The Corporation shall be entitled to participate therein
at its own expense.
(b) Except to the extent such Claim is brought by or in the
right of the Corporation and/or as otherwise provided below, to the extent that
it may wish, the Corporation jointly with any other indemnifying party similarly
notified, shall be entitled to assume the defense of Indemnitee in respect of
such Claim, at the Corporation's own expense, with counsel approved by
Indemnitee, whose approval shall not be unreasonably withheld. After notice from
the Corporation to Indemnitee of the Corporation's election to assume such
defense, the Corporation shall not be liable to Indemnitee under this Agreement
for any legal or other expenses subsequently incurred by Indemnitee in
connection with the defense thereof, other than as expressly provided to the
contrary below. Indemnitee shall have the right to employ his own counsel in
connection with such Claim, but the fees and expenses of such counsel incurred
after notice from the Corporation of its assumption of the defense thereof shall
be at the expense of Indemnitee unless:
(i) Such retention (or continued retention) of
counsel by Indemnitee has been authorized or consented to by Corporation;
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<PAGE> 8
(ii) Counsel employed by Indemnitee shall have concluded
that there is or may be a conflict of interest between Indemnitee and the
Corporation with respect to such action, in which event counsel employed by
Indemnitee also shall be entitled to participate in the defense of Indemnitee in
connection with such Claim;
(iii) The counsel retained by the Corporation to assume
the defense of Indemnitee in such proceeding shall also be representing in such
action the Corporation and/or one or more other parties; such counsel shall have
concluded that there is an actual conflict of interest between Indemnitee and
the one or more of such other parties (including, if applicable, the
Corporation); and within 10 business days after the Corporation is notified of
such conflict, separate counsel shall have been retained by the Corporation to
represent either the party or parties with whom there is such conflict of
interest or Indemnitee (in which case such counsel shall be selected by
Indemnitee and approved by the Corporation, whose approval shall not be
unreasonably withheld); or
(iv) The Corporation shall not in fact have retained
counsel to assume the defense of Indemnitee in connection with such action.
In each of the above cases, the fees and expenses of counsel employed by
Indemnitee shall be at the expense of the Corporation.
(c) The Corporation shall not be required to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any Claim
effected without the Corporation's written consent. The Corporation shall not
settle any Claim in any manner that would impose any penalty or limitation on
Indemnitee without Indemnitee's written consent. Neither the Corporation nor
Indemnitee shall unreasonably withhold consent to any such proposed such
settlement.
11. Indemnification and Expense Advancement Requests.
(a) Advancement of Expenses.
(i) Indemnitee shall, in order to request payment or
reimbursement of expenses pursuant to Section 4 hereof, submit to the Board of
Directors a statement or request for advancement of expenses substantially in
the form of Exhibits 1 or 1A attached hereto and made a part hereof (the
"Expense Advancement Request").
(ii) Within 10 business days after receipt of a properly
completed Expense Advancement Request and an invoice or other statement of the
expenses to be advanced, the President, the Chief Executive Officer, a Vice
President or General Counsel of the Corporation shall authorize the
Corporation's payment or reimbursement of said expenses, whereupon such
payment(s) or reimbursement(s) shall immediately be made. No security shall be
required in connection with any Expense Advancement Request, and it shall be
accepted without reference to Indemnitee's financial ability to make repayment.
-8-
<PAGE> 9
(b) Indemnification.
(i) Indemnitee, in order to request indemnification
pursuant to Section 3 hereof, shall submit to the Board of Directors a statement
of request for indemnification substantially in the form of Exhibit 2 attached
hereto and made a party hereof (the "Indemnification Request").
(ii) Any and all payments on account of the
Corporation's indemnification obligations under Section 3 hereof shall be made
within 10 business days of the Trust's receipt of a duly completed
Indemnification Request with respect thereto.
12. Continuation of Indemnity; Indemnity Not Exclusive. All
agreements and obligations of the Corporation contained herein shall continue
during the period Indemnitee is a Director and/or officer of the Corporation (or
serves at the request of the Corporation as a director, trustee, officer,
partner, employee or agent of another business trust, corporation, partnership,
joint venture or other enterprise or an employee benefit plan) and shall
continue thereafter so long as Indemnitee shall be subject to any possible
Claim.
The rights and benefits of Indemnitee and the obligations of
the Corporation under this Agreement shall be in addition to, and shall not
supersede, limit or be in lieu of, the provisions, if any, relating to the
indemnification of Indemnitee by the Corporation in the Corporation Articles,
the Bylaws of the Corporation, any resolution or resolutions of the Board of
Directors, any other agreement or financing arrangement, the provisions of
policies of insurance of the Corporation, or other applicable law.
13. Subrogation. In the event of payment or reimbursement by
the Corporation under this Agreement, the Corporation shall be subrogated to the
extent of such payment or reimbursement to any and all rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of any and all
such documents as may be necessary to enable the Corporation effectively to
enforce such rights.
14. Notice. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (i) delivered
by hand and receipted for by the party to whom such notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which so mailed:
If to Indemnitee, to: Thomas C. Janson, Jr., Esq.
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
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<PAGE> 10
If to the Corporation, to: Starwood Hotels & Resorts Worldwide, Inc.
777 Westchester Avenue
White Plains, NY 10604
Attention: Secretary
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
15. Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance is held by a
court of competent jurisdiction invalid, void or otherwise unenforceable, the
remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected, and the provision so held to be
invalid, void or otherwise unenforceable shall be reformed to the extent (and
only to that extent) necessary to make it enforceable.
16. Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one document.
17. Captions. The captions of the Sections to this Agreement
have been included herein for convenience of reference only, and this Agreement
shall not be construed by reference thereto.
18. Governing Law; Binding Effect; Amendment and Termination.
(a) This Agreement is made and entered into pursuant to
Section 2-418 of the MGCL, and this Agreement shall be governed by and its
provisions interpreted and enforced in accordance with the laws of the State of
Maryland applicable to contracts made and to be performed in such State without
giving effect to the principles of conflicts of laws.
(b) This Agreement shall be binding upon and inure to
the benefit of (i) the Corporation and its successors and permitted assigns
(including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business and/or assets of the
Corporation), and (ii) Indemnitee, his or her spouse, heirs, executors, personal
and legal representatives and other successors and permitted assigns. Neither
this Agreement nor any right or obligation hereunder may be assigned, delegated
or otherwise transferred by Indemnitee voluntarily during his lifetime or by the
Corporation, except that the Corporation shall require and cause any successor
to expressly assume and agree (by a writing in form and substance satisfactory
to Indemnitee, whose approval shall not be unreasonably withheld) to perform
this Agreement in the same manner and to the same extent that the Corporation
would have been required to perform if no such succession had taken place.
(c) No amendment, supplement or other modification,
or termination of this Agreement shall be effective unless executed in writing
by both of the parties hereto. No waiver of any provision or provisions of this
Agreement shall be deemed or shall constitute
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<PAGE> 11
a waiver of any other provision or provisions hereof (whether or not similar),
nor shall any such waiver constitute a continuing waiver.
19. Other Indemnification Agreements.
(a) This Agreement supersedes and replaces any prior
indemnification agreement between the Corporation and Indemnitee which covers
similar rights and obligations between Indemnitee and the Corporation; provided
however that Indemnitee and the Corporation shall retain any and all rights and
obligations under any such prior agreement which may have accrued or be
applicable to any period prior to the date of this Agreement.
(b) If Indemnitee has entered into, or in the future
enters into, an indemnification agreement with Starwood Hotels & Resorts Trust,
a Maryland real estate investment trust, similar to this Agreement, then if and
to the extent that Indemnitee is entitled to indemnification against and/or
advancement of any judgement(s), fine(s), penalty(ies), amount(s) paid in
settlement, cost(s) and/or expense(s) both under this Agreement and such other
indemnification agreement, Indemnitee shall be entitled to seek such
indemnification and/or reimbursement under either or both said agreements, as
Indemnitee may elect, but any and all such requests for indemnification and/or
advancement or expenses shall be subject to the provisions of paragraph (b) of
Section 5 of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on and as of the day and year first above written.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By: /s/ RONALD C. BROWN
-------------------------------------
Its: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
/S/ THOMAS C. JANSON, JR.
-------------------------------------
Thomas C. Janson, Jr., Indemnitee
EXHIBIT 1- Expense Advancement Request
EXHIBIT 1A- Expense Advancement Request
EXHIBIT 2- Indemnification Request
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<PAGE> 1
EXHIBIT 10.2
FIFTH AMENDMENT TO CREDIT AGREEMENT
FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
August 26, 1998, among STARWOOD HOTELS & RESORTS, a Maryland real estate
investment trust ("Starwood REIT"), SLT REALTY LIMITED PARTNERSHIP, a Delaware
limited partnership ("SLT RLP"), STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a
Maryland corporation (the "Corporation"), ITT CORPORATION, a Nevada corporation
("ITT" and, together with Starwood REIT, SLT RLP and the Corporation, the
"Borrowers"), the lenders from time to time party to the Credit Agreement
referred to below (the "Lenders"), BANKERS TRUST COMPANY and THE CHASE MANHATTAN
BANK, as Administrative Agents (in such capacity, the "Administrative Agents")
and LEHMAN COMMERCIAL PAPER INC. and BANK OF MONTREAL, as Syndication Agents (in
such capacity, the "Syndication Agents"). Unless otherwise defined herein, all
capitalized terms used herein shall have the respective meanings provided such
terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the Borrowers, the Lenders, the Administrative Agents and
the Syndication Agents are parties to a certain Credit Agreement, dated as of
February 23, 1998 (as amended, modified or supplemented to the date hereof, the
"Credit Agreement");
WHEREAS, the Parent Companies are contemplating the following
proposed reorganization transaction (the "Reorganization"): (i) a newly created
direct Wholly-Owned Subsidiary of the Corporation ("Newco") shall be merged
(with such merger being herein called the "Reorganization Merger") with and into
Starwood REIT, with Starwood REIT surviving the Reorganization Merger as a
direct Subsidiary of the Corporation; (ii) the common stock of Newco shall
become the common shares of beneficial interest in Starwood REIT (the "Class A
Shares") and the common shares of beneficial interest in Starwood REIT shall be
converted into a new class of shares of beneficial interest of Starwood REIT
(the "Class B Shares"); (iii) the Class B Shares shall be paired with the common
stock of the Corporation; (iv) the existing Class A Exchangeable Preferred
Shares and Class B Exchangeable Preferred Shares of Starwood REIT shall remain
outstanding as such shares of Starwood REIT; and (v) the organizational
documents of Starwood REIT and the Corporation shall be amended and restated to
effectuate the foregoing;
WHEREAS, three of SLT RLP's Wholly-Owned Subsidiaries, W&S Seattle
Corp., W&S Lauderdale Corp. and W&S Denver Corp. each intend to issue up to 500
shares of preferred shares to at least 100 new shareholders to enable such
corporations to be treated as real estate investment trusts under the Code (with
such stock issuances being collectively referred to herein as the "Westin Stock
Issue");
WHEREAS, the Borrowers wish to request certain one time waivers from
certain restrictions set forth in certain sections of the Credit Agreement in
order to permit the Reorganization and the Westin Stock Issue, as herein
provided; and
<PAGE> 2
WHEREAS, the parties hereto wish to further amend the Credit
Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Waivers, Amendments and Agreements with Respect to the Credit
Agreement.
1. Consent to Reorganization. Notwithstanding anything to the
contrary contained in the Credit Agreement, but subject to the terms of this
Amendment, the Lenders hereby consent to the Reorganization and to the Parent
Companies and their Subsidiaries taking the steps necessary to consummate the
Reorganization, in accordance with the steps described in Exhibit A attached
hereto, so long as the following conditions are satisfied:
(i) after giving effect to the Reorganization Merger, the
Corporation shall own all of the issued and outstanding Class A Shares of
Starwood REIT, which shares shall represent 100% of the equity interests
in Starwood REIT other than the equity interests represented by the Class
B Shares and the Class A Exchangeable Preferred Shares and Class B
Exchangeable Preferred Shares;
(ii) (x) in no event shall any additional Class A Exchangeable
Preferred Shares or Class B Exchangeable Preferred Shares be issued in
connection with the Reorganization Merger, except as specifically
contemplated by clause (ii) of Section 9.14(c) of the Credit Agreement (as
added pursuant to this Amendment), (y) in no event shall the issued and
outstanding Class B Shares, at the time of the consummation of the
Reorganization and immediately after giving effect thereto, represent more
than 49% of the aggregate economic interests (as determined by the
Corporation in good faith on a reasonable basis) represented by all
outstanding equity interests in Starwood REIT (exclusive of the
outstanding Class A Exchangeable Preferred Shares and Class B Exchangeable
Preferred Shares) and (z) in any event the terms of all Class B Shares
shall provide that same shall be, at the option of the Corporation at any
time when one or more material Events of Default (pursuant to the Credit
Agreement or certain other material Indebtedness) have continued in
existence beyond certain cure periods to be determined, mandatorily
exchanged for shares of common stock of the Corporation;
(iii) in no event shall the Class A Shares constitute Margin Stock,
and all said Class A Shares shall be immediately pledged (and delivered
for pledge) by the Corporation pursuant to the Pledge and Security
Agreement;
(iv) all material consents and approvals of, and filings and
registrations with, and all of the actions in respect of, all governmental
agencies, authorities or instrumentalities, as well as all shareholders,
holders of equity interests, creditors and parties to contracts with the
Parent Companies and their Subsidiaries, required in order to make or
consummate the Reorganization shall have been obtained, given, filed or
taken and are or will, at the time of the consummation of the
Reorganization Merger, be in full force and effect (without limiting the
foregoing, all required shareholder consents of the
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<PAGE> 3
Parent Companies shall have been obtained, as well as any consents
required of any holders of material outstanding Indebtedness of the Parent
Companies and their Subsidiaries);
(v) at the time of the consummation of the Reorganization (and after
giving effect thereto) no Specified Default, and no Event of Default,
shall be in existence and all representations, warranties and agreements
contained in the Credit Documents shall be true and correct in all
material respects (it being understood and agreed that any representation
or warranty which by its terms is made as of a specified date shall be
required to be true and correct in all material respects only as of such
specified date); provided that for purposes of this clause (v), the
following modifications shall be deemed made to Section 7 of the Credit
Agreement;
(a) all references in said Section 7 to "Documents" shall be
deemed to include any documents executed and delivered in connection
with the Reorganization; and
(b) all references in said Section 7 to the "Transaction" shall
be deemed to include the Reorganization and each of the components
thereof;
(vi) all proxy materials and similar materials distributed to
shareholders of Starwood REIT or the Corporation, generally, shall be
distributed to the Lenders substantially concurrently with their
distribution to said shareholders;
(vii) all terms of the Reorganization, the Class B Shares and any
other documentation entered into in connection with the Reorganization or
the Class B Shares shall, in each case, be required to be reasonably
satisfactory to the Lead Agents and, if there are any material differences
(in the good faith determination of the Lead Agents) in any of the terms
of the Reorganization, the Class B Shares and the other documentation
entered into in connection therewith from that described in this Fifth
Amendment, same shall be required to be satisfactory to the Required
Lenders. Such satisfaction may be evidenced by (i) the written approval of
the Required Lenders obtained after the documentation relating thereto has
been distributed to them or (ii) if said terms and documentation are
satisfactory to the Lead Agents and the Lenders are notified thereof, the
Required Lenders shall be deemed satisfied therewith unless, within 10
days after the Lenders' receipt of such notice and the relevant
documentation, the Required Lenders have objected in writing to any of the
terms or documentation entered into in connection with the Reorganization
or the Class B Shares;
(viii) the Reorganization Merger shall be consummated not later than
March 31, 1999; and
(ix) the Lead Agents shall have received such opinions of counsel
(with the counsel and form and substance of said opinions to be reasonably
satisfactory to the Lead Agents) to the extent requested by them in
connection with the foregoing.
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<PAGE> 4
As used herein, the term "Reorganization Merger Date" shall mean the date upon
which the merger of Newco with and into Starwood REIT is consummated as
described in step 2 set forth in Exhibit A.
2. Consent to Westin Stock Issue. Notwithstanding anything to the
contrary contained in the Credit Agreement, but subject to the terms of this
Amendment, the Lenders hereby consent to the Westin Stock Issue, so long as the
conditions described below are satisfied:
(i) none of W&S Seattle Corp., W&S Lauderdale Corp. or W&S Denver
Corp. shall issue more than 500 preferred shares pursuant to the Westin
Stock Issue;
(ii) unless the Required Lenders otherwise agree, the preferred
stock issued pursuant to the Westin Stock Issue shall (x) have a
liquidation preference not to exceed $500 per share, (y) have dividends
which accrue thereon at a rate per annum not to exceed 8.25% and (z)
otherwise constitute Perpetual Preferred Stock (as defined in the Credit
Agreement), except for the fact that the issuer thereof shall be the
respective entity identified in preceding clause (i); and
(iii) at the time of each issuance of preferred stock pursuant to
the Westin Stock Issue, no Specified Default, and no Event of Default,
shall be in existence.
3. Definition of Parent Companies. (a) Effective as of the
Reorganization Merger Date, and except as otherwise expressly provided in
following clause (b), all references in the Credit Agreement to the term "Parent
Companies" or "Parent Company" shall be deemed to refer only to the Corporation
and any references in the Credit Agreement before or after the term "Parent
Companies" to items such as "their Subsidiaries", etc., shall be changed
appropriately, mutatis mutandis. Without limiting the foregoing, (i) references
in the Credit Agreement to "either or both Parent Companies", "such Parent
Company", "either Parent Company", "Each Parent Company", "each Parent Company",
"each Parent Company (or both Parent Companies)" and "the respective Parent
Company" shall in each case be deemed to refer to the Corporation, (ii)
references in the Credit Agreement to "Parent Company's" or "Parent Companies'"
shall be deemed to refer to the Corporation's, (iii) any reference in the Credit
Agreement such as "neither Parent Company has been" shall be appropriately
changed to "the Corporation has not been" and (iv) references after the term
"Parent Company" to "their Subsidiaries", "their Subsidiaries and Affiliates"
and other similar references shall be deemed to refer to "its Subsidiaries",
"its Subsidiaries and Affiliates" or other appropriate reference, as the case
may be.
(b) Notwithstanding anything to the contrary contained in preceding
clause (a), the following references to the term "Parent Companies" or "Parent
Company" shall not be changed as otherwise required by preceding clause (a):
(i) references to the "Parent Companies" or "Parent Company" in
Section 5 of the Credit Agreement shall not be modified;
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<PAGE> 5
(ii) references to the Parent Companies in Section 7.03(a) shall
not be modified;
(iii) the reference to the "Parent Companies" in Section 7.14 shall
not be modified;
(iv) the reference to "Parent Companies" in Section 9.03(a)(v)
shall not be modified;
(v) references to "Parent Companies" in Section 9.07, in each
case to the extent relating to periods prior to the Reorganization Merger
Date, shall be deemed not to be changed for such prior periods;
(vi) the reference to "Parent Companies" in the definitions of
"Dividend" and "GAAP" appearing in Section 11 of the Credit Agreement
shall not be changed;
(vii) no modification shall be made to the definition of "Parent
Companies" appearing in Section 11 of the Credit Agreement;
(viii) lower case references to a "parent company" or "parent
companies" shall not be modified (including, without limitation, those
references thereto contained in Sections 13.04(b)(x)(i)(a) and 13.17); and
(ix) the term "Parent Company" and "Parent Companies" as used in
Section 13.12 shall not be modified hereby.
4. Section 4.02(d); Debt Proceeds. Section 4.02(d) of the Credit
Agreement is hereby amended as follows:
(a) by adding at the end of the first parenthetical contained in
Section 4.02(d), the following:
", Indebtedness permitted to be incurred pursuant to Section 9.04(viii),
and Indebtedness in connection with any CMBS Transaction permitted to be
incurred pursuant to Section 9.04(xiv), except that (x) Indebtedness
evidenced by Permanent Senior Notes issued pursuant to Section
9.04(viii)(B) (unless and to the extent such Permanent Senior Notes are
issued as a result of an increase in availability as specifically
contemplated by the last sentence of Section 9.04) and Indebtedness
incurred pursuant to any CMBS Transaction shall not be excepted pursuant
to this parenthetical unless and until all Tranche I Term Loans have been
repaid in full (with the aggregate amount of Net Proceeds from issuances
of Permanent Senior Notes and CMBS Transactions incurred on or before
February 23, 1999 which are actually used to repay principal of Tranche I
Term Loans then outstanding in accordance with the provisions of this
clause (d) being herein called the "Maximum Indebtedness Scheduled Asset
Sale Credit Amount") and (y) thereafter, Indebtedness incurred pursuant to
CMBS Transactions shall not be excepted pursuant to this parenthetical if,
and to the extent, the Indebtedness incurred in connection with the
respective CMBS Transaction is permitted pursuant to Section 9.04(viii) as
a result of an
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<PAGE> 6
increase to the $1.0 billion amount contained therein pursuant to the
provisions of the last sentence of Section 9.04";
and (b) by adding at the end of the second parenthetical contained
in Section 4.02(d) the following:
"and other than Qualified Preferred Stock permitted to be issued pursuant
to Section 9.14(c) (unless and to the extent such Qualified Preferred
Stock is issued as a result of an increase in availability as specifically
contemplated by the last sentence of Section 9.04) shall not be excepted
pursuant to this parenthetical unless and until all Tranche I Term Loans
have been repaid in full."
5. Section 4.02(e); Proceeds from Asset Sales. Section 4.02(e) of
the Credit Agreement is hereby amended by (x) inserting immediately after the
phrase "Scheduled Asset Disposition" the first place it appears therein the
phrase "(except that, if one or more Scheduled Asset Dispositions occurs on or
before February 23, 1999 and after proceeds of Indebtedness issued pursuant to
Section 9.04(viii)(B) and/or 9.04(xiv) and/or proceeds of Qualified Preferred
Stock issued pursuant to Section 9.04(c) have actually been used to repay
principal of outstanding Tranche I Term Loans pursuant to the requirements of
preceding Section 4.02(d) and/or the requirements of this clause (e), an
aggregate amount of Net Proceeds from such Scheduled Asset Dispositions may be
excluded from the requirements that same be applied pursuant to this Section
4.02(e) so long as the aggregate amount so excluded does not exceed the sum of
the Maximum Indebtedness Scheduled Asset Sale Credit Amount and the Maximum QPS
Scheduled Asset Sale Credit Amount)", (y) inserting immediately after the phrase
"receives cash proceeds from any sale or issuance of its equity" the phrase
"(excluding equity issued in accordance with the requirements of Section
9.14(c), except that Qualified Preferred Stock issued pursuant to Section
9.14(c) (unless and to the extent such Qualified Preferred Stock is issued as a
result of an increase in availability as specifically contemplated by the last
sentence of Section 9.04) shall not be excepted pursuant to this parenthetical
unless and until all Tranche I Term Loans have been repaid in full (with the
aggregate amount of Net Proceeds from issuances of Qualified Preferred Stock on
or before February 23, 1999 which are actually used to repay principal of
Tranche I Term Loans then outstanding accordance with the provisions of this
clause (e) or preceding Section 4.02(d) being herein called the "Maximum QPS
Scheduled Asset Sale Credit Amount"))" and (z) deleting the text thereof from
and after the first proviso thereto and inserting in lieu thereof the following
new text:
"provided that, Net Proceeds received in respect of Asset Sales made
pursuant to, and in accordance with the requirements of, clause (viii) of
Section 9.02 and which otherwise would be required to be applied as
mandatory repayments or commitment reductions hereunder shall not be
required to be so applied and may be reinvested in assets used or to be
used in Hotel and Gaming Businesses if the following conditions are
satisfied:
(1) no Specified Default, and no Event of Default, then exists;
(2) the Parent Companies deliver a certificate to the Paying Agent on or
prior to such date stating that such Net Proceeds shall be used (or
contractually committed to be
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<PAGE> 7
used) to purchase assets used or to be used in Hotel and Gaming
Businesses within 360 days (or earlier to the extent required to be
so applied pursuant to the terms of any outstanding Indebtedness)
following the date of such Asset Sale (which certificate shall set
forth the estimates of the proceeds to be so expended);
(3) the amount of Net Sale Proceeds which may be reinvested (including
the amounts of any "deemed reinvestments" pursuant to following
clause (4)) shall not exceed (a) $600,000,000 (or $750,000,000 if,
at the time of the respective Asset Sale and after giving effect
thereto, either (1) the Combined Leverage Ratio is less than 4.5:1.0
or (2) the Unsecured Debt Rating of each Parent Company (or both
Parent Companies) shall be at least BBB- by S&P and Baa3 by Moody's)
for Net Sale Proceeds received during the period commencing on the
Initial Borrowing Date and ending on December 31, 1998 and (b)
$250,000,000 (or $500,000,000 if all Tranche I Term Loans have been
repaid in full) for Net Sale Proceeds received during any Fiscal
Year thereafter; and, if, at the time of the respective Asset Sale
and after giving effect thereto, either (1) the Combined Leverage
Ratio is less than 4.5:1.0 or (2) the Unsecured Debt Rating of each
Parent Company (or both Parent Companies) shall be at least BBB- by
S&P and Baa3 by Moody's), then there shall be no further limitation
on the amount of such permitted reinvestments; and
(4) any Asset Sale structured in the form of a "like-kind exchange" in
accordance with Section 1031 of the Code shall be treated as the
sale of an Asset with the Net Sale Proceeds (deemed to be an amount
equal to the fair market value of the Assets so exchanged) therefrom
reinvested pursuant to clause (3) of this proviso;
provided further, that if (x) all or any portion of such Net Sale Proceeds
not so applied pursuant to the immediately preceding proviso as a
mandatory repayment are not so used (or contractually committed to be
used) within the 360 day period after the date of the respective Asset
Sale (or earlier to the extent required to be so applied pursuant to the
terms of any outstanding Indebtedness), such remaining portion shall be
applied on the last day of such period as provided above in this Section
4.02(e) (without regard to the immediately preceding proviso) and (y) all
or any portion of such Net Sale Proceeds are contractually committed to be
used and subsequent to such date such contract is terminated or expires
without such portion being so used, then such remaining portion shall be
applied on the date of such termination or expiration as provided in this
Section 4.02(e) (without regard to the immediately preceding proviso)."
6. Section 7.13; Mortgage Loans. The second sentence of Section
7.13(b) of the Credit Agreement is hereby amended by inserting, immediately
after the last word thereof, the following:
", except for such waivers, modifications, alterations, satisfactions,
cancellations or subordinations which could not reasonably be expected to
result in a material adverse effect on the value of the affected Mortgage
Loan."
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<PAGE> 8
7. Section 7.15; Preferred Stock Subsidiaries. The first sentence
of Section 7.15 of the Credit Agreement is hereby amended by inserting the
phrase ", as of the Initial Borrowing Date," immediately after the phrase
"complete and accurate list" appearing in the first sentence thereof.
8. Section 7.28; Status as a REIT. Section 7.28 of the Credit
Agreement is hereby amended by deleting the first sentence thereof and by
inserting the following sentence in its place:
"Starwood REIT is organized in conformity with the requirements for
qualification as a real estate investment trust under the Code and, until
the consummation of the Reorganization, is grandfathered from the
application of Section 269B(a)(3) of the Code pursuant to Section
136(c)(3) of the Deficit Reduction Act of 1984."
9. Section 7.31; Stock. Effective as of the Reorganization Merger
Date, Section 7.31 of the Credit Agreement shall be deemed amended and restated
in its entirety to read as follows:
"The Corporation lists its outstanding shares of common stock (other than
the UBS Shares, and except for similar issuances after the Initial
Borrowing Date) on the New York Stock Exchange and such shares trade as
"paired shares" with the Class B Shares of Starwood REIT subject to an
amended pairing agreement between Starwood REIT and the Corporation."
10. Section 8.01; Information Covenants. (a) Notwithstanding
anything to the contrary contained in Section 8.01(a) or (b), as the case may
be, of the Credit Agreement, to the extent financial statements are required to
be delivered pursuant to said Sections 8.01(a) and/or (b) for any fiscal quarter
or fiscal year which ends after the Reorganization Merger Date, each reference
in said Sections 8.01(a) and (b) to (x) the separate consolidated and
consolidating financial statements of each of (i) Starwood REIT and its
Subsidiaries and (ii) the Corporation and its Subsidiaries and (y) the combined
consolidated and consolidating financial statements of the Parent Companies,
shall be deemed to refer to the consolidated and consolidating balance sheets of
the Corporation and its Subsidiaries only.
(b) Notwithstanding anything to the contrary contained in Section
8.01(d) of the Credit Agreement, any budgeted statements prepared in accordance
with the requirements of Section 8.01(d), if prepared after the Reorganization
Merger Date, shall be prepared by the Corporation on a consolidated basis,
rather than on a combined basis.
11. Section 8.11; REIT Requirements. Section 8.11 of the Credit
Agreement is hereby amended by deleting the first sentence thereof and by
inserting the following sentence in its place:
"Starwood REIT shall operate its business at all times so as to satisfy
all requirements necessary to qualify as a real estate investment trust
under Sections 856 through 860 of the Code and, until the consummation of
the Reorganization, shall at all times maintain
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<PAGE> 9
its status as grandfathered from the application of Section 269B(a)(3) of
the Code pursuant to Section 136(c)(3) of the Deficit Reduction Act of
1984."
12. Section 8.16; Margin Regulations. Section 8.16 of the Credit
Agreement is hereby amended by adding the following new sentence immediately
after the first sentence thereof:
"Furthermore, the Borrowers shall take all actions so that at all times
all Capital Stock of Starwood REIT owned by the Corporation or any of its
Subsidiaries (including, without limitation, the Class A Shares to be
issued pursuant to the Reorganization) do not constitute Margin Stock."
13. Section 8.19; REIT and Corporation Stock. Effective as of the
Reorganization Merger Date, Section 8.19 of the Credit Agreement shall be deemed
amended and restated in its entirety to read as follows:
"The Corporation shall maintain in good standing its listing of, or
listing authorization for, all of its outstanding shares of Capital Stock
on the New York Stock Exchange (other than the UBS Shares, and except for
similar issuances after the Initial Borrowing Date) and such shares shall
trade as "paired shares" with the Class B Shares of Starwood REIT subject
to an amended pairing agreement between Starwood REIT and the
Corporation."
14. Section 9.01; Liens. (a) Section 9.01(iii) of the Credit
Agreement is amended by deleting the words "without giving effect to any
renewals, replacements and extensions of such Liens" appearing therein and by
inserting in lieu thereof the phrase "and giving effect to any renewals,
replacements and extensions of such Liens, in each case so long as the
obligations secured thereby are not increased as a result thereof and so long as
such renewals, replacements and extensions do not result in Liens applying to
any Assets which are not already subject to the Liens securing the respective
obligations being renewed, replaced or extended."
(b) Section 9.01 of the Credit Agreement is hereby further amended
by (i) deleting the word "and" appearing at the end of clause (xiv) thereof,
(ii) deleting the period at the end of clause (xv) thereof and inserting in lieu
thereof a semi-colon and (iii) adding new clauses (xvi) and (xvii) at the end of
Section 9.01 as follows:
"(xvi) Liens on Assets of any Borrower or any Subsidiary of any Borrower
(other than Assets constituting Collateral) securing CMBS Transactions
permitted under Section 9.04(xiv); and
(xvii) Liens on cash or Cash Equivalents (with the amount of cash and
Cash Equivalents at any time subject to Liens pursuant to this clause
(xvii) not to exceed the lesser of (x) $135,000,000 and (y) remainder of
$1,135,000,000 less the amount of all payments theretofore made pursuant
to Section 9.03(a)(iv) in connection with the Existing Forward Equity
Transaction entered into with the holder of and in connection with the
UBS Shares)."
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15. Section 9.02; Consolidation, Merger, Etc. (a) Notwithstanding
anything to the contrary contained in the Credit Agreement, the Lenders hereby
waive the restrictions contained in Section 9.02 with respect to the
Reorganization, so long as same is consummated in accordance with the
requirements of Section 1 of Part I of the Fifth Amendment.
(b) Section 9.02(viii) of the Credit Agreement is amended by (1)
deleting the words "as provided in" appearing in clause (z) immediately before
the words "Section 4.02(e)" and replacing the same with "if and to the extent
required by the provisions of", (2) placing a period after the first appearance
of the reference to "Section 4.02(e)" and (3) deleting the entire subsection
from and after such period and replacing the same with the following sentence:
"Notwithstanding anything to the contrary contained in clause (y) of the
immediately preceding sentence, any Asset Sale permitted pursuant to this
clause (viii) may be structured in the form of a "like-kind exchange" in
accordance with Section 1031 of the Code, in each case so long as the fair
market value of the Assets so exchanged would not, when added to the
amount of Net Sale Proceeds in respect of Asset Sales received during the
respective Fiscal Year which are to be reinvested pursuant to clause (3)
of the first proviso to Section 4.02(e), exceed the respective amounts for
such Fiscal Year specified in said clause (3) of the first proviso to
Section 4.02(e) hereof."
16. Section 9.03; Restricted Payments. (a) Section 9.03(a)(ii) of
the Credit Agreement is hereby amended by (x) inserting, immediately after the
phrase "qualifies as a "real estate investment trust" under the Code," appearing
therein the phrase "(A) until the occurrence of the Reorganization Merger Date,"
and (y) inserting the following new text immediately at the end thereof:
"and (B) at all times from and after the Reorganization Merger Date, (a)
Starwood REIT may pay regularly accruing dividends on any Qualified
Preferred Stock issued by it in accordance with the provisions of Section
9.14(c) so long as such Qualified Preferred Stock bears dividends
consistent with then prevailing market conditions (as determined in good
faith by Starwood REIT) at the time of the issuance of the respective
Qualified Preferred Stock), (b) Starwood REIT may pay Dividends to the
Corporation or any Wholly-Owned Subsidiary thereof and (c) during any
period of twelve consecutive calendar months ending after the
Reorganization Merger Date (but excluding that portion of any such twelve
month period which occurs prior to the Reorganization Merger Date),
Starwood REIT may pay cash dividends to its shareholders (excluding (x)
the Corporation and any Wholly-Owned Subsidiary thereof and (y) dividends
paid by Starwood REIT on any Qualified Preferred Stock) for such period in
an aggregate amount not to exceed the lesser of (A) $150,000,000 (with the
dollar amount otherwise provided in this clause (A) to be increased, but
only for periods ended after the date of the respective increase, on each
anniversary of the Reorganization Merger Date by an amount equal to 20% of
the dollar amount as permitted pursuant to this clause (A) as same was in
effect immediately before such increase and (B) 15% of Adjusted Funds From
Operations for such period."
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(b) Subsection 9.03(a)(iv) of the Credit Agreement is hereby
amended and restated in its entirety to read as follows:
"(iv) so long as (x) no Specified Default, and no Event of Default, then
exists or would result therefrom and (y) Starwood REIT qualifies as a
"real estate investment trust" under the Code, Starwood REIT and/or the
Corporation shall be permitted to repurchase shares of their own common
stock and may make payments (excluding the delivery of cash or Cash
Equivalents pursuant to Section 9.01(xvii) unless and until such cash or
Cash Equivalents are actually used to satisfy obligations pursuant to the
respective Existing Forward Equity Transaction) in respect of one or more
Forward Equity Transactions, in an aggregate amount for all purchases and
payments pursuant to this clause (iv) not to exceed $1,135,000,000
(reduced by the amount of cash and Cash Equivalents from time to time
subject to Liens securing any Forward Equity Transaction)."
(c) Effective as of the Reorganization Merger Date, clause (vi) of
Section 9.03(a) shall be deleted, with any amounts theretofore used to
repurchase UBS Shares as provided in said Section 9.03(a)(vi) prior to the
Reorganization Merger Date to thereafter be deemed to have been expended
pursuant to clause (iv) of Section 9.03(a).
17. Section 9.04; Indebtedness. (a) Section 9.04(viii) is hereby
amended and restated in its entirety to read as follows:
"(viii) (A) the Corporation shall be permitted to issue Senior Secured
Bridge Notes on the Initial Borrowing Date as required by Section 5.06(a)
(with the Senior Secured Bridge Note Documents to be in the form provided
pursuant to Section 5.06(b) on or prior to the Initial Borrowing Date) and
shall be permitted from time to time to issue (but not to any Borrower or
Affiliate thereof) Permanent Senior Notes for cash; provided that (w) all
of the terms and conditions of the Permanent Senior Notes (including,
without limitation, amortization, maturities, interest rates, covenants,
defaults, remedies, guaranties, sinking fund provisions and other terms)
shall be reasonably satisfactory to the Lead Agents, (x) at the option of
the Corporation, Permanent Senior Notes may be issued as Permanent Senior
Secured Notes and, in such event, may be secured to the extent provided in
the Pledge and Security Agreement, (y) all Net Proceeds (determined
without giving effect to the proviso to the definition of Net Proceeds
contained herein) from any issuance of Permanent Senior Notes under this
clause (viii)(A) or clause (viii)(B) below shall be applied first to repay
the outstanding Senior Secured Bridge Notes until all such Senior Secured
Bridge Notes are repaid in full (except to the extent such Net Proceeds
are otherwise required to be applied to the Tranche I Term Loans pursuant
to Section 4.02 (d)), and any remaining Net Proceeds shall be used for
general corporate purposes of the Corporation otherwise permitted under
the terms of this Agreement, and (z) in no event shall the aggregate
principal amount of Indebtedness at any time outstanding pursuant to this
clause (viii)(A) exceed $2.5 billion; and
(B) in addition to the Indebtedness permitted to be incurred under clause
(viii)(A) above, the Corporation shall be permitted to issue (but not to
any Borrower or Affiliate thereof) additional Senior Secured Bridge Notes
from time to time and at any time (with
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amendments to the Senior Secured Bridge Note Documents to effect any such
increase to be in form and substance reasonably satisfactory to the Lead
Agents) and shall be permitted from time to time to issue (but not to any
Borrower or Affiliate thereof) Permanent Senior Notes (in addition to
those issued pursuant to clause (viii)(A) above) for cash; provided that
(w) no Specified Default, and no Event of Default, shall exist at the time
of any issuance of Indebtedness pursuant to this clause (viii)(B) or
immediately after giving effect thereto, (x) all of the terms and
conditions of the additional Permanent Senior Notes (including, without
limitation, amortization, maturities, interest rates, covenants, defaults,
remedies, guaranties, sinking fund provisions and other terms) shall be
reasonably satisfactory to the Lead Agents, (y) at the option of the
Corporation, such additional Permanent Senior Notes may be issued as
Permanent Senior Secured Notes and, in such event, may be secured to the
extent provided in the Pledge and Security Agreement, and (z) in no event
shall the aggregate principal amount of Indebtedness at any time
outstanding pursuant to this clause (viii)(B), together with the aggregate
principal amount of all Indebtedness outstanding pursuant to Section
9.04(xiv) and the aggregate liquidation preference of all Qualified
Preferred Stock then outstanding pursuant to Section 9.14(c), exceed $1.0
billion."
(b) Section 9.04 is hereby further amended by (x) deleting the word
"and" appearing at the end of clause (xii) thereof, (y) changing the period at
the end of clause (xii) thereof to "; and" and (z) inserting, immediately after
clause (xiii) of Section 9.04, the following new clause (xiv):
"(xiv) in addition to all other permitted Indebtedness described in
clauses (i) through (xiii) of this Section 9.04, either Starwood REIT, the
Corporation or any of their respective Subsidiaries or Affiliates shall be
permitted to enter into one or more collateralized mortgage backed
securities transactions (each a "CMBS Transaction"); provided that (x) no
Specified Default, and no Event of Default, shall exist at the time of the
consummation of any CMBS Transaction or immediately after giving effect
thereto, (y) all of the terms and conditions of each CMBS Transaction
(including, without limitation, amortization, maturities, interest rates,
covenants, defaults, remedies, guaranties, sinking fund provisions,
security and other terms) shall be reasonably satisfactory to the Lead
Agents and (z) in no event shall the aggregate principal amount of
Indebtedness at any time outstanding pursuant to this clause (xiv),
together with the aggregate principal amount of all Indebtedness then
outstanding pursuant to Section 9.04(viii)(B) and the aggregate
liquidation preference of all Qualified Preferred Stock then outstanding
pursuant to Section 9.14(c), exceed $1.0 billion."
(c) Section 9.04 is hereby further modified and amended by adding
the following new sentence at the end thereof:
"Notwithstanding the provisions of Section 9.04(viii)(B) and Section
9.04(xiv) above, if and to the extent that the aggregate amount of New
Commitments actually obtained pursuant to the Fourth Amendment after the
effective date thereof are less than $500,000,000 and either the
Corporation or Starwood REIT have no further right under the Fourth
Amendment to obtain New Commitments or the Corporation and Starwood
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<PAGE> 13
REIT shall have irrevocably waived in writing (delivered to the Lead
Agents, and in form and substance reasonably satisfactory to the Lead
Agents) such right to obtain New Commitments, the amount "$1.0 billion"
appearing in Section 9.04(viii)(B), Section 9.04(xiv) and 9.14(c) shall,
in each instance in which the same appears, be increased by an amount
equal to the difference between $500,000,000 and the aggregate amount of
New Commitments actually obtained pursuant to the Fourth Amendment after
the effective date thereof, if any (it being understood and agreed that,
at the time of any incurrence of Indebtedness or issuance of Qualified
Preferred Stock pursuant to any of Sections 9.04(viii)(B), Section
9.04(xiv) and/or 9.14(c), if there is basket availability under the
relevant such Section in the absence of the provisions of this sentence,
and if there is also availability pursuant to this sentence, the Borrower
shall, at its option, determine whether or not the respective incurrence
of Indebtedness or issuance of Qualified Preferred Stock has been made as
a result of an increase to the respective such basket pursuant to this
sentence, including for purposes of Sections 4.02(d) and 4.02(e))."
18. Section 9.06; Transactions with Affiliates. Section 9.06 of the
Credit Agreement is hereby amended by (x) deleting the word "and" appearing at
the end of clause (v) thereof, (y) deleting the period appearing at the end of
clause (vi) thereof and inserting "; and" in lieu thereof and (z) inserting the
following new clause (vii) immediately after clause (vi) thereof:
"(vii) in connection with the Reorganization, and in accordance with the
requirements of Section 1 of Part I of the Fifth Amendment, the lessees'
interests under the Operating Leases (in each case so long as the lessee
is a Subsidiary of the Corporation) may be transferred from the current
lessees to the Corporation."
19. Section 9.07; Capital Expenditures. Section 9.07(c) of the
Credit Agreement is hereby amended by (i) deleting the remainder of the Section
beginning with clause (y) thereof and replacing such portion of said Section
with the following:
"(y) for Fiscal Year 1999, $900,000,000 and for any Fiscal Year
thereafter, $400,000,000; provided that, to the extent that the amount of
Capital Expenditures made by the Parent Companies and their Subsidiaries
pursuant to preceding clause (x) during the period specified therein is
greater than $700,000,000, then the amount of such excess, but not to
exceed $200,000,000, shall be permitted, but the amount of such excess
shall reduce the amount available for Capital Expenditures for Fiscal Year
1999 as set forth above."
and (ii) inserting the following new clause (f) immediately at the end
thereof:
"(f) Notwithstanding anything to the contrary contained above in this
Section 9.07, the maximum amount of Capital Expenditures (which in any
event must justified pursuant to the preceding provisions of this Section
9.07) in any Fiscal Year in respect of new construction (for this purpose,
including as new construction any Hotels which are, or have been, entirely
closed for renovation) shall not exceed $350,000,000."
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<PAGE> 14
20. Section 9.09; Maximum Combined Leverage Ratio. The periods and
ratios set forth in Section 9.09 of the Credit Agreement are amended and
restated in their entirety to read as follows:
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<PAGE> 15
Period Ratio
------ -----
From and including the Initial Borrowing 6.50:1.00
Date to and including September 30, 1998
From and including October 1, 1998 to and 5.75:1.00
including March 31, 1999
April 1, 1999 to and including September 30, 1999 5.50:1.00
October 1, 1999 to and including March 31, 2000 5.00:1.00
April 1, 2000 to and including September 30, 2000 4.75:1.00
October 1, 2000 to and including March 31, 2001 4.50:1.00
April 1, 2001 to and including September 30, 2001 4.25:1.00
October 1, 2001 and thereafter 4.00:1.00
21. Section 9.12; Limitations on Voluntary Payments and
Modifications of Indebtedness; Modification of Certificate of Incorporation and
Certain Other Agreements. Section 9.12 of the Credit Agreement is hereby amended
by deleting, in the parenthetical appearing in clause (iii) thereof which
immediately precedes the proviso thereto, the phrase "proceeds of Permanent
Senior Notes" and inserting in lieu thereof the following:
"proceeds (x) of Permanent Senior Notes issued pursuant to Section
9.04(viii)(A) and, in each case except to the extent the Net Proceeds thereof
are required to be used to repay outstanding Tranche I Term Loans in accordance
with the relevant requirements of Sections 4.02(d) and (e), with the proceeds of
Permanent Senior Notes issued pursuant to Section 9.04(viii)(B), CMBS
Transactions entered into in accordance with the requirements of Section
9.04(xiv) and Qualified Preferred Stock issued pursuant to Section 9.14(c) and
(y) Scheduled Asset Dispositions which are effected on or before February 23,
1999 and are not required to be applied pursuant to Section 4.02(d), but only to
the extent the amount so applied to repay Senior Secured Bridge Notes does not
exceed the sum of the Maximum Indebtedness Scheduled Asset Sale Credit Amount
and the Maximum QPS Scheduled Asset Sale Credit Amount."
Furthermore, and notwithstanding anything to the contrary contained
in the Credit Agreement, the Lenders hereby waive the restrictions contained in
Section 9.12 to the extent same would prohibit (a) Starwood REIT and the
Corporation from amending their "pairing agreement" and Starwood REIT, the
Corporation, SLT RLP, SLC OLP and their respective Subsidiaries from amending
their respective organizational documents in order to consummate the
Reorganization, and (b) the Westin Stock Issue from occurring. Furthermore, the
Lenders hereby acknowledge and agree that, notwithstanding the restrictions
contained in Section 9.12, (x) the Senior Secured Bridge Notes Documents may be
amended or modified to loosen certain covenants contained therein, in each case
to adopt changes consistent with those contained
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<PAGE> 16
through and including the Fifth Amendment to the Credit Agreement and (y)
modifications to the Senior Secured Bridge Note Documents may be made to effect
an increase in the outstanding principal amount thereof, in each case as
specifically contemplated by Section 9.04(viii)(B).
22. Section 9.13; Limitations on Certain Restrictions on
Subsidiaries. Section 9.13 of the Credit Agreement is hereby amended by deleting
the word "and" immediately preceding clause (xi) thereof and by adding the
following new text immediately at the end thereof:
", (xii) the Class A Exchangeable Preferred Shares and the Class B
Exchangeable Preferred Shares of Starwood REIT outstanding prior to the
Initial Borrowing Date may remain outstanding, and any additional shares
of preferred stock issued as contemplated by Section 9.14(c) may be issued
and remain outstanding, and any classes of preferred stock so issued or
outstanding may contain provisions requiring that accrued dividends
thereon be paid before distributions are made in respect of common shares
and (xiii) the Class B Shares of Starwood REIT may be issued in connection
with the Reorganization and may contain provisions requiring that
dividends thereon be paid on a pari passu basis with dividends to be paid
on the Class A Shares of Starwood REIT."
23. Section 9.14; Limitations on Issuance of Capital Stock. Section
9.14 of the Credit Agreement is hereby amended by adding the following new
clause (c) immediately after clause (b) thereof:
"(c) Notwithstanding anything to the contrary contained in preceding
clauses (a) and (b), (i) Starwood REIT may issue Class B Shares (x) as
merger consideration in connection with the Reorganization, in each case
in accordance with the requirements of Section 1 of Part I of the Fifth
Amendment, (y) after the Reorganization Merger Date, as "paired shares"
with common shares of the Corporation issued after the Reorganization
Merger Date and (z) to the extent permitted by the terms of theretofore
outstanding Class B Shares, as payment-in-kind dividends on theretofore
outstanding Class B Shares, in each case so long as any issuance of Class
B Shares otherwise permitted by this Section 9.14(c) does not result in a
Change of Control pursuant to the definition thereof contained herein,
(ii) in connection with the Reorganization, Starwood REIT may issue up to
100 additional Class A Exchangeable Preferred Shares, (iii) the Westin
Stock Issue may be consummated in accordance with the provisions of
Section 2 of Part I of the Fifth Amendment, (iv) Starwood REIT and/or the
Corporation shall be permitted to issue Qualified Preferred Stock pursuant
to this Section 9.14(c) so long as (x) no Specified Default, and no Event
of Default, exists at the time of, or immediately after giving effect to,
any issuance of Qualified Preferred Stock pursuant to this Section 9.14(c)
and (y) the aggregate liquidation preference thereof at no time
outstanding exceeds, when added to the aggregate principal amount of
Indebtedness then outstanding pursuant to Sections 9.04(viii)(B) and
9.04(xiv), $1.0 billion (subject to increase as provided in the last
sentence of Section 9.04) and (v) to the extent that the Corporation
issues any common shares after the Reorganization Merger Date, such common
shares shall be issued as "paired shares" with Class B Shares of Starwood
REIT after the Reorganization Merger Date."
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<PAGE> 17
24. Section 9.23; Unencumbered EBITDA Ratio. Section 9 of the Credit
Agreement is hereby further amended by adding the following new Section 9.23
immediately at the end thereof:
"9.23 Unencumbered EBITDA Ratio. The Borrowers will not permit the ratio
of Combined EBITDA to Encumbered EBITDA for any test period ending after
the Fifth Amendment Effective Date to be less then 4.00:1.00."
25. Section 10.11; REIT Status. Effective as of the Reorganization
Merger Date, Section 10.11 of the Credit Agreement is amended by deleting all
language after the words "of the Code" appearing in the second line thereof.
26. Section 11; Definitions. The following definitions in Section 11
of the Credit Agreement are amended as set forth below:
(a) Applicable Asset Sale Percentage. The definition of "Applicable
Asset Sale Percentage" shall be amended by amending and restating the
second proviso to read as follows:
"provided further, that if at any time after all Tranche I Term
Loans have been repaid in full and (A) either (1) the Combined
Leverage Ratio is less than 4.5:1.0 or (2) the Unsecured Debt Rating
of each Parent Company (or both Parent Companies) shall be at least
BBB- by S&P and Baa3 by Moody's, and (B) no Specified Default, and
no Event of Default, then exists, then the Applicable Asset Sale
Percentage shall be reduced to zero for so long as the conditions
specified in preceding clauses (A) and (B) continue to be
satisfied."
(b) Applicable Debt Percentage. The definition of "Applicable Debt
Percentage" shall be modified and amended by deleting the ratio "4.0:1.0"
appearing therein and replacing the same with "4.5:1.0."
(c) Asset Sale. The definition of "Asset Sale" is amended by
deleting the amount "$500,000" in the last line thereof and by inserting
the amount "$5,000,000" in lieu thereof.
(d) Change of Control. The definition of "Change of Control" is
hereby amended by (x) deleting the word "or" appearing immediately before
clause (iv) thereof and by inserting a comma in lieu thereof and (y)
inserting the following new text immediately after the last word thereof:
"or (v) after the Reorganization Merger Date, at any time either (x)
Starwood REIT shall not for any reason be a Subsidiary of the
Corporation or (y) the Corporation shall at any time cease to
directly own 100% of the Capital Stock of Starwood REIT (other than
the Class A Exchangeable Preferred Shares and Class B Exchangeable
Preferred Shares outstanding on the Initial Borrowing Date and any
other shares of Starwood REIT issued thereafter pursuant to the
express provisions of Section 9.14(c), in each case so long as the
issued and outstanding
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<PAGE> 18
Class B Shares of Starwood REIT held by persons other than the
Corporation or Wholly-Owned Subsidiaries thereof at no time
represent more than 49% of the aggregate economic interests (as
determined by the Corporation in good faith on a reasonable basis)
represented by all outstanding equity interests in Starwood REIT
(exclusive of the outstanding Class A Exchangeable Preferred Shares
and Class B Exchangeable Preferred Shares)).
(e) Combined Adjusted Charges. The definition of "Combined Adjusted
Charges" is hereby amended by (i) inserting, immediately before clause (x)
thereof, the following new clause (w):
"(w) the aggregate amount of cash taxes paid by the Parent Companies
and their Subsidiaries (on a combined consolidated basis) during
such period,"
(ii) in clause (y) thereof, inserting the phrase "(other than to the
Corporation or any Wholly-Owned Subsidiary thereof)" immediately after the
phrase "paid by Starwood REIT" appearing therein and (iii) for all periods
from and after the Reorganization Merger Date, changing the phrase
"combined total revenues" appearing therein to "consolidated total
revenues."
(f) Combined Adjusted Charges; Combined Current Assets; Combined
Current Liabilities; Combined Indebtedness; Combined Interest Expense;
Combined Net Income; Combined Shareholders' Equity; Excess Cash Flow. Each
of the definitions of "Combined Adjusted Charges", "Combined Current
Assets", "Combined Current Liabilities", "Combined Indebtedness",
"Combined Interest Expense", "Combined Net Income", "Combined
Shareholders' Equity" and "Excess Cash Flow" appearing in Section 11 of
the Credit Agreement are hereby amended, but only for all periods
occurring after the Reorganization Merger Date, by changing the term
"combined consolidated" in each place it appears therein to
"consolidated."
(g) Combined EBITDA. Effective from and after the first Test Date
occurring after the Fifth Amendment Effective Date, the definition of
"Combined EBITDA" is hereby amended by deleting the amount "$1.651
billion" appearing therein and by inserting in lieu thereof the amount
"$1.608 billion."
(h) Combined Indebtedness. The definition of "Combined Indebtedness"
is hereby amended by adding the following new sentence immediately at the
end thereof:
"Notwithstanding anything to the contrary contained above, to the
extent not already reflected therein, the maximum amount of
Indebtedness at any time outstanding as described in the last
sentence of the definition of Indebtedness contained herein shall be
added to, and form part of, Combined Indebtedness (regardless of any
contrary treatment under GAAP)."
(i) Combined Net Income. The definition of "Combined Net Income" is
hereby amended by adding the following new sentence at the end thereof:
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"Notwithstanding anything to the contrary in clause (ii) of the
immediately preceding sentence, for periods from and after the
Reorganization Merger Date, and so long as no Change of Control
pursuant to clause (v) of the definition thereof contained herein
has occurred, Starwood REIT shall be treated as a Wholly-Owned
Subsidiary of the Corporation for purposes of clause (ii) of the
immediate preceding sentence.
(j) Combined Shareholders' Equity. The definition of "Combined
Shareholders' Equity" is hereby amended by adding the following new sentence
immediately at the end thereof:
"Notwithstanding anything to the contrary contained above, if
Combined Shareholders' Equity is being determined at any time after the
Initial Borrowing Date, then to the extent said Combined Shareholders'
Equity (as determined in accordance with GAAP and before giving effect to
this sentence) has been reduced by (x) cash amounts used by Starwood REIT
and/or the Corporation after the Fifth Amendment Effective Date to
repurchase shares of their own common stock pursuant to Section
9.03(a)(iv) of the Credit Agreement, the aggregate amount of such
reductions (but in no event to exceed $1.0 billion) shall be added back to
Combined Shareholders' Equity for purposes of this Agreement and/or (y)
any "restructuring charges" in respect of deferred tax liabilities
actually incurred by the Parent Companies after the Initial Borrowing Date
in connection with the Restructuring, such amounts (not to exceed
$800,000,000 in the aggregate) shall be added back to Combined
Shareholders' Equity for purposes of this Agreement.
(k) Credit Party Subsidiary. For all periods occurring after the
Reorganization Merger Date, the definition of "Credit Party Subsidiary"
contained in Section 11 of the Credit Agreement is hereby amended by
deleting the phrase ", or which would be a Subsidiary of the Parent
Companies if same were a single entity" appearing therein.
(l) Dividend. The definition of "Dividend" is hereby amended by (x)
inserting "(i)" immediately after the words "shall also include" appearing
in the last sentence thereof, (y) inserting the phrase "or in common stock
of the Corporation" immediately after the phrase "the Parent Companies"
appearing in the last sentence thereof and (z) inserting the following
phrase at the end of the last sentence thereof:
"and (ii) all payments (other than payments made in "paired shares"
of the Parent Companies or common stock of the Corporation) made at
any time in respect of any Forward Equity Transactions."
(m) Excess Cash Flow. The definition of "Excess Cash Flow" is hereby
amended and restated in its entirety as follows:
"Excess Cash Flow" shall mean, for any period, the remainder of (i)
Combined EBITDA for such period less (ii) the sum of (a) the amount
of Capital Expenditures (but excluding Capital Expenditures (x)
financed with proceeds of Indebtedness or equity or reinvestments of
Asset Sale proceeds or (y) made
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<PAGE> 20
pursuant to Section 9.07(d) or (e)) made by the Parent Companies and
their Subsidiaries on a combined consolidated basis during such
period in accordance with Section 9.07, (b) the amount of cash
Dividends paid by Starwood REIT pursuant to Section 9.03(a)(ii) (but
not to the Corporation or any of its Subsidiaries) during such
period, (c) cash payments of taxes actually made by the Parent
Companies and their Subsidiaries on a combined consolidated basis
during such period and (d) that portion of Combined Interest Expense
for such period which is actually paid in cash."
(n) GAAP. The definition of "GAAP" is hereby amended by adding the
following phrase immediately at the end thereof: ", it being understood
that, from and after the Reorganization Merger Date, principles consistent
with the foregoing shall be used in preparing consolidated financial
statements (rather than combined consolidated financial statements) of the
Corporation and its Subsidiaries."
(o) Indebtedness. The definition of "Indebtedness" is hereby amended
by adding the following new sentence immediately at the end thereof:
"Notwithstanding anything to the contrary contained above, all
Forward Equity Transactions shall be deemed to constitute
Indebtedness for purposes of this Agreement, with the amount of such
Indebtedness at any time outstanding to be equal to the maximum
amount of cash and/or fair market value of property which would be
required to be delivered by the Parent Companies and their
Subsidiaries at such time to satisfy in full their obligations under
the respective Forward Equity Transactions; provided that the
Existing Forward Equity Transactions shall not constitute
Indebtedness as a result of the provisions of this sentence unless
(x) the obligations of the Parent Companies and their Subsidiaries
are increased after the Fifth Amendment Effective Date or (y) such
agreements are extended beyond, or in effect after, June 30, 1999."
(p) Net Sale Proceeds. The definition of "Net Sale Proceeds" is
hereby amended by inserting the phrase "(other than the Corporation and
its Subsidiaries)" immediately after the phrase "Dividends to its
shareholders" appearing in clause (c) thereof.
(q) Non-Recourse Indebtedness. The last sentence of the definition
of "Non-Recourse Indebtedness" is amended and restated in its entirety to
read as follows:
"For purposes of Section 9.04(iv), the Corporation and its
Subsidiaries may not incur in excess of $150,000,000, in the
aggregate, of Non-Recourse Indebtedness with Final Stated
Maturities occurring on or prior to the Final Maturity Date."
(r) Operating Lease. The definition of "Operating Lease" is modified
by inserting the following language in the second line after the term
"Starwood REIT":
"or an owner of a Hotel unrelated to the Parent Companies,."
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(s) Permitted Refinancing Indebtedness. The definition of "Permitted
Refinancing Indebtedness" is modified by inserting the following language
after the word "Subsidiary" in the seventh line thereof:
"or Indebtedness constituting New Debt (as defined in the Fourth
Amendment) (or previous refinancings thereof constituting Permitted
Refinancing Indebtedness)."
(t) Qualified Preferred Stock. The definition of "Qualified
Preferred Stock" is amended by adding the following new sentence
immediately at the end thereof:
"Notwithstanding anything to the contrary contained above, up to
$500,000,000 aggregate liquidation preference of preferred stock (x)
issued by Starwood REIT and/or (y) which has a mandatory put,
redemption, repayment, sinking fund or other similar provision
occurring before February 23, 2005, but not before August 23, 2003,
may be issued so long as same meets all of the criteria set forth in
the immediately preceding sentence for Qualified Preferred Stock
except as otherwise expressly permitted pursuant to this sentence."
(u) Subsidiary. The definition of "Subsidiary" appearing in Section
11 of the Credit Agreement shall be modified, for all periods after the
Reorganization Merger Date, by deleting the second sentence thereof in its
entirety.
27. Additional Definitions. Section 11.01 of the Credit Agreement is
hereby amended by inserting the following new definitions in appropriate
alphabetical order therein:
"Class A Shares" shall mean the Class A Shares of Starwood REIT resulting
from the Reorganization.
"Class B Shares" shall mean the Class B Shares of Starwood REIT to be
issued in connection with the Reorganization in accordance with the
relevant requirements of the Fifth Amendment, which shares shall in any
event and in all cases provide that same shall, at the option of the
Corporation at any time when one or more material Events of Default
(pursuant to the Credit Agreement or certain other material Indebtedness)
have continued in existence beyond certain cure periods to be determined,
be mandatorily exchangeable for common stock of the Corporation.
"CMBS Transaction" shall have the meaning provided in Section 9.04(xiv).
"Encumbered EBITDA" for any period, shall mean all amounts included in
Combined EBITDA for such period to the extent such amounts were generated
from Assets (including without limitation Hotels, or any Hotel and Gaming
Business) which is subject to any Lien securing Indebtedness which is then
outstanding (exclusive of Indebtedness secured only pursuant to the Pledge
and Security Agreement).
"Existing Forward Equity Transactions" shall mean the Forward Equity
Transactions described in the last sentence of the definition thereof
contained herein.
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"Fifth Amendment Effective Date" shall mean the date upon which the Fifth
Amendment becomes effective in accordance with its terms.
"Fifth Amendment" shall mean the Fifth Amendment to this Agreement dated
as of August 26, 1998.
"Forward Equity Transactions" shall mean any arrangement or agreement by
either Parent Company or any of their Subsidiaries involving any forward
equity sale, including, without limitation, any agreement pursuant to
which funds are advanced to either Parent Company or any Subsidiary
thereof and pursuant to which any Parent Company or any Subsidiary thereof
is contractually obligated (or permitted) to, at a future date or dates,
issue Capital Stock to satisfy its obligations under such agreement
(whether or not said obligation may be satisfied through the delivery of
cash in lieu of such Capital Stock). It is understood and agreed that the
agreements in place on the Fifth Amendment Effective Date with (x) Union
Bank of Switzerland, London Branch, in respect of the placement of the UBS
Shares on October 15, 1997 and such additional shares as may be required
from time to time, and (y) Merrill Lynch International, Lehman Brothers
Inc. and NMS Services, Inc. (and affiliates thereof) for the issuance of
an aggregate of 4,641,000 Paired Shares on February 24, 1998 and such
additional shares as may be required from time to time, in each case
constitute Forward Equity Transactions.
"Maximum Indebtedness Scheduled Asset Sale Credit Amount" shall have the
meaning provided in Section 4.02(d).
"Maximum QPS Scheduled Asset Sale Credit Amount" shall have the meaning
provided in Section 4.02(e).
"Reorganization Merger Date" shall mean the date upon which the merger of
Newco into Starwood REIT occurs pursuant to the Reorganization.
"Reorganization" shall mean the proposed reorganization transaction
described in the recitals to the Fifth Amendment.
"Westin Stock Issue" shall have the meaning provided in the recitals to
the Fifth Amendment.
II. Confirmation and Agreement of Credit Parties.
Each Credit Party, by its signature below, hereby confirms and
agrees that (x) the identity of the Borrowers and their obligations pursuant to
the Credit Agreement and the Credit Documents shall remain in full force and
effect after giving effect to this Fifth Amendment (and such obligations shall
be unaffected thereby, except to the extent specific provisions of the Credit
Agreement are waived or amended in accordance with the terms of this Fifth
Amendment), (y) the Guaranty shall remain in full force and effect and the
Guaranty shall cover all obligations of each of the Borrowers under the Credit
Agreement, as modified and amended by this Fifth Amendment (including, without
limitation, after giving effect to the Reorganization) and (z) the Pledge and
Security Agreement shall remain in full force and effect as security for all
obligations
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under the Credit Agreement, as modified and amended by this Fifth Amendment
(including, without limitation, after giving effect to the Reorganization) and
the Guaranty.
III. Miscellaneous Provisions.
A. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document. As specified herein, certain of the
modifications effected hereby shall only be effective upon the Reorganization
Merger Date.
B. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrowers and the Paying Agent.
C. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
D. This Amendment shall become effective on the date (the "Amendment
Effective Date") when each of the Borrowers, each Guarantor and the Required
Lenders shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Paying Agent at its Notice Office.
E. The Borrowers hereby covenant and agree that, so long as the
Amendment Effective Date occurs, they shall pay (and shall be jointly and
severally obligated to pay) each Lender which executes and delivers to the
Paying Agent a counterpart hereof by the later to occur of (x) the close of
business on the Amendment Effective Date or (y) 5:00 p.m. (New York time) on
August 26, 1998, a cash fee in an amount equal to 25 basis points (0.25%) of an
amount equal to the sum of the outstanding principal amount of Term Loans of
such Lender and the Revolving Loan Commitment of such Lender, in each case as
same is in effect on the Amendment Effective Date. All fees payable pursuant to
this clause E shall be paid by the Borrowers to the Paying Agent for
distribution to the Lenders not later than the first Business Day following the
later date specified in the immediately preceding sentence.
F. From and after the Amendment Effective Date, all references in
the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as modified
hereby.
G. No Default or Event of Default exists as of the Amendment
Effective Date, both before and after giving effect to this Amendment; and
H. All of the representations and warranties contained in the Credit
Agreement and the other Credit Documents are true and correct in all
material respects as of the Amendment Effective Date, both before and
after giving effect to this Amendment,
-23-
<PAGE> 24
with the same effect as though such representations and warranties had
been made on and as of the Amendment Effective Date (it being understood
that any representation or warranty made as of a specific date shall be
true and correct in all material respects as of such specific date).
[SIGNATURE PAGES FOLLOW]
-24-
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
STARWOOD HOTELS & RESORTS,
a Maryland real estate investment trust
By: /s/ BARRY S. STERNLICHT
-------------------------------------
Name: BARRY S. STERNLICHT
Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a
Maryland corporation
By: /s/ RONALD C. BROWN
------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
SLT REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ BARRY S. STERNLICHT
-------------------------------------
Name: BARRY S. STERNLICHT
Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ITT CORPORATION,
a Nevada corporation
By: /s/ RONALD C. BROWN
------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
-25-
<PAGE> 26
BW HOTEL REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its general partner
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust its general partner
By: /s/ Barry S. Sternlicht
----------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
CHARLESTON HOTEL ASSOCIATES L.L.C., a New Jersey
limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
-----------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
CP HOTEL REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its general partner
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
----------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
-26-
<PAGE> 27
CRYSTAL CITY HOTEL ASSOCIATES, L.L.C., a New
Jersey limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ BARRY S. STERNLICHT
--------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
EDISON HOTEL ASSOCIATES LIMITED
PARTNERSHIP, a New Jersey limited liability
company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its general partner
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ BARRY S. STERNLICHT
--------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
-27-
<PAGE> 28
LONG BEACH HOTEL ASSOCIATES L.L.C.,
a New Jersey limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
______________________________________
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
NOVI HOTEL ASSOCIATES, L.P.,
a Delaware limited partnership
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its general partner
By: /s/ Barry S. Sternlicht
______________________________________
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
PARK RIDGE HOTEL ASSOCIATES L.P.,
a Delaware limited partnership
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its general partner
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
-28-
<PAGE> 29
By: /s/ Barry S. Sternlicht
----------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
PRUDENTIAL-HEI JOINT VENTURE,
a Georgia general partnership
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its general partner
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
----------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SANTA ROSA HOTEL ASSOCIATES, L.L.C.,
a New Jersey limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
----------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
-29-
<PAGE> 30
SLT ALLENTOWN LLC,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investments trust, its general partner
By: /s/ Barry S. Sternlicht
--------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT ARLINGTON L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
--------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT ASPEN DEAN STREET, LLC, a Delaware limited
liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels and Resorts, a Maryland real
estate investment trust, its managing general
partner
-30-
<PAGE> 31
By: /s/ Barry S. Sternlicht
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT BLOOMINGTON, LLC,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels and Resorts, a Maryland real
estate investment trust, its managing general
partner
By: /s/ Barry S. Sternlicht
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT CENTRAL PARK SOUTH, LLC,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its managing general
partner
By: /s/ Barry S. Sternlicht
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
-31-
<PAGE> 32
SLT DANIA L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ BARRY S. STERNLICHT
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT DC MASSACHUSETTS AVENUE, L.L.C., a Delaware
limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its managing general
partner
By: /s/ BARRY S. STERNLICHT
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT FINANCING PARTNERSHIP,
a Delaware general partnership
By: SLT Realty Limited Partnership, a Delaware
partnership, its general partner
By: Starwood Hotels & Resorts, a Maryland real
estate investment partnership, its general
partner
By: /s/ BARRY S. STERNLICHT
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
-32-
<PAGE> 33
SLT HOUSTON BRIAR OAKS, LP, a Delaware limited
partnership
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing general
partner
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its managing general
partner
By: /s/ BARRY S. STERNLICHT
----------------------
Name: BARRY S.STERNLICHT
Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SLT INDIANAPOLIS L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ BARRY S. STERNLICHT
----------------------
Name: BARRY S. STERNLICHT
Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SLT KANSAS CITY L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ BARRY S. STERNLICHT
----------------------
Name: BARRY S. STERNLICHT
Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
-33-
<PAGE> 34
SLT LOS ANGELES L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
______________________________________
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT MINNEAPOLIS L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
______________________________________
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT PALM DESERT L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
______________________________________
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
-34-
<PAGE> 35
SLT PHILADELPHIA L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT REALTY COMPANY, L.L.C., a Delaware limited
liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT SAN DIEGO L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
-35-
<PAGE> 36
SLT SOUTHFIELD L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ BARRY S. STERNLICHT
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT ST. LOUIS L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ BARRY S. STERNLICHT
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
SLT TUCSON L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ BARRY S. STERNLICHT
-------------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
-36-
<PAGE> 37
STARLEX L.L.C.,
a New York limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
--------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
STARWOOD ATLANTA II L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
--------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
STARWOOD ATLANTA L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlicht
--------------------------------------
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
-37-
<PAGE> 38
STARWOOD MISSION HILLS, L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlight
-------------------------------------------
Name: Barry S. Sternlight
Title: Chairman and Chief Executive
STARWOOD NEEDHAM L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlight
----------------------------------------------
Name: Barry S. Sternlight
Title: Chairman and Chief Executive Officer
STARWOOD WALTHAM LLC,
a Delaware limited liability company
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By: /s/ Barry S. Sternlight
----------------------------------------------
Name: Barry S. Sternlight
Title: Chairman and Chief Executive Officer
-38-
<PAGE> 39
VIRGINIA HOTEL ASSOCIATES, L.P., a Delaware
limited partnership
By: SLT Realty Limited Partnership, a Delaware
limited partnership, its general partner
By: Starwood Hotels & Resorts, a Maryland real
estate investment trust, its general partner
By:______________________________________
Name:
Title:
W&S DENVER CORP.
By:______________________________________
Name:
Title:
W&S SEATTLE CORP.,
a Delaware corporation
By:______________________________________
Name:
Title:
W&S REALTY CORPORATION OF DELAWARE,
a Delaware corporation
By:______________________________________
Name:
Title:
BENJAMIN FRANKLIN HOTEL, INC.,
a Washington corporation
By:______________________________________
Name:
Title:
-39-
<PAGE> 40
WESTIN SEATTLE HOTEL COMPANY,
a Washington general partnership
By: W&S Realty Corporation of Delaware, a Delaware
corporation, its general partnership
By: /s/ Barry S. Sternlicht
______________________________________
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
By: Benjamin Franklin Hotel, Inc., a Washington
corporation
By: /s/ Barry S. Sternlicht
______________________________________
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
W&S LAUDERDALE CORP.,
a Delaware corporation
By: /s/ Barry S. Sternlicht
______________________________________
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
LAUDERDALE HOTEL COMPANY,
a Delaware corporation
By: /s/ Barry S. Sternlicht
______________________________________
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
WESTIN BAY HOTEL COMPANY,
a Delaware corporation
By: /s/ Barry S. Sternlicht
______________________________________
Name: Barry S. Sternlicht
Title: Chairman and Chief Executive Officer
-40-
<PAGE> 41
CINCINNATI PLAZA COMPANY,
a Delaware corporation
By: /s/ BARRY S. STERNLICHT
______________________________________
Name: BARRY S. STERNLICHT
Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SOUTH COAST WESTIN HOTEL COMPANY,
a Delaware corporation
By: /s/ BARRY S. STERNLICHT
______________________________________
Name: BARRY S. STERNLICHT
Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TOWNHOUSE MANAGEMENT, INC.,
a Delaware corporation
By: /s/ BARRY S. STERNLICHT
______________________________________
Name: BARRY S. STERNLICHT
Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
HEI HOTELS, L.L.C.
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
MIDLAND BUILDING CORPORATION,
an Illinois corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
-41-
<PAGE> 42
MIDLAND HOLDING CORPORATION, an Illinois
corporation
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
MIDLAND HOTEL CORPORATION,
an Illinois corporation
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
MILWAUKEE BROOKFIELD L.P.,
a Wisconsin limited partnership
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its general partner
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
MOORLAND HOTEL LIMITED PARTNERSHIP, a Wisconsin
limited partnership
By: Milwaukee Brookfield L.P., a Wisconsin limited
partnership, its general partner
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its general partner
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-42-
<PAGE> 43
OPERATING PHILADELPHIA LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and Chief
Financial Officer
SLC ALLENTOWN LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and Chief
Financial Officer
SLC ARLINGTON L.L.C.,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and Chief
Financial Officer
-43-
<PAGE> 44
SLC ASPEN DEAN STREET, LLC, a Delaware limited
liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ RONALD C. BROWN
-------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
SLC ATLANTA II LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /S/ RONALD C. BROWN
-------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
SLC ATLANTA LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /S/ RONALD C. BROWN
-------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
-44-
<PAGE> 45
SLC BLOOMINGTON LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /S/ RONALD C. BROWN
------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
SLC-CALVERTON LIMITED PARTNERSHIP,
a Delaware limited partnership
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its general partner
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /S/ RONALD C. BROWN
-------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
SLC CENTRAL PARK SOUTH, LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its managing general
partner
By: /S/ RONALD C. BROWN
-------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
-45-
<PAGE> 46
SLC DANIA LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ RONALD C. BROWN
--------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
SLC DC MASSACHUSETTS AVENUE, LLC, a Delaware
limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its managing general
partner
By: /s/ RONALD C. BROWN
--------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
SLC HOUSTON BRIAR OAKS, LP,
a Delaware limited partnership
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing general
partner
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its managing general
partner
By: /s/ RONALD C. BROWN
--------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
-46-
<PAGE> 47
SLC INDIANAPOLIS LLC
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ RONALD C. BROWN
------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
SLC KANSAS CITY L.L.C.,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ RONALD C. BROWN
-----------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
SLC LOS ANGELES, LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ RONALD C. BROWN
-----------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
-47-
<PAGE> 48
SLC MINNEAPOLIS LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SLC NEEDHAM, LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SLC OPERATING LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-48-
<PAGE> 49
SLC PALM DESERT LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SLC SAN DIEGO LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SLC SOUTHFIELD LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-49-
<PAGE> 50
SLC ST. LOUIS L.L.C.,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SLC TUCSON LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SLC WALTHAM LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-50-
<PAGE> 51
STARWOOD MANAGEMENT COMPANY, LLC,
a Delaware limited liability company
By: SLC Operating Limited Partnership, a Delaware
limited partnership, its managing member
By: Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation, its general partner
By: /s/ Ronald C. Brown
______________________________________
Name: Ronald C. Brown
Title: Executive Vice President and Chief
Financial Officer
WESTIN PREMIER, INC.,
a Delaware corporation
By: /s/ Ronald C. Brown
______________________________________
Name: Ronald C. Brown
Title: Executive Vice President and Chief
Financial Officer
WESTIN VACATION MANAGEMENT CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
______________________________________
Name: Ronald C. Brown
Title: Executive Vice President and Chief
Financial Officer
WESTIN VACATION EXCHANGE COMPANY,
a Delaware corporation
By: /s/ Ronald C. Brown
______________________________________
Name: Ronald C. Brown
Title: Executive Vice President and Chief
Financial Officer
WVC RANCHO MIRAGE, INC.,
a Delaware corporation
By: /s/ Ronald C. Brown
______________________________________
Name: Ronald C. Brown
Title: Executive Vice President and Chief
Financial Officer
-51-
<PAGE> 52
WESTIN ASSET MANAGEMENT CO.,
a Delaware company
By: /s/ Ronald C. Brown
-------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
WESTIN HOTEL COMPANY,
a Delaware company
By: /s/ Ronald C. Brown
-------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
W&S ATLANTA CORP.,
a Delaware corporation
By: /s/ Ronald C. Brown
-------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
ITT SHERATON CORPORATION,
a Delaware corporation,
By: /s/ Ronald C. Brown
-------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
DESTINATION SERVICES OF SCOTTSDALE, INC.,
a Delaware corporation
By: /s/ Ronald C. Brown
-------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
GENERAL FIDUCIARY CORPORATION,
a Massachusetts corporation
By: /s/ Ronald C. Brown
-------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-52-
<PAGE> 53
GLOBAL CONNEXIONS, INC.,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON INTER-AMERICAS, LTD.,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
HUDSON SHERATON LLC,
a New York limited liability company
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
ITT SHERATON RESERVATIONS CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
MANHATTAN SHERATON CORPORATION,
a New York corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SAN DIEGO SHERATON CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-53-
<PAGE> 54
SAN FERNANDO SHERATON CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON 45 PARK CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON ARIZONA CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON ASIA-PACIFIC CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON BLACKSTONE CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON BOSTON CORPORATION,
a Massachusetts corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-54-
<PAGE> 55
SHERATON CALIFORNIA CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON CAMELBACK CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON FLORIDA CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON HARBOR ISLAND CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON HARTFORD CORPORATION,
a Connecticut corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON HAWAII HOTELS CORPORATION,
a Hawaii corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-55-
<PAGE> 56
SHERATON INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON INTERNATIONAL DE MEXICO, INC.,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON MANAGEMENT CORPORATION,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON OVERSEAS MANAGEMENT CORPORATION,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON WARSAW CORPORATION,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON MARKETING CORPORATION,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-56-
<PAGE> 57
SHERATON MIAMI CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
----------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON MIDDLE EAST MANAGEMENT CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
----------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON NEW YORK CORPORATION,
a New York corporation
By: /s/ Ronald C. Brown
----------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON OVERSEAS TECHNICAL SERVICES CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
----------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON PEACHTREE CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
----------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
SHERATON PHOENICIAN CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
----------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-57-
<PAGE> 58
SHERATON SAVANNAH CORPORATION,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
SHERATON SERVICES CORPORATION,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
SOUTH CAROLINA SHERATON CORPORATION,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
ST. REGIS SHERATON CORPORATION,
a New York corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WORLDWIDE FRANCHISE SYSTEMS, INC.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
SHERATON VERMONT CORPORATION,
a Vermont corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
-58-
<PAGE> 59
ITT BROADCASTING CORPORATION,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
WESTIN LICENSE COMPANY,
a Delaware company
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
WESTIN INTERNATIONAL SERVICES COMPANY,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
WESTIN ASIA MANAGEMENT HOLDING CO.,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
WESTIN ASIA MANAGEMENT CO.,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
WESTIN CANADA MANAGEMENT CO.,
a Delaware corporation
By: /s/ Ronald C. Brown
--------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
-59-
<PAGE> 60
WESTIN OTTAWA MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WESTIN MEXICO MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WESTIN CHARLOTTE MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WESTIN RIVER NORTH MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WESTIN HILTON HEAD MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WESTIN KANSAS CITY MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
-60-
<PAGE> 61
WESTIN MAUI MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN BOSTON MANAGEMENT HOLDING CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN BOSTON MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN CENTURY CITY MANAGEMENT HOLDING CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN CENTURY CITY MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN NEW ORLEANS MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
-------------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
-61-
<PAGE> 62
WESTIN ORLANDO MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
---------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN SANTA CLARA MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
---------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN TUCSON MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
---------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN INTERNATIONAL MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
---------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN INNISBROOK MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
---------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN FRANCE MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
---------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
-62-
<PAGE> 63
WESTIN PITTSBURGH MANAGEMENT HOLDING CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WESTIN PITTSBURGH MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WESTIN PEACHTREE MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WESTIN DALLAS MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WESTIN RIVERWALK MANAGEMENT CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
WESTIN REPRESENTATION CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
______________________________________
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
-63-
<PAGE> 64
WESTIN LICENSE COMPANY SOUTH,
a Delaware corporation
By: /s/ RONALD C. BROWN
-----------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN LICENSE COMPANY NORTH,
a Delaware corporation
By: /s/ RONALD C. BROWN
-----------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN LICENSE COMPANY EAST,
a Delaware corporation
By: /s/ RONALD C. BROWN
-----------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN LICENSE COMPANY WEST,
a Delaware corporation
By: /s/ RONALD C. BROWN
-----------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
WESTIN FRANCHISE CO.,
a Delaware corporation
By: /s/ RONALD C. BROWN
-----------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
SHERATON O'HARE CORPORATION,
a Delaware corporation
By: /s/ RONALD C. BROWN
-----------------------------------
Name: RONALD C. BROWN
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
-64-
<PAGE> 65
BANKERS TRUST COMPANY,
Individually and as Administrative Agent and as
Paying Agent
/s/ LAURA S. BURWICK
By:______________________________________
Name: Laura S. Burwick
Title: Principal
THE CHASE MANHATTAN BANK,
Individually and as Administrative Agent
/s/ FREDERICK P. HAMMER
By:______________________________________
Name: Frederick P. Hammer
Title: Vice President
LEHMAN COMMERCIAL PAPER, INC.,
Individually and as Syndication Agent
/s/ FRANCIS X. GILHOOL
By:______________________________________
Name: Francis X. Gilhool
Title: Authorized Signatory
BANK OF MONTREAL, CHICAGO BRANCH,
Individually and as Syndication Agent
/s/ JOHN T. MEAD, JR.
By:______________________________________
Name: John T. Mead, Jr.
Title: Director
ARAB BANKING CORPORATION (B.S.C.)
/s/ LOUISE BILBRO
By:______________________________________
Name: Louise Bilbro
Title: Vice President
-65-
<PAGE> 66
BANCA POPOLARE DI MILANO
By: /s/ Patrick F. Dillon
______________________________________
Name: Patrick F. Dillon
Title: Vice President, Chief Credit Officer
By: /s/ Esperanza Quintero
______________________________________
Name: Esperanza Quintero
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Kathleen M. Ahern
______________________________________
Name: Kathleen M. Ahern
Title: Vice President
BANK LEUMI USA
By: /s/ Joung Hee Hong
______________________________________
Name: Joung Hee Hong
Title: Vice President
THE BANK OF TOKYO-MITSUBISHI, LIMITED,
NEW YORK BRANCH
By: /s/ N. Saffra
______________________________________
Name: N. Saffra
Title: Vice President
BANK POLSKA KASA OPIEKI S.A. PEKAO S.A. GROUP,
NEW YORK BRANCH
By: /s/ William A. Shea
______________________________________
Name: William A. Shea
Title: Vice President, Senior Lending Officer
-66-
<PAGE> 67
PARIBAS
By: /s/ John W. Kopcha
______________________________________
Name: John W. Kopcha
Title: Vice President
By: /s/ Matthew C. Bishop
______________________________________
Name: Matthew C. Bishop
Title: Assistant Vice President
BANQUE WORMS CAPITAL CORP.
By: /s/ Frederick Gamet
______________________________________
Name: Frederick Gamet
Title: Senior Vice President
BEAR STEARNS INVESTMENT PRODUCTS INC.
By: /s/ Harvey Rosenberg
______________________________________
Name: Harvey Rosenberg
Title: Senior Managing Director
BARCLAYS BANK PLC
By: /s/ John Giannone
______________________________________
Name: John Giannone
Title: Director
CHANG HWA COMMERCIAL BANK, LTD.,
NEW YORK BRANCH
By: /s/ Wan-Tu Yeh
______________________________________
Name: Wan-Tu Yeh
Title: VP and General Manager
CHIAO TUNG BANK CO., LTD. NEW YORK AGENCY
By: /s/ Samuel S.T. Liu
______________________________________
Name: Samuel S.T. Liu
Title: VP and DGM
-67-
<PAGE> 68
DULY AUTHORIZED AND EXECUTED:
CIBC INC.
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE
CREDIT LYONNAIS NEW YORK BRANCH
CREDIT SUISSE FIRST BOSTON
CREDITO ITALIANO
-68-
<PAGE> 69
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
DOMINION BANK
ERSTE BANK DER OESTERREICHISCHEN
SPARKASSEN AG
FIRST COMMERCIAL BANK
-69-
<PAGE> 70
FIRST SECURITY BANK, N.A.
FLEET BANK, N.A.
GENERAL ELECTRIC CAPITAL CORPORATION
GOLDMAN SACHS CREDIT PARTNERS L.P.
GULF INTERNATIONAL BANK B.S.C.
HUA NAN COMMERCIAL BANK, LTD. NEW YORK
AGENCY
-70-
<PAGE> 71
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
NEW YORK BRANCH
ISTITUTO BANCARIO SAN PAOLO DI TORINO SpA
KZH CNC LLC
LAND BANK OF TAWAIN, LOS ANGELES BRANCH
THE LONG TERM CREDIT BANK
OF JAPAN, LTD.
MITSUBISHI TRUST & BANKING CORPORATION
-71-
<PAGE> 72
ML CLO XIX STERLING (Cayman) Ltd.,
NATIONSBANK, N.A.
THE ROYAL BANK OF SCOTLAND, PLC
SOCIETE GENERALE, SOUTHWEST AGENCY
SOUTHERN PACIFIC BANK
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
-72-
<PAGE> 73
WACHOVIA BANK, N.A.
WESTDEUTSCHE LANDESBANK GIROZENTRALE
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
VAN KAMPEN CLO I, LIMITED
By:VAN KAMPEN AMERICAN CAPITAL MANAGEMENT INC.,
as collateral manager
-73-
<PAGE> 74
VAN KAMPEN AMERICAN CAPITAL SENIOR
INCOME TRUST
THE TORONTO DOMINION BANK
MELLON BANK, N.A., solely in its capacity as Trustee
for the GENERAL MOTORS CASH MANAGEMENT
MASTER TRUST, (as directed by Shenkman Capital
Management, Inc.), and not in its individual capacity
INDOSUEZ CAPITAL FUNDING II A Ltd.
By: Indosuez Capital as Portfolio Advisor
-74-
<PAGE> 75
EXHIBIT A
1. Effective as of December 31, 1998, all of the existing Operating
Leases from Starwood REIT, SLT RLP or their Subsidiaries to SLC OLP or its
Subsidiaries are transferred such that the Corporation is the lessee under such
Operating Leases.
2. Between January 4, 1999 and February 28, 1999, a newly created
subsidiary of the Corporation ("Newco") is merged with and into Starwood REIT
(with Starwood REIT being the surviving entity, so that after the merger,
Starwood REIT shall become a direct subsidiary of the Corporation. In the
merger, the common stock of Newco becomes the common shares of beneficial
interest in Starwood REIT and the common shares of beneficial interest in
Starwood REIT are converted into the Class B Shares of Starwood REIT. The Class
B Shares are "paired" with the common stock of the Corporation pursuant to an
amended pairing agreement. The Class A Exchangeable Preferred Shares and Class B
Exchangeable Preferred Shares of Starwood REIT (the "EPS") remain outstanding as
shares of Starwood REIT. In addition, the partnership interests of SLT RLP and
SLC OLP remain outstanding. The organizational documents of Starwood REIT, the
Corporation, SLT RLP and SLC OLP are amended and restated to reflect the
foregoing.
3. After the completion of the merger but before the date on which
Starwood REIT pays its first quarter dividend in 1999, Starwood REIT declares
and pays to the Corporation sufficient dividends to maintain REIT status for
1998 and to avoid federal income tax. Starwood REIT will make an election under
Section 858 of the Code.
4. The Capital Stock of the Preferred Stock Subsidiaries held by
Starwood REIT will be exchanged for non-voting common stock in such entities.
5. The distribution provisions of the partnership agreements of SLT
RLP and SLC OLP may be modified to match the dividends on the Class B Shares and
the Corporation common shares (the "Base Distribution") plus a tax distribution
equal to a percentage of the taxable income allocated to the partners in excess
of the Base Distribution.
<PAGE> 1
EXHIBIT 10.3
AMENDED AND RESTATED SENIOR SECURED NOTE AGREEMENT
BY AND AMONG
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
STARWOOD HOTELS & RESORTS,
THE GUARANTORS
AND
LEHMAN COMMERCIAL PAPER INC.,
AS ARRANGER AND ADMINISTRATIVE AGENT,
BT ALEX. BROWN INCORPORATED AND
CHASE SECURITIES INC.,
AS SYNDICATION AGENTS,
AND THE LENDERS
DATED AUGUST 27, 1998
EFFECTIVE AUGUST 28, 1998
$3,500,000,000
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
ARTICLE I. DEFINITIONS.......................................................1
Section 1.1. Defined Terms.................................................1
Section 1.2. Terms Generally..............................................28
Section 1.3. Accounting Terms; GAAP; Effect of Reorganization on Certain
Definitions...............................................................28
ARTICLE II. THE LOANS.......................................................29
Section 2.1. Commitments..................................................29
Section 2.2. Repayment; Senior Secured Notes..............................31
Section 2.3. Interest; Commitment Fee.....................................32
Section 2.4. Redemption...................................................34
Section 2.5. Purchase Offers..............................................35
Section 2.6. Yield Protection.............................................37
Section 2.7. Breakage Costs...............................................39
Section 2.8. Taxes........................................................39
Section 2.9. Pro Rata Payments; Sharing of Setoffs........................40
Section 2.10. Replacement of Lender.......................................41
Section 2.11. Commitment Reductions.......................................41
ARTICLE III. CONDITIONS.....................................................42
Section 3.1. Effective Date...............................................42
Section 3.2. Conditions Precedent to All Tranche Two Loans................44
ARTICLE IV. REPRESENTATIONS AND WARRANTIES..................................44
Section 4.1. Representations and Warranties in the Acquisition Agreement
and the Bank Credit Facility..............................................45
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 4.2. Organization; Good Standing..................................45
Section 4.3. Due Authorization and Enforceability.........................45
Section 4.4. Affiliate Guaranty...........................................46
Section 4.5. No Conflicts.................................................46
Section 4.6. No Violation of Margin Regulation............................47
Section 4.7. Governmental Regulations.....................................47
Section 4.8. Full Disclosure..............................................47
Section 4.9. Financial Condition; Solvency................................47
Section 4.10. No Material Adverse Change..................................48
ARTICLE V. COVENANTS........................................................48
Section 5.1. Payment of Senior Secured Notes..............................48
Section 5.2. Maintenance of Office or Agency..............................48
Section 5.3. Reports......................................................48
Section 5.4. Compliance Certification.....................................49
Section 5.5. Taxes........................................................50
Section 5.6. Stay, Extension and Usury Laws...............................50
Section 5.7. Restricted Payments..........................................50
Section 5.8. Dividend and Other Payment Restrictions Affecting
Subsidiaries..............................................................54
Section 5.9. Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock........................................................55
Section 5.10. Asset Sales.................................................58
Section 5.11. Transactions with Affiliates................................59
Section 5.12. Liens.......................................................59
Section 5.13. Corporate Existence.........................................60
Section 5.14. Offer to Repurchase Upon Change of Control..................61
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
Section 5.15. Designation of Unrestricted Subsidiary......................61
Section 5.16. Limitation on Status as Investment Company..................61
Section 5.17. Special Covenants...........................................61
ARTICLE VI. SUCCESSORS......................................................62
Section 6.1. Merger, Consolidation, or Sale of Assets.....................62
Section 6.2. Successor Corporation Substituted............................62
ARTICLE VII. TRANSFER OF THE SENIOR SECURED NOTES...........................63
Section 7.1. Transfer of the Senior Secured Notes.........................63
Section 7.2. Registration of Transfer or Exchange.........................63
Section 7.3. Transfers by the Lenders.....................................63
ARTICLE VIII. EVENTS OF DEFAULT.............................................65
Section 8.1. Events of Default............................................65
Section 8.2. Acceleration.................................................67
Section 8.3. Rights and Remedies Cumulative...............................68
Section 8.4. Delay or Omission Not Waiver.................................68
Section 8.5. Waiver of Past Defaults......................................68
ARTICLE IX. GUARANTY AND INDEMNITY..........................................68
Section 9.1. Guaranty.....................................................68
Section 9.2. Joint and Several Indemnity..................................68
Section 9.3. Acceleration of Payment......................................69
Section 9.4. Guaranty of Payment, Independently Enforceable...............69
Section 9.5. Fraudulent Transfer Limitation...............................69
Section 9.6. Subordinated Liabilities.....................................70
Section 9.7. Prohibited Payments..........................................70
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<S> <C>
Section 9.8. Prohibited Actions...........................................70
Section 9.9. Proceedings..................................................70
Section 9.10. Held in Trust...............................................71
Section 9.11. Reimbursement and Contribution Rights.......................71
Section 9.12. The Liability of each Guarantor.............................73
Section 9.13. Certain Waivers by Guarantors...............................75
Section 9.14. Waiver of Benefit of Anti-Deficiency Laws...................76
Section 9.15. Reinstatement...............................................77
Section 9.16. Authority of Guarantors or Borrower.........................77
Section 9.17. Condition of the Borrower and other Guarantors..............77
Section 9.18. Acceptance and Notice.......................................78
Section 9.19. Rights Cumulative...........................................78
Section 9.20. Notice of Events............................................78
Section 9.21. Set Off.....................................................78
Section 9.22. Notation....................................................79
ARTICLE X. SPECIAL COVENANTS................................................79
Section 10.1. Additional Loan Parties.....................................79
Section 10.2. Further Assurances..........................................79
Section 10.3. Security Documents..........................................79
Section 10.4. Permanent Financing.........................................80
ARTICLE XI. MISCELLANEOUS...................................................80
Section 11.1. Notices.....................................................80
Section 11.2. Waivers; Amendments.........................................80
Section 11.3. Expenses; Indemnity; Damage Waiver..........................81
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
Section 11.4. Successors and Assigns......................................82
Section 11.5. Survival....................................................83
Section 11.6. Counterparts; Integration; Effectiveness....................83
Section 11.7. Severability...............................................83
Section 11.8. Right of Setoff.............................................83
Section 11.9. Governing Law; Jurisdiction; Service of Process.............84
Section 11.10. WAIVER OF JURY TRIAL.....................................84
Section 11.11. Additional Guarantors....................................85
Section 11.12. Agents...................................................85
Section 11.13. Headings..................................................86
Section 11.14. Obligations Absolute.....................................86
Section 11.15. Recourse...................................................86
ARTICLE XII. THE ADMINISTRATIVE AGENT.......................................86
Section 12.1. Appointment of Administrative Agent........................86
Section 12.2. Nature of Duties of the Administrative Agent...............87
Section 12.3. Lack of Reliance on the Administrative Agent...............87
Section 12.4. Certain Rights of the Administrative Agent.................88
Section 12.5. Reliance by the Administrative Agent.......................88
Section 12.6. Indemnification of the Administrative Agent................88
Section 12.7. Administrative Agent in its Individual Capacity............88
Section 12.8. Successor Administrative Agent.............................89
Section 12.9. Collateral; Remedies.......................................89
Section 12.10. Defaults..................................................89
Section 12.11. Miscellaneous.............................................89
</TABLE>
- v -
<PAGE> 7
AMENDED AND RESTATED SENIOR SECURED NOTE AGREEMENT dated as of
August 27, 1998 (the "Agreement") by and among STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation (the "Borrower"), STARWOOD HOTELS &
RESORTS, a Maryland real estate investment trust ("Starwood REIT"), and the
other Persons listed on Schedule A hereto (collectively, including Starwood REIT
and together with each Person that at any time becomes a party hereto by a
Guarantor Joinder, the "Guarantors"), the Persons listed on Schedule B hereto
(collectively, and together with each Person that hereafter becomes a party
hereto by Assignment and Acceptance, the "Lenders"), Lehman Commercial Paper
Inc., as Administrative Agent, and BT Alex. Brown Incorporated and Chase
Securities Inc., as Syndication Agents.
RECITALS
On February 23, 1998, certain of the Lenders made loans to the
Borrower, which loans are evidenced by the Borrower's Senior Secured Increasing
Rate Notes due 2003, in an aggregate principal amount of $2.5 billion pursuant
to a Senior Secured Increasing Rate Note Agreement dated as of February 23, 1998
(as amended, the "Original Agreement") among the Borrower, the Guarantors and
the Lenders (or their predecessors-in-interest), which Original Agreement is
being amended and restated hereby.
The Borrowers and the Guarantors have requested that certain Lenders
severally lend to the Borrower during the six-month period beginning on the
Effective Date one or more additional loans of up to the aggregate amounts set
forth on Schedule B hereto for such Lenders and specified as "Tranche Two
Loans," equal in the aggregate to $1.0 billion, on the terms and subject to the
conditions set forth in this Agreement and evidenced by the Borrower's Senior
Secured Notes due 2003, for the Borrower's general corporate purposes, including
the repurchase of certain paired Capital Stock issued by the Borrower and
Starwood REIT.
The applicable Lenders are willing to make such additional loans,
and the requisite Lenders are willing to amend and restate the Original
Agreement, in each case on the terms and subject to the conditions set forth in
this Agreement.
In the arrangement of the credit extended under the Loans, Lehman
Commercial Paper Inc. has acted as Arranger and Administrative Agent, and BT
Alex. Brown Incorporated and Chase Securities, Inc. have acted as Syndication
Agents.
ACCORDINGLY, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. DEFINED TERMS. As used in this Agreement:
"ACCELERATION DATE" means any date prior to the Maturity Date on
which the Loans are declared to be, or become, immediately due and payable
pursuant to Section 8.2.
"ACQUIRED DEBT" means, with respect to any specified Person, (a)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a
<PAGE> 8
Subsidiary of such specified Person, including Indebtedness incurred in
connection with, or in contemplation of, such other Person merging with or into
or becoming a Restricted Subsidiary of such specified Person, and (b)
Indebtedness encumbering any asset acquired by such specified Person.
"ACQUISITION" means the transactions contemplated in the
Acquisition Agreement.
"ACQUISITION AGREEMENT" means the Amended and Restated Agreement and
Plan of Merger dated as of November 12, 1997, entered into by the Borrower,
Starwood REIT, Chess Acquisition Corp. and ITT, as in effect on the date of this
Agreement.
"ADDITIONAL GUARANTOR" has the meaning specified in Section 11.11.
"ADJUSTED MAXIMUM AMOUNT" has the meaning specified in Section
9.11(b).
"ADMINISTRATIVE AGENT" means LCPI, acting in its capacity as
administrative agent hereunder for the Lenders, together with its successors and
assigns in such capacity.
"AFFILIATE" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided, that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control of such Person. Neither any
Lender nor any Affiliate of a Lender shall be an Affiliate of any Loan Party for
purposes of this Agreement.
"AFFILIATE GUARANTY" means the guaranty set forth in Article IX.
"AFFILIATE TRANSACTION" has the meaning specified in Section 5.11.
"AGGREGATE UNREIMBURSED PAYMENTS" has the meaning specified in
Section 9.11(b).
"APPLICABLE MARGIN" means, for Tranche Two Loans, 2.75% per annum,
and for Tranche One Loans, for any day in any Monthly Interest Period listed
below (counted from the Original Closing Date), the percentage rate per annum
set forth below for such Monthly Interest Period:
2
<PAGE> 9
<TABLE>
<CAPTION>
MONTHLY INTEREST PERIODS APPLICABLE MARGIN (P.A.)
------------------------ ------------------------
<S> <C>
1, 2 and 3 1.75%
4, 5 and 6 2.25
7, 8 and 9 2.75
10, 11 and 12 3.25
Thereafter 3.75
</TABLE>
"ASSET SALE" means (a) the sale, conveyance, transfer or other
disposition (whether in a single transaction or a series of related
transactions) of assets or rights (including by way of a sale and leaseback) of
the Borrower or Starwood REIT or any Restricted Subsidiary (each referred to in
this definition as a "disposition") or (b) the issuance or sale of Equity
Interests in any Restricted Subsidiary (other than Starwood REIT, after the
Reorganization), whether in a single transaction or a series of related
transactions, in each case, other than (i) a disposition of inventory or goods
held in the ordinary course of business, (ii) the disposition of all or
substantially all of the assets of the Borrower and Starwood REIT in a manner
permitted pursuant to Article VI or any disposition that constitutes a Change of
Control hereunder, (iii) any disposition that is a Restricted Payment or that is
a dividend or distribution permitted under Section 5.7 or any Investment that is
not prohibited thereunder or any disposition of cash or Cash Equivalents, (iv)
any single disposition, or related series of dispositions, of assets with an
aggregate fair market value of less than $5.0 million, (v) a transfer of assets
among the Borrower, Starwood REIT or any Restricted Subsidiary, (vi) an issuance
of Equity Interests by a Restricted Subsidiary to the Borrower, Starwood REIT or
another Restricted Subsidiary, (vii) any sale, conveyance, transfer or other
disposition of property that secures Non-Recourse Financing that is to or on
behalf of the lender of such Non-Recourse Financing, (viii) any licensing of
tradenames or trademarks or other intellectual property in the ordinary course
of business by the Borrower, Starwood REIT or a Restricted Subsidiary, (ix)(A)
the exchange of one or more lodging, gaming or leisure related properties and
related assets held by the Borrower, Starwood REIT or any of their Restricted
Subsidiaries for one or more lodging, gaming or leisure related properties and
related assets of any other Person, provided, that if any other assets are
received by the Borrower, Starwood REIT or any of their Restricted Subsidiaries,
such other consideration is in cash or Cash Equivalents or in Investments that
are not prohibited by Section 5.7 and any such cash or Cash Equivalents so
received that shall be deemed to be Net Proceeds of an Asset Sale and applied in
accordance with Section 5.10, and (B) the issuance of OP Units that are not
Disqualified Stock as full or partial consideration for the acquisition of real
estate properties and related assets, provided, that in the case of either (A)
or (B), the Board of Directors has determined that the terms of any exchange or
acquisition in excess of $50.0 million are fair and reasonable and that the fair
market value of the assets received by the Borrower, Starwood REIT or a
Restricted Subsidiary are equal to or greater than the fair market value of the
assets exchanged or transferred.
"ASSIGNED STARWOOD NOTE" means a promissory note in the amount of
$2,127,996,246 assigned to Assigned Starwood Note LLC as part of the WD
Disposition, as such note is in effect on the date of this Agreement.
3
<PAGE> 10
"ASSIGNED STARWOOD NOTE LLC" means WD Investment, LLC, a Delaware
limited liability company, (i) the non-member manager of which shall be ITT and
(ii) the 100% member of which shall be WD Parent Corp.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Lender and an assignee, and delivered to the Borrower, in the
form of Exhibit A or any other form approved by the Borrower and the Required
Lenders.
"AVAILABILITY PERIOD" has the meaning specified in Section 2.1(b).
"BANK CREDIT FACILITY" means the Credit Agreement, dated as of
February 23, 1998, among the Borrower, Starwood REIT, SLT Realty Limited
Partnership and Chess Acquisition Corp. (and ITT, as its successor by merger),
certain additional borrowers, various lenders and LCPI, as Syndication Agent,
and Bankers Trust Company and The Chase Manhattan Bank, as Administrative
Agents, together with the related documents thereto (including any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented,
replaced, refinanced or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (but only if such increase in borrowings is permitted by Section 5.9)
or adding or deleting Subsidiaries of the Borrower or Starwood REIT as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"BANKRUPTCY LAW" means Title 11, United States Code, or any similar
federal or state law for the relief of debtors.
"BENEFICIARY" means each Person that holds, beneficially owns or is
entitled to enforce any Guaranteed Obligation.
"BOARD" means the Board of Governors of the Federal Reserve System
of the United States or any successor.
"BOARD OF DIRECTORS" means the Board of Directors of the Borrower or
the Board of Trustees of Starwood REIT or any authorized committee thereof.
"BORROWER" means Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation.
"BUSINESS DAY" means any day that is not (a) a Saturday or a Sunday,
(b) any other day on which commercial banks in New York City are authorized or
required by law to remain closed or (c) when used in connection with the
determination or payment of interest with reference to the One-Month LIBO Rate,
a day on which banks are not open for dealings in dollar deposits in the London
interbank market.
4
<PAGE> 11
"CAPITAL LEASE OBLIGATIONS" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (a) in the case of a corporation, corporate
stock, (b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"CASH EQUIVALENTS" means (a) United States dollars; (b)(i) direct
obligations of the United States of America (including obligations issued or
held in book-entry form on the books of the Department of the Treasury of the
United States of America) or obligations fully guaranteed by the United States
of America, (ii) obligations, debentures, notes or other evidence of
indebtedness issued or guaranteed by any other agency or instrumentality of the
United States, backed by the full faith and credit of the United States of
America, (iii) interest-bearing demand or time deposits (which may be
represented by certificates of deposit) issued by banks having general
obligations rated (on the date of acquisition thereof) at least "A" by Standard
& Poor's Ratings Services ("S&P") or "A2" by Moody's Investors Service, Inc.
("Moody's") (S&P and Moody's together with any other nationally recognized
credit rating agency if neither of such corporations is then currently rating
the pertinent obligations, a "Rating Agency") or the equivalent by another
Rating Agency, if applicable, or, if not so rated, secured at all times, in the
manner and to the extent provided by law, by collateral security in clause (i)
or (ii) of this definition, of a market value of no less than the amount of
monies so invested, (iv) commercial paper rated (on the date of acquisition
thereof) at least "A-1" or "P-1" or the equivalent by any Rating Agency issued
by any Person, (v) repurchase obligations for underlying securities of the types
described in clause (i) or (ii) above, entered into with any commercial bank or
any other financial institution having long-term unsecured debt securities rated
(on the date of acquisition thereof) at least "A" or "A2" or the equivalent by
any Rating Agency in connection with which such underlying securities are held
in trust or by a third-part custodian, (vi) guaranteed investment contracts of
any financial institution which has long-term debt rated (on the date of
acquisition thereof) at least "A" or "A2" or the equivalent by any Rating
Agency, (vii) obligations (including both taxable and nontaxable municipal
securities) issued or guaranteed by, and any other obligations the interest on
which is excluded from income for Federal income tax purposes issued by, any
state of the United States of America or the District of Columbia or the
Commonwealth of Puerto Rico or any political subdivision, agency, authority or
instrumentality thereof, which issuer or guarantor has (A) short-term debt rated
(on the date of acquisition thereof) at least "A-1" or "P-1" or the equivalent
by any Rating Agency and (B) long-term debt rated (on the date of acquisition
thereof) at least "A" or "A2" or the equivalent by any Rating Agency, (viii)
investment contracts of any financial institution either (A) fully secured by
(1) direct obligations of the United States, (2) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States or (3) securities or receipts evidencing ownership interest in
obligations or specified portions thereof described in clause (1) or (2), in
each case guaranteed as full faith and credit obligations
5
<PAGE> 12
of the United States of America, having a market value at least equal to 102% of
the amount deposited thereunder, or (B) with long-term debt rated (on the date
of acquisition of such investment contract) at least "A" or "A2" or the
equivalent by any Rating Agency and short-term debt rated (on the date of
acquisition of such investment contract) at least "A-1" or "P-1" or the
equivalent by any Rating Agency, (ix) a contract or investment agreement with a
provider or guarantor (A) which provider or guarantor is rated (on the date of
acquisition of such contract or investment agreement) at least "A" or "A2" or
the equivalent by any Rating Agency (provided that if a guarantor is party to
the rating, the guaranty must be unconditional and must be confirmed in writing
prior to any assignment by the provider to another subsidiary of such
guarantor), (B) providing that monies invested shall be payable without
condition (other than notice) and without brokerage fee or other penalty, upon
not more than two Business Days' notice for application when and as required and
(C) stating that such contract or agreement is unconditional, expressly
disclaiming any right of setoff and providing for immediate termination in the
event of insolvency of the provider and termination upon demand of the Borrower
or any of its secured lenders or their agents after any payment or other
covenant default by the provider, or (x) any debt instruments of any Person
which instruments are rated (on the date of acquisition thereof) at least "A,"
"A2," "A-1" or "P-1" or the equivalent by any Rating Agency; provided that in
each case of clauses (i) through (x), such investments are denominated in United
States dollars and maturing not more than 13 months from the date of acquisition
thereof; (c) investments in any money market fund which is rated (on the date of
acquisition thereof) at least "A" or "A2" or the equivalent by any Rating
Agency; (d) investments in mutual funds sponsored by any securities
broker-dealer of recognized national standing having an investment policy that
requires substantially all the invested assets of such fund to be invested in
investments described in any one or more of the foregoing clauses and having a
rating of at least "A" or "A2" or the equivalent by any Rating Agency; or (e)
investments in both taxable and nontaxable (i) periodic auction reset securities
which have final maturities between one and 30 years from the date of issuance
and are repriced through a dutch auction or other similar method every 35 days
or (ii) auction preferred shares which are senior securities of leveraged closed
end municipal bond funds and are repriced pursuant to a variety of rate reset
periods, in each case having a rating (on the date of acquisition thereof) of at
least "A" or "A2" or the equivalent by any Rating Agency.
"CHANGE IN LAW" means (a) the adoption of any law, rule or
regulation after the Original Closing Date, with respect to Tranche One Lenders
and Tranche One Loans, or the date of this Agreement, with respect to Tranche
Two Lenders and Tranche Two Loans, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Entity after
the Original Closing Date, with respect to Tranche One Lenders and Tranche One
Loans, or the date of this Agreement, with respect to Tranche Two Lenders and
Tranche Two Loans or (c) compliance by any Lender (or by any lending office of
such Lender or by such Lender's holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Entity made or issued after the Original Closing Date, with respect
to Tranche One Lenders and Tranche One Loans, or after the date of this
Agreement, with respect to Tranche Two Lenders and Tranche Two Loans.
6
<PAGE> 13
"CHANGE OF CONTROL" means the occurrence of any of the following:
(a) the sale, lease or transfer, in one or a series of transactions, of all or
substantially all of the assets of the Borrower and Starwood REIT and the
Restricted Subsidiaries, taken as a whole (other than to the Borrower, Starwood
REIT and/or one or more of the Restricted Subsidiaries); (b) either the Borrower
or Starwood REIT becomes aware (by way of a report or any other filing pursuant
to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise)
of the acquisition by any person or group (within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision),
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), in a
single transaction or in a related series of transactions, by way of merger,
consolidation or other business combination or purchase of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provision) of 20% or more of the total voting power of the Voting Stock of the
Borrower and Starwood REIT; (c) the first day within any two-year period on
which a majority of the members of the Board of Directors of the Borrower are
not Continuing Directors; (d) the adoption of a plan relating to liquidation or
dissolution of either the Borrower or Starwood REIT (except liquidation of (i)
Starwood REIT into the Borrower and (ii) the Borrower into Starwood REIT); and
(e) from and after the Reorganization Date, Starwood REIT shall not for any
reason be a Subsidiary of the Borrower; provided, however, that a "Change of
Control" shall not include the Borrower's becoming the owner of 100% of the
Class A Shares of Starwood REIT pursuant to the Reorganization.
"CIGA" means CIGA SpA, an Italian company.
"CLASS A EXCHANGEABLE PREFERRED SHARES" means the Class A
Exchangeable Preferred Shares of the Borrower and Starwood REIT.
"CLASS B EXCHANGEABLE PREFERRED SHARES" means the Class B
Exchangeable Preferred Shares of Starwood REIT.
"CLASS A SHARES" means the common shares of beneficial interest in
Starwood REIT after the Reorganization.
"CLASS B SHARES" means the new class of shares of beneficial
interest of Starwood REIT to be paired with the common stock of the Borrower
after the Reorganization.
"CODE" means the Internal Revenue Code of 1986 and any regulation
promulgated thereunder.
"COLLATERAL" means all property upon which a Lien is at any time
granted to or held by the Collateral Agent as security for any Senior Secured
Liabilities.
"COLLATERAL AGENT" means Bankers Trust Company, acting in its
capacity as collateral agent for the holders of the Senior Secured Liabilities.
"COMBINED ADJUSTED TOTAL ASSETS" means, with respect to the Borrower
and Starwood REIT as of any date, the sum of (a) Combined Undepreciated Real
Estate Assets on such date, (b) the book value, determined under GAAP, of all
other tangible assets on such date
7
<PAGE> 14
of the Borrower, Starwood REIT and the Restricted Subsidiaries on a combined,
consolidated basis, and (c) 50% of the book value, determined under GAAP, of all
intangible assets on such date of the Borrower, Starwood REIT and the Restricted
Subsidiaries on a combined, consolidated basis.
"COMBINED CASH FLOW" means, with respect to the Borrower and
Starwood REIT for any period, Combined Net Income for such period plus (a) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing
Combined Net Income), plus (b) provision for taxes based upon net income or net
profits of the Borrower and Starwood REIT and the Restricted Subsidiaries to the
extent such provision for taxes was deducted in computing Combined Net Income
(excluding any gaming revenue taxes), plus (c) Combined Interest Expense for
such period to the extent such expenses were deducted in computing Combined Net
Income, plus (d) Combined Depreciation and Amortization Expense for such period
to the extent such expenses were deducted in computing Combined Net Income,
minus (e) non-cash items increasing such Combined Net Income for such period, in
each case, on a combined basis for the Borrower and Starwood REIT and the
Restricted Subsidiaries and determined in accordance with GAAP. To the extent
Combined Cash Flow includes any fiscal quarter ending on or prior to March 31,
1998, Combined Cash Flow shall be the sum of (i) the actual Combined Cash Flow
for each fiscal quarter completed that began on or after April 1, 1998 and (ii)
$1.651 billion, as an assumed allowance for Combined Cash Flow for the 12 months
ended March 31, 1998, but as such amount may be adjusted on a pro forma basis
(as provided in the definition of "Fixed Charge Coverage Ratio") for
acquisitions or dispositions after the Original Closing Date, times a fraction,
the numerator of which is the number of fiscal quarters included in such
calculation that ended on or prior to March 31, 1998 and the denominator of
which is four.
"COMBINED DEBT" means, with respect to the Borrower and Starwood
REIT at any date, the aggregate principal amount of Indebtedness outstanding on
such date of the Borrower, Starwood REIT and the Restricted Subsidiaries on a
combined, consolidated basis determined in accordance with GAAP.
"COMBINED DEPRECIATION AND AMORTIZATION EXPENSE" means, with respect
to the Borrower and Starwood REIT for any period, the total amount of
depreciation and amortization expense and other noncash expenses (excluding any
noncash expense that represents an accrual, reserve or amortization of a cash
expenditure for a past, present or future period) of the Borrower and Starwood
REIT and the Restricted Subsidiaries for such period on a combined consolidated
basis as defined in accordance with GAAP.
"COMBINED FUNDS FROM OPERATIONS" means, with respect to the Borrower
and Starwood REIT for any period, Combined Net Income for such period plus (a)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing Combined Net Income), plus (b) Combined Depreciation and Amortization
Expense for such period to the extent such expenses were deducted in computing
Combined Net Income, plus (c) amortization of debt issuance costs and deferred
financing fees of the Borrower and its Restricted Subsidiaries on a combined
consolidated basis to the extent deducted in computing Combined Net Income,
minus (d)
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non-cash items increasing such Combined Net Income for such period, in each
case, on a combined basis for the Borrower and Starwood REIT and the Restricted
Subsidiaries and determined in accordance with GAAP, and plus (e) the allocable
portion, based upon the ownership percentage, of funds from operations of
unconsolidated investments.
"COMBINED INTEREST EXPENSE" means, with respect to any period,
without duplication, the sum of (a) combined consolidated interest expense of
the Borrower, Starwood REIT and the Restricted Subsidiaries for such period,
whether paid or accrued, to the extent such expense was deducted in computing
Combined Net Income (including original issue discount, non-cash interest
payments (other than in Equity Interests that are not Disqualified Stock), the
interest component of Capital Lease Obligations, and net payments (if any,
whether positive or negative) pursuant to Hedging Obligations, but excluding
amortization of debt issuance costs and deferred financing fees), (b)
commissions, discounts and other fees and charges paid or accrued with respect
to letters of credit and bankers' acceptance financing and (c) to the extent not
included above, the maximum amount of interest which would have to be paid by
the Borrower or Starwood REIT or any Restricted Subsidiary under a Guaranty of
Indebtedness of any other Person if such Guaranty were called upon.
Notwithstanding the foregoing, Combined Interest Expense shall include (and, to
the extent not already reflected therein, Combined Interest Expense shall be
increased by) an amount (not less than zero) equal to the aggregate amount of
cash interest payments made during the respective period in respect of the
Assigned Starwood Note less the amounts paid during such period by WD Parent
Corp. and Assigned Starwood Note LLC in respect of taxes, normal overhead and
the VNU Preferred Stock (net of amounts received during such period by WD Parent
Corp. in respect of Preferred Stock owned by it). To the extent Combined
Interest Expense is determined for any fiscal quarter ending on or prior to
March 31, 1998, Combined Interest Expense shall be the sum of (i) the actual
Combined Interest Expense for each fiscal quarter completed that began on or
after April 1, 1998 and (ii) $650 million, as an assumed allowance for Combined
Interest Expense for the 12 months ended March 31, 1998, as such amount may be
adjusted on a pro forma basis (as provided in the definition of "Fixed Charge
Coverage Ratio") for borrowings and repayments after the Original Closing Date,
times a fraction, the numerator of which is the number of fiscal quarters
included in such calculation that ended on or prior to March 31, 1998 and the
denominator of which is four.
"COMBINED NET INCOME" means, with respect to the Borrower and
Starwood REIT for any period, the aggregate of the Net Income of the Borrower
and Starwood REIT and the Restricted Subsidiaries for such period, on a combined
consolidated basis, determined in accordance with GAAP; provided, however, that
(a) the Net Income for such period of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting, shall be included only
to the extent of the amount of dividends or distributions paid in cash (or to
the extent converted into cash) to the referent Person or a Restricted
Subsidiary thereof in respect of such period, (b) the Net Income of any Person
acquired in a pooling of interests transaction shall not be included for any
period prior to the date of such acquisition, (c) the Net Income for such period
of any Restricted Subsidiary that is not a Guarantor shall be excluded to the
extent that the declaration or payment of dividends or similar distributions by
that Restricted Subsidiary of its Net Income is not at the date of determination
permitted without any prior
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<PAGE> 16
governmental approval (which has not been obtained) or, directly or indirectly,
by the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders, unless such restriction with
respect to the payment of dividends or in similar distributions has been legally
waived, and (d) the cumulative effect of a change in accounting principles shall
be excluded.
"COMBINED UNDEPRECIATED REAL ESTATE ASSETS" means, as of any date,
the cost (being the original cost to the Borrower, Starwood REIT or any
Restricted Subsidiary, plus capital improvements) of real estate assets of the
Borrower, Starwood REIT and the Restricted Subsidiaries on such date, before
depreciation and amortization of such real estate assets, determined on a
combined, consolidated basis in conformity with GAAP.
"COMMITMENT" means, with respect to each Lender, the commitment of
such Lender to make a Loan under the Original Agreement on the Original Closing
Date or one or more Tranche Two Loans hereunder on or after the Effective Date
in the amount set forth on Schedule B, as the same may be reduced or terminated
from time to time in accordance with the terms of this Agreement and as the same
may be adjusted from time to time as a result of assignments to or from such
Lender in accordance with the terms of this Agreement, and otherwise subject to
the terms and conditions set forth herein.
"COMMITMENT PERCENTAGE" means, with respect to each Tranche Two
Lender, a fraction (expressed as a percentage) the numerator of which is the
amount of such Lender's Tranche Two Commitment at such time and the denominator
of which is the aggregate amount of all Lenders' Tranche Two Commitments at such
time, provided, that if the Tranche Two Commitments have been terminated as of
the date of determination, then the Commitment Percentage shall be determined as
of the time immediately prior to such termination.
"CONTINUING DIRECTOR" means, as of any date of determination, any
member of the Board of Directors who (a) was a member of such Board of Directors
on the date of this Agreement or (b) was nominated for election or elected to
such Board of Directors with, or whose election to the Board of Directors was
approved by, the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election.
"CREDIT FACILITY DOCUMENTS" means the Bank Credit Facility and each
note, each banker's acceptance, the ITT acknowledgment, the guaranty of the Bank
Credit Facility, the Pledge Agreement, each subordination agreement and any
other guaranties, pledge agreements or additional security documents, in each
case, as executed and delivered in accordance with the Bank Credit Facility as
in effect on the Original Closing Date.
"CREDIT FACILITY LIABILITIES" means all Obligations and other
amounts owing to the agents, the Collateral Agent or any lender from time to
time party to the Bank Credit Facility pursuant to the terms of the Bank Credit
Facility or any other Credit Facility Document.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
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"DEFAULT" means any event that is, or after the passage of time or
the giving of notice (or both) would be, an Event of Default.
"DISCHARGE OF THE NOTE LIABILITIES" means that all obligations of
the Lenders to extend credit under the Original Agreement and this Agreement
have expired or been terminated and have been absolutely, unconditionally and
irrevocably discharged and the Senior Secured Notes and all other Note
Liabilities at any time created, incurred or outstanding (except Obligations for
indemnification which are then contingent and in respect of which no claim or
demand has then been made) have been fully, finally and indefeasibly paid in
cash.
"DISCLOSURE SCHEDULE" means the schedules attached to the Bank
Credit Facility as of the Original Closing Date.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part on, or prior to, September 1, 2003; provided, however, that any
Capital Stock which would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require the Borrower and/or Starwood
REIT to repurchase or redeem such Capital Stock upon the occurrence of a Change
of Control or an Asset Sale occurring prior to the final maturity of the Senior
Secured Notes shall not constitute Disqualified Stock if the change of control
provisions, event of loss provisions, or asset sale provisions, as the case may
be, applicable to such Capital Stock specifically provide that the Borrower and
Starwood REIT will not repurchase or redeem any such stock pursuant to such
provisions prior to the Borrower's and Starwood REIT's compliance with the
provisions of Section 5.10 and Section 5.14.
"DOLLARS" or "$" means such lawful currency of the United States of
America as may at the time be legal tender for the payment of debts therein.
"EFFECTIVE DATE" means the date on which the conditions referred to
in Section 3.1 are satisfied (or waived in accordance with Section 11.2).
"ELIGIBLE HEDGING LIABILITIES" means Hedging Obligations that,
pursuant to the Bank Credit Facility, are secured by the Lien of the Pledge
Agreement on a pari passu basis with all other Credit Facility Liabilities.
"EMPLOYEE STOCK BUYBACKS" has the meaning specified in Section
5.9.
"ENGAGEMENT LETTERS" means the engagement agreements dated as of
February 23, 1998 and August 17, 1998, each by and among the Borrower, Starwood
REIT, Lehman Brothers and LCPI.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
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<PAGE> 18
"EVENT OF DEFAULT" means any event specified in Section 8.1.
"EXCESS PROCEEDS" has the meaning specified in Section 5.10.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXCHANGE ACT DOCUMENTS" means any and all reports and filings made
by any Loan Party with the SEC pursuant to the Exchange Act after January 1,
1996 and prior to the date of this Agreement.
"EXCLUDED DEFAULT" means the acceleration of not more than
$225,000,000 in Existing Debt based or predicated upon the consummation of the
Acquisition, if such Indebtedness is paid in full and discharged within five
Business Days from the date of such acceleration.
"EXCLUDED TAXES" means, with respect to any Lender or any other
recipient of any payment to be made by or on account of any obligation of the
Borrower hereunder, (a) income or franchise taxes imposed on (or measured by)
its net income by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which the Borrower is
located and (c) in the case of a Foreign Lender, any withholding tax that is
imposed under the laws of the United States of America at the time such Foreign
Lender becomes a party to this Agreement or becomes a Foreign Lender on amounts
payable to such Foreign Lender under this Agreement.
"EXISTING DEBT" means (a) the Class A Exchangeable Preferred Shares,
the Class B Exchangeable Preferred Shares, the Preferred Partnership Units in
both SLC Operating Limited Partnership and SLT Realty Limited Partnership issued
and outstanding on the Original Closing Date or created in connection with the
acquisition of Westin Hotels & Resorts Worldwide, Inc.; (b) 34.4 million savings
shares of CIGA issued and outstanding on the Original Closing Date; and (c)
approximately $3.3 billion of other Indebtedness of the Borrower and Starwood
REIT and the Restricted Subsidiaries outstanding on the Original Closing Date,
after giving effect to the acquisition of ITT (but excluding the Bank Credit
Facility and the Senior Secured Notes and guaranties thereof).
"FAIR SHARE" has the meaning specified in Section 9.11(b).
"FEE LETTERS" means the letter agreements dated as of February 23,
1998 and August 17, 1998, each by and among the Borrower, Starwood REIT, Lehman
Brothers and LCPI.
"FINANCIAL STATEMENTS" means the unaudited combined consolidated
balance sheets and statements of profits and losses of the Borrower, Starwood
REIT and their Subsidiaries as they appear in the Exchange Act Documents.
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"FIXED CHARGE COVERAGE RATIO" means, with respect to the Borrower
and Starwood REIT for any period, the ratio of Combined Cash Flow for such
period to the Fixed Charges for such period. In the event that the Borrower,
Starwood REIT or any Restricted Subsidiary incurs, assumes, guarantees,
defeases, discharges or redeems any Indebtedness (other than revolving credit
borrowings) or issues Disqualified Stock or Subsidiary Preferred Stock (other
than to the Borrower, Starwood REIT or any Restricted Subsidiary) subsequent to
the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated but prior to the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee, defeasance, discharge or redemption of Indebtedness and
the use of proceeds therefrom, or such issuance or redemption of Disqualified
Stock or Subsidiary Preferred Stock, as if the same had occurred at the
beginning of the applicable four-quarter period. For purposes of making the
computation referred to above, acquisitions, dispositions and discontinued
operations (as determined in accordance with GAAP) that have been made by the
Borrower, Starwood REIT or any Restricted Subsidiary, including all mergers,
consolidations and dispositions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be calculated on a pro forma basis assuming that all such acquisitions,
dispositions, discontinued operations, mergers, consolidations (and the
reduction of any associated fixed charge obligations resulting therefrom) had
occurred on the first day of the four-quarter reference period.
"FIXED CHARGES" means, with respect to the Borrower and Starwood
REIT for any period, the sum, without duplication, of (a) Combined Interest
Expense for such period, (b) all capitalized interest of the Borrower and
Starwood REIT and the Restricted Subsidiaries and (c) all dividend payments,
whether or not in cash, on any series of Preferred Stock (other than OP Units
and Preferred Stock issued by the Borrower or Starwood REIT) of such Person or
any of its Restricted Subsidiaries, other than dividend payments on Equity
Interests payable solely in Equity Interests or dividends paid as an increase in
liquidation preference on Preferred Stock, in each case, on a combined
consolidated basis and in accordance with GAAP.
"FOREIGN LENDER" means any Lender that is organized under the laws
of a jurisdiction other than the United States of America, any State thereof or
the District of Columbia.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, the statements and
pronouncements of the Financial Accounting Standards Board and such other
statements by such other entities as have been approved by a significant segment
of the accounting profession, which are applicable at the date of determination.
For the purposes of this Agreement, the term "combined consolidated" with
respect to the Borrower and Starwood REIT or their Subsidiaries shall mean the
Borrower and Starwood REIT consolidated with their respective Restricted
Subsidiaries and combined together and shall not include any Unrestricted
Subsidiary.
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"GAMING AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision, whether now or hereafter existing, or any officer
or official thereof, including the Nevada Gaming Commission, the New Jersey
Casino Control Commission, the Division of Gaming Enforcement of the New Jersey
Attorney General's office, the Nevada State Gaming Control Board, the Clark
County Liquor and Gaming Licensing Board and any other agency with authority to
regulate any gaming operation (or proposed gaming operation) owned, managed or
operated by the Borrower, Starwood REIT or any of their Subsidiaries.
"GAMING LICENSE" means every license, franchise or other
authorization required to own, lease, operate or otherwise conduct gaming
activities of the Borrower, Starwood REIT or any Restricted Subsidiary,
including all such licenses granted under applicable Nevada or New Jersey law,
and the regulations promulgated pursuant thereto, and other applicable federal,
state, foreign or local laws.
"GOVERNMENTAL ENTITY" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality thereof, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"GUARANTEED OBLIGATIONS" has the meaning specified in Section 9.1.
"GUARANTOR JOINDER" means the act or agreement by which any
Restricted Subsidiary becomes bound by this Agreement as a Guarantor hereunder.
"GUARANTORS" means Starwood REIT and each of the Persons listed on
Schedule A and each other Subsidiary of the Borrower or Starwood REIT that
becomes a party to this Agreement by a Guarantor Joinder.
"GUARANTY" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including letters of credit and reimbursement
agreements in respect thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
Obligations of such Person under (a) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (b) other agreements
or arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"INCUR" has the meaning specified in Section 5.9.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
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and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guaranty by such Person of any indebtedness of any other Person
and liability, whether or not contingent, whether or not it appears on a balance
sheet of such Person. The amount of any Indebtedness outstanding as of any date
shall be (a) the accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest, and (b) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness.
"INDEMNITEES" has the meaning specified in Section 11.3(b).
"INDEMNIFIED TAXES" means all Taxes other than Excluded Taxes.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
judgment of the Board of Directors, (a) qualified to perform the task for which
it has been engaged and (b) disinterested and independent with respect to the
Borrower, Starwood REIT and their Subsidiaries and each Affiliate of the
Borrower or Starwood REIT.
"INTERCOMPANY MORTGAGE NOTE" means the subordinated Intercompany
Mortgage Note in aggregate principal amount not to exceed $3,450,000,000 issued
by the Borrower to Starwood REIT and contributed by Starwood REIT to SLT Realty
Limited Partnership.
"INTEREST PAYMENT DATE" means the last day of each Monthly
Interest Period, the Maturity Date and the Acceleration Date.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the form of direct or
indirect loans (including Guaranties of Indebtedness or other Obligations),
advances or capital contributions (excluding commission, travel, entertainment,
moving and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all other
items that are or would be classified as investments on a balance sheet prepared
in accordance with GAAP.
"ITT" means ITT Corporation, a Nevada corporation.
"ITT NOTES" means each of (a) ITT's 6-1/4% Notes due November 15,
2000, (b) ITT's 6-1/4% Notes due November 15, 2000, (c) ITT's 6-3/4% Notes due
November 15, 2005, (d) ITT's 6-3/4% Notes due November 15, 2003, (e) ITT's
7-3/8% Debentures due November 15, 2005 and (f) ITT's 7-3/4% Debentures due
November 15, 2025.
"JOINT PROXY STATEMENT" means the Joint Proxy Statement/Prospectus
dated January 14, 1998, delivered to shareholders of the Borrower, Starwood REIT
and ITT.
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"LCPI" means Lehman Brothers Commercial Paper Inc., a Delaware
corporation.
"LEHMAN BROTHERS" means Lehman Brothers Inc., a Delaware
corporation.
"LENDERS" means the Persons listed on Schedule B and each other
Person that becomes a party hereto pursuant to an Assignment and Acceptance but
does not include any such Person that ceases to be a party hereto by
transferring all Loans outstanding to it to another Lender pursuant to an
Assignment and Acceptance.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"LOAN PARTIES" means the Borrower and the Guarantors.
"LOANS" means the loans made by the Lenders to the Borrower pursuant
to this Agreement or the Original Agreement, including the Tranche One Loans and
the Tranche Two Loans.
"MARGIN REGULATIONS" means Regulation T, U or X of the Board of
Governors of the Federal Reserve System and all official rulings and
interpretations thereunder or thereof.
"MARGIN STOCK" has the meaning assigned to such term in the
Margin Regulations.
"MATERIAL ADVERSE EFFECT" means any circumstance or event that might
have a material adverse effect on (a) any Loan Party's ability to perform its
obligations under any Note Document to which it is a party, (b) the validity or
enforceability of any Note Document, (c) any Collateral, or the creation,
perfection, priority, legality or enforceability of the Collateral Agent's Liens
thereon or the benefits of the security afforded thereby, or (d) the combined
consolidated financial condition, stockholders' equity, business or results of
operations of the Borrower, Starwood REIT and their Subsidiaries, taken as a
whole.
"MATURITY DATE" means February 23, 2003.
"MONTHLY INTEREST PERIOD" means the monthly period that began on the
Original Closing Date, in the case of Tranche One Loans, or that begins on the
date on which the applicable Tranche Two Loan is made hereunder, in the case of
Tranche Two Loans, and ended or ends on the numerically corresponding date in
the month next following thereafter and each subsequent monthly period that
began or begins at the expiration of any such monthly period and ended or ends
on the numerically corresponding date in the month next following thereafter,
except that (a) if any such monthly period would end on a day other than a
Business Day, such monthly period shall be extended to the next succeeding
Business Day unless such
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next succeeding Business Day falls in the next calendar month, in which case
such monthly period shall end on the next preceding Business Day and (b) any
such monthly period that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day to the last
Business Day of such monthly period) shall end on the last Business Day of such
monthly period.
"NET INCOME" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of Preferred Stock dividends, excluding, however, (a) any
gain (or loss), together with any related provision for taxes on such gain (or
loss), realized in connection with (i) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (ii)
the disposition of any securities or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries, and (b) any extraordinary
gain (or loss), together with any related provision for taxes on such
extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the
Borrower, Starwood REIT or any Restricted Subsidiary in respect of any Asset
Sale, net of the direct costs relating to such Asset Sale (including legal,
accounting and investment banking fees and expenses, employee severance and
termination costs, any trade payables or similar liabilities related to the
assets sold and required to be paid by the seller as a result thereof and sales,
finder's or broker's commissions), and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements) or amounts required to be distributed by Starwood REIT in order to
maintain its status as a REIT under the Code that result from the gain from such
Asset Sale, amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that are the subject of such Asset
Sale, all distributions and other payments required to be made to minority
interest holders in a subsidiary or joint venture as a result of the Asset Sale
and any reserve for adjustment in respect of the sale price of such asset or
assets or any liabilities associated with the asset disposed of in such Asset
Sale.
"NEWCO" means a newly created, wholly-owned subsidiary of the
Borrower to be merged with and into Starwood REIT pursuant to the
Reorganization.
"NEW DEBT" means the new Indebtedness and refinancings of existing
Indebtedness, in an aggregate principal amount of up to $500,000,000, defined as
"New Debt" in the Fourth Amendment to Credit Agreement dated as of July 15, 1998
relating to the Bank Credit Facility, as in effect on the date hereof.
"NEW LENDING OFFICE" has the meaning specified in Section 2.8(e).
"NON-RECOURSE FINANCING" means Indebtedness incurred in
connection with the purchase or lease of personal or real property useful in the
business of the Borrower, Starwood REIT or any Restricted Subsidiary and (a) as
to which the lender upon default may seek recourse or payment against the
Borrower, Starwood REIT or any Restricted Subsidiary only through the return or
sale of the property or the equipment so purchased or leased, or in the case of
any Indebtedness issued by a special purpose entity with no material assets
other than the
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assets so financed, only through foreclosure upon the assets or Capital Stock of
such special purpose entity and (b) may not otherwise assert a valid claim for
payment on such Indebtedness against the Borrower, Starwood REIT or any
Restricted Subsidiary (other than as specified above) or any other property of
the Borrower, Starwood REIT or any Restricted Subsidiary.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness or Disqualified
Stock, as the case may be, or that portion of Indebtedness or Disqualified
Stock, as the case may be, as to which none of the Borrower, Starwood REIT or
any Restricted Subsidiary (a) provides credit support pursuant to any
undertaking, agreement or instrument that would constitute Indebtedness or
Disqualified Stock, as the case may be, or (b) is directly or indirectly liable.
"NOTE DOCUMENTS" means this Agreement, the Original Agreement (as
amended hereby), the Senior Secured Notes, the Pledge Agreement, the Engagement
Letters, the Fee Letters, and all documents delivered on the Original Closing
Date pursuant to the Original Agreement or on the Effective Date pursuant to
this Agreement.
"NOTE LIABILITIES" means all direct or indirect debts, liabilities
and other obligations of the Borrower or any Guarantor of any and every type and
description at any time arising under or in connection with this Agreement, the
Original Agreement (as amended hereby), or any other Note Document to LCPI, to
Lehman Brothers, to any Lender or to any Indemnitee or their respective
successors, transferees or assigns, whether or not the right of such Person to
payment in respect of such obligations and liabilities is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured and whether or not such claim
is discharged, stayed or otherwise affected by any bankruptcy case or insolvency
or liquidation proceeding, and shall include all liabilities for principal of
and interest on the Loans and under the Senior Secured Notes and all other
liabilities of the Borrower or any Guarantor under the Note Documents for any
fees, costs, taxes, expenses, indemnification and other amounts payable
thereunder.
"NOTE REGISTER" has the meaning specified in Section 7.3(b).
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing, or owing with respect to, any Indebtedness.
"OFFER PERIOD" has the meaning specified in Section 2.5(a).
"OFFER AMOUNT" has the meaning specified in Section 2.5(a).
"OFFICER" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary or any Vice-President of such
Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of a
Loan Party by two Officers (or if a limited liability company or partnership,
two Officers of the managing member or general partner of such limited liability
company or partnership) of such Loan Party,
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<PAGE> 25
one of whom must be the principal executive officer, the principal financial
officer, the treasurer or the principal accounting officer of such Loan Party;
but in the case of an Officers' Certificate of the Borrower and Starwood REIT,
by one Officer of each of the Borrower and Starwood REIT, one of whom must be
the principal executive officer, the principal financial officer, the treasurer
or the principal accounting officer of the Borrower or Starwood REIT.
"ONE-MONTH LIBO RATE" means, for any Monthly Interest Period for any
Loan, the rate per annum appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Required
Lenders of the applicable Tranche from time to time for purposes of providing
quotations of interest rates applicable to dollar deposits in the London
interbank market) at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Monthly Interest Period, as the rate for
dollar deposits with a one-month maturity period.
"OP UNITS" means limited partnership units in any limited
partnership that is a Restricted Subsidiary and which limited partnership units
by their terms may be exchanged into, or exercised or redeemed for, cash or the
common stock of the Borrower and Starwood REIT.
"ORIGINAL AGREEMENT" has the meaning specified in the Recitals
hereto.
"ORIGINAL CLOSING DATE" means February 23, 1998.
"OTHER TAXES" means any and all current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under any Note Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Note
Document.
"PAIRED COMMON SHARES" means the common stock of the Borrower and
(a) prior to the Reorganization, the common shares of beneficial interest of
Starwood REIT, and (b) upon and following consummation of the Reorganization,
the Class B Shares of Starwood REIT.
"PARTICIPANT" has the meaning specified in Section 7.3(c).
"PAYMENT DEFAULT" has the meaning specified in Section 8.1(f).
"PERCENTAGE SHARE" means, with respect to any Lender (and, where so
specified, any Tranche), that Lender's interest in the applicable facility,
calculated as follows:
(a) for Tranche One, divide the principal amount of that Lender's
outstanding Tranche One Loans by the total principal amount of all Tranche One
Loans outstanding at the time;
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(b) for Tranche Two, divide the aggregate amount of that Lender's
Tranche Two Commitment and Tranche Two Loans by the total amount of all Tranche
Two Commitments and Tranche Two Loans outstanding at the time;
(c) in all other cases, divide the aggregate amount of that Lender's
Tranche One Loans, Tranche Two Loans and Tranche Two Commitment by the aggregate
amount of all Tranche One Loans, Tranche Two Loans and Tranche Two Commitments
then outstanding.
"PERFECTED" means, as to the Collateral Agent's Lien in any of the
Collateral in respect of any and all outstanding Senior Secured Liabilities,
that (a) a creditor on a simple contract could not acquire a judicial lien upon
such Collateral that is superior to the Lien of the Collateral Agent thereon,
and (b) the Collateral Agent's Lien in such Collateral would be perfected and
not avoidable if a Proceeding were commenced under Bankruptcy Law in which the
owner of such Collateral is the debtor.
"PERMITTED INVESTMENTS" means (a) Investments in the Borrower,
Starwood REIT or any Restricted Subsidiary; (b) Investments in Cash Equivalents;
(c) Investments by the Borrower, Starwood REIT or any Restricted Subsidiary in a
Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary or (ii) such Person is merged, combined or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is liquidated
into, the Borrower, Starwood REIT or a Restricted Subsidiary; (d) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Borrower and Starwood REIT or for OP
Units (that are not Disqualified Stock); (e) receivables owing to the Borrower,
Starwood REIT or any Restricted Subsidiary if created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; provided, that such trade terms may include such
concessionary trade terms as the Borrower, Starwood REIT or any Restricted
Subsidiary deems reasonable under the circumstances; (f) payroll, relocation,
housing, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (g) loans or
advances to employees of the Borrower, Starwood REIT or their Restricted
Subsidiaries (1) to fund the exercise price of options granted under employment
agreements and the Borrower's and Starwood REIT's stock option plans or
agreements or (2) for any other purpose including in connection with relocation
not to exceed $50.0 million in the aggregate at any one time outstanding under
this clause (g); (h) stock, obligations or securities received in settlement of
debts created in the ordinary course of business or in satisfaction of
judgments; (i) other Investments in any Person (other than in an Affiliate of
the Borrower or Starwood REIT) or in any Unrestricted Subsidiary having a fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (i) that are at the time
outstanding, not to exceed 5% of the combined consolidated total assets of the
Borrower and Starwood REIT and the Restricted Subsidiaries; and (j) Investments
in any person which Investment is made with Equity Interests (other than
Disqualified Stock) of the Borrower and Starwood REIT or in OP Units (that are
not Disqualified Stock).
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"PERMITTED LIENS" means (a) Liens in favor of the Borrower, Starwood
REIT or a Restricted Subsidiary; (b) Liens securing the Senior Secured Notes and
other Note Liabilities; (c) Liens securing Credit Facility Liabilities incurred
pursuant to clause (a) of Section 5.9 and any additional Indebtedness permitted
to be incurred thereunder pursuant to clause (i) of Section 5.9 and Liens
securing Hedging Obligations that are Eligible Hedging Liabilities and are
permitted to be incurred under clause (f) of Section 5.9, but only if the Note
Liabilities (and, if required, the ITT Notes) are secured equally and ratably
with such Credit Facility Liabilities and Eligible Hedging Liabilities;
provided, that in the circumstances, and to the extent, provided in the Bank
Credit Facility, cash (and Cash Equivalents) collateral may be delivered from
time to time in accordance with the requirements of the Bank Credit Facility
without equally and ratably securing the Note Liabilities; (d) Liens in
existence on the Original Closing Date, attaching to property owned by the
Borrower, Starwood REIT or a Restricted Subsidiary on the Original Closing Date
and securing only Indebtedness that was outstanding on the Original Closing Date
and Liens on the Collateral under the Pledge Agreement securing obligations on,
or with respect to, Hedging Obligations permitted under Section 5.9 and the ITT
Notes equally and ratably with the Senior Secured Liabilities; (e) Liens on
property of a Person existing at the time such Person became a Restricted
Subsidiary, is merged into or combined with or into, or wound up into, one of
the Borrower and Starwood REIT or any Restricted Subsidiary of the Borrower and
Starwood REIT if such Liens were in existence prior to the contemplation of such
acquisition, merger or consolidation or winding up and do not extend to any
other assets other than those of the Person acquired by, merged into or combined
with one of the Borrower and Starwood REIT or such Restricted Subsidiary; (f)
Liens on property existing at the time of acquisition thereof by the Borrower
and Starwood REIT or any Restricted Subsidiary if such Liens were in existence
prior to the contemplation of such acquisition; (g) Liens upon property of any
Person securing Refinancing Indebtedness, if (i) when it was incurred, such
Refinancing Indebtedness was permitted to be incurred under clause (d) in
Section 5.9 and (ii) when incurred, such Refinancing Indebtedness was secured by
Liens not materially more extensive than the Liens securing the Indebtedness so
refinanced; (h) Liens securing Indebtedness that, when incurred, was permitted
to be incurred under clause (g) in Section 5.9; (i) Liens securing Indebtedness
that, when incurred, was permitted to be incurred under the first paragraph of
Section 5.9; (j) Liens on real property and related assets securing the
Intercompany Mortgage Note; (k) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business and which obligations
are not expressly prohibited by this Agreement; (l) Liens constituting or
reflecting the interests of landlords or lessors; (m) (1) Liens for taxes,
assessments or governmental charges or claims or (2) statutory Liens of
landlords, and carriers', warehousemen's, mechanics', suppliers', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business,
in the case of each of (1) and (2), with respect to amounts that either (A) are
not yet delinquent or (B) are being contested in good faith by appropriate
proceedings as to which appropriate reserves or other provisions have been made
in accordance with GAAP; (n) easements, rights-of-way, navigational servitudes,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances which do not interfere in any material respect with the ordinary
conduct of business of the Borrower and Starwood REIT and the Restricted
Subsidiaries; (o) a leasehold mortgage in favor of a party financing a
third-party lessee of the Borrower, Starwood REIT or a Restricted
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Subsidiary, but only if neither the Borrower nor Starwood REIT nor any
Restricted Subsidiary is liable for the payment of any principal of, or interest
or premium on, such financing; (p) licenses of patents, trademarks and other
intellectual property rights granted by the Borrower, Starwood REIT or a
Restricted Subsidiary in the ordinary course of business and not interfering in
any material respect with the ordinary conduct of the business of the Borrower,
Starwood REIT and the Restricted Subsidiaries; (q) any attachment or judgment
Lien not constituting an Event of Default; (r) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (s) Liens on assets of the
Borrower, Starwood REIT and the Restricted Subsidiaries (other than on assets
constituting Collateral) securing collateralized mortgage backed securities
transactions otherwise permitted hereunder in an aggregate principal amount not
to exceed $1,000,000,000 at any time outstanding; and (t) Liens on cash or Cash
Equivalents not exceeding $135,000,000 securing obligations incurred in
connection with the sale of the UBS Shares.
"PERMITTED PAYMENT" means any payment on account of Subordinated
Liabilities made in cash in conformity with the Borrower's and Starwood REIT's
ordinary cash management practices for the businesses conducted by the Borrower,
Starwood REIT and their respective Subsidiaries, if no Event of Default has
occurred and is continuing at the time such payment is made or would result
therefrom.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or government or any agency or political subdivision thereof or any
other entity.
"PLEDGE AGREEMENT" means that certain Pledge and Security Agreement,
dated as of February 23, 1998, by and among the Borrower, Starwood REIT, the
Guarantors and Bankers Trust Company, as collateral agent.
"POST-PETITION INTEREST AND EXPENSE CLAIMS" means any and all claims
of any holder of Guaranteed Obligations (a) for interest on any Note Liabilities
determined for any period of time occurring after the commencement of any
Proceeding at the contract rate (including any applicable post-default increase
therein) set forth in this Agreement and the Senior Secured Notes or (b) for
cost and expense reimbursements or indemnification on the terms set forth in
this Agreement or any other Note Document for costs and expenses incurred and
indemnification rights accrued at any time after the commencement of any such
Proceeding, in each case to the extent such claim accrues or becomes payable in
accordance with the provisions of this Agreement or any other Note Document (or
would have accrued or become payable if enforceable or allowable in such
Proceeding), whether or not such claim is enforceable, allowable or allowed in
such Proceeding and even if such claim is disallowed therein.
"PREFERRED PARTNERSHIP UNITS" means the Class A Units of SLT Realty
Limited Partnership, a Delaware limited liability partnership, and the Class A
Units and Class B Units of SLC Operating Limited Partnership, a Delaware limited
liability partnership.
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"PREFERRED STOCK" means any Equity Interest with preferential right
of payment of dividends or upon liquidation, dissolution or winding up.
"PREPAYMENT DATE" has the meaning specified in Section 2.4(c).
"PROCEEDING" means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of creditors, appointment of a
custodian, receiver, trustee or other officer with similar powers or any other
proceeding for the liquidation, dissolution or other winding up of a Person
(including any such proceeding under the Bankruptcy Law).
"PURCHASE OFFER" has the meaning specified in Section 2.5.
"PURCHASE DATE" has the meaning specified in Section 2.5(a).
"RECORD DATE" means the 10th day of each calendar month.
"REFERENCE RATE" means, for any day in any Monthly Interest Period,
the One-Month LIBO Rate determined two Business Days prior to the commencement
of such Monthly Interest Period, except that if as of the first day of such
Monthly Interest Period the Borrower and the applicable Lenders have received a
Reference Rate Changeover Notice that has not been withdrawn by written notice
of such withdrawal delivered to the Borrower and the applicable Lenders by the
Required Lenders of the applicable Tranche, then the Reference Rate for such
Monthly Interest Period shall be the Three-Month Treasury Bill Alternative Rate
determined as of the first Business Day prior to the commencement of such
Monthly Interest Period.
"REFERENCE RATE CHANGEOVER NOTICE" means a certificate delivered to
the Borrower and the applicable Lenders prior to the first day of any Monthly
Interest Period by Lenders holding at least 25% in outstanding Senior Secured
Notes of the applicable Tranche stating that such Lenders have determined (which
determinations, if made in good faith, shall be conclusive and binding upon the
Loan Parties and the Lenders) and have notified the Borrower that as of the date
such notice is given, (a) by reason of circumstances affecting the London
interbank market, adequate and reasonable means do not exist for ascertaining
the One-Month LIBO Rate for such Monthly Interest Period, (b) funding in the
London interbank market is not available to first-class banks organized under
the laws of the United States or the State of New York, (c) the One-Month LIBO
Rate determined or to be determined for such Monthly Interest Period does not
adequately and fairly reflect the cost that would be incurred by first-class
banks organized under the laws of the United States or by first-class banks
organized under the laws of the State of New York, if such banks were to seek
funding of one-month time deposits in the London interbank market as of the
second Business Day prior to the commencement of such Monthly Interest Period,
or (d) maintenance or continuation of any such funding in the London interbank
market by first-class banks organized under the laws of the United States or by
first-class banks organized under the laws of the State of New York has become
unlawful or impermissible for such banks by compliance, in good faith, with any
law, governmental rule, regulation or order of any central bank or other
Governmental Entity or
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quasi-governmental authority (whether or not having the force of law and whether
or not failure to comply therewith would be unlawful or would result in costs or
penalties).
"REFERENCE RATE INTEREST" has the meaning specified in Section
2.6(e).
"REFINANCING INDEBTEDNESS" has the meaning specified in Section
5.9(d).
"REINVESTMENT PERIOD" has the meaning specified in Section 5.10.
"RELATED PARTIES" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees,
attorneys, agents and advisors of such Person and such Person's Affiliates.
"REORGANIZATION" means a transaction whereby (i) Newco is merged
with and into Starwood REIT, with Starwood REIT being the surviving entity so
that after the merger Starwood REIT is a direct subsidiary of the Borrower; (ii)
the common stock of Newco becomes the Class A Shares; (iii) the common shares of
beneficial interest of Starwood REIT are converted into the Class B Shares; (iv)
the Class B Shares are paired with the common stock of the Borrower; (v) the
existing Class A Exchangeable Preferred Shares and Class B Exchangeable
Preferred Shares of Starwood REIT remain outstanding as shares of Starwood REIT;
and (vi) the organizational documents of Starwood REIT and the Corporation are
amended (including by way of an amendment and restatement) to effectuate the
foregoing, provided, that (A) after giving effect to the Reorganization, the
Borrower shall own all of the issued and outstanding Class A Shares, which
shares shall represent 100% of the equity interests in Starwood REIT other than
the equity interests represented by the Class B Shares, which shall be paired
with the shares of common stock of the Borrower, and the Class A Exchangeable
Preferred Shares and the Class B Exchangeable Preferred Shares, (B) the terms of
the Class B Shares shall provide that the same shall be, at the option of the
Borrower at any time when one or more material Events of Default and other
events of default under the Bank Credit Facility have continued in existence
beyond a cure period to be determined, exchanged for shares of common stock of
the Borrower, (C) the Class A Shares shall not constitute Margin Stock, and (D)
consummation of the Reorganization shall not have a Material Adverse Effect or
constitute a default under the Bank Credit Facility.
"REORGANIZATION DATE" means the date upon which the merger of Newco
into Starwood REIT is consummated.
"REQUIRED LENDERS" means, at any time, Lenders whose combined
Percentage Shares are greater than 50%.
"RESTRICTED INVESTMENT" means (a) an Investment other than a
Permitted Investment or (b) any sale, conveyance, lease, transfer or other
disposition of assets at less than fair market value to an Unrestricted
Subsidiary, provided that the amount of such Restricted Investment under this
clause (b) shall be such difference in value.
"RESTRICTED PAYMENTS" has the meaning specified in Section 5.7.
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"RESTRICTED SUBSIDIARY" means, at any time, any direct or indirect
Subsidiary of the Borrower or Starwood REIT that is not then an Unrestricted
Subsidiary. If any Unrestricted Subsidiary ceases to be an Unrestricted
Subsidiary, such Subsidiary shall automatically become a Restricted Subsidiary.
The term " Restricted Subsidiary" without a reference to a parent Person shall
mean a Restricted Subsidiary of either the Borrower or Starwood REIT.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933.
"SECURITIES PROCEEDS" means any cash proceeds of the sale of any
security of the Borrower, Starwood REIT or any Subsidiary of either of them
(including any sale of collateralized mortgage backed securities, but excluding
the Indebtedness hereunder, Indebtedness under the Bank Credit Facility and New
Debt), net of the direct costs relating to such sale (including legal,
accounting and investment banking fees and expenses), and any taxes paid or
payable as a result thereof (after taking into account any available tax credits
or deductions and any tax sharing arrangements).
"SENIOR SECURED LIABILITIES" means Credit Facility Liabilities,
Note Liabilities and Eligible Hedging Liabilities.
"SENIOR SECURED NOTES" means the Borrower's Tranche One Notes and
Tranche Two Notes.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of either the Borrower
or Starwood REIT that would be a "significant subsidiary" of the Borrower and
Starwood REIT, taken as a whole, as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
was in effect on the Original Closing Date, except that the level of
significance shall be 10% rather than 20% as stated in such definition.
"STARWOOD REIT" means Starwood Hotels & Resorts, a Maryland real
estate investment trust.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company or
Starwood REIT or any Restricted Subsidiary which by its terms is expressly
subordinated in right of payment to the Senior Secured Notes or any guaranty
thereof.
"SUBORDINATED LIABILITIES" has the meaning specified in Section 9.6.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time of determination owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person or a combination thereof and (ii) any partnership of
which more than 50% of the partnership's capital accounts, distribution rights
or general or limited partnership interests are owned or controlled, directly or
indirectly, by such Person or one or
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more of the other Subsidiaries of such Person or a combination thereof. The term
"Subsidiary" without a reference to a parent Person shall mean a Subsidiary of
either the Borrower or Starwood REIT.
"SUBSIDIARY PREFERRED STOCK" means any Preferred Stock issued by a
Restricted Subsidiary (excluding (1) any OP Units that are not Disqualified
Stock and (2) the Preferred Stock of Starwood REIT after consummation of the
Reorganization).
"TAXES" means any and all current or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental Entity.
"T-BILL DIFFERENTIAL" means, as to any Monthly Interest Period that
commences when any event has occurred pursuant to which the Reference Rate for
any Loan outstanding during such Monthly Interest Period is the Three-Month
Treasury Bill Alternative Rate, the excess, if any, (as determined in good faith
by Required Lenders of the applicable Tranche or, if no determination is made by
such Required Lenders, then by the Lenders giving a Reference Rate Changeover
Notice or otherwise giving notice of or affected by such event) of (i) the
One-Month LIBO Rate over (ii) the Three-Month Treasury Bill Alternative Rate,
determined on average for the last ten Business Days prior to the occurrence of
such event for which the One-Month LIBO Rate and the Three-Month Treasury Bill
Alternative Rate can be reliably ascertained.
"THREE-MONTH TREASURY BILL ALTERNATIVE RATE" means, at any time for
any Monthly Interest Period, the sum of (a) the T-Bill Differential determined
for such Monthly Interest Period plus (b) the rate per annum equal to the
secondary market yield to maturity rate for three-month United States Treasury
bills as of the Monday immediately preceding the first day of such Monthly
Interest Period, as such secondary market yield to maturity rate is published
from time to time by the Board in Federal Reserve Statistical Release H.15 (519)
(or any successor to or substitute for such publication providing rate
quotations comparable to those currently provided therein as to secondary market
yield to maturity rates for United States Treasury bills, as determined by the
Required Lenders of the applicable Tranche from time to time).
"TRANCHE" means the facility and commitments used in making a
particular type of Loan hereunder. There are two Tranches: Tranche One Loans
and Tranche Two Loans.
"TRANCHE ONE LENDER" means each Lender to which one or more Tranche
One Loans are owed.
"TRANCHE ONE LOANS" means the Loans made by the Tranche One Lenders
(or their predecessors-in-interest) under the Original Agreement, in the
aggregate original principal amount of $2,500,000,000. All of such Tranche One
Loans remain (to the extent not repaid) outstanding hereunder.
"TRANCHE ONE NOTES" means the Borrower's Senior Secured Increasing
Rate Notes due 2003 in substantially the form of Exhibit B-1.
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"TRANCHE TWO COMMITMENT" means the commitment of each applicable
Lender to make Tranche Two Loans in accordance with and subject to the terms and
conditions of this Agreement. As of the Effective Date, the aggregate principal
amount of all of the Tranche Two Commitments is $1,000,000,000 and the
individual Tranche Two Commitment of each Tranche Two Lender is set forth on
Schedule B.
"TRANCHE TWO LENDER" means each Lender which has a Tranche Two
Commitment or to which one or more Tranche Two Loans are owed.
"TRANCHE TWO LOANS" means the Loans made by the Tranche Two Lenders
pursuant to Section 2.1(b).
"TRANCHE TWO NOTES" means the Borrower's Senior Secured Notes due
2003 in substantially the form of Exhibit B-2.
"TRANSACTIONS" means the Acquisition and the financing thereof and
other transactions occurring on the Effective Date or the Original Closing Date
contemplated by the Acquisition Agreement, this Agreement and the Bank Credit
Facility.
"TRANSACTION DOCUMENTS" means the Acquisition Agreement, the Note
Documents, and the Credit Facility Documents.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939.
"UBS SHARES" means the 2,185,000 Paired Common Shares of Starwood
REIT and the Borrower sold on October 14, 1997 to an affiliate of Union Bank of
Switzerland in a private placement.
"UNRESTRICTED SUBSIDIARY" means any entity that would have been a
Restricted Subsidiary of the Borrower or Starwood REIT but for its designation
as an "Unrestricted Subsidiary" in accordance with the provisions of this
Agreement and any Subsidiary of such entity, so long as it remains an
Unrestricted Subsidiary in accordance with the terms of this Agreement.
"VNU" means VNU International B.V.
"VNU PREFERRED STOCK" means preferred stock issued by WD Parent
Corp. to VNU prior to the date of this Agreement.
"VOTING STOCK" means, with respect to any Person that is a
corporation, any class or series of capital stock of such Person that is
ordinarily entitled to vote in the election of directors thereof at a meeting of
stockholders called for such purpose, without the occurrence of any additional
event or contingency, and with respect to any other Person that is a limited
liability company, membership to manage the operations or business of the
limited liability company.
"WD PARENT CORP." means WD Parent, Inc., a Delaware corporation.
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"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness or Disqualified Stock, as the case may be, at any date, the number
of years obtained by dividing (a) the sum of the products obtained by
multiplying (i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including payment at
final maturity, in respect thereof, by (ii) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment, by (b) the then outstanding principal amount of such Indebtedness
or Disqualified Stock, as the case may be.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such
Person, all of the Capital Stock or other ownership interests of which (other
than directors' qualifying shares) shall at the time be owned by such Person or
by one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.2. TERMS GENERALLY. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." The word "will"
shall be construed to have the same meaning and effect as the word "shall."
Unless the context requires otherwise (a) any definition of or reference to any
law, agreement, instrument or other document herein shall be construed as
referring to such law, agreement, instrument or other document as from time to
time amended, supplemented or otherwise modified (subject to any exceptions and
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors, transferees and assigns, (c) the words "herein," "hereof"
and "hereunder," and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof, (d)
unless otherwise specified, all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement and (e) the words "asset" and
"property" shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, whether real,
personal or mixed and of every type and description.
SECTION 1.3. ACCOUNTING TERMS; GAAP; EFFECT OF REORGANIZATION ON
CERTAIN DEFINITIONS.
(a) GAAP. Except as otherwise expressly provided herein, all terms
of an accounting or financial nature shall be construed in accordance with GAAP,
as in effect from time to time. If the Borrower notifies the Lenders that the
Borrower requests an amendment to any provision hereof to eliminate the effect
of any change occurring after the date hereof in GAAP or in the application
thereof on the operation of such provision or if the Required Lenders notify the
Borrower that they request an amendment to any provision hereof for such purpose
(in each case regardless of whether any such notice is given before or after
such change in GAAP or in the application thereof), then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change became effective until such notice is withdrawn or such provision is
amended in accordance herewith.
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(b) EFFECT OF REORGANIZATION ON CERTAIN DEFINITIONS. Effective upon
consummation of the Reorganization, each reference herein to "combined" or
"combined consolidated" amounts or financial statements with respect to Starwood
REIT and the Borrower shall be deemed modified to refer to "consolidated"
amounts or financial statements, as applicable, with respect to the Borrower and
its subsidiary, Starwood REIT, and the other Restricted Subsidiaries of the
Borrower (but shall not include any Unrestricted Subsidiary).
ARTICLE II.
THE LOANS
SECTION 2.1. COMMITMENTS.
(a) TRANCHE ONE LOANS. The Borrower acknowledges that each Tranche
One Lender (or its predecessor-in-interest) made a Tranche One Loan to the
Borrower on the Original Closing Date, which is evidenced by one or more Senior
Secured Notes issued pursuant to the Original Agreement. Such Tranche One Loans,
in an aggregate original principal amount of $2,500,000,000, shall (to the
extent not repaid) remain outstanding pursuant to the terms and conditions of
this Agreement.
(b) TRANCHE TWO LOANS. Subject to the terms and conditions set forth
herein, each Lender with a Tranche Two Commitment severally (and not jointly)
agrees to make one or more Loans to the Borrower, from the Effective Date
through the date which is six months after the Effective Date (the "Availability
Period"), in an aggregate amount not to exceed such Lender's Tranche Two
Commitment.
(c) MULTIPLE FUNDINGS; NO REBORROWING. The Tranche Two Loans are
available for one or more fundings during the Availability Period. Each Lender's
obligation to make Tranche Two Loans hereunder shall expire and be discharged
upon funding of such Lender's Tranche Two Commitment, and no Lender shall be
obligated to make any Tranche Two Loans hereunder after the last day of the
Availability Period. When repaid, the Loans may not be reborrowed.
(d) FUNDING BRANCH OR OFFICE. Each Lender at its option may maintain
funding of its Loan by causing any domestic or foreign branch or Affiliate of
such Lender to maintain funding of such Loan. The exercise of such option shall
not affect the obligation of the Borrower to repay such Loan in accordance with
the terms of this Agreement.
(e) PROCEDURE FOR BORROWINGS.
(i) REQUESTS FOR LOANS. To request a borrowing of Tranche Two
Loans (each, a "Borrowing"), the Borrower shall deliver to the
Administrative Agent a written notice, substantially in the form of
Exhibit F (a "Notice of Borrowing"). Each Notice of Borrowing shall
specify the aggregate principal amount of the Tranche Two Loans requested
to be made by all Tranche Two Lenders at such time, the Business Day on
which the Borrower requests that such Loans be made and the Borrower's
instructions regarding
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disbursement of such Loans. Notices of Borrowing for Tranche Two Loans
shall be received by the Administrative Agent not later than 11:00 a.m.
New York time on the third Business Day prior to the date of the proposed
Borrowing. Each Notice of Borrowing shall be in an aggregate amount for
all Lenders of not less than $50,000,000 ($100,000,000 in the case of the
initial borrowing of Tranche Two Loans hereunder) or an integral multiple
of $50,000,000 in excess thereof. The Borrower shall specify in each
Notice of Borrowing whether the conditions for the requested Borrowing are
satisfied. Once given, a Notice of Borrowing is irrevocable by and binding
on the Borrower. The Borrower shall provide to the Administrative Agent a
list, with specimen signatures, of officers authorized to request Loans.
The Administrative Agent is entitled to rely upon such list until it is
replaced by the Borrower. The Administrative Agent shall give each Tranche
Two Lender prompt notice by telephone or facsimile transmission of a
Notice of Borrowing.
(ii) MANDATORY REQUEST FOR LOANS. If the Borrower has not
borrowed $250,000,000 or more in aggregate principal amount of Tranche Two
Loans by September 30, 1998 and there is no Default or Event of Default on
such date, the Borrower shall be deemed to have delivered to the
Administrative Agent a Notice of Borrowing requesting a Borrowing of
Tranche Two Loans in an aggregate amount (the "Deemed Borrowing Amount")
equal to the difference between $250,000,000 and the aggregate amount of
Tranche Two Loans otherwise borrowed hereunder on or prior to such date
(after giving effect to any Borrowings requested to be made on such date
under paragraph (i) above), with each Tranche Two Lender's Tranche Two
Loan thereunder to be in an amount equal to such Tranche Two Lender's
Commitment Percentage of the Deemed Borrowing Amount and September 30,
1998 (or the next succeeding Business Day, if such day is not a Business
Day) as the date on which such Tranche Two Loans are to be made.
(iii) DISBURSEMENT OF LOANS. If the conditions set forth in
Section 3.1 are satisfied (or waived in accordance with Section 11.2),
each Tranche Two Lender will fund its Tranche Two Loan by remitting to or
for the account of the Borrower, no later than 2:00 p.m. New York time on
the date of the proposed Borrowing as set forth in the Notice of
Borrowing, an amount in Dollars equal to its Commitment Percentage of the
aggregate principal amount of requested Tranche Two Loans as set forth in
the Notice of Borrowing in compliance with paragraph (i) or (ii) above,
provided, however, that in no event shall such amount exceed the
unutilized amount of such Lender's Tranche Two Commitment. The proceeds of
Loans shall be transmitted by each Lender by wire transfer of immediately
available funds and otherwise as reasonably requested by the Borrower in
its Notice of Borrowing, provided, that if the Borrower does not specify
instructions in writing regarding disbursement of Loans deemed requested
pursuant to a Notice of Borrowing under paragraph (ii) above, the Borrower
hereby agrees that the proceeds of such Loans shall be
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disbursed in accordance with the disbursement instructions attached hereto
as Schedule C.
(f) SEVERAL OBLIGATIONS. The Tranche Two Commitments are several and
no Lender shall be responsible for any other Lender's failure to make Loans.
(g) USE OF PROCEEDS. The Borrower represents and warrants that it
used the proceeds of the Tranche One Loans solely to fund the Acquisition,
refinance Indebtedness and pay fees and expenses related thereto. The Borrower
shall use the proceeds of the Tranche Two Loans solely for its general corporate
purposes, including repurchases of the Paired Common Shares of the Borrower and
Starwood REIT to the extent permitted hereunder.
SECTION 2.2. REPAYMENT; SENIOR SECURED NOTES.
(a) PROMISE TO PAY. The Borrower hereby unconditionally promises to
pay to each Lender on the earlier of the Maturity Date or the Acceleration Date,
in Dollars and at any place of payment in the Borough of Manhattan in the City
of New York identified in or designated pursuant to Section 2.2(b), the then
unpaid principal amount of each Loan outstanding to such Lender, together with
all interest then accrued and unpaid thereon.
(b) PLACE, TIME AND MANNER OF PAYMENT. The Borrower shall make each
payment required to be made by it hereunder or under any other Note Document
prior to 1:00 p.m., New York City time, on the date when due, in immediately
available funds, without setoff or counterclaim. Any amounts received after such
time on any date shall be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments due
to any Lender shall be made to such place of payment within the Borough of
Manhattan in the City of New York as may be set forth by such Lender in Schedule
B or in the Assignment and Acceptance by which it became a Lender or by a
written notice delivered to the Borrower by such Lender from time to time. It
shall not be necessary for any Lender to present, exhibit, or permit notation of
payment on, such Lender's Senior Secured Note as a condition of any payment
thereunder. If any payment under any Note Document is due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments under
each Note Document shall be made in Dollars.
(c) NO MITIGATION OR EXCUSE. The Loans shall be absolutely and
unconditionally payable in Dollars in the Borough of Manhattan in the City of
New York on the earlier of the Maturity Date or the Acceleration Date, without
regard to any other event or circumstances whatsoever, whether or not foreseen
or foreseeable and whether imposed by Act of God, by force majeure or by law,
order, decree or as a consequence of any risk, casualty, loss, act, omission or
wrongful conduct or any other cause, whether or not lawful, as to all of which
the Borrower and the Guarantors hereby assume all risk.
(d) SENIOR SECURED NOTES. On the Effective Date, the Borrower shall
duly authorize, execute and deliver to each Tranche Two Lender, to evidence the
Borrower's
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obligation to repay the Tranche Two Loans made by such Lender, a Senior Secured
Note payable to the order of such Lender in the amount of such Lender's Tranche
Two Commitment hereunder. Thereafter from time to time, with respect to Tranche
One Notes and Tranche Two Notes:
(i) at the request of any Lender upon any transfer of Loans or
Tranche Two Commitments by Assignment and Acceptance, the Borrower will
issue one or more new Senior Secured Notes as necessary to give effect to
such transfer and any interest in the Loans and Tranche Two Commitments,
as applicable, retained by the transferor, in an aggregate amount equal to
the principal amount of Loans and (without duplication) the Tranche Two
Commitment held by the transferor immediately prior to giving effect to
the transfer and against appropriate evidence of cancellation or surrender
of the Senior Secured Note or notes then outstanding to the transferor,
and
(ii) upon request by any Lender, the Borrower will (without
any lost instrument bond or indemnity, unless such bond or indemnity is
reasonably requested by the Borrower) issue a Senior Secured Note to such
Lender in replacement of any outstanding Senior Secured Note payable to
such Lender, if such Lender certifies that such outstanding Senior Secured
Note was defaced, despoiled, misplaced, lost or stolen and has not been
endorsed and delivered to any Person.
SECTION 2.3. INTEREST; COMMITMENT FEE.
(a) EURODOLLAR BORROWINGS. Except as otherwise provided in Section
2.3(h) or Section 2.3(b), all outstanding Loans shall bear interest for each day
in each Monthly Interest Period for the applicable Loan at the Reference Rate
determined for such Monthly Interest Period plus the Applicable Margin for the
applicable Loan determined for such Monthly Interest Period.
(b) INTEREST AFTER EVENT OF DEFAULT. Notwithstanding the provisions
of Section 2.3(a), for each day in any Monthly Interest Period on which any
amount due for principal of or interest on any Loan remains unpaid and, in
addition, for each day in any Monthly Interest Period on which any Event of
Default has occurred and is continuing, any and all outstanding Loans (whether
or not then due and payable) shall bear interest, after as well as before
judgment, at a rate per annum equal to 2% per annum plus the Reference Rate
determined for such Monthly Interest Period plus the Applicable Margin for the
applicable Loan determined for such Monthly Interest Period.
(c) OTHER OBLIGATIONS. All other Note Liabilities at any time
outstanding and due and payable shall bear interest for each day at the highest
rate of interest that is (or, if Loans were outstanding, would be) applicable to
all or any portion of the Loans for such day pursuant to Section 2.3(a) or, when
applicable, Section 2.3(b).
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(d) PAYMENT OF INTEREST. Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Loan, except that, in
any event, (A) interest accrued as set forth in Section 2.3(b) shall be payable
on demand, and (B) in the event of any voluntary or mandatory redemption or
required repurchase of any Loan, accrued interest on the principal amount repaid
or repurchased shall be payable on the date of such repayment or repurchase,
together with any compensation due in respect of such repayment or repurchase
pursuant to Section 2.7.
(e) COMPUTATION OF INTEREST. All interest hereunder shall be
computed on the basis of actual days elapsed and a year of 360 days. Interest
shall be calculated to accrue from and including the most recent date to which
interest has been paid or provided for (or from and including the date on which
such Loan was made if no interest has been paid) to, but not including, the date
of payment.
(f) RECORD DATE. All interest accrued in any Monthly Interest Period
shall become due and payable on the Interest Payment Date for such Monthly
Interest Period to the applicable Lenders determined of record at the close of
business on the Record Date immediately preceding such Interest Payment Date.
(g) DETERMINATION OF REFERENCE RATE. The Required Lenders of the
applicable Tranche may at any time or from time to time make all determinations
necessary to fix the Reference Rate for each applicable Monthly Interest Period
and, absent manifest error, each such determination by such Required Lenders
shall be final, conclusive and binding. Once set for any Monthly Interest
Period, the Reference Rate shall be applicable for each day during such Monthly
Interest Period.
(h) ILLEGALITY. If at any time any Lender determines (which
determination shall, if made in good faith, be final, conclusive and binding
upon all parties) that the funding or continuation of its Loan as a borrowing
priced by reference to the One-Month LIBO Rate has become unlawful or
impermissible by compliance by such Lender in good faith with any law,
governmental rule, regulation or order of any central bank or other Governmental
Entity or quasi-governmental authority (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful or would result
in costs or penalties), then, and in any such event, such Lender may give notice
of such determination, in writing, to the Borrower and each Lender. When such
notice is given by a Lender, such Lender's Loan shall immediately, or if
permitted by applicable law, no later than the date permitted thereby, upon at
least one Business Day's written notice to the Borrower and the Lenders, be
converted so as to bear interest at all times in each Monthly Interest Period
thereafter at the Three-Month Treasury Bill Alternative Rate determined for such
Monthly Interest Period plus the Applicable Margin determined for such Monthly
Interest Period. If, at any time after a Lender gives notice under this Section
2.3(h), such Lender determines that it may lawfully fund and maintain its Loans
by reference to the One-Month LIBO Rate, such Lender shall promptly give notice
of such determination in writing to the Borrower and each other Lender and,
effective at the commencement of the Monthly Interest Period next following
thereafter, such Lender's Loan shall bear interest at the Reference Rate
determined for such Monthly Interest Period plus the Applicable Margin
determined for such Monthly Interest Period.
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(i) COMMITMENT FEE. The Borrower shall pay in arrears to each
Tranche Two Lender, on the last Business Day of each month during which any
Tranche Two Commitments are outstanding hereunder, a fee (the "Commitment Fee")
calculated at a rate per annum of one-half of one percent (0.5%) on the average
unused portion of such Tranche Two Lender's Tranche Two Commitment at the end of
each day during the Availability Period.
SECTION 2.4. REDEMPTION.
(a) RIGHT TO REDEEM. Upon three Business Days' prior written notice
to each of the Lenders, the Borrower may redeem the Senior Secured Notes at any
time in whole or from time to time in part in any amount that is an integral
multiple of $10 million, without premium or penalty, by paying to each Lender an
amount equal to 100% of such Lender's pro rata share of the aggregate principal
amount of Senior Secured Notes to be redeemed, plus accrued and unpaid interest
thereon to the Prepayment Date.
(b) INDEMNITY. The Loan Parties jointly and severally agree to
indemnify each Lender and to hold each Lender harmless from any loss or expense
which such Lender may sustain or incur as a consequence of default by the
Borrower in making any prepayment or redemption after the Borrower has given a
notice thereof in accordance with the provisions of Section 2.4(c). Such
indemnification may include an amount equal to such Lender's actual loss and
expenses incurred (excluding lost profits) in connection with, or by reason of,
any of the foregoing events. A certificate as to any amounts payable pursuant to
this Section 2.4(b) submitted to the Borrower by any Lender shall be conclusive,
final and binding in the absence of manifest error. This Section 2.4(b) shall
survive the termination of this Agreement and the payment of the Senior Secured
Notes and all other Note Liabilities.
(c) EFFECT OF NOTICE OF PREPAYMENT. The Borrower shall notify the
Lenders in writing at their addresses shown in the Note Register of any date set
for redemption (each such day, a "Prepayment Date") of Senior Secured Notes.
Once such notice is sent or mailed, the Senior Secured Notes called for
redemption, prepayment or repurchase shall become due and payable on the
Prepayment Date set forth in such notice. Such notice may not be conditional.
(d) PARTIAL REDEMPTION. In the event that less than all of the
Senior Secured Notes are to be redeemed, the Borrower shall redeem a pro rata
portion of the Senior Secured Notes of all Tranches held by each Lender.
(e) REDEMPTION REQUIRED BY GAMING AUTHORITY. If any Gaming Authority
requires that a Lender or beneficial owner of the Senior Secured Notes must be
licensed, qualified or found suitable under any applicable gaming laws in order
to maintain any gaming license or franchise of the Borrower, Starwood REIT or
any Restricted Subsidiary under any applicable gaming laws, and the Lender or
beneficial owner fails to apply for a license, qualification or finding of
suitability within 30 days after being requested to do so by such Gaming
Authority (or such lesser period that may be required by such Gaming Authority)
or if such Lender or beneficial owner is not so licensed, qualified or found
suitable, the Borrower shall have the right, at its option, (i) to require such
Lender or beneficial owner to dispose of
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such Lender's or beneficial owner's Senior Secured Notes within 30 days of
receipt of such finding by the applicable Gaming Authority (or such earlier date
as may be required by the applicable Gaming Authority) or (ii) to call for
redemption of the Senior Secured Notes of such Lender or beneficial owner at a
redemption price equal to the lesser of the principal amount thereof or the
price at which such Lender or beneficial owner acquired the Senior Secured
Notes, together with, in either case, accrued and unpaid interest, if any, to
the earlier of the date of redemption or, the date of the finding of
unsuitability by such Gaming Authority. The Borrower shall not be required to
pay or reimburse any Lender or beneficial owner of Senior Secured Notes who is
required to apply for any such license, qualification or finding of suitability
for the costs of the licensure or investigation for such qualification or
finding of suitability. Such expenses shall be the obligation of such Lender or
beneficial owner.
(f) MANDATORY REDEMPTION. On each date after the Effective Date on
which the Borrower, Starwood REIT or any Subsidiary of either of them receives
any Securities Proceeds, the Borrower shall redeem or repay, in an amount equal
to the amount of such Securities Proceeds, first the Tranche One Notes, second,
to the extent then required under the Bank Credit Facility, the Tranche I Term
Loans (as defined in the Bank Credit Facility as in effect on the date hereof),
and third, the Tranche Two Notes, in the manner provided in the Bank Credit
Facility (in the case of the Tranche I Term Loans) or in this Section 2.4 (in
the cases of the Tranche One Notes and the Tranche Two Notes); provided,
however, that, if and to the extent required under the Fifth Amendment to Credit
Agreement dated as of the date hereof relating to the Bank Credit Facility, the
Tranche I Term Loans shall be redeemed or repaid prior to the Tranche One Notes.
SECTION 2.5. PURCHASE OFFERS. In the event that, pursuant to Section
5.10 or 5.14 hereof, the Borrower shall be required to commence an offer to all
Lenders to purchase Senior Secured Notes (a "Purchase Offer"), it shall follow
the procedures specified below:
(a) OFFER PERIOD AND PURCHASE DATE. The Purchase Offer shall remain
open for a period of 20 Business Days following its commencement and no longer,
except to the extent that a longer period is required by applicable law (the
"Offer Period"). No later than five Business Days after the termination of the
Offer Period (the "Purchase Date"), the Borrower shall purchase at the purchase
price (as determined in accordance with Section 5.10 or Section 5.14, as the
case may be) the principal amount of Senior Secured Notes required to be
purchased pursuant to Section 5.10 or 5.14, as the case may be (the "Offer
Amount"), or, if less than the Offer Amount has been tendered, the principal
amount of all Senior Secured Notes tendered in response to the Purchase Offer.
Payment for any Senior Secured Notes so purchased shall be made in the same
manner as interest payments are made.
(b) INTEREST PAYMENTS. If the Purchase Date is on or after a Record
Date and on or before the related Interest Payment Date, any accrued and unpaid
interest to the Purchase Date shall be paid on the Purchase Date to the Lender
in whose name a Senior Secured Note is registered on the Note Register at the
close of business on such Record Date, and no additional interest shall be
payable to Lenders who tender Senior Secured Notes pursuant to the Purchase
Offer.
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(c) OFFER NOTICE. Upon the commencement of a Purchase Offer, the
Borrower shall send, by first class mail, a notice to each of the Lenders. The
notice shall contain all instructions and materials necessary to enable the
Lenders to tender Senior Secured Notes pursuant to the Purchase Offer. The
Purchase Offer shall be made to all Lenders. The notice, which shall govern the
terms of the Purchase Offer, shall state:
(i) that the Purchase Offer is being made pursuant to this
Section 2.5 and Section 5.10 or Section 5.14, as the case may be, and the
length of time the Purchase Offer shall remain open,
(ii) the Offer Amount, the purchase price and the Purchase
Date,
(iii) that any Senior Secured Note not tendered or accepted
for payment shall continue to accrue interest,
(iv) that, unless the Borrower defaults in making such
payment, any Senior Secured Note accepted for payment pursuant to the
Purchase Offer shall cease to accrue interest after the Purchase Date,
(v) that Lenders electing to have a Senior Secured Note
purchased pursuant to any Purchase Offer shall be required to tender the
Senior Secured Note to a depositary appointed by the Borrower at an
address in the Borough of Manhattan in the City of New York specified in
the notice at least three Business Days before the Purchase Date,
(vi) that Lenders shall be entitled to withdraw their election
if the Borrower or the depositary, as the case may be, receives, not later
than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Lender, the principal
amount of the Senior Secured Note the Lender tendered for purchase and a
statement that such Lender is withdrawing his election to have such Senior
Secured Note purchased, and
(vii) that, if the aggregate principal amount of Senior
Secured Notes tendered by Lenders exceeds the Offer Amount, the Senior
Secured Notes shall be selected for purchase ratably (in proportion to the
relative amounts tendered for purchase), and that Lenders whose Senior
Secured Notes were purchased only in part shall be issued new Senior
Secured Notes equal in principal amount to the unpurchased portion of the
Senior Secured Notes that were tendered.
(d) ACCEPTANCE AND PAYMENT. On or before the Purchase Date, the
Borrower shall accept for payment the Offer Amount of Senior Secured Notes or
portions thereof tendered pursuant to the Purchase Offer, ratably (in proportion
to the relative amounts tendered for purchase) if more than the Offer Amount has
been tendered or, if less than the Offer Amount has been tendered, all Senior
Secured Notes tendered, and shall deliver to the
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Lenders an Officers' Certificate stating that such Senior Secured Notes or
portions thereof were accepted for payment by the Borrower in accordance with
the terms of this Section 2.5. The Borrower or the Depository, as the case may
be, shall promptly (but in any case not later than five days after the Purchase
Date) mail or deliver to each tendering Lender an amount equal to the purchase
price of the Senior Secured Notes tendered by such Lender and accepted by the
Borrower for purchase, and the Borrower shall promptly issue a new Senior
Secured Note and mail or deliver such new Senior Secured Note to such Lender, in
a principal amount equal to any unpurchased portion of the Senior Secured Note
that was tendered. Any Senior Secured Note not so accepted shall be promptly
mailed or delivered by the Borrower to the Lender that is the holder thereof.
The Borrower shall notify each Lender of the results of the Purchase Offer on
the Purchase Date.
(e) COMPLIANCE. If applicable, the Borrower shall comply with the
requirements of Rule 14e-1 under the Exchange Act, and any other securities laws
and regulations thereunder to the extent such laws or regulations are applicable
in connection with the repurchase of the Senior Secured Notes pursuant to a
Purchase Offer.
(f) APPLICATION OF OTHER PROVISIONS. Other than as specifically
provided in this Section 2.5, any purchase pursuant to this Section 2.5 shall be
made pursuant to the provisions of Sections 2.4 to the extent applicable.
(g) RETIREMENT OF REPURCHASED NOTES. Senior Secured Notes purchased
by the Borrower pursuant to a Purchase Offer shall be retired and may not be
reissued.
SECTION 2.6. YIELD PROTECTION. (a) INCREASED COSTS. If any Change in
Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender or any holding company of
any Lender (except any such reserve requirement reflected in the One-Month
LIBO Rate), or
(ii) impose on any Lender or the London interbank market any
other condition affecting this Agreement or any Loans outstanding to such
Lender,
and the result of any of the foregoing shall be to increase the cost to
such Lender of making or maintaining any Loan or to reduce the amount of
any sum received or receivable by such Lender hereunder (whether of
principal, interest or otherwise), then the Borrower will pay to such
Lender such additional amount or amounts as will compensate such Lender
for such additional costs incurred or reduction suffered.
(b) CAPITAL COSTS. If any Lender determines that any Change in Law
regarding capital requirements increases or could reasonably be expected to have
the effect of increasing the amount or cost of capital required or expected to
be maintained by such Lender
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or any corporation controlling such Lender, or reduces or could reasonably be
expected to have the effect of reducing the rate of return on such capital, and
such Lender reasonably determines that the amount or cost of such capital is
increased, or the rate of return thereon is reduced, by or based upon the
existence or funding of such Lender's commitment to make or maintain loans under
this Agreement and other commitments of this type, to a level below that which
such Lender or such Lender's holding company could have achieved but for such
Change in Law (taking into consideration such Lender's policies and the policies
of such Lender's holding company with respect to capital adequacy), then the
Borrower shall pay to such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender in the light of
such circumstances, to the extent that such Lender in good faith determines such
increase in capital, or reduction in the rate of return, to be allocable to the
existence or funding of its commitment.
(c) PROOF OF COSTS. A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company, as
the case may be, as specified in Section 2.6(a) or Section 2.6(b), shall be
delivered to the Borrower and shall be final, conclusive and binding, absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
(d) LOOK-BACK LIMIT. The Borrower shall not be required to
compensate a Lender pursuant to this Section 2.6 for any increased costs or
reductions incurred more than 90 days prior to the date that such Lender
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of such Lender's intention to claim compensation therefor,
except that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the 90-day period referred to above shall be
extended to include the period of retroactive effect thereof. Subject to the
foregoing, no failure or delay on the part of any Lender to demand compensation
pursuant to this Section 2.6 shall constitute a waiver of such Lender's right to
demand such compensation.
(e) EURODOLLAR RESERVE COMPENSATION. If in any Monthly Interest
Period applicable to such Lender, Lender is required to maintain any reserves
(including any marginal, special, emergency or supplemental reserves) for any
eurocurrency funding or otherwise in respect of the Senior Secured Notes, then
upon demand by such Lender the Borrower will pay such Lender on the Interest
Payment Date for such Monthly Interest Period additional interest in an amount
equal, for each day on which such reserves are required to be maintained by such
Lender, to the difference between (i) interest for such day at the One-Month
LIBO Rate determined for such Monthly Interest Period (the "Reference Rate
Interest") multiplied by a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the
aggregate amount (expressed as a decimal) certified by such Lender in a notice
delivered to the Borrower, to be the reserve percentage (including any marginal,
special, emergency or supplemental reserves) established by the Board and in
effect as to such Lender for such day for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board),
including all reserve percentages imposed pursuant to such Regulation D, and
(ii) the Reference Rate Interest for such day.
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SECTION 2.7. BREAKAGE COSTS. In the event of the payment of any
principal of any Loan other than on the last day of a Monthly Interest Period
applicable thereto (including as a result of any required or voluntary
prepayment or any required purchase offer or any Event of Default), the Borrower
shall compensate each Lender for the loss, cost and expense attributable to such
event. Such loss, cost or expense to any Lender shall be the amount determined
by such Lender to be the excess, if any and only if a positive number, of (a)
the amount of interest that would have accrued on the principal amount of such
Loan had such event not occurred, at the One-Month LIBO Rate that would have
been applicable to such Loan, for the period from the date of such event to the
last day of the then current Monthly Interest Period therefor, over (b) the
amount of interest that would accrue on such principal amount for such period at
the One-Month LIBO Rate determined as of the second Business Day preceding the
date of such event. A certificate of any Lender setting forth any amount or
amounts that such Lender is entitled to receive pursuant to this Section 2.7
shall be delivered to the Borrower and shall be conclusive absent manifest
error. The Borrower shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.
SECTION 2.8. TAXES. (a) PAYMENTS FREE FROM TAXES. Any and all
payments by or on account of any obligation of the Borrower hereunder or under
any other Note Document shall be made free and clear of and without deduction
for any Indemnified Taxes. If, nevertheless, the Borrower shall be required to
deduct any Indemnified Taxes from such payments, then (i) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.8) each Lender receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Entity in accordance with applicable law.
(b) PAYMENT OF OTHER TAXES. In addition, the Borrower shall pay any
Other Taxes to the relevant Governmental Entity in accordance with applicable
law.
(c) TAX INDEMNITY. The Borrower shall indemnify Lehman Brothers and
its Affiliates and each Lender, within 10 days after written demand therefor,
for the full amount of any Indemnified Taxes paid by any of them on or with
respect to any payment by or on account of any obligation of the Borrower
hereunder or under any other Note Document (including Indemnified Taxes imposed
or asserted on or attributable to amounts payable under this Section 2.8) and
any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Entity. A
certificate as to the amount of such payment or liability delivered to the
Borrower by the applicable Indemnified Person shall be conclusive absent
manifest error.
(d) DELIVERY OF RECEIPT. As soon as practicable after any payment of
Indemnified Taxes by the Borrower to a Governmental Entity, the Borrower shall
deliver to the affected Person the original or a certified copy of a receipt
issued by such Governmental Entity evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to such Person.
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(e) FOREIGN LENDER CERTIFICATION. Any Foreign Lender shall deliver
to the Borrower two copies of either United States Internal Revenue Service Form
1001 or Form 4224, or, in the case of a Foreign Lender's claiming exemption from
U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with
respect to payments of "portfolio interest," a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Foreign Lender delivers a
Form W-8, a certificate representing that such Foreign Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Foreign Lender claiming complete exemption from, U.S. Federal withholding tax on
payments by the Borrower under this Agreement and the other Note Documents. Such
forms shall be delivered by each Foreign Lender on or before the date it becomes
a party to this Agreement (or, in the case of a transferee that is a
participation holder on or before the date such participation holder becomes a
Transferee hereunder) and on or before the date, if any, such Foreign Lender
changes its applicable lending office by designating a different lending office
(a "New Lending Office"). In addition, each Foreign Lender shall deliver such
forms promptly upon the obsolescence or invalidity of any form previously
delivered by such Foreign Lender. Notwithstanding any other provision of this
Section 2.8(e), a Foreign Lender shall not be required to deliver any form
pursuant to the preceding sentence of this Section 2.8(e) that such Foreign
Lender is not legally able to deliver.
(f) EFFECT OF FAILURE TO COMPLY. The Borrower shall not be required
to indemnify any Foreign Lender or to pay any additional amounts to any Foreign
Lender in respect of U.S. Federal withholding tax pursuant to Section 2.8(a) or
Section 2.8(c) to the extent that the obligation to pay such additional amounts
would not have arisen but for a failure by such Foreign Lender to comply with
the provisions of Section 2.8(e). Should a Lender become subject to Taxes
because of its failure to deliver a form required hereunder, Borrower shall, at
Lender's expense, take such steps as such Lender shall reasonably request to
assist such Lender to recover such Taxes.
SECTION 2.9. PRO RATA PAYMENTS; SHARING OF SETOFFS.
(a) RATABLE PAYMENTS. The Borrower shall make all payments then due
(including by virtue of a voluntary prepayment) on the Senior Secured Notes
concurrently, without preference of one Lender over another.
(b) DISPROPORTIONATE PAYMENTS. If any Lender shall receive from the
Borrower or any Guarantor or shall otherwise obtain, by exercising any right of
setoff or counterclaim or otherwise, any payment in respect of any principal of
or interest on its Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Loans and accrued interest thereon
than the proportion received by any other Lender in respect of its Loans and
accrued interest thereon then owed and due, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in the
Loans of other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest then owed and due on their
respective Loans without giving effect to any such
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disproportionate payment. If any such participations are purchased and all or
any portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such
recovery, without interest. The provisions of this Section 2.9(b) shall not be
construed to apply to any payment made by the Borrower at any time when no Event
of Default has occurred and is continuing on account of any Note Liabilities
other than the principal of or interest on Senior Secured Notes. The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of setoff and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
SECTION 2.10. REPLACEMENT OF LENDER. If any Lender gives notice of
illegality pursuant to Section 2.3(h) or requests compensation under Section
2.6, or if the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
2.8, then the Borrower may, at its sole expense and effort, upon notice to such
Lender and each other Lender, require such Lender to assign and transfer all
(but not less than all) Senior Secured Notes held by it, without recourse and
pursuant to an Assignment and Acceptance (in accordance with and subject to the
restrictions contained in Section 7.3), to an assignee that shall assume all of
such Lender's obligations under this Agreement (which assignee may be another
Lender willing to accept such assignment), but (in each case) only if (a) such
Lender has received payment of an amount equal to 100% of the principal balance
and all accrued and unpaid interest outstanding on such Senior Secured Notes and
all other Note Liabilities outstanding to such Lender, from the assignee (to the
extent of such outstanding principal and accrued interest) or the Borrower (in
the case of all other Note Liabilities) and (b) in the case of any such
assignment resulting from a claim for compensation under Section 2.6 or payments
required to be made pursuant to Section 2.8, such assignment will result in a
reduction in such compensation or payments. A Lender shall not be required to
make any such assignment and transfer if, prior thereto, as a result of a waiver
by such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and transfer cease to apply.
SECTION 2.11. COMMITMENT REDUCTIONS.
(a) The commitment to make Tranche One Loans of each Tranche One
Lender automatically reduced to zero on the Original Closing Date after the
Tranche One Loans were made, and such commitments may not be reinstated.
(b) On the earliest to occur of (1) September 30, 1998, if the
Borrower has not borrowed at least $250,000,000 in Tranche Two Loans on or prior
to such date, (2) the last day of the Availability Period, after giving effect
to any Tranche Two Loans made on such date, (3) the occurrence of a Change of
Control, (4) the Maturity Date and (5) the Acceleration Date, the Tranche Two
Commitment, if any, of each Lender shall automatically reduce to zero and may
not be reinstated.
(c) The Borrower may reduce or terminate the Tranche Two Commitments
at any time and from time to time in whole or in part; provided, that such
reduction shall be of
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an identical percentage of each Tranche Two Lender's Tranche Two Commitment.
Each such reduction of Tranche Two Commitments must be in an aggregate amount
for all Tranche Two Lenders of not less than $50,000,000 (and in increments of
$50,000,000 in excess thereof). If the Borrower reduces the Tranche Two
Commitments pursuant to this Section 2.11(c) to an aggregate amount less than
$50,000,000, then all of the Tranche Two Commitments shall be reduced to zero
and may not be reinstated. Once reduced, no portion of the Tranche Two
Commitments may be reinstated.
(d) On each date after the Effective Date on which the Borrower,
Starwood REIT or any Subsidiary of either of them receives any Securities
Proceeds in excess of the amount of Securities Proceeds required to be applied
on such date as set forth in Section 2.4(f) ("Securities Excess Proceeds"), each
Tranche Two Lender's Tranche Two Commitment shall be reduced in an amount equal
to such Lender's Commitment Percentage of the amount of such Securities Excess
Proceeds and may not be reinstated.
ARTICLE III.
CONDITIONS
SECTION 3.1. EFFECTIVE DATE. The effectiveness of this amendment and
restatement of the Original Agreement and the obligation of each Tranche Two
Lender to make Tranche Two Loans are subject to the satisfaction or waiver by
the Required Lenders on or prior to August 31, 1998 of the following conditions
precedent:
(a) NOTE AGREEMENT. The Borrower shall have delivered to the Lenders
counterparts of this Agreement duly executed by each Person identified therein
as a signatory party thereto.
(b) SENIOR SECURED NOTES. The Borrower shall have delivered to each
Tranche Two Lender, or the designee of each such Lender, a Tranche Two Note duly
executed by the Borrower made payable to the order of such Lender in the amount
of such Lender's Tranche Two Commitment, with the Confirmation of Guaranty
thereon duly executed by Starwood REIT.
(c) ENGAGEMENT LETTER AND FEE LETTER. The Borrower shall have
delivered to LCPI the Engagement Letters and the Fee Letters, duly executed by
each party thereto.
(d) CREDIT FACILITY DOCUMENTS. The Borrower shall have delivered to
each Lender copies (certified by an officer of the Borrower to be true, correct
and complete) of all other Transaction Documents and all certificates, opinions
and reports delivered thereunder.
(e) CLOSING CERTIFICATE. The Borrower shall have delivered to the
Lenders a certificate in substantially the form of Exhibit C, dated the
Effective Date and signed by the President, a Vice President or a Financial
Officer of the Borrower and attaching the documents described therein.
(f) OPINIONS OF COUNSEL. The Borrower shall have delivered to the
Lenders opinions of counsel in form satisfactory to the Administrative Agent.
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(g) PLEDGE AGREEMENT SHARING ENTITLEMENT NOTICE. The Borrower shall
have delivered to the Lenders a Notice of Pledge Agreement Entitlement in
substantially the form of Exhibit E duly executed by the Borrower and Starwood
REIT, with the Confirmation of Receipt and Approval appended thereto duly
executed by the Persons named thereon.
(h) CONSENTS. Required Lenders (taking into account only outstanding
Tranche One Loans) shall have consented to this amendment and restatement of the
Original Agreement and the requisite lenders under the Bank Credit Facility
shall have consented to the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including the making of
the Tranche Two Loans and the use of the proceeds thereof for each of the
purposes specified in Section 2.1(g).
(i) LEGAL MATTERS. LCPI shall have received such other documents as
it or its special counsel, Latham & Watkins, may reasonably request.
(j) FEES AND COSTS. LCPI shall have received payment of all fees,
expense reimbursements and other amounts due and payable under the Note
Documents.
(k) OTHER MATTERS. The Borrower shall not have been notified in
writing by Required Lenders that:
(i) Any law, litigation or legal, judicial or administrative
proceeding is in effect, pending or threatened that substantially
restricts or seeks injunctive or compensatory relief in respect of the
Transactions or that could reasonably be expected to adversely affect the
ability of the parties to consummate, the Transactions or to have a
Material Adverse Effect,
(ii) Any consents or approvals required to be obtained from
any Governmental Entity or, except as disclosed in the Disclosure
Schedule, any other Person in connection with the Transactions or for the
Borrower or any Guarantor to conduct business, pay its liabilities and
perform its contractual obligations following the Effective Date has not
been obtained or is not in full force and effect, or any applicable
waiting period or appeal period has not expired, or any burdensome
conditions have been imposed with respect thereto, or any action by any
Governmental Entity is pending or threatened that could reasonably be
expected to restrain, prevent or impose burdensome conditions on the
Transactions or such conduct of business, payment of liabilities and
performance of contractual obligations,
(iii) An event has occurred at any time after January 14,
1998, or any information has been disclosed to the Lenders after the date
of this Agreement relating to any event that occurred or condition that
existed at any time, that has or could reasonably be expected to result in
a Material Adverse Effect,
(iv) Any representation, warranty or factual statement made by
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any Loan Party in any of the Transaction Documents is in any material
respect not true and correct, or
(v) A Default has occurred and is continuing.
(l) OTHER CONDITIONS. Each of the additional conditions precedent
set forth on Schedule D hereto shall have been satisfied or waived.
The obligations of the Lenders to make Loans hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 11.2) at or prior to 3:00 p.m., New York City time, on
August 31, 1998. If such conditions are not so satisfied or waived by such time,
each Lender's obligation to make Loans hereunder shall terminate and this
amendment and restatement shall not become effective.
The execution and delivery of this Agreement by the Borrower on the
Effective Date shall constitute a representation and warranty by the Borrower
and each Guarantor to the effect that the applicable conditions precedent set
forth in this Article III are satisfied on the Effective Date.
SECTION 3.2. CONDITIONS PRECEDENT TO ALL TRANCHE TWO LOANS. The
obligation of each Tranche Two Lender to fund any requested Tranche Two Loan is
subject to the following additional conditions precedent, and each Notice of
Borrowing and each acceptance of the proceeds of a Tranche Two Loan shall
constitute a representation and warranty by the Borrower that such conditions
are satisfied:
(a) REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement and the other Note Documents shall be
true and correct in all material respects on and as of the date of such Notice
of Borrowing and on and as of the date such Loan is made, as if then made, other
than representations and warranties that expressly relate solely to an earlier
date;
(b) NO DEFAULTS. No Default or Event of Default shall have occurred
and be continuing, or would result from the making of the requested Loan; and
(c) NO ADVERSE CHANGE. No event or condition shall have occurred
since January 14, 1998 which has had or would reasonably be expected to have a
Material Adverse Effect.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Each Loan Party hereby agrees with, and represents and warrants to,
LCPI and the Lenders that, as of the Original Closing Date, the Effective Date
and the date of the making of each Tranche Two Loan hereunder (it being
understood and agreed that any representation or warranty which by its terms is
made as of a specified date shall be required to be true and correct in all
material respects only as of such specified date), in each case except as
otherwise set forth in the Disclosure Schedule:
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SECTION 4.1. REPRESENTATIONS AND WARRANTIES IN THE ACQUISITION
AGREEMENT AND THE BANK CREDIT FACILITY. Each of the representations and
warranties made by any Loan Party contained in the Bank Credit Facility or in
the Acquisition Agreement or any other Transaction Document, as set forth
therein on the Original Closing Date without regard to any subsequent waiver
thereof or amendment thereto, was true and correct in all material respects on
the Original Closing Date and is hereby incorporated herein by reference as if
set forth at length herein. Each of the representations and warranties made by
any Loan Party contained in the Bank Credit Facility, as set forth therein on
the Effective Date without regard to any waiver thereof or amendment thereto
after the Effective Date, is and shall be true and correct in all material
respects on the Effective Date and on the date of the making of each Tranche Two
Loan hereunder and is hereby incorporated herein by reference as if set forth at
length herein. A true copy of the Disclosure Schedule is attached hereto as
Schedule 4.1.
SECTION 4.2. ORGANIZATION; GOOD STANDING. Each Loan Party has been
duly incorporated, duly organized or duly constituted and is a validly existing
corporation, limited partnership, real estate investment trust or limited
liability company in good standing under the laws of its jurisdiction of
organization, with corporate, trust, partnership or other necessary power and
authority to own, lease and operate its properties and conduct its business as
it is being conducted and is duly qualified to do business and is in good
standing as a foreign corporation, trust, limited partnership, or limited
liability company in all jurisdictions in which it owns, leases or operates
substantial properties or in which the conduct of its business requires such
qualification except where the failure to so qualify will not cause a Material
Adverse Effect.
SECTION 4.3. DUE AUTHORIZATION AND ENFORCEABILITY.
(a) TRANSACTION DOCUMENTS. Each of the Transaction Documents (i) has
been duly authorized, executed and delivered by each Loan Party that is a party
thereto and (ii) constitutes a valid and binding obligation of such Loan Party
enforceable against it in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforceability of creditors' rights generally
and by general principles of equity (whether arising under a proceeding at law
or in equity).
(b) SENIOR SECURED NOTES. The Senior Secured Notes have been duly
authorized by the Borrower and, when executed and delivered to any Lender
pursuant to the terms of this Agreement against funding of the applicable Loan
made by such Lenders, are valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforceability
of creditors' rights generally and by general principles of equity (whether
arising under a proceeding at law or in equity).
(c) LOAN PARTIES. Except for Subsidiaries that are Loan Parties, no
Subsidiary of the Borrower or Starwood REIT has guaranteed any Credit Facility
Obligation or
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has granted or agreed to grant or become subject to any Lien securing any Credit
Facility Obligation.
(d) PLEDGE AGREEMENT BENEFITS. The Senior Secured Notes constitute
Obligations that are Senior Secured Note Obligations pursuant to subclause (v)
of Section 1(a) of the Pledge Agreement. The principal of and interest on the
Senior Secured Notes and the loans and indebtedness evidenced thereby and all
other Note Liabilities are and shall be secured by all security interests and
liens upon all collateral security granted to Bankers Trust Company as
Collateral Agent pursuant to the Pledge Agreement, on the terms and conditions
therein set forth.
(e) COLLATERAL. Neither the Borrower nor Starwood REIT nor any of
their Subsidiaries has agreed to secure, or has granted or become subject to any
Lien securing, any Credit Facility Obligations, except pursuant to the Pledge
Agreement. The Senior Secured Liabilities are, and any Indebtedness incurred to
refinance the Senior Secured Notes is permitted under the Bank Credit Facility
to be and shall be, equally and ratably secured by all Collateral under the
Pledge Agreement. All actions required under the Pledge Agreement to extend the
benefit of the collateral security thereunder to the Note Liabilities have been
duly and effectually taken and completed.
(f) SUBORDINATION. No Indebtedness or other liabilities owed by one
of the Borrower, Starwood REIT or their Subsidiaries to one or more of the
others of them has been contractually subordinated to the payment of any Credit
Facility Liabilities, except Indebtedness and other liabilities that are
subordinated, to at least the same extent, to the payment of the Note
Liabilities.
SECTION 4.4. AFFILIATE GUARANTY. The Affiliate Guaranty has been
duly authorized by each Guarantor and is a valid and binding obligation of each
Guarantor, enforceable against each of them in accordance with its terms, except
as enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforceability
of creditors' rights generally and by general principles of equity (whether
arising under a proceeding at law or in equity).
SECTION 4.5. NO CONFLICTS.
(a) NO VIOLATION. Neither the execution and delivery of any
Transaction Document nor the consummation of any of the Transactions nor
compliance with the terms and provisions hereof or thereof (i) violates or will
violate any law or regulation or any order or decree of any court or
Governmental Entity applicable to any Loan Party or any Restricted Subsidiary or
by which any of their respective properties or assets may be bound, (ii)
constitutes or will constitute a breach or a violation of, any of the terms or
provisions of, or a default under, the organizational documents (including any
certificate of incorporation or bylaws) or any other corporate or organizational
restriction, as applicable, of any Loan Party or any Restricted Subsidiary or
(iii) conflicts with or will result in the breach of, or constitutes a default
under, any contract to which a Loan Party or any Restricted Subsidiary is a
party or by which any of
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them or any of their respective assets may be bound, except in the case of
clause (iii) where such breach, violation or conflict will not cause a Material
Adverse Effect.
(b) NO UNOBTAINED APPROVALS. No consent, approval, authorization or
order of, or any registration or filing with, any Governmental Entity that has
not been obtained or made is or will be required in connection with the
execution and delivery of the Transaction Documents by any Loan Party or the
consummation of the Transactions.
SECTION 4.6. NO VIOLATION OF MARGIN REGULATION. None of the
transactions contemplated by this Agreement (including the use of the proceeds
from the issuance of the Senior Secured Notes and the pledge of the Class A
Shares following the Reorganization) will violate or result in a violation of
Section 7 of the Exchange Act, or any rule or regulation issued pursuant
thereto, including the Margin Regulations.
SECTION 4.7. GOVERNMENTAL REGULATIONS. No Loan Party or Subsidiary
of a Loan Party is or will be subject to regulation under the Investment Company
Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as
amended, the Federal Power Act, the Interstate Commerce Act or to any other
Federal or state statute or regulation limiting its ability to incur
Indebtedness for borrowed money.
SECTION 4.8. FULL DISCLOSURE. None of the Exchange Act Documents,
none of the representations, warranties and factual statements made by any Loan
Party in any of the Transaction Documents and no other information, report,
Financial Statement or certificate delivered or to be delivered to LCPI, Lehman
Brothers or the Lenders in connection with the Note Documents or in connection
with or in anticipation of the Transactions contains or will contain, as of the
date thereof, any untrue statement of material fact or omitted or omits or will
omit to state a material fact necessary to make such statements not misleading
in light of the circumstances in which such statements were made. It is
understood, however, that to the extent the Exchange Act Documents or any such
information, report, Financial Statement or certificate includes projections,
such projections are based upon good faith estimates and assumptions believed to
be reasonable at the time made and are not to be viewed as facts. Actual results
during the period or periods covered by such projections may differ from the
projected results.
SECTION 4.9. FINANCIAL CONDITION; SOLVENCY. Giving due effect to
rights of reimbursement and contribution reserved under the Affiliate Guaranty,
(a) the fair value of the assets of each Loan Party exceeds its debts and
liabilities, direct, subordinated, contingent or otherwise, (b) the present fair
salable value of the property of each Loan Party is greater than the amount that
will be required to satisfy its probable liability on its debts and other
liabilities, direct, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) each Loan Party is able to
pay its debts and liabilities, direct, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (d) no Loan Party
will have unreasonably small capital with which to conduct the business in which
it is engaged as such business is now conducted and is proposed to be conducted
following the Effective Date. No Loan Party intends to incur debts beyond its
ability to pay such debts as they mature, taking into account the timing and
amounts of cash to be
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received by it and the timing and amounts of cash to be payable on or in respect
of its Indebtedness.
SECTION 4.10. NO MATERIAL ADVERSE CHANGE. No event has
occurred since January 14, 1998 that has had, or could reasonably be expected
to have, a Material Adverse Effect.
ARTICLE V.
COVENANTS
So long as any of the principal of or interest on the Senior Secured
Notes shall be unpaid or any Tranche Two Commitment remains outstanding, the
Borrower and each of the Guarantors covenants and agrees with the Lenders as
follows:
SECTION 5.1. PAYMENT OF SENIOR SECURED NOTES. The Borrower shall pay
or cause to be paid the principal of and interest on the Senior Secured Notes at
the rates and on the dates and in the manner provided in this Agreement and the
Senior Secured Notes.
SECTION 5.2. MAINTENANCE OF OFFICE OR AGENCY.
(a) MAINTENANCE OF OFFICE OR AGENCY. The Loan Parties shall maintain
an office or agency where Senior Secured Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Borrower or the Guarantors in respect of the Senior Secured Notes and
this Agreement may be served. The Loan Parties shall give prompt written notice
to the Lenders of the location, and any change in the location, of such office
or agency.
(b) OTHER OFFICES OR AGENCIES. The Borrower may also from time to
time designate one or more other offices or agencies where the Senior Secured
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind such designations. The Borrower shall give prompt written
notice to the Lenders of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 5.3. REPORTS. The Borrower and Starwood REIT shall provide
to the Lenders, within 15 days after they file them with the SEC, copies of
their annual report and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the SEC may by rule or
regulation prescribe) which the Borrower or Starwood REIT is required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
Notwithstanding that the Borrower or Starwood REIT may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
or otherwise report on an annual and quarterly basis on forms provided for such
annual and quarterly reporting pursuant to rules and regulations promulgated by
the SEC, the Borrower and Starwood REIT shall continue to provide each Lender
with, without cost to any Lender, (a) within 90 days after the end of each
fiscal year, annual reports on Form 10-K (or any successor form) containing the
information required to be contained therein (or required in such successor
form); (b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, reports on Form
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10-Q (or any successor form); and (c) promptly from time to time after the
occurrence of an event required to be therein reported, such other reports on
Form 8-K (or any successor form) containing the information required to be
contained therein (or required in any successor form). The Borrower and Starwood
REIT shall in all cases, without cost to each recipient, provide copies of such
information to the Lenders and shall make available such information to
prospective purchasers and to securities analysts and broker-dealers upon their
request. In addition, the Borrower and Starwood REIT shall, for so long as any
Senior Secured Notes remain outstanding, furnish to the Lenders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. Notwithstanding anything to the contrary herein, no Lender and
no other Person shall have any duty to review such document for purposes of
determining compliance with any provisions of this Agreement.
SECTION 5.4. COMPLIANCE CERTIFICATION.
(a) OFFICERS' CERTIFICATE. The Borrower and Starwood REIT shall
deliver to each Lender, within 90 days after the end of each fiscal year, an
Officers' Certificate stating that a review of the activities of the Borrower
and Starwood REIT and their Subsidiaries during the preceding fiscal year has
been made under the supervision of the signing Officers of the Borrower and
Starwood REIT with a view to determining whether each Loan Party is in
compliance with this Agreement and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge each Loan
Party is in compliance with each and every covenant contained in this Agreement
and is not in default in the performance or observance of any of the terms,
provisions and conditions of this Agreement (or, if a Default or Event of
Default shall exist, describing all such Defaults or Events of Default of which
he or she may have knowledge and what action the Loan Parties are taking or
propose to take with respect thereto) and that to the best of his or her
knowledge no event has occurred that remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Senior
Secured Notes is prohibited or if such event exists, a description of the event
and what action the Loan Parties are taking or propose to take with respect
thereto.
(b) AUDITORS' STATEMENT. So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 5.3 shall be
accompanied by a written statement of the Borrower's and Starwood REIT's
independent public accountants (who shall be a firm of established national
reputation) that in making the examination necessary for certification of such
financial statements, nothing has come to their attention that would lead them
to believe that any Loan Party is in violation of any provisions of Article V or
Article VI or, if any such violation exists, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation.
(c) NOTICE OF DEFAULT. The Borrower and Starwood REIT shall, so long
as any of the Senior Secured Notes are outstanding, deliver to each Lender,
within ten Business Days after any Officer becomes aware of any Default or Event
of Default or any event of default under any document, instrument or agreement
representing Indebtedness of the
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Borrower or Starwood REIT, an Officers' Certificate specifying such Default,
Event of Default or event of default and what action the Borrower and Starwood
REIT are taking or propose to take with respect thereto.
SECTION 5.5. TAXES. The Borrower and Starwood REIT shall pay, and
shall cause each Restricted Subsidiary to pay, prior to delinquency, all
material taxes, assessments, and governmental levies except such as are
contested in good faith and by appropriate proceedings or where the failure to
effect such payment would not have any Material Adverse Effect.
SECTION 5.6. STAY, EXTENSION AND USURY LAWS. Each of the Borrower
and the Guarantors covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Agreement; and each of the Borrower and the Guarantors
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
any Lender, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 5.7. RESTRICTED PAYMENTS. The Borrower and Starwood REIT
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly: (i) declare or pay any dividend or make any distribution on account
of any of the Borrower's or Starwood REIT's or any Restricted Subsidiary's
Equity Interests (including any payment in connection with any merger or
consolidation involving either of the Borrower or Starwood REIT) or to the
direct or indirect holders of either of the Borrower's or Starwood REIT's Equity
Interests in their capacity as such (other than (A) dividends or distributions
by the Borrower or Starwood REIT payable in Equity Interests (other than
Disqualified Stock) of the Borrower and/or Starwood REIT (or accretions
thereon); or (B) dividends or distributions paid to the Borrower or Starwood
REIT or a Restricted Subsidiary); (ii) purchase, redeem or otherwise acquire or
retire for value (including, without limitation, in connection with any merger
or consolidation involving either of the Borrower or Starwood REIT) any Equity
Interests of the Borrower, Starwood REIT or any Restricted Subsidiary (other
than any such Equity Interests owned by the Borrower, Starwood REIT or any
Restricted Subsidiary); (iii) make any payment on or with respect to or
purchase, redeem, defease or otherwise acquire or retire for value any
Subordinated Indebtedness of the Borrower, Starwood REIT or any Restricted
Subsidiary (other than, in each case, scheduled interest and principal payments
with respect to any such Subordinated Indebtedness); (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Borrower would, after giving pro forma effect to such
Restricted Payment as if such Restricted Payment had been made at the beginning
of the applicable
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four-quarter period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of Section 5.9 (applying only
clauses (1) and (2) and not clause (3) thereof); and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Borrower, Starwood REIT and the
Restricted Subsidiaries after the Original Closing Date (excluding Restricted
Payments permitted by clauses (ii), (iii), (vi), (ix), (x), (xii), (xiii), (xiv)
and (xv) of the next succeeding paragraph and including the other Restricted
Payments permitted by the next paragraph), is less than the sum of (X) an amount
equal to (1) for as long as, and for the period during which, Starwood REIT
qualifies as a REIT under the Code, 90% (or, for the portion of any such period
from and after the Reorganization Date, 50%) of the Combined Funds From
Operations of the Borrower and Starwood REIT for the period (taken as one
accounting period) from December 31, 1997 to the end of the Borrower's and
Starwood REIT's most recently ended fiscal quarter for which internal financial
statements are available (or, in the case such Combined Funds From Operations
for such period is a deficit, minus 100% of such deficit), plus (2) for as long
as and for the period during which Starwood REIT does not qualify as a REIT
under the Code, 50% of the Combined Net Income of the Borrower and Starwood REIT
for the period (taken as one accounting period) commencing at the end of the
fiscal quarter during which it failed to qualify as a REIT under the Code to the
end of the Borrower's and Starwood REIT's most recently ended fiscal quarter for
which internal financial statements are available (or, in the case such Combined
Net Income for such period is a deficit, minus 100% of such deficit), plus (Y)
without duplication, 100% of the aggregate net cash proceeds received by the
Borrower or Starwood REIT since the Original Closing Date from capital
contributions (other than from the Borrower, Starwood REIT or any Restricted
Subsidiary) or the issue or sale of Equity Interests (other than Disqualified
Stock) or debt securities of the Borrower or Starwood REIT that have been
converted into or exchanged for such Equity Interests of the Borrower or
Starwood REIT (other than Equity Interests or such debt securities of the
Borrower or Starwood REIT sold to the Borrower, Starwood REIT or a Restricted
Subsidiary and other than Disqualified Stock or debt securities that have been
converted into or exchanged for Disqualified Stock, excluding any Equity
Interests or debt securities that have been converted into Equity Interests, the
proceeds of which were applied, directly or indirectly, to the costs or expenses
of the Acquisition), plus (Z) to the extent not otherwise included in Combined
Funds From Operations or Combined Net Income, as the case may be, 100% of the
cash dividends or distributions or the amount of the cash principal and interest
payments received since the Original Closing Date by the Borrower, Starwood REIT
or any Restricted Subsidiary from any Unrestricted Subsidiary or in respect of
any Restricted Investment (other than dividends or distributions to pay
obligations of or with respect to such Unrestricted Subsidiary such as income
taxes) until the entire amount of the Investment in such Unrestricted Subsidiary
has been received or the entire amount of such Restricted Investment has been
returned, as the case may be, and 50% of such amounts thereafter. In the event
that the Borrower or Starwood REIT converts an Unrestricted Subsidiary to a
Restricted Subsidiary, the Borrower and Starwood REIT may add back to this
clause (c) the aggregate amount of any Investment in such Subsidiary that was a
Restricted Payment at the time of such Investment, with such Investment to be
valued at the lower of book value or fair market value at the time of
conversion.
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The foregoing provisions will not prohibit
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at the date of declaration such payment would
have complied with the provisions of this Agreement;
(ii) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Borrower, Starwood REIT or any
Restricted Subsidiary, in each case, in exchange for, or out of the
proceeds of, the substantially concurrent sale or issuance (other than to
the Borrower, Starwood REIT or a Restricted Subsidiary) of Equity
Interests of the Borrower or Starwood REIT (other than any Disqualified
Stock); provided that the amount of any net cash proceeds from the sale of
such Equity Interests shall be excluded from clause (c) (Y) of the
preceding paragraph;
(iii) the defeasance, redemption, repurchase, retirement or
other acquisition of any Subordinated Indebtedness of the Borrower,
Starwood REIT or any Restricted Subsidiary in exchange for, or out of the
proceeds of, the substantially concurrent sale or issuance (other than to
the Borrower, Starwood REIT or a Restricted Subsidiary) of Subordinated
Indebtedness of the Borrower, Starwood REIT or such Restricted Subsidiary
or Equity Interests of the Borrower or Starwood REIT (other than
Disqualified Stock); provided, however, that (1) the principal amount of
such Subordinated Indebtedness incurred pursuant to this clause (iii)
shall not exceed the principal amount of the Subordinated Indebtedness so
redeemed, repurchased, retired or otherwise acquired (plus the amount of
reasonable expenses incurred and any premium paid in connection
therewith), (2) such Subordinated Indebtedness shall have a Weighted
Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of the Subordinated Indebtedness being redeemed,
repurchased, retired or otherwise acquired, (3) such Subordinated
Indebtedness shall be subordinate in right of payment to the Senior
Secured Notes and Affiliate Guaranty on terms at least as favorable to the
Lenders in respect of the Senior Secured Notes and the Affiliate Guaranty
as those contained in the documentation governing the Subordinated
Indebtedness being redeemed, repurchased, retired or otherwise acquired
and (4) the net cash proceeds from the sale of any Equity Interests issued
pursuant to this clause (iii) shall be excluded from clause (c) (Y) of the
preceding paragraph;
(iv) any redemption or purchase by the Borrower, Starwood REIT
or any Restricted Subsidiary of Equity Interests or Subordinated
Indebtedness of the Borrower or Starwood REIT required by a Gaming
Authority in order to preserve a material Gaming License; provided, that
so long as such efforts do not jeopardize any material Gaming License, the
Borrower, Starwood REIT or such Restricted Subsidiary shall have
diligently tried to find a third-party purchaser for such Equity Interests
or Subordinated Indebtedness and no third-party purchaser acceptable to
the applicable Gaming Authority was
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willing to purchase such Equity Interests or Subordinated Indebtedness
within a time period acceptable to such Gaming Authority;
(v) for so long as Starwood REIT is a REIT under the Code for
Federal income tax purposes, Starwood REIT may make cash distributions to
its shareholders in amount necessary to maintain its status as a REIT
under the Code;
(vi) intercompany payments, including without limitation, debt
repayments, between or among the Borrower, Starwood REIT and their
Restricted Subsidiaries or the payment of any dividend by a Subsidiary of
the Borrower or Starwood REIT to the Borrower, Starwood REIT or any
Restricted Subsidiary as the holder of its Equity Interests;
(vii) the repurchase of shares of, or options to purchase,
common stock of either of the Borrower or Starwood REIT from employees,
former employees, directors or former directors of the Borrower or
Starwood REIT or any Restricted Subsidiary (or permitted transferees of
such individuals), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto), in each case, as
in effect on the date of this Agreement and as approved by the Board of
Directors under which such individuals purchase or sell, or are granted
the option to purchase or sell, shares of such common stock (the "Employee
Stock Buybacks");
(viii) repurchases of Capital Stock of the Borrower or
Starwood REIT deemed to occur upon exercise of stock options if such
Capital Stock represents a portion of the exercise price of such options;
(ix) WD Parent Corp. to pay regularly scheduled cash dividends
on the VNU Preferred Stock at a rate not to exceed 6% per annum and any
mandatory redemptions thereunder;
(x) WD Parent Corp. to otherwise redeem outstanding shares of
VNU Preferred Stock;
(xi) the purchase of UBS Shares prior to December 31, 1998 for
an aggregate consideration of up to $200,000,000;
(xii) other Restricted Payments not to exceed $135 million in
the aggregate in any calendar year pursuant to this clause (xii);
(xiii) the purchase for cash of up to $1.0 billion of the
Paired Common Shares of the Borrower and Starwood REIT;
(xiv) the acquisition or retirement for value of Equity
Interests in Newco and Starwood REIT pursuant to the Reorganization; and
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(xv) Restricted Investments of up to $350,000,000 outstanding
at any one time,
provided, that at the time of, and after giving effect to, any Restricted
Payment permitted under clauses (ii) (to the extent that any Equity Interests
are redeemed, retired or acquired from the cash proceeds from the sale or
issuance of Equity Interests), (iii) (to the extent that any Subordinated
Indebtedness is defeased, redeemed, retired, repurchased or otherwise acquired
from the cash proceeds from the sale or issuance of other Subordinated
Indebtedness or Equity Interests), (v), (vii), (ix), (x), (xi), (xii), (xiii),
(xiv) and (xv) no Event of Default (and, in the case of clauses (xiii), (xiv)
and (xv), no Default) shall have occurred and be continuing or would occur as a
consequence thereof.
For purposes of determining the amount of Restricted Investments
outstanding at any time, all Restricted Investments shall be valued at their
fair market value at the time made, and no adjustments will be made for
subsequent changes in fair market value.
Not later than the date of filing any quarterly or annual report,
the Borrower and Starwood REIT shall deliver to each Lender an Officers'
Certificate stating that each Restricted Payment made in the prior fiscal
quarter was permitted and setting forth the basis upon which the calculations
required by this Section 5.7 were computed, which calculations may be based upon
the Borrower's and Starwood REIT's latest available financial statements.
SECTION 5.8. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Borrower and Starwood REIT shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to (a) (i) pay dividends
or make any other distributions to the Borrower or Starwood REIT or any
Restricted Subsidiary (A) on their Capital Stock or (B) with respect to any
other interest or participation in, or measured by, its profits, or (ii) pay any
Indebtedness owed to the Borrower, Starwood REIT or any Restricted Subsidiary
(other than in respect of the subordination of such Indebtedness to the Senior
Secured Notes, the Affiliate Guaranty or any other Indebtedness incurred
pursuant to the terms of this Agreement, as the case may be), (b) make loans or
advances to the Borrower, Starwood REIT or any Restricted Subsidiary or (c)
sell, lease, or transfer any of their properties or assets to the Borrower,
Starwood REIT or any Restricted Subsidiary, except (in each case) for such
encumbrances or restrictions existing under or by reason of (1) contractual
encumbrances or restrictions in effect on the Original Closing Date, (2) the
Bank Credit Facility (and any related security agreements) and any Guaranties
thereof, this Agreement, the Senior Secured Notes, the Affiliate Guaranty,
indebtedness incurred pursuant to clause (h) and (j) of Section 5.9 and any
related security agreements, (3) this Agreement, the Senior Secured Notes and
the Affiliate Guaranty, (4) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Borrower, Starwood REIT or any Restricted
Subsidiary as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, (5) by reason of customary
non-assignment provisions in leases entered into in the
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ordinary course of business, (6) purchase money obligations for property
acquired in the ordinary course of business or secured indebtedness permitted to
be incurred and secured hereby that impose restrictions of the nature discussed
in clause (c) above on the property so acquired or which secures such
indebtedness, (7) applicable law or any applicable rule or order of any Gaming
Authority, (8) customary restrictions imposed by asset sale or stock purchase
agreements relating to the sale of assets or stock by the Borrower, Starwood
REIT or any Restricted Subsidiary, (9) any encumbrances or restrictions imposed
by any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings of the contracts,
instruments or obligations referred to in clauses (1) through (8) above,
provided, that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are, in the
good faith judgment of the Borrower and Starwood REIT, no more restrictive with
respect to such dividend and other payment restrictions than those contained in
the dividend or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding, replacement
or refinancing, or (10) customary encumbrances or restrictions, pursuant to the
terms of Preferred Stock permitted to be issued pursuant to Section 5.9, on the
payment of dividends or distributions on the other Capital Stock of the issuer
of such Preferred Stock.
SECTION 5.9. LIMITATIONS ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE
OF DISQUALIFIED STOCK. The Borrower and Starwood REIT shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable with
respect to (collectively, "incur" and correlatively, an "incurrence" of) any
Indebtedness (including Acquired Indebtedness) or any shares of Disqualified
Stock or Subsidiary Preferred Stock; provided, however, that the Borrower,
Starwood REIT or a Restricted Subsidiary may incur Indebtedness or issue shares
of Disqualified Stock or Subsidiary Preferred Stock if:
(1) the Fixed Charge Coverage Ratio for the most recently
ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date of such incurrence would have
been at least 2.0 to 1.0 determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the Disqualified Stock had been issued,
as the case may be, and application of proceeds had occurred at the
beginning of such four-quarter period,
(2) Combined Debt is no greater than 60% of Combined Adjusted
Total Assets, determined on a pro forma basis after giving effect to such
incurrence, and
(3) the aggregate principal amount of (A) all Indebtedness of
the Borrower and Starwood REIT that is secured by any Lien on any property
of the Borrower or Starwood REIT plus (B) all Disqualified Stock issued by
any Restricted Subsidiary other than Starwood REIT plus (C) all other
outstanding Subsidiary Preferred Stock plus (D) all Indebtedness of any
Restricted Subsidiary other than Starwood REIT (whether or not secured by
a Lien),
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excluding (X) (so long as they are equally and ratably secured) the Bank
Credit Facility and the Senior Secured Notes and Guaranties thereof, (Y)
other Guaranties of Indebtedness of the Borrower or Starwood REIT and (Z)
any such Indebtedness, Disqualified Stock or Subsidiary Preferred Stock
that is owed to or held by the Borrower, Starwood REIT or any Restricted
Subsidiary, does not exceed 40% of Combined Adjusted Total Assets,
determined on a pro forma basis after giving effect to such incurrence.
The foregoing limitations will not apply to:
(a) the incurrence by the Borrower, Starwood REIT or any Restricted
Subsidiary of Indebtedness under the Bank Credit Facility and any Guaranties
thereof in an aggregate principal amount not to exceed at any one time
$3,100,000,000, less the aggregate amount of all principal repayments and
mandatory prepayments of term loans outstanding thereunder made after the
Original Closing Date and the amount of all reductions to revolving loan
commitments made after the Original Closing Date (in each case to the extent
that all required repayments in respect of such revolving loan commitment
reductions have actually been made), but excluding any principal repayments or
prepayments or commitment reductions to the extent same are made in connection
with the incurrence of refinancing indebtedness, whether in whole or in part,
under the Bank Credit Facility or a successor Bank Credit Facility;
(b) the incurrence by the Borrower, Starwood REIT or any Restricted
Subsidiary of any Existing Debt;
(c) the incurrence by the Borrower, Starwood REIT or any Restricted
Subsidiary of Indebtedness represented by the Senior Secured Notes and the
Affiliate Guaranty;
(d) the incurrence by the Borrower, Starwood REIT or any Restricted
Subsidiary of Indebtedness (the "Refinancing Indebtedness") issued in exchange
for, or the proceeds of which are used to extend, refinance, renew, replace,
substitute or refund Indebtedness referred to in the first paragraph of this
covenant or in clauses (b), (c), this clause (d), (h) or (j); provided, however,
that (1) the principal amount of such Refinancing Indebtedness shall not exceed
the principal amount of Indebtedness (or, in the case of Indebtedness with
original issue discount, the accreted value of such Indebtedness) so extended,
refinanced, renewed, replaced, substituted or refunded (plus the amount of
reasonable expenses incurred and any premium paid in connection therewith), (2)
if the Indebtedness being extended, refinanced, renewed, replaced, substituted
or refunded is subordinate in right of payment to the Senior Secured Notes, such
Refinancing Indebtedness shall be subordinate in right and priority of payment
to the Senior Secured Notes and the Affiliate Guaranty on terms at least as
favorable to the Lenders in respect of Senior Secured Notes and the Affiliate
Guaranty as those contained in the documentation governing any subordinated
Indebtedness being extended, refinanced, renewed, replaced, substituted or
refunded, and (3) the Refinancing Indebtedness shall have a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of the Indebtedness being extended, refinanced, renewed, replaced, substituted
or refunded;
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(e) (1) intercompany Indebtedness between or among the Borrower,
Starwood REIT and any Restricted Subsidiary; provided, however, the obligations
to pay principal, interest or other amounts under such intercompany Indebtedness
is subordinated to the payment in full of the Senior Secured Notes and the
Affiliate Guaranty or (2) Disqualified Stock or Subsidiary Preferred Stock
issued to the Borrower, Starwood REIT or any Restricted Subsidiary;
(f) Hedging Obligations that are incurred (1) for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is not prohibited by the terms of this Agreement to be
outstanding or (2) for the purpose of fixing or hedging currency exchange rate
risk with respect to any currency exchanges;
(g) to the extent that such incurrence does not result in the
incurrence by the Borrower, Starwood REIT or any Restricted Subsidiary of any
obligation for the payment of borrowed money of others, Indebtedness incurred
solely in respect of performance bonds, completion guarantees and similar
obligations (other than standby letters of credit or bankers acceptances);
provided, that such Indebtedness was incurred in the ordinary course of business
of the Borrower, Starwood REIT or a Restricted Subsidiary;
(h) Acquired Indebtedness, provided that (i) such Indebtedness was
not incurred in connection with or in contemplation of the acquisition by which
such Acquired Indebtedness was acquired, and (ii) such Acquired Indebtedness
does not exceed 100% of the total value of the assets or of the entity so
acquired;
(i) the incurrence by the Borrower, Starwood REIT or any Restricted
Subsidiary of additional Indebtedness not otherwise permitted hereunder in an
aggregate amount at any time outstanding not to exceed $500 million; and
(j) the guaranty by the Borrower, Starwood REIT or any Restricted
Subsidiary of Indebtedness of the Borrower, Starwood REIT or a Restricted
Subsidiary that was permitted to be incurred by another provision of this
covenant.
The Borrower and Starwood REIT shall not permit any of their
Unrestricted Subsidiaries to incur any Indebtedness (including Acquired
Indebtedness) or issue any shares of Disqualified Stock, other than Non-Recourse
Indebtedness; provided, however, that if any such Unrestricted Subsidiary ceases
to remain an Unrestricted Subsidiary, such event shall be deemed to constitute
the incurrence of the Indebtedness in such Subsidiary by a Restricted
Subsidiary.
For purposes of determining compliance with this Section 5.9, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Indebtedness permitted in clauses (a) through (j) above or is
entitled to be incurred pursuant to the first paragraph of this Section 5.9, the
Borrower and Starwood REIT shall, in their sole discretion, classify such item
of Indebtedness in any manner that complies with this Section 5.9 and such item
of Indebtedness will be treated as having been incurred pursuant to only such
clause or clauses or pursuant to the first paragraph hereof. Accrual of
interest, the accretion of accreted
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value or principal and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes
of this Section 5.9.
The Borrower covenants and agrees that the Note Liabilities will at
all times rank pari passu in right of payment with all other senior indebtedness
of the Borrower and the Guarantors, including all Obligations under the Bank
Credit Facility, and that the Note Liabilities will at all times be senior in
right of payment to all Indebtedness of the Borrower and the Guarantors which is
contractually subordinated to any other Indebtedness of the Borrower or any
Guarantor.
SECTION 5.10. ASSET SALES. The Borrower and Starwood REIT shall not,
and shall not permit any Restricted Subsidiary to, consummate an Asset Sale,
unless (a) no Default or Event of Default exists or is continuing immediately
prior to or after giving effect to such Asset Sale, (b) the Borrower, Starwood
REIT, or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined by an Officer for any Asset Sale of less than $50.0 million
and as determined by the Board of Directors for any Asset Sale in excess of
$50.0 million and, in each case, as set forth in an Officers' Certificate
delivered to the Lenders annually) of the assets sold or otherwise disposed of
and (c) at least 75% of the consideration therefor received by the Borrower,
Starwood REIT or any Restricted Subsidiary, as the case may be, is in the form
of cash or Cash Equivalents or Investments that are not prohibited to be made
under Section 5.7; provided, however, that the amount of (A) any liabilities (as
shown on the Borrower's, Starwood REIT's, or such Restricted Subsidiary's, as
the case may be, most recent balance sheet or in the notes thereto) of the
Borrower, Starwood REIT, or such Restricted Subsidiary, as the case may be
(other than liabilities that are by their terms expressly subordinated to the
Senior Secured Notes and the Affiliate Guaranty), that are assumed by the
transferee of any such assets and (B) any notes or other obligations received by
the Borrower, Starwood REIT or any Restricted Subsidiary, as the case may be,
from such transferee that are converted by the Borrower, Starwood REIT or such
Restricted Subsidiary, as the case may be, into cash (to the extent of the cash
received) within 5 Business Days following the closing of such Asset Sale, shall
be deemed to be cash only for purposes of satisfying clause (y) of this Section
5.10 and for no other purpose.
Within 365 days after the Borrower's, Starwood REIT's or any
Restricted Subsidiary's receipt of the Net Proceeds of any Asset Sale (the
"Reinvestment Period"), such Person may apply the Net Proceeds from such Asset
Sale (i) to permanently reduce Credit Facility Liabilities (in such manner as to
reduce the amount available under Section 5.9(a)) or other Indebtedness that is
not Subordinated Indebtedness or (ii) in an investment in any one or more
business, capital expenditure or other tangible asset of the Borrower, Starwood
REIT or any Restricted Subsidiary, in each case, engaged, used or useful in the
business, in each case, with no concurrent obligation to make an offer to
purchase any Senior Secured Notes. Pending the final application of any such Net
Proceeds, the Borrower, Starwood REIT or such Restricted Subsidiary may
temporarily reduce Credit Facility Liabilities, if any, or otherwise invest such
Net Proceeds in Cash Equivalents. Any Net Proceeds from the Asset Sale that are
not invested or used to repay Indebtedness or as working capital within the
Reinvestment Period as provided in the first sentence of this paragraph shall be
deemed to constitute "Excess Proceeds." When the aggregate
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amount of Excess Proceeds exceeds $50.0 million, the Borrower shall, subject to
any repayment obligations owed to the lenders under the Bank Credit Facility,
make a Purchase Offer to all Lenders in respect of Senior Secured Notes to
purchase the maximum principal amount of Senior Secured Notes, that is an
integral multiple of $1,000, that may be purchased out of the Excess Proceeds at
an offer price in cash in an amount equal to 100% of the aggregate principal
amount thereof, in each case, plus accrued and unpaid interest to the date fixed
for the closing of such offer, in accordance with the procedures set forth in
Section 2.5. To the extent that the aggregate amount of Senior Secured Notes
tendered pursuant to a Purchase Offer is less than the applicable Excess
Proceeds, the Borrower may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Senior Secured Notes
tendered by Lenders exceeds the amount of Excess Proceeds, the Senior Secured
Notes to be purchased shall be prepaid in accordance with Section 2.5. Upon
completion of any such Purchase Offer, the amount of Excess Proceeds shall be
deemed reset at zero.
SECTION 5.11. TRANSACTIONS WITH AFFILIATES. The Borrower and
Starwood REIT shall not, and shall not permit any Restricted Subsidiary to,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into any contract,
agreement, understanding, loan, advance or guaranty with, or for the benefit of,
any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (a)
such Affiliate Transaction is on terms that are no less favorable to the
Borrower, Starwood REIT or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Borrower, Starwood
REIT or such Restricted Subsidiary with an unrelated Person and (b) the Borrower
delivers to the Lenders (i) with respect to any Affiliate Transaction involving
aggregate payments in excess of (A) $5.0 million, an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (a) above, or
(B) $10.0 million, a resolution adopted by a majority of the disinterested
directors of the Board of Directors approving such Affiliate Transaction and set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (a) above or if there are no disinterested members of the
Board of Directors, an opinion as to the fairness to the Borrower, Starwood REIT
or such Restricted Subsidiary from a financial point of view issued by an
Independent Financial Advisor. The foregoing provisions shall not apply to the
following: (1) any employment, indemnification, noncompetition or
confidentiality agreement entered into by any of the Borrower, Starwood REIT or
any of their Restricted Subsidiaries with their employees or directors in the
ordinary course of business; (2) the payment of reasonable fees to directors of
the Borrower, Starwood REIT or their Restricted Subsidiaries who are not
employees of the Borrower, Starwood REIT or their Restricted Subsidiaries; (3)
transactions between or among the Borrower, Starwood REIT and/or any of their
Restricted Subsidiaries; (4) with respect to the Borrower, Starwood REIT and any
Restricted Subsidiary, Restricted Payments permitted under Section 5.7; or (5)
the transactions contemplated by Schedule 9.06 in the Disclosure Schedule.
SECTION 5.12. LIENS.
(a) The Borrower and Starwood REIT shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly create, incur, assume or
suffer to exist any Lien on any asset owned as of the Original Closing Date or
thereafter acquired by the Borrower,
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Starwood REIT or any such Restricted Subsidiary, or any income or profits
therefrom, or assign or convey any right to receive income therefrom, except, in
each case, Permitted Liens.
(b) The Borrower and Starwood REIT shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly create, incur, assume or
suffer to exist any Lien on any of their property or assets securing any
Obligations with respect to the Bank Credit Facility or any Guaranty thereof,
unless all Obligations under this Agreement and the Senior Secured Notes or the
Affiliate Guaranty, as the case may be, are equally and ratably secured until
such time as the Obligations with respect to the Bank Credit Facility and any
Guaranty thereof are not so secured; provided, that in the circumstances and to
the extent provided in the Bank Credit Facility, cash (and Cash Equivalents)
collateral may be delivered from time to time in accordance with the
requirements of the Bank Credit Facility without equally and ratably securing
the Note Liabilities.
(c) The Borrower and Starwood REIT shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly, create or assume any Lien
on the Collateral described in the Pledge Agreement, except for the Lien of the
Pledge Agreement. The Borrower and Starwood REIT shall not, and shall not permit
any Restricted Subsidiary to, permit or consent to any Indebtedness becoming an
Obligation secured by the Lien of the Pledge Agreement except for Credit
Facility Liabilities, the Senior Secured Liabilities, Eligible Hedging
Liabilities or the Senior Secured Notes or Affiliate Guaranty, the ITT Notes and
any refinancings thereof.
SECTION 5.13. CORPORATE EXISTENCE.
(a) MAINTAIN EXISTENCE. Subject to Article V and Article VI, each of
the Borrower and Starwood REIT and each of the other Guarantors shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate, trust or limited liability company existence, and the
corporate, limited liability company, partnership or other existence of each of
its Subsidiaries, in accordance with the respective organizational documents (as
the same may be amended from time to time) of the Borrower, Starwood REIT, any
such other Guarantor or any such Subsidiary and (ii) the material rights
(charter and statutory), licenses and franchises of the Borrower, Starwood REIT,
the other Guarantors and their respective Subsidiaries; provided, however, that
the Borrower, Starwood REIT and the other Guarantors shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of their respective Subsidiaries, if the Boards of
Directors of the Borrower and Starwood REIT shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Borrower, Starwood REIT, the other Guarantors and their Subsidiaries, taken
as a whole, and that the loss thereof would not have a Material Adverse Effect.
(b) PAIRED SHARE STATUS. Each of the Borrower and Starwood REIT
shall do or cause to be done all things necessary to maintain its "paired share"
status such that all holders of the Common Stock of the Borrower and Starwood
REIT own the same proportionate interest in both Borrower and Starwood REIT.
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(c) REORGANIZATION. Notwithstanding anything in this Section 5.13 to
the contrary, each of the Borrower and Starwood REIT shall be permitted to
consummate the Reorganization.
SECTION 5.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL. Upon the
occurrence of a Change of Control, the Borrower shall make an offer to each
Lender of Senior Secured Notes to purchase all or any part (equal to $1,000 or
an integral multiple thereof) of the Senior Secured Notes held by each such
Lender pursuant to a Purchase Offer at an Offer Amount in cash equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest to the
date of purchase. Such Purchase Offer shall be made in accordance with the
procedures set forth in Article II hereof. The Borrower shall commence such
Purchase Offer by mailing the notice set forth in Section 2.5(c) to the Lenders
in respect of Senior Secured Notes.
SECTION 5.15. DESIGNATION OF UNRESTRICTED SUBSIDIARY. The Boards of
Directors of the Borrower and Starwood REIT may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary; provided, that (a) at the time of
designation, the Investment by either of the Borrower or Starwood REIT and any
Restricted Subsidiary in such Subsidiary (other than Permitted Investments)
shall be deemed a Restricted Investment (to the extent not previously included
as a Restricted Investment) made on the date of such designation in the amount
of the fair market value of such Investment as determined in good faith by the
Board of Directors, (b) since the Original Closing Date, such Unrestricted
Subsidiary has not acquired any assets from the Borrower, Starwood REIT or any
Restricted Subsidiary other than as permitted by the provisions of this
Agreement, including Sections 5.7 and 5.10; (c) at the time of designation, no
Default or Event of Default has occurred and is continuing or results
immediately after such designation or as a result of any Restricted Investment
made in such Subsidiary at the time of such designation; (d) at the time of
designation, such Subsidiary has no Indebtedness other than Non-Recourse
Indebtedness of such Subsidiary; and (e) such Subsidiary does not own any Equity
Interests in a Restricted Subsidiary.
A Subsidiary shall cease to be an Unrestricted Subsidiary and shall
become a Restricted Subsidiary if either (i) at any time while it is a
Subsidiary of the Borrower or Starwood REIT (A) such Subsidiary acquires any
assets from the Borrower, Starwood REIT or any Restricted Subsidiary other than
as permitted by this Agreement, including Sections 5.7 and 5.10 hereof; (B) such
Subsidiary has any Indebtedness other than Non-Recourse Indebtedness of such
Subsidiary; or (C) such Subsidiary owns any Equity Interests in a Restricted
Subsidiary of the Borrower or Starwood REIT; or (ii) the Boards of Directors of
the Borrower and Starwood REIT designates such Unrestricted Subsidiary to be a
Restricted Subsidiary and no Default or Event of Default occurs or is continuing
immediately after such designation.
SECTION 5.16. LIMITATION ON STATUS AS INVESTMENT COMPANY. None of
the Borrower, Starwood REIT or the Restricted Subsidiaries shall become subject
to registration as an "investment company" (as that term is defined in the
Investment Company Act of 1940).
SECTION 5.17. SPECIAL COVENANTS. The Borrower and Starwood REIT
shall, and shall cause each of the Restricted Subsidiaries to, comply with
Article X.
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ARTICLE VI.
SUCCESSORS
SECTION 6.1. MERGER, CONSOLIDATION, OR SALE OF ASSETS. Neither the
Borrower nor Starwood REIT shall consolidate or merge with or into or wind up
into (whether or not such entity is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, any Person unless
(a) the Borrower or Starwood REIT, as the case may be, is the surviving Person
or the Person formed by or surviving any such consolidation or merger (if other
than the Borrower or Starwood REIT) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is a Person
organized or existing under the laws of the United States, any state thereof,
the District of Columbia, or any territory thereof; (b) the Person formed by or
surviving any such consolidation or merger (if other than the Borrower or
Starwood REIT) or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the obligations
of the Borrower and Starwood REIT under this Agreement pursuant to a
supplemental agreement or other documents or instruments in form reasonably
satisfactory to the Required Lenders; (c) immediately after such transaction no
Default or Event of Default exists; (d) such transaction will not result in the
loss or suspension or material impairment of any material Gaming License; (e)
the Borrower or Starwood REIT or any Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made shall, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the clauses (1) and
(2) (but not clause (3)) of first paragraph of Section 5.9; and (f) such
transactions would not require any Lender (other than any Person acquiring the
Borrower or Starwood REIT or their assets or any Affiliate thereof) to obtain a
gaming license or be qualified under the laws of any applicable gaming
jurisdiction; provided, that such Lender would not have been required to obtain
a gaming license or be qualified under the laws of any applicable gaming
jurisdiction in the absence of such transactions. Notwithstanding the foregoing,
the Borrower and Starwood REIT or Starwood REIT and Newco may consolidate or
merge with or wind up into each other without meeting the requirements set forth
in clause (e) above.
SECTION 6.2. SUCCESSOR CORPORATION SUBSTITUTED. Upon any
consolidation or merger, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the assets of the Borrower or
Starwood REIT in accordance with Section 6.1 hereof, the successor corporation
formed by such consolidation or into or with which one of the Borrower or
Starwood REIT is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted for
(so that from and after the date of such consolidation, merger, sale, lease,
conveyance or other disposition, the provisions of this Agreement referring to
the "Borrower" or "Starwood REIT," as the case may be, shall refer instead to
the successor corporation and not to the Borrower or Starwood REIT, as the case
may be), and may exercise every right and power of a Loan Party under this
Agreement with the same effect as if such successor Person had been named as
such Loan Party
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herein; provided, that the surviving entity or acquiring corporation shall (a)
assume all of the obligations of the acquired Person incurred under this
Agreement and the Senior Secured Notes, (b) acquire and own and operate,
directly or through Restricted Subsidiaries, all or substantially all of the
properties and assets then constituting the assets of the Borrower or Starwood
REIT, as the case may be, or any of their Restricted Subsidiaries, as the case
may be, (c) have been issued, or have a combined Subsidiary which has been
issued, Gaming Licenses to operate the acquired casino operations and entities
substantially in the manner and scope operated prior to such transaction, which
Gaming Licenses are in full force and effect, (d) be in compliance fully with
Section 6.1 and (e) the Borrower and Starwood REIT have delivered to the Lenders
an Officers' Certificate and opinion of counsel, subject to customary
assumptions and exclusions, stating that the proposed transaction complies with
this Agreement; provided further, however, that the predecessor Person shall not
be relieved from the obligation to pay the principal of and interest on the
Senior Secured Notes.
ARTICLE VII.
TRANSFER OF THE SENIOR SECURED NOTES
SECTION 7.1. TRANSFER OF THE SENIOR SECURED NOTES. Each Lender
represents and agrees that it is acquiring the Senior Secured Notes for its own
account and that it will not, directly or indirectly, transfer, sell, assign,
pledge or otherwise dispose of such Senior Secured Notes unless such transfer,
sale, assignment, pledge or other disposition is made pursuant to an available
exemption from registration under, or otherwise in compliance with, the
Securities Act. Each of the Lenders also represents and warrants to the Borrower
that it is an "accredited investor" (as that term is defined in Rule 501 of
Regulation D under the Securities Act). Subject to the foregoing, each Loan
Party agrees that each Lender will be free to sell or transfer all or any part
of the Senior Secured Notes to any third party and to pledge any or all of the
Senior Secured Notes to any commercial bank, federal reserve bank or other
institutional lender.
SECTION 7.2. REGISTRATION OF TRANSFER OR EXCHANGE. Against receipt
of evidence of cancellation, discharge or surrender of any Senior Secured Note
by a Lender for registration of transfer or exchange, the Borrower and Starwood
REIT will execute and deliver in exchange therefor a new Senior Secured Note or
Senior Secured Notes of the same aggregate tenor and principal amount,
registered in such names and in such denominations as such Lender may request.
The Borrower will pay any stamp tax or governmental charge imposed in respect of
any such transfer.
SECTION 7.3. TRANSFERS BY THE LENDERS.
(a) ASSIGNMENT BY LENDERS. Any Lender may assign to one or more
assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Tranche Two Commitment and the Loans at the
time owing to it), without the consent of any Loan Party or any other Lender,
but in compliance with all applicable laws; provided, however, that no interest
in the Tranche Two Commitments or any Loans may be sold, assigned or otherwise
transferred except with the prior consent of Lehman Commercial Paper, Inc., as
the Administrative Agent (which consent shall not unreasonably be withheld or
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delayed). Except in the case of an assignment to a Lender or an Affiliate of a
Lender or an assignment of the entire remaining amount of the assigning Lender's
Tranche Two Commitment or Loans, the amount of the Tranche Two Commitment or
Loans of the assigning Lender subject to each such assignment (determined as of
the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $10 million unless
the Borrower otherwise consents. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement with respect to the applicable Tranche. The
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Acceptance. Upon recording thereof pursuant to Section 7.3(b),
from and after the effective date specified in each Assignment and Acceptance
the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of the assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.6,
2.7, 2.8, 2.9 and 11.3). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 7.3(a)
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with Section 7.3(c).
(b) NOTE REGISTER. The Administrative Agent shall keep a copy of
each Assignment and Acceptance delivered to it and maintain a register of the
names and addresses of each Lender, its Tranche Two Commitment, if any, and the
principal amount of the Loans owing to it pursuant to the terms hereof from time
to time (the "Note Register"). Upon its receipt of each duly executed and
completed Assignment and Assumption Agreement, the Administrative Agent will
give prompt notice thereof to the Borrower, deliver to the Borrower a copy of
the Assignment and Assumption Agreement and modify the Register to give effect
to such Assignment and Assumption Agreement. No assignment shall be effective
for purposes of this Agreement unless it has been recorded in the Note Register
as provided in this Section 7.3(b). Within ten (10) Business Days after its
receipt of such notice, the Borrower shall execute and deliver to the applicable
Lenders one or more new Senior Secured Notes in accordance with Section 2.2(d).
The entries in the Note Register shall be rebuttably presumed to be correct,
absent manifest error, and the Administrative Agent, the Loan Parties and the
Lenders may treat each Person whose name is recorded in the Note Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Note Register shall be
available for inspection by the Borrower and any Lender, at any reasonable time
and from time to time upon reasonable prior notice.
(c) PARTICIPATIONS. Any Lender may, without the consent of any
Person, sell participations to one or more banks or other entities (a
"Participant") in all or a portion of such Lender's rights and obligations under
this Agreement (including all or a portion of its Tranche Two Commitment and the
Loans owing to it), but in such event (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible
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to the other parties hereto for the performance of such obligations and (iii)
the Loan Parties and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce the Note Documents and to approve any amendment,
modification or waiver of any provision of the Note Documents, except that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in clauses (i) through (vii) in Section 11.2(b) that affects such
Participant. Subject to Section 7.3(d), the Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.6, 2.7, 2.8 and 2.9
to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 7.3(a). To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 11.8 as though it
were a Lender, if such Participant agrees to be subject to Section 2.10 as
though it were a Lender.
(d) PARTICIPANT NOT ENTITLED TO A GREATER PAYMENT. A Participant
shall not be entitled to receive any greater payment under Section 2.6, 2.7 or
2.8 than the applicable Lender would have been entitled to receive with respect
to the participation sold to such Participant, unless the receipt of a greater
payment pursuant to the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.8 unless
(i) the Borrower is notified of the participation sold to such Participant and
such Participant agrees, for the benefit of the Borrower, to comply with Section
2.8(e) as though it were a Lender and (ii) such Participant is eligible for
exemption from the withholding tax referred to therein, following compliance
with Section 2.8(e).
(e) PLEDGE OR ASSIGNMENT AS SECURITY. Any Lender may at any time
pledge or assign a security interest in all or any portion of its rights under
this Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section 7.3
shall not apply to any such pledge or assignment of a security interest. No such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.
ARTICLE VIII.
EVENTS OF DEFAULT
SECTION 8.1. EVENTS OF DEFAULT. An "Event of Default" with
respect to the Senior Secured Notes occurs if:
(a) the Borrower defaults in payment when due and payable, upon
redemption or otherwise, of principal on any of the Senior Secured Notes;
(b) the Borrower defaults for 30 days or more in the payment when
due of interest on any of the Senior Secured Notes or in the payment when due of
any other Note Liability;
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(c) the Borrower fails to offer to purchase, or fails to purchase
the Senior Secured Notes, in each case when required under Section 5.10 or
Section 5.14 or under an offer made pursuant to Section 2.5;
(d) the Borrower, Starwood REIT or any other Guarantor fails to
comply with Section 5.7 or Section 5.9;
(e) any of the Borrower, Starwood REIT or any other Guarantor for 45
days after receipt of written notice from Lenders holding at least 25% in
outstanding principal amount of Senior Secured Notes fails to comply with any of
their other agreements under this Agreement or any other Note Document;
(f) default (except an Excluded Default) under any mortgage,
indenture or instrument under which there is issued or by which there is secured
or evidenced any Indebtedness for money borrowed by any of the Borrower,
Starwood REIT or any Restricted Subsidiary or the payment of which is guaranteed
by the Borrower, Starwood REIT or any Restricted Subsidiary, whether such
Indebtedness or Guaranty existed as of the Original Closing Date, now exists or
is created after the Effective Date, which default (i) is caused by a failure to
pay when due (giving effect to any grace period or waiver related thereto) any
principal or interest of such Indebtedness (a "Payment Default") or (ii) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which a Payment Default
then exists or with respect to which the maturity thereof has been so
accelerated or which has not been paid at maturity, aggregates $50.0 million or
more;
(g) failure by any of the Borrower, Starwood REIT or any of their
Restricted Subsidiaries to pay final judgments aggregating in excess of $50.0
million, which final judgments remain unpaid, undischarged and unstayed for a
period of more than 60 consecutive days (and is not fully covered by a reputable
and solvent insurance company);
(h) the repudiation by any of the Borrower, Starwood REIT or any of
their Subsidiaries of their obligations under, or any judgment or decree by a
court or governmental agency of competent jurisdiction declaring the
unenforceability of, (i) the Affiliate Guaranty in any respect for any reason
that, in each case, would materially and adversely impair the benefits to the
Lenders in respect of the Senior Secured Notes or (ii) the Pledge Agreement;
(i) any representation, warranty or factual statement made by the
Borrower or Starwood REIT or any of their Subsidiaries in this Agreement
(including those incorporated by reference herein) or in any of the other Credit
Facility Documents or the Note Documents is in any material respect not true and
correct on the date as of which made or deemed made and failure by any of the
Borrower, Starwood REIT or other applicable Guarantor for 45 days after receipt
of written notice from Lenders holding at least 25% in outstanding principal
amount of Senior Secured Notes to cure such breach, if such breach is
susceptible of cure;
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(j) any of the Borrower, Starwood REIT, any other Guarantor that is
a Significant Subsidiary or any group of Guarantors that would together
constitute a Significant Subsidiary pursuant to or within the meaning of
Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
(iv) makes a general assignment for the benefit of its
creditors; or
(k) any proceeding is commenced involuntarily against the Borrower,
Starwood REIT or another Guarantor that is a Significant Subsidiary or any group
of Guarantors that would together constitute a Significant Subsidiary in a court
of competent jurisdiction under any Bankruptcy Law and:
(i) such proceeding is not dismissed within 60 days
thereafter;
(ii) an order for relief is entered in such proceeding;
(iii) the court in such proceeding appoints a Custodian of any
of the Borrower, Starwood REIT or another Guarantor that is a Significant
Subsidiary or any group of Guarantors that would together constitute a
Significant Subsidiary of the Borrower or Starwood REIT or for all or
substantially all of the property of any of the Borrower or Starwood REIT
or a Guarantor that is a Significant Subsidiary or any group of Guarantors
that would together constitute a Significant Subsidiary; or
(iv) the court in such proceeding orders the liquidation of
the Borrower, Starwood REIT or a Guarantor that is a Significant
Subsidiary of any Borrower or Starwood REIT or any group of Guarantors
that would together constitute a Significant Subsidiary.
SECTION 8.2. ACCELERATION. If an Event of Default (other than an
Event of Default as to the Borrower or Starwood REIT specified in Sections
8.1(j) and (k)) occurs and is continuing, the Lenders holding at least 25% in
principal amount of the then outstanding Senior Secured Notes by written notice
to the Borrower, may declare the unpaid principal of and any accrued interest on
all the Senior Secured Notes to be due and payable. Upon such declaration the
principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 8.1(j) or (k) occurs as to the Borrower or Starwood
REIT, such an amount shall ipso facto become and be immediately due and payable
without any declaration or other act or notice on the part of any Lender.
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SECTION 8.3. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy
herein conferred upon or reserved to the Lenders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent or subsequent assertion or employment of any
other appropriate right or remedy.
SECTION 8.4. DELAY OR OMISSION NOT WAIVER. No delay or omission by
any Lender to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Agreement or by law to the Lenders may be exercised from time to time, and as
often as may be deemed expedient, by the Lenders.
SECTION 8.5. WAIVER OF PAST DEFAULTS. Subject to Section 11.2, the
Required Lenders by written notice to the Borrower may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived.
ARTICLE IX.
GUARANTY AND INDEMNITY
SECTION 9.1. GUARANTY. Each Guarantor hereby absolutely and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of (a) the principal of and interest on
the Senior Secured Notes and all other Note Liabilities now outstanding or
hereafter arising under or in connection with this Agreement or any other Note
Document, whether for principal of or interest on any Loan or for the principal
of or interest on any other credit extended by any Lender or for fees, taxes,
additional compensation, expense reimbursements, indemnification or otherwise,
(b) each other debt, liability or obligation of the Borrower or any Guarantor
now outstanding or hereafter arising under this Agreement or any other Note
Document, and (c) any and all Post-Petition Interest and Expense Claims arising
in respect of any of the foregoing (the Senior Secured Notes and all other Note
Liabilities and all such other debts, liabilities and obligations and
Post-Petition Interest and Expense Claims, collectively, are the "Guaranteed
Obligations").
SECTION 9.2. JOINT AND SEVERAL INDEMNITY. Each Guarantor hereby
agrees, jointly and severally with each other Guarantor, to pay and assume all
risk of, and to defend, indemnify and hold harmless each Beneficiary and all of
its Related Parties from and against, any and all claims, damages, liabilities,
losses, costs and expenses (including all fees and disbursements of legal
counsel, whether or not suit is brought) arising from, based on or relating in
any manner to (a) any inaccuracy in or breach of any of the representations and
warranties set forth in this Agreement or any other Note Document or any failure
by any Loan Party to perform or observe, or any breach of, any of the covenants
and agreements set forth in this Agreement or any other Note Document, in each
case whether or not such inaccuracy, failure or breach was caused by the
Borrower or a Guarantor or any other Person or resulted
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from an Act of God or otherwise and whether or not such inaccuracy, failure or
breach is otherwise within the control of the Borrower or such Guarantor or any
other Person, or (b) any and all Post-Petition Interest and Expense Claims,
whether or not allowed or enforceable in any bankruptcy case or insolvency,
reorganization, receivership, dissolution or liquidation proceeding and even if
disallowed or not enforceable therein.
SECTION 9.3. ACCELERATION OF PAYMENT. If (a) any Event of Default
occurs and notice of demand for payment under this Section 9.3 is given by the
Required Lenders to any Guarantor, or (b) any Guarantor becomes a debtor in any
bankruptcy case or the subject of any insolvency, reorganization, receivership,
dissolution or liquidation proceeding commenced voluntarily by such Guarantor or
(if it remains pending for more than 60 days or such Guarantor consents to entry
of an order for relief therein) commenced involuntarily against such Guarantor,
then (in each such event) all liability of such Guarantor under this Agreement
that is not then due and payable shall thereupon become and be immediately due
and payable, without notice or demand.
SECTION 9.4. GUARANTY OF PAYMENT, INDEPENDENTLY ENFORCEABLE. Each
Guarantor (a) guarantees that the Guaranteed Obligations will be paid in
accordance with the terms of this Agreement and the other Note Documents,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights and claims of any holder
of Guaranteed Obligations against the Borrower or any other Guarantor with
respect thereto and even if any such rights or claims are modified, reduced or
discharged in any bankruptcy case or insolvency, reorganization, receivership,
dissolution or liquidation proceeding or otherwise and (b) agrees that such
guaranty is a guaranty of payment when due and not of collectibility. The
obligations of each Guarantor under this Agreement are independent of the
Guaranteed Obligations, and a separate actions or actions may be brought and
prosecuted against each Guarantor to enforce this Agreement, whether or not any
action is brought against the Borrower or any other Guarantor and whether or not
the Borrower or any other Guarantor is joined in any such action or actions.
SECTION 9.5. FRAUDULENT TRANSFER LIMITATION. Each Guarantor
represents and warrants that, on the date it becomes bound as a Guarantor
hereunder and after giving effect to the liability incurred by it under this
Agreement and the rights granted to it in Section 9.11, (a) the fair value of
the assets of each Loan Party, at a fair valuation, will exceed its debts and
liabilities, subordinated, contingent or otherwise; (b) the present fair
saleable value of the property of each Loan Party will be greater than the
amount that will be required to pay the probable liability of its debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) each Loan Party will be able
to pay its debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (d) each Loan Party will
not have unreasonably small capital with which to conduct the business in which
it is engaged as such business is now conducted and is proposed to be conducted
following such date. If, notwithstanding the foregoing, enforcement of the
liability of any Guarantor under this Agreement for the full amount of the
Guaranteed Obligations would be an unlawful or voidable transfer under any
applicable fraudulent conveyance or fraudulent transfer law or any comparable
law, then the liability of such Guarantor hereunder shall be reduced to the
highest amount for which such
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liability may then be enforced without giving rise to an unlawful or voidable
transfer under any such law.
SECTION 9.6. SUBORDINATED LIABILITIES. Each Guarantor hereby agrees
that any and all present and future debts, liabilities and obligations of every
type and description (whether for money borrowed, on intercompany accounts, for
provision of goods or services, under cash management arrangements or tax
sharing, management or contribution agreements, for reimbursement, contribution
or otherwise on account of this Agreement or any other agreement of such
Guarantor by which any Indebtedness or other liability is guaranteed or on
account of any payment made under this Agreement or any such other agreement, or
on account of any other transaction, agreement, occurrence or event and whether
absolute or contingent, secured or unsecured, direct or indirect, matured or
unmatured, liquidated or unliquidated, created directly or acquired from
another, or sole, joint, several or joint and several) now outstanding or
hereafter incurred, arising or owed to such Guarantor by the Borrower, by
Starwood REIT or by any of their Subsidiaries (collectively, the "Subordinated
Liabilities") shall be, and hereby are, postponed and subordinated to the prior
payment of all Guaranteed Obligations in full and in cash.
SECTION 9.7. PROHIBITED PAYMENTS. Until Discharge of the Note
Liabilities, no Guarantor will demand, sue for, accept or receive, or cause or
permit any other Person to make, any payment on or transfer of property on
account of any Subordinated Liabilities, except a Permitted Payment.
SECTION 9.8. PROHIBITED ACTIONS. Until Discharge of the Note
Liabilities, no Guarantor will, without the prior written consent of the
Required Lenders, commence or join with any other Person in commencing any
bankruptcy case or insolvency, reorganization, receivership, dissolution or
liquidation proceeding of or against the Borrower, Starwood REIT or any of their
Subsidiaries.
SECTION 9.9. PROCEEDINGS. In any bankruptcy, insolvency,
reorganization, receivership, dissolution or liquidation proceeding by, against
or affecting the Borrower, Starwood REIT or any of their Subsidiaries:
(a) PRIORITY OF PAYMENT. The holders of Senior Secured Liabilities
shall be entitled to receive payment of all amounts due or to become due on or
in respect of the Senior Secured Liabilities (including all Post-Petition
Interest and Expense Claims), in full and in cash, before any Guarantor is
entitled to receive any payment or distribution of any kind or character,
whether in cash, property or securities or otherwise, on account of any of the
Subordinated Liabilities.
(b) TURNOVER OF PAYMENTS AND DISTRIBUTIONS. The holders of Senior
Secured Liabilities (including Post-Petition Interest and Expense Claims) shall
be entitled to receive, for application to the payment thereof, all payments and
distributions of any kind or character, whether in cash, property or securities
or otherwise (including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other debt or liability of the
Borrower or any Subsidiary of the Borrower or any Guarantor being subordinated
to the
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payment of the Subordinated Liabilities), which may be payable or deliverable in
respect of the Subordinated Liabilities, or any Lien securing Subordinated
Liabilities, in any such case or proceeding.
(c) DISALLOWED POST-PETITION INTEREST AND EXPENSE CLAIMS. Each
Guarantor expressly acknowledges and agrees that, pursuant to the provisions of
Section 9.9(b), any such payment or distribution payable or deliverable in
respect of Subordinated Liabilities will be turned over to, and will become the
property of, the holders of Senior Secured Liabilities until the holders of
Senior Secured Liabilities have received payment in full and in cash of all
Senior Secured Liabilities, including any and all Post-Petition Interest and
Expense Claims that are not enforceable, allowable or allowed in such case or
proceeding and as to which, as a consequence, such Guarantor will not have any
subrogation claim in such case or proceeding. Each Guarantor acknowledges and
agrees that all such Post-Petition Interest and Expense Claims shall be included
in the Senior Secured Liabilities and shall be paid from any such payment or
distribution because it is the intention of the Guarantors and Beneficiaries
that the Senior Secured Liabilities shall be determined and shall be guaranteed
and paid by each Guarantor without regard to any rule of law or order which may
relieve Borrower or any other obligor, or the estate in any such case or
proceeding, of liability therefor.
(d) CLAIMS IN BANKRUPTCY. Each Guarantor will file all claims
against the Borrower or any Subsidiary of the Borrower or any Guarantor in any
case under the Bankruptcy Law and in each other insolvency, reorganization,
receivership, dissolution or liquidation proceeding in which the filing of
claims is required or permitted by law upon any of the Subordinated Liabilities
and will assign to the holders of Senior Secured Liabilities all rights of such
Guarantor thereunder. If any Guarantor does not file any such claim at least 30
days prior to any applicable claims bar date, each holder of Senior Secured
Liabilities is hereby authorized (but shall not be obligated), as
attorney-in-fact for such Guarantor with full power of substitution, to file
such claim or proof thereof in the name of such Guarantor.
SECTION 9.10. HELD IN TRUST. If any payment, transfer or
distribution is made to any Guarantor upon any Subordinated Liabilities or any
Lien securing Subordinated Liabilities that is not permitted to be made under
this Article IX or that the holders of Senior Secured Liabilities are entitled
to receive under this Article IX, such Guarantor shall receive and hold the same
in trust, as trustee for the benefit of the holders of Senior Secured
Liabilities, and shall forthwith transfer and deliver the same to the holders of
Senior Secured Liabilities, in precisely the form received (except for any
required endorsement), for application to the payment of Senior Secured
Liabilities.
SECTION 9.11. REIMBURSEMENT AND CONTRIBUTION RIGHTS. The Guarantors
desire to agree upon and allocate among themselves, in a fair and equitable
manner, their rights of reimbursement and contribution when any payment is made
by one of the Guarantors under this Agreement. Accordingly:
(a) REIMBURSEMENT CLAIMS AGAINST THE BORROWER. Each Guarantor
reserves the right to claim reimbursement from the Borrower for the entire
amount of any payment made by such Guarantor on account of Guaranteed
Obligations pursuant to this Agreement, but each
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Guarantor agrees that its claim for such reimbursement shall not arise until,
and is subject in all respects to, Discharge of the Note Liabilities and the
prior payment of all Guaranteed Obligations in full and in cash. Accordingly,
each Guarantor agrees not to assert, sue upon, collect or otherwise enforce
against the Borrower (by set-off or otherwise) any claim for reimbursement on
account of any payment made by such Guarantor hereunder, until Discharge of the
Note Liabilities and the prior payment of all Guaranteed Obligations in full and
in cash.
(b) CONTRIBUTION AMONG SUBSIDIARY GUARANTORS. The Guarantors agree
that if the Borrower at any time fails to pay any reimbursement that has become
due and payable to any Guarantor as contemplated in Section 9.11(a) and such
failure continues for a period of 60 days after Discharge of the Note
Liabilities and payment of all outstanding Guaranteed Obligations in full and in
cash, then if and to the extent any such unreimbursed payment due to such
Guarantor under this Agreement is such that the Aggregate Unreimbursed Payments
of such Guarantor are greater than its Fair Share of the Aggregate Unreimbursed
Payments of all Guarantors, such Guarantor shall be entitled to a contribution
from each other Guarantor in the amount necessary to cause each Guarantor's
Aggregate Unreimbursed Payments to equal its Fair Share. For these purposes:
(i) "Fair Share" means, with respect to a Guarantor as of any
date of determination, an amount equal to (A) the ratio of (1) the
Adjusted Maximum Amount of such Guarantor to (B) the Adjusted Maximum
Amounts of all Guarantors, multiplied by (2) the Aggregate Unreimbursed
Payments of all Guarantors.
(ii) "Adjusted Maximum Amount" means, with respect to a
Guarantor as of any date of determination, the maximum aggregate amount of
the liability of such Guarantor under this Agreement limited to the extent
required under Section 9.5 (except that, for purposes solely of this
calculation, any assets or liabilities arising by virtue of any rights to
or obligations of reimbursement or contribution under this Section 9.11
shall not be counted as assets or liabilities of such Guarantor).
(iii) "Aggregate Unreimbursed Payments" means, with respect to
a Guarantor as of any date of determination, the aggregate net amount of
all payments made on or before such date by such Guarantor under this
Agreement for which reimbursement by the Borrower to such Guarantor is
then due and payable as contemplated in Section 9.11(a) but has not been
paid to such Guarantor.
The allocation and right of contribution among the Guarantors set
forth in this Section 9.11(b) shall not in any respect limit the Guarantors'
liability under this Agreement to the holders of the Guaranteed Obligations.
(c) REIMBURSEMENT AND CONTRIBUTION RIGHTS UNSECURED. All rights of
reimbursement reserved in Section 9.11(a) shall be unsecured obligations of the
Borrower, and
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all contribution rights arising under Section 9.11(b) shall be unsecured
obligations of the Guarantors.
(d) RELEASE OF ALL OTHER REIMBURSEMENT, SUBROGATION, AND
CONTRIBUTION RIGHTS. Each Guarantor hereby waives, releases and discharges,
absolutely, unconditionally, irrevocably and forever, all rights of recourse,
reimbursement, contribution or indemnity and all other claims that such
Guarantor might otherwise have or acquire against the Borrower, Starwood REIT or
any other Guarantor or any other Person liable for the payment of any of the
Guaranteed Obligations (including the owner of any interest in collateral
subject to a Lien securing any of the Guaranteed Obligations) and all rights of
subrogation that such Guarantor might otherwise have or acquire against any
Beneficiary by reason of any payment made by such Guarantor under this Agreement
or otherwise as a result of or in connection with this Agreement, whether such
rights or claims are conferred by agreement, implied or created by law or
otherwise, except only the reimbursement rights reserved by such Guarantor in
Section 9.11(a) and the contribution rights granted to such Guarantor under
Section 9.11(b).
(e) NO CLAIMS. Neither the execution and delivery of this Agreement
by any Guarantor nor any payment by any Guarantor under this Agreement shall
give rise to any claim (as that term is defined in the Bankruptcy Code) in favor
of such Guarantor against the Borrower or Starwood REIT or any of their
Subsidiaries, except as set forth in Section 9.11(a) and Section 9.11(b).
(f) SUBORDINATION OF SECTION 9.11 RIGHTS. All rights and claims
reserved in or arising under this Section 9.11 shall be included among the
Subordinated Liabilities. Until Discharge of the Note Liabilities, no Guarantor
will assert, exercise or enforce against any other Guarantor any right or claim
arising under this Section 9.11.
SECTION 9.12. THE LIABILITY OF EACH GUARANTOR.
(a) ABSOLUTE AND UNCONDITIONAL. The liability of each Guarantor
under this Agreement shall be absolute and unconditional.
(b) NOT LIMITED. Subject only to Section 9.5, the liability of each
Guarantor under this Agreement shall be unlimited in amount.
(c) IRREVOCABLE AND CONTINUING. The liability of each Guarantor
under this Agreement shall constitute an irrevocable and continuing offer and
agreement guaranteeing payment of any and all Guaranteed Obligations and
granting indemnification and subordination as herein set forth and shall extend
to all Guaranteed Obligations and indemnified matters and Subordinated
Liabilities whether now outstanding or created or incurred at any future time,
whether or not created or incurred pursuant to any agreement presently in effect
or hereafter made, until Discharge of the Note Liabilities. To the extent any
contingent Obligation survives the expiration or termination of the Note
Documents and the repayment of the Note Liabilities that are then due, each
Guarantor's liability under this Agreement shall likewise survive.
(d) JOINT AND SEVERAL. The liability of each Guarantor under this
Agreement shall be the joint and several obligation of each Guarantor and may be
freely enforced against
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each Guarantor, for the full amount of the Guaranteed Obligations and all other
liabilities of such Guarantor hereunder, without regard to whether enforcement
is sought or available against any other Guarantor.
(e) NOT AFFECTED OR IMPAIRED. The liability of each Guarantor under
this Agreement shall not be affected or impaired in any manner by (a) the
failure of any Person to become or remain a Guarantor hereunder or the failure
of any holder of Guaranteed Obligations to preserve, protect or enforce any
right to require any Person to become or remain a Guarantor hereunder, (b) any
lack of validity or enforceability of this Agreement or any other Note Document
or any other agreement, instrument or document relating thereto, (c) any change
in the time, manner or place of payment of, or in any other term of, any of the
Guaranteed Obligations, or any other amendment or waiver of or any consent to
departure from the terms of any Note Document, including any extension or
renewal of the Guaranteed Obligations (whether or not for longer than the
original period) and any increase in the Guaranteed Obligations resulting from
the extension of additional credit to the Borrower or otherwise, (d) any taking,
failure to take, failure to create, perfect or ensure the priority of, or
exchange, release or termination or lapse of any Lien securing any Guaranteed
Obligations, or any taking, failure to take, release or amendment or waiver of
or consent to departure from any other guaranty of, any of the Guaranteed
Obligations, (e) any manner or order of sale or other enforcement of any Lien
securing any of the Guaranteed Obligations or any manner or order of application
of the proceeds of any such Lien to the payment of the Guaranteed Obligations or
any failure to enforce any Lien or to apply any proceeds thereof, (f) any
change, restructuring or termination of the corporate structure or existence of
the Borrower, or Starwood REIT or any of their Subsidiaries or Affiliates or any
other Person, or (g) any other circumstance which might otherwise constitute a
defense (except the defense of payment) available to, or a discharge of, a
surety or guarantor.
(f) REMAINS VALID AND ENFORCEABLE. The liability of each Guarantor
under this Agreement shall remain valid and enforceable and shall not be subject
to any reduction, limitation, impairment, discharge or termination for any
reason (other than indefeasible payment in full of the Guaranteed Obligations),
including the occurrence of any of the following, whether or not any Guarantor
shall have had notice or knowledge of any of them: (a) any failure or omission
to assert or enforce or agreement or election not to assert or enforce, or the
stay or enjoining, by order of court, by operation of law or otherwise, of the
exercise or enforcement of, any claim or demand or any right, power or remedy
(whether arising under the Note Documents, at law, in equity or otherwise) with
respect to the Guaranteed Obligations or any agreement relating thereto, or with
respect to any other guaranty of or security for the payment of the Guaranteed
Obligations; (b) any rescission, waiver, amendment or modification of, or any
consent to departure from, any of the terms or provisions (including provisions
relating to events of default) of this Agreement, any of the other Note
Documents or any agreement or instrument executed pursuant thereto, or of any
other guaranty or security for the Guaranteed Obligations, in each case whether
or not in accordance with the terms of this Agreement, such Note Document or any
agreement relating to such other guaranty or security; (c) the Guaranteed
Obligations, or any agreement relating thereto, at any time being found to be
illegal, invalid or unenforceable in any respect; (d) the application of
payments received from
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any source to the payment of any liability other than the Guaranteed
Obligations, even though any Beneficiary might have elected to apply such
payment to any part or all of the Guaranteed Obligations; (e) any Beneficiary's
consent to the change, reorganization or termination of the corporate structure
or existence of the Borrower or Starwood REIT or any of their Subsidiaries and
to any corresponding restructuring of the Guaranteed Obligations; (f) any
failure to perfect or continue perfection of a security interest in any
collateral which secures any of the Guaranteed Obligations; (g) any defenses,
set-offs or counterclaims which the Borrower or any other Loan Party or any
other Guarantor may allege or assert against any Beneficiary in respect of the
Guaranteed Obligations, including, for example, failure of consideration, breach
of warranty, payment, statute of frauds, statute of limitations, accord and
satisfaction and usury; and (h) any other act or thing or omission, or delay to
do any other act or thing, which may or might in any manner or to any extent
vary the risk of any Guarantor as an obligor in respect of the Guaranteed
Obligations.
(g) RELEASED ONLY BY A SIGNED WRITING. The liability of each
Guarantor under this Agreement and each right, remedy, interest or power granted
herein or arising hereunder may be released only by a writing signed by the
Beneficiary against which enforcement of such release is sought.
(h) DISCHARGE UPON SALE OF GUARANTOR. If (i) all outstanding Equity
Interests issued by any Guarantor and owned by any Loan Party are at any time
sold to any Person not an Affiliate of the Borrower or Starwood REIT (including
by merger or consolidation) in any transaction which (A) is not prohibited by
this Agreement or (B) is otherwise consented to by the Required Lenders and (ii)
at the time such transaction is consummated any and all liabilities of such
Guarantor under any and all guaranties of any other Indebtedness of any Loan
Party (including all liabilities of such Guarantor in respect of the Bank Credit
Facility) are discharged and released, then the liability of such Guarantor
under this Agreement shall automatically be discharged and released without any
further action by any Beneficiary or any other Person effective as of the time
such transaction is consummated.
SECTION 9.13. CERTAIN WAIVERS BY GUARANTORS. Each Guarantor
hereby waives and agrees not to assert or take advantage of:
(a) PRIOR RESORT TO ANY OTHER PERSON, PROPERTY OR RIGHT. Any right
to require any holder of Guaranteed Obligations to proceed against or exhaust
its recourse against the Borrower, Starwood REIT, any other Guarantor or any
other Person liable for any of the Guaranteed Obligations or against any Lien
securing any of the Guaranteed Obligations or against any other Person or
property, before demanding and enforcing payment of the Guaranteed Obligations
from any Guarantor under this Agreement;
(b) CERTAIN DEFENSES. Any defense that may arise by reason of (i)
the incapacity, lack of authority, death or disability of the Borrower, Starwood
REIT, any other Guarantor or any other Person, (ii) the revocation or
repudiation of any of the Note Documents by the Borrower, Starwood REIT, any
other Guarantor or any other Person, (iii) the unenforceability in whole or in
part of the Note Documents or any other instrument, document or agreement, (iv)
the failure of any holder of Guaranteed Obligations to file or enforce a claim
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against any Person liable for any of the Guaranteed Obligations or in any
bankruptcy case or insolvency, receivership, dissolution or liquidation
proceeding, (v) any election made by any holder of Guaranteed Obligations as to
any right or remedy granted or available to it under Bankruptcy Law, or (vi) any
other borrowing or grant of a security interest under any provision of
Bankruptcy Law;
(c) NOTICES AND DEMANDS. Presentment, demand for payment, protest,
notice of discharge, notice of acceptance of this Agreement, notice of the
incurrence of, or any default in respect of, any Guaranteed Obligation, and all
other indulgences and notices of every type or nature, including, to the maximum
extent permitted by law, notice of the disposition of any collateral security;
(d) ELECTION OF REMEDIES. Any defense based upon an election of
remedies (including, if available, an election to proceed by non-judicial
foreclosure) or any other act or omission of any holder of Guaranteed
Obligations or any other Person which destroys or otherwise impairs any right
that any Guarantor might otherwise have for subrogation, recourse,
reimbursement, indemnity, exoneration, contribution or otherwise against the
Borrower, Starwood REIT, any other Guarantor or any other Person;
(e) COLLATERAL SECURITY. Any defense based upon any grant of, any
failure to demand, take, perfect, protect or enforce, or any modification or
release of any Lien securing, or guaranty of, any or all of the Guaranteed
Obligations, or any failure to create or perfect or ensure the priority or
enforceability of any security interest in any collateral for any of the
Guaranteed Obligations or any act or omission related thereto;
(f) RECOUPMENT AND SETOFF. Any right to recoup from or offset
against any of the Guaranteed Obligations any claim that may be held or asserted
by or available to (i) the Borrower or Starwood REIT or any other Guarantor or
any other Person liable for any of the Guaranteed Obligations against any holder
of Guaranteed Obligations or (ii) any Guarantor against the Borrower, Starwood
REIT, any other Guarantor, any other holder of Guaranteed Obligations or any
other Person; and
(g) OTHER MATTERS. Any other claim, right or defense (including, for
example, such matters as failure or insufficiency of consideration, statute of
limitations, breach of contract, tortious conduct, accord and satisfaction, and
discharge by agreement or conduct or in any bankruptcy case or other insolvency
or liquidation proceeding), except the defense of payment, that may be held or
asserted by or available to (i) the Borrower or any other Guarantor or any other
Person liable for any of the Guaranteed Obligations against any holder of
Guaranteed Obligations or (ii) any Guarantor against the Borrower, any other
Guarantor, any other holder of Guaranteed Obligations or any other Person.
SECTION 9.14. WAIVER OF BENEFIT OF ANTI-DEFICIENCY LAWS. If, in the
exercise of any rights and remedies, any holder of Guaranteed Obligations shall
forfeit any of its rights or remedies, including its right to obtain a
deficiency judgment against the Borrower, Starwood REIT or any other Guarantor
or any other Person, whether because of any applicable laws pertaining to
recourse to collateral security or election of remedies or barring claims for a
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deficiency following foreclosure of any Lien or the like, each Guarantor hereby
consents to such action by such holder and, to the maximum extent permitted by
applicable law, waives any claim or defense based upon such recourse to
collateral security, election of remedies, loss of claims for a deficiency or
the like, even if such action by such holder shall result in a full or partial
loss of any rights of subrogation, recourse, reimbursement, contribution or
indemnification which such Guarantor might otherwise have had but for such
action by such holder or but for the provisions of this Section 9.14.
Furthermore, each Guarantor waives all rights and defenses arising out of any
recourse to collateral security or election of remedies by any holder of
Guaranteed Obligations, even though such recourse to collateral security or
election of remedies, such as a nonjudicial foreclosure with respect to security
for any Guaranteed Obligation, has destroyed such Guarantor's rights of
subrogation, recourse, reimbursement, contribution or indemnification against
the Borrower, Starwood REIT or any other Guarantor or any other Person by the
operation of applicable law or otherwise. Any election of remedies which results
in the denial or impairment of the right of any holder of Guaranteed Obligations
to seek a deficiency judgment against the Borrower, Starwood REIT or any other
Guarantor shall not, to the maximum extent permitted by applicable law, impair
any other Guarantor's obligation to pay the full amount of the Guaranteed
Obligations. In the event any holder of Guaranteed Obligations shall bid at any
foreclosure or trustee's sale or at any private sale permitted by law or the
Note Documents, such holder may bid all or less than the amount of the
Guaranteed Obligations and (if expressly permitted under the Note Documents or
approved in writing by all of the Lenders) the amount of such bid need not be
paid by such holder but shall be credited against the Guaranteed Obligations. To
the extent permitted by applicable law, the amount of the successful bid at any
such sale, whether any holder of Guaranteed Obligations or any other Person is
the successful bidder, shall be conclusively deemed to be the fair market value
of the property being sold and the difference between such bid amount and the
remaining balance of the Guaranteed Obligations shall be conclusively deemed to
be the amount of the Guaranteed Obligations guaranteed under this Agreement,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which any
holder of Guaranteed Obligations might otherwise be entitled if no holder had
bid at any such sale.
SECTION 9.15. REINSTATEMENT. If at any time any payment on any
Guaranteed Obligation is set aside, avoided or rescinded or must otherwise be
restored or returned, this Agreement and the liability of each Guarantor under
this Agreement and the indemnification and subordination granted hereby and all
other liabilities of each Guarantor hereunder shall remain in full force and
effect and, if previously released or terminated, shall be automatically and
fully reinstated, without any necessity for any act, consent or agreement of any
Guarantor, as fully as if such payment had never been made and as fully as if
any such release or termination had never become effective.
SECTION 9.16. AUTHORITY OF GUARANTORS OR BORROWER. It is not
necessary for any Beneficiary to inquire into the capacity or powers of any
Guarantor or the Borrower or the officers, directors or any agents acting or
purporting to act on behalf of any of them.
SECTION 9.17. CONDITION OF THE BORROWER AND OTHER GUARANTORS. Each
Guarantor is fully aware of the financial condition of the Borrower and each
other Guarantor
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and is executing and delivering this Agreement based solely upon such
Guarantor's own independent investigation of all matters pertinent hereto and is
not relying in any manner upon any representation or statement by any holder of
Guaranteed Obligations. Each Guarantor represents and warrants that it is in a
position to obtain, and each Guarantor hereby assumes full responsibility for
obtaining, any additional information concerning the financial condition of the
Borrower, Starwood REIT or any other Guarantor or their respective properties,
financial condition and prospects and any other matter pertinent hereto as such
Guarantor may desire, and such Guarantor is not relying upon or expecting any
holder of Guaranteed Obligations to furnish to such Guarantor any information
now or hereafter in the possession of any holder of Guaranteed Obligations
concerning the same or any other matter. By executing this Agreement, each
Guarantor knowingly accepts the full range of risks encompassed within a
contract of this type, which risks each Guarantor acknowledges. No Guarantor
shall have the right to require any holder of Guaranteed Obligations to obtain
or disclose any information with respect to the Guaranteed Obligations, the
financial condition or prospects of the Borrower or Starwood REIT or any of
their Subsidiaries, the ability of the Borrower or Starwood REIT or any other
Guarantor to pay or perform the Guaranteed Obligations, the existence,
perfection, priority or enforceability of any collateral security for any or all
of the Guaranteed Obligations, the existence or enforceability of any other
guaranties of all or any part of the Guaranteed Obligations, any action or
non-action on the part of any holder of Guaranteed Obligations, the Borrower,
Starwood REIT, any of their Subsidiaries, any other Guarantor or any other
Person, or any other event, occurrence, condition or circumstance whatsoever.
SECTION 9.18. ACCEPTANCE AND NOTICE. Each Guarantor acknowledges
acceptance hereof and reliance hereon by the Lenders and each other holder of
Guaranteed Obligations and waives, irrevocably and forever, all notice thereof.
SECTION 9.19. RIGHTS CUMULATIVE. The rights, powers and remedies
given to the Beneficiaries by this Agreement are cumulative and shall be in
addition to and independent of all rights, powers and remedies given to any
Beneficiary by virtue of any statute or rule of law or in any of the other Note
Documents or any agreement between any Guarantor and one or more of the
Beneficiaries or between Borrower and one or more of the Beneficiaries. Any
forbearance or failure to exercise, and any delay by any Beneficiary in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.
SECTION 9.20. NOTICE OF EVENTS. Ten Business Days after any
Guarantor obtains knowledge thereof, unless the Borrower has given the Lenders
written notice thereof, such Guarantor shall give the Lenders written notice of
any condition or event which has resulted in a Material Adverse Change, a
Default or an Event of Default.
SECTION 9.21. SET OFF. In addition to all other rights any Lender
may have under law or in equity, if any amount shall at any time be due and
payable by any Guarantor to any Lender under this Agreement, such Lender is
authorized at any time or from time to time, without notice (any such notice
being hereby expressly waived), to set off and to appropriate and to apply any
and all deposits (general or special, including but not limited to indebtedness
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evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness of any such Lender owing to such Guarantor and any other
property of such Guarantor held by any Lender to or for the credit or the
account of such Guarantor against and on account of the Guaranteed Obligations
and liabilities of such Guarantor to any Lender under this Agreement.
SECTION 9.22. NOTATION. Starwood REIT agrees to execute the form of
Confirmation of Guaranty appended to each Senior Secured Note as and when such
Senior Secured Note is issued at any time and reissued from time to time by the
Borrower. The provisions of this Article IX shall be fully enforceable against
Starwood REIT and each other Guarantor, whether or not any such Confirmation of
Guaranty, or any other instrument or document except this Agreement, is ever
signed by Starwood REIT or any other Guarantor.
ARTICLE X.
SPECIAL COVENANTS
SECTION 10.1. ADDITIONAL LOAN PARTIES. If at any time after the
Original Closing Date any Person who becomes a Subsidiary of the Borrower or
Starwood REIT or any other Subsidiary of the Borrower or Starwood REIT that is
not a Loan Party guarantees, assumes or otherwise becomes liable for any Credit
Facility Liabilities or grants, assumes or creates any Lien in favor of the
Collateral Agent or any other Person as security for any Credit Facility
Liabilities or ITT Notes, then (in each such event) the Borrower and Starwood
REIT will, within ten days thereafter, (a) notify the Lenders thereof, (b) cause
such Person to execute and deliver to the Lenders a Guarantor Joinder, (c) cause
such Person to grant the Collateral Agent a Lien upon all property of the type
described in the Pledge Agreement then owned or thereafter acquired by such
Person as security for the payment of the Senior Secured Liabilities and to
become bound by the Pledge Agreement in the same manner as each other Guarantor
that is a party thereto, and (d) cause such Person to deliver to the Collateral
Agent all certificated securities, instruments, Collateral, certificates,
financing statements, legal opinions and other documents that would have been
required from or as to such Person on the Original Closing Date pursuant to the
provisions of the Bank Credit Facility if such Person has been a party to this
Agreement and the Pledge Agreement on the Original Closing Date.
SECTION 10.2. FURTHER ASSURANCES. Each Loan Party will, from time to
time upon the request of the Required Lenders, at the expense of the Loan
Parties, execute, deliver and acknowledge all instruments, assignments, security
agreements, financing statements or other documents and take all other actions
as the Collateral Agent or Required Lenders may in good faith deem necessary or
appropriate to create, Perfect, ensure the priority and enforceability of,
protect or (if an Event of Default is continuing at the time) lawfully enforce a
Lien in favor of the Collateral Agent for the ratable benefit of the holders of
the Senior Secured Liabilities and (to the extent required) the ITT Notes upon
any and all property of such Person of the type described in the Pledge
Agreement or upon which such Person has granted, assumed or become subject to a
Lien as security for any Credit Facility Liabilities or ITT Notes.
SECTION 10.3. SECURITY DOCUMENTS. The Borrower will, and will cause
each of its Affiliates that is a party to the Pledge Agreement or any other
security document securing Senior Secured Liabilities to, duly and punctually
perform and observe each and all of their
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respective covenants and agreements thereunder. Without limiting the generality
of the foregoing, on the Reorganization Date the Borrower shall pledge (and
deliver for pledge) the Class A Shares of Starwood REIT pursuant to the Pledge
Agreement, and the Borrower shall take or cause to be taken all actions required
so that at all times all Capital Stock of Starwood REIT owned the Borrower or
any of its Subsidiaries (including the Class A Shares to be issued pursuant to
the Reorganization) do not constitute Margin Stock.
SECTION 10.4. PERMANENT FINANCING. UNTIL THE DISCHARGE OF THE NOTE
LIABILITIES, EACH LOAN PARTY WILL TAKE ALL ACTIONS REQUIRED OF IT, OR
CONTEMPLATED TO BE TAKEN BY IT, UNDER THE ENGAGEMENT LETTERS.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.1. NOTICES. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(i) if to any Loan Party, to it at Starwood Hotels
and Resorts, 2231 East Camelback Road, Suite 410, Phoenix,
Arizona 85016, Attention: Ronald C. Brown, Telecopy No. (602)
852-0115 and Starwood Hotels and Resorts Worldwide, Inc., 2231
East Camelback Road, Suite 400, Phoenix, Arizona 85016,
Attention: Alan M. Schnaid, Telecopy No. (602) 852-0115, and
(ii) if to any Lender, to it at the address set forth as to it
on Schedule B or in the Assignment and Acceptance by which it becomes a
Lender.
Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties
hereto. All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date set forth in a telecopy confirmation, the first Business Day
after personal service or delivery to an overnight courier service or the fifth
Business Day after mailing.
SECTION 11.2. WAIVERS; AMENDMENTS.
(a) NO WAIVER; RIGHTS AND POWERS CUMULATIVE. No failure or delay by
any Lender in exercising any right or power hereunder or under any other Note
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Lenders hereunder and under the other Note Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of any Note Document or consent to any departure by any
Loan Party therefrom shall
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in any event be effective unless the same shall be permitted by Section 11.2(b),
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Under no circumstances shall the making of
a Loan be construed as a waiver of any Default, regardless of whether any Lender
may have had notice or knowledge of such Default at the time.
(b) WRITING REQUIRED. Neither this Agreement nor any other Note
Document nor any provision hereof or thereof may be waived, amended or modified
except, in the case of this Agreement, pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders or, in the case of
any other Note Document, pursuant to an agreement or agreements in writing
entered into by the signatory parties thereto, in each case with the consent of
the Required Lenders, except that no such agreement shall (i) increase the
Commitment of any Lender without the written consent of such Lender, (ii) reduce
the principal amount of any Loan or reduce the rate of interest thereon, or
reduce any fees payable hereunder, without the written consent of each Lender
affected thereby, (iii) postpone the scheduled date of payment of the principal
amount of any Loan or any interest thereon or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of the Commitment, without the written consent of
each Lender affected thereby, (iv) change Section 2.9 in a manner that would
alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (v) change any of the provisions of this Section 11.2 or
the definition of the term "Required Lenders" or any other provision of this
Agreement specifying the number or percentage of Lenders required to waive,
amend or modify any rights thereunder or make any determination or grant any
consent thereunder, without the written consent of each Lender, (vi) release any
Guarantor from its liability under the Affiliate Guaranty (except as expressly
provided in Section 9.12(h)), or limit such liability, without the written
consent of each Lender, or (vii) release all or any substantial part of the
Collateral, without the written consent of each Lender.
SECTION 11.3. EXPENSES; INDEMNITY; DAMAGE WAIVER.
(a) EXPENSES. The Borrower and Starwood REIT jointly and severally
agree to pay (i) all reasonable and documented out-of-pocket expenses incurred
by the Administrative Agent, LCPI or Lehman Brothers or its Affiliates,
including all reasonable fees, charges and disbursements of their counsel, in
connection with the syndication of the credit facilities provided for herein,
the preparation, negotiation and administration of the Note Documents or any
drafts or agreements or proposals related or antecedent thereto, or any
amendments, modifications or waivers of the provisions thereof (whether or not
the transactions contemplated hereby or thereby shall be consummated), and (ii)
all reasonable and documented out-of-pocket expenses incurred by the
Administrative Agent, LCPI, Lehman Brothers or its Affiliates or the Lenders,
including all reasonable fees, charges and disbursements of counsel for LCPI,
Lehman Brothers or its Affiliates or the Lenders and any advisors, appraisers,
consultants, or other professional engaged by them or by such counsel, in
connection with the enforcement or protection of their respective rights in
connection with the Note Documents, including their rights under this Section
11.3, or in connection with the Loans made hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
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negotiations in respect of such Loans or during the pendency of any bankruptcy
or insolvency proceeding.
(b) INDEMNITY. The Borrower and Starwood REIT agree jointly and
severally to defend and indemnify LCPI, Lehman Brothers and its Affiliates, the
Administrative Agent and each Lender, and each Related Party of any of the
foregoing Persons (all, collectively, "Indemnitees"), against, and to hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the reasonable and documented fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of any Note Document or any other agreement or instrument
contemplated hereby, the performance by the parties to the Note Documents of
their respective obligations thereunder or the consummation of the Transactions
or any other transactions contemplated hereby, (ii) any Loan or the use of the
proceeds therefrom, (iii) any actual or alleged presence or release of hazardous
materials on or from any property currently or formerly owned or operated by any
Loan Party or any of their Subsidiaries, or any environmental law liability
related in any way to any Loan Party or any of their Subsidiaries, (iv) the
inaccuracy of any representation or warranty made by any Loan Party in any of
the Transaction Documents, or (v) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto, except only that no Indemnitee shall be indemnified hereunder if
and to the extent that any such losses, claims, damages, liabilities or related
expenses incurred or sustained by it are determined by final judgment of a court
of competent jurisdiction to have resulted directly and primarily from the gross
negligence or willful misconduct of such Indemnitee.
(c) WAIVER OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL AND
PUNITIVE DAMAGES. Neither the Borrower nor Starwood REIT will assert, each of
them will cause each of their Subsidiaries never to assert, and each of them for
themselves and each of their present and future Subsidiaries and their
respective Related Parties hereby forever waives, releases and agrees not to sue
upon, any claim against any Indemnitee, on any theory of liability (whether
based upon contract, or founded upon tort or any legal duty or otherwise), for
any special, indirect, consequential damages and, to the fullest extent a claim
for punitive damages is permitted to be waived by law, for punitive damages
arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan or the
use of the proceeds thereof or any act, omission, claim, breach, wrongful
conduct, or other occurrence or event in any respect relating hereto.
(d) PAYABLE UPON DEMAND. All amounts described in this Section 11.3
shall be payable promptly after written demand therefor.
SECTION 11.4. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon the parties hereto and their respective
successors and assigns permitted hereby and shall inure to the benefit of and be
enforceable by such parties and LCPI, Lehman Brothers and its Affiliates and
each Indemnitee and their Related Parties and each of their successors and
assigns. Neither the Borrower nor Starwood REIT may assign or otherwise transfer
any of its
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rights or obligations hereunder without the prior written consent of each Lender
(and any such attempted assignment or transfer without such consent shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, LCPI, Lehman
Brothers and its Affiliates and each Indemnitee, their Related Parties and each
of their respective successors and assigns) any legal or equitable right, remedy
or claim under or by reason of this Agreement.
SECTION 11.5. SURVIVAL. All covenants, agreements, representations
and warranties made by the Loan Parties in the Note Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Note Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Note Documents and the making of any Loans, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as the Tranche Two Commitments
have not expired or terminated. The provisions of Sections 2.6, 2.7, 2.8, 2.9
and 11.3 shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Commitments or the termination of
this Agreement or any provision hereof.
SECTION 11.6. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Note Documents and any separate letter agreements with respect to fees
or compensation payable to any Person constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 3.1, this Agreement shall become effective
when it shall have been executed by the Loan Parties and the Lenders and when
LCPI and the Borrower shall have received counterparts hereof that, when taken
together, bear the signatures of each of the other parties hereto, including
each Lender identified on Schedule B, and thereafter shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 11.7. SEVERABILITY. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 11.8. RIGHT OF SETOFF. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from
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time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other obligations at any time owing by such Lender or
Affiliate to or for the credit or the account of any Loan Party against any of
and all the obligations of any Loan Party now or hereafter existing under this
Agreement held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section 11.8 are in addition to
other rights and remedies (including other rights of setoff) that such Lender
may have.
SECTION 11.9. GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS.
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) CONSENT TO JURISDICTION. Each Loan Party hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Note Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or any other Note Document shall
affect any right that any Lender may otherwise have to bring any action or
proceeding relating to this Agreement or any other Note Document against any
Loan Party or their properties in the courts of any jurisdiction.
(c) WAIVER OF OBJECTIONS TO VENUE. Each Loan Party hereby
irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to this
Agreement or any other Note Document in any court referred to in Section 11.9(b)
other than a court referred to in the last sentence thereof that is not referred
to elsewhere therein. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) SERVICE OF PROCESS. Each Loan Party hereby irrevocably and
unconditionally consents to service of process in the manner provided for
notices in Section 11.1. Nothing in this Agreement or any other Note Document
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 11.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
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ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER SENIOR
SECURED NOTE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.10.
SECTION 11.11. ADDITIONAL GUARANTORS. The initial Guarantors
hereunder shall be Starwood REIT and such Subsidiaries of the Borrower or
Starwood REIT as are signatories hereto on the date hereof. From time to time
subsequent to the date hereof, additional Subsidiaries of the Borrower or
Starwood REIT may become party hereto, as additional Guarantors (each an
"Additional Guarantor"), by executing a counterpart of this Agreement and
delivery of a copy of any such counterpart to the Lenders. Upon such delivery,
notice of which is hereby waived by each Guarantor, each such Additional
Guarantor shall be a Guarantor and shall be as fully a party hereto as if such
Additional Guarantor were an original signatory hereof. Each Guarantor expressly
agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Guarantor hereunder, nor by
any election of any Beneficiary not to cause any Subsidiary of Borrower or
Starwood REIT to become an Additional Guarantor hereunder. This Agreement shall
be fully effective as to any Guarantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Guarantor hereunder.
SECTION 11.12. AGENTS. Lehman Commercial Paper Inc., as Arranger,
and BT Alex. Brown Incorporated and Chase Securities, Inc., as Syndication
Agents (collectively, the "Agents"), shall not have under this Agreement any
rights, duties or responsibilities in their capacity as such. Without limiting
the generality of the foregoing, (a) no Agent shall be subject to any fiduciary
or other implied duties, regardless of whether a Default has occurred and is
continuing, (b) no Agent shall have any duty to take any discretionary action or
exercise any discretionary powers, (c) no Agent shall have any responsibility
with respect to the collection or distribution of any payments, documents or
notices delivered under this Agreement, and (d) no Agent shall have any duty to
disclose, and no Agent shall be liable for the failure to disclose, any
information relating to the Borrower or Starwood REIT or any of their
Subsidiaries that is communicated to or obtained by any Agent or any of its
Affiliates in any capacity. No Agent shall be liable for any action taken or not
taken by it with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 11.2) or in the absence of such Agent's own
gross negligence or willful misconduct. No Agent shall be deemed to have
knowledge of any Default unless and until written notice thereof is given to
such Agent by the Borrower or a Lender, and no Agent shall be responsible for or
have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with any Note Document,
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(ii) the contents of any certificate, report or other document delivered
thereunder or in connection therewith, (iii) the performance or observance of
any of the covenants, agreements or other terms or conditions set forth in any
Note Document, (iv) the validity, enforceability, effectiveness or genuineness
of any Note Document or any other agreement, instrument or document, (v) the
creation, enforceability, perfection, priority or sufficiency of any Lien, or
(vi) the satisfaction of any condition set forth in Article III or elsewhere in
any Note Document. Each Agent shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not an Agent, and such Agent and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of business with any Loan Party
or Affiliate thereof as if it were not an Agent hereunder.
SECTION 11.13. HEADINGS. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 11.14. OBLIGATIONS ABSOLUTE. The Borrower's obligation to
pay the Senior Secured Notes and all other Note Liabilities and each Guarantor's
obligation to pay the Guaranteed Obligations shall be absolute, unconditional,
and irrevocable, and shall be paid strictly in accordance with the terms hereof
and thereof, under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which any Loan Party may have or have had
against any Lender or any other Person.
SECTION 11.15. RECOURSE. Each Lender acknowledges and agrees that
the name "Starwood Hotels & Resorts" is a designation of Starwood REIT and its
Trustees (as Trustees but not personally) under a Declaration of Trust dated
August 25, 1969, as amended and restated as of June 6, 1988, as further amended
on February 1, 1995 and as further amended on June 19, 1995 and as the same may
by further amended from time to time, and all persons dealing with Starwood REIT
shall look solely to Starwood REIT's assets for the enforcement of any claims
against Starwood REIT, as the Trustees, officers, agents and security holders of
Starwood REIT assume no personal liability for obligations entered into on
behalf of Starwood REIT, and their respective individual assets shall not be
subject to the claims of any person relating to such obligations.
ARTICLE XII.
THE ADMINISTRATIVE AGENT
This Article XII is for the benefit of the Administrative Agent and the
Lenders only.
SECTION 12.1. APPOINTMENT OF ADMINISTRATIVE AGENT. Each Lender
hereby designates LCPI as its agent and irrevocably authorizes the
Administrative Agent to take action on its behalf under this Agreement and with
respect to the Notes, to exercise the powers and perform the duties described
herein, and to exercise such other powers reasonably incidental thereto. The
Administrative Agent may perform any of its duties through its agents or
employees. In addition, the Administrative Agent may designate one or more
subagents from time to time, with the consent of the Borrower (which consent
shall not be unreasonably
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delayed or withheld and shall not be required if any Default is then
continuing), to perform administrative services with regard to the Tranche Two
Commitments, the Loans and the Notes. Any subagent so designated by the
Administrative Agent shall be entitled to the same protections, exculpations and
indemnities as are set forth in this Article XII with respect to the
Administrative Agent for all actions and omissions performed by such subagent
pursuant to such designation.
SECTION 12.2. NATURE OF DUTIES OF THE ADMINISTRATIVE AGENT. The
Administrative Agent has no duties or responsibilities except those expressly
set forth in this Agreement. Neither the Administrative Agent nor any of its
officers, directors, employees or agents shall be liable for any action taken or
omitted hereunder or in connection herewith, except for such Person's gross
negligence or willful misconduct. The duties of the Administrative Agent shall
be mechanical and administrative in nature. The Administrative Agent shall not
have a fiduciary relationship to any Loan Party, any Lender or any participant
of any Lender. The Administrative Agent shall act only for the Lenders and
neither the Administrative Agent nor any Lender assumes any agency or trust
relationship with any Loan Party. Except for the express obligations of the
Administrative Agent and the Lenders under this Agreement and the other Note
Documents, neither the Administrative Agent nor any Lender assumes any
obligation to any Loan Party. The Administrative Agent shall have no liability
for the acts or omissions of any subagents engaged or selected by the
Administrative Agent, provided that the Administrative Agent was not grossly
negligent in the engagement or selection of such subagents. The Administrative
Agent may deem and treat each Lender as the holder of the Loan held by it, as
reflected in the Note Register, for all purposes hereof. The Administrative
Agent shall not be required to deal with any Person that has acquired a
participation in any Loan.
SECTION 12.3. LACK OF RELIANCE ON THE ADMINISTRATIVE AGENT.
Independently and without reliance upon the Administrative Agent, each Lender
has made and shall continue to make its own independent investigation and
analysis of the content and validity of the Note Documents and of the
performance and creditworthiness of the Loan Parties thereunder. Each Lender
shall, independently and without reliance on upon the Administrative Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement and the other Note Documents.
The Administrative Agent assumes no responsibility and undertakes no obligation
to make inquiry with respect to such matters. The Administrative Agent shall not
be responsible to any Lender for any recitals, statements, representations or
warranties made by any Loan Party or any officer, employee or agent of any Loan
Party or any other Person, whether contained in this Agreement or any other Note
Document or otherwise, or for the value, legality, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Note
Document, or for the perfection or priority of any security interest or lien in
any Collateral or for any failure by any Loan Party to perform any obligations
hereunder or thereunder. The Administrative Agent shall not be required to keep
itself informed as to any Loan Party's compliance with any Note Document or to
inspect the properties or books and records of any Loan Party. Except for
notices and other documents and information that this Agreement expressly
requires the
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Administrative Agent to furnish to the Lenders, the Administrative Agent shall
have no duty or obligation to provide any Lender with any credit or other
information concerning the business, operations, result of operations, assets,
liabilities, prospects or condition (financial or otherwise) of any Loan Party.
The Administrative Agent shall not be required to file this Agreement or any
other Note Document for record or to give notice to anyone of any of the
foregoing.
SECTION 12.4. CERTAIN RIGHTS OF THE ADMINISTRATIVE AGENT. The
Administrative Agent may request instructions from Required Lenders at any time.
If the Administrative Agent requests instructions from Required Lenders at such
time with respect to any action or inaction, the Administrative Agent shall be
entitled to await instructions from Required Lenders at such time before such
action or inaction. No Lender shall have any right of action based upon the
Administrative Agent's action or inaction in response to instructions from
Required Lenders at such time. Any action taken or failure to act pursuant to
instructions of Required Lenders shall be binding on all Lenders and any other
holder of all or any portion of any Loan or any interest or participation
therein. Except for actions expressly required of the Administrative Agent under
this Agreement, the Administrative Agent shall in all cases be fully justified
in failing or refusing to act hereunder unless it shall have received further
assurances (which may include a requirement for cash collateral) of the Lender's
indemnity obligations under this Article XII in respect of any and all liability
and expense that the Administrative Agent may incur by reason of taking or
continuing to take any such action.
SECTION 12.5. RELIANCE BY THE ADMINISTRATIVE AGENT. The
Administrative Agent may rely upon written or telephonic communications it
believes to be genuine and to have been signed, sent or made by the proper
person. The Administrative Agent may obtain the advice of legal counsel
(including, for matters concerning the Borrower, counsel for the Borrower),
independent public accountants and other experts selected by it and shall have
no liability for action or inaction in good faith based upon such advice.
SECTION 12.6. INDEMNIFICATION OF THE ADMINISTRATIVE AGENT. To the
extent the Administrative Agent is not reimbursed and indemnified by the
Borrower, each Lender will reimburse and indemnify the Administrative Agent, to
the extent of such Lender's Percentage Share, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including counsel fees and disbursements) or disbursements of any kind
or nature whatsoever (including all expenses) which may be imposed on, incurred
by or asserted against the Administrative Agent in performing its duties
hereunder or otherwise relating to the Note Documents or any other documents
contemplated hereby or thereby (including any costs and expenses that any Loan
Party is obligated but fails to reimburse) or in the enforcement of any of the
terms hereof or thereof. Notwithstanding the foregoing, no Lender shall be
liable to the Administrative Agent: (a) to the extent of losses directly
resulting from the Administrative Agent's gross negligence or willful
misconduct; or (b) with respect to any loss of principal of or interest on the
Administrative Agent's Loans.
SECTION 12.7. ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. In
its individual capacity, the Administrative Agent shall have the same rights and
powers hereunder as any other Lender and may exercise them as though it was not
performing the duties of an agent for
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the Lenders. The Administrative Agent and its Affiliates may lend money to,
acquire equity interests in, and generally engage in any kind of investment
banking, financial advisory or other business with the Borrower or any Affiliate
of the Borrower as if it were not performing the duties of an agent for the
Lenders, and may accept fees and other consideration from the Borrower for
services in connection with this Agreement and otherwise without having to
account for the same to any Lender.
SECTION 12.8. SUCCESSOR ADMINISTRATIVE AGENT. (a) The Administrative
Agent may, upon five Business Days' notice to the Lenders and the Borrower,
resign at any time by giving written notice thereof to the Lenders and the
Borrower. Upon any such notice of resignation, the Required Lenders shall have
the right to appoint a successor Administrative Agent, with the consent of the
Borrower (which consent shall not be unreasonably delayed or withheld and shall
not be required if any Default is then continuing). If no successor
Administrative Agent shall have been so appointed by the Required Lenders and
shall have accepted such appointment within thirty days after notice of the
Administrative Agent's retirement or resignation, then the retiring the
Administrative Agent may, on behalf of the Lenders, appoint one of the Lenders
as successor Administrative Agent.
(b) Upon its acceptance of the agency hereunder, a successor
Administrative Agent shall succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. The retiring Administrative Agent shall
continue to have the benefit of this Article XII for any action or inaction
while it was the Administrative Agent.
SECTION 12.9. COLLATERAL; REMEDIES. Each of the Loan Parties and the
Lenders hereby acknowledges that the Administrative Agent shall have no duties
or obligations with respect to any Collateral or the selection or enforcement of
any remedies hereunder or under any other Note Document.
SECTION 12.10. DEFAULTS. The Administrative Agent shall not be
deemed to have knowledge of the occurrence of a Default or Event of Default
unless the Administrative Agent has received notice from a Lender or from the
Borrower specifying such Default or Event of Default and stating that such
notice is a "Notice of Default." If the Administrative Agent receives such a
notice, then the Administrative Agent shall give prompt notice thereof to the
Lenders, but in no event shall the Administrative Agent be required to take or
refrain from taking any other action with respect to any Default or Event of
Default.
SECTION 12.11. MISCELLANEOUS. Notwithstanding anything to the
contrary in this Agreement, the Administrative Agent shall not be bound by any
waiver, amendment, supplement or modification of this Agreement or any other
Note Document that affects its duties, rights or functions hereunder or
thereunder in such capacity unless the Administrative Agent shall have given its
prior written consent thereto. The Administrative Agent shall have no
liabilities or responsibilities to any Loan Party or any Lender on account of
any Lender's (except the Administrative Agent's) or Loan Party's failure to
perform its obligations hereunder or under any other Note Document. Without
requiring the consent of any Loan Party
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or any Lender, the Administrative Agent may at any time and from time to time
transfer its functions as the Administrative Agent hereunder and under the other
Note Documents to any of its offices wherever located in the United States,
provided that the Administrative Agent shall promptly notify the Borrower and
the Lenders of any such transfer.
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<PAGE> 97
LIST OF EXHIBITS
Exhibit A Form of Assignment and Acceptance
Exhibit B-1 Form of Tranche One Note
Exhibit B-2 Form of Tranche Two Note
Exhibit C Form of Closing Certificate
Exhibit D Form of Notice of Pledge Agreement Entitlement
Exhibit E Form of Notice of Borrowing
LIST OF SCHEDULES
Schedule A Guarantors
Schedule B Lenders, Commitment Amounts, Notice and Payment Information
Schedule C Disbursement Instructions
Schedule D Additional Conditions Precedent
Schedule 4.1 Disclosure Schedule (from Bank Credit Facility)
<PAGE> 98
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
a Maryland corporation
By: /s/ RONALD C. BROWN
-------------------------------------------
Name: Ronald C. Brown
Title: Executive Vice President and
Chief Financial Officer
CHARLESTON HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
CRYSTAL CITY HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
LONG BEACH HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
SANTA ROSA HOTEL ASSOCIATES, LLC,
a New Jersey limited liability company,
SLT ALLENTOWN LLC,
a Delaware limited liability company,
SLT ARLINGTON LLC,
a Delaware limited liability company,
SLT ASPEN DEAN STREET, LLC,
a Delaware limited liability company,
SLT BLOOMINGTON LLC,
a Delaware limited liability company,
SLT CENTRAL PARK SOUTH, LLC,
a Delaware limited liability company,
SLT DANIA LLC,
a Delaware limited liability company,
SLT DC MASSACHUSETTS AVENUE, LLC,
a Delaware limited liability company,
SLT INDIANAPOLIS LLC,
a Delaware limited liability company,
<PAGE> 99
SLT KANSAS CITY LLC,
a Delaware limited liability company,
SLT LOS ANGELES LLC,
a Delaware limited liability company,
SLT MINNEAPOLIS LLC,
a Delaware limited liability company,
SLT PALM DESERT LLC,
a Delaware limited liability company,
SLT PHILADELPHIA LLC,
a Delaware limited liability company,
SLT REALTY COMPANY, LLC,
a Delaware limited liability company,
SLT SAN DIEGO LLC,
a Delaware limited liability company,
SLT SOUTHFIELD LLC.,
a Delaware limited liability company,
SLT ST. LOUIS LLC,
a Delaware limited liability company,
SLT TUCSON LLC,
a Delaware limited liability company,
STARLEX LLC,
a New York limited liability company,
STARWOOD ATLANTA II LLC,
a Delaware limited liability company,
STARWOOD ATLANTA LLC,
a Delaware limited liability company,
STARWOOD MISSION HILLS, L.L.C.,
a Delaware limited liability company,
STARWOOD NEEDHAM LLC,
a Delaware limited liability company,
<PAGE> 100
STARWOOD WALTHAM LLC,
a Delaware limited liability company,
By: SLT Realty Limited Partnership,
a Delaware limited partnership, the managing member of each of the
above listed entities
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Barry Sternlicht
Name: Barry Sternlicht
Title: Chairman and Chief Executive Officer
SLT REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Barry Sternlicht
Name: Barry Sternlicht
Title: Chairman and Chief Executive Officer
STARWOOD HOTELS & RESORTS,
a Maryland real estate investment trust,
By: /s/ Barry Sternlicht
Name: Barry Sternlicht
Title: Chairman and Chief Executive Officer
BW HOTEL REALTY, LP,
a Maryland limited partnership,
CP HOTEL REALTY, LP,
a Maryland limited partnership,
EDISON HOTEL ASSOCIATES, LP,
a New Jersey limited liability company,
<PAGE> 101
NOVI HOTEL ASSOCIATES, LP,
a Delaware limited partnership,
PARK RIDGE HOTEL ASSOCIATES LP,
a Delaware limited partnership,
SLT FINANCING PARTNERSHIP,
a Delaware partnership,
SLT HOUSTON BRIAR OAKS, LP,
a Delaware limited partnership,
VIRGINIA HOTEL ASSOCIATES, LP,
a Delaware limited partnership,
PRUDENTIAL HEI JOINT VENTURE,
a Georgia general partnership,
BY: SLT Realty Limited Partnership,
a Delaware limited partnership, the general
partner of each of the above listed entities
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Barry Sternlicht
------------------------------
Name: Barry Sternlicht
Title: Chairman and Chief
Executive Officer
<PAGE> 102
HEI HOTELS, L.L.C.,
a Delaware limited liability company,
OPERATING PHILADELPHIA LLC,
a Delaware limited liability company,
SLC ALLENTOWN LLC,
a Delaware limited liability company,
SLC ARLINGTON LLC,
a Delaware limited liability company,
SLC ASPEN DEAN STREET, LLC,
a Delaware limited liability company,
SLC ATLANTA II LLC,
a Delaware limited liability company,
SLC ATLANTA LLC,
a Delaware limited liability company,
SLC BLOOMINGTON LLC,
a Delaware limited liability company,
SLC CENTRAL PARK SOUTH, LLC, a
Delaware limited liability company,
SLC DANIA LLC,
a Delaware limited liability company,
SLC DC MASSACHUSETTS AVENUE, LLC,
a Delaware limited liability company,
SLC INDIANAPOLIS LLC,
a Delaware limited liability company,
SLC KANSAS CITY L.L.C.,
a Delaware limited liability company,
SLC LOS ANGELES LLC,
a Delaware limited liability company,
SLC MINNEAPOLIS LLC,
a Delaware limited liability company,
<PAGE> 103
SLC NEEDHAM LLC,
a Delaware limited liability company,
SLC PALM DESERT LLC,
a Delaware limited liability company,
SLC SAN DIEGO LLC,
a Delaware limited liability company,
SLC SOUTHFIELD LLC,
a Delaware limited liability company,
SLC ST. LOUIS LLC,
a Delaware limited liability company,
SLC TUCSON LLC,
a Delaware limited liability company,
SLC WALTHAM LLC,
a Delaware limited liability company,
STARWOOD MANAGEMENT COMPANY, LLC,
a Delaware limited liability company,
By: SLC Operating Limited Partnership,
a Delaware Limited Partnership, the managing member of each of
the above listed entities
By: Starwood Hotels and Resorts
Worldwide, Inc., a Maryland corporation, its
general partner
By: /s/ RONALD C. BROWN
----------------------------------
Name: Ronald C. Brown
Title: Executive Vice President
and Chief Financial Officer
[SIGNATURES OF LENDERS OMITTED]
<PAGE> 1
EXHIBIT 10.4
AIRCRAFT DRY LEASE AGREEMENT
THIS AIRCRAFT LEASE AGREEMENT (hereinafter "Lease") is made and entered
into as of February 6, 1998, by and between STAR FLIGHT, L.L.C., a Connecticut
limited liability company, having a mailing address of c/o Starwood Capital
Group, Three Pickwick Plaza, Greenwich CT 06830 (hereinafter "Lessor"), and ITT
FLIGHT OPERATIONS, INC., a Pennsylvania corporation, with its principal office
situated at 987 Postal Road, Allentown, PA 18103 (hereinafter "Lessee").
WITNESSETH:
WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to lease
and take possession of the aircraft described in Article I from Lessor, all upon
the terms and conditions of this Lease;
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee
(hereinafter the "Parties"), intending to be legally bound, do hereby agree as
follows:
ARTICLE I
General
A. Subject Matter of Lease. Lessor hereby dry leases to Lessee
and Lessee hereby dry leases from Lessor one (1) Gulfstream III Aircraft,
Manufacturer's Serial Number 335, Registration Mark: N117MS, as more fully
described in Appendix A, "Description of Aircraft," and as equipped in all other
respects at the time of Lessee's acceptance (hereinafter the "Aircraft"),
together with all manuals, computerized maintenance programs, logs and similar
records pertaining to the use and operation of the Aircraft.
B. Effect of Lease. Title to the Aircraft shall be vested in
Lessor at all times during the Lease Term. Lessee shall have the right to
possession and quiet enjoyment of the Aircraft during the Lease Term so long as
Lessee is not in default under this Lease Agreement. Notwithstanding the
foregoing, Lessor shall have the right to interrupt Lessee's quiet enjoyment and
take temporary possession of the Aircraft during the Lease Term, at such times
and for such periods as Lessor shall require in order to perform (or have
performed) certain capital improvements, as agreed to by Lessor and Lessee, or
to inspect the condition of the aircraft, upon reasonable advance notice to
Lessee (hereinafter referred to as a "Period of Term Interruption"). During any
Period of Term Interruption, all of the terms and conditions of this Lease shall
remain in full force and effect, including the obligation of the Lessee to make
the minimum rental payment pursuant to Article IV of this Agreement. However, if
such Period of Term Interruption exceeds two (2) weeks, the rent due hereunder
shall abate.
<PAGE> 2
ARTICLE II
Term of Lease
The Lease Term shall be for the one-year period, commencing on February
6, 1998, and continuing through February 5, 1999, and shall thereafter be
automatically renewed for successive one year periods unless and until either
party provides the other party with thirty (30) days written notice of its
intention not to renew prior to the expiry of the then current term of the lease
or the lease is earlier terminated as otherwise provided herein.
ARTICLE III
Delivery
The Aircraft was delivered to the Lessee on February 6, 1998. Upon such
delivery, Lessee has inspected, and upon any subsequent delivery following a
Period of Term Interruption the Lessee shall inspect, the Aircraft and, if found
satisfactory in the reasonable opinion of Lessee, will accept the Aircraft by
signing and delivering to the Lessor the Acceptance Supplement to the Lease
Agreement, which is attached hereto as Appendix B, whereupon the Aircraft shall
become subject to and governed by all portions of the Lease Agreement. Delivery
of the Acceptance Supplement by the Lessee shall be deemed conclusive proof that
the Lessee has fully inspected the aircraft to its satisfaction and acknowledges
that the aircraft is in good condition and repair and that the Lessee is
satisfied with and has accepted the aircraft in such condition and repair.
ARTICLE IV
Rent and Use of Aircraft
A. Use Rent. Lessee agrees to pay Lessor a base use rent of 1.25%
of the Lessor's total costs, relating to the Aircraft per month (amounting to
$122,542.94 per month at the commencement of the Lease Term). However, the
monthly base rent lease payments shall increase by an additional 1.25% per month
of all additional costs incurred by Lessor, with respect to the Aircraft,
throughout the Lease Term. Such additional costs shall be subject to approval of
Lessee, which approval shall not be unreasonably withheld or delayed.
Additionally, Lessee shall pay three hundred dollars ($300.00) for each and
every hour that the Aircraft is in use. This base rent and the hourly use rent
shall be due and payable on the 15th of the calendar month following the month
of the use for which the rent is to be paid. The use rent shall be payable to
Lessor by check at its mailing address or at such other address as shall be
designated in writing by Lessor.
B. Taxes and Duties. Lessee agrees to pay all taxes and duties,
other than property taxes, including any sales or use tax or duties, tolls,
license fees or assessments, which may be levied or assessed by any government
against the Aircraft with respect to Lessee's use thereof during the Lease Term.
Lessee will reimburse Lessor for any such taxes or duties which Lessor shall be
required to pay (except for income taxes, if any, due on the rental payments);
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<PAGE> 3
however, Lessee may contest any assessment of tax or duty on Lessor and Lessor
shall provide Lessee with a timely opportunity to defend against such assessment
and cooperate in the defense. Any tax or duty levied with respect to a period of
time including but in excess of the Lease Term shall be prorated so that Lessee
shall bear only the portion thereof attributable to Lessee's use during the
Lease Term. Lessee shall keep the Aircraft free and clear of all liens and
encumbrances including any which may arising from the imposition of any tax or
duty as described in this Section B.
C. Out-of-Pocket Expenses. All out-of-pocket expenses incurred in
connection with the leasing of this Aircraft shall be borne by Lessee,
including, by way of example, fuel, pilot cost, food service, hangar and
tie-down charges, landing fees and custom fees.
ARTICLE V
Warranties
A. Lessor's Warranties. Lessor warrants and represents that:
(1) Lessor has duly authorized, executed and delivered the
Lease Agreement and has the lawful right to lease the Aircraft in accordance
with the terms and conditions hereof.
(2) To the best of Lessor's knowledge, the Aircraft has been
maintained in compliance with applicable Regulations under FAR Part 91 in an
airworthy condition.
(3) Lessor has no knowledge of undisclosed defects in the
Aircraft.
(4) ALL OTHER WARRANTIES WITH RESPECT TO THE AIRCRAFT, WHETHER
EXPRESS, IMPLIED, OR STATUTORY, SUCH AS WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE ARE HEREBY EXCLUDED AND DISCLAIMED TO THE EXTENT THEY
EXCEED THE FOREGOING WARRANTIES, WHICH WARRANTIES COMPRISE LESSOR'S ENTIRE
RESPONSIBILITY WITH RESPECT TO ANY FAILURE OR DEFECT TO THE EXCLUSION OF ALL
OTHER LIABILITY IN TORT (WHETHER FOR NEGLIGENCE OR OTHERWISE) OR IN CONTRACT,
INCLUDING ANY LIABILITY OF LESSOR WITH RESPECT TO INCIDENTAL OR CONSEQUENTIAL
DAMAGES OR LOSS OF USE.
B. Lessee's Warranties and Representations. Lessee warrants and
represents that:
(1) Lessee has full power, authority and legal right to
execute this Lease Agreement. This Lease Agreement has been duly authorized by
all necessary actions of Lessee and constitutes a valid and binding obligation
of Lessee, enforceable in accordance with its terms.
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<PAGE> 4
(2) No registration with, or approvals of, any
governmental agency is necessary for the performance by Lessee of its
enforceability hereof except for those which have been duly made or obtained.
(3) There is no action, litigation or other proceeding
pending or threatened against Lessee before any court or government agency which
might materially affect the business or operations of Lessee adversely or which
would jeopardize the ability of Lessee to perform its obligations under this
Lease Agreement.
ARTICLE VI
Use of the Aircraft
A. Use of Aircraft. Subject to the requirements of the U.S.
Federal Aviation Regulations (hereinafter "FAR"), the Aircraft shall be used
only for business uses of the Lessee including, without limitation,
transportation of personnel, business guests, and equipment of affiliate
companies for which compensation may be provided. The Aircraft shall not be
utilized in a business transporting persons or property for compensation or hire
pursuant to FAR Part 135 without the express written permission of the Lessor
and then only if the Lessee is certified by the Federal Aviation Administration
(hereinafter the "FAA") for such use of the aircraft, the aircraft has been
maintained and inspected to FAR Part 135 Standards and adequate insurance
coverage has been obtained for such operations from reputable insurers.
B. Lawful Operation. Lessee's use of the Aircraft under Section A
of this Article VI shall be in compliance with all laws of the jurisdictions in
which the Aircraft may be operated and in accordance with rules of the FAA. In
particular, the Aircraft shall at all times be operated within the limitations
specified in the flight and maintenance manuals assigned to the Aircraft, within
the normal operating limitations under which the Aircraft is certificated, as
well as within the requirements of all insurance policies relating to the
Aircraft.
ARTICLE VII
Records
A. Records. Lessee shall maintain the logs and records delivered
with the Aircraft under Section A of Article I in accordance with the
manufacturer's instructions and FAA rules and regulations. Such logs shall be
kept in the Aircraft and shall be available for inspection at all reasonable
times by Lessor or its representatives, without prior notice.
B. Filing of Lease with FAA -- Truth in Leasing. Lessee shall
file a signed copy of this Lease with the FAA, Aircraft Registration Branch,
Attention: Technical Section, Post Office Box 25724, Oklahoma City, Oklahoma,
United States of America 73125, within twenty-four (24) hours after the
execution of this Lease. Lessee shall keep a copy of the Lease in the Aircraft
at all times.
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<PAGE> 5
C. Filing of Lease with FAA Public Notice. If the Lease has been
filed for public notice with the FAA in addition to the Truth in Leasing filing
required under Section B of this Article VII, Lessee shall execute FAA AC Form
8050-26 and transmit to Lessor or file it with the FAA as Lessor instructs at
the end of the Lease Term or upon a Premature Termination of this Lease.
D. Notification to FAA of First Flight. At least forty-eight (48)
hours prior to takeoff of the first flight under this Lease, Lessee shall
notify, by telephone or in person, the FAA Flight Standards District Office,
General Aviation District Office, Air Carrier District Office, or International
Field Office nearest the airport where the first flight under the Lease will
originate, of (i) the location of the airport of departure; (ii) the departure
time; and (iii) the registration number of the Aircraft.
ARTICLE VIII
Maintenance of Aircraft
A. Maintenance. Subject to other provisions of this Lease
Agreement, Lessee shall keep the Aircraft in good operating condition and
completely airworthy during the Lease Term by performing the service and
maintenance recommended in the Gulfstream Factory Maintenance Program. The
performance of all maintenance and repair work shall be by or under the
supervision of properly qualified and trained personnel and in compliance with
FAA or other governmental requirements and shall be at the Lessee's expense.
B. Replacement of Certain Parts. In the event of failure of any
expendable or on-condition items during the Lease Term including, but not
limited to windshields, cabin pressure transducers, air data computer, relays
and aileron cables, Lessee shall repair or replace the failed unit with a
serviceable unit of comparable quality to the failed unit at Lessee's expense.
C. Required Service Changes. Lessee agrees to incorporate, or, at
its expense, arrange for the incorporation of, those mandatory service changes
(and other service changes necessary for the safety of the Aircraft) issued by
the FAA with respect to the Aircraft during the Lease Term and which Lessee
and/or Lessor deem necessary.
D. Time Between Overhaul Items. Except as expressly agreed,
Lessee agrees to perform at its expense any scheduled overhaul or replacement of
any component of the Aircraft with designated "time between overhaul" (TBO)
life, including, but not limited to hydraulic pumps and inverters, which have
become "time expired" or "run out" during the Lease Term. However, Lessor shall
pay for engine, APU and generator overhauls. In the event of the failure of any
TBO item, Lessee shall replace the failed item with a serviceable unit, provided
by Lessee, of comparable quality to the failed unit. The designation of an item
as either expendable or on-condition to which Section B of this Article VIII
applies, or as a TBO item to which this Section D of Article VIII applies, shall
be based upon Lessee's maintenance practices during the term of this Lease
Agreement.
- 5 -
<PAGE> 6
E. Alterations. Lessee shall not make any changes in or
alterations of the Aircraft without the prior written consent of Lessor except
as necessary for compliance with the provisions of this Lease Agreement.
ARTICLE IX
Insurance
A. Third Party Liability Insurance. During the Lease Term, Lessor
shall at all times and at Lessor's sole expense carry in full force and effect
public liability and property damage insurance in respect of the Aircraft. All
policies of insurance carried in accordance with this Section A of Article IX
shall name Lessee and Business Aerotech East Corp. as additional insureds and
shall contain cross-liability endorsements. Lessee shall reimburse the expense
of such insurance to Lessor.
B. Amount of Coverage. Public liability and property damage
insurance in respect of the Aircraft covering possession, maintenance and
operation of the Aircraft shall be in minimum limits of Two Hundred Million
($200,000,000.00) Dollars combined single limit, including bodily injury,
property damage and passenger legal liability.
C. Hull Insurance. During, the Lease Term, Lessor shall at all
times and at Lessor's sole expense obtain and keep in full force and effect "All
Risk" type hull insurance on the Aircraft, including "in motion" and "not in
motion" coverage, in an amount not less than the Insured Value of the Aircraft.
Any and all policies under this Section C shall name Lessor solely as loss payee
and any recovery under the policies shall be made payable to Lessor to the
extent of the Insured Value. As used herein the term "Insurance Value" shall
mean full "replacement value".
D. War Risk Insurance. Lessor shall, before it permits and
authorizes the Lessee to operate the Aircraft in any area where the Aircraft may
be subject to war risk damage, or in any area of hostility as designated by
Lessor, at its own expense, obtain and keep in full force and effect War Risk
Insurance coverage applicable to such areas. Such insurance shall protect
against confiscation, seizure, detention and the like by any government, whether
de facto or de jure, other than the United States, in type, amount, coverage and
terms reasonably satisfactory to Lessee.
E. Substitute for War Risk Insurance. Lessor agrees to accept, in
lieu of the above described War Risk Insurance, indemnification from the United
States Government against war risks under the regular Military Airlift Command
program or the Civil Reserve Air Fleet Indemnification program for a carrier in
the event that a limited or national emergency is declared, if Lessor in its
sole discretion is reasonably satisfied with the sufficiency thereof in
complying with the same terms and conditions stated herein with regard to War
Risk Insurance.
F. Additional Terms and Conditions of Insurance. Lessee shall
provide Lessor with a copy of the certificate of insurance and policy for each
insurance obtained by Lessee
- 6 -
<PAGE> 7
under this Article IX. Lessor will also provide same certificates to Lessee with
respect to insurance Lessor is required to obtain. Each policy shall contain an
agreement by the insurer that, notwithstanding the lapse of any such policy for
any reason or any right of cancellation by the insurer or the Lessee, or Lessor
(as the case may be) whether voluntary or involuntary, such policy shall
continue in force for the benefit of Lessor or Lessee (as the case may be) for
at least thirty (30) days (or such lesser time as may be permitted in the case
of War Risk Insurance, if such War Risk Insurance so requires) after written
notice of such lapse or cancellation shall have been given to Lessor and Lessee
and that no alteration whatsoever in any such policy which would have the effect
of reducing the coverage required pursuant to this Section F of Article IX shall
be made except on written approval of Lessor and Lessee.
G. Lessor releases Lessee and its respective officers and
employees (hereinafter "Authorized Representative") from any claims for damage
to the Aircraft caused by or resulting from risks insured against under any
insurance policies carried by Lessor and in force at the time of any such
damage, including, without limitation the hull insurance referred to in Section
C, above. Lessor shall cause any such insurance policy obtained by it to provide
that the insurance company waives all right of recovery by way of subrogation
against Lessee and its Authorized Representatives in connection with any damage
covered by any such policy. Lessee and its Authorized Representative shall not
be liable to Lessor for any damage to the Aircraft caused by the risks insured
against under any such insurance policy.
ARTICLE X
Default and Remedies
A. Event of Default. Any of the following events shall constitute
an Event of Default under this Lease Agreement:
(1) Failure of Lessee to make any payment of rent to Lessor
when due and such failure shall continue for ten (10) days after Lessor gives
Lessee written notice of such failure.
(2) Failure of Lessee to procure or maintain any insurance
coverage required under Article IX and such failure shall continue for ten (10)
days after Lessor gives Lessee written notice of such failure.
(3) Failure of Lessee to observe or perform any other
covenant, condition, agreement or warranty contained in this Lease Agreement and
such failure shall continue for ten (10) days after Lessor gives Lessee written
notice of such failure, provided that if such failure is not reasonably
susceptible of being cured within said ten (10) day period, such additional
period of time shall be granted as may be reasonably necessary to cure same
provided that Lessee commences to cure within such ten (10) day period and
diligently prosecutes same.
(4) Inclusion of a material falsity by Lessee in any
representation or warranty of Lessee contained in this Lease Agreement or in any
documents executed and
- 7 -
<PAGE> 8
delivered by Lessee to Lessor pursuant to the terms hereof and such failure
shall continue for ten (10) days after Lessor gives Lessee written notice of
such failure, provided that if such failure is not reasonably susceptible of
being cured within said ten (10) day period, such additional period of time
shall be granted as may be reasonably necessary to cure same provided that
Lessee commences to cure within such ten (10) day period and diligently
prosecutes same.
(5) Omission of a material fact by Lessee in any
representation or warranty of Lessee contained in this Lease Agreement or in any
documents executed and delivered by Lessee to Lessor pursuant to the terms
hereof and such failure shall continue for ten (10) days after Lessor gives
Lessee written notice of such failure, provided that if such failure is not
reasonably susceptible of being cured within said ten (10) day period, such
additional period of time shall be granted as may be reasonably necessary to
cure same provided that Lessee commences to cure within such ten (10) day period
and diligently prosecutes same.
(6) The insolvency of Lessee; the institution by or against
Lessee of any voluntary or involuntary proceedings under any bankruptcy law; the
adjudication of Lessee as a bankrupt or an insolvent; the appointment of a
receiver of Lessee's property; or any assignment by Lessee for the benefit of
its creditors.
B. Notice of Event of Default. Lessee shall give Lessor notice of
the occurrence of any Event of Default promptly upon obtaining knowledge
thereof.
C. Lessor's Remedies. Upon the occurrence of any Event of
Default, Lessor shall be entitled to use one or more of the following remedies:
(1) Give Lessee notice which identifies the Event of Default
and states that this Lease Agreement shall terminate on the date specified
therein (hereinafter "Premature Termination"). Upon a Premature Termination, all
rights of Lessee under this Lease Agreement shall cease and Lessee shall
redeliver the Aircraft to Lessor in accordance with Article XI.
(2) Demand payment from Lessee of any and all amounts which
are due and are unpaid, or which may become due from Lessee under this Lease
Agreement plus any damages, to the extent not fully covered by insurance, in
addition thereto which Lessor shall have sustained by reason of the Event of
Default, but excluding consequential damages.
(3) Proceed by appropriate action in law or equity to enforce
performance by Lessee of the applicable covenants of this Lease Agreement or to
recover damages, to the extent not fully covered by insurance, resulting from
the Event of Default, but excluding consequential damages.
(4) Lessor agrees to take reasonable actions to mitigate
damages upon the occurrence of any Event of Default.
D. Waiver of Event of Default. Lessor may elect not to exercise
any one or all of its rights to seek a remedy for an Event of Default under
Section C of this Article XI. Lessor
- 8 -
<PAGE> 9
may also rescind a Premature Termination of this Lease Agreement by giving
Lessee notice to this effect prior to the date of such Premature Termination.
However, no waiver of enforcement of any of its rights under this Lease
Agreement with respect to any Event of Default shall operate to affect or impair
unenforced rights with respect to that Event of Default or any right with
respect to another Event of Default whether past or future.
E. Lessor's Costs of Enforcement. If Lessor brings an action to
enforce any of its rights under this Lease Agreement and is entitled to a
judgment, Lessor may recover reasonable expenses attendant to that action,
including reasonable attorney's fees, and the amount thereof shall be included
in such judgment.
ARTICLE XI
Return of Aircraft
A. Lessee's Obligation to Redeliver Aircraft. At the end of the
Lease Term, or upon the Premature Termination of the Lease Agreement, Lessee
shall redeliver the Aircraft at its own expense to any delivery point within the
continental United States specified by Lessor.
B. Condition of Aircraft. Except for any casualty losses for
which insurance proceeds have been received, or are receivable, by Lessor, upon
redelivery, the Aircraft:
(1) Shall be clean by the best commercial airline operating
standards;
(2) Subject to Section D of Article VIII, shall have installed
thereon the engines, equipment, accessories and parts as installed at the
commencement of the Lease Term or replacements made in accordance with Section B
of Article VIII; and
(3) Subject to Section D of Article VIII, shall be in the same
or better condition as when originally delivered to Lessee, ordinary wear and
tear excepted, and subject to changes or alterations properly made by Lessee as
permitted or required under this Lease Agreement.
C. Failure of Lessee to Redeliver Aircraft. If Lessee does not
redeliver the Aircraft as required under Section A of this Article XII, Lessor
may cause immediate possession of the Aircraft to be taken by its agent without
liability to return to Lessee any rent previously paid and free of any claims of
Lessee whatsoever. In taking possession under this Section C of Article XII,
Lessor may remove the Aircraft from the possession and use of Lessee and for
such purpose may enter upon Lessee's premises where the Aircraft may be located
and use and employ in connection with such removal any supplies, services, means
or other facilities of Lessee with or without process of law.
D. Return of Records. All records kept in the Aircraft pursuant
to Section A of Article VII shall be returned with the Aircraft upon its
redelivery to Lessor.
- 9 -
<PAGE> 10
E. Risk of Loss. Lessor shall bear the risk of loss with respect
to the Aircraft at all times during the term of this Lease Agreement, except for
violation of law or regulation by Lessee with respect to which the hull
insurance policy referred to in Section C of Article IX hereof does not apply
and provide coverage.
F. Additional Costs. Any and all additional expenditures with
respect to the Aircraft, except for those set forth in Exhibits X and Y, and
future engine overhauls, APU overhauls and DC generator overhauls, shall be the
sole cost and expense of Lessee.
ARTICLE XII
Miscellaneous
A. Identification. The manufacturer's serial numbers affixed to
the Aircraft and the engines shall not be removed or defaced. In the event of
such removal or defacement, Lessee shall promptly cause the assigned serial
numbers to be restored.
B. Assignment by Lessee. Lessee shall not make any assignment or
sublease of this Lease Agreement nor of any rights and interest, or delegate any
obligations under this Lease Agreement without the prior written consent of
Lessor.
C. Assignment of Lease/Sale of Aircraft by Lessor. Lessor may not
assign its rights or obligations hereunder without the consent of Lessee.
However Lessor, at any time, in its sole discretion, can sell the Aircraft. In
the event of such a sale of Aircraft by Lessor, Lessor or Lessee, at either
parties' sole discretion, may terminate this Lease upon thirty (30) days written
notice. Notwithstanding anything contained herein, Lessor may assign its rights
and obligations hereunder to any entity or person controlled by Lessor, under
common control with Lessor, or which controls the Lessor (an "Affiliate"). Such
Affiliate shall agree to be bound by the terms of this Lease.
D. Notice. Any notice given under this Lease Agreement shall be
sent by registered mail, certified mail or telex to the recipient Party at its
mailing address. The date of delivery of the notice to the post office shall be
the date of the mailing.
E. Scope and Change of Lease. The terms and conditions contained
herein constitute the entire agreement of the Parties with respect to the use of
the Aircraft by Lessee. This Lease Agreement shall supersede all communications,
representations and agreements, either oral or written, between the Parties with
respect to the lease of the Aircraft. No agreement or understanding which
modifies the terms and conditions herein shall be binding upon either Party
unless reduced to writing and signed by a duly authorized representative of each
Party.
F. Liens and Encumbrances. Without the prior written consent of
Lessor, Lessee shall not create or incur any mortgage, lien, charge or
encumbrances of any kind on any of its rights under this Lease Agreement, on the
Aircraft or any part thereof. If such encumbrances come into existence, Lessee
at its sole expense shall promptly remove the same.
- 10 -
<PAGE> 11
G. Successors and Assigns. This Lease Agreement shall be binding
on and shall inure to the benefit of Lessor and Lessee and their respective
successors and assigns, provided that any assignment or sublease shall be made
in accordance with the terms hereof and no other persons shall have or acquire
any rights under or by virtue of this Lease Agreement.
H. Survival of Lease Provisions. All provisions of this Lease
Agreement which must survive the Lease Term for their full observance and
performance shall survive the Lease Term.
I. Governing Law. This Lease Agreement shall be governed,
construed and interpreted in accordance with the laws of the Commonwealth of
Pennsylvania.
J. Arbitration. Any dispute arising out of, or relating to, this
Lease Agreement shall be submitted to arbitration by written notice to the other
party or parties within one (1) year of the event giving rise to the dispute.
The arbitration will be conducted in New York, NY in accordance with the
procedures in this document and the Arbitration Rules of the American
Arbitration Association then in effect ("AAA RULES").
The arbitration will be conducted before a panel of three arbitrators,
regardless of the size of the dispute, to be selected as provided in the AAA
Rules. Any issue concerning the extent to which any dispute is subject to
arbitration, or concerning the applicability, interpretation, or enforceability
of these procedures, including any contention that all or part of these
procedures are invalid or unenforceable, shall be governed by the Federal
Arbitration Act and resolved by the arbitrators. No potential arbitrator may
serve on the panel unless he or she has agreed in writing to abide and be bound
by these procedures.
The result of the arbitration will be binding on the parties, and
judgment on the arbitrators' award may be entered in any court having
jurisdiction.
K. Truth in Leasing. THE AIRCRAFT WILL BE MAINTAINED AND
INSPECTED UNDER FAR PART 91 FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE
DURING THE LEASE TERM. IN THE EVENT LESSEE DECIDES TO OPERATE THE AIRCRAFT UNDER
FAR PART 135, LESSEE AGREES THAT THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED
IN ACCORDANCE WITH FAR PART 135 REGULATIONS.
ITT FLIGHT OPERATIONS, INC., IS CONSIDERED RESPONSIBLE FOR OPERATIONAL
CONTROL OF THE AIRCRAFT IDENTIFIED AND TO BE OPERATED UNDER THIS LEASE AND FOR
COMPLIANCE WITH APPLICABLE FAR.
AN EXPLANATION OF THE FACTORS BEARING ON OPERATIONAL CONTROL AND THE
PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA
FLIGHT STANDARDS DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE OR AIR
CARRIER DISTRICT OFFICE.
- 11 -
<PAGE> 12
I, RICHARD UHLE, CHIEF PILOT OF ITT FLIGHT OPERATIONS, INC., CERTIFY
THAT I AM RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT IDENTIFIED IN THIS
LEASE AGREEMENT AND I UNDERSTAND MY RESPONSIBILITIES FOR COMPLIANCE WITH
APPLICABLE FEDERAL AVIATION REGULATIONS. FURTHER, I CERTIFY THAT I AM FAMILIAR
WITH AND KNOWLEDGEABLE OF THE CONTENTS OF FAR 91.23,14 C.F.R.Section 91.23 AND
THE ADVISORY CIRCULARS THEREUNDER (TRUTH IN LEASING).
Signed /s/ RICHARD UHLE
----------------------------
IN WITNESS WHEREOF, each party has caused this Dry Lease Agreement to
be signed by its duly authorized representative on the date first above written.
STAR FLIGHT L.L.C. ITT FLIGHT OPERATIONS, INC.
(LESSOR) (LESSEE)
By /s/ JEROME C. SILVEY By /s/ ROBERT F. SHEEHY
-------------------------------- ---------------------------------
Title EXECUTIVE VICE PRESIDENT Title PRESIDENT
----------------------------- ------------------------------
Attest: Attest:
/s/ LINDA FERRANTI /s/ JAMES W. LATHAM
- ----------------------------------- ------------------------------------
APPENDIX A -- Description of Aircraft
APPENDIX B -- Acceptance Supplement
- 12 -
<PAGE> 13
FIRST AMENDMENT TO THE
AIRCRAFT DRY LEASE AGREEMENT
This First Amendment to the Aircraft Dry Lease Agreement is entered
into as of the 25th day of August 1998 (this "Amendment") by and between the
Star Flight L.L.C. ("SF") and ITT Flight Operations, Inc. ("ITT")
WITNESSETH:
WHEREAS, SF and ITT entered into that certain Aircraft Dry Lease
Agreement dated as of February 6, 1998, (the "Lease Agreement"); and
WHEREAS, SF and ITT wish to make certain modifications to the Lease
Agreement to reflect more accurately the understandings and agreements among SF
and ITT.
NOW, THEREFORE, SF and ITT agree that the Lease Agreement is hereby
amended as follows:
1. Article II of the Lease Agreement is hereby deleted in its
entirety and replaced with the following:
"The Lease Term shall be for the one-year period, commencing
on February 6, 1998, and continuing through February 5, 1999, and shall
thereafter be automatically renewed for successive one year periods. After
February 5, 1999, either party hereto may terminate the Lease Agreement, with or
without cause, by providing the other party ninety (90) days prior written
notice to terminate the Lease Agreement."
This First Amendment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document. Capitalized terms not
otherwise defined herein shall be defined as set forth in the Lease Agreement.
Except as modified herein, the Lease Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, this First Amendment has been executed by all of
the parties to the Lease Agreement as of August 25, 1998.
(SIGNATURES ON THE NEXT PAGE)
- 16 -
<PAGE> 14
STAR FLIGHT L.L.C.,
a Connecticut limited liability company
By: /s/ Jerome C. Silvey
------------------------------------
Jerome C. Silvey
Executive Vice President
ITT FLIGHT OPERATIONS, INC.,
a Pennsylvania corporation
By: /s/ Robert F. Sheehy
------------------------------------
Name: Robert F. Sheehy
Title: President
- 17 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998 AND THE RELATED STATEMENTS OF
INCOME AND CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 OF STARWOOD
HOTELS AND RESORTS WORLDWIDE, INC. WHICH INCLUDE THE ACCOUNTS OF STARWOOD HOTELS
AND RESORTS WORLDWIDE, INC. AND WESTIN FROM THE DATE OF THE ITT MERGER ON
FEBRUARY 23, 1998 THROUGH SEPTEMBER 30, 1998 AND THE ACCOUNTS OF ITT AS OF AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998.
EPS HAS BEEN PREPARED IN ACCORDANCE WITH SFAS NO. 28, AND BASIC AND DILUTED EPS
HAVE BEEN ENTERED IN THE PRIMARY AND FULLY DILUTED LINE ITEMS, RESPECTIVELY.
</LEGEND>
<CIK> 0000316206
<NAME> STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 251
<SECURITIES> 0
<RECEIVABLES> 876
<ALLOWANCES> 0
<INVENTORY> 67
<CURRENT-ASSETS> 1,098
<PP&E> 6,612
<DEPRECIATION> 1,034
<TOTAL-ASSETS> 11,471
<CURRENT-LIABILITIES> 2,368
<BONDS> 10,542
0
0
<COMMON> 2
<OTHER-SE> (2,666)
<TOTAL-LIABILITY-AND-EQUITY> 11,471
<SALES> 0
<TOTAL-REVENUES> 6,294
<CGS> 4,614
<TOTAL-COSTS> 1,714
<OTHER-EXPENSES> (6)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 387
<INCOME-PRETAX> (384)
<INCOME-TAX> (80)
<INCOME-CONTINUING> (288)
<DISCONTINUED> 1,116
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 828
<EPS-PRIMARY> (1.54)
<EPS-DILUTED> (1.54)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998 AND THE RELATED STATEMENTS OF
INCOME AND CASH FLOWS FOR THE PERIOD FROM THE ITT MERGER ON FEBRUARY 23, 1998
THROUGH SEPTEMBER 30, 1998. NO RESULTS PRIOR TO FEBRUARY 23, 1998 ARE REPORTED
AS A RESULT OF THE REVERSE PURCHASE PRICE ACCOUNTING FOR THE ITT MERGER.
EPS HAS BEEN PREPARED IN ACCORDANCE WITH SFAS NO. 128, AND BASIC AND DILUTED
EPS HAVE BEEN ENTERED IN THE PRIMARY AND FULLY DILUTED LINE ITEMS,
RESPECTIVELY.
</LEGEND>
<CIK> 0000048595
<NAME> STARWOOD HOTELS AND RESORTS
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 9
<SECURITIES> 0
<RECEIVABLES> 2,900
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 348
<PP&E> 4,589
<DEPRECIATION> 314
<TOTAL-ASSETS> 8,333
<CURRENT-LIABILITIES> 448
<BONDS> 604
153
5
<COMMON> 2
<OTHER-SE> 6,682
<TOTAL-LIABILITY-AND-EQUITY> 8,333
<SALES> 0
<TOTAL-REVENUES> 437
<CGS> 0
<TOTAL-COSTS> 121
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> 304
<INCOME-TAX> 0
<INCOME-CONTINUING> 304
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 304
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.45
</TABLE>
